How can we break this vicious circle and tear the rents from Russia’s natural wealth out of the hands of the criminal bureaucrats? I believe there is a solution, and it’s a fairly obvious one. It’s a different matter that it’s not much use to those who are currently in power, nor those who hope to take over power. The ones who would benefit are those in today’s Russia who are deprived of proper political representation, and whose voice, therefore, is never heard. I think that the only possible solution to the problem of what to do with resource rents in Russia is to lock them into the social needs of the population. This would cut out the state’s role as the middle-man in their redistribution.
And such a possibility genuinely exists in Russia.
If we roughly compare the recoverable profits that Putin’s regime receives today from resource rents with the amount that the government should be paying for pensions but cannot cover, then the sums are virtually the same. On the payments’ side we can also add in spending on medical insurance, that the government also isn’t able to meet, and which it therefore is constantly cutting back. So if this is the case, wouldn’t it be simpler to cut out all the intermediate stages and direct the windfall profits from resource rents – in the main, those from raw materials, notably oil and gas – straight to people’s pension and health savings’ accounts? When the need arose, either when they reached pensionable age or were ill, people would receive the necessary funds. What’s more, this would be proper sums of money, not simply the crumbs that prevent them from dying of starvation.
Technically, this wouldn’t be difficult to arrange. Already today, the windfall profits from the sale of raw materials are marked out, and come into the state coffers in a separate line from the companies that receive resource rent, so it wouldn’t be difficult to distinguish them (it would simply be a question of the inefficiency of Putin’s managers). Today they’re simply merged into the overall budget flow, and the government disposes of them as it wishes, spending them on crazy Kremlin projects or simply stealing them. But each month they should be divided equally into the savings’ accounts of every citizen of the country.
These savings’ accounts, pension and health, should be opened the moment a person is born, and last until they die. This would be a genuine privilege of Russian citizenship, and not an imaginary symbol of belonging to a great country. We have to create a situation where being a citizen of Russia would mean they you lived with dignity into your old age, and not just have the privilege of dying to protect “Rottenburg’s palaces” in a series of endless and pointless wars entered into by the regime. Today, resource rent drops into a black hole, where it’s redistributed in the most outrageous fashion to the beneficiaries of Putin’s regime. We must make this black hole transparent, so that every citizen can see and understand what’s happening with the national property that’s been handed down by our ancestors.
The sums of money that would be saved in these accounts would be very significant. All around the world pension funds are important investment vehicles, and I don’t see why Russia should be an exception. I suggest that surplus amounts could be held temporarily on the Russian Financial Index (a consolidated packet of Russian shares, traded on the stock market), which would in turn support Russian production. In this way a safety cushion would be created, that would genuinely help to turn Russia away from being a socialist state, where the country’s wealth of raw materials belong to the bureaucrats, into a proper welfare state, where resource rent belongs to the people, and comes under the direct control of society.
I’d like to repeat what exactly I see as the difference between the model of a socialist state – with no prospects for the future – and a welfare state. By this I mean not simply what is written in the Constitution, but what in actual fact is the only suitable way for the economic system in Russia today to develop. In a socialist state, production and distribution are in the hands of an inefficient monopoly, that does everything in the interests of a bureaucratic clan. In a welfare state, however, the state doesn’t take production nor distribution under its control, thus encouraging competition in all areas. The state’s responsibility lies simply in setting the rules in order to lessen social inequality.
On the surface, some of these suggestions reflect the slogans of the left opposition to Putin’s regime, and also to those spouted by the Russian Communists. These also call for the re-establishment of social control over resource rent; but, as I mentioned earlier, they propose doing this in the same way as the Bolsheviks carried out nationalisation, and putting control over resources into the hands of the state. Whilst I agree with the left insofar as it is essential to re-establish social control over natural resources, I cannot agree with the way in which they want to do it. As I see it, this wouldn’t even level out inequality, but simply turn it from an economic method into one dominated by the nomenklatura and their clans.
Unlike a socialist state, a welfare state doesn’t try to make everyone equal in order then to work out who are more equal than others. The aim of a welfare state is to give everyone an equal chance of development and success. Had I written this text 15 or 20 years ago, I would probably have put a full stop after that. But given the experience that I’ve gained today, I’ll put a comma. Equal opportunities to succeed should be given to all those who are ready to use them. But those who cannot do this, or just don’t want to, should be given minimal guarantees. Without this humanitarian component, no welfare state can exist, especially in Russia.
To summarise briefly, let me explain why I believe we need a left turn at the current stage of development of Russian statehood. We need it in order to remove the political factors that are leading to an explosive growth in social inequality, and start to follow a consistent path aimed at reducing this inequality. Naturally, I consider the most important thing that we need to do is to get rid of Putin’s system, with its “raiding by the siloviki”. This allows for the redistribution by non-economic means of national wealth among groups of people who are loyal to the regime, leading to it being concentrated in the hands of a small clique who are running the state.
Once this first condition has been swiftly carried out, the temporary government should resolve the question of establishing social control over resource rent. As I wrote above, I see the most sensible and efficient way of doing this as being the creation of life-long insurance savings’ accounts for the people, into which the windfall profits from raw materials should be paid in various amounts. Deciding this issue will be just as important as was the question of property that took place during the social revolution in Russia at the start of the twentieth century. But this time it must really be solved in the interests of the whole nation, and not just its “leaders”. This is the only thing that will give the temporary government the genuine support of the people as a whole, and create that political “safety cushion”, that will allow it to carry out all of the long overdue economic and political reforms.
Chapter 11. How Do We Achieve Economic Justice:
Nationalisation or Honest Privatisation?
The total restoration of social justice is impossible without the restoration of economic justice. In the widest sense of the term, economic justice is the most important part of social justice. And in the narrower sense, it signifies equality, not so much in the distribution of national wealth, so much as in having access to the basic means of production. In other words, it’s economic justice that gives people a more even chance of becoming rich.