That Mystery Called the Region

Until the population becomes economically self-sufficient, it is pointless to talk about local self-government on the regional level.

- There is a certain mysterious level of government in Russia called a region. Russia is made up of a multitude of them. The federal government doesn't seem to know much about how people are living, or rather scraping by, in these mysterious places, especially in remote areas. It's hard to imagine that a Moscow bureaucrat has a clear idea what a "drunken village" far from the capitol actually looks like. It's just as hard to imagine him knowing what lengths local governments are going to in order to feed school kids, when they receive only 1 ruble and 73 kopeks a day to this end from state budgets. Can he fathom how former state farms, now called co-operatives, make ends meet, and how next to them, private farmers are struggling to establish themselves? Can this bureaucrat understand how the traditional Russian sentimentality, seemingly directly opposed to economic pragmatism, is actually helping people survive in market conditions? Rural Russia is still alive and kicking, thanks for the most part to informal economic ties.

The Russia outside of Moscow has been the object of study for the Center of Strategic Analysis in the Privolga Federal District for several years now. Vyacheslav Glazychev, Professor at the Moscow Architecture Institute, shared the results of the center's research in one of the regions of Orenburg Province.

- What is this region like?

- It is extremely complex. There are a several dozen basic types of socio-economic structures and entities. These include villages, autonomous (meaning outside regional control) municipalities, a couple village councils, a military base, an airport, and hundreds of dacha communities. There are state-owned areas, some of which at one point were government agricultural research centers. There are farms. There are orphanages which belong to the region but are included in the federal system. Out of 48 thousand inhabitants, six thousand are engaged in some type of small business (transport, trade, and so on). And that's just those who are officially registered.

- How does such a complicated region manage to administer itself?

- In most cases, there is very little local administration. Most of those working on this low level of government are in fact appointees. In the Orenburg Province, the regional heads are "voted in" from among the provincial congress representatives as suggested by the governor. A similar situation can be found in the majority of provinces in the Privolga District, not to mention in the autonomous republics.

- But according to the Constitution, the regional level of government is supposed to be democratically elected. There could be some debate about governors, but local self-government is clearly stated in the Basic Law.

- Yes, local experience strongly contradicts federal law. The contradiction is gradually being resolved, but this hasn't yet touched the regional level yet.

- Of course, the federal law on local self-government is only an outline, and, as far as I know, gives those in power lots of room for interpretation.

- Exactly. Every federal entity, for instance, would have a hard time deciding according to which principles local self-government should be established: according to territory or population? The second option means apply self-government to every inhabited place, right down to the tiniest of hamlets. With the first option, people could decide to re-group into larger units but for this to happen there needs to be a push from below which doesn't exist at the moment. At first, officials latched on to the population principle and ended up with 579 self-governing entities. Three-fourths of them didn't have two coins to rub together. It ended up ridiculously: almost all the entities were subsidized and their bosses all democratically elected. Then, they went to the other extreme and defined regions as self-governing units, of which the province had thirty-one. Yet the region isn't uniformly populated and there are twenty to thirty towns fairly distant from one another. So, again, they ended up with nonsense. Moreover, in the region where I'm working, there are several municipalities that lie outside its jurisdiction and make their own laws independently.

- Most likely these municipalities are economically self-sufficient and therefore want to keep to themselves. At least that's the story with complexly structured federal entities like Tyumen Province.

- Yes. One of the municipalities receives all its income from a natural gas factory within its limits and only shares these revenues with others via the provincial government. But it gets even worse. There are a couple areas where the population was somehow convinced to join the municipality. This means that they became part of the city, not the region, and all the subsidies and benefits offered to rural dwellers disappeared. It's easy to trick people. I'm bringing all these details up because this needs to be understood, as in order to understand anything about our economy, you have to understand what's happening at the lowest level. This is exactly what our macroeconomic analysts don't want to think about. There is no economy "in general." Economics are something concrete. Here's a region with twenty-six settlements and half of them are on a kind of life support. This statement doesn't even express the real situation, because in one of these settlements, there are a thousand discharged officers-healthy, reasonably well-educated guys-who can't find work. But in the next village, they are dying for mechanics. In another village, there is no place to take out a small loan to bring a quarry into operation. Economically, about half of these settlements need to die a natural death. So the administration is faced with a political decision: to work to encourage the strong communities or keep feeding the weak ones. It's a difficult choice, because there are people trying to survive everywhere. Many villages have fewer than a hundred inhabitants and could never support any industry. If they aren't fed by the provincial government, they'll die out.

- Do they have anyone capable of working in such villages?

- By legal standards, sure, but in reality they have no desire or ability to work.

- What about kids?

