“We Are Racing into a Huge Pit”: The Small-Town Russian Businessman Who Publicly Opposed Putin

All that is left of the anti-Putin leaflets posted by Nikolai Korshunov

“We Are Racing into a Huge Pit”: The Businessman Who Spoke Out against Putin
Аlexander Valiyev
Radio Svoboda
26 February 2018

In the town of Verkhny Ufaley, Chelyabinsk Region, police have torn down posters cataloguing the “brilliant” outcome of Putin’s reign from the outside walls of several shops. The posters were hung there by a local businessman, who has already had occasion to fight the authorities in this way. 

Nikolai Korshunov owns six small shop in this company town 120 kilometers from Chelyabinsk. Police paid visits to Korshunov’s shops on the eve of Fatherland Defenders Day, February 23. The businessman told Radio Svoboda what happened.

Николай Коршунов (в центре) с сыном и родственником на Забастовке избирателей в Москве

Nikolai Korshunov (middle) with his son and another relative at the Voters Strike, Moscow, January 28, 2018. Photo courtesy of Nikolai Korshunov and Radio Svoboda

Nikolai Korshunov: I am very active civically. I always serve as an elections monitor during elections. I own six small shops. We sell the basics: bread, milk, etc. The stores are my venue for voicing my opinion about current events. This takes the shape of handmade posters, information leaflets.

My argument is that, since the stores are my property, I have the right to post any information whatsoever in them. The Constitution gives me that right. But I have run into opposition from law enforcement and the city hall in our town. It also happened before the 2016 Duma elections, in which Verkhny Ufaley famously voted only four of the twenty United Russia candidates into the local parliament. People read my posters very carefully. Naturally, they regard anything that is not propaganda as out of the ordinary. It is interesting because if they, say, live in one part of town and the neighborhood dairy plant has shut down, they still remember that, but if, say, a timber plant or infant feeding center has ben closed on the other side of town, they might not have heard about it at all, because it does not affect them.  But when they read the entire list, they think to themselves, “What a lot of things have happened in our town over this time.” Even since the 2016 Duma elections there have been colossal changes for the worse in Verkhny Ufaley: total poverty, unemployment, and hopelessness.

An excerpt from one of Korshunov’s information leaflets. It lists by name the Verkhny Ufaley plants, companies, businesses, and services that have closed during Putin’s eighteen-year reign. Photo courtesy of Nikolai Korshunov and Radio Svoboda

​Radio Svoboda: What was on the the posters?

I have lived in Verkhny Ufaley for a very long time. I was born and raised here. In the run-up to the presidential election I decided to make a list of things that have changed in our town during the eighteen years of Putin’s administration. What businesses and factories have closed? The town’s main employer, the Ufaley Nickel Plant closed [in December 2017]. The Metalworker Factory closed. The open hearth and wheel spring shops closed. Then all hell broke loose: the sausage plant, the dairy, the furniture factory, etc., closed. There are thirty-four items on the list, including the children’s hospital and the railroad’s inpatient clinic. Then there are the plants that are barely hanging on. I wrote about them, too, for example, the metallurgical plant where five thousand people once worked. Now it employs a maximum of five hundred to seven hundred people.

Do you think people have suddenly forgotten about what has been happening in town?

Of course they know, but it is just another reminder, a way of saying, Hey, guys, you say that Vladimir Putin has raised the country from its knees, but I don’t think that is the case. I think we are racing into a huge pit at enormous speed. I cannot answer for the entire country, but as a resident of a small industrial town, I see what has been shut down, what has been destroyed, what has been dismantled, what has been pilfered. When you go and vote, people, think a bit before making your choice.

The continuation of Korshunov’s list. Photo courtesy of Nikolai Korshunov and Radio Svoboda

​How many votes do you think Putin will pick up in Verkhny Ufaley?

He will win for one simple reason. Our town is small: everyone knows everything about everyone else, and everyone tells everyone else about everything. I will give you an example. At the employment office—our town has terrible unemployment, by the way, because everything has shut down—the boss gathers his underlings and says, “God forbid you don’t go and vote. If you don’t, I won’t pay you bonuses.” This is more or less what goes throughout state sector. So a huge number of people, maybe even dissenters, will naturally go out and vote in order to keep their miserable jobs at places like the employment office. No one will buck against the bosses. So, Putin will definitely win. Because he has the administrative resource behind him, and huge numbers of people are incapable of thinking.

The administrative resource can compel people to turn out for an election, but people go into the voting booths alone. 

They have their tricks. They can ask people to photograph their filled-out ballot paper on their telephones and send them the photos. We have been through it before. It happend during the 2016 Duma elections, and during the 2012 presidential election, when I was a polling station monitor. It’s all elementary. It’s not a problem at all. But most people have, of course, been hypnotized by television. They cannot reason, think or compare facts. When it comes to them, what the TV says definitely goes, although it is flagrant, mendacious, aggressive propaganda.

I am sure people have asked you, “If not Putin, then who?” People do not see an alternative. How do you counter them?

В таком виде полиция оставила стену магазина после своего визита
The wall of one of Korshunov’s shops looked like this after a visit from the local police. Photo courtesy of Nikolai Korshunov and Radio Svoboda

There is no alternative for one reason and one reason alone: all of politics has been purged by the administrative resource. Anyone who could compete against Putin would never be allowed to run in honest, alternative elections under any circumstances. That’s why there is no alternative. Putin’s only “opponents” are people who have definitely been appointed to the role. They stand for nothing and no one, and compared with them Putin looks like a superhero. On top of everything is the propaganda and hypnosis that reinforces the message that Putin is the most respected politician in the world, and we are the world’s mightiest country.

