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View Full Version : One Question Test--Russian Benefits Reform (Long)



Halyavshik
19-01-2005, 09:40
From my High-School Russian Teacher. A socio-political analysis, and a fantastic one at that (if you ask me).

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1. The recent wave of street protests and demonstrations against changes in the Russian pension and benefits system should be viewed as

(a) timely, appropriate to the cause and worthy of general public support.
(b) a half-century too late and programmatically pointless at this juncture. Or
(c) yet another case (like so many others in Russia’s social history) of several seemingly contradictory things being true at the same time—with the istina (or ‘ur-truth’) behind them holding lessons we ignore only at our peril.

* * *
(a) To marvel, for a moment, at the obvious: pensioners protesting against unfair implementation of new laws that directly and adversely affect the quality of their lives makes perfect sense. As reported in various media outlets, in a number of regions and municipalities around the Russian Federation local authorities have taken advantage of the uncertainty surrounding the redesigned benefit-distribution system—in many districts no one really knows, it seems, who’s entitled to what at this point—and “redesigned” themselves and their immediate bureaucratic constituencies into positions of new advantage. In some cases benefits have apparently been denied to individuals and whole categories of people whose status had in fact not changed under the new provisions; and the appropriated benefits, as was easily to be predicted, have ended up in the hands (or at the disposal) of people who were intended as their administrators, not their beneficiaries.

This is both an obvious and particularly distasteful form of theft, and the pensioners deserve our support and encouragement in protesting long and loud until such abuses are stopped, the abusers punished (all right, publicly admonished) and the stolen benefits returned. The annoyance of a traffic jam or two is a small price to pay for the restoration of simple justice to thousands (or perhaps millions) of Russia’s aged and infirm—who may well be fighting a cause, lest we forget, that could become be our own to fight one day.

(b) A second way of looking at these protests, however, also demands our attention—and no less serious consideration. If there is ample reason to criticize the way in which these reforms are being carried out in some locales, there is much less to complain of in their objective. Let’s return for a moment to the mid-1950’s: faced with a population which was in the main either malevolently indifferent or openly hostile to its increasingly idiosyncratic economic “plans”, the Soviet government came to strike a deal with its citizenry: If you’ll show up at work regularly (or at least occasionally) and otherwise stay out of trouble, we’ll pay you a living wage (of sorts) and guarantee you a marginally acceptable pension. This unwritten social contract served as an effective economic modus vivendi between governed and government during the Khrhushchev and Brezhnev periods, essentially diverting a natural conflict between the two into a sort of tactful mutual dismissal: “They pretend to pay us and we pretend to work.”

Since it was not based on any rational economic principles, of course, this agreement could hardly be expected to outlive the irrational semi-command economy that spawned it—and yet, when the Russian Federation inherited most of the remains of the failed USSR, one of the first and loudest social alarms to be sounded by the populace was “What about our pensions?!?” Reality had not yet set in; and the Yeltsin governments of the 1990’s felt they could not, for political reasons, disavow their publicly perceived responsibility as guarantors of a pension and benefits system that was based, as they knew, on a state-as-giant-pinata fantasy left over from the ancien régime. A chance to begin changing this perception was lost: how much good it might have done if Boris Nikolaevich, summoning all the charisma he carried with him in the early 90’s and borrowing liberally from Franklin Roosevelt’s approach to popularizing difficult economic policies, had addressed the Russian nation in a series of candid, sobering and yet encouraging “fireside chats” on the new economic realities facing everyone in the country…

Alas, it did not happen. And thus an utterly mythical perception—that every employed person in the Soviet Union had been contributing to an ongoing national pension fund—was allowed to survive the initial transition from the USSR…and thus survive to this day in a great (and greatly darkened) portion of the post-Soviet public mind. To those who subscribe to it, each post-Soviet individual, armed with his personal stick, is today fully entitled to get his whacks in on the successor pinata that is the new Russian state. (Naturally enough, both the post-Soviet Communist Party and the post-rational “National Bolshevik” performance art troupe are lined up four-square with this “cause.” Such support can and should summon but one word in the minds of pension protesters still in touch with any version of reality: “Yikes.”)

As of this January, in any case, various state ministries have individually and in concert begun conveying to the pinata constituency (and the political opportunists hovering around them) the new message, one intended to be as sobering as it is simple: No. Read our lips: real life doesn’t work that way. The fact that you were formally employed for 30 years or something at a Soviet enterprise does not mean that you (much less your government) were somehow putting money away for your Golden Years—money that now entitles you to a lifetime of free subway rides, free medical care, subsidized housing, food discounts, and so on. Come on: all most of you did was pretend to work, remember? What makes you think that the current government—of another country, come to that—owes you something more than a pretend pension?

