There is No “Reform” in Russia’s Recent “Pension Reform” Bill | Interview with Evgeny Gontmakher

Cash, Calculator, Pen

(PONARS Eurasia – Maria Lipman, Evgeny Gontmakher – July 26, 2018)

[Text of interview here ponarseurasia.org/article/there-no-reform-russias-recent-pension-reform-bill-interview-evgeny-gontmakher]

Maria Lipman speaks with Evgeny Gontmacher about the political and socioeconomic implications of raising the retirement age. Gontmacher is the deputy director responsible for social policy projects and recommendations at Aleksei Kudrin’s Committee of Civil Initiatives. Over 1992-2003, he held positions as Head of Department at the Russian Ministry of Labor, Deputy Chair at the Presidential Council for Social Policy, and Head of Department at the Russian Government Administration.

Soon after his inauguration for a fourth presidential term, President Vladimir Putin held his annual call-in show (Pryamaya liniya) with the Russian people. He spoke a great deal about his plans to cut poverty, boost economic growth, and improve medical care and demographics trends – saying for instance that life expectancy should reach at least 80 years of age by 2024. When asked whether the retirement age would be raised, Putin didn’t say yes or no. Instead, his response was lengthy and evasive:

“As for the retirement age… I’ve always taken a highly cautious and careful attitude to it. …One of the key goals that I have set to the Cabinet is to increase the pensioners’ incomes, and it should be a significant increase… (A)nother important goal is to decrease by half the number of those below the poverty line. We should find out in the nearest future which measures the Cabinet will come up with to solve this key task… I want to emphasize again: the key goal of the whole system of pensions is to significantly increase the level of welfare and incomes of pensioners.”

One week later, Prime Minister Dmitry Medvedev announced that as of 2019 the retirement age would be gradually raised from 55 to 63 years of age for women and from 60 to 65 for men.

On July 19, after a short, but emotional debate, the Duma voted for the bill implementing the new retirement ages. The next day Putin, who had kept silent on this matter since his Pryamaya liniya, said that he “disliked any variant [of the pension reform] that involves a raise of the retirement age.” This variant “can’t appeal to an overwhelming majority of our citizens,” he added. Putin has thus emerged as his people’s savior, concerned about their well-being and standing up to protect them against those in the Cabinet who, as he said, may “dupe” them.

The need to raise the retirement age has been discussed by the government and nongovernment experts, as well as the media, at least as long as Putin has been Russian president. A major reason cited by experts has been that the number of pensioners is growing, while the overall population is not; this means a growing financial burden for those employed to provide – through their taxes and other payments – for those who don’t work (pensioners as well as other non-working categories).

Anatoly Vishnevsky, Russia’s leading demographer, referred to this trend as “unwelcome, but inevitable” and emphasized that the rise of the demographic load would be especially steep in the next 10-15 years. He also stressed the fact that, even though this trend has been long predicted, the government only now begins to deal with it, and even so in a manner that he referred to as “shortsighted and momentary… without a clear vision of the long-term prospects.”

Even if Putin and his various administrations have ever seriously considered circumspect, forward-looking policies, none have been pursued. One thing is certain, however: throughout his time in office, Putin explicitly rejected the idea of raising the retirement age, which he rightly saw as a highly unpopular measure. During his 2005 Pryamaya liniya he was quite straightforward:

“I am against raising the retirement age. And as long as I am president, such a decision will not be made. It is my general belief that we have no need to raise the retirement age… [we should not] infringe on [people]’s pension rights …. And I will repeat once again that I am against an increase of the retirement age for both, men and women.”

In 2005, Putin must have been especially anxious to reassure his citizens. Earlier that year his government launched the so-called “benefits-for-cash” reform – a replacement by cash payments of in-kind entitlements, the legacy of the command economy. The ill-prepared reform came as a shock to unsuspecting retirees and other entitled categories: many did not trust the government and were concerned that they would simply lose their benefits, while the compensation would be inadequate if paid at all. Across Russia, spontaneous protests erupted in large urban centers and smaller towns. What made things worse still was that the mass protests at home almost coincided with the Orange revolution in Ukraine. This, of course, further increased the Kremlin’s alarm; the reform was mostly suspended, and special payments were made in order to quell the protests. As Evgeny Gontmakher says in the interview below, in the end, the no-reform was even costlier than the actual reform would have been. After that, Putin’s administrations consistently refrained from large-scale unpopular reforms – and luckily for the Kremlin, the price of oil remained mercifully high so the government could afford to avoid these risky moves.

