Mort à crédit

DSCN0660

Voronezh Region Residents Took Out Nearly 55 Billion Rubles in Loans over Six Months
Ilya Makar
Kommersant
September 28, 2017

From January to July 2017, Voronezh Region residents borrowed 54.7 billion rubles [approx. 800 million euros] from banks, reports the Central Bank’s Central Federal District regional office. Of this total, 43 billion rubles [approx. 630 million euros] were loaned for consumer needs, a figure almost 30% higher than for the same period last year. As of August 1, 2017, residents of the region owed banks 138.4 billion rubles [approx. two billion euros] in loans.

Thanks to Nikolay Mitrokhin for the heads-up. Translation and photo by the Russian Reader

Your Money Is Safe with Us

754990768314087 — Mezhtopenergobank. Photo courtesy of Alexei Zotovo/Kommersant & RBC

I love the names of Russian banks, nearly all of them fronts for the global machinations of the Kremlin, its oligarchs, and their minions.

“Mezhtopenergobank (rated among the country’s top hundred banks in terms of assets) has admitted it lacks liquidity. The difficulties arose because ‘negative information about the bank’s financial state’ had been making the rounds.”

Source: RBC Facebook News Feed

* * * * *

PRESS SERVICE

July 2, 2017

Mezhtopenergobank PJSC reports difficulties in completing transactions due to lack of available liquidity

Mezhtopenergobank PJSC, a commercial interregional fuel and energy bank, reports difficulties in completing transactions due to a lack of available liquidity.

The bank’s financial condition has become less stable due to a number of factors caused by negative market conditions, in particular, in the construction sector. A reduction in profits and an increase in the volume of overdue debts have also resulted from the refusal of major borrowers to fulfill their obligations. In addition to the need to generate significant reserves for problem loans, as required by the supervising authority, the postponement of the scheduled refinancing of a number of client projects and the revision and tightening of the repayment schedule by the Small and Medium Enterprises Bank (SME Bank) have also been negative factors in the bank’s business.

Despite the worsening of a number of financial indicators, the bank was fulfilling client requests in a timely manner, maintaining liquidity at the required level, until last week. The bank’s operations also continued to generate a stable income.

The rapid loss of liquidity was triggered by the vigorous dissemination of negative information about the bank’s financial condition, which resulted in a sharp increase in the number of client withdrawal requests. Consequently, the load on information systems increased. They could not handle the critical volume of requests, which led to failures and affected the speed and possibility of completing transactions. Nevertheless, until July 2, the bank continued to perform transactions at its offices, via remote banking, and through ATMs.

The bank reminds its clients that all funds in accounts are fully accounted for in the bank’s information systems, balance sheets, and mandatory registers, despite the fact that the ability to dispose of these funds is currently impeded. Mezhtopenergobank PJSC is a participant of the Deposit Insurance System and has insured all funds in the accounts, cards, and deposits of private individuals and individual entrepreneurs in the amounts stipulated by law.

We would also remind borrowers and co-signatories that all payments under current obligations to the bank will be received and processed as usual, and must be sent to Mezhtopenergobank PJSC by the due dates, as stipulated in agreements.

Remote client services are operating in informational mode. Clients will have full access to bank account balances, transaction records, and electronic statements.

Customers and co-signatories will be informed about further actions as additional information becomes available.

Source: mteb.ru

Translated by the Russian Reader

Russia’s Economic Performance: Fudging the Stats

“The Country’s Leaders Are Relying on Erroneous Economic Data”
Economist Grigory Hanin Explains How the Official Figures Are Deceiving
Alexander Trushin
Ogonyok
February 11, 2017

The article “Russia Cannot Be Understand by Labor” (Ogonyok 3, 2017), which dealt with low workforce productivity in Russia, struck a huge chord with readers. Serious academics responded to it, including Grigory Hanin, a professor at RANEPA’s Siberian Institute of Management, and Dmitry Fomin, an assistant professor at the Novosibirsk State University of Economics and Management. They are convinced the official figures on which both government agencies and the authors of the above-mentioned article rely do not jibe with reality.

