Putin’s Pension Push: Political Hiccup, Policy

by Gordon M. Hahn

The Kremlin’s clumsy handling of the optics surrounding the decision-making and the fall in Russian President Vladimir Putin’s and the government’s approval ratings surrounding the proposal to raise the pension age notwithstanding, the policy is more ore less the right one and its political implications will be short-term, a political hiccup. The policy decision to raise the pension age has been put off for years and is overdue. Although it may reflect deeper financial shortfalls, the latter are unlikely to destabilize the regime.

The Kremlin clearly went too far in claiming that President Putin was playing no role in the policy discussions of the pension age raise. Russians may still believe in the ‘good tsar, bad boyar’ myth — the idea that Russian top leaders are basically good but the people around him are not — but the idea that such a politically sensitive policy initiative was undertaken without his agreement is absurd, and Russians instinctively smelled a rat. This feau pax probably added to the 9-point fall in Putin’s presidential approval rating in just one week last week driven by the reform proposal. Perhaps some in the Kremlin thought that grandmas and grandpas cannot make a revolution, so the political risk of riling them was limited. More likely they were well aware that every family has one or more grandparent, that pension payments do not provide a living minimum income, and that this burden falls on to all Russian families. Therefore, raising the pension age will hit most Russian family budgets.

This might have been why they chose to announce the policy as the World Cup games began proving popular, providing a cushion to protect the presidential and governmental approval rating. Nevertheless, the basic political instinct is right – you cannot build a color revolution on cadres consisting of grandparents and Russian families; that is historically the purview of urban youth, who are little interested in pensions. This might explain the Kremlin’s apparent lack of nervousness, reflected in the quick official approval of requests from opposition elements in cities across the country to hold demonstrations. The political effect will ultimately be no greater than the brief spurt of demonstrations that accompanied the Kremlin’s decision a decade and a half ago to ‘monetize’ social benefits such as free access to public transportation and prescription, housing, telephone and other subsidies with a small cash payment of some $7 per month. With Putin’s popularity having been near their all-time high in the wake of the presidential election, now is the time to make difficult reforms. They can be undertaken without risking a prohibitively low rating to emerge. This is especially true, since pensioners are traditionally a pro-Putin constituency.

As a policy prescription, the proposals are reasonable — putting aside other factors such as economic assistance to the Kremlin’s ‘friends and family’ in the wake of Western sanctions against state oligarchs and officials. The decision to raise the pension age has been delayed for years, and reform is overdue. Russia’s present pension ages — 60 for men and a ridiculously low 55 for women — are among, if not the lowest in all of Europe and post-Soviet Eurasia. The rise to 65 for men and 63 for women is to be implemented gradually, completed for men in a decade (in 2028) and for women in more than a decade and a half (2034). With Russian life expectancy continuing to rise from 73 years as of 2017, these are reasonable age thresholds. Alexei Kudrin, newly appointed Accounting Chamber chairman and former Russian Finance Minister and ‘European Finance Minister of the Year, has long called for pension reform, and I will defer to his expertise on the Russian financial system’s need for such reform. Kudrin’s new post puts him in good position to maximize the use of the savings that Russian coffers will accrue as a result of raising the pension age.
In addition to the reform being overdue and the popularity rating cushion, there may be an additional reason why the decision to reform was made now. The oil price collapse that began in 2012, combined with the West’s ongoing sanctions obsession, suggest that it is best to move now so that when energy prices fall again, perhaps accompanied by even more sanctions, the Russian budget and national welfare or ‘rainy day’ funds will not be overly taxed. That could lead to the kind of financial and/or economic crisis that really could help spark political instability that the West may seek to parlay into a color revolution, putting aside the Trump the Putin agent mania. Another reason may have been that the pension reform was deemed politically and economically safer than raising Russia’s flat tax rate from 13 to percent as some are proposing and the Kremlin was rumored to be considering.
Of course, the pension reform, which will hit poor and middle-class families the hardest, would be more morally and ethically justifiable if it were occurring on a background lacking massive state corruption and Kremlin friends’ and families’ feeding at the trough of the state. But this is a dream likely to be long deferred in Russia, the rest, and increasingly the West as well.
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About the Author – Gordon M. Hahn, Ph.D., Expert Analyst at Corr Analytics, http://www.canalyt.com and a Senior Researcher at the Center for Terrorism and Intelligence Studies (CETIS), Akribis Group, San Jose, California, www.cetisresearch.org.

Dr. Hahn is the author of Ukraine Over the Edge: Russia, the West, and the ‘New Cold War (McFarland Publishers, 2017) and three previously and well-received books: Russia’s Revolution From Above: Reform, Transition and Revolution in the Fall of the Soviet Communist Regime, 1985-2000 (Transaction Publishers, 2002);  Russia’s Islamic Threat (Yale University Press, 2007); and The Caucasus Emirate Mujahedin: Global Jihadism in Russia’s North Caucasus and Beyond (McFarland Publishers, 2014). He has published numerous think tank reports, academic articles, analyses, and commentaries in both English and Russian language media and has served as a consultant and provided expert testimony to the U.S. government.

Dr. Hahn also has taught at Boston, American, Stanford, San Jose State, and San Francisco State Universities and as a Fulbright Scholar at Saint Petersburg State University, Russia. He has been a senior associate and visiting fellow at the Center for Strategic and International Studies and the Kennan Institute in Washington DC as well as the Hoover Institution at Stanford University.

3 thoughts on “Putin’s Pension Push: Political Hiccup, Policy

  1. “Although it may reflect deeper financial shortfalls, the latter are unlikely to destabilize the regime.”

    Mr. Hahn, why do you call Russian government “the regime”?

    “The political effect will ultimately be no greater than the brief spurt of demonstrations that accompanied the Kremlin’s decision a decade and a half ago to ‘monetize’ social benefits”

    The comparison if false. Now, go back and compare the number of protesters back in 2005 over monetization of the social benefits (which was way bigger and spread all over the country compared to the over-hyped Bolotnaya) with the protests that happened so far. Go ahead, I’ll wait.

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  2. Oh, and one more thing

    “Of course, the pension reform, which will hit poor and middle-class families the hardest, would be more morally and ethically justifiable if it were occurring on a background lacking massive state corruption and Kremlin friends’ and families’ feeding at the trough of the state. “

    🙂

    Let’s see… France is a country that is:

    – Rife with corruption on all levels

    – Has nukes

    – Has oil

    – Suppress freedom of speech via dictatorial laws that (gasp!) punsih with severe fines and even prison time the denial of the Armenian Genocide and the Holacaust

    – Jails Pyotr Pavlensky. By torching the doors of that Parisian bank, the radical artist ties its sinister history – the Jacobin Terror, the colinialism, Vichy government – to Macron’s current reign. No wonder he was arrested for hooliganism. Pavlensky has been charged with “hooliganism” – yet this is a superbly well-aimed piece of political art. Normally, setting fire to a building would not win my approval. Someone might get hurt. But in assaulting this bank , Pavlensky has drawn attention to an architecture of terror. This building is a living symbol of all that has gone wrong in France since the 1789.

    – Meanwhile in 2017 the trade unions in France valiantly protested against the amoral changes of the labour code – to no awail. French police demonstrated to the entire wolrd its brutality by violently dispersing peaceful protesters!

    So I ask you, Mr.Hahn – why the West is silent? Humanitrian intervention when? 😉

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About Gordon M. Hahn