Administrative fervor

“No Money?—Kill the Banker!”  

Governor of St.Petersburg extirpates poverty. 

Somehow, Russian media did not pay attention to the recent meeting of the Governor of St. Petersburg Valnetina Matvienko with the Russian President Vladimir Putin. After examining a considerable number of reports, one could get a feeling that situation in the Northern capital appears to be rather stable. Petersburg's metro however needs financing and another considerable portion of money is needed to build a direct highway to Moscow.

Also, Valentina Matvienko informed the president of a new program that is being developed by the city's government to double regional GDP along with the city's budget in a four-year term. The fact that Petersburg's governor also mentioned her new program aimed at extirpating poverty in the city somehow managed to escape proper acknowledgement. Too bad.

Actually, it seems as though the general plan aimed at fighting poverty has completely escaped federal government's attention. The new tax reform of Russia's main liberal German Gref does not seem to lead to definite sharp increase of the GDP or the overall improvement of living conditions of Russians. As a result of decreased unified social tax, Russian business will have more free money. However, what exactly those businesses will do with that free money remains a mystery for Gref, the President, and Valentina Matvienko.    

From the standpoint of liberal ideas, today's reform appears to be great in many respects. Liberals consider that the government’s main goal is to create certain conditions that would enable businesses to acquire maximum profits, part of which will be given to the government and society as tax money. However, previous experience with liberal reforms indicate that no matter hoe much tax money is collected, it will still be not enough to support the army, our teachers and pensioners. At the same time, businesses continue to moan and complain that they have to pay high taxes.

Consequently, a liberal thinks that in order to make businesses’ existence a bit more bearable, part of this tax burden should be placed on peoples’ shoulders. Then, Russian liberal starts spreading this idea in political circles and general masses. Obviously, he possesses all confidential data and is fully aware of the exact percentage of Russians who's been living below possible level of survival for a decade already, what exact percentage has been and continues to acquire resources through the criminal shadowy economy and what percentage really shares a lion’s portion of national income in its small circle.

Obviously, Russian liberal at power has to make sure that this shared portion of income within the small circle continues to rise. Especially, since he is the one who actively participates in the affair as well. However, since income taxes for instance cannot be raised due to political reasons, he has no other way but to keep trying to find other sources of income. As a result, cumulative pension reform goes down the drain. At any rate, both Mr.  Kudrin and Mr. Gref are searching for these sources only in the pockets of ordinary Russians. That is why, perhaps, authorities plan to lobby a reform of housing and communal services, increase property tax, aside from mandatory auto insurance, they also plan to introduce mandatory housing insurance, education, medicare and everything that can possibly be insured.

According to liberals, there is logic behind authoritative structures. They are certain (at least publicly) of their ideas and continue to pretend that if businesses feel comfortable, then those businesses will make people feel comfortable as well. This would be true had Russia been Latvia. But Russia is no Latvia and such saddening circumstance makes our liberals look like miserable and cynical liars.

Everyone understands that only government officials are capable of doing “comfortable” businesses, since they can create great conditions for extracting profits. They spit at the rest of people. It is noteworthy to mention that Russian business prefers to 'import' extremely cheap labor from countries of the CIS, instead of giving job to highly qualified Russian personnel. In the meantime, Russian high class engineers of the Soviet era are forced to collect bottles on the streets to provide for their families.

And no lowering of the unified social tax will make Russian businessmen to willingly disclose and raise salaries of their employees. After all, ordinary employees have no power to force their employers to do so.

In the meantime, in the course of her meeting with the President, Valentina Ivanovna Matvienko has definitely infringed upon something sacred (for liberals) and perhaps, she has brought quite interesting point to the president's attention.

What is the essence of Mrs. Matvienko's proposals? She plans to give Petersburg's employees a raise by the end of the year to bring their salaries to the level of the minimum living wage. Such step will obviously burden the city budget. Valentina Matvienko however assumes that the city government will handle it. According to the city's Governor, 17.5% of employees from the off-budget sphere receive official salary that is below minimum living wage. The governor claims authorities will be abele to handle this situation. How?

According to Valentina Matvienko, St. Petersburg’s legislative assembly plans to pass a bill forcing businesses to deal with the issue as well. In other words, Petersburg business will be legally responsible to raise all salaries at least up to the level of a minimum living wage. This aspect however appears to be rather problematic.

First of all, this is no secret that entrepreneurs officially indicate extremely low “white” (disclosed) wages in order to avoid paying taxes, mainly unified social taxes along with other social assessments. In reality, employees receive either a portion or their entire salary unofficially. This is why, in case businesses will be forced to increase their “legal” salaries to the employees, consequently, the shadowy “unofficial” portion of their wages will be decreased. The decrease will obviously be disproportionate, one can be certain of it. As a result, many St. Petersburg residents will have to cope with significant losses. Such fact will definitely deprive authorities of peoples' sympathies.

Second of all, such major business attack will lead legal businesses to move to shadows. In this case, city's budget will most likely be the first to suffer. This will cause “unofficial” unemployment rate to go up significantly.

Thirdly, a part of small or average entrepreneurship dealing with shadowy business but which are ready to legalize their activity will most likely change their minds and continue their shadow existence.

In reality, regional GDP will most likely continue to grow. However, such growth will take place in the shadow, while feeding corrupted government officials and not the Governor's authority. So basically, as a result of an attempt to battle poverty, people's socio-economic condition can in fact worsen.

Although it is possible that monthly wages of janitors and postmen will be raised to the living minimum. But is this going to do any good for the city at large? Anyway, it is impossible to survive on the minimum living wage in the Northern capital.

Note: PHOTO: writing on the wall says: “No Money?—Kill the Banker!”  

Join the discussion on Russian economy at PRAVDA Forum

Subscribe to Pravda.Ru Telegram channel, Facebook, RSS!

Author`s name Evgeniya Petrova