We’ve been in business [they could go on] for all of fourteen years now, and you’ve been paying taxes since…when? 1999? 2001? Come on, be honest—how many of you have ever paid taxes? We don’t see a lot of hands going up. What kind of pension/benefit base could we in government have possibly amassed over this quickest and dirtiest of periods, this historical blink of an eye which, as if the rest weren’t enough, featured a national default in the middle? And yet you all want pensions; you all want benefits; and you all want them now. Look, you tell us: how much sense does that make?

To be fair, many of the current protesters surely understand this. Indeed, what may hurt many of them more than anything is the recognition that they are, in effect, standing out there in the cold and snow in order to protest against…themselves. They now see, and alas all too clearly, that it was they, individually and collectively, who sold both themselves and their futures down the proverbial Volga when they agreed with the Soviet bully-state that yes, they should shut up, lie low and not worry (much less think clearly) about things economic—including their pensions. It is not pleasant to be reminded that you did foolish, irrational and sometimes cowardly things earlier in life; and it is scant comfort to tell yourself Well, most everyone else at the factory (or the office or the collective farm) did too. Be that as it may, when forced by 20-20 hindsight and latter-day economic sobriety to recall such regrettable folly, it is a natural enough (if less than admirable) reaction on the part of many of today’s Russian citizens to look for…someone else to blame. It can’t be the long-departed Yeltsin or the ever-popular (and pleasingly “semi-authoritarian”) Putin, so there could be a problem here—but thank heavens: onto stage right, appearing as if on cue, come these reptilian “local pension-reform authorities”, practically begging for someone to cast the first stone…

So: there is both good reason for and considerable self-reproach behind the loud cries we are now hearing of Down With the Thieving Bureaucrats! What appears to be one cry is really two, and both charges have merit. It seems reasonable to conclude, at all events, that the on-site thieves, however rife they are, do not constitute the principal problem. They are an unpleasant diversion from the real issue at hand—the need for reform, both in practice and popular mindset. To advance this cause, the people above the local authorities in Putin’s vaunted “vertical of power” will have to do better at explaining the new pension system and putting it (or a better version of it) into place. (And perhaps they would be better equipped to do this, one wants to wonder aloud within earshot of the president, if they were elected by their constituents rather than appointed over them…)

(Continued)

Halyavshik
19-01-2005, 09:41
(Continued)

In any case, the present government, whatever its (myriad) faults, can hardly be blamed for trying what it is trying: to establish a system (albeit a flawed one) which will invoke certain rational economic restraints to derail (or at least long delay) an otherwise-inevitable kablooey—the big bang at the end of this decades-in-the-making All-Russian National Retirement Bash, wherein the pinata finally bursts into smithereens and the new Russian state finds itself as broke and disillusioned as the old one it had so hopefully replaced. To marvel once again at the obvious: the prevention of this explosion, one way or another, would seem a Good Thing, right? Does anyone really disagree with this? The “Putin model” of the ascendant one-party state needs the geezer constituency to continue its development apace—but it needs them to think clearly about their own economic entitlement, too. At base, the regime wants to assume, the thoughtful among the protesters are not saying “Bring back the Soviet pension system!”, but rather “Please reconsider the methodology of the new one”—a plea with which it is hard not to sympathize. Now: how to balance sympathy and the demands of expediency? Well, throwing a month’s worth of free bus rides back at the sputtering geez-mobs seems to be the initial tactic of choice in some locations. And then…?

No nation is immune from the disease of economic self-delusion. It may well be that these “ornery Russian geezers”, as one western observer patronizingly dubbed them, are in fact engaged in what will later seem a polite and gentle disagreement compared to America’s Pension Armageddon of 2042 (or so), when the U.S. Social Security system finally implodes from the pressure of three generations of ostrich-like economic “planning.” What will Americans do when they discover that their version of fantasy economics—begun by slashing billionaires’ taxes while waging lengthy (and unprovoked) land wars on the other side of the planet—actually costs you, in the end, more than “a little more than the system was designed to handle”? Indeed, a lot more. Will Americans then understand how dim they really were in 2000 and 2004—and try desperately to recall, in the shock and awe of sudden impoverishment, just how it was that they came to believe the seemingly incomprehensible: that a failed businessman turned failed baseball executive could have even the vaguest idea of how to reform their Social Security system? (Perhaps, they’ll tell themselves, it was his eloquence…)

