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Sergei Ivanenko: There are no answers to the main questions in the 8,836 pages of the 2003 budget
An interview with Sergei Ivanenko, first deputy head of the Yabloko Party's parliamentary group
Mr. Ivanenko, Yabloko's attitude to the government has traditionally been critical. Will you also criticize the 2003 budget draft, which is praised by many deputies of the Duma?
First of all, the 2003 budget is a copy of the 2002 budget in terms of the economic policy, the priorities specified by the government, and economic goals to be pursued. Even the figures show this. The main figures of the social and economic development, the main budget entries resemble those of 2002 like fraternal twins with some adjustments for inflation. We see practically the same ratio between revenues and expenditures, the GDP volume, the dollar rate, and the oil price.
However, in fact, an opinion on the budget depends on what the real economic situation is like and whether it is in line with the optimistic economic policy that is specified in the 2003 budget draft or not. We seriously doubt it. We have at least three big economic questions to which there is no answer in the 8,836 pages of the budget draft.
First, what is the state of the financial reserve? Why has it contracted so drastically? And why is the budget absolutely non-transparent, and we have no information on how the funds are allocated within this reserve? All this is causing serious concern.
The second question is what is going on with tax collection? It has decreased sharply this year. And the optimistic statements by the Prime Minister that everything is not so bad are based on absolute figures. Some increase can, in fact, be seen here. Nonetheless, it is substantially smaller that it should have been if the efficiency of tax collection remained at the 2001 level and were in line with the target figures of the 2002 budget. Hence a question: What are the reasons for such a drastic decline? What is the government doing, what measures does it intend to take to stabilize the sources of budget revenues?
The third question without an answer is what is the government going to do with the regional budgets? A substantial part of the regions of Russia have found themselves on the verge of default. Their budgets have been practically exhausted by autumn, since a rise in salaries, initiated at the federal level, has not been adequately supported by sources of revenues. About the same increase has been scheduled for next year, a public utility reform is approaching - all that will obviously require financial aid. But have sufficient funds been included in the budget draft?
The budget draft has no answers to these three questions, which, not just the budget, but the entire social and political situation in the country largely depend on. And Yabloko believes that serious analysis is necessary. Unbiased analysis without adorning the real social and economic situation. That is why we are preparing an alternative budget draft. The work on it is nearly completed now, and we will submit it to the State Duma for consideration before the first reading of the government bill and will also send it to the President and the Cabinet of Ministers. The idea of this work, which we do every year, is to produce a professional economic document without traces of lobbying and esprit de corps.
However, even you possibly have no doubts that the alternative budget draft will be rejected, and the government bill will be adopted?
Yes, the political prospects of the 2003 budget draft are obvious. It will be passed, and rather fast, since the majority in the State Duma has already declared that. One can assume that the budget draft has already been passed on the first reading, and the debates on it in the State Duma have no principal importance any more.
Yet, I would like to remark on one important aspect. Such unanimity, obedience of the State Duma in fact lead to a situation when real economic problems are no longer discussed in political terms. Practically, the government, especially the Finance Ministry, is given indulgence to make any economic moves next year.
Nonetheless, we have no clear idea of how the country will develop. I mean the budget is not reliable, since any changes in the major parameters, such as oil prices, tax collection, revenues to the regional budgets, may call its implementation into question. At the same time the "Group of Four," the centrists, are, in fact, exchanging RUR 10bn ($316.36m) for RUR2.4trln ($75.93bn) in budget revenues, they are discussing only RUR5bn ($158.18m) to be allocated to the Road Construction Fund and RUR5bn to be allocated for agriculture. Therefore, the majority in the State Duma is doing everything so as not to give the people information on the real state of our economy, so that the public would not discuss the economic policy. Given this procedure for 'preliminary consultations,' the real economic problems are not resolved and are not even discussed. In this connection, our budget very much resembles the last budget of the Soviet Union, speaking about which people used the words "possibly," "probably," "not unlikely." We are in about the same situation today.
But the centrist majority of the State Duma says that their efforts allowed for producing a solid budget draft, there is no need to improve it further, and it is necessary to adopt it. What are the reasons behind this position?
