Since at least 1992, successive Russian governments have been pressed by the imf to cut public spending, and, in particular, to eliminate the large public subsidy to housing inherited from the Soviet-era ‘communal economy’ of housing provision. Indeed, the Yeltsin presidency has witnessed a steady erosion of the institutions which allowed the Russian people to be accommodated in cities in which the private costs of shelter and transport were nationalized. The former Vice Premier Nemtsov openly brandished the need to end all public housing subsidies, but even the Primakov government, formed after the financial collapse of August 1998, has felt obliged to continue negotiations with the imf that envisage rent hikes and heavy charges for municipal services.footnote1 The required policies put question-marks over: (i) the future of the Russian city as a distinctive urban type; (ii) the wisdom of imposing policy conditions which have no regard for the circumstances of Russian urban living. Everything in the cities built under the administrative-command system—from highly efficient metro systems, to industrialized building, to the effective district heating systems—
The proposals canvassed by the free-market reformers were simple, but radical. In 1994, it had been estimated that the average urban household was spending 2–3 per cent of its income on housing and utility costs—housing maintenance, water, electricity, gas, heating and telephones. Then it was decreed that these charges be increased by 20 per cent per annum over a five year period, but, by 1996, household payments contributed no more than an estimated 27 per cent to the ‘true’ costs. Under the reform plan announced by the government, the domestic tariff would not have been cross-subsidized by industrial or commercial tariffs and households would pay the full cost by 2003. Allowances would offset charges—so that households would not pay more than 16 per cent of income initially, 20 per cent by 2000: a seemingly moderate measure, but one with strong implications for a society whose urban citizens have come to expect as a fundamental right cheap housing and everything that is necessary to use it fully. Home life has come to depend on the dispensation of heat: normally suffocatingly warm in winter, distanced from the harshness of the post-Soviet city by a felt-padded door, urban families can relax and try to forget about the austerities of the public domain. It was not just for its financial effects that Luzhkov, Moscow’s mayor, predicted ‘gigantic upheavals and the dismissal of the government’ if the welfare commitment were abrogated. It might be thought that the downfall of Kirienko, confirming this prediction, would mean the end of attempts to privatize Russia’s housing provision, but this has not proved to be the case.
Since 1994, Russia has lurched from one budget crisis to another. Industrial production fell by 60 per cent between 1991 and 1996—and a further 6 per cent between 1996 and 1997—and with the de facto bankruptcy of the core of the industrial economy, the secure revenue-base for the regional and federal authorities disappeared also. In October 1996, it was reported that ‘only 16.5 per cent of the necessary tax receipts were collected for the Federal treasury. Expenditure was financed at a rate of only 36.3 per cent and two-thirds of that money was borrowed from banks . . . of the 2.6m enterprises registered only 16 per cent pay their taxes in full and on time. Nearly 800,000 are the targets of “man-hunts”’.footnote3 Specialists also indicated that the ‘shadow’ (non-registered) economy was perhaps 20–40 per cent of the size of the
Average gdp per head of population—purchasing power parity—in Russia has been calculated as being 70 per cent of that of Mexico, 82 per cent of that of Brazil; neither of these states are encumbered with the inherited overheads of the Soviet régime nor the costs of transition from the state-command economy. In November 1996, 6.8m (9.4 per cent) of the economically active were unemployed according to ilo criteria. A further 6.7m had been forced to take ‘administrative leave’ during 1996, and 3.2m were working part-time.footnote7 The majority of the unemployed and those laid off were men. Poverty is endemic. Twenty per cent of the population had incomes below minimum living standards, defined according to a ‘beggar’s basket’ of subsistence goods, and only 25 per cent could be defined as ‘reasonably well-off people’. And many were either not being paid for months on end, or not receiving their pensions. By the end of 1996, it was estimated that 65m–67m had not been paid wages, salaries or pensions for some period that year.footnote8 The ‘salvation committees’ in the Kuzbass coalfield of Siberiafootnote9 were one symptom of the widespread distress; another was the wave of pensioners’ protests. One series reported was at Tver, where pensioners, every Tuesday, had picketed the regional administration, blocked the streets, and eventually sat down on the St. Petersburg–Moscow railway tracks. Fear and desperation were said to be the motivation:
The dearth of funds in the state sector is of drastic proportions. St. Petersburg is one of Russia’s six most affluent cities. There, ‘since 1990, all the city budgets have shown a deficit. The main cause of this is the instability of the tax base and the continued high share of expenditure on housing and public transport subsidies’.footnote11 Federal revenue had been withdrawn, and the city retained only 56 per cent of taxes collected from a shrinking tax base.footnote12 While charges for urban services had been increased, so had energy costs, so that, by 1995, the population was still paying only 14.7 per cent housing maintenance, 39.8 per cent electricity, 30 per cent gas, 75 per cent water, 28.8 per cent heating and 35 per cent public transport costs. Since 1994, after the exhaustion of the returns from enterprise privatization, the budget had been balanced only by selling city centre properties, taking out bank loans, issuing municipal bonds—to a total of $366m in 1995, covering 16 per cent of the budget—and selling the administration’s shares in privatized enterprises ($350m in 1995).footnote13 To cover the 17.9 per cent deficit built into the budget for 1997, a Eurobond issue for $300m had to be floated. The city administration is caught in a ‘scissors’: on one blade, the urgency of improvements to the city’s infrastructure (roads, metro, water, gas) and environment (pollution) to underpin private investment, and, on the other, the preferential tax treatment needed to attract outside investors to an impoverished and overdeveloped city.