| 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 has been praised by many deputies from the Duma?
First of all, the 2003 budget is a copy of the 2002 budget in
terms of economic policy, the priorities specified by the government,
and the economic goals to be pursued. This is demonstrated by
the figures. The main indices for social and economic development
and main budget entries resemble those of 2002 like twins, with
some adjustments for inflation. We see practically the same ratio
between revenues and expenditures, the GDP volume, the dollar
rate and oil price.
However, in fact, an opinion on the budget depends on the real
economic situation and whether it is in line with the optimistic
economic policy specified in the 2003 budget draft or not. We
have serious doubts. We have at least three big economic questions
which are not answered in the 8,836 pages of the budget draft.
First, what is the state of the financial reserve? Why has it
contracted so drastically? Why is the budget totally opaque and
why do we have no information on how funds are allocated within
this reserve? All these issues are causing serious concern.
The second question concerns tax collection, which fell sharply
this year. The optimistic statements by the Prime Minister that
everything is not so bad are based on absolute figures. Some increase
can be seen here. Nonetheless, it is substantially smaller that
it should have been if the efficiency of tax collection had remained
at the 2001 level and was in line with the target figures set
by the 2002 budget. This leads to the following question: What
caused this drastic decline? What is the government doing, what
measures does it intend to take to stabilize the sources of budget
revenues?
The third question that remains answered is as follows: what is
the government going to do with the regional budgets? A substantial
number of the regions of Russia have found themselves on the verge
of default. Their budgets have been practically exhausted by autumn,
as the rise in salaries, initiated at federal level, has not been
adequately supported by sources of revenues. About the same increase
has been scheduled for next year, anda public utility reform is
approaching - all these issues 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, on which
both the budget and the entire social and political situation
in the country largely depend. And Yabloko believes that serious
analysis is necessary. We require objective analysis and no embellishment
of the social and economic situation. That is why we are preparing
an alternative budget draft. This draft is nearly completed: we
will submit it to the State Duma for consideration before the
first reading of the government draft and will also send it to
the President and the Cabinet of Ministers. We perform this work
every year to produce a professional economic document without
lobbying.
However, you are probably convinced 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 rapidly as well, as declared by the majority
in the State Duma. One can assume that the budget draft has already
been passed at first reading, and the debates in the State Duma
have no principle importance any more.
I would like to comment on one important aspect. Such unanimity
and obedience of the State Duma lead to a situation when real
economic problems are no longer discussed in political terms.
Practically, the government, especially the Finance Ministry,
is being accorded the right to take any economic steps it wants
next year.
However, we have no clear idea how the country will develop. I
mean that the budget is unreliable, as 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 they can not to give the public information
about the real state of our economy, so that the public does not
discuss the economic policy. In view of these 'preliminary consultations,'
real economic problems are not resolved and are not even discussed.
Consequently our budget resembles the last budget of the Soviet
Union, where people used words such as "possibly," "probably,"
"not unlikely." We are in about the same situation today.
But the centrist majority of the State Duma says that their efforts
made it possible to produce a solid budget draft, which needs
no improvements and should be adopted. Why are they making such
statements?
Everybody knows that the State Duma has practically liquidated
itself as an independent body. Let provide an analogy with a joint-stock
company: the majority in the State Duma has transferred its block
of votes to the Russian President Vladimir Putin. The Head of
State obviously has a controlling block of votes (52%), but this
is still not 100%! But the majority in the State Duma has given
all its votes to the executive branch, has reallocated responsibility
for decision-making and refused to take part in discussing the
problems of the joint-stock company called The Russian Federation.
And that is the issue at hand.
This position is backed by the 'natural' state of the authority
that is noticeable in the entire political process today, in terms
of legislation, regional policy and limitations on the freedom
of the press. In short, this is the vertical structure of (political)
power, the controlled democracy that we have heard so much about.
But this may be a normal system of parliamentarianism, when the
majority in the parliament belongs to political forces supporting
the Head of State, and the executive and legislative branches
pursue 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. Accountability before the electorate plays a decisive
role In our case this majority has been formed in reverse order.
Parliament does not form the government, but the government forms
parliament. This makes a difference anyway.
If, when discussing the draft budget, the majority in parliament
suggests a big political solution, this can somehow be acceptable.
But with the naked eye one can see that there are absolutely different
issues in the balance. The transition to a voluntary military
service, the elimination of monopolies, and questions about control
of natural monopolies are not discussed. Nothing is said about
supporting competition in the small business sector, about the
financing of real social programmes. Instead two issues are discussed,
as they have lobbies: the Road Construction Fund and agriculture.
The second aspect is philosophical. In your question I hear a
philosophical sub-question, which can be transformed into a political
anecdote. Obviously, the best form of government is a monarchy,
provided that the monarch is wise, kind, honest, and gives enough
money to all his subjects. However, since this never happens,
a monarchy offers the worst form of government.
There the issue is the decision-making process which has a number
of drawbacks. For example, when it is stated that the State Duma
spoils the budget, this 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 this lobbying 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, systematic proposals for the budget does
Yabloko have?
We have neither the philosophers' stone, nor any universal panacea.
We are speaking about a well-grounded economic policy. We have
about 40 specific proposals that cover both small business and
reduction in the 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 lagging behind the rest
of the world.
