Putin’s Presidential Address: The need for social market economy?

By Elisabeth Hellenbroich

On February 20^th, Russian President Putin addressed the Russian Federal Assembly with a remarkable speech whose primary focus was on the domestic problems of Russia and the challenges which the Russian nation is facing right now.  What was striking about this year’s address was the frankness and soberness with which the President described in detail the social and economic development problems of Russia- among them the acute demographic crisis, major short comings in the health and pension system and in education as well as economic problems which middle class citizens in Russia are facing. He ended with a bold outlook defining Russia’s priorities for economic and infrastructure development, including the development of Siberia and the Far East, Russia’s  foreign policy priorities in the Eurasian Economic Union and in cooperation with Chinas One Belt One Road, with India, Japan and Europe, showing confidence about new ways of cooperation which Russia will chose.

In light of the cancellation of the INF Treaty Putin declared that Russia is ready to engage in disarmament talks and that it is looking forward to such talks but it also expects that those who want to engage in such dialogue come forward and “knock at Russia’ doors first.” While it looks fairly improbable that the US would engage in such efforts, more hopeful signs for disarmaments talks are coming from Europe, in particular from Germany’s Foreign Minister Heiko Maas who aside his speech in Munich at the MSC conference, in an interview with Badische Zeitung (21.02.) spoke about the need for new disarmament initiatives which are joined by more states than so far. And those talks should include aside nuclear weapons, also highly modern autonomous weapons or cyber weapons. He announced that in March his foreign ministry will host a meeting in order to discuss these issues with military, diplomats and scientists.

The care for families

President Putin started his address by focusing on the “family” stating that “all around support to families: Family, childbirth, procreation and respect for the elderly, have always served as a powerful moral framework for Russia and its multi-ethnic people. We have been doing everything in our power to strengthen family values and are committed to doing so in the future. One of the key problems of Russia is, as Putin underlined, the problem of “demographics – which is reflected in higher death rates and a decline in birth rates and natural population growth. He expressed confidence that by late 2023 and early 2024 Russia could return to natural population growth. (Statistically the Russian Federation by end of 2018 was at 146 510 100 people – including 1 862 100 birth versus 2 030 600 death (!) E.H.)

Among the package proposed for families is the proposal to provide more for payments of subsidies for the first two children until they reach 18 months.  Benefits for the first child are paid from the federal budget and families can use the maternity capital subsidy for obtaining benefits for their second child.  Starting January 1, 2020 he stated, that he hopes to increase the number of families entitled to additional benefits by 50%.  Some 70% of families with one or two children will be able to benefit from help from the government . Of course the income of Russian families must increase, he said.  This includes that tax burden for the family needs to be relieved: “The more children there are, the lower the tax – I propose increasing federal tax relief on real estate for families with many children. I also propose lifting taxes on 5 square meters in a flat and 7 square meters in a house per child.  Next there must be from the side of the Government and Central Bank a policy to lower mortgage rates to 9% and then to 8% or below.”  Putin called for a “comprehensive development of cities and townships, ensuring that families have everything they need near their homes: clinics, schools and sports facilities. By doing this, we will enable parents to work, study, live happily and enjoy parenthood.”

Solving the demographic problems, increasing child expectancy and reducing the mortality rates, is according to the President “directly related to eradicating poverty. While in 2000 more than 40 million people were living below the poverty line, now there are about 19 million, but this is still too many, too many.”

Healthcare

The next important subject he raised is “healthcare.” As Putin emphasized the problem is that people in remote areas “are having trouble getting appointments with medical personnel.” “I want to emphasize that medical treatment should become accessible for everyone by the end of 2020 in all populated areas across Russia without exception and for all citizens, regardless of their place of residence. For your information, an additional 1,590 outpatient clinics and paramedic stations are to be built or renovated in 2019-2020, and I hope that this will be accomplished.”  He underlined that a number of regions are implementing the thrifty outpatient clinic project and they are operating very well. Such outpatient clinics are rather the exception than the rule, however.

Aside calling for more IT penetration in health care that links medical institutions, pharmacies, doctors and patients, Putin called for new incentives for “country doctors” (older than 50 years) who should receive a one- time payment when moving to rural areas. And that there must be the creation of world class recovery facilities for children and special focus be given to the treatment of children who suffer from cancer. He urged that close cooperation is needed with foreign partners and he mentioned the example from “Germany where some doctors simply moved from Germany to Moscow (!) and spent a lot of time here and probably still do, which yielded results.” He further stated that cancer screening has to be made obligatory.

