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.