#6323
#9
Versty
June 22, 2002
RUSSIA GETTING USED TO POVERTY
An interview with Duma deputy Sergei Glazyev
Author: Yevgeny Lakoza
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
A NEW BUDGET MARATHON HAS STARTED. THE GOVERNMENT HAS CALCULATED THE MOST IMPORTANT FOGIRES FOR 2003. DUMA DEPUTY SERGEI GLAZYEV, ASSOCIATE MEMBER OF THE RUSSIAN ACADEMY OF SCIENCES, SAYS IN THIS INTERVIEW THAT THE RUSSIAN GOVERNMENT AVOIDS INTERVENING IN THE ECONOMY.
A new budget marathon has started. The government has calculated the most important fogires for 2003. The GDP is forecast as 12.85 trillion rubles (this year this figure is expected to be 10.27 trillion rubles), the average exchange rate as 34 rubles to the dollar, and inflation as 12%. Russia's payments on foreign debts will total $17 billion.
According to the 2003 budget, the largest expenditures will be assistance to budgets of other levels (665.3 billion rubles, or 29.3% of the total of budget expenditures) and the national defense (333 billion rubles, or 14% of budget expenses). Expenditures on law enforcement activities and state security are to be increased. The government intends to spend 241.1 billion rubles (10.6% of expenses) on these spheres, whereas this year this figure is 184.6 billion rubles (9.4%).
At the same time, Finance Minister Alexei Kudrin has announced that if the economic situation in the world is favorable for the Russian economy, the government will manage to accumulate a financial reserve of 42 billion rubles by the end of the year. However, it is not rules out that incomes of the federal budget in 2002 will be less than the initially planned figure of 40-50 billion rubles. Thus, at the end of the year Russia may be left without any financial reserves.
We have asked Duma deputy Sergei Glazyev, associate member of the Russian Academy of Sciences, to comment on this situation.
Question: The government has approved the basic parameters of the draft 2003 budget, in which the share of non-interest spending is to be decreased. What does this measure threaten to do?
Sergei Glazyev: This is sad news, since non-interest spending is all state spending except for those connected with the state debt. Thus, funding of science, healthcare, education, culture, maintenance of investment activity, and encouragement of economic growth will be reduced. The government does not change its policy regarding foreign debts. Its priority is repayment of foreign debts even at the expense of the national economy and the welfare of Russian citizens.
I'd also like to stress that the state budget is not only the basic source of funding the social sphere but also the most important instrument of economic growth. For instance, the government may stimulate the ultimate demand by means of increasing expenditures and encourage investments in promising fields of the national economy. The government may also finance programs of structural reconstruction of the economy aimed at solving Russia's socio-economic problems.
Question: Many analysts consider that the draft budget is some kind of thing in itself, unconnected with the actual situation in Russia.
Glazyev: I share this opinion. This statement may be supported by the latest statements by Prime Minister Mikhail Kasianov and members of his cabinet. On listening to them, I came to the conclusion that neither the prime minister nor the government are aware of the reasons for which economic growth has ceased in the country. They don't know how to take the country out from the crisis. The government has once again demonstrated its helplessness from the point of view of analyzing and assessing the situation in the country.
Despite the notable revival of the economy that had been observed until the middle of 2001, its general state is determined by the long and drastic collapse of manufacturing in the country. It has twice dwindled since 1991, and today it is lower than in any country of the G7, twice lower than in India, and four times lower than in China.
The government has not had (and still doesn't have) a clear investment policy. Therefore, technological changes in the economy are obviously lagging behind. The most substantial backwardness is observed in modern branches of industry: their level lags behind the developed nations by 15-25 years. The output of most products involving high technology has decreased by four-fifths, which exceeds the general scale of economic decline. Currently, Russian high-tech products are almost completely ousted from the Russian market by imported equivalents.
Russia's scientific and technical resources have also decreased considerably. The number of research and design developments has fallen to less than a tenth of its previous level, making the national economy much less competitive and less capable of growing. If the government remains so indifferent to science, the trend to degradation will become irreversible.
Some developed nations spend up to 90% of annual GDP increases on their scientific and technical resources. In Russia, this figure has been reduced from 60% to 4%. Thus, the economy is now using the remnants of previous scientific and technical developments.
Question: The government apparently thinks the required level of industry investment in research will be taken care of by the market.
Glazyev: Unfortunately, the Russian government tends to avoid intervening in the economy, relying on the market. The unique opportunities in the favorable economic situation were missed. For instance, the government even failed to properly invest additional budget revenues of 318 billion rubles in 2001. Moreover, even the budget expenditures aimed at maintenance of the economic growth were underfunded.
The natural consequence of this policy was involvement of the Russian economy in depression, and socio-economic outcomes of this depression may be even harder than those of the monstrous decline of manufacturing in 1993-1995. The level, at which the economic growth has stopped, is much lower than that of the start of the 1990's, and the level of people's incomes and budget expenditures is even smaller than in 1997. The amount of investments in industry should be at least three times as large for reproduction on a simple scale of the basic capital alone. Investments in scientific research and design developments should be at least five times as large. This should be done within the following two or three years, since because of the extreme exhaustion of the out-of-date manufacturing capacities, 25% of them will be past repair in three years, and in 2006, this figure will be 50%.
The new wave of the economic decline may destroy the last reserves of economic growth. This, in turn, will lead to irretrievable degradation of the society. Almost half of the country's population is getting used to poverty today and is giving up standards of living of the middle class that were developed for decades. The loss of these stereotypes will drastically reduce the market of modern products in Russia and hinder revival of the economy. This loss is no less important for the nation than the loss of skills of working with high technologies.
FROM OUR FILES
The president's rebuke of the Cabinet for lacking ambition has made the Cabinet 0.5% more confident. The government has changed the forecast for economic growth in 2003 from 3.2-3.7% to 4%. However, the prime minister is not even sure of this figure. According to him, the basis of maintenance of the tempo of economic growth consists of the growth of productivity of labor and development of competition. However, he noted that if our work is not oriented to these factors, we will not reach even these figures. Minister for Taxes and Duties Gennady Bukaev does not sounds too optimistic either. He complained the other day that only 88% of the planned VAT were collected in January-April 2002 (19 billion rubles failed to be collected). Industrial enterprises just do not have enough money to pay VAT with. Enterprises also seem to lack money even for payment of wages, for wage arrears in Russia amount to 30 billion rubles now.
Besides, the sizes of salaries people get are still far from being normal. Although Mikhail Kasianov asserts that the level of the welfare of the Russian population grew by 9.5% in January-April 2002, this is still a very scanty figure. Besides, this figure was achieved by means of the fact that a number of well-to-do people have come out of the shadow because of the introduction of the 13% uniform income tax. It is also noteworthy that in January-May the index of inflation was 8.4%, and so I devoured the entire increase. According to our correspondents working in regions, the share of poor people does not diminish. In this connection, the editorial staff is asking readers to report to the newspaper what size of salary per month they view as adequate. Opinions of readers on this topic will be publicized in following issues.
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