There are kids there and they need schools. It is a well known fact that a school is the last thing to go. If you lose your school, your village is doomed. Many people are saying that in other countries, they've learned it's less expensive to bus kids to other schools. But in reality it doesn't turn out that way. With the current level of teachers' salaries and price of fuel, it could end up more expensive. The roads would have to be cleared at least half the year. It's the same situation with medical facilities and other social services. These, by the way, employ three thousand of the forty eight thousand inhabitants. Here's another story along the same lines. This region has a fairly successful private enterprise, a meat packing plant. Not great at marketing, but still on its feet. What does the regional government do? They tie it to a dying state farm. What does the company tolerate this? Partly because it would cost them more to fight the administration, and partly out of pity. This is an important point: our traditional sentimentality hasn't died. When it comes into conflict with economic efficiency, it usually wins.

- Is there no rational explanation for this kind of behavior?

- Almost none. Of course, as agricultural reform is put into effect, you could see this as some kind of very long-term investment, and probably the private businessmen have something like this in the back of their minds. But nonetheless, traditions remain strong, including Soviet ones. Here's another story. The region's businessmen get together, for the most part the state farm heads. They have been dealing with the market for a while now but are still addicted to the concept of government purchase orders. They simply refuse to believe that the good old days are gone, never to return. We are going to get beyond this, but it will take at least ten years. But the most surprising thing is that along side these state farms are strong private farms. By 1998, their number had decreased from 564 to 369, but last year their number again grew to around 500.

- How have they managed to survive?

- That's a difficult question to answer but I have my own ideas why. I think for the most part it's due to illegal migrants at whom we are so eager to throw harsh words and stones. But the main labor force comes from Tajikistan, Kazakhstan, and Uzbekistan, which is fine with many people.

- Are they seasonal workers, or do they come to the region with their entire families? How many are there?

- There are all sorts of migrants. My estimates are very rough, but I would say that around half of the laborers on the larger farms are seasonal. They can also be found in the co-ops but I couldn't give you any numbers at this time. This is a really important issue and yet it isn't taken into consideration at the official level at all. But it has to be, because otherwise we won't get a realistic picture of migrants and the social issues that come with them.

- But any social issues regarding illegal migrants are the problem of their home countries.

- It only seems that way. In reality, they become our problems, taking our sentimental inclination into account. If a pregnant woman on a stretcher comes gets wheeled into the maternity ward, she would never be turned away. And she isn't turned away. Now, providing medical treatment to those without insurance, knowledge of Russian, or even passports is already eating up 10% of the regional budget. This is a big economic loss, but has a kind of humanitarian benefit.

- What kind benefit can there be when locals' problems are on the increase?

- Alas, they are on the increase. I recently learned a very unpleasant fact: the number of orphans and abandoned children has risen sharply in the villages, something that never existed before. There are already several hundred children in the region, a fact that demands that children's homes be expanded, as current facilities only cover one fourth of the need. We could just ignore the problem, but that would be hiding our heads in the sand. I recently spoke with a director of a rural orphanage who asked me, "I can get these kids to adulthood, but what will they do when they leave us?" Neither the nation nor the province is addressing this question. We need to create jobs for such individuals in the very near future, or the burden on smaller cities will only increase. Small cities won't have them, and they'll move on to the big cities, where social services cost considerably more than in rural areas.

- Is the shadow economy really obvious at the lower level?

- I would call it the informal economy, especially in rural areas where everything is in the open and everybody knows about it. It is really noticeable at the lower level, and the informal economy can be divided into two connected but very different parts. The first I would call the economy of compensation for state incompetence. For decades we lived under conditions which forced farms to over-report their harvests, and now they under-report them, by as much as 50% according to some experts. Here we have actual, useful resources that go to fix roads neglected by the government, to school lunches, to medicine at the hospital, and other such things. This money keeps cultural centers and libraries afloat, where there is a waiting list for the works of Nietzsche, believe it or not.

- So, pilfering actually helps rural communities survive?

- Not everywhere, unfortunately. Drunken villages are lost causes. Some witnesses have informed me that there are places where the only food to be found is ground wheat soaked in boiling water. Rehab can work, but it is incredibly expensive. There are villages with two hundred families and not a single person with a job. Ideally, we should send in a whole team of doctors, psychologists, and social workers to deal with each situation on a case-by-case basis. As a rule, these people are truly ill. Including the women. We simply don't have the resources, and so these villages will die. Or, if the location is nice, new people will move in. There are extreme differences in the quality of life in different parts of the same region. Do you know how much is officially allotted for one child's school lunch each day? 1 ruble 73 kopeks. Do you know that sometimes the kids whose parents pay extra are fed separately from those whose parents can't afford to? Talk about a great way to ignite class tensions!

- How do local governments react to this situation?

