The Kremlin is launching a system to prevent social crises in the regions. Businessmen are told not to cut their payrolls.
When Boris Yeltsin was elected for a second term in 1996 a map with indicator lights signaling places where crises were brewing appeared at the Kremlin. Journalists were shown the map room. At the time the Kremlin tried to reassure the public. "I think it was called the situation analysis room. It was important to demonstrate that he keeps his finger on the pulse of the nation", political scientist Alexei Titkov remembers. A similar map with illuminated indicators is being put up by the President's Administration, this time for internal use, to know that the nation is under control.
The social mood in the regions is already being watched. The governors are creating anti-crisis headquarters, the Cabinet monitors all the sackings in the country every week under Section 27 of the anti-crisis plan signed by Vladimir Putin. The Prosecutor General's Office is keeping its own watch: the local prosecutors are to gather data from employers on the number of people dismissed and the planned layoffs. "One of our plants received a memorandum today in which the prosecutor demands that we report to him twice a month how many people have been dismissed, how many are going to be dismissed and what the wage arrears are", the owner of an industrial holding told Newsweek last Wednesday.
More recently the Kremlin joined the effort. It is aware that the crisis is spreading and that social unrest is a possibility. Low oil and metal prices, inflation, the shortage of cash in the economy and the fall of the rouble: with these indicators, zero growth next year would be the most optimistic scenario, experts say. Demand is falling and assembly lines are grinding to a halt. Owners are thinking of ways to cut costs. People are not just growing poorer, they are losing their jobs. At major industrial facilities, such as KamAZ, some workers have been sent away on involuntary leaves: they stay at home receiving two thirds of their wage. So far there have been no sackings or protests, and the Kremlin is planning ways to avoid any civil unrest in the future. This is what the automatic system of preventing crises in the regions is for.
EVERYTHING IS UNDER CONTROL
This is how the warning light system will operate. Every region will send three streams of data into the special computer system: publications in the local press, the findings of internal surveys carried out by Spetssvyaz of the Federal Guard Service, or FSO, and economic performance indicators from presidential representatives in the federal districts to rule out human distortion (the Kremlin official in charge of a region could mistakenly assess the situation). "After all, we are not the Ministry for Emergencies under Shoigu," our source explains. For them it is clear that if something blows up they take off and fly there. [This system's] screen will display a heated situation in Perm, for example protest sentiments are mounting and severance pay is growing. The computer programme compares all the data and produces its verdict: objectively [things are pretty bad].
The lamps are still not lit. So far the Kremlin is watching the country in manual mode without computers. The regions submit reports to the Presidential Representative Office every week. The representatives put the data in tables and send them to the Kremlin. Newsweek has obtained such a report form already filled in by the government of a region in Central Russia. "No massive layoffs have been registered", reads point 2. Point 3 (the names have been changed - Newsweek) reads: "A pre-strike atmosphere has arisen at OAO XXX over a two month pay delay, the head of municipal entity N reports".
Trade unions are also helping out. "We do monitoring once a week. We have 21,000 local trade union committees. They urge employers not to sack anyone, and to adjust wages for inflation", says Natalya Agapova, the head of the Agricultural Workers' Union and one of the leaders of the "For Putin" movement. The United Russia Party has joined the effort. Before they went to their respective constituencies the deputies received questionnaires to report back on the situation in the regions. Point 3 in the form is dynamics of unemployment and point 4 is the state of affairs at the core industries that provide livelihood for entire cities.
Crisis management offices have been formed in practically all regions. In addition, Yekaterinburg, Chelyabinsk and Tyumen have sectoral anti-crisis groups under regional ministries. They were formed in early November, even before Vladimir Putin presented his anti-crisis programme to the party congress. Anti-crisis groups operate in the following way: business managers come to the minister and tell him about their problems with extending the terms of their credit with banks and paying wages, whereupon the minister goes to the federal inspector. The Presidential Envoy then links up via video with the inspectors, says Yevgeniya Tuchkova, a representative of the Chelyabinsk Industry Ministry. The Presidential Representative is informed about possible layoffs.
From there information is fed to the Kremlin. "We receive these data from the presidential representatives every week. Conclusions are drawn from them. We have everything under control," a Kremlin source says. The Kremlin is indeed "monitoring the situation," the Sverdlovsk Region Economics Minister, Mikhail Maksimov confirms: "But they are interested not only in staff reductions, but in a whole range of issues. [Previously] it was banks and now the steel/iron ore industry is a big issue."
SACKING PEOPLE QUIETLY IS NOT AN OPTION
Yuri Voloshin, the Vice Premier of Chuvashia, says that the presidential representative to the Volga Region, Grigory Rapota, is most concerned with social stability. "He is a serious man", Voloshin stresses. In Irkutsk the crisis management headquarters is headed by the Governor with representatives of the Interior Ministry, the FSB and the tax authorities. The same is true of Krasnoyarsk. "The Federal Inspector is always in the loop", says a representative of the Krasnoyarsk Administration. Prefectures in Moscow will also gather information from enterprises, a source at a major company registered in the capital told Newsweek.
Big and medium-size businesses, says Tuchkova from Chelyabinsk, all hand in information about their plans to the ministry without any reminders. "Members of our staff make calls to large and medium-size businesses, or they call us themselves. This is an established routine," Ms Tuchkova goes on. Businessmen have an incentive not to sack anyone: those who have declared plans to cut their payrolls won't get any budget funding, she explains. The regional budget has allocated 200 million roubles in subsidies on loans and leasing.