Do people in Verkhny Ufaley know about Alexei Navalny, his exposés, and his call to boycott the presidential election?

Most of them don’t know, of course. A particular segment knows, young people mainly, of course, because Navalny has access only to the internet, to YouTube, which is largely viewed by young people, by schoolchildren and university students. Elderly people know nothing about Navalny, naturally. They know only what the propagandists on TV tell them: that Navalny is an out-and-out thief, scoundrel, and so on.

What about middle-aged people?

Middle-aged people are probably more thoughtful, but not so very thoughtful at the end of the day. Our town is basically a village. We live in a kind of swamp. Middle-aged people are averse to risks. They work somewhere in the state sector, earn ten thousand rubles a month [approx. 142 euros], and are up to their necks in debt. When they sit around chatting in the kitchen, they support Navalny, of course. But they cannot voice their opinions actively, because they would be fired from their jobs in two seconds flat. People primarily think about themselves. Their political views come second.

A photograph of all thirty-four factory and other closures in Verkhny Ufaley during the Putin years, along with the message, “Think hard! What will become of the town between March 18, 2018, and March 2024? || March 18: Not an election, but a fraud. Don’t let yourself be fooled. Don’t go [and vote]. The Voters Strike.” Photo courtesy of Nikolai Korshunov and Radio Svoboda

How have the authorities reacted to your protests?

Our mayor is also secretary of the local United Russia party branch. During the 2016 election campaign, I hung up leaflets in my shops saying United Russia was the party of crooks and thieves. The United Russians came running and blatantly tore down the posters. Many locals approached me afterwards and said, well done, I had done the right thing, because the United Russians were high-handed, arrogant, and had lost all sense of measure. During this campaign, they have reacted differently. First, they sent young women who work in lowly positions at city hall to photograph the leaflets in my shops. Then city hall put pressure on the police, who showed up on the eve of Fatherland Defenders Day, February 23. The leaflet had been up for around two weeks by then, and from time to time I had added information to them. They showed up when I was not there and tore down everything. In one shop, they tore down a big piece of fiberglass along with the posters. There were five or six of them. They intimidated the cashiers. They took statements from them and drove away. That happened in five shops. They showed up at the sixth shop the next day. There, however, the cashier is a serious woman. She did not let them tear down the posters and called me. I arrived, and we hashed things out with them for two and a half hours. There were two neighborhood beat cops and an investigator. They were unable to tell me what laws I could have violated. I imagine they are quite unfamiliar with the Administrative Offenses Code. From time to time they would call the dispatch center for instructions. I know there is nothing illegal about my actions. Nothing will come of it, just like last time.

There was no pressure on you after the Duma elections? You were not tormented with surprise inspections of your shops?

No, there was nothing of the sort. I was written up for an administrative violation, but apparently the magistrates told the police there was no law covering leaflets. So nothing came of it, nor was any pressure put on me.

Are you planning to file a complaint against the police?

I did not complain last time, and I will not complain this time, either. It is a waste of time. There is honor among thieves.

Will you put the leaflets back up?

Yes, definitely, they are already up in some shops.

What are your plans for March 18? Will you vote?

I completely agree with Alexei Navalny. I’m going to boycott the vote. I even traveled to Moscow on January 28 for the Voters Strike. But I will definitely go to some polling station or another on election day to help prevent vote rigging.

Translated by the Russian Reader. Thanks to Comrade Uvarova for the heads-up

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Russia Isn’t a Basket Case?

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Villanova University basketball team in action. Photo courtesy of Forbes.com

“Russia is neither the juggernaut nor basket case it is varyingly made out to be. A well-reasoned Russia policy begins by quelling one’s hysteria long enough to recognize this and then engaging it accordingly.”
—Mark Lawrence Schrad, “Vladimir Putin Isn’t a Supervillain,” Foreign Policy, March 2, 2017

Try telling a great many people in Russia that the country isn’t a basket case, or that Putin and his regime aren’t a total menace, especially to Russians themselves, as Mark Lawrence Schrad argues in the article I’ve quoted above. They would laugh in your smug face.

I wonder if this useful idiot and assistant professor in political science at Villanova has ever lived in the country long enough to figure this home truth out. Probably not.

Villanova has a great basketball team this year, however. Maybe I should focus on them.

Somehow, I have to stay positive in the midst of the dawning awareness that lots of Anglo-American Slavists would, seemingly, like to work for the KGB if they could. Or are simply too clueless to do their jobs.

At very least, Professor Schrad’s article would have been accepted for publication in Russian Insider as is. TRR

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“For Rent.” Photo by TRR

Exhibit One: Downtown Petersburg’s Commercial Property Glut

This is what a “non-basket case” looks like in real life, not from one’s office in Philadelphia.

“Arenda” (“For Rent”) is definitely the most popular shop sign in the neighborhood around Voznesensky and Izmailovsky Prospect when I went there the other day to do a couple of errands, and it is complemented by lots of shops that aren’t flying the “Arenda” banner just yet, but which are definitely closed for business forever, like this Chinese restaurant, now known as “Khui” (if you read the fine print on the plasterboard that has replaced the broken glass in the door).

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“Fuck.” Photo by TRR

Except for a few parts of central Petersburg where commercial spaces never stay empty for long, even in bad times, this is the visual-economic landscape you would see all over town. It is a landscape of “mixed and uneven development,” to put it charitably.