We quote the letter they sent to us:

“Your magazine has been promptly sounding the alarm as to Russia’s lagging behind in terms of workforce productivity. Your focus on the obsolescence of Russia’s production facilities is also justified. But the stance adopted by the authors is weakened when they rely on figures from Rosstat, which embellish the real state of the economy, as the Soviet Central Statistical Directorate (TsSU) used to do. We have produced alternative estimates of macroeconomic indicators for the Soviet Union since the early 1970s and now for the Russian Federation, based on a number of more reliable figures from Soviet and Russian statistics. We have been able to refine Rosstat’s estimates. The gap in workforce productivity between Russia and the developed countries is greatly underestimated in the article. If instead of the quite dubious cost data cited there, you use the genuine data, you find a gap of five to seven times or more, sometime as much as ten times.

“The authors have greatly underestimated the deterioration of physical capital. We have made alternative estimates of the depreciation of fixed assets in the Russian Federation from 1991 to 2015, taking into account the real value of fixed capital during this period and the preceding Soviet period. The estimates have shown that the depreciation of fixed capital amounted to 64.4% in 2015, rather than the 49.4% indicated by Rosstat. […] For a better understanding of our country’s problems with regard to the depreciation of physical capital, we should factor in the depreciation of human capital, the disastrous decline in education from the 1970s to the present. The objective of navigating a way out oof Russia’s backwardness in terms of workforce productivity is extremly complex, requiring colossal efforts and sacrifices from the entire society[.]”

Ogonyok asked one of the letter’s authors, Grigory Hanin, to explain what was wrong with the statistics cited by everyone from government agencies to ordinary people.

What is the difference between the official figures and your estimates of Russia’s macroeconomic indicators?

According to the longitudinal research Dmitry Fomin and I have been doing, Russia’s GDP has not grown by 13.4% from 1992 to 2015, as Rosstat claims, but has decreased by 10.2%. During the same period, Russia’s workforce productivity has fallen by 30.1% instead of having grown by 9.2%, as the official figures claim. Basic fixed assets (buildings and plant, machinery, machine tools, and other assets involved in production) have decreased by 29.2% in terms of their full book value, although the official figures claim they have increased by 50.9%.

How do you explain this discrepancy?

The official figures deal with basic fixed assets incorrectly. We are talking about physical capital, a vital economic resource. Along with human capital, it defines the level of economic development and shapes GDP’s performance and value and other macroeconomic indicators. No other indicator has been distorted as much in statistics in the Soviet Union and Russia as this one. It is a fairly complicated indicator. Many countries have problems with it, even the World Bank, which does its estimates based on the official data submitted by each country, including Rosstat.

How important is the erroneous estimate of fixed assets?

First of all, when there is inflation, which there has almost always been in the Soviet Union and Russian Federation, the underestimation of fixed assets has always led to exaggerating their performance, since old and new assets are valued in terms of different rubles: old assets in terms oof expensive rubles, and new assets in terms of cheap rubles. All of this impacts the underestimation of the value of depreciation and production costs. Consequently, profits are exaggerated.

Meaning, we cannot get a fix on the real state of the Russian economy?

It’s a problem that has been dragging on since the late 1920s, when assets were, according to my calculations, undervalued by almost half. Consequently, resources spent on refurbishing the assets were not take into account, nor was the increase in production costs. In the 1930s and 1940s, the underestimation continued to grown, despite reevaluations in certain sectors. Only in 1960 was a general reevaluation of fixed assets carried out, but it was chockablock with mistakes. Afterwards, due to ongoing inflation, the error in calculating the value of fixed assets continued to grow. By the late 1980s, it had grown by four and a half times. By 2015, the fixed assets were underestimated by 7.3 times, according to our calculations.

In the Soviet economy, all cost data that reflected productivity and national income growth, including the value of fixed assets, were distorted. Soviet production figures given in physical terms (tons, units, etc.) can be considered more or less reliable, because the central planning process was based on them.

But the problem persisted when we switched to a market economy in the 1990s?

In the early 1990s, Russian statistics switched to international standards. We seemingly had rid ourselves of the shortcomings of Soviet statistics, but new ones emerged. Several attempts were made in the 1990s to reevaluate fixed assets, but the official figures on the trends in fixed assets still turned out wrong.

What is your estimate of the scale of the disaster?

