What does the coming day hold for the country?

Автор: Ilyin Vladimir Aleksandrovich

Журнал: Economic and Social Changes: Facts, Trends, Forecast @volnc-esc-en

Статья в выпуске: 6 (30) т.6, 2013 года.

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ID: 147223540 Короткий адрес: https://sciup.org/147223540

Текст ред. заметки What does the coming day hold for the country?

Delivering his Address to the RF Federal Assembly in December 2012, V.V. Putin, who was elected to a third term as President, noted the following: “The authorities must not be an isolated caste. This is the only way to build a strong moral foundation for creative work, an affirmation of order and freedom, morality and civic solidarity, justice and truth, and nationally oriented consciousness” ¹ . The President pointed out that the fulfillment of the goals set out in the Decrees as of May 7, 2012 is in its essence the programme for providing the decent standard of living, the significant enhancement of Russia’s competitiveness in the world, reduction of threats to its national security.

However, the outgoing year shows that, unfortunately, there was no such spirit in the activities of the RF Government in the implementation of specific measures aimed at “ensuring the country’s dynamic development in all the spheres”.

In his Address to the Federal Assembly on December 12, 2013 V.V. Putin stated: “A year and a half has passed since the executive orders were issued. You know what I’m seeing? Either things are being done in a way that elicits a negative reaction among the public, or nothing is done at all. Clearly, we will fail to achieve our stated goals with this kind of work” ² .

Throughout the year, the Government four times reduced the main forecast indicators that show the development of Russia’s economy (tab.1) .

Back in September 2012 the Ministry of Economic Development forecasted for 2013 that Russia’s gross domestic product would increase as compared with the previous year level by 103.7%, in April 2013 – by 102.4%, and in December – by only 101.4%.

Table 1. Forecast of the main macroeconomic indicators of development of the Russian Federation in 2013, as a percentage of those of the previous year (in comparable prices)

Indicators	Dates of provision of the forecast
Indicators	September 12, 2012	December 14, 2012	April 12, 2013	August 26, 2013	December 4, 2013
GDP	103.7	103.6	102.4	101.8	101.4
Industrial production index	103.7	103.7	102.0	100.7	100.1
Investment in fixed capital	107.2	106.5	104.6	102.5	100.2
Inflow (+), outflow (-) of capital, billion US dollars	-10.0	-10.0	-50.0	-70.0	-60.0
Source: RF Ministry of Economic Development.

December 2013 witnessed the stagnation of investment instead of the previously forecasted 7 percent growth. The December forecast indicated that the planned sharp reduction in the volume of capital exports from the country would not be achieved. Moreover, the index had an upward trend.

The crisis of regional finance has been aggravating. The parameters for 2013, set out in the three-year forecasts of the regions’ budgets, are deviating more and more from the projects, which proves the poor quality of budget planning. According to estimates, the territorial budgets’ own revenues in 2013 will be reduced by a trillion rubles, or by 13% compared with the three-year budget for the period of 2013–2015, and their deficit will increase in 3.8 times (tab. 2) .

At that, the decline in the profit of economic entities is the key factor in the reduction of the regions’ own budget revenues (tab. 3) . This is mainly the result of the fact that oligarchic corporations have lobbied for a new order of assessing the tax base through the formation of consolidated groups of taxpayers, which led to a deepening crisis of regional finances.

The Chairman of the Government D.A. Medvedev and senior government officials throughout most of the year explained the situation by external factors, namely, deterioration of the situation in the world market.

In his Address to the Federal Assembly on December 12, 2013, V.V. Putin made a statement of principle: “Of course we are feeling the effects of the global economic crisis, but let’s be frank: the main reasons for the slowdown in our economy are internal rather than external in nature” 3.

During the year the President more than ten times publicly reproofed the Government and Federal Ministers for the low level of organizational activity on the implementation of the set goals, the inefficiency of governmental decisions on the support to necessary economic growth4.

It appears that V.V. Putin has every reason to move from a regular criticism of D.A. Medvedev’s inefficient government to coercive measures and to transfer “slow-witted” cabinet officers to the expert community.

An objective analysis conducted by the institutes of the Russian Academy of Sciences5, including ISEDT RAS, proves that as a result of neoliberal market reforms Russia has

Table 2. The main forecast parameters of consolidated budgets of the RF subjects for 2013, billion rubles

Parameters	Budget forecast by draft laws for a three-year period			2013, assessment of expected parameters	Dynamics of assessment for 2013 in comparison with the projects
	2011–2013	2012–2014	2013–2015		2011–2013		2013–2015
	2011–2013	2012–2014	2013–2015		billion rubles	%	billion rubles	%
Revenues	7338	8134.3	9062	8909	871	11.9	-853	-9.4
Own revenues	6374	7047	7765	6767	393	6.2	-998	-12.9
Deficit	-136	-36.7	-121	-460	324	3.4 р.	339	3.8 times

Sources: RF Ministry of Finance; ISEDT RAS calculations.

