The game of “pass the trash” has been a constant feature of Russia’s long economic decline. The government stiffs its suppliers, and the suppliers stiff their workers. Borrowers stiff the banks, and the banks stiff their depositors. No one pays taxes, and the government defaults on its bonds. An untaxed, unregulated, and lawless economy fills the space left by the shrinking legal system.
That now just may be changing. Recently released statistics show a drop in non-payments of all types in the months since the August 1998, financial collapse. From the end of 1998 to the end of 1999, total wage, tax, and company-to-company arrears fell from nearly 79 billion rubles (US$3.7 billion) to around 46 billion rubles (US$1.7 billion), a drop of 54 percent in dollars.
Most of the improvement comes from payment of back wages. Federal and regional governments cut the level of their wage arrears by 49 percent (or 69 percent if the number is adjusted for inflation) during calendar year 1999. Total wage arrears, including those of the private sector, fell by 43 percent (65 percent adjusted). Tax arrears and arrears to banks also declined, but by much smaller amounts. Nonpayment is still a major problem for the fiscal and financial systems.
Writers (including this one) have attributed Vladimir Putin’s popularity solely to the war in Chechnya. But he and other incumbents surely benefit when government puts more money in people’s pockets. The public-opinion polls cited above show support for Putin rising to 60 percent among voters who say their standard of living has improved in the past twelve months.