Vladislav Inozemtsev – The Other Russia http://www.theotherrussia.org News from the Coalition for Democracy in Russia Wed, 09 Jun 2010 05:58:37 +0000 en-US hourly 1 https://wordpress.org/?v=5.6 Kasparov: Russia’s European Choice http://www.theotherrussia.org/2010/02/03/kasparov-russias-european-choice/ Wed, 03 Feb 2010 20:31:31 +0000 http://www.theotherrussia.org/?p=3784 The idea of European integration set out by opposition leader Garry Kasparov in an interview with Yezhednevny Zhurnal last November was met by an overwhelmingly positive reaction from its readers. Seeing the idea as a genuine and strategic alternative to current Russian foreign policy, many were left wondering if such integration could realistically be achieved.

Therefore, Yezhednevny Zhurnal recently sat down with Kasparov for another interview, in order to extend the discussion of why European integration is necessary for Russia and how current political posturing on economic and political reforms will inevitably come to naught.

Garry Kimovich, in your opinion, do the nationalist and leftist wings of the National Assembly support the idea of European integration?

The strategic vector of Russia’s future development is, of course, a question for national discussion. At a time when a new global consensus is developing, Russia’s own interests force it to determine who its strategic partners are. It is possible that, as before, part of the left will look towards China. They think that the ruling Chinese Communist Party will implement the correct scenario for the country’s development.

However, in my opinion, if Russia focuses so recklessly on the East, it will inevitably cause our country to lose geopolitical subjectivity. Nothing will come of Russia’s own role, most likely becoming a purely raw-exports role for its active eastern neighbor. China is a very strong player, constantly driving economic expansion. By steadily expanding the limits of its influence, it has already established hegemony over practically the entire Asian expanse.

It is possible that there are some nationalists who, believing in Russia’s divine destiny, will say: “But we don’t need anyone – we’ll handle it ourselves.” I think that all of these utopian theories will come to be rejected as a result of discussion. I do not doubt that in the end, both the nationalists and the leftists will choose the vector of European integration.

Do you think that all Russian citizens support this geopolitical course?

Unlike the United States or China, which have a potentially negative connotation in the Russian consciousness, Europe won’t be rejected outright by Russian citizens. Europe is a related culture with high standards of living and free movement across the continent without the need for a visa. Where do our citizens turn to when they are disappointed with Russian justice? To Strasbourg. Many consider Europe to be a source of judicial justice. On the other hand, there’s a danger that people will get high expectations and hope that integration will solve all of our problems. The integration process is long and requires the introduction of legislation to bring us in line with basic European norms, and also to balance economic conditions and social safety nets.

Over the course of the integration process, the situation in the country should fundamentally change, of course, for the better. It is obvious that industries are beginning to move from the West to the East, closer to sources of raw materials, and that the qualified work force is catching up with them. Indeed, Europe today is suffering from overpopulation, and Russia has a great deal of undeveloped territory. If Russia becomes part of a common European expanse, we will be able to have European technology for, among other things, Russia’s gigantic farmlands. We will come to share such high-tech European projects as Airbus. With European integration, situations like the failed deal between Sberbank and Opel will become impossible. These issues will be resolved without the influence of political factors, even if the Americans don’t like it.

Is it just coincidental that several Kremlin political consultants have recently introduced projects that, in one way or another, promote the idea of European integration?

It is important to stress here that the Kremlin’s projects differ fundamentally from the processes of European integration as we understand them. They would base the integration of Russia with the Western world on alliances, including military-political ones, with various governments in Europe and America. For example, Director Igor Yurgens of the Institute for Contemporary Development proposed forming a military-political alliance with America together with his coauthors in a project entitled “A New Entente.” The United States could choose to enter into an alliance with Russia for their own tactical reasons – to move Russia away from China and to prevent China from creating a raw materials base in the Far East and Siberia. In doing so, the Americans would close their eyes to the lawlessness and absence of democracy in Russia.

