Credit IMF Photo/rogeranis.photo
Credit IMF Photo/rogeranis.photo
The global economy is stuck in a low-growth gear, largely because of aging populations, weak business investment, and structural frictions that prevent capital and labor from flowing to where it can be most productive.
As demographic pressures intensify and the green and digital transitions call for significant investment and resource reallocation across companies and industries, some countries are poised to fall further behind.
This makes it even more urgent to update the rules that shape how economies operate. Although specific policy priorities differ across countries, many economies share the need to ease market entry for new businesses, foster competition in the provision of goods and services, encourage workers to stay in the labor force, and better integrate immigrant workers.
Reforms like these need broad societal support, yet public discontent has mounted since the global financial crisis.
To build trust and public support, policymakers need to improve communication, engage the public when designing reforms, and recognize some people may need support if reforms hurt them, as we show in new analysis highlighted in a chapter of the latest World Economic Outlook.
Understanding social resistance
Our exploration of factors that shape public attitudes toward reforms shows that resistance often extends beyond mere economic self-interest. Personal beliefs, perceptions and other behavioral factors account for about 80 percent of support for reforms, according to our surveys of more than 12,000 people across six representative countries.
Crucially, knowledge and misperceptions about the need for reform and the effects of policies are the primary predictors of differences in policy support. This is important—and encouraging—because it offers a clear area for policymakers to act.
Perceptions of distribution and fairness are also critical. Reform opponents often worry more about the impact on their communities, particularly the most vulnerable, than on themselves. For example, opponents fear reforms to increase the role of the private sector in the electricity and telecommunications industries would make those services less affordable and reduce access for the poorest.
Lack of trust can also fuel opposition to reforms. People who say they oppose reforms, even if their concerns were to be adequately addressed by additional measures, mostly cite general distrust of the parties involved and doubts about the government’s ability to implement policy changes and mitigate any harms.
Strategies and tools to boost support
Our analysis suggests a multi-faceted strategy can ease resistance to structural reforms:
Policymakers need to enhance their toolkit to build on this strategy and make reforms more acceptable to people. Public forums, pilot programs, and opinion surveys can help inform a two-way dialogue with citizens. Large-scale surveys, focus groups, and other participatory tools can identify concerns, craft adequate mitigations, and build consensus for reforms. New civic technologies, such as digital community engagement platforms, should also help more citizens participate.
Effective reform design requires thorough consultation, communication, and mitigation to compensate those who might be hurt. Better tools to encourage participation will help people better understand proposals and build the public trust needed to carry out vital economic reforms. These principles should also be reflected in the IMF’s periodic reviews of its program, surveillance, and capacity development initiatives.
—This blog is based on Chapter 3 of the October 2024 World Economic Outlook, “Understanding the Social Acceptability of Structural Reforms.”
