It is commonly known that inflation is not only economic, but also political problem, especially when its growth is too rapid and the population begins to grumble seeing the price tags change daily. In such cases, where regular increase of pensions and wages is eaten by the price rise immediately, there is no good way out for politicians. Any solution seems bad.  

Nikolai Ryzhkov, one of the last prime ministers in Soviet Union, tried to chase after prices with money compensations given to the populations. That ended up in failure and the goods just disappeared from the shops. Even worse is the reputation by Egor Gaidar, who tried to struggle with inflation in another way – that’s restriction of incomes by the population. Gaidar managed to fill the shops with goods, but the population has not forgiven him the rest.  

Unfortunately, today the issues related to inflation grow, are out of public discussion and political debates. In the meanwhile, a soft polemic between the Kremlin and the Russian White House about social-economic policy has caused some tension for the political class. Proceeding from the task of strengthening the popularity by prime minister Putin and making him able to fulfill undertaken social obligations, the government has been sticking to the line of increasing the state expenses without taking the growing inflation into consideration. Seemingly, the members of the cabinet calculated that the ongoing growth of the treasury thanks to export of oil would compensate the social consequences out of the price rise. The finance minister Alexei Kudrin was in minority with his attempting to restrict somehow the growth of expenses overloading the national economy.    

After President Dmitry Medvedev allowed investing the means from the National Wealth Fund into buying the shares of Russian companies, one began to get an impression that the advocates of inflationary policy had won. However, last week the situation seemed to change again. The head of the state had sent to the State Duma a budget message where he set the goal of restricting the state expenses and reducing the inflation. And the government agreed to that.   

Does that mean the argument is over and now the Russian authorities decide to act following the rational economic logic? Well, it seems it’s too early to rejoice, as the obstacles are too serious on our way to normal logic of economic policy. First of all, this is about the growing appetite by sectoral lobbyists who appear to believe strongly in the infiniteness of the budget pie. The RAO Russian Railroads just received a huge grant for its strategy of development up to 2030. Transportation ministry intends to create a state corporation for the road construction, which will also require trillions. Agriculture ministry proposes an idea of making a state corporation for raising the breeding industry. And there are many other sectors of economy where the interested officials affirm that making state corporations is just necessary.     

Probably, this is why many observers perceived reservedly the words by prime minister Putin spoken at the budget commission of the government where he meant reduction of ungrounded and ineffective expenses. In their opinion, there are no rules without exceptions. So choosing between financial stabilization and stimulation the economy the government is likely to prefer the latter.   

Another problem when returning to sensible economic logic has to deal with relations between the authority and the masses that have got used in recent years to constant distribution of social welfare and to increase of wages and pension benefits. Such an increase can never be satisfactory as people are convinced it must go on permanently. With oil and gas going up daily how can it be announced to the masses that the good cannot last for ever! For the state policy must not be trapped by illusions and stereotypes even considering they have a “folk” origin. So the minister Kudrin explained with an exactness of an accountant that the coming decade is going to be difficult for the Russian economy. Oil and gas incomes are not going to suffice to provide the current high living and the workforce will decrease and the pension Fund will be getting empty.

But all that was told to the rulers of economy, officials and political class, not to the masses. So who of the current leading politicians would venture such an explanation to the wide population? Who is capable to risk one’s reputation and even career?