Table 3. Key indicators of the budget process in the regions of the Russian Federation, billion rubles

Indicators 10 months of 2012 10 months of 2013 Dynamics, % Profit 6965.7 6324.9 90.8 Profit tax 1709.8 1457.5 85.2 Public and municipal debt 1364.3 1717.5 125.9 Debt load, % 25.8 31.7 5.9 p.p. Sources: RF Ministry of Finance; Federal Treasury; ISEDT RAS calculations. developed a socio-economic system of a mixed oligarchic type, the main manifestations of which are the following:

– establishment of elitist oligarchic corporatism (as a result of unreasoned policy of privatization), which owns a significant part of state property and distributes its influence on the policies of the legislative and executive authorities;

– predominance of the bureaucratic system that solves pressing issues through continuous introduction of amendments in the current socio-economic system; moreover, these changes, are not connected, as a rule, with qualitative updating of this system;

– slackening of the state’s control functions, primarily in the sphere of compliance with tax regulations and obligations, expansion of the scale of lobbying activity not regulated by the legislation and not accountable to the society.

Large-scale private ownership of strategically important economic sectors and natural resources does not allow the controllability of the economy to be ensured and the financial and economic resources to be allocated appropriately.

In the previous issues of our journal we published the main research findings of ISEDT RAS according to the results of the analysis of activity of Russia’s leading ferrous metallurgy corporations6. Due to the fact that their products were exported by offshore traders at prices that were by 20–30% lower than the global ones, the approximate lost revenue for 2008–2011 amounted to 367 billion rubles. Profit tax from this sum could have added 11 billion rubles to the federal budget, and 66 billion rubles to the territorial budgets. Two-thirds of taxes paid by metallurgical corporations are returned in the metallurgical sector in the form of compensation of input VAT on export operations. All this is continuously depleting the federal budget and, especially, regional budgets, increasing their debt load7.

Table 4. How would you assess the current performance of the RF President?, as a percentage of the number of respondents

Assessment	2000	2003	2004	2007	2011	2012	2013	Dynamics (+/-), 2013 in comparison with
Assessment	2000	2003	2004	2007	2011	2012	2013	2012	2011	2007	2004	2000
I approve	66.0	67.6	64.9	75.3	58.7	51.7	55.3	+4	-3	-20	-10	-11
I do not approve	14.8	13.7	19.2	11.5	25.6	32.6	29.4	-3	+4	+18	+10	+15

Table 5. Assessment of the performance of the RF President by various social groups of the Vologda Oblast population (answer option “I completely and generally approve”), as a percentage of the number of respondents

Social groups	Year							Increment/decrease in 2013 in comparison with
Social groups	2000	2003	2004	2007	2011	2012	2013	2012	2011	2007	2004	2000
Sex
Men	66.0	66.1	66.2	73.6	55.6	48.9	52.4	3.5	-3.2	-21.2	-13.8	-13.6
Women	66.0	68.7	63.9	76.7	61.2	53.9	57.7	3.8	-3.5	-19.0	-6.2	-8.3
Age
Under 30	66.2	71.2	69.0	76.6	58.3	49.7	52.9	3.2	-5.4	-23.7	-16.1	-13.3
30–55	66.4	66.5	64.4	75.1	57.6	50.9	55.4	4.5	-2.2	-19.7	-9.0	-11.0
Over 55	65.1	65.9	61.9	74.6	60.7	54.6	57.1	2.5	-3.6	-17.5	-4.8	-8.0
Education
Secondary and incomplete secondary	64.0	62.7	62.7	70.3	54.9	46.0	51.4	5.4	-3.5	-18.9	-11.3	-12.6
Secondary vocational	67.7	68.5	66.5	76.4	59.8	51.8	55.8	4.0	-4.0	-20.6	-10.7	-11.9
Higher and incomplete higher	67.6	71.8	65.8	80.1	61.3	56.6	59.1	2.5	-2.2	-21.0	-6.7	-8.5
Income groups
20% of the poorest people	56.4	57.1	56.9	65.1	45.7	40.9	49.6	8.7	3.9	-15.5	-7.3	-6.8
60% of the people with middle-sized income	68.9	70.7	67.7	78.0	60.4	53.8	56.1	2.3	-4.3	-21.9	-11.6	-12.8
20% of the most prosperous people	69.3	74.7	73.1	82.6	68.9	59.4	63.6	4.2	-5.3	-19.0	-9.5	-5.7
Territories
Vologda	66.7	74.4	62.1	74.1	58.3	51.6	53.2	1.6	-5.1	-20.9	-8.9	-13.5
Cherepovets	62.2	64.4	64.0	82.8	68.5	62.3	63.7	1.4	-4.8	-19.1	-0.3	1.5
Districts	67.7	66.1	66.7	72.2	53.9	46.3	51.9	5.6	-2.0	-20.3	-14.8	-15.8
Oblast	66.0	67.6	64.9	75.3	58.7	51.7	55.3	3.6	-3.4	-20.0	-9.6	-10.7