From an economist's point of view, a GDP growth rate of 4 percent
a year is just about the bottom level. An increase of 0.5% is
a lot for countries with strong economies. We face the threat
of stagnation with a very poor consumption level and weak demand
- consumer, governmental and corporate demand. In these circumstances
the country is doomed to lag behind. And it can always become
dependent on two "needles" that we've been sitting on
over the past few years: oil and gas. Any change in market conditions
that hits these two resources will take its toll on the country.
Currently we not seeing large slumps or stunning convulsions.
At the same time we are not seeing any major breakthroughs. As
a result, each year we find ourselves lagging more and more behind
our peers. By apply this stagnant approach for 10-20 years Russia
will end up as an absolutely backward country economically. This
boils down to our belief that the current economic situation is
not positive, even though 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, with labour and capital
markets, competition, guarantees on property rights, intellectual
property first of all, the opportunity to start your own business
and social security. In a word, that will mean following the path
that Europe has gone. We believe this is what really can give
Russia a huge boost and foster the creation of an an economy that
is not almost 100 % dependent on raw materials markets.
Some experts say: What kind of breakthrough are you talking
about when we are endebted?
There is indeed a debt problem. But the government must have
repaid some of the debt. In fact, Yabloko has no exact information
about developments here. And we are not alone. We have a foreign
debt commission in the State Duma. I asked its Chairman about
the size of our debt. He said nobody in this country offers a
precise answer to that question. The Finance Minister should know,
I guess, but the real situation is beyond public awareness. They
seem to go to any length to dodge any 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 revenue for the government is
probably used to tackle Russia's foreign debt.
However, despite very high foreign debt repayments, the 2003
federal budget stipulates a surplus. Is that logical?
There is no doubt the 2003 budget will post a surplus, but the
2003 problem still exists, irrespective of attempts to gloss over
this issue. If you look at the original foreign debt repayment
schedule, you will see that this represent the Alps that our Finance
Minister intends to surmount like Suvorov once did. There is a
peak in payments, and therefore we cannot run such a risk and
make the budget balanced, let alone draw up with a deficit.
But speaking about short-term prospects, i.e. two-three years,
there is no universal answer to that question. You can't provide
an abstract answer and you have to take a broader look at the
whole economic policy.
Today we lack answers to crucial questions. In particular, how
does the government plan to promote economic growth? These days
the government says the economy is living its own life and no
state intervention is expected. That is one approach to the problem
of a budget surplus or deficit. If a programme of big government
investments is approved, we are going to see a budget deficit,
as this programme will contradict the very bone and marrow of
the financial policy pursued by the government.
Speaking about Yabloko's stance, I think we should make a balanced
budget to avoid any huge mid-term surplus or deficit, and force
the government to clearly map out income and expenditures in.
Ultimately countries 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 economic theory
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 a deficit investment policy.
I think that over the long haul Russia will need exactly this
kind of economy. But it is too soon to talk about that today,
as in our case a mechanical shift from a budget surplus to a budget
deficit will simply prompt whopping inflation and we will get
nothing in return: neither real economic growth, nor a stable
financial position.
Yabloko has been introducing alternative budget drafts for years,
which are not used. Don't you think this is a mindless waste of
effort and isn't it better to follow the trodden path: win an
absolute parliamentary majority and then implement your programmes?
You are correct. We are seeking to convince voters that we are
a political force worth their backing. But if a man makes economic
sense, is he a knucklehead or a man of principle? Of course, we
are stating the economic facts all the time. This is our tenth
budget. I don't want to exaggerate, but each of our budget drafts
have components that end up influencing the government, the Finance
Ministry and the President. Moreover, we have even noticed a trend:
the main ideas in our budget drafts are implemented during the
year. For example 11 of 16 suggestions from our alternative draft
budget for 2001 were picked up for the 2002 budget.
To be quite candid, we do exert influence so much as public
opinion can do. What I mean is not legislative work or the adoption
of amendments, although we manage to pass some of them, but the
discussion of macroeconomic policy .As our political rivals, primarily
centrists, have virtually given up on the discussion, we are currently
positioned as a force to be reckoned with.
One final question: the 2003 problem as a problem of the Russian
State Duma elections. How much will this factor impact the budget
and economic life over the next year?
I may seem original, but I believe the election and budget year
will have no influence whatsoever on the budget process. The parliamentary
majority that currently controls approval of the budget will certainly
go to the polls. But they are much less dependent on voters than
the minority opposing the government's draft budget. The United
Russia faction will not go to the polls with the 2003 budget,
but with the name of President Vladimir Putin. This is how they
will be perceived by the electorate. Therefore they are relatively
free from decision-making. I wouldn't say the behaviour of the
Duma's parliamentary majority is determined by pre-election events.
I think that if the budget is fraught with blunders, these will
be not attributable to pre-election blunders, but rather stem
from elsewhere.
On the other hand, there will be protests. I think the rank
and file of the People's Deputy or the Regions of Russia factions
will protest and issue plenty of amendments. However, at a critical
moment someone will say the magic word and we will witness a final
unanimous yes vote, while the public will be provided with the
texts of their speeches.
See also:
Budget
2003
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