It was only this year we finished a full year-by-year estimate of the performance of fixed assets from 1991 to 2015. I have to confess the outcome was surprising. I should emphasize from the outset that our calculation does not claim to be totally precise. (There is no such animal in macroeconomic statistics.) But we are confident of its objectivity. So, the volume of fixed assets in terms of depreciation had decreased approximately twofold by 2015 compared to 1991. [This figure differs from the total book value, which is based on the original cost of the assets, to which upgrading costs have been added — Ogonyok.] This is much more than the damage incurred by the Great Patriotic War [i.e., WWII]. The decrease then amounted to 33.5%. Here is another figure. The Russian economy has lost a total of 422.5 trillion rubles in fixed assets, taking into account their depreciation over the last 25 years. This sum is equal to Russia’s GDP for the last five years. The reduction of fixed assets has occurred because capital investment during the post-Soviet period has been less than the scale of asset retirement. Rosstat, however, does not take this into account attempting to persuade us the reverse is true: that physical capital has increased by 51% since 1991. This radically alters how we evaluate the economy’s profitability, because it dramatically increases the costs of depreciating fixed assets. According to our estimates, in the early 2000s, their overestimation led to huge losses for the major manufacturing industries, while the commercial services sectors were highly profitable. Guided by official data on income, however, the tax authorities collected taxes mainly from the loss-making manufacturing sectors, thus exacerbating their financial difficulties, while exacting a minimum of taxes from the service industries.

How does the Russian economy look nowadays?

Let’s begin with the fact that half the fixed assets are left. I should note they are used better now in certain industries where the market economy has had a positive effect. The greatest reduction of fixed assets has occurred in manufacturing, but they have grown in the commercial services sector. At the same time, we have two industries that were almost wholly revived by foreign capital, beer brewing and confectioneries manufacturing. The services sector has increased almost twofold in Russia since 1991. This applies to the private sector of the economy: retail and wholesale trading, food services, hotel management and tourism, vehicle maintenance, private medical care, communications, public information services, and so on. In the public services sector—public healthcare, science and education, sport and physical education, housing and public utilities, the public road system—fixed assets have declined, but not as much as in industry. In Soviet times, there was a disproportion: an emphasis on heavy industry alongside underdeveloped service and consumer sectors. Now we see the hypetrophied growth of commercial services and the underdevelopment of the economy’s investment sector.

How has GDP’s performance fluctuated during this period, according to your calculations?

We have still not reached the level of 1991 in comparable prices, whereas Rosstat shows a surplus of 13%. However, in the 1990s, Rosstat even undervalued the drop in GDP a bit, because it gave insufficient weight to the gray economy. GDP was greater in the 1990s than Rosstat has claimed. On the other hand, from 1998 to 2007, the official figures greatly exaggerated the growth in GDP: 82%. According to our figures, growth amounted to only 48%. The upsurge in the early noughties, aside from a rise in the oil price, was due to the use of the reserve production capacity and manpower that had formed in the 1990s. By 2007, however, these growth opportunities had been tapped out. Stagnation and then a decline in economic growth inevitably had to set in. Which was what happened.

And things are also not kosher with the official inflation estimates?

Exactly. The underestimation of inflation levels is determined, albeit roughly, by the difference between Rosstat’s GDP performance stats and ours. This difference amounts annually to around two percentage points. Instead of 5% per year, say, it amounts to 7%.

Why do we need to calculate inflation accurately?

It affects social spending by the state: pensions, benefits, and all other payments that the state should index for inflation. And besides, there are the state’s investment costs, which have to account for inflation. But if accurate figures do not exist, then there is not enough money for new projects, which happens quite often.

Have foreign experts provided more accurate assessments of the state of the Russian economy?

No, they have all been mistaken, because they used Rosstat’s figures for their estimates. In the 1990s, they thought that since Rosstat had switched to international standards, they would not need to recalculate anything. On the other hand, the World Bank monitors two hundred countries, and it is simply physically incapable of recalculating the data for every country’s economy.

You have claimed that workforce productivity in Russian is lower than in developed countries, by five to seven times, or even ten times. What is the basis for these estimates?

There are two types of economists: macroeconomists and industrial economists. And there are methods of estimating workforce productivity. The first focus on price indicators, while the second focus on non-monetary indicators. The first calculation is often wrong due to the dubiousness of the ruble-to-dollar conversion factors. But you can use non-monetary indicators for certain industries, and then you obtain different outcomes. For example, petroleum production. Divide the volume of production by the number of people employed in the industry, and you get output per worker. You can do the same thing with metallurgy, machine building, agriculture, and all industries, and then compare them with other countries. That was how we got the outcome about which we wrote to you. The estimate was derived from numerous Russian industry publications.

How do you assess the state of human capital in Russia?

