Privatization in Russia
Alexander Ivanov and Tamara Chistyakova
[A Report on Activities by Ecograd, St. Petersburg,
Russia / 25 July 1998]
It's a shame we cannot participate in the Conference. However, we would
like to inform you about Ecograd Center activities as to the
dissemination of Henry George's ideas in Russia and the implementation
of land rent socialization.
Current situation in Russia is seen as a crisis in many ways. It is not
political and financial crisis only, but in the first place of real
production and taxes. The result of 7 years of active privatization and
massive World Bank credits (primarily aimed at the development of the
private property system) is the disruption of tax base for the
production has been falling all these years. In the circumstances the
Government devises schemes to draw taxes from payrolls and income rather
than profit of the enterprises, which is quite understandable because
it's become usual thing to collect only a small portion of our main
taxes - on profit and VAT (50% of planned amount). Privatization gave
just a fraction of what was planned - 4%.
The failure of privatization worsened by the financial crisis in the
leading companies has become evident. In the circumstances the land
question has become highly actual. Our estimation is that 78 subjects of
the Russian Federation (i.e. regions and republics) highly need
subsidies from the Federal Government, otherwise they will not survive
being unable to collect sufficient revenue. Several regional
legislatures passed acts in favor of landed private property. However,
the majority of the subjects stick strictly to the leasehold. Moscow
leads in the development of land lease system, and a substantial portion
of its revenue is collected from land. Saint-Petersburg (the origin of
privatization) having high land tax rates has achieved but little
advantage from the privatization of land. It results from the then
obligatory character of privatization when the sites were given away to
the enterprises or sold for next to nothing.
Recent invigoration of political activity in view of the coming Duma
(1999) and Presidential (2000) elections seems to revive interest in
George's ideas on the part of citie and region authorities, and
consequently in land evaluation methodology and land rent socialization
models. Ecograd Center has got commissions from different cities to
develop rent zoning and rationalize taxes on land values, to develop the
models of cities self-financing through land. In 1997 and the first half
of 1998 we have carried out such work for Kaliningrad, Surgut (Western
Siberia), Izhevsk and Solicamsk (the Urals). In course of land
evaluation we have invented a new methodology that combines land policy,
town planning and the ecology issues. It has received an official
support at the Federal (ministerial) level. Thus we seem to get hold of
means of influence on the legislative process regarding land, and a
possibility to stop those lobbying land ownership. Notably, the efforts
to introduce land ownership system in Russia (be it legislation or
practicality) have not given anticipated results to their leaders so
far. This gives us hope that Russia might be the country where it would
be possible to implement most of Henry George's ideas.
Currently Ecograd Center is preparing a monograph "Land Market"
generalizing Russian experience of 10 years of perestroika (1988- 1998),
appraising the economic development processes and the state of land
market, formulating the Russian model of land rent socializing. A
separate chapter will be devoted to Henry George's theory and his
followers' activities. Let us express our cordial greetings to the
Conference participants and a hope for the future fruitful
collaboration. American Georgists have always been an enthusiastic
example for the international movement actively supporting the sprouts
of the ideology in different countries. It is crucial for Russia and we
highly value your contribution.
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