Andrey Movchan: “It is very difficult for Russia to be equal to European states in terms of sociality”

The day of the October Revolution, which also became a socialist one, makes one wonder: where is there real socialism in the world? After all, state support for the poor and incapacitated in many countries was also the result of October 1917. To what extent the social state is fully fledged in Russia and what measures are required in our social sphere to make the state strong — famous Russian economist Andrey Movchan argues in the interview with Realnoe Vremya.

“The definition of the social state cannot exist in principle”

Mr Movchan, according to the Constitution, Russia is a social state, but is it really so? Many complain that we have less free medicine, less state-funded places in universities, that payments to the unemployed and pensioners are too low.

I have to upset you and your readers — the definition of the social state cannot exist in principle: social is a part of speech, an adjective, and so it's all the same as to define whether a state beautiful or not, strong or not, and since it is already the comparative degree, we can say what state is more social than the other. The state can be considered strong in social terms if it has developed measures to protect the low-income or disabled segments of the population, and in this sense, the Russian state, as in all its other manifestations, is at an average level, if we talk about the world, but much higher than a number of backward states. Of course, it is very difficult for Russia to be equal to European states in terms of sociality — especially the Scandinavian ones, which are the most social ones, it is difficult for us to be equal to the United States, where almost half of the population receives tangible social assistance, but if we compare our state with India or with the BRICS countries — we look quite decent.

But there is a significant social inequality in Russia today — the incomes of the rich and the poor differ by 16 times. Although it is believed that in a social state the difference should not exceed eight times the value. Can such picture correlate with the concept of “Russia — a social state”?

There are two points of view on the social state: the first says that the social state should strive to ensure that there are no poor, and the second, which, by the way, actively professed in the USSR, says that the social state is the state where there are no rich. I am a supporter of the first view, and I think that from the point of view of the social state no matter what Gini coefficient the state has (or the level of social stratification), the Gini coefficient in Russia is quite close to the ratio in the United States where social stratification is very high but the standard of living of the relatively poor in the United States is incomparable to the Russian one. Hence, the task of our state is not to equalize the standard of living but to help those who have a rather low standard of living.

If we talk about the development of economy (although this is a separate topic), its development is very much tied to inequality, and very often it is excessive inequality that hinders the development of economy, but inequality has nothing to do with the sociality of the state.

Photo: Dmitry Reznov
Of course, Russia in terms of sociality is very difficult to equal to European states — especially the Scandinavian countries, which are the most social ones, it is difficult for us to equal to the United States, where almost half of the population receives tangible social assistance, but if we compare our country with India or with the BRICS countries — we look quite decent

But your colleagues say that if the progressive tax, which exists in developed countries, had been introduced, the problem of inequality wouldn't have looked so acute because there would have been means to smooth it — for example, wages would have risen, social payments to large families, poor people would have been increased. What can you say about it?

These things have nothing to do with each other. In Russia, both the economic and sociological schools are very weak, and in our country people say things without even trying to compare them from the point of view of logic. Progressive and non-progressive taxes are primarily ways of creating state revenues, and taxes have nothing to do with state expenditures and the formation of the social environment. Today Russia has enough revenues — the state budget is currently in surplus, the state spends less than it earns, and if you even assume that the creation of a progressive tax will increase the fees to the budget, then these fees will still go primarily to the budget profit, and here the question arises — if we want to increase the social spending of the budget, why not use its current surplus? We can discuss whether it is good or bad to have progressive taxation and how to make it look good, but this measure will have nothing to do with the sociality of the state.

“Subsidies are the worst way to increase the sociality of the environment”

So, it's all about approaches to the correct social distribution of the budget?

That's right — it all depends on how income is distributed, and on what social institutions are created and how they work. But as some serious experiments have shown (for which this year, by the way, they gave the Nobel Prize in Economics), subsidies and monetary rewards for the poor are the worst way to increase the sociality of the environment — these measures do not work: they do not help the poor to become less poor, they do not help the state to create a more progressive environment in which there are fewer poor. The state needs to do absolutely different things — it is necessary to create a system of getting a good education, good health care in the country, the state needs to create a system of support in getting a profession, to create support for small and medium-sized businesses. That is, the creation of incentives and infrastructure is much more effective for building a social state than the distribution of money. And what is important — not always the creation of incentives and infrastructure requires money, but rather the opposite — for example, some tax benefits can be introduced to a number of citizens: Yes, money becomes less, but at the same time these benefits help the state to fight poverty.

Do you not consider raising the minimum wage as a number of measures to create a strong state? You will agree that from 2020, yes, it will increase and will be a little more than 12 thousand, but it cannot be called “decent”.

The minimum wage has nothing to do with the collection of taxes and income of people. The minimum wage is a kind of semi-fixed value that is used to calculate fines and penalties. What difference does it make whether the minimum wage is more or less: the amount of the employee's salary is still determined by an official or a businessman. What is more, for people who earn less than the minimum wage, raising it will further drag our economy into the shadows. If you are, relatively speaking, the owner of a bakery and you can pay an employee based on your economy — no more than, say, 15,000 rubles (this is not enough, but just the way the economy of your bakery is arranged — nothing can be done), and then suddenly you will be required to pay him 20,000, then you can either close the bakery and lose income, and then go for benefits or social assistance, or you can start paying the employee “in black”, which means that the state will lose taxes. Or you will come up with some more engineering — for example, you will keep a part-time employee, but he will work full-time. Today, a person can have a job for 15,000, but can lose it when raising the minimum wage to 20,000! Many just have nowhere to take these five thousands from! It is just a myth that all the capitalists, the owners of the same bakeries, are greedy: the have huge profits but pay little to workers. After all, in our country there is a competitive environment, and if the owner of a bakery Abram pays you 15,000, but the owner of a nearby bakery, Ivan, pays 20,000, then you go to the next, and with the loss of the worker Abram will not have money, no matter how greedy capitalist he was. You see, we are dominated by ideas from the middle of the 19th century, but the markets have changed a lot since then — the salary markets have become effective, and today they pay less not because the entrepreneur is greedy: today, on the contrary, you will pay more if you want to have the right people. Therefore, it is pointless to raise the minimum wage! But removing income tax for people whose salary is less than 20,000-30,000 rubles and reducing social payments for such salaries would be very correct.