I don’t see how any self-respecting scholar wouldn’t start with this grassroots reality when analyzing Russia’s current state, rather than with a grab bag of rank speculations, half truths, and outright falsehoods he or she has read in English-language newspapers, magazines, and websites.

But that’s mostly how the new, actually quite fairly hysterical “anti-hysteria”/”anti-Russophobia” school of half-baked journalism and “Russia hands” scholarship operates. Its adepts sit far from Russia and tells Russians how good they’ve got it. TRR

__________________

Exhibit Two: How the Russian Countryside Is Dying

How the Russian countryside is dying.

A sad name for a reportage. But first of all one feels for the people in the reportage, who have worked the land for many years.

I visited the hinterland just yesterday at the request of the workers at the Vegetable Integrated Agricultural Production Company in Tonshalovo, Cherepovets District, Vologda Region. The fact is that everything there has been frozen, and the company has been put on the road to bankruptcy. The prosecutor’s office is looking for the guilty parties, but instead of reading thousands of words, I suggest you watch the video. The inhabitants of our country utter many wonderful, sincere words in the video. What is happening with agriculture nowadays all over Russia is quite sad.

#VO35 #VologdaRegion #Tonshalovo #Vegetable #Prosecutor #Authorities #Bankruptcy #Unemployment #Agriculture

Source: vk.com/vologda_net

Nettle Info, How the Russian Countryside Is Dying. YouTube video, in Russian. Posted January 23, 2017, by Nettle Info

Translated by the Russian Reader. Thanks to Comrade Koganzon for the heads-up

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Exhibit Three: Russia’s Wildly Corrupt Prime Minister

Russian opposition politician Navalny links PM Medvedev to billion euro property empire
Deutsche Welle
March 2, 2017

Navalny alleges Medvedev took bribes from key Russian oligarchs under the guise of donations to charities. In a 49-minute exposé, Navalny even flies drones over lavish properties he alleges were bought with corrupt money.

Russian opposition politician Alexei Navalny accused Prime Minister Dmitry Medvedev of massive corruption in a report accompanied by a Youtube video he posted on Thursday.

The anti-corruption activist alleged Medvedev controls a property empire including mansions, yachts and vineyards financed by bribes from oligarchs to a network of non-profit organisations.

“Based on the documentation disclosed, we can confirm that at least 70 billion rubles (1.3 billion euros or US$1.19 billion) have been transferred in cash and assets to Medvedev’s foundations,” said Navalny, who heads the Anti-Corruption Foundation.

Medvedev “practically openly created a corrupt network of charitable foundations through which he receives bribes from oligarchs and frantically builds himself palaces and vacation homes across the whole country,” the report alleged.

The report was welcomed by Transparency International Russia, a non-profit organization that targets corruption, though it questioned some of its conclusions.

Findings met with skepticism

Navalny has sworn that he will be a candidate in upcoming elections despite being dogged by legal problems

“There are certain doubts in the story of Ilia Yeliseyev, the deputy chairman of the Gazprombank. It is doubtful that Yeliseyev is just a scarecrow. Despite the fact he was a classmate of Medvedev, he is an important figure. He could have earned that fortune himself,” spokesman Gleb Gawrisch told DW.

Gawrisch also said although it looked suspicious it wasn’t actually illegal for Medvedev to use real estate owned by non-profit organizations

“Corrupt officials often use non-profit organizations to hide financial flows and property,” he conceded in a statement to Deutsche Welle.

“The problem is finding out who the ultimate beneficiary is, and we are delighted that the Anti-Corruption Foundation has succeeded in presenting such an extraordinary investigation.”

Medvedev, a lawyer from Saint Petersburg, was president from 2008 to 2012 while Vladimir Putin served as premier between presidential terms. Medvedev intended to run in the 2018 presidential election.

Navalny, also a lawyer, garnered notoriety for his denunciations against corruption and was sentenced to five years in prison with a suspended sentence for embezzlement, which forbid him from being a candidate in the elections.

His [49]-minute video amassed several hundred thousand views in a few hours on YouTube.

Anti-Corruption Foundation, Don’t Call Him Dimon: Palaces, Yachts, and Vineyards—Dmitry Medvedev’s Secret Empire. YouTube video, with subtitles in English. Posted March 2, 2017, by Alexei Navalny

 

Navalny said that the foundations receive “donations” from oligarchs and companies, which are then used to purchase lavish properties for Medvedev, who is never registered as the owner.

“The prime minister and his trusted friends have created a criminal scheme, not with companies registered in tax havens as usual, but with non-profit foundations, which makes it virtually impossible to determine the owner of the assets,” he said.

“Medvedev can steal so much and so openly because Putin does the same, only on a bigger scale,” he wrote, presenting his team’s online report.

Navalny said he was able to establish the links to Medvedev by tracing the purchases online.

Medvedev’s spokeswoman dismissed the allegations as promotion for Navalny’s presidential bid.

“Navalny’s material is clearly electioneering in nature,” Natalya Timakova told RIA Novosti state news agency. “It’s pointless to comment on the propagandistic attacks of an oppositional convict,” she added.

_____________

P.S. An acquaintance just told me the average monthly salary at the world-renowned St. Petersburg Conservatory is 11,000 rubles a month (approx. 178 euros), but employees there have not been paid since the end of last year.