We suffered huge demographic losses in the twentieth century through wars, purges, famine, emigration. According to my estimates, we lost between 70 and 80 million people. Moreover, the losses affected the intellectual segment of the populace more: such people were more likely to die in wars and more likely to emigrate. Three of the four living Russian Nobel Prize winners work abroad. Add to that the degradation of secondary and higher education that has been observed since the 1970s. Plus the stupefaction of the populace by the media, especially the electronic media. I go to our library in Novosibirsk, one of the largest libraries in Russia. The reading roooms are nearly empty: there are more librarians there than readers. Recently, I visited the Bavarian State Library. Tears welled up in my eyes. I saw an enormous reading room, nearly a kilometer long, chockablock with people. If you go into our main bookstore in Novosibirsk you’ll find ten to fifteen shoppers, while in Munich they have a seven-storey bookstore. There are something like two hundred people people browsing the shelves, picking out books, sitting on couches, sipping coffee, and chatting.

Can we bridge the gap with the developed countries?

Bridging the gap is unthinkable. Imagine you are standing at the starting line, and your competitors have taken off and have a five-kilometer headstart on you. The government relies on erroneous economic data and underestimates the depth of problems. The illusion is generated that economic recovery is possible without serious costs. We have estimated that, in terms of 2015 prices, 14.6 trillion rubles in investments would be required to maintain fixed assets and grow them by 3%. Plus, we would need 900 billion rubles for working capital. To develop human capital—education, healthcare, research—we would have to invest 10.3 trillion rubles. This would amount to 25.8 trillion rubles a year, which is a third of Russia’s annual GDP.

And nothing can be done?

It’s possible to narrow the gap. To do this, we would have to redistribute incomes to physical and human capital, and to the neediest segments of the populace. But even that would require enormous efforts. We could, for example, redistribute incomes to narrow the social differentiation among decile groups from the current ratio of 30:1 to 6:1, that is, the figure that exists in most Western European countries. But this would all take many years to accomplish.

***

Ogonyok asked Rosstat to comment on the divergence in key economic development indicators for Russia. We are waiting for a response to this request.

Business Card

An Economist with a Stance

Grigory Hanin finished graduate school at the Leningrad Finance and Economic Institute in 1962, and then worked at Novosibirsk State University. In 1968, he successfully defended his candidate’s dissertation, but the Higher Attestation Commission (VAK) refused to approve it due to its “market-based approach.” In 1972, Hanin was dismissed from the university for his dissenting views on the economy, which were, allegedly, “negatively affecting” students in the economics department. Hanin could not be expelled from academics, however. He successfully defended his candidate’s dissertation at the Institute of World Economy and International Relations of the Russian Academy of Sciences (IMEMO RAN), and then his doctor’s dissertation at the Central Economic and Mathematical Institute of the Russian Academy of Sciences (TsEMI RAN). Hanin did research on alternative macroeconomic estimates of the Soviet economy. In 1987, Hanin and journalist Vasily Selyunin published the famous article “Tricky Numbers” in the journal Novy Mir, causing a huge public outcry. Hanin is currently a professor at RANEPA’s Siberian Institute of Management, where he researches recent Russian economic history.

The Numbers

A Big Difference

How official and alternative estimates of Russia’s macroeconomic performance vary

	Rosstat’s figures	Alternative estimates
GDP*	113.4%	89.8%
Productivity*	109.2%	69.9%
Inflation**	5.38%	7.38%

* In 2015, relative to 1991

** In 2016

Translated by the Russian Reader. Thanks to Sergey Shpilkin for the heads-up

Land of NOD

nod miting-lurye portait — “Stop American demonocracy! Don’t touch Russia, gentlemen! My country is a great power!” Demonstrators at September 19, 2015, NOD rally on the Field of Mars, Petersburg. Photo by and courtesy of Vadim F. Lurye

Petersburgers, Stop the “Social Bombardment” of the Population!

Coordinator: Tatyana Chuprova

Venue: 4:00 p.m., September 19, 2015, Field of Mars, St. Petersburg

Our President has made significant progress in the struggle to return the sovereignty lost by our country after the defeat of 1991.

The United States could not remain indifferent to a colony’s desire to gain independence. The decline in oil prices, the coup in Ukraine, and the sanctions are all episodes in the economic war declared by the West against our Motherland.

As a result of his commitment to a national course for the country’s development, the head of state’s rating has reached a historic high. Contrary to the expectations of enemies, the people love Vladimir Vladimirovich for his merits.

Therefore, the West has moved on to the next phase, “social bombardment.” The dismissal of police officers, layoffs of doctors, cancellation of welfare benefits, increases in utility rates, and so on are all aimed at undermining our leader’s rating.

