Russia in the Pit of Stability
The state has disclaimed all liability for the country’s future
June 22, 2016
The country has been handed the bill for Crimea, Donbass, and “stability.” The bill includes unemployment, poverty, and hopelessness. The petrodollar dolce vita is over. The only things growing now in Russia are prices, taxes, and utility bills, while incomes, purchasing power, and the standard of living are falling. Nineteen million Russians live below the poverty line. Yet the minimum monthly cost of living in Moscow is 14,413 rubles [approx. 200 euros], and 9,452 rubles nationwide, meaning that a huge number of people who are not officially poor are barely making ends meet. Thirty-nine percent of families do not have spare cash; they spend their entire incomes on groceries. The worst thing is that these people cannot afford to buy not only things but also medicines. Almost fifty percent of the population suffers from structural hunger. And that is not is the limit: the crisis is not over yet.
On the other hand, no one in the government has been sacked, there has not been a single bankruptcy on the Forbes list of the world’s billionaires, and the number of dollar millionaires in Russia has not changed. “We picked the sweet berries together, but the bitter berries I pick alone”?
“Berries Are Sweet,” a song from the film Earthly Love (Yevgeny Matveev, dir., 1974)
The propagandists have, of course, been trying to powder the ugly picture with “poll results” claiming that eighty percent of Russians consider themselves happy, ninety-four percent look to the future with optimism, and eighty-two percent support the president’s policies. Not even the most desperately optimistic patriots believe in this anymore, however. Universal jingoistic boldness has given way to a heavy hangover, and instead of talk about Russia getting up from its knees, you more often hear the saying, “It won’t be worse than the nineties.”
It will be worse. In the nineties, it was only the free hand of the market that suffocated ordinary folk, but now the market will be reinforced by the strong arm of the state. More and more new taxes will be introduced: on property, land, vehicles, securities, and anything that moves. More and more bureaucratic dodges will be devised so the state can get its share, but from everyone and for nothing. There will be more and more new construction projects whose price tags will be doubled or trebled so the “elite” can maintain their prosperity. Phrases like “Crimea tax,” “payment for an extractive economy and decades of incompetent sloth,” and “money for officials and security forces” will be inscribed in invisible ink on each new levy, requisition, and massive construction project.
Sensitive to change, since they have something to lose, and quick off the mark, because they are able to leave, the middle class has quickly realized that hard times are coming. Since the introduction of sanctions, its ranks have thinned: some have been ruined, while others have fled. Even before the crisis, the regime did everything it could to make doing business more or less honestly in Russia unprofitable. Even the sanctions and promises to support domestic producers have changed nothing. Those who steal have it good, those who work have it bad, and the smaller the business, the more it gets fleeced. Due to the government’s anti-western rhetoric, many entrepreneurs who do business with other countries also got scared they would be targeted with everything from travel bans to confiscations of money and property. Hedging their bets, they have taken refuge in the Baltic countries, where it is easy to get a residence permit, as well as in Europe, Asia, and even Latin America. So many economic emigrants have left the country in recent years that we could speak of “economic steamships” bearing them out of the country. Many have purchased citizenships in other countries, and many of those people plan to renounce their Russian citizenships due to the passage of new laws. (The question of whether Russia needs such citizens and whether we should mourn their departure is beyond the scope of the article.)
But what will happen to those people who stay here? Will the nineties seem like a piece of cake to them?
People had no money in the nineties, but neither they did have any debt. Today, around thirty-eight million people have outstanding bank loans. This is fifty-nine percent of the working population, and it excludes people in debt to semi-underground micro lenders. Moreover, eight million people have at least three outstanding loans, and every sixth person has no way to pay back his or her debts. More than half the loans taken out in 2016 were used to pay off outstanding loans. In addition, people raised on the ideology of consumption cannot kick the credit habit even in hard time. Impoverished and unemployed, they mechanically keep on acquiring debt, using the money they have left to buy appliances or a trip to a resort, thus getting bogged down ever deeper in debt. The laws are written in the interests of the banks, and the inaction of the police and the connivance of the authorities favor the debt collectors. Banks get away with things mere mortals could not get away with. Billions are spirited out of the country annually using crooked banking schemes, and these crimes go to trial only in exceptional cases. It is one thing, however, to move capital abroad and not returns millions in loans to the treasury. It is almost a safe thing to do.