And you would still say Russia is not a “basket case,” Mark Lawrence Schrad, assistant professor in political science at Villanova? Could you live on 178 euros a month while also not being sure you would actually be paid that measly sum on time every month?

I imagine that Professor Schrad was paid more than a paltry 178 euros for his wildly misleading article in Foreign Policy.

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St. Petersburg Conservatory. Photo courtesy of Wikipedia

Alexei Gaskarov: A 25,000 Ruble Minimum Monthly Wage Is a Good Idea

Rank-and-file Russians deserve a mandatory minimum wage, argues Alexei Gaskarov, and it would be good for the economy. Street scene near Haymarket Square in Petersburg, 4 February 2017. Photo by TRR
Rank-and-file Russians deserve a mandatory minimum wage, argues Alexei Gaskarov, and it would be good for the economy. Street scene near Haymarket Square in Petersburg, 4 February 2017. Photo by TRR

A 25,000 Ruble Minimum Monthly Wage Is a Good Idea
Alexei Gaskarov
Snob
February 8, 2017

How would a high minimum wage help Russia turn into a developed country? Why is Alexei Navalny’s campaign pledge not stupid at all? Financial analyst Alexei Gaskarov shares his opinion. 

What’s Wrong with Russia?
Russia ranks at the very top in international ratings of social inequality.

There are different means of combating inequality, including progressive taxation and raising unemployment benefits. But as soon as someone proposes a solution to the problem, he is immediately dubbed a populist.

This fate has befallen Alexei Navalny. In his presidential election program, he proposed setting a minimum wage of 25,000 rubles a month [approx. 400 euros at current exchange rates].

Is This Populism?
Let’s see how the structure of Russia’s GDP would change if this measure were implemented under current macroeconomic parameters. And let’s compare Russia’s GDP with the GDPs of the G20 countries.

GDP is the market value of all goods sold and services rendered in the country during the year. Costs are always someone’s income, so GDP can be calculated not only in terms of consumption, investment, government expenditures, and net exports but also in terms of income.

STRUCTURE OF RUSSIAN GDP IN TERMS OF INCOME IN % (PER ROSSTAT)
2015 2016 2017
GROSS DOMESTIC PRODUCT 100.0 100.0 100.0
Compensation of employees, including wages and mixed income not captured by direct statistical methods 47.2 45.0 46.6
Net taxes on manufacturing and imports 13.9 11.1 10.7
Gross economic profit and gross mixed income 38.9 43.9 42.7

There are three types of income:

  1. Compensation of employees, includes expenditures on insurance and pensions.
  2. Net taxes on production and imports. Essentially, this is revenue from the extraction of natural resources and their subsequent import abroad.
  3. Business income: company profits, capital gains, incomes of individual entrepreneurs.

The table shows that business income is nearly equal to the income of all employees.

Indirect taxes (e.g., income tax and VAT) are not included in GDP in order to avoid duplication, since they are based on the same profits and wages.

This is what average income distribution looks like in the G20 countries:

Source: The Labour Share in G20 Economies (ILO, 2015)

The labor share in Russia is 6–7% lower than the average for the G20 countries. The reason for the difference is the weakness of democracy and civic institutions in Russia. Election results do not depend on the opinion of the populace, trade unions are weak, and protests against social policy are far and few between. So it makes no sense to redistribute incomes to benefit employees.

How Much Would We Spend?
72,323,000 people are employed in Russia. We have to subtract entrepreneurs [i.e., the self-employed] from this figure. According to the Unified State Register of Individual Entrepreneurs (EGRIP), they amount to approximately 3.5 million people. We also have to subtract those people who work part-time: according to Rosstat, there are around one million such people, if we discount those involved in small business. So the upper limit of full-time employees in Russia is 67,820,000 people. Within this group, 50.3% earn less than 25,000 rubles a month.

However, 1.4% of employees earn between 5,000 and 5,000 rubles a month, and 20.9%, between 17,000 and 25,000 rubles a month. Another 50 percent of employees receive an average monthly wage of 15,329 rubles [approx. 240 euros].

Accordingly, the poorest wage earners would benefit most of all from the introduction of a mandatory minimum wage. On average, every employee currently earning less than 25,000 rubles a month would be paid an additional 9,671 rubles (i.e., 25,000 rubles – 15,329 rubles = 9,671 rubles ).

We would thus have to reallocate almost 3.96 trillion rubles annually: 9,671 rubles (the average pay rise) x 67,820,000 (the number of employees) x 50.3% (the share of those currently earning less than 25,000 rubles a month) x 12 (months) ≈ 3.96 trillion rubles.

Let us add in insurance premiums and pension contributions, which amount to 30.2%. The overall total would be around 5.15 trillion rubles (3.96 trillion x 1.302).

Russia’s GDP in 2015 was 83.23 trillion rubles. If we reallocate 5.15 trillion rubles from profits to wages, we arrive at the following ratio.

2015 2015 (%) 2015* 2015* (%)
GROSS DOMESTIC PRODUCT 83.233 trillion rubles 100 82.233 rubles 100
Compensation of employees 37.471 trillion rubles 45 42.621 trillion rubles 51
Net taxes on manufacturing and imports 9.272 trillion rubles 11 9.272 trillion rubles 11
Gross economic profit and gross mixed income

 

36.489 trillion rubles 44 31.339 trillion rubles 38

In the resulting structure, the share of labor income is slightly higher than the average figure among the G20 countries.

