INCREASED GOVERNMENT EXPENDITURE COULD BACKFIRE ON YELTSIN.
Publication: Monitor Volume: 2 Issue: 40
Yeltsin’s speechwriters evidently hope either that the government can take measures to quickly improve living standards and thus secure a Yeltsin victory in June, or that dismissing a government associated with hard times offers the best chance of restoring Yeltsin’s popularity. If the latter interpretation is correct, the speechwriters may perhaps be right. But if they think the government can wave a magic wand and enrich the population, they must be desperate indeed. Official statistics on personal incomes tell a curious story about developments over the past year. Apparently, per capita real disposable household income fell by 13 percent, even though GDP fell by only 4 percent. (6) At the same time, the percentage of the population living in poverty fell from 30 percent in January 1995 to 25 percent in December 1995. (7)
The oddity of reduced poverty alongside falling average incomes may simply be produced by bad statistics. However it may reflect the beneficial impact of stabilization on low-income households. The lowest incomes — pensions, other state benefits and the pay of most state employees — are less likely to keep pace with inflation than higher ones. Therefore, any reduction in inflation benefits the poor more than the rich. Thanks to the policies of the reform wing of the Chernomyrdin cabinet, inflation fell from 17.8 percent in January 1995 to 3.2 percent in December 1995. Far from "forgetting about those living on wages and pensions," therefore, the government produced results that tended to alleviate the lot of the poorer members of Russian society. Increasing government expenditure beyond the limits set in the 1996 budget would, by contrast, tend to raise inflation and penalize the poor. However, recent eastern European experience suggests that, even if the government could do something quickly to raise living standards, there is no guarantee that this would raise the president’s electoral chances.
Moscow Unilaterally Lifts Sanctions on Bosnian Serbs.
