To rebuild, Ukraine needs just social policy

First published at Rosa Luxemburg Stiftung.

The ongoing Russian war against Ukraine has had devastating consequences for the entire country. Many Ukrainians lost their jobs and left their homes. According to survey conducted in September by the Sociological Group “Rating”, a Ukrainian polling agency, only 61 percent of Ukrainians remained at their place of employment, 36 percent of whom worked full-time.

The situation is particularly bad in the east of the country, where most of the fighting has taken place. According to World Bank estimates, as of August 2022, about 817,000 residential buildings had been damaged, 38 percent of which were beyond repair. In other words, millions of Ukrainians have been rendered vulnerable since the war began.

The war has pushed a significant part of the country’s most poorly protected citizens to their existential limits. In addition, much of Ukraine’s social infrastructure has been damaged or destroyed, with the World Bank estimating over 160 million dollars in destruction, and the workload of institutions providing social services has increased tremendously due to the flow of displaced persons.

The social protection system is also overloaded, especially against the backdrop of falling state revenues. In this context, the social security system has to be a priority issue, especially as the political establishment questions whether it should continue to exist at all.

Plans to “reform”, i.e., neoliberalize Ukraine’s welfare state had already been in the making before the war, but now, the state of exception imposed by the Russian invasion has been used by some to seek to undermine the Ukrainian welfare state even further. This neoliberal vision for Ukraine’s future must be opposed, as it undermines the very foundations that would allow our society to rebuild when the war finally ends.

The welfare state and the war

Ukraine’s system of social protections was not prepared for the challenge of a full-scale invasion. In July, a recovery plan for the Ukrainian social system was presented at the Ukraine Recovery Conference in Lugano. Its authors decried its outdated structure and alleged “Sovietness”, claiming it made excessive promises to citizens that the state could not guarantee in practice.

Undoubtedly, every government blames problems on its predecessor. However, why turn to the distant Soviet past, given Ukraine’s 30 years of cuts to social spending, privatization, and the decline of public social infrastructure — a course the authorities obviously have no intention of departing from?

Since the beginning of the war, the government has announced and implemented several measures to stabilize the population’s wellbeing. Yet many of them entailed a curtailment of workers’ and trade unions’ rights, and placed stricter limits on unemployment benefits. For example, the registered unemployed will be engaged in “community service”, such as repair and recovery work or clearing roads, with payment not lower than the minimum wage if they fail to find a job within 30 days. However, those who refuse to serve the community will lose their unemployed status, and with it their benefit payments.

Moreover, the government announced the development of a social code aimed at “inventorizing information on the existing obligations for social payments of the state” and bringing them in line with the state’s financial capabilities. In addition, Law 2620 liquidated Ukraine’s social insurance fund. In its place, the pension fund received its budget and part of its functions, while its expenses and employees were significantly reduced — a move that triggered a public uproar across Ukrainian society.

A significant part of the measures taken by the government during the war and proposed in the draft recovery plan have only a tenuous link to the challenges brought by the war itself. Rather, they represent a continuation of the approach to social policy (as well as in related areas, such as health care) that has been in place in Ukraine for some time.

For the last few decades, this political orientation has been called neoliberalism. But rather than discuss the ideology as such, to understand what is happening in Ukraine, we need to look at the specific programmes being implemented.

Neoliberalism’s archnemesis

What is commonly known as the welfare state is an old enemy of neoliberalism. According to the standard narrative, Western European social policies flourished in the post-war period. Things began to shift in the 1970s, when the oil crisis and economic recession emboldened neoliberal thinkers to claim that excessive spending on social programmes was slowing down economic growth.

The history of social policy in Ukraine has different origins than in the West. Nevertheless, in the 1990s, the country also got on board the train to a market economy. The economic recession of the first decade and full-scale privatization immediately led to reduced spending on the social sphere and the deterioration of social infrastructure, especially in rural areas. For example, the first two decades of independence brought an almost two-third decrease in the number of kindergartens.

At the same time, international donors and creditors encouraged cuts to social spending (or, as it was often formulated, “effective use of resources”). Globalization and the pursuit of foreign investors also become a separate incentive for systematic attempts to limit workers’ rights and social guarantees, as well as create more attractive tax conditions for businesses to retain capital.

From universalism to almsgiving

What does neoliberalism in practice look like in the Ukrainian social sector? On the one hand, it is based on intentions to reduce social spending, while changing the very nature of social policy on the other. How does reducing spending work? To obtain benefits, citizens must demonstrate that they need assistance, that is, they have to verify their income. However, the income threshold is very low.

For instance, let us consider the conditions for identifying a family as low-income in order to receive assistance. As of November 2022, to get financial aid, a family of two adults and one child under the age of six must declare that their average monthly income for the last six months was less than 29,474 hryvnia (about 4,912 hryvnia or 125 euro per month). Moreover, not only income but also other factors influence whether a family will receive benefits. For example, they could be turned down if one or both adults have not worked, studied full-time, or been employed for the past three months. In addition, control measures are very strict to ensure that those who are not entitled to assistance do not receive it.