The Central Bank is a vital link in the external governance of our country. Under the Constitution, the Central Bank is independent from Russian state authorities. And, according to international agreements, it is subject to the instructions of the IMF. As a consequence, loans in Russia are expensive, the President of Russia’s orders for de-offshoring the economy have been sabotaged, the exchange rate has collapsed, and, along with it, so, too, has the country’s economy.

Let us unite in the face of external threats! Stop “social bombardment”! Let’s express our support for the national leader Vladimir Vladimirovich Putin!

nod miting-suggested image — “Rally, September 19. Stop the social bombardment of the population!” Image courtesy of rusnod.ru

Source: Russian National Liberation Movement (NOD) website. Translated by The Russian Reader. See my previous posts about NOD.

The Putinist Economic Miracle

As Inflation Soars, One in Five Russians Can Only Afford Bare Necessities
Delphine d’Amora
May 14, 2015
The Moscow Times

Many Russians flocked to stores late last year as the ruble plummeted against the euro and dollar, eager to get the most out of their savings before the prices of imported goods rose.

Nearly 20 percent of Russians can now afford nothing more than the absolute necessities as double-digit inflation erodes their spending power, a survey by consumer research firm Nielsen found.

The figure is a record high for the survey, which has been conducted regularly since 2005. Even in the first quarter of 2009, in the depths of the previous financial crisis, only 4 to 7 percent of Russians reported having no spare income after paying for basic items such as food and accommodation.

Runaway price rises are making it harder to make ends meet. Consumer price inflation was running at 16.4 percent in April this year after hitting a 13-year high of 16.9 percent in March, according to state statistics service Rosstat. Prices have been driven up by Russia’s ban on a range of food imports from the West — a response to Western sanctions over Ukraine — and a steep devaluation of the Russian currency.

High inflation has depressed real wages, which fell 9.3 percent year-on-year in March, according to Rosstat. It has also encouraged some unwise behavior — Many Russians flocked to stores late last year as the ruble plummeted against the euro and dollar, eager to get the most out of their savings before the prices of imported goods rose.

This wave of spending is now coming back to haunt consumers, Ilona Lepp, Nielsen’s commercial director for Russia, said in a statement.

“After spending a lot at the end of 2014, Russians ran up against a significant rise in prices on the most essential goods in the beginning of the year, which means the drop in real wages was felt particularly hard,” Lepp said.

Russians’ consumer confidence fell to a record low of 72 points in the first quarter on Nielsen’s Consumer Confidence Index, a seven-point dip from the previous quarter.

With falling real wages forcing Russians to reduce spending, 55 percent of respondents to the survey said they would cut back on entertainment outside the home. Fifty percent said they would save on clothing purchases and 48 percent planned to switch to cheaper food brands.

Such cutbacks brought overall consumer spending in Russia down 8.7 percent year-on-year in March, damaging a key sector of the economy and deepening an economic slowdown that is expected to shrink the country’s gross domestic product by up to 5 percent this year.

The survey, part of Nielsen’s global consumer confidence study, was carried out among Internet users between Feb. 23 and March 13 of this year. The margin of error did not exceed 0.6 percent.

Icon by artist Sergei Suksin

Ilya Matveev: Austerity Russian Style

Austerity Russian Style
Ilya Matveev
November 19, 2014
OpenLeft.ru

Despite attempts to confuse and misinform the public, protests in the social sector will continue to grow.

“Only the rich will survive”

Reforms of the social sector in post-Soviet Russia have always had a very important feature: their course has been completely confusing and opaque, and everything connected to the reforms, even their strategic goals (!), has been shrouded in mystery. This is partly a consequence of the extreme fragmentation of the Russian state apparatus, unable to implement a completely coherent reform strategy, but in many ways it is a quite deliberate policy: a policy of disinformation.

The Russian authorities are confident that painful reforms are not necessary to explain, let alone announce, sometimes. One can always give journalists the shake, because who are they anyway? As for the public, it suffices to blame them for not understanding the grand design, for confusing reform and optimization, optimization and modernization, modernization and business as usual. This “spy” policy towards reform leaves wide room for maneuvering. It is always possible to note the level of public indignation and pull back a bit (while making the obligatory remark, “That was the way it was intended!”).

This has been borne out by research. For example, Linda J. Cook, author of Postcommunist Welfare States, has written that when carrying out reforms, both the parliament and the government have relied on a strategy of delays, deliberate obfuscation, and denial of responsibility.

