The Stability Pit, or, Bend Them like Gandhi

Screenshot of a photograph on the website of the Debt Collection Development Center. The photograph was taken during a conference on debt collection. Source: Tsentr razvitiia kollektorstva — Screenshot of a photograph found on the website of the Debt Collection Development Center. The photograph was taken during a conference on debt collection. The man in glasses displayed on the screen is identified as “M. Gandhi.” Source: Tsentr razvitiia kollektorstva

Russia in the Pit of Stability
The state has disclaimed all liability for the country’s future
Elizaveta Alexandrova-Zorina
Moskovsky Komsomolets
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

Whipping Bear

Whipping Bear: Why the President Needs a “Bad” Prime Minister
Nikolay Mironov
Moskovsky Komsomolets
June 1, 2016

Remember the Soviet joke about the plumber who comes to an apartment to fix a leaky radiator?

“The entire system is rotten here: the entire system has to be changed!” he concludes.

The joke is as topical now as it was then, because the system, it seems, has hit rock bottom. But the nation is clearly of two minds. It is seemingly aware of what has been happening in the country, but at the same time it maintains its loyalty to the regime that has brought us to this pass.

On the one hand, we see a president with a huge rating. On the other hand, we see a rapidly failing economy, a deteriorating social sphere, and, consequently, a high degree of public dissatisfaction with the regime. How can it be that as the foundation crumbles, the president manages to maintain his popularity?

The logic of this social attitude was, I think, nicely expressed by a cabbie who recently gave me a lift.

“Putin is going like gangbusters: the West, America, Syria, Donbas. And Medvedev is supposed to be taking care of the economy instead of fiddling with his iPhone.”

And right then and there he served me up a helping of bad news. He has been getting less work. Prices are rising. Who knows where the hell we are headed.

The taxi driver in fact reproduced the classic propaganda formula he hears every day on the TV. Aside from America, bad officials and liberals are the root of our troubles. The government is clearly underperforming, while the president is terribly busy with foreign policy and lifting Russia from its knees. He is the country’s sacred patron, its guardian angel, and the shortcomings of officials do not stick to him.

If you are thinking straight, cognitive dissonance must kick in, of course. The president has a huge number of powers. He appoints the government, and he could, if he felt like it, sack any minister, including the prime minister, without consulting with anyone. He has the power to kickstart any reforms via presidential decrees. And the Duma is at his beck and call, for United Russia holds the majority of seats there. Why does Putin not appoint a good team, dismiss corrupt officials, and announce a policy shift for the country? How will he lift the country from its knees if the economy tanks? If he is weak and incapable of doing it, why should we support him? If he just does not want to do it, that is another strike against him. But the nation, which has a weak grasp of political institutions and sees no credible alternative in sight, is willing to believe that “Putin has it rough,” that “he is fighting,” and that “they are getting in his way.”

The massive brainwashing on this point allows the regime to keep a tight lid on the system and change nothing fundamental about it, thus preserving the current inertial scenario, which is favorable to the elites. It is favorable to them because, were the government to decide to undertake economic reforms, the economic interests of the elites would inevitably take a hit, forcing them to surrender some of their comforts and excess profits.

However, while the costs of the crisis are primarily borne by the masses, somebody has to be made the fall guy, the virtual whipping boy. With the exception of defense minister Sergei Shoigu and foreign minister Sergei Lavrov, the cabinet has been appointed to this role along with abstract liberal circles, who, allegedly, have a behind-the-scenes influence on officials.

It is obvious that today the head of state cannot officially support the current course, which has resulted in rampant poverty among the population. Equating this policy with the president would be, if not tantamount to suicide, then certainly a powerful blow to his popularity. But Putin has no intention to change course for the reason given above: the interests of the elites. For this reason, on the eve of the election campaigns, the plan is to deliberately unhook the domestic agenda from the president and hang it on Medvedev and his government. Consequently, the prime minister will no longer be the number two man in Russia, but an expendable, a scapegoat.

%d0%bc%d0%b8%d1%80%d0%be%d0%bd%d0%be%d0%b2-%d0%bd-%d0%bc — Nikolay Mironov. Photo courtesy of the Center for Economic and Political Reform (Moscow)

Moreover, we should not identify Medvedev with United Russia. Their identities are not blurred in the propaganda, and this is no accident. All the negativity towards officials and the head of the government must not devolve on the party tasked with winning a majority in the Duma in September. United Russia members have thus even been criticizing government ministers, pretending that they and the executive branch are different animals, despite the fact they have the same leader (Medvedev) and a majority in parliament, allowing them to make any and all political appointments and legislative decisions.

