Putin becomes a convert to Keynesianism
If crisis has one positive thing about it, it's that it makes people smarter. It's not an accident that only now, having lost his oil bubble, Putin has finally shown some rudimentary understanding of basic economics.
"MOSCOW, Nov 25 (Reuters) - Russian pensioners who will have 46 percent more money in 2010 than this year will provide a much needed boost for the flagging economy as they spend, Prime Minister Vladimir Putin said on Wednesday.
'Our decision to increase pensions may contradict (the goal of maintaining macro stability). But at the same time it is a stimulus. It is consumption,' Putin told a pensions conference in Moscow.
Putin said the pensioners, who spend 80 percent of their meagre income on consumption, shun expensive imported goods and tend to buy domestically produced ones.
Russia, hit harder by the economic crisis than most other major emerging economy, is very slow to recover due to the very weak domestic demand and Putin has vowed to continue stimulus policies, helping the demand recover.
Russia is raising pensions by 35 percent in 2009 and plans to raise them further in 2010, envisaging to spend a staggering 10 percent of GDP on pensions and other social benefits."
As a result of the increase, the average pension will rise to 8,000 roubles ($277.4), breaching the minimum subsistence level and achieving a replacement ratio of 39.7 percent on the average post-crisis salary.