At moments of crisis, chaos and uncertainty in the social sector only grow. Yet now, in my opinion, an absolutely unique situation has taken shape.

First of all, the social sector in Russia has been moved into an austerity regime. This must be noted. Funding will be cut, along with the quantity (and quality) of public services in education, health, and other areas. But how has this austerity been organized?

Paradoxically, it was launched not by a technocratic decision hatched in the bowels of the government, but by Putin’s populist decree on increasing the salaries of state employees. Disinformation has reached its peak: cuts are made to the social sector via a decree that at first glance has nothing to do with it. However, it does, as it turns out. The mechanism is simple. Given insufficient federal subsidies for executing the decree, the regions can carry it out only one way: by cutting some workers while increasing the workload (along with the salaries) of other workers. Of course, the decree does not function in isolation: for example, in health care it is combined with measures to move to “single-channel” financing, meaning that salaries have to be increased, but the only available money is from the health insurance fund. Together, the decree and single-channel financing form a lethal package, leading to indiscriminate layoffs and the closure of health care facilities.

Such is the strange state into which the social sector has been immersed. No less strange is the political spectacle being played out around this issue, a spectacle that reprises in caricatured form the conflict between Party activists and bourgeois specialists in the 1920s. When government and regional “specialists” warn about the impossibility of fulfilling the “order of the Party” (Putin’s May 2012 decrees), “activists” from the All-Russia People’s Front reply, No objections! If you mess up, it’s the firing squad for you! Putin weighs in wisely: the decrees must be carried out, but taking mistakes into account, and without excesses at the local level.

However, the banal fact is that from the outset the federal funds allocated for implementing the decree were not nearly enough, and subsidies will be cut even more in 2015. In such circumstances, implementing the decree on salary increases, in fact, automatically translates into layoffs, increased workloads, and the closure of public facilities.

At the same time, according to Kommersant, “[I]n general, suspension of the decrees may not have to be announced: technically, the government and the administration do not have to do this.”

It is a kingdom of crooked mirrors. “Salary increases” mean layoffs and increased workloads. These increases/layoffs can be stopped at any moment, but what that depends on is unclear. “Activists” are fighting “specialists.” Putin remains calm.

But will society remain calm? The juggling act with Putin’s decrees has not gone unnoticed by independent trade unions representing state employees, including Action, Teacher, and University Solidarity. University Solidarity has already announced protests against cuts to subsidies for increasing the salaries of university lecturers in 2015. The layoffs cannot be hidden, even if they are presented as “increases.”

The rally against the dismantling of the Moscow health care system, on November 2, was the largest social protest since 2005. The protests will continue to grow. In this situation, in my opinion, it is important to point to the clear link between cuts to the social sector and Putin’s policies. The “activists” are no less to blame than the “specialists,” but the main culprit is Putin, who, after all, signed these very decrees. The only way to stop the degradation of the social sector and prevent permanent crisis in the Russian economy, which actually has lasted since 2008, is broad political change.

Ilya Matveev is a researcher and teacher.

Today’s One-Minute Russian Lesson

Рубль выходит из-под контроля.

[Rubl’ vykhodit iz-pod kontrolya.]

The ruble is getting out of control.

Пенсионер избил свою жену молотком и выбросился с восьмого этажа.

[Pensioner izbil svoyu zhenu molotkom i vybrosilsya s vos’mogo etazha.]

A pensioner beat his wife with a hammer and jumped from the eighth floor.

source: Petersburg Channel 100

Zorkin: The Road (Back) to Serfdom?

Valery Zorkin

A little over a week ago, western media outlets made a big little fuss over an article by Russian Supreme Court chief justice Valery Zorkin, published on September 26 by Rossiiskaya Gazeta, the official government newspaper. They accused Zorkin of advocating a “return to serfdom.” Elena Holodny, writing in Business Insider, seems to have broken the story in the English-language press and thus set the tone for subsequent coverage:

He advocates for serfdom and says that it was the main “staple” holding Russia together in the 19th century. He justifies his argument by saying that serfdom is beneficial for the serfs.

In the article he writes (translated from the original Russian by Business Insider):

Even with all of its shortcomings, serfdom was exactly the main staple holding the inner unity of the nation. It was no accident that the peasants, according to historians, told their former masters after the reforms: ‘We were yours, and you — ours.’

[…]

The roughly translated term “staple” (in Russian “скрепа”) is significant. It’s an older word that has become popular in recent years after Putin used it in a news conference in 2012.

