The crisis that could take down Putin’s presidency
Friday 27/July/2018 - 12:19 PM
"Washington Post" newspaper- By "Kristy Ironside":
Russia’s Vladimir Putin is all over the news — portrayed as having some sort of leverage over President Trump and rapidly becoming a central figure in U.S. politics. But back home، Putin is being assailed for a very different reason: muting criticism of an unpopular plan to increase Russians’ retirement age. The bill، whose first reading was approved by lawmakers last Thursday، would mandate that men retire at 65 instead of 60، and women retire at 63 instead of 55.
Opposition activist Alexei Navalny has started a campaign informing citizens which local politicians supported the pension reform to systematically vote them out of office. The Russian Internet is awash with memes criticizing the reform and the deputies who supported it. Public protests have spread، and 20 people were arrested in St. Petersburg last Wednesday.
Pension reform is always a politically fraught process، but Russia faces specific challenges inherited from the country’s Soviet past. By the last decades of the Soviet Union’s existence، old-age pensions had become inviolable guarantees: In exchange for their tireless labor and their service to the state، ordinary citizens were promised future financial security. That guarantee was eviscerated with the collapse of the U.S.S.R. and the economic catastrophe of the 1990s، which Putin promised to reverse. Putin now wants to touch the third rail of Russian domestic politics. In reforming the pension system، he threatens to undermine one of his key sources of support: those who depend upon state pensions to survive. He has also provoked anger and anxiety among those who fear that the money will be long gone by the time they reach the age to claim a pension.
The Bolsheviks came to power in 1917 promising sweeping benefits to workers، including old-age pensions، but it took another 10 years for the economically embattled regime to actually pay them. The first pensions were offered to textile workers in 1927 and were rolled out to other industries over the course of the first Five-Year Plan. The current retirement ages were set in 1930; workers in dangerous or remote industries could retire even earlier as an incentive to enter these lines of work. In short، pensions were rewards for workers who embraced communism and contributed to the country’s industrialization and socialist development.
But the Stalinist old-age pension system was flawed. Pensions were capped at low amounts and not adjusted for inflation، which meant that pensioners were often some of Stalinist society’s poorest members. And not everyone received even these meager pensions: Although the 1936 Constitution guaranteed citizens “maintenance” in old age، amid massive labor turnover، pensions became not only a carrot but a stick as the regime struggled to get workers to stay put and be more productive. Many workers were denied a pension due to gaps in their employment history or inadequate time in the workforce. Collective farmers، who were the target of some of the Stalinist regime’s most repressive policies، were categorically ineligible.
Pension reform was thus high on new Premier Nikita Khrushchev’s post-Stalinist agenda. Although he retained the previous system’s emphasis on labor discipline as a prerequisite for receiving a pension and continued to exclude collective farmers، an October 1956 law harmonized the Stalin era’s piecemeal pension legislation and raised and standardized the amounts most pensioners received.
Khrushchev’s decree also enshrined that the Soviet pension system would be different from systems such as America’s Social Security program. He promised that workers would never be asked to pay for their own pensions. In practice، this meant that workers did not see deductions from their monthly wages toward their pensions as U.S. workers do; instead، the enterprises they worked for paid into the state’s social insurance fund on their behalf. This allowed the government to crow about the superiority of the socialist approach and the regime’s largesse. In 1977، a new constitution affirmed citizens’ right to old-age pensions، and the tenure of Khrushchev’s successor، Leonid Brezhnev، is often thought of as the Soviet Union’s “golden years” of high living standards. Oil profits allowed the government to fund a generous social welfare agenda، including subsidizing old-age pensions.
But Brezhnev left a sinking economy behind، and the burden posed by pensions soon became unsustainable. In 1990، Mikhail Gorbachev sought to rework pension financing to involve workers’ own contributions، but the Soviet Union collapsed before these reforms could be implemented.
Pensioners were among the hardest hit by Russia’s transition to a market economy. During the 1990s، the Russian pension system moved toward the U.S. Social Security model، financed by wage taxes paid by the younger generation، instead of being subsidized by the state budget. That move، however، did not prevent the government’s pension fund from collapsing. Hyperinflation undermined the value of pensions، making poverty among the elderly commonplace.
Putin came to power promising to stabilize the Russian social welfare system and improve living standards. During his first presidency، he eliminated past-due pension payments and increased amounts. In 2002، his government unveiled a new pension system for the elderly financed by contributions paid by citizens born after 1967.
In 2009، a voluntary co-financing scheme — paid by employees and the government — was introduced to try to stabilize the system’s finances. That system was partially rolled back in 2013 after the government passed a controversial law giving it more control over private pension funds، raising fears about the nationalization of pension savings to fund other state priorities. And yet، none of these fixes offers an answer for a poor economy. Russia’s economy has been contracting because of the strains caused by sanctions imposed in the wake of its 2014 annexation of Crimea، as well as low oil prices. The pension system is in dire financial straits، which is why the government now wants to raise the retirement age.
In reforming Russia’s pension system، Putin faces the impossible task of satisfying older citizens who see their pensions as a right and guarantee (many of whom support Putin precisely because he pays their pensions) and younger citizens whose contributions to the pension system are critically needed، but who are now incensed that they might not get to enjoy the same rights and guarantees. Across the board، Russians are grousing at being asked to pay into a system، when the new retirement ages and low life expectancy mean that they won’t earn back what they paid in.
Russians’ support for Putin is often attributed in the West to his promotion of conservative values، encouragement of nationalist sentiment and returning Russia to “great power” status. But it also rests on a much more basic promise to the population: steady improvements to their living standards. Pension reform threatens Putin’s image as someone who has brought increased prosperity to the average post-Soviet citizen — an image based upon efforts in his early years in office to alleviate poverty.
While Americans may view Putin as a subversive threat to democracy، many Russians see him as a protector. The proposed pension reform puts that image at risk. Some Russians now see Putin as a threat to their very well-being. And what they decide will have a far greater say in Putin’s long-term political fate than anything tied to President Trump or relations with the U.S.