Obviously, many people would lose their jobs after a minimum wage of this kind was introduced, primarily those people who dig pits with a shovel where an excavator should be doing the work. These jobs are safe nowadays only because you can pay people almost nothing in Russia.

In turn, employers would seek to maintain profits by increasing prices for finished products. In aggregate, these effects would shape an economy typical of developed countries.

What Do We Risk?
Many people fear inflation. Let’s evaluate the risks. To introduce a mandatory minimum wage of 25,000 rubles a month, according to the structure indicated above, we would have to increase wage costs by 13.7%. The share of labor costs in the economy is 45%. Accordingly, to cover the increased costs, the price of finished products would have to be increased by 6.165% (13.7% x 45% = 6.165%). That would be the upper limit of possible inflation.

In reality, however, a rise in prices decreases consumption and forces prices to creep downwards. In addition, unemployment and inflation are inversely proportional to one another, meaning the higher the unemployment rate, the lower the rate of inflation.

Additional inflation would be two or three percent, and for the most part it would be spread out over the whole of society, meaning that people who earn a lot would forfeit this percentage of income, while the incomes of the poorest workers would increase significantly.

Of course, such a drastic rise in wages is a rather radical measure, given that the minimum wage is currently even below the subsistence level, and it is bound up with a variety of social benefits that would also automatically increase. But the tenor of the reform is absolutely correct and corresponds to successful examples in world practice.

The introduction of a statutory minimum wages in Germany has lead neither to inflation nor unemployment. In the US, increases in the minimum wage have increased the salaries of low-paid workers while maintaining employment.

Translated by the Russian Reader. Thanks to Alexei Gaskarov for the heads-up. For another take on the Russian economy’s performance and the figures provided by Rosstat, see yesterday’s featured post, “Lies, Damned Lies, and Statistics,” a translation of an op-ed piece by liberal economist Sergei Aleksashenko.

Kotlas: Russia’s Bankruptcy Capital

A City of Bankrupts
Vladimir Ruvinsky
Kommersant Dengi
November 28, 2016

Kotlas, a district center in Arkhangelsk Region, will be one hundred years old in 2017. During the first half of the twentieth century, it was one of the main transit centers for political prisoners, but nowadays it is the capital of individual bankruptcies. There is no work in the city, which over the past ten years has become a local consumer’s paradise, and every fourth resident is up to their ears in debt.

In 2012, Kotlas resident Tatyana and her entire family, including her husband, daughter, and brother, took out a total of five million rubles in loans from banks. She asked we not reveal her surname, since her husband is unaware their daughter also took out a loan. As Tatyana says, they took out the loans not for themselves, but for a friend.

“I worked for two female entrepreneurs who sold clothing. We had known each other for something like twenty years. We would visit each other’s homes, go to each other’s birthday parties, and attend the weddings of each other’s children,” Tatyana recalls. “One of them, in fact, asked me to take out the loans because otherwise, she said, they would have to borrow at an interest rate of eight percent on the black market.”

Tatyana borrowed 1.7 million rubles at Trust, Tinkoff Bank, Home Credit, and OTP Bank.

“I worked for my friends selling luxury clothing. The turnover was good so I was not particularly afraid,” she explains.

Soon afterwards, her friends persuaded to take out additional loans for them. Her husband, daughter, and brother agreed to do this, borrowing 900,000 rubles, 1.8 million rubles, and 700,000 rubles, respectively. The deal was based on trust. Tatyana’s family handed the loan agreements over to the female entrepreneurs, and they paid back the loans themselves. This went on for two years.

“In 2014, the police came and searched our workplace. It turned out the women had been running something like a pyramid. They had been borrowing money on paper to purchase goods. They had not been buying anything, however, but had been cashing out the loans,” say Tatyana. “That is how we got in trouble, although we had not taken out the loans for ourselves.”

The banks demanded repayment of the loans. At first, Tatyana admits, she felt like hanging herself.

“But that is no solution. A woman I know hung herself over a loan. Someone shot himself. Well, if I hung myself, the debt would have been passed on to my relatives. So I got up and went to work.” Continue reading “Kotlas: Russia’s Bankruptcy Capital”

Help!

"Putin, Help!" Photo courtesy of Go31.ru
“Putin, Help!” Photo courtesy of Go31.ru and 5koleso.ru

Drivers Spell Phrase “Putin, Help!” with Buses in Stary Oskol
RBC
September 27, 2016

Drivers at the OskolPasTrans passenger transport company in Stary Oskol have held a flash mob during which they parked their buses to spell out the phrase “Putin, help!” They have published a video of their protest on their own channel on YouTube.

The drivers involved in the protest asked that attention be paid to the actions of local officials, who, according to the drivers, have driven them out of the transport market. In the video, the drivers note that the flash mob’s main goal is an “objective investigation of the local passenger transport market.”

The protesters are also seen toting placards with slogans such as “Governor, help!” “No to corruption,” and “Give us back our property.”

As a female driver in the video recounts, she appealed to the Arbitration Court to protect her interests. On September 6, 2016, the court ruled in favor of her lawsuit, but “attempts by city hall to terminate [the company’s?] contract have continued.”

According to the Belgorod-based new website Go31.ru, OskolPacTrans was the city’s major carrier, but the authorities had concerns about the quality of their services. In the summer of 2016, the Stary Oskol mayor’s office terminated its contract with the carrier, and the drivers were put out of work.