- I would like to bring up one issue that's widely known but not taken very seriously. Most farms and communities operate according to the "grow it and sell it" principle, which means there is no processing capacity that could increase the products' value. Long-term financing for small loans is no longer a question of economic development, but of economic survival. Even a basic grain elevator with a mill in such conditions becomes an important resource for storing grain, grinding flour, and baking bread. The local administration would seem to be a key player in this, but they have only organizational and not financial resources. This means the local administration doesn't have the main thing it needs: its own budget. Everything comes from above. The main task of the local administration is to find promising sectors in the local economy and try to develop them. Moreover, it's not enough just to grow your crops; you also have to sell them, which makes it clear why former state farm directors still think in terms of state purchase orders. Many of them have to continue playing the state purchase order game on the provincial level. This doesn't mean they are all reds. This state charity action eats up huge amounts of money, though a market approach is being attempted. For example, the province says, we can buy a certain amount of grain. Whoever offers a lower price, sells more. This is already a step toward a competitive atmosphere, which will increase efficiency and decrease costs. But this step is proving difficult, as is making the process fully transparent.

- This is a very grim picture you're painting…

- There is a silver lining, though. Recently, the province opened bidding for contracts on pillows, blankets, and other such things for the prisons, hospitals, and so on. The bidding was open. The provincial economic department was hoping to save 20% by doing this, but ended up saving almost half. However, it cost a lot of effort, as the openness of the process disrupted the mutually convenient relationships between producers and buyers. Another positive development is the rise in officials' education level in the last five to seven years, with improved education in economics, administration, and general subjects. You could even talk about a revolution in cadres in some places. The director of the regional economic department is today a well-educated specialist with whom you can discuss economic problems of great complexity. This is major progress. Another big improvement is in roads, not just major highways, but also smaller roads connecting villages. The entire region now has natural gas, and little by little, the president's program "Electronic Russia" is bringing in access to computers.

- Could any of the experience of other former socialist counties be of use here?

- I think so. I know an interesting example from Poland of a dirt-poor village whose only resource was its huge willow thickets. The Poles organized a wickerwork festival and set up a promising enterprise to provide jobs for members of the community. We also have a unique product, Orenburg scarves, but no one has thought to market them.

- Do local governments have enough autonomy in your opinion?

- They are handed down budgets which are carbon copies of the federal budget and prevent people from seeing reality. The budget in and of itself is far from rational. Too much money is being spent on building new things like schools, clubs, and cowsheds. Yet we don't seem to be able to or want to fix what's already there. The reason is obvious: it's easier to build something new and it's easier to steal more on remodeling projects than on construction ones. Agriculture is under-subsidized if you consider its potential role in the local economy. Skill in manipulating these funds is absent at both the provincial and the regional levels. The budget categories and amounts are strict, and changing them punishable by law. But anything outside the budget gets used very creatively. Creative energy gets pushed into the informal economy and working in the open becomes impossible. If administrations are elected or appointed is important, but not as important as their ability to use their resources independently, which is the basis of self-governance. The current rules of the game don't give them any room to maneuver. However, our local administrators have prepared themselves mentally. For example, the mayor of Omutninsk in impoverished Vyatsk Province knows all the European documents about local self-government by heart. And my region has its own official anthem, which is really touching.

- Does local politics have a strong influence on the local economy?

- The role of politics in regional budgeting varies. It depends on the grace of provincial officials. One of the most terrible things about province-region relations is their complete arbitrariness. There are good regional administrations and there are bad ones. I can assure you that the political battles being fought below are no less brutal than those above. In fact, local officials use the same tactics as those in the Ministry of Economic Development: that guy gets something, and that guy doesn't. The only difference is that here we're talking about millions, and up there, billions.

- How would you sum all this up?

I would say that if we pay attention to the local level, we are forced to throw out the idea of self-government that has been crudely copied from European models, as too awkward and paralyzing for Russia. European communities have centuries of experience in local government and relative prosperity. But if the population isn't financially self-sufficient, then it's pointless to talk about self-government. If I were a lawmaker, I wouldn't start worrying about self-government before a third of the population reaches that point. In a suburban village council, where there are ten times more weekenders and summer residents than year-round residents, it still costs the same to maintain emergency services regardless of the season. In such cases, local autonomy becomes a cruel game, even if coming from good intensions. The fact that regions can't always support themselves is only half of the tragedy. In the end, if budget resources from above were stable and guaranteed, they could get by. But we still live by the old Soviet habit of promising ten but only giving three, and this is still done by higher administrative units. The only solution is to legalize informal economic activity. And the only way to truly understand and analyze Russia's economy is to get down to the local level, the region or even the village council.


Published on "Expert", №16 (323), 2002

By Natalia Arkhangelskaya

 Журнал "Эксперт"

Русская версия статьи

See also:

§ Russia's Remote Areas: 2000 - 2002



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