Tuesday, January 28, 2020

New Government Likely to Be Less 'Soft’ than Medvedev’s, Inozemtsev Says

Paul Goble

            Staunton, January 23 – Russian commentators are speculating on how the new government will be different than the Medvedev regime, Vladislav Inozemtsev says; but to do so, it is important to understand the nature of the outgoing regime to be able to assess what changes are likely as well as to understand that the Kremlin not the government makes policy.

            The Russian economist argues Medvedev pursued, within his limits, “a relatively ‘soft’ approach to citizens” but adds that “I cannot call this liberalism.” Rather it reflected his understanding that given the enormous financial possibilities of the state, it wasn’t worthwhile to “try the patience of citizens” all the time with new pressures (znak.com/2020-01-23/chto_prostym_rossiyanam_i_elite_zhdat_ot_novogo_pravitelstva_razmyshleniya_vladislava_inozemceva).

            Inozemtsev says he views this as “a completely correct approach. But now people have come into the government who consider that ‘people are the new oil’ and likely things will be different.” The new team will impose greater controls in order to extract more resources rather than promote growth or even avoid further offending the already depressed population.

            Initially, he suggests, this will take the form of “a new corruption” as members of the new regime seek to “parasite” on the budget. Then the new division will be established, “and everything will be as before,” with new understandings of who gets what and how much rather than focusing on the development of the economy.

            Medvedev evolved in something like the same way. He initially proclaimed modernization as his goal but then at the end raised the pension age. “this mean that a cross was placed on the idea of raising the productivity of labor. Instead of that, it was decided to increase the amount of labor resources.”

            “In essence, business was sent a signal that it isn’t necessary to invest in technology and raise the productivity of labor [because] a cheap labor force predominates. That is,” Inozemtsev says, “Medvedev with his own hands destroyed his own plans after six years. When those were destroyed, he was finished.”

            “If the main efforts of the new government will be focused as I have already said on how it may be possible to extract mor taxes, then this change to a great extent will not mean anything for the Russian economy,” Inozemtsev says.  Most of the new people are from the control sectors and so that is especially likely to be the case.

            And there is another reason for pessimism, one that has its roots in the past. “If we speak on the whole,” the economist continues, “our economic growth was restorative. We were able to get out of the collapse of the 1990s as a result of high prices for oil and a number of other factors” and certain sectors really did grow.

            But where Russians encountered the numbers from Soviet times, recovery ended when those figures were approached and haven’t exceeded them in many areas.  Construction, for example, fell to the level of the 1980s and now perhaps is even lower,” a sharp contrast with even other post-Soviet states.

            And as for the defense sector, Russia now produces weapons that “don’t work, are bestially expensive or – and this is the most common situation – turn out to be Soviet but simply modernized” rather than innovations. “There are simply no breakthroughs in cosmonautics or the military sphere.” Russians have “hit a wall.”

            In making his changes, Putin talked about demography but in doing so he showed that he does not understand the challenges in that sector. Birthrates are falling in all modern countries, and while Russia’s use of maternal capital led to a short-term upsurge, the population proved it could adapt to that, took it in stride and now it doesn’t have the effect it did initially.

            For birthrates to rise significantly, the economy must improve and people must have a sense that tomorrow will be better than today. They don’t. But even more, Inozemtsev argues, Moscow should be looking less at boosting birthrates than in providing better medical care for middle aged people who now suffer from super-high mortality rates.

            But these are issues that the Kremlin and not the government will decide. “The government itself decides nothing. The principle of the new government will remain the same as it was under Medvedev: collect money from those who earn it and redistribute it among those who cannot escape from the difficulties of life” or who benefit the regime.

            Because that is the Russian government’s overriding task in the Putin regime, there is little reason to except any real commitment to taking the steps that will actually boost production as opposed to spending on national projects which may give the impression that is happening but won’t in fact have that effect.

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