The situation with Europe is more complex, but it could also enter into other types of elite arrangements. For example, former German Councilor Gerhard Schröder has already worked for Gazprom’s sister company for quite some time. The former Finnish Prime Minister, Paavo Lipponen, also works for Gazprom. Silvio Berlusconi makes no attempt to hide his close business contacts with Putin. This is precisely why the propagandists from the Kremlin are trying to formulate such projects, so that they can maximally integrate the Russian elite with the global elite. Such plans would ensure that there would be no interference from the West in our own matters, and would preserve the patriarchal-feudal system of the Russian government. Even Dmitri Rogozin has spoken publicly about the use of integrating Russia into NATO. These projects are pure ostentation, and the authorities have absolutely no desire to discuss the process of real European integration that would demand a change in the inner substance of our state. Such changes would be fatal for the government, since they would have to introduce electoral legislation that corresponds to European norms.

Are the experts from the Institute for Contemporary Development, who are often critical of the government and promote various proposals to modernize the economy, really not potential allies for the opposition?

As a matter of fact, they are our antagonists; our ideological opponents. And they are all the more dangerous – in contrast with open fans of authoritarian and totalitarian forms of governance, they put on a show of multi-layered, ostentatious rhetoric to hide their actual refusal to accept political liberalism. That the very meanings of “democracy” and “liberalism” have been cheapened in the eyes of Russian society has been their “contribution.”

Rehabilitating liberal thought in Russia would require overcoming the inertia of a massive consciousness that still include proponents of the views of Gaidar and Chubais. Andrei Piontkovsky devotes much consideration to this important topic in his impassioned articles, constantly pointing out how these types of Russian liberals are incorporated into the infrastructure of the oligarchic regime. The National Patriots, who have shown that they are prepared to work with other ideological groups and abandon current stereotypes, did an interesting comparative analysis of the position of liberals and neo-liberal “liberasts” on key socio-political issues.

Not long ago, Yegor Gaidar made a very important confession. In an interview with Novaya Gazeta, he said that while we had indeed created a market economy, “we did not solve one of the important problems – the separation of power and property.” Herein lies Yegor Timurovich’s trickery: that the problem of the separation of power and property was never solved. We never had real market reform because the market, most of all, presupposes a systematic battle against monopolization in every sector, and not a formal division and privatization by the very same oligarchs of companies such as the Unified Energy System.

In her new book, “The Lonely Power,” Lilia Shevtsova writes that Russian “reformers” came under criticism in the 1990s by Joseph Stiglitz, Nobel laureate in economics, then-Senior Vice President of the World Bank. “Privatization is no great achievement,” Stiglitz mocked the “privatizers,” “it can occur whenever one wants – if only by giving away property to one’s friends. Achieving a private competitive market economy on the other hand is a great achievement but this requires an institutional framework, a set of credible and enforced laws and regulations.” Stiglitz convincingly proved that privatization in Russia occurred “in an unregulated environment,” and instead of doing what was needed to creating the environment “to curb political intrusion in market processes, an instrument was created to be used by special interest groups and political forces to preserve power,” Shevtsova concludes.

The oligarchic method of governing – that is to say, the seamless interweaving of power and property – will sooner or later lead to the abolition of democracy as such. Nobody will give up their power if they risk losing their property. Obviously, the ideal of the Medvedev wing that Yurgens represents is the liquidation of various excesses from Putin’s administration. But in doing so, it may not touch the oligarchic essence of the state. The Russian liberals that are incorporated into the system fear free elections like fire, since they inevitably lead to the abolition to the oligarchic model of government rule. Among these people, genuine liberalization brings about a real allergic reaction.

Why, then, was Igor Yurgens present at the conference of the Public Anti-crisis Initiative, expressing his intent to sign a measure that would promote political demands to modernize the political system?

First of all, signing a demand and managing to fulfill it are very different things. Secondly, the political reforms proposed by this group go, at the very most, only halfway. Without a doubt, Vladimir Ryzhkov, Sergei Aleksashenko and even Aleksandr Lebedev can potentially be our allies, but they have never before crossed the line necessary to challenge the system.

What do you think of the idea of gradual democratization of the system, which many have put their hopes in?