But enough. The correct answer here, at length, is (c). The images we are seeing now, of Russia’s elderly blocking highways with their bodies in the dead of winter, represent more than the obvious: they are, indeed, an understandable (and commendable) cry for local justice; and they are also a saddening echo of modern Russia’s irrational economic history and the staying power of myth. But they are also more than this, and more than the sum of these parts. This movement is only beginning, still feeling its way; it is certainly growing; and there are different directions in which it may go from here. These scenes, in the end, may be variously instructive for various different futures, perhaps ultimately forming a kind of visual cautionary tale—one with a critical and not-too-coded message, both for local consumption and for export.

So, students: are you watching this drama closely? What is the message? What are the Russian geezers really telling you—and the rest of us as well—about economics, protest, populism, and the 21st century state? Are they creating answer (d)?

J.D.
19-01-2005, 09:49
If you are going to hijack Hal's login for some serious political/philosophical discussion could you also change his avatar?
It is distracting when trying to read something serious.

Ned Kelly
19-01-2005, 10:14
really interesting. you'd love to imagine it was the beginning of the end of the leader/saviour myth.

SpruceGoose
19-01-2005, 12:02
I dunno if you have had a look at George W Bush's innauguration plans but it would seem to me that the reverse is happening. The Americans are investing somewhat heavily in the leader/saviour thing themselves.

Ned Kelly
19-01-2005, 12:08
mate, when malcolm blight dobbed that goal from 70 metres out after the siren i became a convert to the leader/saviour thing!

kniga
19-01-2005, 12:37
Halfasack,

Quite an interesting lesson with the balance that has not been presented elsewhere. Except for the expected Bush bashing from your very bright, but typical inhabitant of the Left's Ivory Towers of Academe, you old teacher has presented both sides of the argument very clearly, a difficult thing to accomplish when issues are so emotionally charged. I would have been even more impressed had he offered his solution.

Halyavshik
19-01-2005, 12:48
Originally posted by kniga
I would have been even more impressed had he offered his solution.

If it were that easy, I don't think the topic would be so controversial to begin with. If he had one, he'd probably replace Illarionov tomorrow and never worry about teaching again. :)

kniga
19-01-2005, 13:00
Halfasack,

Then do you?

Halyavshik
19-01-2005, 13:28
Originally posted by kniga
Halfasack,

Then do you?

Not one that's plausible, feasible or realistic. Maybe they could tranfer proceeds and profit from Baikal Invest's sale of Yugasnkneftegaz to a pension fund to be paid out over the next five years ?

I think that's the point. There's no easy answer.

kniga
19-01-2005, 14:54
Halfasack,

If there is money to handle this crisis that has been manufactured suddenly by the Russian government, first there is the matter of how many pensioners are there who must be dealt with and for how long, i.e., what is their statistical longevity? I have read that 51% of the Russian population fits into the category of pensioner, a percentrage that seems very high to me until I look at the declining birthrate that will eventually make Russia a land empty of its native stock and rife to be repopulated from outside its borders, a process that is already underway. If, however, following the roughly 50% that should be eligible pensioners, then that means there are roughly 73,000,000 penioners (half of the January 1, 2000 census of 145,924,500, although unsubstantiated sources suggest today's population is closer to 137,000,000) needing pensions at least equal to what they have been getting, pittance that it is. The average pension is 1,120 rubles (about $40.00) and the maximum pension amounted to 1,638 rubles (about $58.50). Taking the average pension, the Russian government needs to come up with 81,717,720,000 ($291,849,000) rubles a month or 980,612,640,000 ($35,021,880,000) rubles a year. At that rate, this demand would wipe out the present suplus fund of $100 billion in about three years and the likelihood of exceedingly high $50+ a barrel oil to replenish this fund at a sufficient rate to keep paying these pension amounts seems dubious. None of these calculations takes into account the other lost pensioner benefits, e.g., free transportation on the metro, trolley buses, buses, lower cost medicines, etc., that have been eliminated, all of which cannot begin to be replaced by the roughly 300 rubles a month substituted for them by this new government decree. So the question becomes first, can the government continue to pay the present pensions and provide the nearly cost-free benefits, not should they. If they can, where are these revenues to come from? There is no fat in a budget that needs to replenish everything that has worn out in the 74 years of the USSR and the interregnum between the collapse of the old failed Soviet system and the replacement as a work in progress new Russian system of governance. Everywhere one looks in Russia today there are budgetary requirements to address infrastructure, industries, education, military and public welfare needs beyond the government's ability to provide all that is necessary in every sector, even if the endemic and massive corruption and fraud were to be squeezed out of the system, an unrealistic expectation for the foreseeable future.

