Truck and Barter: Russia's Putin-Duma: Welfare to be Paid in Cash

August 07, 2004

Russia's Putin-Duma: Welfare to be Paid in Cash

By Kevin

One of the major barriers to economic reform in Russia is the in-kind welfare benefits given to veterans, who are generally perceived as deserving. These in-kind benefits are housing, medical care, public transportation passes, etc.

The Russian system is geared not just to finance such welfare benefits but to directly allocate and provide them. One result is a two-tiered system: 1) a privately-run Western system of medicine ("American doctors"), new apartment buildings, and Mercedes for those young, adaptive, and perhaps unscrupulous, and 2) a publicly-run network of 1930's-1970's quality medical system, decrepit apartment houses, and creaky transportation options available to the State-dependent. In my opinion, almost everybody tacitly recognizes that the latter are horrendously inefficient and welfare-reducing (subject to bribery, graft, fraud, ineptitude, rudeness, dirtiness, etc.). But these systems are not wholly independent; you can't sustain a sea of prosperity within a ghetto, and the public systems are holding back the advance of the private system...

Hence, I applaud the Putin-Duma's initial attempt to create a schism between finance and production in welfare, in the hope that the public systems can eventually be absorbed into a quasi-private sector:

The new system will also increase transparency, and crack-down on those who use fake ID to abuse the system.

But many genuine claimants see losing their automatic benefits as an insult. Millions of Russians are entitled to state help in recognition of their role fighting or working for their country. They see that as a mark of respect.

Some pensioners say they will suffer serious financial implications...

''Our benefits have been paid for by the blood of our fathers - by our own hard labour," her letter read.

"Keep your paws off them, or face the curse of the nation. You still have time to change your mind - use it! Signed - Lidiya Malokeeva, Murmansk, a victim of your repressions."

Analyst Stanislav Belkovksy believes opposition to the reform is as much emotional as economic - a hangover from Soviet times.

''For this nation, the role of the state as a father and mother is of paramount importance," he explains.

"It's much more important than any money, and especially in the sort of amounts suggested by the new law."

I tend to perceive such moves as sacrificing Russia's poor at the altar of hope for its future generations. Russia's government is no longer letting them get in the way. Some--probably many--invalids, veterans, etc. will find their purchasing power severely eroded, as has happened with the disproportionate increases in the regulated prices of public transportation. As a result, how will the poor respond? Nobody is suggesting that they will starve to death, but only those with children and grandchildren they haven't alienated will probably see little difference in living standards.

Posted at August 7, 2004 04:01 PM

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