Wednesday, May 31, 2017

Russia Spends Far Less on Human Capital than EU Countries – and That Isn’t Even the Worst News, Khachaturov Says

Paul Goble

            Staunton, May 31 – As percentages of GDP, the Russian government in 2015 spent half as much on healthcare and three times as much on national defense as the average countries of the European Union, Arnold Khachaturov says, a situation that if sustained will lead to national degradation over time.

            But the far worse news, the Novaya gazeta journalist says, is that the government’s lack of interest in investing in human capital is mirrored by a lack of interest among most Russians in investing in themselves through health care and education and thus putting themselves in line for a better future (

            Many have pointed to “the passive adaptation” of the majority of Russians to the current economic crisis.  Most have simply accepted that the way things are is “the new normal” and that they cannot do anything about it, an attitude that is making it even more difficult for the country and its people to escape the current situation.

            “Only 15 percent of Russians,” he says citing the findings of the Institute of Social Analysis and Prediction of the Russian Academy of the Economy and State Service, are engaged in any active efforts to improve their situation via raising their qualifications through education or seeking additional sources of income. 

            The other 85 percent is “paralyzed by a feeling of its own impotence and does not see any prospects for itself.” Consequently, members of this large group “do not invest in education, their own health, and so on,” a pattern that feeds on itself and makes the situation ever worse for themselves and Russia as a whole. 

            Only two groups of the population have a positive outlook: “workers of the force structures and those in the bureaucratic apparatus of the state, i.e., the representatives of the two most promising professions in the eyes of Russians … a manifestation of the paternalistic model of power in which the state plays the key role in solving economic problems of the population.”

            This is especially so in economies based on the extraction and sale of raw materials and a search for rents.  That search “rapidly becomes the norm not only for elites but also for the entire society, and shifting away from such arrangements is very difficult even after a reduction of the size of ‘the pie.’”

            Many have argued that Moscow needs to promote change by providing more assistance to the power strata of the population and to the creative classes. But there is little money to do the former and no particular political inclination to do the latter, Khachaturov suggests.  Instead, the Kremlin has been moving in the opposite direction.

            As a result, he continues, “the share of social payments in the incomes of Russians last year reached a historic maximum of 19 percent, four percent more than the same measure in the USSR in which people were building socialism.” Indeed, “for 40 percent of the population [now,] transfers from the budget exceed half of their incomes.”

            Once again, many in the Russian capital are talking about improving the situation with regard to human capital. But “the country has fallen into the trap of paternalism: above there aren’t the former resources and political will and below there isn’t a readiness to struggle for economic freedoms.”

            One need not be an expert on economics to understand, Khachaturov says, that “the scenarios of innovative development require a quite different social atmosphere.”

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