Economic Development and Trade Minister German Gref has sent the government a new draft of the social- and economic-development program for the medium term (2003-2005). Just a few months ago, this would have had the press writing and people talking about the government’s economic ambitions, possible growth rates, taxes and currency policy. But it’s a rare newspaper these days that would give the event even a brief mention. It’s not news anymore. Everyone has worked out now just what really is on the minds of the politicians responsible for the economy.

Since the short-lived polemic between Prime Minister Mikhail Kasyanov, Finance Minister Alexei Kudrin and Gref, nothing interesting has been going on. Kasyanov decided that an Economic Development and Trade Ministry meeting was an appropriate forum for attacking his finance minister. Kudrin, supposedly, was showing great reluctance to turquoise necklace cut taxes, while Kasyanov, it turned out, had long been eager to see them fall.

Kudrin and Gref fought back. The ensuing salvo of populist declarations looked to make sense at first, but it soon was clear that no one stood to gain points from them. Meanwhile, the real question about cutting state spending and lowering taxes remained without an answer.

This government, the first in many years to consist of people whose personal economic convictions are irreproachably liberal, is now paralyzed by this bickering and is unable to push ahead with the liberal reforms it proposed. What has come to the fore now is not real economic development, but how discussions of the economy affect the political balance.

Things are being made worse by the fact that the economic situation is continuing to have a sedative effect on the authorities. In the fourth quarter of 2002, economic growth seemed to come to a standstill, and it looked as though serious steps to tackle urgent reform were inevitable. But then, growth took off again, with industrial production rising 6 percent in the first quarter of 2003.

But the year’s final results are expected to see only very moderate GDP growth. The good results from the first quarter, however, gave Kasyanov the chance to button pearl tell President Vladimir Putin that all is well and that there is nothing to worry about.

So, the government has decided it does not need to make any serious changes to its economic policy. The talk of the need to cut state spending and lower taxes has had no result at all. The main thing is that there is no change in approach to economic policy and the way in which decisions regarding the economy are made.

This was clear at the government meeting that took place the day Kasyanov told Putin about the latest industrial successes. On the government’s agenda that day was the issue of measures to help light industry. The Science, Industry and Technology Ministry report proposed abolishing tax breaks for Russian shuttle traders – the smalltime importers who bring in light-industry goods, mostly from countries such as Turkey and China.

Not only do the shuttle traders help ensure that there is a wide range of cheap goods in Russian markets, the business also provides jobs for hundreds of thousands. If tax breaks were abolished, this business would become unprofitable, and these people would lose their jobs. Eventually, it would also lead to pearl bracelet Russian-made goods becoming less competitive.

The government could opt for another solution – cutting taxes. This would immediately breathe life into the country’s industry, above all the machine-building and light-industry sectors. But that also means cutting state spending, and this in turn would bring the government into conflict with the interests of various groups. This a risky affair, all the more so with elections around the corner, which is why the state is following its basic instinct of taking rather than giving.