One thing that strikes you, as you wander the shops of any Russian city, is the sheer cheapness of booze and cigs. As little as 3 years ago, one could buy a pint-sized bottle of beer or a pack of cigarettes for just $1, while a 0.5l bottle of vodka cost as little as $3. Prices have since risen, but they remain very low in comparison to incomes.
This happy era was due to come to an end. The Finance Ministry planned to raise excise duties on ethanol products by a factor of 4.3 and by a factor of 15 on tobacco products, in a graduated way through to 2015. The result would have quadrupled the minimum price of lower-range vodkas (105 rules, to 410 rubles) and of the average cigarette pack (24 rubles, to 100 rubles). The practice of selling beer in large, plastic containers is to be forbidden from January 2013. Given that alcohol was found to cause 32% of aggregate mortality amongst middle-aged Russians in 2005, and the high prevalence of smoking among Russian men, these measures are surely long overdue. The plans will help Russia to consolidate the reductions in alcohol-related mortality of recent years.
The main driving force behind this seemed to be Finance Minister Kudrin, if for reasons that have little to do with public health (the taxes are estimated to bring in a further $11 billion in revenues, in addition to the $3 billion garnered through existing ones). Though these sums are very small relative to Russia’s total budget, they will nonetheless help to appreciably narrow the budget deficit.
However, these ambitious plans may have received a setback following Putin’s criticism of the plans in late March; namely, that such rapid price rises would encourage more Russians to take to moonshine alternatives. The alcohol and tobacco lobbies also raised objections.
According to a Finance Ministry source who contacted Russian Reuters, the revised plans call for a smaller increase in excise tax on vodka, by a factor of 2.2 instead of the previous 4.3 by 2015. The result will be a mere doubling of lower-end vodka prices (105 rules, to 180 rubles); and, given rising incomes and substantial inflation, only a modest decrease in its relative affordability. Likewise, smokers are in for good news: the former quadrupling is now little more than a doubling by 2014. It is still unclear which plan will ultimately be favored. For instance, the pro-Communist Trud speculates that the revised plan will be adhered to until after the 2012 elections – after which there is a chance that the rate of excise tax increases will be stepped up.
The fear amongst Putin, lobbyists, most Russian regions, and about 50% of Russians as per a VCIOM poll, the main effect of rapid price rises is going to be negative, as many people will supposedly only switch to “dangerous and unregulated homebrews, as well as poisonous surrogates like eau de cologne, shoe polish and even jet fuel”, according to Mark Schrad of the NYT. The Gorbachev experience, in which alcohol laws were made stricter from 1985, is continuously cited as evidence.
I remain to be convinced. First, according to that same VCIOM poll, 30% of Russians say they will continue drinking the same alcohol and another 20% say they will drink less; only 15% say they will start drinking homebrews and 4% will look for bootlegged vodka.
Second, for all that maligned Soviet experience of restricting vodka, life expectancy increased from 67.7 years in 1984 to more than 69 years for the rest of its existence (peaking at 70.0 years in 1986-87); and only fell below the late Soviet-era low in 1993, when the state’s vodka monopoly was dissolved and the country was in the midst of a rapid socio-economic collapse. Now given the differences between the Soviet Union and modern Russia, namely that there are far more alternatives to hard spirits, e.g. beer and wine, increasing prices will probably be even more effective now.
Gorbachev’s anti-alcohol campaign: now maligned, but more or less successful while it lasted.
So while I don’t usually agree with Boris Nemtsov, I can only support him in his condemnation of the regime for reducing the scope of vodka and tobacco excise tax increases.
EDIT 5/18/2011: Synopsis of final FinMin plans from Kommersant. The growth in excise taxes will be minimal until after the 2012 elections. From July 1st, 2012, they will start increasing at a faster rate, reaching 500 rubles per 0.5l of spirits (prev. 901 rubles) and 1040 rubles per 1000 cigarettes (prev. 874 rubles) – with the possibility of going higher if the action is coordinated with neighboring Belarus and Kazakhstan. The result is that the typical price of a lower-range 0.5l vodka bottle will rise from 125 rubles now, to 175 rubles in H2 2012, 220 rubles in 2013, and 260 rubles in 2014. The minimal price of a pack of cigarettes will rise from 16 rubles now, to 22 rubles in 2012, 29 rubles in 2013, and up to 38 rubles rubles in 2014.