An anti-democratic regime can be neither reformed nor modernized; it can only be dismantled. All the hope that goes into finding a way to somehow reform or perfect the current system is in vain. It’s impossible, because the essence of the system will remain the same. Yegor Gaidar was precise in defining this: it’s power and property mixed up in the same bottle. Our situation will not change while the question of the separation of power and property remains resolved. This is a purely political decision. There exists no other way of reforming the system, such as with free elections. The five-second rule doesn’t apply to free elections – they’re basically saying that “we cannot allow irresponsible people to come to power.” We take a directly contradictory stance: “Give the people freedom, and you need not worry excessively about their elections.”

Do you think that the government’s apologists will convince the public that the discussion of unfair elections is a thing of the past, and that now, like they say, the new president is working to curb the “administrative games” of United Russia?

As a matter of fact, Medvedev has said nothing about honest elections; I don’t need to speak on his behalf. Twenty years ago, this was a beloved pastime of Western experts, who based their conjectures on their readings of Gorbachev in translation. Thank god we listen to Medvedev in Russian! On the contrary, he maintained the status-quo, saying: “We shall not rock the boat… We shall not allow the balance to be disrupted… We shall put this to an abrupt stop… We shall put them in jail.” Add to that the fact that the authorities took this as a direct order and put Limonov in jail for ten days for standing up for citizens’ right to freedom of assembly. Nothing in Medvedev’s speeches indicates that the Russian president wants real change. So, let’s leave him alone.

The apologists from the “Medvedev Majority” don’t say anything about free elections, either. This remains the case even when examining very different people. For example, the same Igor Yurgens who talks about the possibility of democracy “from above.” He proposes creating two political parties – one under Putin and another under Medvedev, and making it so that they can replace each other from time to time. Are those really free elections? This is a mask for the regime, unapologetically suppressing any impulses that threaten the bond between power and property. And free elections are a direct threat to the oligarchic method of managing the economy.

This is also characteristic of the regional governments, where the families of governors and state prosecutors control large spheres of business. So the regional elites aren’t interested in free elections, either. But Medvedev’s apologists won’t manage to fool the people. Russia’s main “liberast,” Anatoly Chubais, generally sees these tricks as an empty waste of time, and is calling directly for economic reform, putting a stop to these unnecessary discussions of political reform.

One more apologist from the “modernization majority,” a, is trying to hoist the same agenda upon us, but hiding it behind the name of Andrei Dmitrievich Sakharov. Such attempts are typical for the more active Russian “liberasts,” and are especially immoral because they use Sakharov’s humanitarian legacy to justify a purely technocratic approach to governing the country, one based on the innermost contempt for its own people.

Then what does it tell us when, for example, prominent United Russia member Andrei Makarov announces that the Internal Ministry needs to be liquidated? Did he not, in fact, state your proposal?

That’s the spontaneous revolt of individual people who are sensing the dead end ahead. Anyone not completely hardwired into the system is protesting. And within the system, this protest is gaining momentum. “Sartre’s nausea,” as Andrei Piontkovsky writes, is approaching. The Brezhnev generation might see the question of when everything will come tumbling down as a rhetorical one, but for the 40-50-year-olds who make up the basis of the current government, this is not a theoretical question, but a practical one. Today, these people want to understand what will happen tomorrow. They still have the strength and desire to not wind up beneath the wreckage of the system.

And indeed, the system is not going to collapse just because I write that it will – all I do is expound upon the fears and dangers that a lot people are experiencing. I think that the process of the system’s collapse is going to gain momentum. At the end of the day, the stumbling block will be the question of political liberalization.

It’s possible that all of these people will put their hopes in Medvedev until the very end…

But he isn’t planning to introduce any corrections into the political system. After a year and a half of Medvedev’s tenure as president of Russia, Putin’s authoritarian regime has only become more severe. The Internal Ministry now has a special new subdivision for the war on extremism – Center “E;” cases of extremism have begun to appear, demonstrations have begun to be broken up more severely, and political activists have begun getting beaten.