Apparently, in today’s much less auspicious economic situation, the government felt that procrastination was no longer affordable. It is impossible to believe, however, that Putin did not sanction the decision to finally start raising the retirement age. Yet, the Kremlin tried to persuade the Russian people that Putin was not involved. His spokesperson, Dmitry Peskov, has repeatedly emphasized that the decision was the Cabinet’s, not Putin’s. “Neither the (Kremlin) Administration nor the president participated in these discussions,” he insisted.

But the people were not convinced. Putin’s approval and trust ratings have fallen for the first time since the annexation of Crimea. According to Grigory Kertman of the FOM polling agency, which is generally seen as loyal to the Kremlin, “The attempts to distance the president from the pension reform have been lost on the citizens; the (polling) numbers point to significant discontent.”

Polling data confirmed what was obvious all along: an overwhelming majority were against retirement reform, and numerous street protests followed. In many regions, local authorities, reluctant to approve the highly unpopular reform, especially shortly before Election Day in September, lingered and didn’t come up with their assessments until they were strongly pressured from Moscow. (In the end, most regions submitted their approvals).

In Moscow, which will have a mayoral election in September, the city legislature announced that it would not discuss the reform until after the election. The incumbent mayor’s competitors are a joke, and the results of the Moscow election, just as of any federal or regional election in Russia, are fully preordained. And yet, the authorities have sought not to upset Muscovites prior to the vote.

Closer to the day when the Duma was to vote for the controversial bill, the government media consistently avoided words such as “reform” or “raise.” According to research conducted by meduza.io, the media opted instead for wordings such as “changes in the pension legislation,” “changes in the pension system,” “a bill on pension changes” or simply “the pension bill.”

The debates in the Duma lasted just one day. For the three nominal opposition parties, this was an opportunity to vote against “the anti-people government,” but since United Russia, the major pro-Kremlin faction has a solid majority, nearly all amendments were declined, and the bill was easily approved by 328 votes against 104.

The Russian opposition parties have long been reduced to opposition only in name, and Vladimir Zhirinovsky, the leader of one of those parties, the LDPR, has long become an unparalleled master of a political travesty. His contribution to the debate was a fiery speech against the raise of the retirement age in which he blamed “the mess of the past 100 years” on the Duma deputies of the early 20th century who “staged a revolution” and “killed the Tsar.” “Everywhere where there’s a monarchy, people live better,” he declared.

In a heavily monopolized political system, pushing a piece of legislation through the Duma or forcing governors or regional legislatures to approve unpopular policy is hardly a problem. Public sentiments are much harder to control. As Samuel Greene and Graham Robertson wrote in a recent piece, “[T]he one thing that can be relied on to create protest in Russia is policy that makes life palpably harder for any particular group of people.” In the case of retirement age, the “group” amounts to tens of millions of people.

As Gontmakher points out, the protests staged so far have been relatively insignificant. One reason may have been that many in Russia were distracted by the World Cup; besides, Putin had earlier issued a decree introducing strong restrictions, a de-facto ban, on public rallies and other actions in the cities hosting the World Cup. But Putin’s declining ratings are in itself a very serious factor. His amazing levels of approval have endowed him with a unique status: he is unchallenged and unaccountable, way above all institutions, and infinitely superior to anyone in the Russian political establishment. Putin’s approval ratings, which have remained at 80 percent or higher (since the annexation of Crimea), have served as the safeguard of his regime’s stability, despite economic stagnation and declining living standards.

“The rise or decline of discontent depend on the moves of the president who is currently taking a pause,” FOM’s Kertman said in late June.

On Friday last week, Putin interrupted his “pause” by saying that he, along his people, disliked the reform and would save the citizens of Russia from the risk of being “duped.” A plurality of Russians had expected him to interfere on their behalf: 35 percent thought back in June that a softer version of the reform would be adopted (only 19 percent expected the cabinet’s plan to be enforced. The rest did not have a clear opinion).

It is unclear at this point whether the reform may indeed be softened, or what consequences Putin’s interference may have for the Cabinet and the prime minister. After Putin’s statement, it is them who look “duped” or at least outplayed.

Experts are skeptical that Putin will substantially soften the reform proposal. The stagnant economy leaves him with very limited freedom to maneuver. He is more likely to offer minor changes and benefits for small groups. The key question, however, is whether his ratings will rebound….

INTERVIEW WITH EVGENY GONTMACHER ….

[Text of interview here ponarseurasia.org/article/there-no-reform-russias-recent-pension-reform-bill-interview-evgeny-gontmakher]


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