The regions will again pay for the structural transformation of the economy

About how the measures of the government of the Russian Federation to overcome the economic crisis will affect the life of the already poor regions of the country, economist Dmitry Prokofiev writes in his channel:

“In general, it is clear how the authorities are going to carry out the “structural transformation” of the Russian economy (yes, the authorities do not particularly hide their plans). It is supposed to reduce the share of wages in GDP faster than the GDP itself will decrease - in this case, as it seems to the bosses, the business will have to generate additional profit that can be invested (well, or spent in some other way).

This idea is quite obvious, it lies on the surface, especially since there is already experience in applying this practice - it was according to this scheme that the 1998 crisis was overcome, when the Russian Federation lost its foreign exchange reserves, foreign exchange earnings were negligible, and the government could not pay off debt obligations.

But the problem here is that this approach to solving economic problems looks simple and spectacular "from the capital."

"In the regions" its benefits are not so obvious - a decrease in people's incomes will mean a reduction in personal income tax, and a reduction in consumption (which the authorities rely on) will also mean a reduction in the taxable profits of organizations, primarily retail trade.

That is, we will talk about reducing the budget revenues of local authorities. In addition, any amateur economic activity of people depends on the income level of the population - this activity is concentrated primarily at the local level and localized in the regions, the level of household well-being depends to a large extent on it.

In other words, according to the capital, the "structural transformation" will have to be paid not only by ordinary workers - at the cost of reducing their incomes, but also "regions as economic entities" - at the cost of reducing their tax collections. But what do the regional elites think about this - who asked them?

To comment on the difference in views on economic policy “from the regions” and “from the capital”, the following quote from the book “Damned Economies” will help (author Andrey Movchan, Alexey Mitrov, AST Publishing House LLC, 2020):

“... in Moscow, the largest and richest city in Russia, a city whose population is growing every year by about 100,000-200,000 people, and the birth-death ratio, survival times and per capita incomes of Muscovites are at the European level and far exceed the average levels across Russia.

Moscow is the capital of the Russian Federation, thanks to the peculiarities of the political and economic structure of the country and its budget structure, it plays the role of a metropolis surrounded by ... Russia.

60-70% of the assets of the country's banking system are concentrated in Moscow; more than 50% of construction is underway; city budget revenues per inhabitant are about 5 times higher than the national average (excluding Moscow).

In 2019, the per capita income of the population in the country showed a weak (about 0.8%) growth only due to a significant increase in the income of Muscovites – across the country, per capita income continued to fall. According to some reports, Moscow is served by about two million migrants.

In fact, Moscow is a single-industry city that “sells” management services to the whole of Russia and rents itself out as a base for company headquarters and a logistics hub.

The city created a huge amount of expensive inefficient infrastructure, settled millions of internal migrants who were looking for stable earnings, and at the same time destroyed virtually all of its industries except for management, internal services and “creation of meanings” (to use the apt expression of S.A. Kapkov - however, he sincerely used it in a positive connotation).

It is scary to think what will happen to Moscow if, for example, …, redirecting tax flows, creating interregional direct supply chains – and even in the event of a drop in oil revenues (MET – centralized tax) and / or a transition to collecting taxes on profits in the places of its formation , and not the registration of companies ... "