In addition, today we have come face-to-face with a new and extremely dangerous phenomenon – the sharp growth of street violence between neo-Nazi and anti-fascist groups. Violence is pouring out onto the streets, and the thieving, cowardly government tries to use violence to its own ends. All of Medvedev’s attempts to play an independent role are connected with a desire to preserve Putinism without Putin. Further thoughts on this are worthless. Putin and Medvedev are representatives of a single system, one where power and property are combined. This renders the whole conversation about economic reform meaningless. The monopoly in politics and the economy doesn’t go together well with free elections.

Would you, then, recommend those who aren’t hardwired into the system to wait for the regime’s collapse?

In any case, I don’t advise them to participate in Medvedev’s various initiatives – that’s an attempt to shift his civic duty onto somebody else. Such attempts may bring about an opposite result and only prolong the agony of the regime. No attempt to play along with Medvedev’s initiatives will benefit anyone. The citizens that want free parliamentary elections have been effective in uniting into their own networks.

Is this where you got the idea to transform the National Assembly into a series of networks?

Yes, we are planning to reform the National Assembly. We want to make it available for all Russian citizens to join, and also to create regional branches for the National Assembly. The new structure will respond to the demand to represent a maximum number of different ideological trends on the basis of our common values. We hope that the existence of such a wide-ranging structure will help us support the country at a time of catastrophe, and implement a range of necessary actions during the transitional period while the country is preparing for elections – which will be held with clear, transparent rules. Right now, nobody knows where they’re going to be working, whether in the legislative, executive, or judicial branches; we can develop an objective procedure for elections and a system of checks and balances that would suit everyone.

In your opinion, will the National Assembly be the only force vying for power when the system collapses?

Undoubtedly not. A variety of forces will come to the surface during the moment of chaos. The advantage of our organizational structure is that it includes all colors of the rainbow; all political spectrums. The National Assembly is a place to form a new political expanse. We have an important trump card – nobody has learned better than us how to negotiate the most complex issues. And it is only possible to rescue the state during a moment of crisis on the basis of a wide consensus.

Interview conducted by Olga Gulenok. Original version in Russian available on Ej.ru.

Exclusive translation by theotherrussia.org.

]]>
Russia Lagging Behind in Infrastructure, Modernization – Inozemtsev http://www.theotherrussia.org/2009/07/17/russia-lagging-behind-in-infrastructure-modernization-%e2%80%93-inozemtsev/ Fri, 17 Jul 2009 03:34:52 +0000 http://www.theotherrussia.org/?p=2847 Russian roads are world-famous for their unbearable potholes and poor state of repair.  The same is true of the country’s other infrastructure, from an aging power grid to a crumbling rail network.  Vladimir Inozemtsev, an economic expert with the Center for Research of Post-Industrial Studies, argues in the Vedomosti newspaper that these issues must be addressed immediately in order for Russia to modernize and become competitive in the world market.

Unfortunately, Russia’s redevelopment is hindered by an inept state and unfathomable levels of corruption.  Even as the government raked in record windfalls from energy sales in recent years, roads were left to rot, and infrastructure projects were not initiated.  Russia is falling behind, Inozemtsev argues, and for the moment, the path to modernization looks bleak unless a drastic change is made.

Read more about Russia’s crumbling roads from the LA Times.

Modernization.ru: Billions in Asphalt

Vladislav Inozemtsev
07.14.2009
Vedomosti

In order to modernize the economy, a series of conditions are necessary, and one of the most important is the condition of infrastructure.  Accelerated development is unthinkable without a network of roads, accessibility of power and communications, and the ease of mobility for workers.

