Yevgeny Khokhlov

I

nvitation to a meeting
These meetings were not closely packed assemblies but they arise regularly and countrywide from Saint-Petersburg to Vladivostok. The reason for concern has become the law on monetization of benefits which was put in force in January, that is, the law on the substitution of cash indemnity for social services which had been free or at a discount granted to pensioners, invalids, war veterans, etc.
An upsurge of social discontent troubled the deputies of the State Duma. They demanded of explanations from the government why the reform started so abortively. The government acknowledged own mistakes but not in the law but in its performance. As was claimed by Premier Mikhail Fradkov, it was impossible to foresee everything in this complicated case and in such a big country as Russia.
Among the "unforeseen things" there happened to be, above all, the consequences of cancellation of the right for free use of urban and exurban public transport. The cash indemnity size somehow turned out to be much less than the actual cost of transit, with cast indemnity payments often delayed. Moreover, local administrators decided to raise transportation rates in this particular January. But the most painful reaction was caused when people were divided into "one’s own" and "foreigners". For example, the town of Khimki, long ago absorbed by the Moscow megapolis but keeping an individual municipal status, became an enclave for a part of its citizens or they had to give half of their pension to continue bus and metro travels. No wonder that the pensioners of this town were the starters to the indignation actions by a live chain to partition off the Moscow–St.Petersburg road.
The Russians not so easily go out into the street to protect their rights as the Europeans do. But if the indignation movement takes a mass shape it is very hard to be extinguished.
The authorities did not venture to resort to force and commence prosecutions against aged people. The right for free travel was recalled. However, the indignation wave failed to be suppressed. In February the pensioners’ actions were supplemented by rallies organized by transport trade unions. Ahead there will be puzzles with the reforms of housing and communal services, health care and education where "people are especially sensitive to any mistakes". These are the works of President Putin himself who when meeting the senators on the 3rd of February expressed his concern that "the coming into force of a number of norms out of the social package started to be accompanied by evident halts in the very beginning".

Determination to put away with uncertainty
Independent analysts are in doubt why the authorities needed to break, with their own hands, "Putin’s stability" lasting already for five years. You know, the benefits could have been substituted absolutely without pain, for instance, in the case of alternative and voluntary choice or in a selective way with a prolongation for several years.
The matter is certainly not in the problem of benefits but in the holistic social-and-economic policy, to be more exact, in its absence.
The presidential administration has to take into account, on one hand, the expectations of the West that the democratization process and market reforms will go on in Russia, and, on the other hand, deep disappoval of the mass part of the Russian population of the results of the process. As virtually any observer remarks, a queerish compilation of liberal rhetoric and attempts to restore a paternalistic state is a result of the above.
Halfness of actions does not bring a relief. Meantime, the circumstances are favorable as never before. In the political asset there is a support of a majority of electorate, a weak opposition and a passing of regional leaders to the complete control of the Kremlin. The most profitable situation in the raw materials markets for the last three years is in the economy, like a cherry-pie. It leads to a stable favorable balance, an uprise of GDP at a rate of 7% per year and an accumulation of gold reserves to the size that makes it possible, as the President worded it, "to promptly dispose of the external national debt". Having discussed and thought it over, the government came to the conclusion that the best way to deal with the available reserves is to redeem the debts to IMF and Paris Club in advance.
Is it all the current authorities can do?! И это все, на что способна нынешняя власть?! The public is disappointed. Sure any other government would be able to suggest a more efficient action program than just technical functioning what Fradkov’s cabinet is distinguished by.
Thus at the peak of political and economic stability the resolution comes: to begin reforms which seem to be unpopular but will be fruitful for the country and, in the long run, for the population. An inspiring example of Chernomyrdin’s government is behind the back. A decade ago it managed to introduce money turnover in the industry for which it was necessary to suppress a practice of cross-cancellation of debts and barter transactions among enterprises. Now a similar task shall be settled relating to socially-oriented sectors being in doldrums: to direct money flows to them and then implement efficient reforming.
But the government overestimated the loyalty of the population and the degree of own political influence. It had to retract – not because of the street protests but in view of the displeasure of the State Duma and the criticism of the President. This false start is paid a lot. The planned increase of basic pensions is brought forward and an amount of pension payments went up. It will greatly raise an inflation potential which is already too high.

Inflation and firm ruble
Up to recently, Russia managed to reduce inflation rates step-by-step. It had been perhaps an only acknowledgement of the correct economic course personified by Minister of Finance Kudrin and Minister of Economy Gref: the other macroeconomic achievements (favorable budget, etc.) critics consider not a merit but a good chance of the government.
But in 2004 the government failed to maintain inflation within the planned limit of 10 %. On the background of numerous alarming comments and forecasts relating to this point, the opinion of the minister of finance was the most unexpected one. Having noted that in the conditions of unexampled high prices a record growth of gold reserves takes place, Alexey Kudrin highly appreciated the role of stabilization fund as a sterilizer of money stock, and after that threw a phrase: «In this connection I think that the inflation rate of 11.7% is a governmental success because it could be many percent higher".
The government having claimed that the key target of the monetary policy for 2005 is the fight against inflation goes on with "successes" of the same kind. In January inflation was 2.6%, that is, almost one third of the annual limit, 8.5%, planned by the government itself. But it did not embarrass the minister of finance. Alexey Kudrin announced that the cabinet is able to curb inflation, interalia, through a more definite than before strengthening of the ruble exchange rate – by 8% per year.
It is still an enigma how the government intends to support high economic growth rates in the conditions of such a drastic strengthening of the national currency. This task is intricate for stronger economies than the Russian one.
But the main intrigue is connected with the inflation problem. Once Egor Gaidar and his successors in the government struggled against inflation by monetary methods and were much criticized by economists of other schools and industrialists. In the opinion of representatives of "real economy", an artificial constraint of money quantity caused a contraction of market and decelerated an economic growth. Now there is a possibility to check an alternate variant and eye where mass money payments will lead to – growth of market or prices.
Monetarist Gaidar justified his actions by proving that unprotected population strata, pensioners, suffer from inflation most of all. Even his most ardent critics did not contravene it. But if the worst anticipations prove true a next inflation wave will sweep all alowances to pensions and compensations. And not only them. Most probably the ministers who when getting down to the reforms "failed to foresee" their consequences will have to lay down their powers.

На поля:
• In Russia growth of protest sentiments is observed. In 2001 only 17% believe that actions of citizens of their town or district to advocate their rights are quite possible. Meantime in January, 2005 this figure grew to 49% of respondents. Here only 27% confirmed that they are ready to directly participate in the actions.
Data by VTsIOM (All-Russian Center of Public Opinion Study)
• Almost every second respondent (48%) pointed out that the monetization of the benefits deteriorated the material standing of his family. An increase in housing and communal payments is apprehended by 97% of respondents and only 20% are of the opinion that they will be able to adjust to it.
Data by VTsIOM