In this regard, it is very important that part of the Presidential Address was devoted to counteracting the offshores. Putin proposed three new initiatives. The revenues of companies, registered in an offshore jurisdiction and owned by the Russians, ultimate beneficiaries, should be subject to Russian tax regulations.

Companies registered abroad, should be deprived of state support measures, VEB loans and state guarantees, they should also be denied access to the execution of public contracts and contracts between the structures and the state.

The President focused on the importance of civic participation in the life of the country, the enhancement of public control. He showed that he felt the increased level of requirements of the society to the state and its leadership.

In many respects the 2013 Presidential Address is the logical continuation of his September speech at the Valdai International Club, when the Head of State clearly declared that moral values should prevail at all levels of executive and legislative power, for all levels of business, officials, public employees.

V.V. Putin’s desire to improve the moral situation in the country, to strengthen the control of civil society over the activities of authorities at all levels finds growing support in the country.

The research carried out at ISEDT RAS shows that according to the results of six consecutive surveys conducted in 2013 in the Vologda Oblast, the indicators of approval of the President’s performance increased in comparison with the results of 2012 from 3–5 points (tab. 4) . Moreover, positive assessments are observed virtually in all social groups (tab. 5) .

However, it is noteworthy that more than half of the respondents (57%) do not consider that the President’s activity aimed at boosting the economy and wellbeing is successful (see table on p.16) . This assessment is largely formed due to uncoordinated actions of the RF Government. Under the influence of oligarchic corporations, it organizes the work like a circular firing squad. It is this style that has led the dynamics of the national economy development to the recession.

In our opinion, the President should not only remind the political elite of the necessity to execute the formal decisions; he should also force it to do so, and eliminate the “quasicolonial part of the elite”.

2014 should not become the year of missed opportunities for the RF President V.V. Putin with regard to the implementation of strategically important state tasks on modernization of the country, set out in the pre-election articles and stipulated by the Decrees dated May 7, 2012.

Appendix to page 6.

Concise list of essential activities and critical statements of Russia’s President V.V. Putin with regard to the performance of the RF Government and government structures

Список литературы What does the coming day hold for the country?

Putin V. V. Presidential Address to the Federal Assembl y, December 12, 2012. Available at: http://news.kremlin.ru/transcripts/17118
Putin V. V. Presidential Address to the Federal Assembl y, December 12, 2013. Available at: http://news.kremlin.ru/transcripts/19825
Glazyev S.Yu., Lokosov V.V. Assessment of the critical threshold values of the indicators of the state of Russian society and their use in the socio-economic development management. Herald of the Russian Academy of Sciences. 2012. Vol. 82. No.7
Glazyev S.Yu., Fetisov G.N. On the strategy of Russia’s sustainable development. Ekonomist. 2013. No.1
Russian transformation: 20 years later. Ed. by J. Sapir. Moscow: Magistr, 2013
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Osipov G.V., Kara-Murza S.G. Knowledge society: transition to innovation development of Russia. Moscow: Librokom, 2013
Russia on the way to the modern, dynamic and efficient economy. Ed. by Academicians A.D. Nekipelov, V.V. Ivanter, S.Yu. Glazyev. Moscow: Russian Academy of Sciences, 2013.
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Ilyin V.A. National and regional security: a view from the region. Economic and social changes: facts, trends, forecast. 2013. No.3
Ilyin V.A. New agenda and state management efficiency. Economic and social changes: facts, trends, forecast. 2013. No.5.
Ilyin V.A., Povarova A.I. Issues of state management efficiency. Budget crisis in the regions: monograph. Vologda: ISEDT RAS, 2013.

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