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Friday, March 16, 2018

Empty plans: what’s wrong with the development strategy and Titov Kudrin

“Stolypin club” Boris Titov and the Center of strategic researches Alexey Kudrin present the strategy for socio-economic development of the country. Of two papers the Kremlin intends to take the most acceptable, in his opinion, the proposals and to incorporate them in the government program. Which will be as empty as all the previous ones.

photo: Natalia Muslinkina

Why modern Russian society is experiencing a persistent nostalgia for the bygone Soviet Union, with its queues, deficits and household disorder? What is the reason for the popularity of Stalin, embodying a strong hand, with all inherent in this period of excesses, repressions and cult of personality?

The answer to both questions is the same: the longing for justice, which in the first case is identified with the solidarity and equality of opportunity, and the second with corruption, embezzlement and illicit enrichment. And even free for people education and medicine, stable pensions and other types of social security, the Imperial authority in the international arena.

Equity, or the observance of basic rights and freedoms of citizens, the direct participation of the state in public distribution and redistribution of income, and support social interaction, according to Nobel laureate Amartya Sen, “ultimately associated with what kind of life people live, not only with the nature surrounding their institutions.” In other words, we must distinguish between applied and abstract justice, and due things.

The famous article seven of the Constitution, that, in the first paragraph which States that “the Russian Federation is a social state whose policy is aimed at creating conditions for a dignified life and free development of man” in the eyes of the people puts an equal sign between social and fair government. No wonder the second paragraph posits that “in the Russian Federation the labor and health of people, establish a guaranteed minimum wage, provided by the state family support, motherhood, paternity and childhood, disabled and elderly citizens, develop a system of social services and establish government pensions, benefits and other guarantees of social protection.”

Does the national idea of justice related to the economy? No doubt. Whoever doesn’t agree can read the seventh article of the Constitution again. If there is at least a distant reminder of the unconditional national priority programmes of the latter-day economic guru? No. But the lush color bloom pride and vanity, grafomanstvo and ideological tyranny, the worship of the market, free from morality, and rational choice based solely on personal gain.

The program Titova simple: unconditional marketer Titov, exposing the main clause controlled the issue of money that can be used to expand lending to the real sector, does not take into account at least three concrete objections. First, daily account balances of commercial banks at the Central Bank amount to about 2 trillion rubles, that is money in the banking system is, but to lend to anybody, the banks don’t want. Secondly, the share of Bank loans in the total amount of investments slightly more than 8%, whereas almost two-thirds of investments are made at the expense of the profit of the owners ‘ funds and budget. Thirdly, authors, unwittingly, a substitute for the market and want to personally determine the priorities of economic development of the country. In Soviet times a similar experiment called the “Gosplan”. To remind you how that ended?

Kudrin program, no matter how brilliant nor was it the compilers, you will not find a positive response in the society because it is only one point: the obsessive desire of the former Finance Minister to raise the retirement age. And to do so for accounting reasons, reduction of expenditures, whereas the retirement age, that is the definition of the period when the employee loses the ability to be productively employed, for category medical and social, require specialized research, which employees of the Ministry of Finance have absolutely nothing.

It is well known that Kudrin, in 2005 became the father of the pension system deficit, when pressed through reduction of the Unified social tax (UST) from 35.6% to 26%, with 8 percentage points of the total reduction was achieved by reducing contributions to the pension Fund. The hope was that the business will begin to emerge from the shadows and the reduction of the UST rate will be offset by an increase in aggregate contributions.

If the Central Bank then proceeded to conducted in recent years to rehabilitate the banking sector, in other words, the license of the “encasement” of the banks, the tax dramatically increased control over expenses of citizens, and financial intelligence are puzzled by the outflow of capital, reducing the single social tax would have a positive effect. But since after the first step the second is not followed, the price of illegal financial operations remained at the level of 2-3% of the amount.

In those circumstances, the entrepreneurs were still on how much the government will reduce taxes on personal income. Or to reduce to 2-3%, which is unrealistic, or omit the barrier in the form of long-term imprisonment, which would be a violation of the unwritten Convention, “we, the people, don’t meddle in your Affairs, you state, in ours.”

Today, instead of admit a mistake and to lobby for increased pension contribution rate, Kudrin is trying to disguise the guilt of raising the retirement age, the severity of the negative social consequences of which are unknown.

Business rebel? Then first you need to decide what team played “soft” headliners and then calculate how much increase the cost to the economy as a whole. Last year the share of wages in GDP was 46%. It turns out that the increase in pension contributions by 4 percentage points would increase the cost of production on average by 1.9%, which is relatively easily “digested” by tax agents.

Or, calculating price growth in the implementation of the tax maneuver “22 22” (a reduction in the overall rate of social contributions from 30% to 22% along with the increase of VAT from 18% to 22%), the Ministry of Finance agrees to a one-time surge in inflation, while increasing the contributory load — no? I think one that is a double standard?

Speaking of double standards. How many know that according to the Federal law “On state pensions in the Russian Federation” the state civil servants are entitled to pension benefits in the presence of length of service at 15 years and 6 months (by 2026, the minimum length will increase to 20 years), and the amount of the pension is 45% of average monthly earnings? Moreover, for each subsequent full year of “processing” to the basic retirement pension (45%) is added at 3%, but cannot exceed 75%?

It is another thing. Gallant deputies of the state Duma have the right to a pension in the size of a quarter from the Duma salary in a year once they complete their “hardest” of the duties in two years — half and three years — 75%.

What is more important: the desire to abstract social justice or the reduction of the applied manifestations of injustice? Society is clear that the second. “Strategic” about it not even thought of. Otherwise, even the dotted line, but marked a move toward restoring the confidence of the people in the state.

A classic of modern moral philosophy John Rawls “Theory of justice” argued that social and economic inequalities, since they cannot be avoided, must obey two conditions. First, they must be linked to posts and positions open to all under condition of fair equality of opportunity to achieve them. And secondly, forced inequality must be of the most benefit the poorest segments of society.

Progressive scale of income tax subject to the exemption from taxation of income to the poor, as well as a progressive scale of inheritance tax or tax on capital (dividends or lease payments in favour of physical persons), better corresponds to the principle of Rawls. In Russia the opposite is true: the flat rate personal income tax seems to be aimed at whitewashing of income, and the current point system of mandatory pension insurance makes no sense a legitimate income more than 876 thousand rubles a year, or 73 thousand rubles a month (these options are approved for 2017) because premiums paid in excess of the specified amount, “burn.”

In the end, all program sin one strategic disadvantage because their authors refuse to consider the common order of thought and action (not for nothing do they say that “reformers” with the people not lucky), appearing in the image of the fake Danko, a quarter of a century trying to convey to us sinners, the light of prosperity. During this time in our mentality firmly imprinted the habit of living one day and not rely on miraculous institutions, and on the off chance, you or your relatives. Happen in the near future another change in the economic rules, people are once again convinced of fidelity of the chosen way.


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