In an economic bind, authorities search for new ideology
Belarus needs to create a new motto. This opinion was expressed at a Belaya Rus seminar by Alexander Radkov, First Deputy Head of the Presidential Administration and Chairman of quango Belaya Rus.
Ahead of the 2015 presidential election, the authorities need to review the state ideology to ensure the electorate’s loyalty. Due to the socio-economic crisis and shrinking ‘welfare state’, the previous ideology has stopped working. Alexander Lukashenko attempts to exploit his ‘father of the nation’ image with an emphasis on traditional conservative values.
The motto ‘For Belarus!’ first appeared in 2004. In full, this motto was ‘For a strong and prosperous Belarus’ and was widely used during the last two presidential campaigns. It reflected Lukashenko’s vision of Belarus’ development and clearly laid out domestic policy priorities: a strong social policy and significant wage growth.
However, since 2011, Belarus’ socio-economic model has been in crisis. The strong ‘welfare state’ has shrunk and lacks resources to continue previous populist policies in the short and medium term. Simultaneously, Lukashenko’s electoral rating has stopped depending on wage growth. Moreover, a significant wage growth in 2013 has unbalanced Belarus’ economy, and in 2014-2015 the authorities will have no resources to provide for wage growth. While the authorities do not yet quite understand how state ideology should change, they have started to shape up some of its components.
Since the Belarusian authorities have been unable to provide ‘living standards like in Europe’ as they promised, they have decided to use other stimuli. For instance, Alexander Radkov at a seminar for ‘Belaya Rus’ members said that ‘Belarus, situated in the heart of Europe, should preserve traditional civilizational values, including Christian’. At a press conference, Lukashenko said that ‘we are observing a gradual destruction of centuries-old moral values, moral anomalies are transforming to a ‘normality’, national, cultural differences between nations are vanishing, and a global English-language neo-culture, based on American standards and values is emerging’.
Alexander Lukashenko has been increasingly exploiting his ‘Father of the nation’ image through various projects. For example, in July 2013 the State Flag Square was finished, and by mid-October 2013 a huge construction project should be completed - a new presidential residence, called the ‘Independence Palace’.
At a meeting with students in Mogilev, Lukashenko talked about a national idea and said that ‘our national idea is peace, harmony, and mutual assistance in our large family, which is called the Belarusian people’. In early October, the president also talked about ‘The Large Family’ social project, one of his possible pre-election initiatives.
To sum up, the authorities are considering changing the current state ideology to one less costly for the state. The new ideology might be used by Lukashenko during the next presidential campaign. The scarcity of resources pre-determines the shift from a ‘consumerist’ society to one with traditional conservative values, ensuring national independence and a better life for future generations.
The rapid increase in wages has led to a decline in the ratio between labour productivity and real wages to one. Previously, the rule was that enterprises, in which the state owned more than 50% of shares in the founding capital, were not allowed increasing salaries if this ratio was equal to or less than one. The authorities are unlikely to be able to meet the wage growth requirement without long-term consequences for the economy. Hence, the government is likely to contain wage growth for the sake of economic growth.
According to Belstat, In January – August 2017, GDP growth was 1.6%. The economic revival has led to an increase in wages. In August, the average monthly wage was BYN 844.4 or USD 435, i.e. grew by 6.6% since early 2017, adjusted for inflation. This has reduced the ratio between labour productivity and real wages from 1.03 in January 2017 to 1 in the first seven months of 2017. This parameter should not be less than 1, otherwise, the economy starts accumulating imbalances.
The need for faster growth in labour productivity over wage growth was stated in Decree No 744 of July 31st, 2014. The decree enabled wages growth at state organizations and organizations with more than 50% of state-owned shares only if the ratio between growth in labour productivity and wages was higher than 1. Taking into account the state's share in the economy, this rule has had impact on most of the country's key enterprises. In 2013 -2014 wages grew rapidly, which resulted in devaluation in 2014-2015.
Faster wage growth as compared with growth in labour productivity carries a number of risks. Enterprises increase cost of wages, which subsequently leads to a decrease in the competitiveness of products on the domestic and foreign markets. In construction, wholesale, retail trade, and some other industries the growth rate of prime cost in 2017 outpaces the dynamics of revenue growth. This is likely to lead to a decrease in profits and a decrease in investments for further development. Amid wage growth, the population is likely to increase import consumption and reduce currency sales, which would reduce the National Bank's ability to repay foreign and domestic liabilities.
The Belarusian government is facing a dilemma – either to comply with the president’s requirement of a BYN 1000 monthly wage, which could lead to new economic imbalances and could further affect the national currency value, or to suspend the wage growth in order to retain the achieved economic results. That said, the first option bears a greater number of negative consequences for the nomenclature.
Overall, the rapid growth in wages no longer corresponds the pace of economic development. The government is likely to retain the economic growth and retrain further growth in wages. Staff reshuffles are unlikely to follow the failure to meet the wage growth requirement.