Source: Vedomosti
Russia’s opposition leader Alexei Navalny has published a policy platform that indisputably raises very important issues and proposes a number of long-awaited actions, including judicial reform, changes to the criminal code, and the reform of the Federal Penitentiary Service.
The platform’s economic section, however, leaves much to be desired. Most of the proposals are seriously concerning, look impractical, and are evocative of the left-wing populist slogans of Russia’s Communist Party (KPRF).
A very explicit example would be a proposal to increase the minimum wage to 25,000 rubles ($425) per month (60 percent of the current average wage, a 250 percent increase): the figure itself is left without an explanation (why 25,000 not 20,000 or 30,000?); the question arises of how to reconcile such a draconian increase in production costs for most SME and low-margin labor-intensive businesses with the principle of reduced state involvement in the economy and the idea of helping currently suffering private businesses resurrect and start to grow. The idea has been widely criticized for both its baselessness and its lack of ultimate effect (instead of raising salaries, businesses will partly cease operations, partly move to gray payments, and partly hire part-time or find other work-arounds), but Navalny has plainly refused to correct the slogan or elaborate on it in order to make it more reasonable.
Navalny’s determination to tax the owners of earlier privatized enterprises also raises considerable questions. In the latest version of his platform, it manifests as a “compensatory tax on the use of infrastructure created through the labor of past generations and dishonestly privatized in the 1990s and 2000s.” What infrastructure Navalny is referring to, and who uses it and how, is left without an answer.
Who counts as past generations? What constitutes “dishonest” privatization when there are legal documents accounting for everything? The idea, if implemented, opens a way for a state racket and demanding a ransom for doing business in Russia; still, it will not solve any of the Russian economic problems, none of which have arisen from the lack of funds.
Navalny’s commitment to “total independence” for municipalities sounds at least like an exaggeration. Only someone with no understanding of how government works can talk of redistributing tax revenue in such a way as to make the municipality a principal recipient and independent further distributor of 100 percent of it. Even if implemented in a country with a more or less equal geographical distribution of tax income, such a platform would leave the country lacking vital infrastructure and federal systems. In Russia, on top of that, it would clash with the need to redistribute tax revenues between the regions.
A whole series of measures brings to mind the image of parts of government being juggled. Why hand over thousands of half-senseless state-owned businesses to Russia’s pension fund? Today, the federal budget finances 50 percent of the pension fund, including through revenue generated by state property. What will change if state property is handed over to the pension fund? The emergence of a new bureaucratic structure within the pension fund that will control these assets in place of the Economic Development Ministry?
The platform has inherited from Navalny’s nationalist youth a thesis proposing work visas for migrant workers from Central Asia. No reasons are given, but I would dare to guess what they are: shielding unemployed Russians from competition from those accepting lower wages, and protecting Russians from acts of crime and terrorism perpetrated by migrants from Central Asia. Alas, in reality, there are not many Russians who have lost jobs to migrants from Kyrgyzstan, but there are thousands of Russian companies that rely on such migrants.
Furthermore, statistics show that immigrants commit far less crime than Russian nationals; nor does Russia suffer from imported terrorism. In fact, the labor migrants provide Russians on average with a precious opportunity to elevate themselves to the engagement in more efficient and highly-paid labor. It is the education system and business environment that we need to improve, not the labor visa bureaucracy, requiring the creation of a colossal bureaucratic mechanism responsible for the allocation of 5 to 7 million visas. It would destabilize the job market and provide corrupt officials with a new trough on an unprecedented scale.
Much is also said of the fight against corruption. Yet the platform’s plan for tackling it—making officials more transparent and more accountable—closely resembles that of the current president. Those methods have failed to work so far; why they would succeed in the future is unclear.
A number of intelligent people have observed that what is needed is a smaller role for the government, not transparency and accountability. Navalny’s platform also favors a smaller role for the government, but only in theory. In practice, according to the platform, the battle against corruption would begin with “the establishment of a new independent state anti-corruption structure” and “a new body responsible for increasing the competition,” in other words, with the government’s expansion.
