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#10
AN IMPARTIAL VIEW OF RUSSIAN ECONOMY
Versty
No 59
June 2002
[translation from RIA Novosti for personal use only]
We live in poverty because we have an inadmissibly low level of labor remuneration, not because we work poorly, believes Academician Dmitry Lvov.
In recent years Russian scientists have many times addressed the government with their proposals, there have been many fundamental publications on Russia's economic development. "Russian Reforms Through the Eyes of Russian and US Scientists" is one of them. It was published in Russia and the USA. In it, we have expressed a common point of view: what we have in Russia today has nothing to do either with world practice or theory. Post-liberal reforms are a purely Russian invention with deplorable consequences.
We have a lot of social and economic problems and no one sees a way out of the current situation. Directly or indirectly, an early repayment of the state debt to external creditors has been set as a top priority. The implementation of social programs has been pushed to the background. At the same time, the problems of natural monopolies are putting increasing pressure on the government. The government is trying to effect the reform of housing facilities and public utilities from the third attempt and has been involved in the reform of railways. One may think that this is the key link that would allow us to solve all other social problems at once.
I think this is not true. Serious macroeconomic problems, which the country's leaders ignore, have been persisting since the Soviet times. These problems are the main brake. They are rooted in the low level of labour remuneration characteristic of the Soviet times. Over the years of reforms, this disproportion has deepened. We live in poverty because we have an inadmissibly low level of labor remuneration, not because we work poorly. Not a single civilized country has such a low level of pay by the hour.
The reforms of the population's incomes is the first thing we should have started from. This should be the main strategic task for the president and the government today. This truth, which is obvious for me, as a citizen and scientist, is not clear to reformers, for some reason. Over the 1990s, effective wages have declined by 60 percent.
When we proclaimed the transition to the market, we liberalized everything but wages. What market turnover in the conditions of the so-called free market can one talk about if Soviet wages, low as they were, have dropped, while prices for food and services have come close to world prices? This is a fundamental disproportion and there are no grounds to plead the lack of resources to eliminate it.
As to the second disproportion, if we take the whole of Russia's income, in whose creation capital, hired labor and natural resources - gas, oil, and what is given by God, as we in Russia say, take part, then we will see the following picture. Today, our labour accounts for a mere 5% of income growth, capital, including entrepreneurs' contribution and risk - 20% , while the remaining 75% - is the natural rent. The fate has given Russia a vast territory and incalculable riches, and from the moral-ethical point of view, what is given by God in Russia should belong to all. However, today we witness a paradox whereby the whole of the tax system in Russia is built the other way round, as it were. What we have in the tax system - a model of the liberal doctrine - can be called an absurdity, because if we put together all tax components, we will see that labour, the labour remuneration fund accounts for 70% of the revenues of the Russian treasury. Is this not a paradox? This is a striking contradiction for a normal person, to say nothing of a scientist. In our estimates, we oppress our working people by committing this outrage. Under such a taxation system, there will be neither business, nor interest in the material support of workers. If a country gets two-thirds of resources from the natural potential, this revenue should be enough to solve social problems, maintain science ... However, we have consciously or subconsciously built a system under which all problems related to budget spending are solved by taxation, something that spells a disaster for Russia(!)
In order to eliminate this disproportion, the Duma should not have drafted a good-for-nothing Tax Code. Instead, it should have submitted to the president a tax-substituting mechanism: to cover budget expenditures at the expense of the rent component. I propose that a law be adopted which, under the Russian Constitution, defining the bowels of the earth as state, public property, would read that rental income is public, and that its use for personal enrichment is a grave crime from the ethical and political points of view and must be prosecuted. You may take in an open market competition an oil field and use it, but repay this debt by rent. All investments that you have made belong to you. Today, we annually lose $46 billion in terms of rental income. In addition, we lose $6.5 billion as a result of poor work with public property. Taken together, this makes up another budget which bypasses the treasury.
The third disproportion is linked with our regions. The correlation of the per capita maximum and minimum GDP by Russian regions is 64 times, by investments - 2,000 times, by consumption level - 30 times. In the countries of the European community, the gap between consumption levels does not exceed 6.5-7 times. In this sense, Europe with its different countries has more grounds to be called a single country than Russia with its regions now.
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