Prior to the conference, that word was basically never used in speech.

In the news conference, Putin said there was a “lack of a spiritual staples” among Russians — meaning there was no spiritual unity. And he subsequently indicated that Russia needed a “spiritual cleanse.”

“Putin essentially used the term ‘скрепа’ to mean the ‘spiritual staples that unite the Russian society.’ He was saying that we need a spiritual unity amongst the whole Russian society,” a Moscovite [sic] told Business Insider.

Following Putin’s news conference, Russian politicians and citizens have started using the word all over the place.

And Zorkin is following suit by using the Putin terminology to indicate that serfdom is the “spiritual staple that unites the [Russian] society.”

In the current climate of cheap hysteria and mental laziness, it is easier to make headlines, literally, saying a top Russian official wants his country to return to serfdom than to read his long, mostly dry-as-dust, pseudo-scholarly article and figure out what he was really trying to say. The payoff, in fact, comes in the final three paragraphs of Zorkin’s article, in which there is no mention, much less “praise,” of serfdom (the emphasis, below, is mine):

Opinion polls and many conflicts in our courts show that the broad masses of our people only suffer as a given the style and type of social, economic, political, and cultural life that the era after the revolution of 1991 brought to Russia. But internally they do not regard them as just and proper.

Moreover, polls show that the greatest degree of aversion pertains to legislative innovations that attack the moral and ethical sphere of social life. [This aversion] is registered primarily among religious people, regardless of denominational affiliation. It is especially pronounced among the older and middle generations. In contrast to the results of opinion polls taken a decade ago, however, it has also begun to manifest itself quite clearly among completely atheistic young people. The new legislative “tolerance” in family, gender, behavioral, and educational relations has been met with growing and increasingly widespread protest.

In connection with the above considerations and historical analogies, I want to reiterate a thesis that I have repeatedly voiced before. Any attempt to overcome “in a single leap” the gap between the law (and law enforcement) and mass perceptions of welfare and justice are fraught with social stress, shock, the growth of all kinds of alienation within society, and between society and the authorities, and, finally, social chaos. Which, as a rule, has to be extinguished by means of counter-reforms and repression.

Zorkin’s article is thus an apology not for serfdom as such. After all, before it was abolished, serfdom really had been the glue that held the Russian political economy together, just as slavery had been in the southern American states, and Zorkin goes to great lengths in his article to show that the nineteenth-century Russian elites, even the nominal conservatives among them, mostly agreed that serfdom was an evil that had to be “extinguished”—eventually and ever so gradually. The article is, rather, a defense of the current reactionary regime, which has increasingly used a combination of funhouse mirrors (“pollocracy,” the relentless manufacture and promotion of moral panics, wildly manipulative and frantically suspicious media coverage of political and social conflicts abroad, “weaponized absurdity”), outright crackdowns on prominent political dissidents, and targeted ultraviolence to persuade itself, the various Russian publics (whether liberal, leftist, conservative or indifferent), and western reporters, policymakers, and pundits that it is acting on behest of a “conservative” popular base dwelling in the heretofore unknown “Russian heartlands.” And even (by way of giving the talking classes more nonexistent fat to chew) that this newfound “traditionalism” has considerable appeal well beyond those heartlands, in the allegedly morally fatigued countries of the perpetually collapsing liberal West.

As a friend of mine wrote to me when we were discussing Zorkin’s article, “It is no longer enough to gang up on gays. We must also make women wear long skirts and headscarves. And forbid them from getting a higher education.” This new overwhelming necessity to de-modernize Russia, however, is not grounded in an actual conservative groundswell or the perennial aversion of the “broad Russian masses” to reform and (God forbid) revolution. Rather, it is meant to jam up brain cells so they cannot ponder (much less act against) sleights of hand like this:

Sanctioned [Russian oligarch] villa owners could be reimbursed with Russian pension savings: The government said in mid-September it was setting up a fund to support sanctioned companies, which would receive a cut of the 309 billion rubles ($7.8 billion) gleaned from redirecting part of the public’s pension savings to the budget this year, the RBC news agency said at the time.

Zorkin has not been the only top Russian official contemplating the lessons of Russian history in the past couple of weeks:

German Gref, head of Russia’s biggest lender Sberbank, on Friday castigated systemic inefficiencies in the Russian government that, he said, waste trillions of rubles and threaten to drag Russian society back into Soviet times.

“We have inconceivable social costs in the area of public administration,” Gref said in a speech to investors and top officials gathered at the VTB Russia Calling investment forum.

