Boris Kagarlitsky on the socially responsible state in Russia

Jurriaan Bendien bendien at
Mon Jul 21 18:31:11 MDT 2003

Moscow Times, Tuesday, Jul. 22, 2003. Page 13

Welfare on Eve of Elections

By Boris Kagarlitsky

Russia likes to think of itself as a socially responsible state. No one
knows exactly what this means, but most everyone agrees that it's a good
thing. All of our political parties portray themselves as champions of
public services, with the possible exception of the Union of Right Forces.

In practice, the socially responsible state in Russia amounts to what has
survived of the Soviet system. Privatization in the 1990s never got as far
as health care, education, public transport and housing. As a result, these
services remain largely the responsibility of the state, though private
enterprise has made inroads as well.

The reform program proposed by Economic Development and Trade Minister
German Gref shortly after President Vladimir Putin took office threatened to
put an end to such holdovers of the Soviet past. For two years the
government frightened us with the prospect of housing reform, explaining
that we were living beyond our means. The state was subsidizing the upkeep
of our apartments, we were told, and that was unacceptable. Those subsidies
come from our taxes, of course, and the overwhelming majority of Russians
believe that the state should subsidize housing. But in terms of free market
ideology, apparently, we have all got it wrong. And who's to argue with

Housing reform was a resounding failure. In Voronezh, where the local
government introduced a new system of housing payments, reform led to
widespread unrest and no less widespread nonpayment. Upon closer inspection,
it emerged that the new system would either leave one-third of the
population without a roof over their heads or that the various forms of
compensation doled out to low-income residents would more than cancel out
any savings achieved by abolishing blanket housing subsidies in the first

Attempts to introduce per-minute billing for telephone calls also went
nowhere, although the prospect of payment based on the length of calls gave
pensioners and Internet users no rest for several years. In the end, the
issue got buried in the State Duma. New legislation offering consumers a
range of payment options guarantees that nothing will change, because no one
in their right mind will voluntarily pay more.

The bureaucrats' next big idea was privatization of public transport. They
didn't seem bothered by the fact that most public transport networks belong
to city governments that have no intention of handing them over to private
operators. The smart money says that privatization of trolleybuses will
share the fate of housing reform.

On the whole, the socially responsible state has held together. Even the
authors of Gref's reform program have fallen silent about the need for
change. But that's not the end of the story. While reform efforts are at a
standstill, the cost of living is not. This summer, everything from
telephone charges to electricity is becoming steadily -- if not
dramatically -- more expensive. Rate hikes are under consideration. The cost
of education is also on the rise. Take, for example, Moscow Linguistic
University's notorious decision to charge students on full financial aid for
foreign language instruction. Nor were fee-paying students let off the hook;
they would have been charged twice. After protests by students and faculty,
the university administration shelved the proposal.

By fall, consumers will discover that their cost of living has significantly
increased. Where should we point the finger? Parliamentary elections are
right around the corner, and come fall the campaign will be in full swing.
Yet there's no reason to assume that the rising cost of living will become a
major campaign issue. Voters know full well that on this issue, the Duma is
neither here nor there. That will change when we get around to the
presidential election next year.

In 2000, it was no liability for Putin that he had people like Gref in his
entourage. Few really knew what Putin was about, and they certainly weren't
thinking about Gref or his reform program. Now all that has changed. The
president will have to prove his commitment to the basic principles of the
welfare state. For powerless Duma deputies, words will suffice. But Putin
will have to back up his words with deeds.

If the rising cost of living is the only appreciable result of Putin's
social policy when election day rolls around, he will have a much harder
time than expected winning re-election. But then again, by hook or by crook
the Kremlin will ensure Putin's re-election.

Boris Kagarlitsky is director of the Institute of Globalization Studies.


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