As is his custom, this afternoon Vladimir Putin delivered a well-constructed speech to the nation in which, after expressing the nation’s gratitude to its medical cadres and other front-line personnel dealing with the coming epidemic, he spoke next about the issue that everyone knew was at the forefront of his concerns, the 22 April referendum on the Constitutional Reform. The referendum will now be postponed indefinitely, pending recommendations from health experts. As Mr. Putin reminded his audience the lives, health and security of the nation are the highest priority of his administration. In and of itself, this is a rather comforting message that contrasts with the confusion over serving the economy and serving the public health that we find in many Western countries, including the USA.
Then Mr. Putin set out an extensive list of immediate government measures intended to deal with the oncoming epidemic, which has in the past few days shown an exponential rise in the number of proven infections, generally in line with the experience of China and most recently of Europe. The need to act, the need to see the corona virus as potentially as devastating in Russia as it has shown itself to be in Italy, Spain and France, indeed the need for this address was tipped off yesterday by the televised remarks of Moscow Mayor Sergei Sobyanin.
One may be certain that the Mayor was given the microphone to issue his stark warning precisely to set the context for today’s address. In previous weeks Russian media had pointed to the insignificant infection rate, while detailing the misery (Western) countries are now experiencing. Sobyanin’s words were a transparently “corporate” maneuver. The same may be said of Putin’s donning a yellow space age anti-infectious disease suit and helmet with nano-filtration for his visit yesterday to the Kommunarka hospital treating corona virus patients. Corporate America should take off its hat to Vladimir Vladimirovich for this performance, worthy of the best top executives.
Among the key measures that President Putin mentioned in his speech this afternoon were the following:
- A week-long stay at home order for the population beginning this weekend except for essential services
- A substantial rise in unemployment insurance payments to those laid off due to the virus and its impact on the economy. These will rise from 8,000 rubles monthly to the legal minimum income (poverty level) of 19,000 rubles monthly (223 euros at today’s exchange rate)
- Speeding up the allocations of new social benefits to families with children announced during his state of the nation address in mid-January as well as accelerated payment of bonuses to veterans of WWII
- A moratorium on personal credit and mortgage credit repayments during this crisis
- Credits to be made available to small and medium businesses
- A temporary halt to bringing bankruptcy proceedings against businesses in default
Then, with special flourish, Mr. Putin used the impending crisis to fix several unpopular tax loopholes favoring the very rich, so that the proceeds of the new taxes may be used to offset some of the costs of the social protection measures now being introduced for the great majority of the working population, for families, etc. To name one such abuse, he is calling for all remittances of dividends and the like by physical persons to offshore ‘tax havens’ where they go untaxed, now to be subjected to a 15% income tax in Russia. The double taxation treaties with those tax haven countries allowing this abuse will be amended accordingly.
Now let us consider what was missing from the speech.
First, and most importantly, there was not a word about the fate of the forthcoming May 9th celebrations marking the 75th anniversary of the victory over fascist Germany. Here we see that the Putin administration is taking the same head-in-the-sand position as the Abe government did over postponement of the Olympics that was finally agreed two days ago.
It is foolish to think that the same considerations of public health underlying the decision on the Constitutional referendum of April 22nd are not applicable to May 9th, when normally there would be the March of the Immortal Regiment bringing out a million or more civilians onto city streets in Moscow and in St. Petersburg, and lesser but still very large public gatherings across the nation. If allowed to go ahead, these marches and the celebrations in restaurants that follow them will serve as a splendid platform for propagation of the corona virus.
There was also not a thought given to how the impending crisis might require a greater mobilization of society and greater creativity of approach than the technocratic Cabinet and the United Russia party majority in the Duma can muster.
I return here to my standing recommendation that the President move to create a government of national unity by bringing leading figures from the Duma opposition parties into the cabinet, starting with the position of Minister of Labor.
This is all the more relevant when we see that the latest legislative initiative of Duma Chairman Volodin to combat the corona virus is to establish criminal liability for those who violate the quarantine rules, thereby causing the infection and possible death of others. The notion that this problem will be solved by putting quarantine violators in prison for five or seven years is foolhardy and will be totally ineffective. One might better ask why the Russian government and Aeroflot are doing so much to repatriate the 50,000 or so Russians stuck abroad on vacations which they took when the gravity of the global epidemic was already clear. These insouciant egoists are the greatest threat to Russian public health as they now return home at government expense. Here is a flagrant violation of common sense.
In both the “corporate flair” of the presidential administration and in the shortcomings of imagination at the Duma, we see that Putin’s command of the situation is faltering. On the other side of the ledger, it is also true that Russia may be spared the “Italian scenario” for reasons very specific to its geography and to the extreme caution and prudence of its fiscal and monetary management over the past decade dealing with a sequence of ‘stress tests’ by which I mean sanctions. The latter is self-evident. The geography related advantage requires a word of explanation.
Apart from Moscow, Europe’s most populous city, St. Petersburg and Novosibirsk, Russian cities hover around one million and there are not many of them at that size. An unusually large part of the population still lives in the countryside. Indeed, a still larger percentage of the elderly live precisely in the empty countryside, left behind when young males and other able-bodied folks went to town for jobs and contemporary life style. In this sense, the world’s largest country has intrinsic advantages compared to Western Europe, where population density is often very close to China’s. We will see in a few weeks how this plays out.
© Gilbert Doctorow, 2020