It is another matter not to give back a bank 100,000 rubles on time. True, a law regulating the work of debt collectors has finally been passe. As of 2017, absolutely criminal methods of forcing people to pay their debts will be prohibited. The law is quite timely, but you can count on laws only in countries where they are obeyed. Debt collection will thus shift from the legal realm to the semi-legal realm. Instead of official bank employees, debtors will now be getting visits from shaven-headed wise guys who supposedly have no connection to the banks.
By the way, bailiffs have recently been permitted to garnish the bank accounts of debtors. No one could care less whether you need the money for a life-or-death operation or you have a whole house of children to feed. The bank needs the money more than you do. The more the debt burden of the population increases, the more such measures will be adopted to help banks get their money back.
In the nineties, after the collapse of the Soviet Union, utility rates had not yet skyrocketed, and people could put off paying bills for years on end, until better times. There were no methods of debt collection, and besides, the housing and utilities sector had not yet been divvied up among contractors, many of whom are now in the hands of officials and their “subsidiaries,” only minus any government liability.
Nowadays, people who are overdue paying their utility bills for a couple of months are threatened with having their gas, electricity, water, and heating turned off, sued in court (which in Russia is always on the side of the strong), and can legally be evicted from their apartments. The regime, of course, serves the interests of the property management companies by increasing fines and simplifying debt collection procedures. Trying to carve up a meager budget, people wonder whether to pay the utility bills or make their loan payments. They base their decision on whom they fear most: the extortionists from the utility companies or the gangsters from the banks. The water and the power will probably not be turned off nationwide, but targeted outages and evictions will definitely kick off, and the most defenseless will be at risk. In my landing, a pensioner living with her sick son has had her electricity shut off, and the widow of a man disabled during WWII has received a “polite” threat from the housing service.
For the time being, Russians are keeping on top of their bills, but according to experts, the numbers of overdue utility bills will skyrocket and grow exponentially. Already sensing the profits to be made, collection services have taken an interest in the matter. (The new law on debt collectors, by the way, does not extend to people in debt to utility companies.) Considering their methods, this is definitely frightening. The website of the Debt Collection Development Center features a special section on extorting utility bill debts that lists such methods of pressuring debtors as special notices in the media and leafletting, participation of debt collection specialists in general tenant meetings, legal threats, and unorthodox options [nestandartnye varianty].* The last point gives me the creeps. What exactly are these unorthodox options? A clothes iron? A soldering gun? Matchsticks under the fingernails?
Another sign of the times that did not exist in the nineties is that no one feels sorry for anybody nowadays. A young family with a child has no way of paying back its foreign currency mortgage? Parents cannot pay for their son’s eduction? People have to sell the TV, car or dacha to pay off the loan used to buy that selfsame TV, car or dacha? You shouldn’t have borrowed money from a bank! You have no money to pay your bills? Sell your flat and buy one you can afford! You cannot pay for medical treatment or pay your university fees? Get a job! There are no jobs? That is your fault!
People have no sympathy for others or sense of solidarity. Nor should we expect protests and rallies in support of these who have gone into debt, even when the whole country ends up in that pit. The police and judicial system insures our government against any disturbances.
In fact, the punitive apparatus (from the police and the courts to bank debt recovery departments) is a single sector in which the state is present in one way or other. But what does the state do for its own people? It squanders state funds, including the pension fund. It cuts spending on everything not associated with the military, abroad and domestically. It has been exiting the social sector, shutting down hospitals, schools, and kindergartens, eliminating further and supplemental educational programs, canceling benefits, and reducing welfare payments that as they were amounted to kopecks. 24,000 schools, 4,800 hospitals, and 4,800 medical clinics were closed in Russia from 2001 to 2013 alone. (There is no data on the Rosstat website after 201. Apparently, it was decided to classify the information.)
The state has disclaimed all liability for the country’s future, but it still costs a lot to its people. In the nineties, the regime attempted to spend the Soviet inheritance, which was so rich that part of it is still left over today. In the noughties, it cashed in on resource extraction. Today, it has no choice but to shake down its own citizens for money. The entire state vertical, the entire system of power, from the government to the security forces, has focused on this. And since it often has to shake the last kopecks from people’s pockets, the process will be cruel and painful.
Translated by the Russian Reader
* In the interests of fairness, I should mention I could not find this exact wording on the Debt Collection Development Center’s website, although I did find the page where the other methods listed, above, were discussed. TRR