Arkhangelsk also has a crisis management headquarters, only they call it "budget revenue assurance committee" to be on the safe side. "We don't want to scare people with the word crisis. We hold meetings regularly." an advisor to the Arkhangelsk Governor, Dmitry Taskayev, reports. While they try not to scare people, the same is not true of business. "I formally issue this warning to all of you: the authorities will closely watch any attempts to infringe on employee interests using the crisis as a cover," the Krasnodar Governor Alexander Tkachov said on Thursday.
The Vice Governor of a region recently gave Newsweek a quote from a speech his boss made to businessmen: "if it didn't sink in, I will give you concrete examples. There are a lot of levers. If we see that personnel are mistreated we will oppose it in every way possible. After all, I am responsible for stability in the region, not you. It comes down to me to decide whom to send on a leave and whom to sack and when. So, sacking people quietly is not an option, forget it." The governors are nervous because they will be held accountable for any untoward events in their regions.
PROGRAMME "CATHARSIS"
So far things are calm. Even in the Chelyabinsk Region, which is full of heavy industries, only one plant has been shut down. It is a business that sustains the city of Verkhny Ufalei. It was shut down not by the crisis, but by the prices of nickel which fell even before the crisis. Last week Vladimir Putin urged local leaders to pay particular attention to the industries that sustain cities. The plant in Ufalei has been at a standstill for a month and the workers have been sent on a leave with two thirds of their wages, like at KamAZ plant. The future for the plant looks bleak, but the workers do not take to the streets, they sit at home. "The danger of mass protests is not as great as for example a mass panic in the banking sector. Workers either try to make money by doing odd jobs or go on a drinking binge", expert Titkov explains. However there have been some protests in neighbouring Sverdlovsk Region. In October the workers of the Lobvinsk Biochemical Plant, which stopped producing ethylated alcohol and yeast, staged a rally and decided to complain to the Kremlin. The Kremlin's reply came in November: your appeal has been considered and sent to the Regional Ministry. There have been no more rallies since.
The situation in Cheboksary is also quiet although layoffs are already underway. "We do not call them layoffs, we call it business restructuring", Vice Premier Voloshin says. There are still vacancies in other areas. They are already doing it in the Chelyabinsk Region: they dismiss workers from one plant and launch production of electric hot plates at another plant; the hot plates are in demand. The Primorye Territory also counts on internal labour migration. The Polymetal Plant in Dalnegorsk is on its last legs, but another plant in the same city is hiring. The regional employment center has organized an automated programme called "Catharsis" which can quickly find vacancies in neighbouring regions.
Even though things may be quiet in the regions so far, the Kremlin is not complacent. Experts agree that social upheavals may happen. They all predict that unemployment will double next year from 4 million to 8-10 million. That is not a lot for the country's economy, but unemployment is concentrated in specific places, says Yevgeny Gontmakher of the Institute of Contemporary Development
. The Government has found some of the views he expressed in his recent article "Novocherkassk-2009" published in the newspaper Vedomosti to be extremist.
Naberezhnye Chelny, Cherepovets and Magnitogorsk are the big industrial centers where problems may come to a head first, according to economist Gontmakher. Not all government officials agree with him: some think the small towns will be hit first. The Yaroslavl, Tver and Tula Regions have been named by a member of the staff of the Presidential Representative to the Central Federal District: "It's the same in Ivanovo," especially at plants where they produce just one kind of product." In any case businessmen across the country have been told not to cut their payrolls without permission. "The authorities see businessmen not as tax payers but above all as employers," says expert Alexei Titkov.
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NOVOCHERKASSK-1962: WAGE RIOT
In the early 1960s the Soviet Government spent staggering amounts of money on space and defense programmes, but keeping down meat and butter prices was too much for the government. On May 31, 1962 retail prices of butter, meat and meat products jumped by an average 30%. At about the same time the management of the plant in Novocherkassk that built electrical locomotives cut pay rates by more than a third.
A spontaneous strike broke out in the steel smelting facility on June 1. Workers demanded higher pay rates.. A crowd of more than a thousand gathered in front of the plant's office. The plant's manager, Boris Kurochkin, cut one of the speakers short by saying, "If you can't afford meat eat pirozhki with liver sausage". Kurochkin was booed off the podium. The strike spread throughout the factory within hours. By noon more than 5000 workers had downed tools, strikers blocked the North Caucasus Railway. On Nikita Khrushchev's orders, army units and security troops moved into the city.
On the morning of June 2 a crowd of many thousands, including women and children, gathered in front of City Hall where Moscow party bosses and the Chairman of the KGB, Alexander Shelepin, were in conference. The situation was getting worse, the crowd broke through the security lines and entered the first floor of the building. After several warning shots into the air the military opened fire on the crowd. The official figures were 24 dead and 87 wounded. The leaders of the riots were convicted: seven people were executed and another 105 were given prison sentences of between 10 and 15 years.
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PUTIN'S LADDER
Premier Vladimir Putin announced at the United Russia Congress that unemployment benefits Emergency Situations Ministry plane arriving at Pulkovo airport would be raised to a maximum of 4900 roubles. But not all unemployed people will be eligible.
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* If you earn less than 6500 roubles a month and you do not work in the Far North and you have been laid off, you are not eligible for the maximum welfare benefit.
* If you earned under 8000 roubles before you were laid off you will be entitled to a 4900 rouble unemployment benefit only in the first three months of unemployment.
* If you earned between 8000 and 11000 roubles you will be entitled to the maximum 4900 rouble benefit over 7 months.
* If you earned 11000 roubles or more, and you are OK. While you look for another job the state will pay you 4900 roubles a month for a year. In the second year, if you still have not found a job, the government will only pay you 850 roubles a month as an unemployment benefit.
Konstantin Gaaze, Artyom Vernidub