Translated by the Russian Reader

Tatyana Maleva: People and Oil Don’t Mix

Demolishing the Population’s Income Is a Big Mistake by the Authorities
Yevgeny Andreyev
Special to Novaya Gazeta
October 17, 2015
Novaya Gazeta

Why the government prefers oil to people, why poverty could touch half the population, and why social services are losing out to defense spending

Tatyana Maleva. Photo: TASS
Tatyana Maleva. Photo: TASS

In previous years, when it submitted the latest draft budget to the Duma for consideration, the government repeatedly emphasized its social focus: it was all about people, they would say. Now, as the 2016 budget is being worked out, the authorities prefer not to think about this. Spending on the most people-focused items—education and health care—will be significantly reduced. Despite annual inflation’s soaring to nearly 16%, public sector wages will not be indexed at all, while old-age pensions will be indexed only by 4%. Tatyana Maleva, director of the Institute of Social Analysis and Forecasting at the Russian Academy of National Economy and Public Administration (RANEPA) told us how the social sector would cope with all these blows.

Based on your analysis of the projections for the 2016 budget now being submitted to the Duma, which of the social sector issues do you see as most acute?

Those caused by the insufficient indexation of old-age pensions. The government has chosen the most economical solution to this problem.

A 4% indexation does not correlate at all with the expected outlook for inflation. Thus, the budget risks reducing the real value of pensions.

The acuteness of the problem is amplified by the fact that, if we look at the history of incomes in post-reform Russia over the past twenty-five years, we see that pensions have fallen lower than all other sources of income such as wages and benefits. Only in 2010, thanks to the valorization of pension rights [a one-time increase in the monetary value of the pension rights of citizens with time in employment before 2002Y.A.] and pulling the minimum pension up to the subsistence level, we pushed the real value of pensions to where it had been at the outset of reforms in the nineties. It had taken twenty years to restore the purchasing power of pensions. But now, during a crisis, they are being demolished again by the budget under consideration. This is a big mistake by the authorities.

But why? After all, budget cuts are not the government’s whim, but hard necessity dictated by the economic crisis.

As events of the last two years have shown, there are basically only two kinds of resources in this country, oil and people. The price of oil has collapsed, but the people are still here.

It is people who are, in fact, the most reliable of all resources. Sooner or later, investment in people produces economic growth. Oil, on the contrary, is impacted by circumstances unconnected with the Russian economy; we cannot influence the market price of oil. It turns out that one key resource makes us hostage to the situation, while we are voluntarily refusing to support the other resource. So I would argue that during the crisis we should look for ways to support people and even risk a larger budget deficit if necessary. Most economists, including me, are forecasting a long crisis. It is only beginning, and demolishing people’s real incomes right at the outset of the crisis is fundamentally wrong.

How painful will the decision to partially index pensions be?

The government thinks that indexing pensions by 4% will affect only the 38 million pensioners. This is misleading. Models of consumption and survival are based not on individual strategies, but on the strategies of households, meaning families. Around 40– 45% of Russian families include pensioners. The experience of the nineties tells us that even miserly pensions, when they were paid, served as a safety cushion against poverty in families when their younger member lost their jobs or faced nonpayment of wages. Because, in this case, pensions support the household’s minimum consumer budget and act as social insurance. Consequently, the forthcoming partial indexation of pensions will reduce the budgets of 40–45% of Russian households. Meaning that the real impact of this decision will be the growing risk of poverty not among pensioners but among nearly half the country’s population.

The government contends that real incomes have fallen by 2–3%, and real wages by 9–10%. Do you agree with these figures?

At one time, incomes showed a more moderate decline, but now they are rushing [downwards] hot on the heels of wages. Because the factors that were propping up incomes, including pensions, have ceased functioning, and incomes are going to fall, maybe even lower than wages. Over the last year, we have experienced a huge reduction in incomes. Basically, the entire growth they had achieved over the previous three or four years has imploded. And there is no reason to expect the growth will be restored. The decline might simply slow down due to arithmetic: the base for comparison will decrease from month to month, and therefore the rate of decline in real wages may turn out to be 7–8%, not 9–10%. But this does not alter the fact the population’s income is likely to be reduced.

How hard is inflation hitting people’s wallets?

Apparently, by year’s end we will be seeing 13–15% inflation. It is inflation that has a total effect on all incomes by devaluing them, regardless of social classes and age groups. But the risks that emerge among different social group because of high inflation are different. For examples, employees face the risk of job losses and cuts in nominal wages. This is already happening. We see cuts in benefits, reductions in allowances, and the axing of bonuses around the country. Moreover, while individuals are capable of combating other causes of income reduction such as job loss or reduction in wages by looking for a new job or retraining, they can do nothing to withstand inflation.

The number of poor people in Russia increased sharply over the past year—by three million people. Are the authorities capable of dealing with this scourge, or does everyone just have to wait for a rise in oil prices?

It is appropriate to recall how poverty has evolved in Russia. In the nineties, over 30% of the population was poor, but this was shallow poverty. When economic growth began in the nineties, poverty was significantly reduced. Many poor Russians moved into the so-called sub-middle class, rather than sinking into outright poverty. Economic growth reduced poverty levels relatively easily all by itself, without a restructuring of social benefits, without support for various social groups. But as soon as the country shifted from growth to recession, this seemingly happy trajectory turned into a disaster for us. Since, during the “fat” years, a reasonable system of targeted social support for the poor was not established, we are now reaping the consequences of its lack. Very many types of social support were eliminated in 2015, and certain “visionary” regions gutted many social benefits as far back as late 2014. Therefore, poverty will grow, and in this sense, indeed, the only hope is a hypothetical rise in the price of oil.