Photo: Dmitry Reznov

Subsidies and monetary rewards for the poor are the worst way to increase the sociality of the environment — these measures do not work: they do not help the poor to become less poor, they do not help the state to create a more progressive environment in which there are fewer poor

“It's high time to move to the system of fixed-contribution, when you save for retirement yourself”

What to do with pension issues? Yes, in the next five years, the Russian pensioner will receive an increase of an average of 1,000 rubles every year, but do these steps smooth out much? What should be the pension system in the social state?

Russian pension policy is fundamentally wrong, we are futile to create a system but it is impossible in the modern world to have a pension system that has the following scheme — no matter how much you made, and then the formula calculates how much pension you will get. Such systems will naturally go bankrupt because the world now lives in a different way — the world is now much more pensioners than workers, the share of labour in income is gradually falling, and it is high time to move to the system of pension contributions, when you save for retirement yourself — you make pension contributions, from which your pension is formed. If you do not form anything in pension savings, the state pays you a minimum pension from the funds that it took from the workers — such systems work successfully in the US and in Europe, and such a system cannot go bankrupt, and in such a system you do not need to raise or lower the retirement age because a person himself determines when he retires, based on the funds that he has accumulated. Such a pension system is the future. It is clear that our government has a pathology of mental control and they can not allow a system that controls itself, in which each person is the owner of his pension account, and they believe that the formula for calculating pensions should be controlled by an official, so the system that is in the United States, we are unlikely to see soon. But otherwise, our pension system will go bankrupt.

Is it possible in Russia to introduce a basic unconditional income — for example, for the unemployed? Or is it too early to introduce such an idea in our country?

Economic ideas do not live in a vacuum — only school physics problems live in a vacuum, but at university these problems already acquire the features of reality. We can't just talk about absolute basic income — we have to ask ourselves: what is our unemployment rate? If unemployment is high in the country (even due to the fact that many people as workers are not needed, and the economy is working well), then an unconditional basic income should be introduced because this is a sure way to calm the labour market — people will have a basic income, and they will not be eager to work, and only the most talented will work, who will strive to earn good money — this will be a natural regulator. In Russia, unemployment is low, and to say that it is necessary to bring people out of the labour force, while the number of workers is declining, is simply absurd. In addition, Russia has a very low labour efficiency — if it were incredibly high and efficient, we would say that it's okay — all the resources we have are involved, in the future only half of them will be needed (as labour efficiency is growing), so we need to think about the basic income. But while our labour efficiency is not growing, while we have a lot of low-profit businesses in the country, and what will be a decent basic income? Here, on the contrary, it will be more correct to find a job for a person.

Photo: Oleg Tikhonov
In Russia, we have built a rental state, and such a state lives by its own laws, that is, as long as there is rent, it will live exactly as it is now. Russia, by the way, is not the worst version of the rental state, a reasonable option, but the rental state is never particularly social

“Russia, by the way, is not the worst option of a rental state, a reasonable option”

Mr Movchan, many sociologists and economists have said that the absence of civil society and the role of trade unions prevent the construction of a strong social state in Russia. Do you agree?

The question is very complicated, and that's why — the thing is that when we are in a space in which the absolute majority of the population creates added value, and creates quite seriously (for example, as it was in the classical industrial society, where workers and peasants created 90 per cent of the added value), it is already a serious association of people, which can fight for their rights and makes the state more social — after all, people represent the majority of the population. Russia in a sense is an industrial state (an early industrial state, to be more precise) — except for oil and gas, the added value is distributed in it quite a thin layer — labour efficiency is small, and the economy needs a lot of people, and here trade unions would be a very effective tool in terms of the sociality of the state. In Russia, both trade unions and multipartisanship — a real multiparty system, not a puppet one — would of course have a positive impact on the authorities.

If civil society, trade unions do not put pressure on the authorities to raise wages, reduce the tax burden for the same poor strata, then our social policy, therefore, will not change — at least until 2024?

Look, we have a rent state built in Russia, and such a state lives by its own laws, that is, as long as there is rent, it will live exactly as it is now. Incidentally, Russia is not the worst option rental state, a reasonable option, but rental government never social — it is a different case if the rent is very large, as in the United Arab Emirates or Norway, but in Russia the state with an average size of rents, and the government won't accept the change, then the situation will be like today — slowly deteriorate and will become less social, a bit tougher, but without any breakthroughs. Yes, there will be some left-wing pullbacks, when under the guise of socialization, the state will become populist and lose the economy. And when rental income will decrease or fall significantly (by the way, according to some experts, this will happen in Russia in 15-20 years), then Russia will have to endure a social shock, as it was in the early ‘90s. Unfortunately, after the first shock, we came out little changed, so we are doomed to a second such shock. And only after the second shock, there will be opportunities to build a real social state. But for this to happen, the country's economy must seriously change.

Interviewed by Sergey Kochnev