Ekaterina's Home


Ekaterina Shelkova lives about 200 miles south-east of Moscow in Zarya, a village with three dozen houses. A few years ago, she and her husband sold their flat in town and moved to a spacious wooden house where, since the 1930s, five generations of her family, in-laws, friends and, above all, her beloved grandchildren have spent many happy hours together.

She is a strong, independent woman. Yet there are problems that need more hands and resources. The road to the village has been broken up by heavy lorries carrying sand for nearby roadwork. Atrocious but passable in summer, the track gets blocked off during the long Russian winters. Last January, a man died because an ambulance couldn’t get through. When another villager fell and broke his spine, the neighbours carried him bodily for about a mile to the intersection with a bigger road to hand him over to paramedics.

There are other troubles too. The posts that support power transmission cables have rotted away and need urgent replacement. A local businessman who is also a deputy of a local council is destroying the beautiful river bank: his machines dig out sand and dump poisonous waste.

When conventional channels - the mayor, the governor and the press - did not work Ekaterina Shelkova still persevered and through a video call spoke to the President’s office in Moscow. This is how things work nowadays: for a simple matter like a municipal road, a dozen electric posts and a parochial king of the castle, the Kremlin has to get involved.

Though in theory Russia is a relatively decentralized country – more than a third of its public spending comes from the sub-national level – in reality it has become more vertical, more rigid and, arguably, more Soviet than ever before – and all this since the demolition of the USSR. It is hard to say whether this state of affairs reveals more about Russia’s fiscal policy, the views of its political leaders or the lassitude and indifference of local communities.

Ildar Antarov runs a middle-sized construction company in St Petersburg. He has been building garages since the 1970s - despite commonly held beliefs, there were entrepreneurs in the Soviet Union. ‘It has become so difficult to get the necessary permission that business is almost at a standstill,’ he says, ‘it is even more difficult than it was in the USSR. Then there were ispolkoms which at least were capable of making decisions. Now dealing with the authorities is a nightmare.’

It is hard to say whether this state of affairs reveals more about fiscal policy, political leaders or local communities.

Whether the Union of Soviet Socialist Republics was in fact a federation, as the title implies, is a matter of opinion. Sergey Dovlatov, a Russian writer who emigrated to the US in 1979, wrote that the Soviet Union was a country whose very name was a lie. Still, local authorities had substantial power in resolving everyday matters. After all, the Soviet Union was (and now Russia is) the world’s biggest country.

The Soviet state, nonetheless, was overcentralised and overbearing. If some social contract was created during perestroika and glasnost, devolution - both from central to local government and from any government directly to people - was one of its focal clauses.

According to the Constitution of 1993 Russia is based on a clear-cut division of powers between the centre and the regions. There is also a special chapter on local self-government. The law of 1995 ‘On local self-government’ was so liberal that it could give the lie to the proposition that the state never really intended to devolve its powers.

In 1995, Republic of Kalmykia, a tiny region with population of 300,000, pronounced itself ‘an internal off-shore’ where local taxes were cancelled in exchange for a small fee. Other regions followed. Companies from all over Russia began to set up affiliated structures there in order to shift their tax base from the cities where they actually worked to these domestic tax havens.

Though other regions suffered, the federal taxes and revenues were intact. That is the theory. In reality, tax control in those ‘off-shores’ was nominal and soon they turned not only into an enormous drain of public money but a reservation for money launderers and con men.

Russia’s status as a petrol-state makes fiscal decentralisation not just difficult but in many ways hopeless. When almost all its revenues come from the exportation of resources and taxes on consumers, there is little provincial governments can do to increase revenues from their constituencies. Although Russian Tax Code has set a proportion of local and regional shares in a common tax base, these sources are not sufficient. Most regions and all municipalities depend on transfers from the centre.

The USSR’s fiscal system was vertical; its primary sources of income were profits of large, integrated enterprises, rents, turnover taxes and a foreign trade monopoly. Little has changed since then. The output of smaller, local firms - arguably the economic foundation of local communities - is insignificant. In the EU and Japan, the number of small companies per thousand people is around 50, in the U.S. almost 80, while in Russia - only six. Overall, in Russia SMEs make less than 10% of the country’s GDP, more than five times less than in Europe.

Political results of the devolution of the 1990s were strange. In 1998 in Nizhniy Novgorod, a large city of 1.3 million people and home of industrial giants, Andrey Klimentiev was elected the mayor despite two felony convictions. In St Petersburg, Yury Shutov became the deputy of the city’s legislative assembly. By this time he had already served a 5 year sentence in prison for arson and theft. Later he was sentenced to life imprisonment for organising a gang which murdered businessmen.

In Kalmykia, the Republic’s head of the Ministry of Internal Affairs, this military organisation with its strict vertical hierarchy, refused to obey his own dismissal. He was arrested eight months later in a nearby republic to which he was invited under a false pretence.

Then came Vladimir Putin. He felt a reverence for the local, the small and the independent. He divided the country into seven districts, each headed by a president’s representative. Then the governors were removed from the Federation Council, the upper house of parliament. Finally, in December 2004 gubernatorial elections were abolished, with governors now serving at the behest of the president. Legislation on non-commercial organisations was tightened, forcing many to close. The recently proposed police reform makes the police a more centralised organisation than it had been during the USSR.

Vladimir Putin likes to pose as a strong man. This summer when the whole country was choking from fires, he appeared on TV watering the forest from a helicopter. Later he visited a village near Nizhniy Novgorod, where most houses had been burnt down, and promised that they will be rebuilt. He even placed cameras in the village, so that he can personally watch from his computer how the work is being done.

People who are enraged by the ineptitude of the provincial authorities so clearly demonstrated this summer, like Putin’s image of a kind tsar and a superhero. Against all odds, he is the most popular politician in Russia and has more support in his country than Barack Obama in the US, David Cameron in the UK or Nicolas Sarkozy in France.

Ekaterina Shelkova blames the sluggishness of local communities rather than the Kremlin. ‘The laws are not that bad,’ she says, ‘people just need to be more persistent in fighting for their rights. They should take responsibility for the way their lives are run.’ She has the impression that that man from the president’s office was genuinely glad that someone down there in Russia, in Zarya village, is ready to do just that.


September 9, 2010
text: S. Alekseev
picture: NatalyArt - Fotolia.com



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