It is not a secret that the State Duma has practically liquidated itself as an independent body. By analogy with a joint-stock company, the majority in the State Duma has transferred its block of votes to Russian President Vladimir Putin. The Head of State obviously has a controlling block of votes of 52%, but it is still not 100%! But the majority in the State Duma has given all its votes to the executive branch, has reallocated responsibility for making decisions, has refused to take part in discussing problems of the joint-stock company called The Russian Federation. And that is the issue.
Behind this position is the 'natural' state of the authority that is noticeable in the entire political process today. In terms of the legislation, the regional policy, and the limitation on the freedom of the media. In short, this is the vertical structure of (political) power, the controlled democracy that we have heard so much about.
But possibly, this is a normal system of parliamentarianism, when the majority in the parliament belongs to political forces supporting the Head of State, and the executive and the legislative branches are pursuing a common policy?
There are two aspects here. The first deals with the 'naturalness' of this parliamentary-governmental majority. It is natural when a parliamentary majority forms the government after winning the elections. The answerability to the voters is a decisive factor. In our case this majority has been formed in reverse order. The parliament does not form the government, but the government forms the parliament. This makes a difference anyway.
If, discussing the budget draft, the majority in the parliament suggests a big political solution, this can somehow be acceptable. But with the naked eye one can see that there are absolutely different questions in the balance. The transition to a voluntary military service, the elimination of monopolies, and questions of the control of natural monopolies are not discussed. Nothing is said about supporting competition in the small business sector, about the financing of real social programs. Instead, the two lobbyist entries: the Road Construction Fund and the agriculture are discussed.
The second aspect is philosophical. In your question I hear a philosophical sub-question, which formulates into a political anecdote. Obviously, the best form of government is a monarchy, on the condition that the monarch is wise, kind, honest, and he gives enough money to all his subjects. However, since this never happens, the worst form of government is monarchy.
It is a matter of the system for making decisions, which has a lot of drawbacks. For example, when one says that the State Duma spoils the budget, it is true. There are both lobbying and groundless populist declarations in the budget process. Yet, there would be no pressure on the executive branch without it to resolve problems outside the interests of the government and the Finance Ministry. Of course, democracy is a bad method of government, but unfortunately, mankind has not invented anything better so far.
What kind of large, system proposals for the budget does Yabloko have?
We have neither the philosophers' stone, nor any universal panacea. We are speaking about the system economic policy. Yes, we do have around 40 specific proposals that cover both small business and the reduction of monopolies' share in the economy, competition and debt management.
If we talk about general guidelines, we have to bear in mind the major problem of today's economic situation. We believe Russia's principal, pivotal problem is that we are badly falling behind the rest of the world.
From an economist's point of view, the GDP growth rate of 4 percent a year is just about the bottom level. Only for the countries with strong economy a growth rate of 0.5 percent is a lot. We fall into stagnation with a very poor consumption level and very weak demand - consumer, governmental and corporate demand. In such conditions the country is doomed to hang behind. And it can always fall into dependence on two "needles" that we've been sitting on over the last few years: oil and gas. Any change in market conditions that hits these two resources will take its toll on the country.
In the current situation, there are really no large slumps, no stunning convulsions, but neither are there any huge breakthroughs. As a result, each year we find ourselves lagging more and more behind our peers. In 10-20 years of this sort of a stagnating approach, Russia will be projected as an absolutely backwoods country in terms of economy. What it boils down to is that we do not think the current economic situation is positive, despite the fact it is still better that the one we had 3-4 years ago.
Our strategic position is to create a really liberal market economy. An economy free of monopolies, which sports a labor and a capital market, competition, guarantees on property rights, intellectual property first of all, the opportunity to start one's own business and social security. In a word, that will mean following the path that Europe has gone. We believe it is what really can give Russia a huge impetus and help create an economy that is not nearly 100 percent dependent on raw materials markets.
Some experts say: What kind of breakthrough are you talking about when we are in debt up to the ears?
That's true, there is a debt problem. But the government must have repaid a part of the debt. In fact, Yabloko has no exact information about what is really happening in this field. And we are not alone. There is a foreign debt commission in the State Duma, and I asked its Chairman how big our debt was. He said nobody in this country gives a precise answer to that question. The Finance Minister should know, I guess, but anyway the real situation is beyond public awareness. They seem to go to any length to dodge a discussion on this issue. That is why I can say tentatively that the debt problem was in part settled this year. Oil prices are currently $27 per barrel, while a $18 price is earmarked in this year's budget. So one can imagine the volume of additional income for the government that is probably used to tackle Russia's foreign debt.