All countries that have successfully modernized ran into this limiter of economic growth in the early stages, and decisively took to amending the situation.  One can confidently say: only those who managed to jump this barrier succeeded in modernizing.  Those who threw in their hands were left in the past.  Russia, sadly, had nothing to brag about here.  From 1995 to 2008, the length of the auto and rail network hardly expanded (comprising 750,000 and 755,000, and 87,000 and 86,000 kilometers [respectively]; Russia by numbers.  Official publication.  Federal State Statistical Service, 2009, chart 18.9).  From 1989 to 2008, the volume of overseas transport fell by 4.8 percent, and the number of airline passengers- by 2.1 times;  housing stock put into operation fell by 34%, and connecting to the power grid became a nationwide problem.  Leading countries, on the other hand, behaved in a completely different manner.  Its customary now to compare Russia with the other BRIC [Brazil Russia India China] countries – and the comparison here is staggering.  In Brazil, the length of the road network grew by 65% from 1988 to 2005; the volume of overseas transport by 90%; and the number of airline passengers more than doubled.  It’s better not to recall China: in only the last five years, 3.1 billion square meters of housing were built, 480,000 km of automotive and 19,000 km of rail routes; 16 large new airports have been put into operation, the first high-speed trains have been launched, six Chinese ports entered the list of the top 12 sea gateways of the world (moreover, the least busy of them handles more cargo than all of Russia’s ports combined), and connecting to the electrical grid now takes 19 days.

Russia is losing in this competition as result of the incompetence and corruption of the government, which does not set complex development goals as a priority.  The less authorities interfere with infrastructure development –the better the end result.  In 2000, the revenue from providing mobile telephone services was three times lower than services for stationary local and long-distance telephone communications.  In 2008, it was four times greater.  Yet there is no competition in road construction, and there are no results: in 2008, just 2300 km of motor ways were built (in China, this much is built in 10 days!), and the Avtodor state corporation (which was recently granted fiduciary management over 18,000 km of roads) will sooner work to change them into paid toll roads than build new ones.

What is the reason for the failure of Russia’s infrastructure modernization?  In our opinion, it’s clear: unlike the Chinese, Korean of Brazilian, the Russian government is incapable of lodging firm demands on its contractors and optimally organize production.  Today, 1 kilometer of four-lane highway costs $2.9 million in China, $3.6 mln in Brazil, and in Russia – $12.9 mln (for the section of highway from Moscow-St. Petersburg, the figure from the 15th to the 58th kilometer amounts to $134 mln for 1 km; for the Western High-Speed Diameter in St. Petersburg – $142 million for 1km, for Moscow’s Fourth Transport Ring – around $400 mln for 1 km).  The cost of building warehouses and commercial real estate in Russia is higher than in France or Germany, and exceeds the Brazilian figures by 2.4 times, and the Chinese by 3.2 times.  With that said, 1 square meter of area in a residential home expends .9 cubic meters of concrete and 90 kilograms of reinforcing metal, although in developed countries this is 2 times less (in turn, the equivalent of 210 kilograms of fuel oil is spent to produce 1 ton of cement, which is used to make concrete.  In the European Union- 125 kg).  In Germany, 65% of highways are built by laying precast concrete pads, in PRC [China] – 38%, in Russia – 0%.  After all, these coverings do not require repair for 20 years or more, and we spend 5.5 times more funds on repairing existing roads than laying new ones.

The Russian government overpays builders by tens of billions of dollars and throws away capital in even larger sums, simply because those who associate themselves with the government are not “statists,” but “feeders.”  It would not be an exaggeration to say that Russian infrastructure projects in recent years have become the site of the most widespread, non-transparent redistribution of wealth in the world (in 2006-2008 around $230 billion was expended without any visible material result).  Unsurprisingly, this market is completely closed to foreign companies, and the cost of work is growing each year by 25-40%.

Modernization presupposes a rigid system of rule- a true vertical, that can impose terms.  It succeeds where such a system has been built, and falters where bureaucrats act like businessmen.  And since the latter is visible in Russia much more distinctly, then as long as the situation does not change, one can’t expect a more modern infrastructure or modernization as a whole in the country.

The author is the director of the Center for Research of Post-Industrial Studies;   publisher and editor-in-chief of the Svobodnaya Mysl (Free Thought) magazine.

translation by theotherrussia.org

]]>
Experts Comment on the Russian Market’s Downward Spiral http://www.theotherrussia.org/2008/09/18/experts-comment-on-the-russian-markets-downward-spiral/ Wed, 17 Sep 2008 23:21:15 +0000 http://www.theotherrussia.org/2008/09/18/experts-comment-on-the-russian-markets-downward-spiral/ MICEX index on Sept. 16Stock trading was suspended for a second day in Russia, as markets continued downward in a free-fall. The Kasparov.ru online newspaper asked experts for their take on the consequences of Russia’s crashing stock market for the country’s economic and political future:

Independent politician and former Deputy Prime Minister Boris Nemtsov:

The mediocrity of our leadership has now become obvious to even the most hard-headed people. Russia is a record-holder for market collapse, and share values have fallen in half. Russia is suffering more than everyone else. Half a million citizens, who invested in national IPOs, have lost 70-80 percent of their savings. They believed Putin’s promises, that these were good investments. They have been cheated once again. The financial crisis in the US is just one of the reasons for the crack of the Russian stock market. Another is the abominable investment climate in Russia. Putin personally carries responsibility for this: the squeeze on Mechel and [Mikhail] Gutseriev, the transfer of the Sakhalin project to Gazprom, arbitrariness in the courts – it would hard to think up anything worse. A third reason is Russia’s financial isolation after the Georgian-South Ossetian war. Investors consider our political regime to be unpredictable and aggressive.

How will this economic crisis turn out for the majority of citizens? I anticipate that there will be a wild growth in prices for food products, and on other everyday needs and utilities. Inflation will surpass 15 percent, and inflation on socially important goods and services will constitute 25-30 percent. A bank crisis will happen, whereupon the mid-sized banks will suffer, and not the large banks, which will have deplorable consequences for depositors. The bankruptcy of the chekist-governmental corporations in the name of Chemezov and Putin is possible. Our last report says that their collective debt equals 61.6 billion dollars. These are short-term debts, which is why the companies will have trouble refinancing them. No one will give them the money.

There is good news: it is possible that housing prices will fall. Although truth be told, getting credit will be very hard. Mortgage loans will become more expensive. If the situation in the stock market continues to worsen, and prices for oil continue to fall, it is obvious that the growth in the economy and industry will slow. In the nineties, when I was a Deputy Prime Minister, we survived then the price of oil was 10 dollars [per barrel], but for today’s authorities, the Rubicon is 70 dollars. If prices are lower, delays in the payment of pensions and wages may begin. That is to say that the system has no margin of safety. All this is the result of greed on the part of the authorities, and their custom of free-loading. The crisis will grow, because that “emperor is naked,” who makes incompetent decisions. The authorities, in order to preserve their riches and influence, are ready to unleash another war. In this situation, it is very important that the democratic opposition remains clone-knit, and doesn’t allow the country to fall into chaos.

Nikita Krichevsky, Ph.D (economics) and head researcher of the National Strategy Institute

The collapse of the stock market will not affect the economic situation in the country. Problems will arise for several businesses, who took credits on security of their shares. This whole situation was initiated by the Kremlin, who sanctioned investing in these financial pyramids. Zero hour happened on August 8th. The number of injured players was 800 thousand. The people close to authorities, who invested their money for political reasons, walked out. Still, the Kremlin is now taking a shot at saving the market, so that those people who it was responsible to can take out their money. Meanwhile, taxpayer money is being used for this. The primacy of business always stood before the primacy of laws. I hope that these shocks open a prospect for cleaning out the stock market, and that it becomes as it should be. Because now, 30 issuers comprise 99 percent of the market, and more than half of them are oil and gas companies.

Vladislav Inozemtsev, Ph.D (economics), publisher and editor of the Svobodnaya Mysl (Free Thought) magazine, and analyst with Centre for Research of Post-Industrial Studies

I think that nothing extraordinary has happened. The market was overheated. The financial bubble was being blown up by a group of oligarchs. The authorities participated in this, embellishing the improving investment climate in the news. Considering the reduction of oil prices, this panic is natural. A more or less acceptable corridor could be created, with the RTS index at a level of 1000 points. Investors would get used to the new reality. The outlook will depends on how much everyone was involved in the fundamental financial sector. Realistically… a fourth of investments were made by foreign investors. Losses of 40 billion dollars are not catastrophic. Many firms and corporations have free reserves on their books. And infusions, provided by the government in the sum of 2 trillion rubles, will be enough for this.