Education

While the number of students from small towns and remote areas studying at the best Moscow and regional universities is increasing and while there are qualitative changes in Russia’s school education (from 2000 the share of modern study conditions at schools have increased from 12% to 85% in 2018.), it is still the case, as Putin stated, that today “200.000 children still go to schools where there is no proper heating, water supply and sewage system.” He proposed that similar to expanding the Country Doctors’ program programs should start for education: the “Country Teacher.” “Teachers who decide to move to smaller towns and villages will receive a one- time payment of one million rubles.”

Critical bottlenecks in the Russian economy

Putin also addressed the Economic problems of Russia, urging that by 2021 economic growth rates must exceed 3%. Given that more than 70 million people work in manufacturing, agriculture or the service or are small business owners, he identified  four systemic problems in the economy must be resolved: 1.Labor productivity  primarily based on new technologies and digitalization; 2. Improve business climate and quality of national jurisdiction. Growth in investment should increase by 6-7% in 2020. 3. Removing infrastructural constraints for economic development and for unlocking the potential of our regions; 4. Training the modern personnel and increasing powerful scientific and technological foundations. “We are faced with historical opportunities for a qualitative growth of Russian business, mechanical engineering and machine tool making, microelectronics, IT industries and other industries.

Infrastructure and the development of the Far East

The President gave particular attention to the problem of infrastructure and the need to develop and improve Russia – which is the world’s largest country with its vast territory. While this year the railway section of the Crimean Bridge will be launched  with trains beginning to use the Crimean bridge by 2019, he also pointed to the expressway linking  Moscow and St Petersburg which is expected to be completed, creating new business opportunities and jobs for people living in Novgorod, Tver, Leningrad and Moscow regions. He further stated that more than 60 airports will benefit from upgrades over the next six years, including international airports in Khabarovsk, Yuzhno- Sakhalinsk and Petropavlovsk- Kamchatsky.

“In 2015 the throughput capacity of the Baikal- Amur Mainline and Trans- Siberian Railway will grow 1.5 times, reaching 210 million tons which is a very important for the development of Siberia and Russia’s far East. Let me reiterate that key indicators to social and economic development and quality of life in all Russia’s Far Easter regions are expected to exceed the national average. This is a national cause, and a major priority of our efforts to promote Eastern Siberia and the Far East as strategic territories.” He announced that in September a meeting will take place in Vladivostok where it will be discussed what each of the federal agencies as done and intends to do for the Far East. All the plans for building and upgrading roads, railways, sea ports, air service and communications must prioritize regional development , including promoting these regions as travel destinations.

Russian foreign policy priorities

Russia’s foreign policy actions are based on a framework that includes the UN, the Commonwealth of Independent States, the Group of 20, BRICS and the Shanghai Cooperation Organization. In this context President Putin emphasized particularly the role of Eurasian economic cooperation and the strategic cooperation with China as well as with Europe. He underlined that together with “the integration partners within the Eurasian Economic Union, we will continue creating common markets and outreach efforts. This includes the decisions to coordinate the activities of the EAEU with China’s Belt and Road initiative on the way to a greater Eurasian partnership. Russia’s equal and mutually beneficial relation with China currently serves as an important factor of stability international affairs and in terms of Eurasian security, offering a model of productive economic cooperation.

Of similar importance is the special privileged partnership with India and the need to promote dialogue and economic cooperation with Japan.  “Russia stands ready to work with Japan on finding mutually acceptable terms for signing a peace treaty. We intend to promote deeper ties with the Association of Southeast Asian Nations. We also hope that the European Union and the major European countries will finally take actual steps to put political and economic relations with Russia back on track.”

He finally spoke the “unilateral withdrawal of the USA from the INF-Treaty, accusing the USA for being fundamentally “dishonest”.  Since as he underlines the Americans began developing and using medium range missiles calling them discretionary “Target Missiles” for missile defence. They began deploying Mk-41 universal launch systems that can make offensive combat use of Tomahawk medium range cruise missiles possible. He stated that the American blatantly ignored provisions envisaged by articles 4 and 6 of the INF treaty.

Putin spoke about an international security architecture that took shape over the past decades as being “completely and unilaterally dismantled” while Russia keeps being referred to “as the main threat to the USA.” He stated clearly that as President of Russia he is ready to engage in a new round of disarmament talk: “I have already said this and I will repeat that we are ready to engage in disarmament talks, but we will not knock on a locked door anymore. We will wait until our partners are ready and become aware of the need for dialogue on this matter.”