The likeliest answer, if my facts are correct, is that the Russian government may make some readjustments to these sweeping social changes, but they will be bandages on the hemorrhaging body of aging pensioners who will provide the ultimate solution to the problem by dying off. The younger generations of Russians will have to depend on their own savings or private enterprise pensions for their own retirement years and not expect the impoverished Russian budget to be stretched to cover them as well as all society's other needs that are deemed to be more pressing.

So there's my answer, Halfasack. How say you?

Halyavshik
19-01-2005, 15:31
Originally posted by kniga
So there's my answer, Halfasack. How say you?

Kniga, research sounds good to me. My reply about Yuganskneftegaz was facetious, obviously.

What can I say ? It sounds to me as if you reach essentially the same conclusion as my teacher; answer 'd'. There really isn't much that can be done. Their ultimate fate --no pun intended-- will write a new chapter of history in the 21st century state development.

SpruceGoose
19-01-2005, 15:39
Gee Bush Bashings a tough call. I am merely a tad worried about the expenditure involved, that’s all, particularly given the polite coughs emanating from American Treasury officials and the growing number of East Asian types looking up the word ‘hubris’ in their English dictionaries after finding it on the underside of their American dollar securities. One assumes they were referred to these by the small print on the current American credit card statement.

On a spectacle level I am all for it. Actually I am hoping that with a little luck they will get Vince MacMahon to announce him on the day as the new WWF Heavyweight champion before he walks around the front of the White House in his underpants with an arm raised in salute and flexing before the adulating masses. Then, after heading off to a penetrating five minute interview with ‘mean Gene’ Okerlun and divulging (with reference to Ossama Bin Laden, Kim Jong Ill, the Iranians, the French, the Palestinians, anyone who doesn’t agree with him, > ten watt thinkers, etc) that,
“I’m gonna rip his head off! I’ll get him in a clothes line and the DDT! He’ll wince in pain from a souflex, shriek in a figure four leg lock and beg for mercy in a Boston crab! An’ you know what I’m gonna do then Gene?’
‘No Mr President whatta you gonna do then?’
‘I’m gonna finish him off with the WMD!’
the crowd will burst into enraptured cheers before Vince comes back in with the announcement ‘The greatest battle of all time! Good versus Evil! In Wrestlemania XXXIV!’
(then back to the studio for a sponsors announcement)

But I agree with most of the other observations ade and think it a very interesting post, which as Kniga says, is nicely balanced .

kniga
19-01-2005, 16:46
Halfasack,

I also agreee with your teacher's comments about the U.S. Social Security program, our own version of "the Impossible Dream." No senator or congressman wants to touch this issue because to recommend what needs to be done to save it, i.e., raise deductions or decrease benefits or both, is an automatic anathema to his/her reelection efforts. So I see the Russian pensioners' financial crunch as a preview of what many here on this site will see happening to their own meager government pension plan.

SpruceGoose
19-01-2005, 17:01
Yeah, the pension plan thing is hanging like a sword of damocles over most of the western governments of the world. An interesting article I looked at recently supposed that the only real way for these governments to be able to manage the baby boomers heading into retirement would be to institute huge scale immigration programs, although I wasnt of the understanding that the US is facing such a problem, more western europe, Australia, NZ and such like. The reason the parliamentary types dont like facing the issue is because they are in the position of either having to level with younger types and tell them they will have to pay through the nose of their taxes for the next forty/fifty years to pay for pensions of their parents, or explaining to these parents that they arent going to be getting to much of a pension if they are relying on the government alone. The alternative of bumping up the immigration to 'artificially' [for lack of a better word] grow the economy to cover the necessary outlays raises the hackles of environmentalists (worried about the environmental impact of all this), the anti immigration types (who dont like immigrants no matter where they are from - and could be expected to become worse if these immigrants started appearing to business as more attractive employment prospects than older types not yet wanting to be retired) and economists (worried that all that is happening is shunting the problem off until tomorrow).

But like here in Russia (and I very much agree this is in some ways a precursor of what is to come elsewhere) somehting will have to give somewhere.