If the price goes up, there will be more money in the budget, and maybe benefits will return. But I am not so certain of this. It is absolutely not a fact that federal revenues are converted into institutions of social support. I think that in this case there will be a serious struggle with a high probability of the social sector’s losing to the military-industrial complex.

The country made this choice long ago, and it is clearly not going to be revisited.

The official unemployment rate in Russia has not exceeded 6%, which is quite a favorable figure by international standards. At the same time, there is lot of evidence that hidden unemployment has grown. What is your overall assessment of the employment sector?

Indeed, 6% is not a high figure at all. Actually, a low unemployment rate has been traditional in Russia in all phases of the economic cycle, whether the economy has been in growth, crisis, boom or recession. Over the quarter century that Russia has been living in the market economy, it has not really experienced unemployment. But economic laws still apply, and during crises, pressure on the market increases. Ultimately, the market extends possibilities for part-time employment, and this can be interpreted as hidden unemployment. People are willing to work a full workweek, but employers offer them part-time work, either half a day or two or three days a week.

The labor market has formed a kind of social contract under which employers save on costs by not dismissing employees, because the Labor Code forces them to bear exorbitant costs when letting employees go. Employees remain employed, which gives them the chance to earn seniority. And the state pretends not to notice any of this, because it also has a stake in the situation. It saves on unemployment benefits and thereby reduces its financial obligations.

Overall, how has the current economic crisis aggravated social problems in the country? Are there factors capable of causing society to protest and take political action?

It is not just the matter of the crisis. Long-term factors are also capable of impacting the social sector. Even during phases of economic growth, many social processes in Russia were not entirely favorable. Take demographics: the long-term trend has been determined by previous generations, and it cannot be changed. Nothing can be done about the fact that each successive generation in Russia will be smaller than the previous generation.

Furthermore, if we look at a longer trend, we have to admit that wages and other types of income have fallen undeservedly much lower than GDP has sunk. This has predetermined very many processes in the economy. Low-wage labor and a low-income population cannot be effective. We have repeatedly been taught this lesson over the last twenty-five years. Coming to terms now with a drop in incomes and wages means recognizing the inefficiency of our human resources. Yes, of course, no one gets rich during a crisis. But it is not a worsening of social tensions in the country due to a sharp collapse in incomes that we should be afraid of. We should be afraid of social apathy, of the population’s withdrawing into itself and washing its hands of the situation. From the socioeconomic viewpoint, this is a step backwards. This apathy can hold us back for many decades. And even if drivers of economic growth do emerge in Russia, and we expect that people will respond quickly, this might not happen.

But what is the source of this apathy?

In the nineties, the population really lent a helping hand to economic reforms by a creating a strong platform for the informal economy. Everyone predicted that society would explode, but it did not happen. The population thus gave an advance to the government that was carrying out reforms. The country managed to make this incredibly difficult transition from one type of economy to another. The people’s patience was rewarded. We are seemingly now in the same situation. However, our vector is pointing down, not up. The current patience of Russians might pull the country down. The population has not been integrated into this economy; it has not become its subject. It has elaborated its own behavioral trajectories, tactics, and strategies, which do not correspond in any way to state policy. The state and the populace lead separate lives.

Are you not idealizing the nineties? After all, even now, during a crisis, people’s living standards and incomes are much higher than they were then.

What saved people from hunger and many people from death in the nineties? First, grassroots unorganized trading, whose symbol was the famous shuttle traders. A huge informal trading sector was formed, flea markets emerged, and so on. But this sector ultimately disappeared, losing out to powerful commercial chains. Second, a powerful sector of private household plots formed in small towns and villages in the nineties. Even if they provided no cash income, people lived off the land. During the years of economic growth, this sector has turned into dacha villages with lawns, and has also ceased to exist as a source of subsistence for households. Third, a small business sector took shape in some form, albeit a specific form with many negative traits. Nevertheless, there was entrepreneurial freedom. Now, all attempts to get small business on its feet have led to nothing. The administrative obstacles erected in recent years have shut the door to the big economy for small business. Fourth, by the early noughties, a small but noticeable nonprofit and NGO sector had been established in Russia. Now, many of these organizations have been labeled “foreign agents.” Formally, [many of] the NGOs continue to operate, but they do not have the ability to act freely as they see fit.

These are the four legs that have been sawed off the Russian market economy stool, and it will not be able to stand up without them. The set of factors that prevented social catastrophe in the nineties is no longer functioning.

Maybe other mechanisms will be developed, but so far I do not see them. So everything is going to depend on the speed, depth, and duration of the crisis. But if we proceed from the most probable assumption, that the crisis will shift into a protracted, sticky recession, the quality of services will fall, despite the fact that, purely superficially, universities, schools, and clinics will continue to function. We do not know yet how the population will respond economically to these challenges. It has very few options. In fact, its only option is to wait for mercy from the state. People have been prevented from taking care of themselves.

Translated by the Russian Reader. Thanks to Ilya Matveev for the suggestion.

Ivan Ovsyannikov: Russia’s Welfare Chainsaw Massacre

Russian President Dmitry Medvedev holds

Welfare Chainsaw Massacre
Ivan Ovsyannikov (Russian Socialist Movement)
September 30, 2013
anticapitalist.ru

A “welfare chainsaw massacre” is exactly what we might call the government’s actions and statements over the last few months. The ruling class is once again attempting to pay for the latest uptick in the economic crisis from out of the pockets of workers.

