Paul
Goble
Staunton, May 1 – Vladimir Putin is
taking care of his basic electorate, pensioners and government employees, at
the expense of the private sector, Yevgeny Gontmakher says. And because Moscow
increasingly lacks the funds to do so, the Kremlin leader will take ever more money
from business, a shift popular in the near term but dangerous in the longer
one.
In an article in “Yezhednevny
zhurnal” today, the economist says that Putin has not presented his policies in
any specific document but that the Kremlin’s actions allow one to conclude that
he is creating new classes of winners and losers in the hopes of maintaining
his base and preserving stability in the country (ej.ru/?a=note&id=25050).
As it has become obvious that there
are insufficient government funds to fulfill Putin’s earlier promises– the economy
is in recession, more people are working off the books and not paying taxes,
and the government is boosting spending on defense and law enforcement – Moscow
has been cutting spending but in a “very selective way.”
Among those who remain “’sacred cows’”
whose incomes cannot be cut without undermining support for Putin are the 40
million Russian pensioners, who are now getting even more because of
indexation, and 15 million government employees, including the military and
other siloviki,
But supporting them has come at a
price. On the one hand, because support for education and medicine are in the
regional budgets, regional officials have had to reduce the number of employees
in those sectors in order to boost the pay of those remaining, as well as cutting
back on all other spending for facilities and the like.
And on the other, the shift in the
Kremlin’s budgetary priorities is hurting everyone else, everyone that is who “does
not fall under the wing of the government as their employer and does not work
in Gazprom or Rosneft because with these companies as with all monopolists
everything remains in order,” Gontmakher says.
Not only are people in this sector
seeing their incomes fall as profits have, but Prime Minister Dmitry Medvedev
has said that now, unlike in 2008-2010, the government will not “artificially
preserve ineffective work places.” That
means, the economist says, there will be an increase in unemployment in the
private sector. And that sector will bear most of “the growing costs” of
medical care and schooling.
That trend, Gontmakher continues,
leads one to ask how stable is such a situation going to be and for how long “because
for Putin, ‘stability at any price’ is a real mantra.” Any political, economic or
social unrest is unwelcome, even though the division of society into a
privileged and protected group and all the rest would seem to make such unrest
more likely.
“Several months ago,” Gontmakher
says, “this question was purely theoretical, but after the beginning of events
in Ukraine, a certain answer appeared.” It is now clear that Putin sees this
situation as dangerous to himself and has concluded that if nothing changes, he
could face a serious challenge in “two or four years.”
The Ukrainian events have given
Putin the opportunity to make use of patriotic propaganda that has as one of
its goals convincing Russians that any “tightening of belts and worsening of
the social situation is first being done for the salvation of Russia and second
is connected not with Putin’s policies but with external circumstances” and the
actions of “’a fifth column.’”
His logic, Gontmakher says, is
approximately this: “’Enemies surround us, we are almost in a state of war, and
for this high spiritual goal it is necessary to sacrifice some things in the material
level.’” This theme, not yet predominant
over the notion that “Russia is rising from its knees,” is likely to become
ever more important.
Putin’s use of it, the economist
says, is going to arrive more quickly “as a result of sanctions” and even more the
ways in which they in turn will lead both foreign and domestic investors to
conclude that putting their money in Russia is not a good idea. That will
accelerate Russia’s slide into recession.
Of course, promoting Russian
investment in Russia as Putin has been doing is not in itself a bad idea,
Gontmakher says, but in the current situation, it may have some consequences
that won’t promote the ends the Kremlin leader says.
In the past, Putin sought to have
Russian businesses invest in big business ventures like the Sochi Olympics, but
now, with the worsening of the Russian economy, he is likely to view their
money as a solution to the country’s social problems and to demand that they “invest”
in the solution of those.
“Russians will applaud the president”
for such a step, for the latest iteration of the old idea of “’expropriating
the expropriators.’” For a short time,
extracting more resources from businesses and investors will thus help Putin,
but it will not work for long: The amount of money he can get this way is
limited, and seeking to take a lot of it will drive business underground or
abroad and reduce tax collections as well.
Consequently, Gontmakher concludes,
while such an approach may help Putin in the short term with his electoral base
whose paternalism may be satisfied by “’bread and circuses,’” it will cost him
support in the elites and, over the longer term, “lead to the worsening of the
situation on all fronts” -- killing off
any prospects for development.
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