Improvement of the Institutional Environment as the Conditions of the Effectiveness of the State Financial Policy of Social Development in Ukraine

Abstract

The article reveals the essence of the institutional environment and generalizes the scientific approaches to its definition. It is shown that the dynamic development of all spheres of society’s life needs to take into account the state of the country institutional environment in the process of the state financial policy implementation. The social, economic and political institutions are outlined. Significant components of the institutional environment that form its segments in the context of influence on social processes in society are singled out. It is shown that in Ukraine, along with the instability of economic dynamics, high debt burden, increased openness of the economy and deepening of the processes of integration into the system of international economic relations, there is an aggravation of social problems and the probability of occurrence of social risks increases, which manifests itself in the existence of a number of social imbalances. The institutional aspects of the important components of the state financial policy ‒ the fiscal policy, which in the conditions of instability has more effective influence on social processes, in particular, in the aspect of neutralization of social instability risks, are determined. It was shown that in the conditions of a weak institutional environment there is a risk of increasing inefficient budget expenditures in connection with the implementation of the social function of the state, in particular, expenditures of social orientation. Moreover, under these conditions, increasing levels of funding will lead to increasingly inefficient spending, caused by the existence of institutional dysfunctions. Among the major dysfunctions of the institutional environment in the aspect of their influence on the formation and implementation of the state financial policy of social development of the society attention was drawn to the existence of a debt trap in Ukraine and the trap of «the vicious circle of poverty». It is shown that reforms are being carried out in the country and measures are taken to improve the institutional environment, including in order to eliminate these traps. However, some measures are still non-systematic, consistent, situational in nature. It is substantiated that the state financial policy can influence the improvement of the formal component of the institutional environment of the society, which will increase its effectiveness, provided that certain coordination measures are implemented. At the same time, the need to improve the quality of the institutional environment focuses on its informal component, which today remains virtually oblivious. The methods of the institutional environment improving are generalized and the possibilities of realization of some of them in Ukraine are outlined. It is concluded that the improvement of the institutional environment for the implementation of the social function of the state in Ukraine should be carried out mainly through modernization, rather than institutional design, since under the conditions of slow economic dynamics such an approach will not lead to a significant increase in transaction costs.