On September 1, while speaking to students at the Far East Federal University, Putin announced the transition to a policy of austerity and reduced social spending. “The world economy has slumped a bit, and ours is hunkering down behind it,” the president said in his typical manner by way of explaining the upcoming unpopular measures. And he supported an earlier proposal, voiced by Minister of Finance Anton Siluanov, to replace the “maternity capital” program with “targeted assistance to poor families.”

However, a few days later, Dmitry Medvedev said that the maternity capital program would not be cancelled. “But it will be modified,” Minister of Labor and Social Affairs Maxim Topilin added in a whisper.

The fact that public opinion has been probed on such a sensitive point is quite significant. The maternity capital program is almost the only widely publicized social achievement of the Putin era. Putin has repeatedly stated it was his idea. And now this essential element of Putin’s social populism has been openly questioned.

No less provocative looking are the experiment with introducing social norms for electricity consumption (see Andrei Zavodskoi, “Cruel Economy”) and the de facto raising of the retirement age, which has long been discussed and is today closer than ever to realization. According to Deputy Primer Minister Olga Golodets, “We are not discussing raising the [retirement] age for any category of workers. We’ve gone another direction by promoting voluntary postponement of retirement. That is our principled position, and the government’s position.” However, such tricks are unlikely to mislead anyone.

The most scandalous revelations, however, are the statements made by government officials concerning labor relations. If, until recently, Mr. Topilin based his ministry’s decision not to index Russia’s penny-ante unemployment benefits on the fact that “at present there remains a high probability of finding employment in the labor market,” Mr. Medvedev has now said the exact opposite. He argues it is time to get away from the policy of preserving employment at all costs and not be afraid of cutting inefficient jobs: “The times all of us now face are not the easiest. […] Some people—perhaps a significant portion of the population—will have to change not only their jobs but also their professions and place of residence.” There is no doubt we have fallen on hard times, but the Prime Minister is clearly disingenuous when he talks about “all of us.” Russia’s ruling elite has no intention of depriving itself of jobs and handsome profits. So, in a conversation with François Fillon, Mr. Putin elegantly hinted that he would “not exclude” the possibility of seeking a fourth term as president.

But has the Russian economy “hunkered down” badly enough to warrant such painful experiments on the population? Isn’t “stagnation” only a plausible excuse for implementing the longstanding plans of the gentlemen from the Russian Union of Industrialists and Entrepreneurs?

As was reported in late August, the Ministry of Finance planned to save 1.1 trillion rubles [approx. 25 billion euros] over three years by eliminating the maternal capital program and reducing expenditures on pensions. At the same time, federal and regional budget expenditures on preparations for the 2018 World Cup should amount to 438 billion rubles, that is, almost half a trillion. The mass protests and riots in Brazil, sparked by excessive government spending on the 2014 World Cup, are still fresh in everyone’s minds. Russians could learn a lesson or two from Brazilians.

But maybe massive sports venue construction projects will generate many new jobs and return the taxpayer money spent on them? No, they will not. Unlike the great construction projects of the Soviet era, when funds were invested primarily in developing production, Olympiads, Universiades, and World Cups are, by definition, loss makers for national governments. Many analysts trace the current economic disaster in Greece to the 2004 Summer Olympics, which enriched transnational corporations while depleting public finances. The London Olympics have also been declared unprofitable. As for the 2014 Sochi Winter Olympics, its unprofitability has been recognized by nearly all serious experts, including Vnesheconombank chair Vladimir Dmitriev, who said in an interview with Vedomosti newspaper that “a serious percentage of [Olympics-related construction] projects are calculated to make a loss.” According to Dmitriev, “Given the current model and market trends, there are big problems with returns on investments. For example, one million square meters of hotel space are being built in the Imereti Lowland. When this space goes onto the market after the Olympics, a sixty percent occupancy rate will be hard to achieve. The costs of many projects have seriously risen as they have been implemented. […] For many sites, there is no complete project documentation or confirmed cost estimates. All this confirms our doubts.”

As for jobs, they really will be generated—for thousands of migrant workers. Federal Law No. FZ-108, adopted specifically for the World Cup, leaves no doubt about that. First, the law establishes special lightweight entry requirements for foreign workers involved in preparations for the World Cup. Second, it limits the applicability of a number of existing labor laws, effectively legalizing slavery. As the Confederation of Labor of Russia (KTR) declared in their statement on the subject, “The potential for runaway importation and recruitment of cheap labor, undermining the national labor market, and leading to a decrease in wages and legal guarantees in the area of labor relations, and an increase in the level of unemployment among the population, has been legally enshrined in the Russian Federation.”

The government could not care less about the fortunes of workers during the crisis, and it does almost nothing to hide it. How else can we account (to cite just one example) for Mr. Topilin’s proposal to deny free health care to all informally employed and unemployed people not registered with an employment bureau?

In light of the foregoing, the Kremlin’s actions aimed at reconciliation with the liberal opposition also become intelligible, as do unexpected initiatives to put the “against all” option back on voting ballots. The authorities fear that public discontent will grow and want to channel it in a direction that presents no danger to the ruling elite. Whether this political maneuver succeeds depends in part on the willingness of leftist political forces and trade unions to win over public opinion and make the fight against austerity measures as much of a mobilizing factor as it has been in Greece, Spain, and other countries facing the consequences of the capitalist system’s crisis.

Translated by the Russian Reader. Photo courtesy of deviantart.net