'Middle Class' To Bear Main Cost of Reform

Last Friday, former economics minister Yevgeny Yasin told journalists that the Russian government had no more than 1 1/2 years to carry out a whole series of social reforms. Thereafter, Russia will again be in the thick of a pre-election campaign and the authorities won't be in a position to undertake any unpopular measures.


The Russian economy is such that practically any decisive step will be an unpopular one. And if it is a matter of social reform, including housing, pension and tax reforms, then these measures could easily be called "anti-popular." At least, such reforms would give the opposition every reason to accuse the government of carrying out economic policies against the people.


Russia has the youngest pensioners in the world. There are many professions in which workers have the right to retire between the ages of 45 and 50. Indeed, the standard retirement age is 55 for women and 60 for men. In Russia, armed forces officers do not pay income tax. The housing allowances and subsidies exceed military expenditures.


Such a burden could not be sustained by even the richest and most stable of economies, much less the Russian economy. But can the Russian government raise the pension age without arousing the anger of a large number of voters? Could it make the military pay income tax without setting all the armed forces against the country? Could it increase the share that families pay for housing and utilities without inciting a wave of protests?


On one hand, the government has its hands and feet tied politically. But on the other, it has a historical responsibility to save the economy from the destructive burdens of unjustified benefits and ill-conceived subsidies.


This is why Yasin says the government has the task of carrying out "anti-popular" measures. Although he is no longer economics minister, Yasin, the second in the history of independent Russia to be appointed minister without portfolio, maintains his influence on the highest government officials.


Yasin thinks that the brunt of most of the social reforms will need to be borne by the so-called middle class. The price that Yasin estimates the middle class will have to pay hovers around 100 trillion rubles ($17 billion). And this is also politically harmful because it is precisely the middle level of society that forms the social basis for reforms.


Experts have been unable to agree on who belongs to this category. The standard criteria -- apartment, dacha, car -- are not suitable because many families acquired these goods during Soviet times. Today, the value of goods such as crowded apartments in khrushchyovka (standard, five-story apartment houses built under Khrushchev), old Zhiguli and small sheds on 600 square meters of land in a garden cooperative is dubious.


Nonetheless, it is the middle class that will have to assume a large share of the burden for reform. The poor simply don't have money, and the rich have enough money to fend off any pressure that may be exerted on their personal budgets.


Whether the middle class has such financial reserves, or one can talk of a middle class at all, is a big question. What is clear, though, is that the "anti-popular" social reforms, which are necessary to the people, will not add any popularity to the government or its policies.





Mikhail Berger is economics editor of Izvestia.