As mentioned above, state disengagement from the economy in the eyes of Navalny would begin with the consolidation of state properties within the pension fund, a new tax on privatized enterprises and massive crackdown upon “past violations of laws” by businessmen and officials, forcible increases in the minimum wage and state subsidization of healthcare and education, and mortgage rates of under 2 percent (who is going to subsidize this is left unclear).
The platform further asserts that following the sharp decline in mortgage rates and a corresponding increase in the property tax rate for larger and luxury properties, the cost of housing will actually fall. Of course, Navalny is hardly the first to declare that universal economic rules do not apply in Russia, but then what makes him different from the rest?
“By and large, developers build homes for the elite,” Navalny says out loud. Have none of his associates shown him the figures? Of the 75 million square meters built in Russia per year, the cages found in multistory prefabricated panel apartments—the kind in which only the very poor live in Europe—account for more than half, while all higher-class housing accounts for around 35 percent (and “elite” houses, those looking like middle-class European apartment buildings, constitute 5 to 10 percent). Housing construction for the poor grows annually by 12 percent, while the rest falls by 15 to 20 percent. The truth is, Russia is filling up with ugly and uncomfortable multistory dormitories where only the very poor would live; it is strange to propose further exacerbating this trend.
The platform also contains numerical oddities. It is suggested that the tax on individual entrepreneurs be replaced with a fixed sum of 25,000–30,000 rubles, to be collected annually. Such a step would increase taxes for all those earning 500,000 rubles a year or less, significantly decrease taxes for the highest earners, and overall leave the size of the budget revenue largely unchanged. Why is Navalny, having repeatedly declared his determination throughout the platform to reduce inequality, suddenly suggesting considerably increasing inequality in the world of small business?
There are also outright errors in the platform. When calculating the pay of Russia’s future professional army, taxes are not taken into account, and it is mistakenly suggested that soldiers’ pay may account for half of the defense budget.
The platform furiously notes that Russia spends 3.7 percent of its GDP on healthcare, while Organization for Economic Cooperation and Development (OECD) member states spend 9 percent. The author of this claim has consulted the wrong table: the 9 percent figure for OECD member states reflects their total healthcare expenditure, including both public and private spending, in 1995. As for public spending, according to World Bank data, the OECD as a whole spends 7.8 percent of GDP, while Israel spends 4.7 percent and South Korea—4 percent.
Surely the author did not mean to suggest that ordinary Russians should spend more on healthcare than they already do; similarly, surely they did not mean to imply that Russia can cut taxes, which account for 33 percent of GDP, while simultaneously aspiring to spend as much on healthcare as countries where taxes account for around 50 percent of GDP?
But the platform’s greatest problem is that it attacks all vocal parts of society in favor of a mythical “people.” The federal government is to be prosecuted, the regional governments replaced, the civil service severely downsized, businessmen labeled as crooks and forced to pay tribute for their participation in privatization, business owners who employ migrants to be made to pay extravagant sums for work visas, small business owners to pay more in taxes, army officers to suffer radical downsizing of the budgets and unclear reforms, defense industry workers to prepare for massive layoffs, and managers of state-owned businesses—for extortion of revenues in favor of the budget à la Venezuela and unclear transformations of management systems.
Beyond the lines of the platform, Navalny declares everyone who supports another candidate an enemy of his own and Russia’s, and blames all of them for “being paid by the corrupt regime.” Who is left? Pensioners are faithful to the KPRF, while the preferred candidate of low-paid state company employees is LDPR leader Vladimir Zhirinovsky. Attracting voters with such a platform will be quite a challenge.
An honest candidate’s platform in contemporary Russia cannot promise paradise for free. The great Winston Churchill promised his people nothing but “blood, sweat, and tears.” He did this without describing half of the country as crooks and halfwits, or manipulating concepts and figures. This is what I expected from Navalny’s platform, and would have been pleased to see in it, but did not.
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