EDITORIAL: The Russian Pension Morass

EDITORIAL

The Russian Pension Morass

The average monthly retirement benefit paid to an American by the federal government is $1,086.  That’s 6.6 times more money than an average Russian pensioner receives — they get just $164 per month (if you believe the habitually dishonest Kremlin’s data).  An American pensioner gets over $36 per day to live on — a Russian gets less than $6.  And remember: The American population is twice the size of Russia’s, so America is actually spending 13.2 times more on its senior citizens than Russia is as a nation.

Even Russian dictator Vladimir Putin seems to realize this is a serious problem.  Therefore, he has proposed to increase the payroll tax paid by employers to fund the state pension system by a whopping 30%, from 26% today to 34% in 2010.

Yekaterina Katz of Delovaya Rossia, a lobby group for small and medium-sized businesses, called the measure “unacceptable” and warned: “It would kill most industrial enterprises.”

The Russian stock market, however, seems to like the idea.

It sees the measure as an opportunity for the government to extract huge quantities of cash from recalcitrant businesses, then using that cash to invest in the Russian stock market against their will.  Obviously, given the recent apocalyptic collapse of the market, it is having some considerable difficulty getting people to plonk down their money voluntarily.  The Moscow Times quoted Kingsmill Bond, a strategist at Troika Dialog, stating:   “One of the causes of the recent stock decline is the absence of long-term capital in Russia.  If the government is able to restructure the pension system so that capital from every worker flows into domestic funds, they will be better off.”

Of course, Mr. Bond would also be dramatically better off, now wouldn’t he? Convenient, isn’t it, how he views Russian national interests as being perfectly in line with the lining of his pockets?

This is, to put it mildly, a classically insane Russian scenario.  Russian old people are wallowing in horrific poverty, and the only solution the Kremlin can conceive of is Communism.  It’s going to rape the assets of successful business enterprises, wiping out their ability to invest and expand, stunting their growth and destroying them, and leaving the government ultimately with even less resources to help old folks than it has now.  It’s exactly what the Soviets tried, exactly what brought the USSR to its knees.

Mind you, even now Russia is highly socialistic.  After all, the difference between the GDPs of the U.S. and Russia is a factor of around 12, yet the difference between the pensions they pay is only a factor of six.  So Russia is already imposing a massive drag on its economy as it attempts to support its aging population, and now it’s going to increase that dramatically.

And consider this:  Russians live much shorter lives than Americans do, especially the men, whose lives are 15-20 years shorter than those of Americans on average.  Do you dare to imagine, dear reader, what the state of the Russian economy would be if Russian lifespans started to get longer? Given that prospect, is it any wonder that Mr. Putin isn’t too concerned about finding ways to make Russians healthier?  If they actually did get healthier, they could bankrupt the Russian economy in short order.

But Russia is between a rock and a hard place, because the country obviously isn’t going to get very far if its population keeps going extinct — yet Russia can’t afford to make its people healthier.  Well, it could, but doing that would mean diverting precious resources from the new cold war.  You can’t improve healthcare for seniors and also send nuclear bombers and warships all the way to Venezuela, not when you have such an anemic GDP as the one Russia sports.

It’s a classic Russian morass, exactly the type that undermined and laid low the supposedly mighty USSR.  And there are no signs of it abating.  In response to the collapse of the Russian stock market, Putin declared: “We see an inability to take appropriate decisions. This isn’t the irresponsibility of particular individuals, it is the irresponsibility of a system that, as we know, had claims to leadership.”  Not only did Putin ignore his own outrageous missteps (for instance, trashing industrial giant Mechel and, as Boris Nemtsov has documented, looting Gazprom), Putin didn’t seem to realize he was admitting that the Russian markets are the helpless slaves of American economic power, with the Kremlin utterly impotent to influence them.  Yet, it has been his government’s policy to attack an destabilize the American economy at every turn, from escalating tensions in the Middle East to ratchet up oil prices to litterally buzzing American shores with nuclear bombers.  Just try to name one affirmative step Putin has ever taken to help boost the American economy and thus protect Russia’s markets.  You’ll be hard-pressed indeed to do so.

Russia is governed by unqualified maniacs, just as the USSR was.  Indeed, it is governed by a clan of KGB spies consumed with aggression and hatred.  How then, can it hope to escape the USSR’s fate?

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