Reductions in existing programmes are also on the agenda. The government intends to modify the existing social obligations of the state to reduce everything that allegedly “does not correspond to financial possibilities”. In addition, it announced the “transformation of the extensive system of social payments into universal social assistance”, which will target the poorest. Such a policy no longer provides, for example, financial aid to all single mothers. Instead, only those passing a means test — i.e., the poorest — will get this aid. In effect, Ukrainian citizens are gradually being deprived of any universal rights to support through these reforms.

In terms of changes in the very nature of social policy in Ukraine, we can see attempts to replace the entities that provide social services and their financing scheme. Thus, a reform passed in 2019 aims to create a market for social services, with private service-providing institutions contesting state and communal ones. However, the state must finance the services provided at the expense of the state, not the institution. Therefore, it follows the logic of medical reform, where the money comes with a patient, and hospitals transform into enterprises earning money to exist.

The same proposals crop up in the field of pension provision. The draft reconstruction plan and the specialized committee of Ukrainian parliament, the Verkhovna Rada, called pension reform an “objective necessity”, not rushing to implement it before the war. It is about abandoning the solidarity pension system in favour of a mixed system by introducing individual pension plans and partially privatizing the pension provision.

Essentially, Ukraine’s social reforms are about reducing overall funding and turning everything into a source of profit. In addition, while there are supposedly no financial sources to support the social security system, nobody mentions raising taxes on large corporations and enterprises or introducing a more progressive tax rate. On the contrary, throughout the war, the state has made concessions to businesses, particularly when it comes to taxes. At the same time, the tax burden on workers has not changed. The social reproduction of the labour force that businesses use increasingly relies on the labour force itself.

Solidarity or atomization?

Why is this policy path dangerous? In most states with a developed social policy, support programmes vary depending on a recipient’s income. However, the question is what amount of public goods (or, as we say, services) is available to all citizens as a universal right, regardless of their income. For example, in terms of ensuring guaranteed free access to kindergartens, schooling, health services, child benefit payments, etc.

The less universal the various government assistance programmes are, the closer they are to supporting only the poorest and the less support they usually have among taxpayers. For example, if only the poorest are entitled to assistance, the average person may have no chance to receive aid, although their situation may be difficult. So, why pay social security contributions for something you cannot count on?

People are less willing to invest in something they most likely will not get any benefit from. Thus, in the future, social spending will decline even more. This means that the number of active support programmes will also decrease.

In addition, such an approach stigmatizes the recipients, as they appear cut off from the rest of society. Being under maximum pressure to enter the labour market as soon as possible may also encourage recipients to agree to any job under any conditions. It further deepens their insecurity — this time, in the workplace. People who cannot enter the labour market for various reasons are regarded as parasites, since the rest of the taxpayers do not receive anything from the state but have to support them anyway.

Due to the gradual reduction of state funding, the quality of the public goods provided by communal and state facilities may decline. Therefore, wealthier people are less inclined to use their services, preferring private alternatives: schools, medical facilities, care facilities, etc. Public service providers and their clients are even more stigmatized. Finally, support for welfare state spending is decreasing: after all, why finance something that “we” do not use and is of lower quality?

From a political perspective, these tectonic shifts in political consciousness, whereby social risks are individualized in response to welfare state cuts, are dangerous. Individual pension plans, where a person’s wellbeing essentially depends on the success of their investments in the stock market, are an illustrative model of this trend. As a result, a person associates themselves with business, seeing themselves as an investor rather than a fellow citizen. It undermines the feeling of intergenerational support and leads to the individualization of social consciousness: everyone is on their own, and the state will help only in the worst case.

Is this the kind of society Ukrainians really aspire to, especially after the war? Why should they move towards greater individualization and atomization at a time when the country is experiencing unprecedented national unity?

What would a solidarity-based social policy look like?

The war has affected everyone in Ukraine, but some have suffered disproportionately greater losses — oftentimes those who were already in difficult situations. Their problems have only intensified and overlapped, and will continue to be there after the war ends. So, what would Ukraine need to move towards a society that takes care of everyone?

It would be fair to demand higher income taxes and wealth redistribution to implement generous social policies and universal social protection programmes. There is no other effective way of supporting those who have lost their homes and jobs. We must not only stand in solidarity in the face of the enemy’s army, but also internally, among ourselves. Otherwise, our collective strength will be exhausted, as everyone focuses on their own survival.

It is not only a question of one’s respective vision for what Ukrainian society could be. There are also pragmatic considerations behind a solidarity-based social system.

Equal societies with generous social policies, where everyone agrees to contribute to the common good and receives benefits afterward, are happier, healthier, and more stable. After the war, Ukrainians cannot afford domestic political instability, and economic turmoil can deepen social divisions. The same is true of the reintegration of the currently occupied territories and, above all, the territories occupied since 2014. A generous and universal social policy can become one of the instruments promoting social consolidation and reintegration of those living in uncontrolled areas for years.

A social policy consisting only of a support system for the poorest will not be up to the challenges of post-war reconstruction without leading to increased inequality and social atomization in Ukraine. We need a universal and solidarity social policy that covers every group and providing a decent minimum standard of living for everyone. This, in turn, will help to make Ukrainians feel included in a network of social solidarity they can count on.

Natalia Lomonosova is an analyst at the think tank Cedos and a member of the left-wing organization Sotsialny Rukh. An earlier version of this article first appeared in Commons, a Rosa Luxemburg Foundation partner in Ukraine. Translated by Yulia Kulish.