Wednesday, July 11, 2018

Pension Fight Highlights Russia’s Fundamental Problem – Its Government, Gontmakher Says

Paul Goble

            Staunton, July 10 – The fight over Moscow’s proposal to raise the pension age highlights the fact that Russia’s “main problem is a state [which] doesn’t fulfill its functions of serving” the people. Instead, it acts like an enormous corporation that collects rents and doesn’t distribute them in an effective way, economist Yevgeny Gontmakher says.

            And “as long as we have such a state, not a single more or less effective decision in economics or in the social sphere will be taken,” he continues. Consequently, talk about pensions, which in fact is not simply about aging but about “the fate of the country” must extend a discussion of how to reform the state (

To justify the increase in pension age, Russian officials are projecting a rise in the life expectancy of Russians to 80 by 2030, Gontmakher begins, but there is no reason to believe them, Instead, that figure may rise from the current 72 years to only 75 because more is required for that to happen than the government is doing.  And even that will be an achievement.

Those countries which have achieved longer life expectancies have higher incomes out of which money for pensions can come and better medical care to ensure people at all ages are healthy, neither of which the Russian government is promoting. Consequently, the claims of its spokesmen should be dismissed as fantasies.

Moreover, he says, there must be a different view of pension-age people and their economic and political possibilities than the one most people in Russia have. In the West, older people serve in top posts, and they use the occasion of retirement for retraining or moving into a new career altogether.

In Russia, on the contrary, Gontmakher says, people view education as a one time thing allowing them to have a job for life and then taking retirement after which they will do little unless compelled to by pensions that are too low for survival.  All that has to change; and for that to happen, the entire system has to change.

The aging of the population could prove to be a good thing if there is more investment in education and health care, he argues; and it may even be accompanied by an increase in longevity as the government says – but only if the government puts more funds into these things that it ever has in recent years.

Younger people need to be willing to put more money aside for pensions both directly and via the government, the economist argues; but to do that, they must be able to trust the government not to steal it for its own purposes. There is no reason for them to do that in either case.

On the one hand, the government now controls the banking system and siphons off funds from long-term savings accounts rather than protecting them. And on the other, it uses pension contributions to the government as simply another source of revenue for whatever it wants to do to meet its own purposes.

According to Gontmakher, trust must be restored; and he argues that one way to do that is to have the pension age adjustment begin only in January 2025 and then only gradually rather than all at once.  There is likely to be a softening of the reform this fall but not a wholesale revision of that kind.

The economist recalls that Vladimir Putin said in his message to the Federal Assembly on March 1 that “the greatest threat for Russia is falling behind.’  I agree with that one hundred percent,” Gontmakher says.

But what Putin means by this and what is required are too different things. It isn’t so much that the Russian population has fewer computers and robots.  Rather, there is a “global” revolution going on as far as the organization of society is concerned.” That that is where the problem is.

“Our lagging behind is in the most important area: in the development of the human being. For the country this can end poorly [because] our Russian individual will become non-competitive” with others.

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