Uladzimir Matskevich: I think Belarus is seen as a country that disclaimed active reforms

Aliaksei Yurych, EuroBelarus Information Service

It is easier for the regime to ask for money from the humble population than really start structural transformations.

Alexander Lukashenko claims that 2016 will become the hardest year in the history of modern Belarus. The authorities affirm their promises with actions: prices in many spheres have grown during the three weeks in January. Average salary for 2015 has declined by $200; experts forecast its further fall down to $200. Starvation salaries combined with epidemic rise in prices and galloping inflation turn the life of Belarusans into a race for survival.

What can sharp decline of people’s living standard turn into?

Uladzimir Matskevich, philosopher and methodologist, the head of the Board of the International Consortium “EuroBelarus” answered the questions of the EuroBelarus Information Service.

— Pricing staged a real race: prices on electricity and gas rose by 20%, prices on water grew by 3.5 times at once in Minsk, a number of new taxes and levies from the citizens was introduced. Yet again the state subsidizes unprofitable industries and enterprises secretly from the people. What is the purpose of a new government policy?

— Each of the questions has to be considered separately. A foolish, short-sighted economic policy that the authorities have been carrying out for 21 years already and that keeps afloat loss-making enterprises and leads to stagnation in the economic development of the country is one thing; whereas tariffs on water, on housing and communal services that are far from the country's social market value is another thing. Between subsidization of loss-making enterprises and subsidization of housing and communal services there is one thing in common — all the subsidies are paid not by consumers, but by taxpayers.

It would seem that subsidies for utility services and paying debts of loss-making businesses looks like the desire for some social justice. Social justice in the sense that not all Belarusans earn enough to pay the real cost of housing and communal services, and workers in unprofitable enterprises work just as those in profitable ones. But this is only an illusion of justice. Funding of unprofitable entities supports incompetent managers in all sectors — both in production, business, and those who receive subsidies without coping with their work and not being able to pay for the services they receive.

But we need to break the vicious circle either by actually bankrupting the loss-making enterprises, or by charging a real market price for the services. But in that case the housing and communal services will become intolerable for many people.

If we talk about the growth of tariffs for communal services, Belarus, on the whole, has an unbalanced real estate market. Housing is one of the basic people’s needs and the majority of the Belarusan population has their own housing to some extent. But the disparity in the real estate market distorts it: the state subsidizes housing services to those who already have their own apartment, and on the other side — the real estate market keeps excessively high prices not only on new housing, but even on housing in the secondary market. This disparity gives rise to a number of other imbalances. In order to solve all the problems, they must be separated from one another, that is to consider the manufacture and business exclusively in the light of market only and do not support loss-making industry thinking about the creation of new job places. And this, of course, will lead to rise in prices.

Of course, it is impossible to carry out the market reform without rise in prices. But the problem must be addressed comprehensively. Now it is tied in a tight knot, and every year it is becoming harder and harder to untie it.

— Some experts said that the government decided to take unpopular measures in order to get the loan from the International Monetary Fund. But are these the reforms that the IMF is expecting from the official Minsk: take the money from the people in order to fund loss-making enterprises?

— The IMF has quite standard requirements for any country. Loans may be given for stabilization and development purposes. In any case, loans require certain guarantees for their return. If the Belarusan economy remains in a semi-socialist form that the state supports now, the IMF cannot count on the return of loans from the current political regime. Therefore, many countries with low credit ratings can get little stabilization loans, which are insufficient for the development of the economy. I think Belarus is seen as a country that disclaimed active reforms, so it can only count on a stabilization loan. But even stabilization loans require at least the most inexpensive and the most obvious market reforms — bringing prices for goods and services closer to market prices is one of these requirements. It is easier for the regime to ask for money from the humble population than really start structural transformations.

— The average salary in Belarus amounted to $412 in late December 2015. The rapid rise in prices, inflation, and unrestrained devaluation (taking into account the January devaluation the average salary for December 2015 has already shrunk to $344) will significantly accelerate the impoverishment of Belarus. Experts predict that salaries fall to $200. Where is the limit of Belarusans’ patience?

— It is necessary to refer to the economic theory and practice of introducing reforms around the world. Transition from one economic model to another is impossible without certain losses. Therefore, market-based reforms may be accompanied by shock therapy — deep transformation with quite fast way out from the critical state. We can also try to prolong the transformations on for years. What's better and what is more expedient is determined reform program.

We have never had anything like this. We didn’t have shock therapy, but it does not mean that the country is not adapting to the global economy — changes occur. Processes that take relatively short time in other countries have protracted nature in our country. Instead of the shock therapy Belarus is gradually adopting to the global economy, which has been dragging on for years. Now everything depends on how the changes will be taking place and whether government resources for slow drift towards the geo-economic relations established in Europe and the world. If the authorities will manage to slow down the crisis development of the crisis, slow slump in income and slow impoverishment won’t lead to a social explosion and won’t inflame protests.

Decline in income and the forecasted faster decline is a rapid impoverishment. The authorities are trying to slow it down with leveling of the ruble to a more or less real exchange rate. Cheaper manpower due to inflation can stimulate some export industries and slow down the development of the crisis, making it possible for the population to adapt to the decline in revenue. If it doesn’t work, we all will be facing hard times.

— Is social explosion possible in Belarus? What will be more important — fear of hunger or fear of war?

— It’s hard to say. Spontaneous protests happen rarely and always end badly. Organized protests are impossible. The latest proof of this is the situation with individual entrepreneurs. Today they are on the verge of existence; they might cease to exist as an economic class. Nevertheless, the authorities postpone the negotiations, while the individual entrepreneurs are unable to organize themselves for protests; but even if they organized themselves it would not find support among the wider population. All this makes the Belarusan perspective rather vague.

— Individual entrepreneurs with the employees and their families account for about 500 thousand people, half a million are declared to be freeloaders — a million people that have been suddenly thrown out of an economically active life mean a lot of power. Where should we put it?

— I wouldn’t call them power, rather socially vulnerable population. In order to suppress their activity, the authorities can resort to all sorts of measures, including subsidies and intimidation. For example, the tax on freeloaders can’t be fully realized in practice. Protests of "freeloaders" will be individual: nobody will be paying taxes. But it’s impossible to organize " freeloaders " and lead them to the streets. The same pattern works for individual entrepreneurs.

Mass layouts at enterprises can pose a threat for the authorities, where even without trade unions and political forces at least some organization on site and spread of protests on the snowball principle is possible. But I think that the authorities are doing everything possible to avoid massive layoffs and to shut down any other possible causes of a social explosion.

The economists cannot provide me with evaluation of the real safety factor of the Belarusan regime and cannot say how much it is able to prolong the adaptation to the slow decline in living standards. Only sharp changes in the economic situation of the population pose threat of social unrest.