There is another negative aspect. The KIT Finans investment bank did not pay out its debts in the sum of 6 billion rubles. This will complicate the situation in the banks. The panic can be quelled within half a year, if our companies can receive a financial boost from the West –this is the main source of their financing. If the rates continue to grow, then this could actually become a serious threat. We are receiving opposing signals. Nearer to the end of the year, it will be clear if the situation is heading towards correction or worsening. For now, there is little certainty. As a whole, we should start from the general economic sentiment, that the US will need one or two years to improve the health of its financial sector, which means that we cannot count on growing oil prices.

Leonid Paidiyev, Ph.D. (Economics) and expert from the Open Economy Foundation:

People around the world have warned of this terrible situation, when powerful financial actors, in order to quietly reform themselves, throw all the weight of their losses on the weakest agents. We have quite a grave situation: all the blue chips have fallen. This is disturbing. Out government is taking some steps: buying up gold, currency. I believe it is very important that the ruble be strengthened. The dollar must cost no more than 25 rubles. Otherwise investors will start to panic. Our country was robbed as results of serious mistakes that were permitted by authorities. The large oligarchic structures, in order to cover their financial losses, used foreign borrowing. I have written in detail on what needs to be done so that we don’t fall into this situation in the future. It is necessary to strengthen the power of the personal financial system, through the mechanism of non-inflationary issue. Realizing these ideas requires a democratic society. Whether the government will go for this, I don’t know, because these measures undermine the basis of power of the oligarchic structures themselves. The lessons of other countries show, that aside from democratization, there is no other way. If the authorities don’t exercise enough prudence, a new, powerful economic crisis will arise.

translation by theotherrussia.org

]]>
44 Percent of Russian Economy is “Off the Books” –Experts http://www.theotherrussia.org/2008/04/17/44-percent-of-russian-economy-is-%e2%80%9coff-the-books%e2%80%9d-experts/ Thu, 17 Apr 2008 16:45:59 +0000 http://www.theotherrussia.org/2008/04/17/44-percent-of-russian-economy-is-%e2%80%9coff-the-books%e2%80%9d-experts/ Money.  Source: vologda.ruOn April 16th, Russia’s National Strategy Institute, an independent think-tank, held an expert seminar entitled “The shadow sector of Russia’s economy, and pathways to minimize it.”

Nikita Krichevsky, an economist that moderated the seminar, underscored the significance of the problem, commenting that shadow –or “off the books”—incomes account for 44 percent of all income in the country. Thus, some 6.5 trillion rubles ($278.8 billion or €174.9 billion) go undocumented each year, meaning that almost 850 billion rubles ($36.5 billion or €22.9 billion) never make it into the national budget. According to Krichevsky, the inability to collect these tax revenues contributes to Russia’s low pensions and low wages for government workers. He went on to name five reasons for the shadow economy, the principal of which is corruption.

Yevgeny Gontmakher, the director of the Center for Social Studies at the Institute of Economics of the Russian Academy of Sciences, agreed with that assertion, adding that the problem has a political character. In his opinion, the system of taxation must be reformed to keep revenues at the municipal level. He suggested that income and property tax remain decentralized, and added that battling corruption would break the “aqueous armistice” currently drawn up between the authorities and the criminal element.

Vladislav Inozemtsev, a well-known economist from the Center for Post-Industrial Studies, commented that Russia is far from the only place with a significant shadow economy. In the US, it represents some 10-11 percent, in Europe, 7 percent, and in Latin American countries, undocumented income reaches 50 percent. Inozemtsev believes that the government is currently in a successful position, since the public and the authorities are content with the situation, and since similar conditions of corruption can exist for decades.

Economist Mikhail Delyagin, a former aide to President Boris Yeltsin, suggested that Russia’s judicial system must be changed if battling corruption was actually a priority. In his words, this could be done very simply by firing all the judges and replacing them with fresh blood.

During the seminar’s concluding remarks, Nikita Krichevsky reviewed the findings: “All the experts invited to the seminar, in general displayed an enviable unanimity, discovering a link between corruption and a shadow economy.” He added that the experts had jointly agreed that solving the problem required political steps, and must be taken on by the new elites.

]]>