Alarming trends

Alarming trends

The results of public opinion polls carried out in the Vologda Oblast in February 2015 show significant changes in some indicators (parameters) of social well-being of the population, in comparison with December 2014:

• –    the proportion of individuals with good mood has decreased from 70.9 to 61.8% (by 9 p.p.);

• –    the proportion of those who believe that “everything is not so bad; it’s difficult to live, but it’s possible to stand it” has decreased from 80 to 74.3% (by 6 p.p.);

  – consumer sentiment index has declined from 82.3 to 75.7 p. (by 6 p.).

An explanation for these disturbing facts can be probably found in the uncertainty of actions in 2014 on the part of political structures, the State Duma, and the Federation Council with regard to actual measures undertaken to curb negative trends in socio-economic development according to almost all the indicators1.

The editorial, which opened the first issue of the Journal in 2014, expresses the viewpoint that the meeting of the RF President Vladimir Putin with the authors of the report “Russia on the way to a modern, dynamic and efficient economy” 2 prepared by the Russian Academy of Sciences, which took place February 19, 2014, has significant positive prospects. Speaking at the opening of the meeting, the President said: “That is precisely why we have agreed to meet today, to hear your opinions. I will ask my colleagues from the Cabinet and the Presidential Executive Office to express their ideas as well, to work together on seeking concrete measures to promote economic growth. We believe we can resolve the challenge of faster growth in the economic and social spheres only by resolving this most important, capital, fundamental challenge.... We will need to develop and present a coherent policy on mobilising all available resources for accelerated growth” (emphasis added)3.

Last year the Russian Federation had to cope with serous challenges. The reunion of the Crimea and Sevastopol with Russia became a historic event. Russia has proven that it can protect its fellow countrymen, and defend truth and justice. The Eurasian Economic Union launched a full-fledged work. Economic relations with China reached a new level. The large-scale national program for the comprehensive reconstruction of the transport system in the city of Sochi was implemented; a modern sports complex to host the winter Olympics was constructed, and the Winter Olympic Games were successfully held.

An important step in strengthening national security was undertaken in December 2014, when the military doctrine signed by the President on December 26, 2014 was adopted.

According to one of the leading experts, the military doctrine reflects the transitional condition of Russia as it is shifting from a state controlled by the West to an independent state, at least in its political sphere4.

However, it should be noted that “for the entire year of 2014 no sound policy has been developed and declared, which would seek to mobilize all available resources for accelerated growth”5; as a result, there has been a significant slowdown the country’s economic development.

The use of inflation targeting and the floating exchange rate of the ruble to stimulate the economy, the desire to achieve a balanced budget by reducing expenditures on economy in order to establish macroeconomic stability and reduce investment, primarily in the real sector of the economy in 2012–2013 led to the results that turned out to be quite opposite to what had been expected”6.

At the end of 2014 the situation became even worse because of the downfall of the ruble; as a result, all the economic entities have lost confidence in the national currency. The negative impact of these internal economic factors was aggravated by adverse foreign economic conditions, first of all, the decline in oil prices and the introduction of sectoral sanctions by Western countries in the second half of 2014.

However, despite the increasing number of critical problems hindering Russia’s economic growth, the Government has not undertaken any decisive and timely actions to resolve or mitigate the existing aggravating issues. Until recently, the Government has assessed the ongoing events as a financial crisis, which will last as long as oil prices remain low, and one should just wait till this crisis is over.

The Gaidar Forum, which opened the new 2015, has reflected this viewpoint very clearly in the speeches of the most famous Russian liberals, who participated in the event. But the viewpoint, which is supported by a number of scientists and which runs contrary to that of the Government, was not voiced at the Forum7. It is quite remarkable that the entire economic “top management”, including Prime Minister D. A. Medvedev, delivered their speeches at the Forum. Chairman of the Government commended the liberal model of Russia’s economy. He said: “I think it is right that the 2015 budget was formed on the basis of the same scheme of distribution of surplus revenues from oil export. In all likelihood, we should adhere to this rule in the future as well”.

Minister of Economic Development A. Ulyukaev also expressed his attitude toward the growing public anxiety concerning the state of the Russian economy. He said: “The most important thing in a crisis situation is to maintain peace of mind, to have a caring family and support of your relatives, and, most of all, to think about your own health and the health of those you love”8. The Minister’s words can be understood in the following way: it is not up to you to worry about the dynamics of economic development in the country, you had better think about yourselves. We think this is a clear manifestation of snobbery.

We agree with a shrewd remark of a well-known economic publicist and expert Aleksandr Privalov, who commented on the speeches delivered at the Forum: “We have been listening to similar universal resolutions on any matters of economic policy for a long time... The same people have been talking about the bad investment climate in the same words heaven knows how many years. If they had been able to improve anything at all, they would have done that long before (emphasis added) . The speeches on combating inflation are especially lovely when they are delivered by those who have just made a significant contribution to its increase”⁹.

It is only at the end of January 2015 that the Government developed and published an anticrisis program. It is called “the Plan of priority measures to ensure sustainable economic development and social stability in 2015”.

The Plan has 60 items, but so far only 20 of them contain quantitative characteristics, i.e. the amount of state support is specified only for one third of the events. The amounts of support for a significant part of the activities will be established when regular changes are introduced to the federal budget in late February – early March. And then it is still unknown how much time will be required to bring budget funds to recipients.

