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Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992

4.1 Entrepreneurship and Property

4.1.1 Conversion of the Social Infrastructure

Unresolved Issues

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During the conversion of the social infrastructure, a number of problems arise, which can only be resolved by the local authorities and various administrative levels: from the Russian Federation Congress of People's Deputies to the regional administrations.

As was noted earlier, the population's low level of expenditure on housing and public utilities was considered to be a major achievement of Soviet power. Here one does not need to mention the quality of the housing. It was and is far lower than apartment rents, which have not been revised since the 1920s.

In addition, the Russian Federation's Constitution stipulates that a Russian citizen's right to housing is guaranteed by the "low housing and public utility charges".

We believe that we should do our best to reject old stereotypes as quickly as possible. To solve the problem, people should be given the chance to freely choose where to live and which apartment to rent or buy, based only on their own personal incomes. There is only one proviso: these expenses should be taken into consideration in incomes, including pensions.

On the other hand, the differentiation in incomes will continue increasing. A certain level of unemployment is inevitable. In addition, there will always be large families and solitary elderly people who need social protection. These functions should be borne by the state via the construction of low-cost municipal housing, and the provision of various subsidies and privileges to low-income individuals.

A number of existing legislative acts will therefore have to be reviewed. In particular, this involves laws on taxation, housing, etc.

At present, legislation does not stipulate any serious economic sanctions for failure to pay apartment rent or public utilities. A fine of 0.1% of the payments per day overdue cannot be considered an incentive to pay for housing on time. Lately, the number of individuals who have stopped paying for both housing and public utilities has grown considerably. Whereas in December 1991 in Nizhni Novgorod, Arzamas, and other cities of the oblast, 4% defaulted on payments, by August 1992 this figure had risen to 40%. Such a sharp increase in the number of defaulters may be attributed to a great degree to the cash crisis which has arisen. Naturally enough in such a situation, people are forced first and foremost to spend their money on food, and only then on anything else.

The situation is complicated by the fact that, during the conversion of the social infrastructure, public services will be extremely dependent on the population. Whereas the vast majority of resources used to maintain the housing stock are remitted, via non-cash transfers, from the profits of the enterprises, which list the housing stock on

their balance sheets, in future the well-being of the services will be completely dependent on the residents' solvency.

In this case, the public utility organisations will be more interested in receiving these funds on time. At the same time,, however, penalties for overdue housing payments should be increased. This is all the more justified, as individuals will be receiving the requisite funds to pay for housing and public utilities.

One should have recourse to claims against individual property in the case of overdue housing rent and public utility charges. The procedure for considering such affairs in court should also be simplified as much as possible. Moreover, one should substantially raise the fines for overdue payment of housing rent and public utilities. Significant amendments should be introduced to the legislation regulating the minimum wage, and all related systems. Otherwise, increases in the minimum wage by the amount of compensation would lead to multiple rises, as wages are "tied" to the minimum.

Approaches to the establishment of a consumer basket, and the determination of unemployment benefits, should be reconsidered. When they are recalculated, one should bear in mind the full housing and public utility expenses. At the same time, all the aforementioned disparities in the legislation do not prevent a conversion of the social infrastructure on a regional level.

In this situation, one should exhance as much as possible the ability of the regions' administrators to take decisions on these issues.


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