NCPA - National Center for Policy Analysis


February 14, 2005

Last year, Russia dramatically overhauled its welfare system, capping off a series of pro-market reforms under President Putin.

Leon Aron of the American Enterprise Institute notes that from 2000 through 2003, Russia initiated a host of market reforms, including:

  • Land privatization, pension privatization and the liberalization of currency laws.
  • A radical simplification of the tax code and the reduction of personal and corporate income tax rates to some of the world's lowest flat rates.
  • The passage of a package of laws to break up the state electricity monopoly.

In August 2004, Russia implemented its version of welfare reform, revamping a system that was notoriously wasteful, corrupt and poorly targeted. The reforms will:

  • Replace a variety of entitlements -- ranging from free bus rides to free prescription drugs -- with cash allowances, a move that will affect some 30 million recipients.
  • Individuals will receive a monthly 450-ruble stipend (about $14) and supplementary allowances ranging from 600 to 2,400 rubles.

The Putin administration hopes that these new cash allowances will help improve efficiency, lower costs and improve consumer choice.

Source: Leon Aron, "Putin's Risks," American Enterprise Institute, Winter 2005.

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