Vladimir Potapov

P

rime Minister Mikhail Fradkov approved the program “Main Directions of Activity of the Russian Federation Government for the Period till 2008”. He personally presented this program as a basic mid-term plan of federal authorities’ actions in the sphere of economy.
As the program states, the most important task is to ensure high and stable rates of economic growth. In the Government’s opinion, this is feasible only with the macroeconomic stability being based on the steady reduction of inflation rates, implementation of weighted monetary policy that makes it possible to move to the full ruble convertibility without its excessive consolidation, maintenance of a balanced federal budget along with further lowering of the economy’ tax burden and significant increase in efficiency of budget spending.
As some in the Russian mass media believe, now it is possible to state new principles of the Cabinet’s economic policy. While in the past determining macroeconomic parameters was based on several development scenarios that proceeded from forecasts of oil prices, this time there is an apparent desire to manage "free forces of the market". As one high government official said, "now forecasts should become normative".
In analysts’ opinion, it implies an obvious change in "the rules of the game". There is no more counting on liberalization and business initiative. Now the Government believes that "the State should be involved in the economy as much as necessary for accomplishing the set tasks". And the most important of them is well-known: to ensure the annual increase of GDP by about 8%.
So far statistical indicators have proved the steady economic growth. In a recent report the Statistics Committee stresses that, by rates of GDP increments, Russia is the leader among the industrially developed countries. In 2000 this index amounted to 10%, it was 5.1% in 2001, 4.7% in 2002 and 7.3% in 2003. In the first six months of 2004 the volume of industrial production in the Russian Federation has grown up by 7.4% as compared with the first six months of 2003. There have also been an increase in investments and a steady positive balance of the foreign trade turnover.
As experts believe, these achievements by as much as over 70% are due to market conditions, which have a favorable impact on the Russian economy that is strongly oriented on raw materials. Prices for oil are record high. The demand is also high for metals, another important item of the Russian exports. That is why the Government quite easily achieved an uneven growth of the federal budget: according to the draft for 2005 its volume is three times as much as in 2000. Besides, the Stabilization Fund has accumulated large reserves, which allow to finance social spending items, even if oil prices fall down twice as much.
However, the Government’s political opponents are in no hurry to predict Russia’s coming prosperity. Prominent pundit Stanislav Belkovsky, for one, insists that the ruling elite is manipulating statistical data by using it to substitute the unbiased analysis of the economy’s actual state of affairs. He also puts in doubt the President’s basic assumption of doubling GDP by 2010 that serves as a base of the new strategy. Belkovsky is against making a fetish of such indicators and along with others he would like to get an answer to the following question: how life of the country’s population as a whole and of concrete social groups in particular will change as a result of achieving (or failing to achieve) this arbitrarily set goal?
It is hard for the Government to react to such attacks. The matter is that precisely Mikhail Fradkov’s Cabinet has been destined to conduct planned social reforms, which get an extremely negative response of the population. The list of these reforms includes:
– the pension reform, which economist Mikhail Delyagin defines as confiscatory;
– the package of housing laws, which, in fact, repeal the Constitution-guaranteed right of every citizen "to live under the roof";
– reforms of the education and health care systems that will make these spheres inaccessible to the poor;
– replacement of natural privileges with money compensations.
It is assumed that these unpopular reforms will help force the social and economic development. However, their opponents – with the majority of the population being among them – do not want to pay such a high price for achieving those goals that are set by the mid-term strategy and, by all appearances, the criticism of the Government will be getting stronger.
There is one more aspect that is unpleasant to Russian authorities. In contrast to Mikhail Kasyanov’s Cabinet, which "befell" the present President of Russia as if "by right of succession", Fradkov’s Cabinet by its structure, functions and personalities is formed in total compliance with preferences of Vladimir Putin himself. So, it is no wonder that this Cabinet’s actions directly affect the President’s authority.
According to the data by the All-Russian Center of Public Opinion Research, which timed its poll to the first 100 days of Vladimir Putin’s second term, he justified hopes of only 50% of voters. On the contrary, during his first term Putin’s rating was keeping steady at 70% to 75% and in the elections, which were held half a year ago, today’s Head of State was supported by 71.31% of Russian citizens.
Trying to improve its image the Government launched a propaganda counteroffensive under the slogan "concrete actions for concrete people". For example, Minister of Finance Alexei Kudrin stated that in the previous four years the real income of teachers and medical doctors increased 2.2 times and that it was planned to be doubled again in the next four years. He promised that the growth of the well-being of workers in this category would exceed rates of the economic growth as a whole. Alexei Kudrin said that inflation would be undermining people’s income less and less since it was planned to reduce its rates down to 3% to 4% by 2008. "Thanks to the Stabilization Fund, we can ensure lowering inflation regardless of oil price fluctuations", Kudrin stressed.
So far the Government’s active attempts to popularize its strategy have failed to convince the suspicious population, which is mindful of the fact that in the near future consequences of reforms will affect an everyday life of each family. At the same time, judging by polling results neither the public nor politicians can determine, where the present course is leading the country to: to building a Western-type liberal society or to consolidating autocracy.

Reference:
In the first six months of 2004 the volume of foreign investments in the economy of the Russian Federation increased 49.9%, to $19 billion, as compared with the similar period of last year. Direct foreign investments amounted to $3.4 billion growing up by 35.3%; portfolio investments went up 3.4 times, to $129 million. The volume of investments marked as "others" rose 52.9% equaling $15.4 billion.
The volume of investments directed from the Russian Federation abroad increased 56.9%, up to $15.3 billion. In the first six months of 2004 Russian investors were putting money most actively in the U.S. ($4.4 billion), Cyprus ($3.7 billion) and Great Britain ($1.4 billion).