At the same time, the measures to support the banking sector are being implemented very quickly. According to the Plan, a trillion rubles has already been allocated to the additional capitalization of credit institutions in 2014 (in the framework of budget execution). Additional inflows into banks will reach 550 billion rubles. If we add up the amount of support provided to the banking system, it will be 85% of the entire plan.

According to Doctor of Economics, RF State Duma Deputy O. Dmitrieva and her supporters in the “Just Russia” party, this measure will not produce the desired effect. In their opinion, it has nothing to do with the fact that the large-scale support of banks during the global crisis of 2008–2009 had little effect.

The point is that such “treatment” is logical to implement only in the countries, whose financial institutions are malfunc- tioning, and it is totally unsuitable for Russia, since the main reason for its current economic difficulties lies in the sharp decline in oil prices and in devaluation. When the government policy is sound, the “cheapening” of the ruble can be beneficial, because it provides an opportunity to boost economic growth and import substitution. It is this very factor that Prime Minister E. M. Primakov and Head of the Central Bank V.V. Gerashchenko used in 1998 as a powerful lever to overcome the crisis10.

Academician V.V. Ivanter, Director of the Institute of Economic Forecasting of the Russian Academy of Sciences, gives the clear assessment of the government actions: “Such, I would say, unprofessional management has led to what we are having now. We were pursuing an economic policy that was inadequate. This policy was pursued by financial and monetary authorities as well...We have now proved by experiment that this policy does not do our economy any good ” (emphasis added) ¹¹.

According to V.V. Ivanter, the main thing is that now “the trust of the population, banks and even the government is lost. And in a monetary economy it is impossible to live without confidence in the national currency.

What does the Government Plan propose to resolve this problem? The problem is formulated in the first paragraph of the Plan, which states that “the increase in the budget allocations to the provision of loans of the budget system of the Russian Federation if the subjects of the Russian Federation implement their regional plans for sustainable economic development and social stability in 2015”. It is expected to allocate up to 160 billion rubles for these purposes. This amount does not even slightly reduce the severity of the current budget crisis in the regions, whose current debt reaches two trillion rubles13.

Russia has over 22 thousand municipalities, from big cities to small rural settlements.

However, so far, a uniform approach to socio-economic functions is still applied to municipalities of different size. As a result, many municipal authorities, especially in rural settlements, turn out to be almost powerless. Nevertheless, the Anti-Crisis Plan does not address these problems, in fact.

But now, when the work to implement the Anti-Crisis Plan has already ben launched, the discipline and responsibility for its implementation are becoming crucially important.

Unfortunately, there is no reason to believe that the Russian Government headed by D. A. Medvedev is able to implement the Plan timely and efficiently and, most importantly, to change the negative vector of economic development to the positive one, which will help raise the standard of living of the main layers of population and prevent its reduction.

Over the last three years the President has repeatedly expressed sharp criticism concerning various aspects of the Government’s performance14.

The most recent example that shows the quality of work of D. A. Medvedev’s Government can be found in the unforeseen consequences of the decisions about the compensation of commuter railroad transportation companies’ revenues from the regional budget. It was well known that most of the regions have no money for these purposes. The Vologda Oblast, for example, owes Russian Railways 142 million rubles, and in recent months the commuter railroad transportation has been gradually cancelled there. The rate of 2 rubles 20 kopecks per kilometer that was in in effect in the Oblast in 2014 was raised in early February 2015 to 5 rubles 20 kopecks per kilometer, which is too expensive for the local residents. Beginning in January 2015 and onward, Russian Railways cancelled 144 commuter trains in 26 regions; in February – March it proposed to cancel another 139 commuter trains. We can very well understand V.V. Putin’s indignation, which he expressed at the meeting with members of the Government on February 4 concerning the speech of Deputy Prime Minister A. Dvorkovich about the cancellation of trains: “Don’t we have a Transport Ministry? I thought you were responsible for supervising this sector. What is happening? We understand how serious this is. This isn’t just some bus route that got cancelled. Commuter trains in the regions stopped operating. Are you crazy, or what? Listen, this is not a serious approach to the matter. After all, this affects thousands of people... Commuter rail service should be restored immediately”15.

Unfortunately, it often happens that normal life and security of a big country are placed in jeopardy for the sake of someone’s personal and corporate interests.

Probably, it is necessary to reconsider the role of railway transport as a system- forming factor in the spatial unity of the country. This has already been the subject of previous discussions, and now they have started again. Some very convincing reflections on the role of Russian Railways in preserving the integrity of the country were expressed by E. Kholmogorov in the newspaper “Izvestia”16 and by T. Voevodina in the newspaper “Zavtra”17.

In general, I would like to support the President’s remarks “are you crazy” and “this is not a serious approach to the matter” addressed to the Government; but I don’t think they are crazy, and I believe they treat the subject seriously; they just set targets differently, they see Russia’s future differently. Not like the President of the Russian Federation V.V. Putin sees it.

The President set out his vision of Russia’s future in the Decrees of May 7, 2012, and his voters still have trust in their President and believe he will fulfill the stated goals of improving the quality of life of all the segments of the population. However, for the first time last year there emerged certain alarming trends on several indicators of social well-being of the voters.