These costs increase government spending and render well-intended initiatives ineffectual, threatening Russia with a repeat of past mistakes, he said.

“[Soviet leaders] didn’t respect the laws of economic development. Even more, they didn’t know them, and in the end this caught up with them. It is very important for us to learn from our own history,” Gref said.

Actually, Gref’s speech was much more revolutionary (whatever you think of his neoliberal biases) than this mild account would suggest. If you listen to the whole thing (below, in Russian), you will realize it was a direct attack on the myth of Putin’s extreme competence as a manager of economic policy and the omniscient wizard behind Russian’s alleged newfound prosperity:

In this light, Zorkin’s article should not be seen as a literal call for a return to serfdom, but yet another warning (dolled up, as is often the case with pseudo-scholarship like his, as a “sober” reading of Russian history) that at least one important part of the ruling class is supremely ready and willing to deepen and expand the Duginist quasi-Talibanesque media spectacle of the past year, in which basically anyone at all (except the ruling class itself, of course) is blamed for Russia’s misfortunes or accused of plotting against it—the “Kiev junta,” “foreign agents” (i.e., local NGOs defending basic rights), NATO, Obama, singer Andrei Makarevich, “Ukrainian fascists,” western rock bands, Greenpeace activists, the EU, American students studying Russian at Petersburg universities, “extremist” journalists, you name it. The only solution offered for repelling these “assaults” is to intellectually and culturally medievalize the country that once, not so long ago, gave the world its first artificial satellite and sent the first man into space. But the real point of all this flailing is to prevent anyone from asking too forcefully why this incredibly wealthy country’s vast human and natural resources are siphoned away on frivolous mega projects like the Sochi Olympics and making a few members of a lakeside dacha cooperative fantastically wealthy.

In any case, serfdom’s alleged new best friend, like so many latter-day enemies of “innovative” gender relations and education for women, was singing a very different tune (almost the opposite one, in fact) only eight years ago. They do have ways of making a guy talk. And polling the life out of people whose heads they are otherwise stuffing with nonsense and who cannot be trusted to vote the “right” way.

Art Criticism

The best critique of the recent desperate bit of performance art on Red Square has been this brief analysis, by Leonid Bershidsky, of Russia’s dismal economic prospects and the state’s seeming indifference to this state of affairs:

Pavlensky, however, may have been on to something. The apathy and fatalism he so dramatically depicted is clear in the Russian economic ministry’s long-term economic development forecast. The forecast, which stretches through 2030, is a major strategy document meant to serve as the basis for policy decisions — though in this case the most probable scenario does not require much action at all.

In March, when the previous version of the forecast was adopted, the basic scenario was a moderately optimistic one that had the Russian economy growing at an average of 4 percent a year, noticeably faster than developed countries like the U.S. and members of the European Union. The current version is based on a “conservative” scenario, with average growth limited to 2.5 percent annually and a drop in Russia’s share of global output to 3.4 percent in 2030 from 4 percent in 2012. In other words, despite consistently high energy prices — in 2030, the forecast sees oil at $90 to $110 per barrel in 2010 prices — Russia will keep lagging behind other developing nations, especially China and other Asian countries.

While the previous version of the forecast envisioned a net capital inflow of 1.5 percent gross domestic product, the current one says capital flows will be “balanced” — an improvement on the $80 billion capital flight expected this year but not an overly ambitious goal.

Other parts of the forecast look just as dismal. For example, private investment in research and development is not expected to make any contribution to economic growth. Russia will only be able to increase productivity by importing technology, which by 2030 will allow it to reach 66 percent of the U.S.’s productivity level, up from the current 39 percent. There will be more income inequality; incomes and domestic demand will grow about as slowly as the economy as a whole.

“The expected trends in global raw materials markets will not be able to re-emerge as prime drivers of economic growth,” the forecast says. “At the same time, structural constraints to growth have significantly increased. They include undeveloped infrastructure, obsolescent equipment, unfavorable demographics and a growing deficit of qualified personnel. That means in the next 20 years, the Russian economy will not be able to return to the 2000-2008 growth trajectory and even keeping up a lower growth tempo will require significant reforms.”

Such depressing reading gave rise to frustrated and angry comments. “A new strategy for Russia: we have lost the last shred of conscience and we are too lazy even to pretend that we are doing something,” money manager Yulia Bushueva wrote on Facebook. “Don’t bother us, we are busy stealing.”