I refer to Stephen Cohen's article in The Nation and Ed Weick's comments on
it:
At 11:49 21/08/98 -0400, you wrote:
>>Johnson's Russia List
>>#2316
>>20 August 1998
>>[EMAIL PROTECTED]
>>
>>#3
>>The Nation
>>September 1, 1998
>>Why Call It Reform?
>>By Stephen F. Cohen
>>Stephen F. Cohen is a professor of Russian studies and history at New
>>York University. His most recent book, Rethinking Russia, will be
>>published next year by Oxford.
>>
>>As Russia’s economic collapse spirals out of control, rarely if ever has
>>American discourse about that country been so uncaringly and dangerously
>>in conflict with reality. With its endless ideological mantra of a
>>purported “transition from Communism to free-market capitalism,” almost
>>all US government, media and academic commentary on Russia’s current
>>troubles is premised on two profoundly wrong assumptions: that the
>>problem is essentially a “financial crisis” and that the remedy is
>>faster and more resolute application of the “reform” policies pursued by
>>President Boris Yeltsin since 1991.
>
(EW)
>There is a third assumption that Mr. Cohen does not mention. This is that
>the Russian government is actually in control of the Russian economy. When
>I was in Moscow on a study tour a couple of years ago I attended a lecture
>by Vladimir I. Markov (Ph.D., economics), Deputy Director, Russian Academy
>of Sciences, Institute for Socio-economic Studies of Population, who
>suggested that fully 60% of the existing private companies are in some way
>or another associated with the criminal world - either they are part of this
>world themselves or they make payments to it for their survival. This
>situation has probably not improved since then.
>
>As well, the difficulties that the Russian government has had in collecting
>taxes are well documented. The interests of private companies may be better
>served by paying protection money than by paying taxes.
I'm sticking my neck out here but my guess is that what is going to happen,
inevitably, is that Russian Government will have to give up the idea
altogether of collecting personal income and corporation taxes*. Let me
briefly discuss both categories.
Personal Income Taxes: Because the vast majority of state- and
large-firm-waged people get paid only episodically (or, in the case of
middle- and small-firms, are paid mainly by barter-goods) then something
like 60 or 70% of the GDP has been forced to become a grey economy
invisible to the Government. Even if the Government were to collect
personal taxes efficiently then it would still only represent a fraction of
the total taxation necessary to maintain the full state apparatus. The grey
economy exists by means of barter goods (or dollars or other strong
currencies) and a barter economy is by no means as inefficient as
economists are wont to describe it (especially in the large cities where
well-developed personal networks can supply most essential domestic goods
and services). The upshot of this is that if even if the Government were to
regularise the paying of wages and thus the receipt of personal income tax
-- so returning to some sort of normality -- the huge grey economy would
not disappear overnight. Once people have developed an efficient grey
economy (such as in Italy where it has remained at about 30% for decades)
it is almost impossible for governments to get rid of it.
Corporation Tax: The Russian Government is in debt to the tune of about $50
billion, yet it is calculated that the large and middling Russian firms
have sent $200 billion of their profits abroad (with a further $50 billion
exported by something like 3,000 Mafia organisations). Despite all their
efforts, the Russian Government have so far been unable to tax this money.
Time and again, the owners of these firms say that they will not bring
money back into the country for investment unless corporation tax is
reduced or scrapped. But many of these companies are not anti-taxation per
se, and give sizeable donations to local governments where they can see
their money being spent on local services and pensioners, rather than
having taxes be swallowed up in some central maw.
(EW)
>In another lecture, by Boris Erasov Ph.D., Professor of Social and Cultural
>Studies, Institute of Oriental Studies, Academy of Sciences, argued that
>without a strong state at the top - without a powerful central authority -
>Russia was likely to revert to tribalism internally, and to be under threat
>from foreign powers. He suggested that, unlike the west, Russia has lacked
>the institutions which have melded a variety of minorities into common
>nationhood. He maintained that there is no Russian nation. Lift off the
>central authority (as at present), and there is a general reversion to
>tribalism (also as at present). This is essentially what was behind the
>Chechnya war, where the Russians were trying to re-impose central authority
>before tribalism got completely out of hand.
Because the nation-state is everywhere in decline because of the resumption
of global trade (so far, back to levels of the 1870s) Yeltsin's Government
is having to swim even more strongly against the tide than Western nations
in trying to maintain (or in his case, re-impose) centralised national
authority. I would question Boris Erasov's view that, unlike western
nations, Russia has "lacked the institutions which have melded a variety of
minorities into common
nationhood". I would say, rather, that the 100-odd ethnic minorities in the
USSR -- as well as the sheer physical size of the country, including a
large Islam component -- have, at the end of the day, simply proved too
difficult for any government to handle. It is indeed questionable whether
Western governments have succeeded all that well despite appearances during
the course of this century and the acceptance by most people that
centralised nation-state governments are somehow "natural" institutions.
All over Europe, regional cultures are re-asserting themselves even though
they might share national languages. Even nations with small populations,
such as the UK, are breaking up.
(*The Russian Government would, of course, have to have some form of
taxation and one candidate would be an enlargement of value-added tax. This
would be much easier to administer. It is rather interesting that some
commentators are saying that, in the West, too, future taxation will have
to be mainly of this sort. Personal and corporate taxation systems are
becoming so complex (and, indeed, may break down altogether with the Y2K
bug) that they are overwhelming the intellectual and administrative
capacities of revenue departments. Such taxes are also becoming easier to
evade. Also, of course, investments [particularly pensions funds of
ordinary people] are now being dispersed around the world to avoid high
taxation in their home countries.)
Some FWers might say that Mike Gurstein's original posting of the article
on Russia and Ed and my comments on it are little to do with the purpose of
this list. But the tragedy of Russia is everything to do with it because
what is taking place there now is an integral part of a vast tectonic-type
readjustment of the whole world's economy. What is happening to Russia is
an important part of what is happening to us. Matters of unemployment
everywhere are willy-nilly part of powerful global trends and thus cannot
be solved by clever national policies. (In the UK the only clever thing
about the New Deal unemployment policy is the government-sponsored
advertising one sees on TV saying it is a glorious success. It is
brilliantly done and almost convinces me when I see it, but in fact it is
fiction.)
Keith Hudson
_______________________________________________________________________
Keith Hudson,6 Upper Camden Place, Bath BA1 5HX, England
Tel:01225 312622/444881; Fax:01225 447727; E-mail:[EMAIL PROTECTED]
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