On the other hand, despite a huge absolute volume of foreign debt repayment, the 2003 federal budget was drawn up with a surplus. Is that logical?
There is no doubt the 2003 budget will post a surplus, but the 2003 problem still exists, no matter how glossed-over it seems to be. If you look at the original foreign debt repayment schedule, you'll see that's indeed the Alps that our Finance Minister is dead-set to surmount like Suvorov once did. That's a peak in payments indeed, and therefore we cannot run such a risk and make the budget balanced, let alone drawing it up with a deficit.
But speaking about short-term perspectives, i.e. 2-3 years, there is no universal answer to that question. You can't give an abstract answer to it and you have to take a broader look on the whole economic policy.
Today we lack answers to crucial questions. In particular, in what way is the government planing to promote economic growth? These days the government says the economy is living its own life and no state interference is expected. That's one approach to the problem of the budget surplus or deficit. If a program of big government investments is approved, then there's going to be a deficit budget, since this program will contradict the very bone and marrow of the financial policy that the government is pursuing.
Speaking about Yabloko's stance, I think we should make a balanced budget not to let any staggering mid-term surplus and especially a deficit emerge, and get the government to map out its income and expenditures in a more clean-cut way.
Ultimately, the countries that are hard-set on aggressively repaying their foreign debts without attracting loans on foreign and domestic markets normally lose momentum. A modern economy hinges on credits - in a sense, that's a deficit economy. It's a neo-Keynsenian economy, although there are different approaches in the economic theory, which have been rivaling for decades. But it is such neo-Keynsenian policy that prevails in the economic practice of modern countries. The policy of stimulating effective demand is in a sense the investment policy of deficit.
I think over the long haul Russia will need exactly this kind economy. But it is too soon to talk about that today, since in our case a mechanical shift from a budget surplus to a budget deficit will simply prompt whopping inflation and we'll get nothing: neither real economic growth, nor a stable financial position.
Yabloko has been introducing alternative budget drafts for years, which are in fact out-of -use. Don't you think it is a mindless waste of effort and isn't better to follow the trodden path: win an absolute parliamentary majority and afterwards implement your programs?
That's right. We are seeking to convince voters that we are a political force worth their backing. But if a man talks a twice-two-is-four sort of talk, is he a knucklehead or a man of principle? Of course, we are saying that twice-two-is-four stuff all the time. This is our tenth budget. And I don't want to exaggerate, but each budget draft that we come up with has its bit in the overall influence on the government, the Finance Ministry and the President. Moreover, we have even noticed a sort of trend: the major ideas of our budget drafts are put in place in a year. For instance, out of 16 suggestions from our alternative budget draft for 2001, 11 were picked up for the 2002 budget.
To be quite candid, we do exert influence so far as public opinion can do that. What I mean is not legislative working, not the adoption of amendments, although we manage to pass some of them, but the discussion of macroeconomic policy. Since our political rivals, centrists first of all, have virtually given up on discussion, we are currently positioned as a force that one has to reckon with.
The last question: the 2003 problem as a problem of the Russian State Duma elections. How much will this factor impact the budget and economic life within the next year?
I may seem to be original, but I believe the year of elections and the budget year will have no influence whatsoever on the budget process. The parliamentary majority that currently controls the approval of the budget will certainly go to the polls, too. But they are much less dependent on voters than the minority that is opposing the government's budget draft. The United Russia faction will go to the polls not with the 2003 budget, but with the name of President Vladimir Putin. And it is the way they are going to be perceived and voted for. Therefore they are relatively free from decision-making. I wouldn't say the behavior of the Duma's parliamentary majority is determined by pre-election events. I think if the budget is fraught with blunders, those will be not pre-election blunders, but they will stem from elsewhere.
On the other hand, there will be protests, too. I think the rank and file of the People's Deputy or the Regions of Russia factions will protest and produce plenty of amendments. But at a critical moment someone will say the magic word and a final unanimous vote of "yes" will take place, while the public will be provided with the texts of their speeches.
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