As expected, this is a substantially watered down version, under which the price of vodka and tobacco will remain well under Western norms through to 2015. Cynical electoral populism, and the influence of the alcohol and tobacco lobbies, are working to limit the potential public health gains that could have resulted from a more aggressive plan for raising excise taxes on spirits and tobacco.
If it truly is Nemtsov behind this, I have to agree with you – the opiate of the masses is no longer needed now that most workers take home enough to buy appliances and minor luxuries instead of just enough to stay dead drunk on until the next paycheque.
Take a look at western alcohol and cigarette prices. I can’t vouch so much for the USA (although both seem ridiculously cheap there to me, and you’ve always been able to buy Canadian Club cheaper in the USA than here where it’s made), but here every time the government gets ambitious or otherwise needs more money – yet dare not raise taxes – four things are going to get a sharp upward adjustment: gas, postage, booze and cigarettes.
As hard as it is for me to believe now, I swore I would quit smoking as soon as they went over $1.00 a pack. When I joined the military, they were still around .95 cents per large pack (25) on the outside, but aboard ship they dropped to .30 cents, because they were duty-free. You could leave each day with two packs, provided one was opened. I finally quit in 2005, although they had gone far over $1.00 per pack everywhere by then (we lost the duty-free privilege years ago because civilians complained it was unfair, although you generally didn’t see any civilians lining up to go through the gas hut every year for refresher training, or volunteer to stick themselves in the thigh with an atropine injector during NBCD refresher).
Anyway, pardon me that stagger down memory lane, but what I meant to suggest is that western prices for booze have zoomed in recent years, and it has caused absolutely zero upward mobility in the bootleg sector. Bootleggers cannot make booze that anyone besides a diehard juicehead would want to drink, and even then he’d get better results from melting down old Black Sabbath albums and straining the liquid through a sock.
Russia was once in a very bad way, and staying smashed all the time was probably as good a way to dull the suffering as any. However, Russia is in a lot better shape now, and making some slightly painful adjustments for long-term good would makes sense now while high energy prices will soften the foregone-revenues blow.
It’s a bit more complicated than merely bad living conditions during Soviet times which explains the alcoholism. Since the state ran the Vodka racket for centuries, Russians do not think beer is an alcoholic beverage but a soft drink. This cultural distortion means that getting together for an evening with your friends or family is to drink at least a quarter of a bottle of 40% proof alcohol. Peer pressure to consume hard alcohol results in addiction.
This is a good post showing that alcohol is a primary factor in the short Russian lifespan compared to the west. At least with the fall of communism there has been some cultural change towards “soft” alcohol for socializing. It is time for western style sin taxes and bans on tobacco advertising.
I think the raising of taxes on alcohol is less dangerous than people make it out to be. The two most visible examples in Russia are the Gorbachev era, as mentioned, as well as a lesser known, but equally telling situation that occurred in the mid-2000’s.
In about 2005/06, Russia embarked on an effort to better legitimize the alcohol supply by changing to a new labeling system. All hard alcohol had to be registered through a new system and to get a new type of label. The process was botched due to poor planning and a lack of labels. The majority of the hard alcohol supply was almost completely stymied for close to three months. I was living there at the time and was stunned at the sight of empty liquor shelves.
As feared, many Russians took to desperate measures by drinking more moonshine and even perfume. Headlines sprouted up everywhere about the shocking deaths that resulted from it, causing hysteria and a demand to do something about it. In the end, the real statistics showed that during that short period, deaths from alcohol poisoning actually decreased. One must look past the media frenzy and notice that reducing accessibility to hard alcohol does make a positive impact.
There are two other important forces that must be in place to put the final nails in the coffin to problematic drinking in societies: economic and cultural.
In societies where economic opportunities improve, people have more to lose when they have good jobs. The price of showing up to work hungover gets too high. Hopefully, Russian prosperity will be an effective cure over the long haul. The other variable is the availability of other options beyond vodka. To me, vodka is nearly a poison, so as alternatives increase, like beer and wine, drinkers will at least be consuming something that is less toxic. Drinking levels in France, Germany, and Italy are not that far off from Russian drinking levels, yet they are usually drinking wine and beer which are far less harmful than vodka.
The last nail is the removal of social acceptance of heavy drinking. Economics can’t cure everything. Statistics have even shown, much to Medvedev’s surprise, that despite improved prosperity in the last 10-15 years, alcohol consumption has not declined. Until the public stigmatizes drunkenness, the problem will still remain stubborn to remove.