02 June 2004 08:17
Perverse Preferences for Subsidies Not Cash
Last Thursday, nearly 1,000 people joined a demonstration outside the State Duma. Were they protesting human rights
violations? Police brutality? No, they were protesting the government's decision to replace a range of benefits and
subsidies with cash payments. Next year, 13 million people who now qualify for subsidies will receive $6 billion from
the state. But people don't want billions -- they want benefits.
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We look forward to hearing from you.Email the Opinion Page EditorThe system of subsidies works something like
this.
Act One. A doctor writes his elderly patient a prescription for a subsidized medicine.
Act Two. The elderly woman goes to the pharmacy. The prescribed medicine is in stock, but the pharmacist knows that
the woman will only pay half-price. He won't collect the other half until the state medical insurance fund
processes his request, and that could take anywhere from a month to a year. The pharmacy is privately owned and
can't afford to go into the red. The pharmacist therefore tells the woman that the Russian-made medicine prescribed
by her doctor is out of stock and suggests an imported equivalent, which costs $100 and is not on the list of subsidized
medicines.
Act Three. There is another pharmacy around the corner. It belongs to the governor's son. This pharmacy
doesn't dispense subsidized medicines, either, but it does have an excellent working relationship with the local
medical insurance fund, headed by the deputy governor's daughter. The two have worked out a nifty deal: He sells
medicines at full price, then files for compensation as though he had sold them at the subsidized price. She approves
his request and they're both in the money.
Benefits and subsidies are nothing more than a clever way to embezzle from the state budget on the pretext of
providing assistance to the needy.
It's not hard to get 1,000 people to turn out for a demonstration. But as a talk show host on Ekho Moskvy who
frequently fields questions about subsidies on the air, I can tell you that I have never had a single caller who
supported the idea of replacing subsidies with cash payments. Every time I point out that subsidies are actually
inaccessible to most of the people who qualify for them, and that 2 rubles are embezzled for every one that goes to help
the population, I am bombarded by irate callers demanding that the station manager "get rid of this woman who goes
around bad-mouthing pensioners." And the station's pager fills up with messages accusing me of "having no
idea what real life is."
Of course I don't. If I knew the secret of life I would long ago have invented a cure for cancer and received
the Nobel Prize for biochemistry.
People regard subsidies as medals of honor to which they don't necessarily attach a monetary value. The
demonstrators outside the Duma held posters declaring: "Subsidies Are Permanent, Money Is Temporary." And this
slogan accurately reflects their view of the world. People are afraid of money and the freedom of choice that comes with
it. Subsidies, on the other hand, constitute the state's recognition of their misfortune.
A woman who was dying of cancer once broke down on my radio show. There was nothing I could say. It would have been
perverse in that situation to argue that subsidies distort the payment structure of the companies that have to step in
and pick up the tab for her treatment when the state fails to pay.
The crux of the problem is simple: Life is unfair. Cancer, old age, grief and death cannot be compensated with money.
But Russian people regard subsidies as the state's compensation for old age, grief and death. They are
society's recognition of the services rendered by veterans and heroes.
Subsidies are the last vestige of socialism, of a society in which the state paid us nothing and gave us everything
-- or rather, promised us the world. People want their subsidies. For as Mikhail Khodorkovsky wrote in the open letter
published earlier this year, President Vladimir Putin is more liberal than 70 percent of the people who voted for
him.
Yulia Latynina is a columnist with Novaya Gazeta.
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