Trust is a key factor in the successful functioning of the economy under ordinary conditions. Actually, all the progress of humanity is due to the cooperation of many people, which can be ensured only by defining certain rules of the game that will not work without trust. In normal socio-economic conditions, it is impossible to overestimate the importance of trust, and at war this factor is absolutely fundamental and existentially necessary. In fact, every day we all are witnesses of an unprecedented increase in trust between people within and outside the country, which considerably materializes in volunteering. I think that in the future this sociological and factual material will become a base for scientific research in various fields of knowledge, and now it is possible to record certain observations and draw preliminary conclusions that may have not only scientific, but practical value today, and not least for those who are authorized to make political decisions.
We all were once taught that the state should exist to correct the failures of the market mechanism, which is true. However, as economic history shows, this happens with varying degrees of efficiency. To be frank, the Ukrainian state has performed its functions extremely negligently for the past thirty years, and therefore there are quite many complaints. In order to justify my criticism, I should mention that what matters is not the error, but the reaction of the system to the error, so I hope for the reader’s indulgence.
I believe that the invention of volunteering as an institute, which has been improved over the years since the first Maidan, was an absolutely natural reaction of the civil society of Ukraine to the state’s failures. This institute allows “filling the vacuum” in the field where the state, for various reasons, was unable to perform its functions to which it was authorized by taxpayers – from safety to social ones. This phenomenon is, without exaggeration, a global one, which has quickly spread throughout the world thanks to the Ukrainian diaspora, people of good will and modern digital technologies.
People, of course, helped each other before, and not only their species, as the function of empathy, which, according to neuroscientists, the human limbic system is responsible for, was formed 120 million years ago. However, this assistance was always local, since it was limited by the circumstances of place and time. Modern digital technologies, which have made a tremendous leap forward in the last 30-40 years, have de facto removed these restrictions. Most military experts note that our war is the first world precedent for online warfare. Of course, seeing all the tragedy of the situation in their gadgets, normal people (we don’t take into account vatniks or empty-headed people) sympathize and try to help somehow. This is a normal human reaction!
Therefore, the volunteering has actually become a mechanism that allows sending the necessary humanitarian, military, medical and other aid to those who need it directly. The word “directly” is crucial here, because such aid is targeted in contrast to non-targeted, by their nature, taxes, which through the ‘leacky bucket’ of the state budget, according to Artur Okun, may one day go to the beneficiaries or be used for certain public services with unclear effectiveness.
Therefore, correcting the “failures” of the state actually means that volunteer aid is complementary to the functions of the state, although I do not state that it cannot be a substitute, and actually changes approaches to the formation of state policies, first of all, tax policy. Becauseevolution is a stubborn thing and works its way on unexplored paths. For example, in the field of taxation, as I have repeatedly emphasized before, the evolution of forms and methods can be from barbaric ways of collection to voluntary payment of taxes (remember tax KPIs) and further to self-taxation. But we can see higher and higher level of accountability and transparency of the state to citizens regarding the directions and effectiveness of tax use. It seems that, at least in certain areas of public services, the tax as a non-targeted payment should have long ago turned into a targeted one, butit is not the time and place here for this, to a certain extent, scholastic discussion.
For correct comparisons it is reasonable to use the quantitative measurement of any phenomenon. Financial indicators are the most convenient for economists, so let us try to assess the scale of volunteering in Ukraine by these parameters and compare them with some other, in our opinion, interesting numbers.
It should be noted that the invaluable part of volunteering is not subject to any quantitative assessments because it is measured by human lives, but they must also be taken into account. In particular, there is an example of civilians – volunteers, who sometimes stopped the movement of the Russian army with their bare hands or, at best, with a “Bandera compote”, which is nothing more than volunteering and self-sacrifice.
Unfortunately, during martial law, access to public electronic registers and some open sources of information is limited, so we will use what is available and, I hope, reliable assumptions.
On the website of the National Bank of Ukraine, one can find information about the special account, which is formed at the expense of citizens’ donations, the funds from which are used for the Ukrainian army and humanitarian needs. I suggest forgetting about the legal entities for some time, because to some extent this is an abstract legal construction, which is based on people who make decisions. As of July 25 of this year, since the opening of the special account, more than UAH 19.8 billion was transferred to it for the needs of the army, and about 700 million UAH went to the account at the NBU, opened for humanitarian needs. In total, we have more than UAH 20 billion for the five months of the war only through the NBU account.
One of the most famous volunteer funds of Ukraine “Come Back Alive” reports that over the past five months, almost UAH 3.8 billion has been received from more than 770 thousand donations with an average amount of UAH 4.9 thousand.
The website of the charity fund “Army SOS” notes that for the first two quarters of this year the fund received UAH 76 million.
Actually, this list of examples can be continued for a long time, but our goal is not to assess the entire “general collection” of at least officially registered non-profit organizations involved in charitable activities. The task is to show the trend. Based on the interviews conducted by the author with people involved in volunteer activities, it can be concluded that the estimated amount of income for the average fund during the months of the war is UAH 10-15 million. Considering that there are several hundreds of such organizations in Ukraine, minus non-working and false ones, we can get an approximate amount, UAH 30-35 billion, collected by volunteers during this time!
It should also be remembered that, in addition to the official network of volunteer organizations, quite significant (unfortunately, they are not subject to any assessment) assistance are provided through informal associations of citizens, activists or directly to card accounts or in kind to persons who need it. I think we can add a few billion hryvnias to the above figure. Value of manufactured and sewn equipment, provided and repaired equipment and weapons, food products, transport services, etc.
All this is the help of ordinary citizens, the main benefit of which is, if not the size, buttimeliness. As they say, “a stitch in time saves nine”.
For comparison with alternative sources of financing the needs of the army and the urgent needs of society, we can take the volumes of military government issued bonds purchased by our citizens during the same period.
The National Bank of Ukraine reports that as of July 25, 2022, the second largest in volume, after commercial banks, is the portfolio of military bonds, concentrated in citizens and businesses of Ukraine. It is: UAH 12,086.2 million, denominated in hryvnia; USD 167.7 million; EUR 136.6 million. Considering that the short-term bonds have already been repaid and they could have belongedto citizens, not banks, the amount may be slightly higher. So, totally it could be about UAH 22-24 billion (calculated at the official exchange rate of the dollar and euro before the NBU increase).
Another precedent of trust or distrust to the state, I can’t figure it out, is a one-time voluntary declaration campaign. State Tax Service of Ukraine reports that as of July 20, UAH 4 billion has been declared by individuals since the beginning of the campaign. The amount of levy declared as payableamounted to UAH 241.7 million. According to the same body, during the martial law, the volume of declared assets increased by a little more than UAH 1 billion, which, given the phenomenon and scale of volunteering, cannot be considered satisfactory. It is said that there is an excuse for prolonging the campaign of voluntary declaration, which is an indirect unsatisfactory assessment of the project by its ideologues.
Thus, these few examples show that between the two alternatives of choosing to finance the army through the budget system, debt instruments, on the one hand, and volunteering infrastructure, on the other, the citizens of Ukraine choose the second alternative, because it is… simpler, more efficient, faster, and most importantly, more reliable, because everyone chooses those whom they trust the most.
The country is based on trust, but what is the base for the state?
It seems that everyone needs to draw conclusions.
Kostiantyn Shvabii, expert, professor of the Growford Institute