This is a quite important part of the spectacle. Medvedev has to be a lightning rod for Putin, and yet United Russia, which Medvedev chairs, has to make it successfully through the campaign for the new seating of the Duma. Since this is the task at hand, the regime will do its utmost to control the volume of criticism leveled at the prime minister, including criticism voiced by opposition parties. As for attacks by forces close to the regime (e.g., the Russian People’s Front’s usual philippics against bureaucrats), they will most likely come down to a matter of tweaking the picture to help the president avoid the impact of potential criticism for the current situation. But the propagandists will avoid belittling the government excessively during the election period. “Local officials” will bear the brunt of the negativity. The government, moreover, will be given carte blanche to spend budgetary funds for populist purposes and to mitigate the crisis, including through a temporary increase in dividends paid out by large corporations. (The figures currently quoted range between 300 and 400 billion, which should be quite enough to get through the summer.)

Thus, during the Duma campaign, Medvedev will draw fire upon himself. So-called managed democracy, however, will ensure this fire will not turn into a conflagration and burn the regime and the elites. The president must remain unharmed, since his main play strategically is the 2018 presidential election, a key election for the elites.

The next act in the political spectacle will be Medvedev’s premiership after the Duma elections in September and in the run-up to 2018. Here, too, he will function as a whipping boy and political expendable, readying the way for the launch of Putin’s next presidential campaign.

After the election, the prime minister, having received formal carte blanche from the voters, can undertake unpopular measures. (Unless, of course, the oil price suddenly rises miraculously.) It is inevitable. Someone has to pay for the crisis, and, apparently, the elites are still not this someone. In any case, it is Medvedev who will have to make ends meet in the 2016 budget, with its whopping 14.7% deficit on the expenditures side, and then rob Peter to pay Paul when drafting the 2017 and 2018 budgets.

If the situation gets ugly, and the populace’s complaints attain a critical mass, Putin can dismiss Medvedev on the eve of the presidential election, appointing him to some cushy post. And he will again profit from the decision, because in the eyes of the electorate, the president will be seen as a virtual national savior. Having dampened tensions in society this way, he will be re-elected to another six-year term as president, winning an acceptable percentage of the vote. The opposition will again be confounded, and someone like Alexei Kudrin can become prime minister. This will nicely symbolize the compromise between “liberals” and “conservatives,” while also functioning as a nod to the west, whose cheap money we need desperately.

The alpha and omega of all this complicated maneuvering is preserving the system, and thus preserving the privileges and assets of the supreme elites, their lifestyle, and their ability to peaceably transfer their wealth to their children. They will be able to breathe a sigh of relief and once again enjoy the sunsets on the French Riviera and in Italy.

Only time and economic conditions will tell what comes next. If the country’s currency reserves run out, and the oil price does not increase, intrigues around choosing Putin’s successor will kick off. Or a new scapegoat will be found, and so on ad infinitum. Generally speaking, the current regime just does not plan that far ahead.

Only one question remains. What is in all of this for Medvedev himself? Does he enjoy being expendable? Here it is like the line from the classic Soviet comedy film The Pokrovsky Gate: “Life is lived not for pleasure’s sake, but for the sake of conscience.”

I think the answer that immediately comes to mind is also the most likely to be the right answer. Medvedev does his job and is loyal to his boss. He cannot imagine himself outside the system, much less as the creator of a new system.

Another joke comes to mind in this connection. President Medvedev wakes up in a sweat. His wife asks what the matter is.

“I dreamt I fired Putin,” Medvedev replies.

2011 clearly showed that staging a revolution or even serious reforms was beyond the prime minister’s scope. Medvedev’s political career consists of brief ascents followed by a series of humiliations. However, his job has numerous upsides, too. Is it so bad being prime minister of such a rich country as Russia for a whole six years?

Nikolay Mironov is head of the Center for Economic and Political Reform, in Moscow, and a frequent columnist for Moskovsky Komsomolets newspaper. Translated by the Russian Reader. Thanks to Sean Guillory for the heads-up.