A catastrophic social budget

by Andrey Borodaevskiy

During the past two years, Vladimir Putin repeatedly stressed his special attention to and personal patronage of the efforts to keep up and somehow improve the pitiful situation concerning the overall social position and living standards of retired and disabled people, such as those receiving pensions of different kind.

Those efforts cannot be denied. But what should we, as ordinary Russia-loving people, think and say now as we look at projections for the next three budget years, the opening years of Putin’s regained presidency?

It is well known that budget expenditures, first of all at the federal level, play a paramount role in financing spheres most vital for family life. According to official statistical publications, in 2011 more than 28 percent of federal budget money was spent on social policy — an item covering pensions as well as various grants and allowances, including those going to young mothers.

For “election year” 2012, budget projections provided for a 24 percent rise in spending along those lines (totaling more than 30 percent of all expenditures) — truly remarkable numbers for sure!

For 2013, the growth forecast is reduced to 6.7 percent (which is approximately on a par with inflation), and for 2014, no growth at all is projected.

How can this be? Is the president regaining his post only to take back what he granted as prime minister? Was all that noise about helping poor families clear the subsistence threshold nothing but pre-election populism?

Among other big budget items, the most important for normal family life and the successful raising of children are housing, utilities, education, health protection and sports. Together with several smaller items covering expenditures on culture, theater and movie-making, mass media and environmental protection, such socially oriented spending amounted to 13.7 percent of the federal budget in 2011 (health care alone was 4.6 percent).

As for the next three years, those projections are seen falling: first to 12 percent, then 10 percent and finally 9 percent of the federal budget, respectively. Already, in the current year, expenditures on housing and utilities will fall by more than two-fifths; in 2013, by almost a quarter more; and in 2014, by another 30 percent.

Those are numbers bordering on a catastrophe in a country with untamed inflation. Those are numbers overstepping the threshold of decency in a country that enjoys super-revenues from fuel and raw material exports.

The money earmarked for health care will drop after 2013 and amount to a mere 3.3 percent of budget expenditures in 2014 (compared to about 10 percent in France). As for expenditures on amateur and professional sports, they will diminish by almost one-tenth in 2012, then stagnate for a year, only to dive by over 30 percent in 2014 (as if it were a kind of fatigue after the financially straining Sochi Olympics). In that same year, budget spending on education will diminish by over 10 percent.

The demographic background for all this is rather horrific. According to international criteria, the “graying” of a population is considered already pronounced when 7 percent are over 65 years old. In Russia, this ratio is around 13 percent. Every fifth Russian has reached the age when he or she is entitled to a pension. There were about 31 million pensioners in 2011.

The number of children and teenagers younger than 16 is 8 million fewer than those of retirement age. Because of the aging population, the size of the workforce is slowly but steadily declining. The “demographic burden” rose to more than 600 (about 260 children and 340 pensioners) for every thousand working-age people. To boot, among the annual dead, the share comprising the workforce amounts to almost 30 percent, and 80 percent of those are men.

Let us return to the budget figures. The direct military and law enforcement spending (national defense and internal security) amounted to exactly one-quarter of the federal budget in 2011, while respective growth projections for 2012, 2013 and 2014 are estimated at 29 percent, 32.2 percent and 35 percent. A remarkable rise, isn’t it?

One is tempted to ask: “Please, be so kind as to show us the ‘potential aggressor’ against whom such a sudden and drastic military buildup has become necessary?”

In fact, no such threat looms. So, we pray that our leaders do not create one — in the manner that they painted Georgia on our southern borders as a bogeyman.

What may hide, then, behind all those extreme budget distortions? Knowing the real situation in the country, one could suppose that maybe the government has at last decided to do something for ordinary military personnel in the way of improving their social and living conditions. Or that the problem of “monocities” — local communities formed around one big industrial enterprise — will be dealt with.

It is a well-known fact that there are many places around the country where practically all working people are employed by only one big industrial company, state-owned or private (more often than not belonging to the military-industrial complex). Many such places experienced a downturn during the 1990s as a result of a steep fall in government purchases coupled with ugly privatization practices.

For such monocities, might today’s visible shift in budget spending toward national defense turn out to be a boon? Fat chance! That’s because the main budget priority in Russia’s military spending in coming years, and possibly for decades, is to build up the striking ability of the feeble and outmoded Russian Pacific Navy.

And for what?

To defend the “Southern Kurils” or keep away illegal fishermen? To counterbalance China’s presence in these not-so-calm waters? Or, is it to simply provide better opportunities to steal and get kickbacks from allocated sums?

Be that as it may, at least one corvette with precision assault weapons is already in the process of construction in an Amur River dockyard. Thus it looks rather certain that those god-forsaken monocities in the Russian midland, which have been counting on enhanced budgetary spending on traditional weapons for land forces, will be disappointed.

An ingeniously structured “socially oriented” federal budget indeed! Is this what the ruling “tandem” calls modernization?

Maybe “neglect of social needs” would be a more fitting word combination to describe the actual situation.

Andrey Borodaevskiy (annabo36@mail.ru), an expert on world economy and international economic relations, was a professor at Seinan Gakuin University, Fukuoka, from 1994 to 2007.