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urce Same in mil.) and increment In relation to In relation of prices of 2002 in expenditures (in RFB to GDP inform %) ation 2 Expenditures for the military organization included in item Law Enforcement and State Security Total expenditures for law enforcement and state security, including: 0500 244644 46537 10,4 1, 220400 + 26,8 + 1,5 + 0,1* 2.1 Troops of the RF Interior Ministry 0502 18490 3087 0,8 0,1* 16658 + 22,7 + 0,1 0,2.2 State security agencies 0505 47842 11288 2,0 0, 43101 + 35,5 + 0,1 + 0,1* 2.3 Border Service (agencies and troops) 0506 24065 4122 1,0 0,21680 + 23,5 + 0,1 0,3 Military expenditures included in other sections of the Federal Budget 3.1 Maintenance, military training, and logistics of MES forces (troops) 4071 250 0,17 0,(without fire service) 1302 3668 + 7,3 0,0 0,2* 3.2 Federal special construction service of 0707 1059 315 0,05 0,the RF 954 + 49,3 + 0,02 0,2* 3.3 Mobilization preparedness of the 2300 500 - 50 0,0 0,economy 450 - 0,1 0,0 0,1* 3.4 Civil defense 1203 66 37,1 0,0 0,59,5 + 165 0,0 0,3.5 Military reform 2501 15800 - 745 0,61 / 0,12 / 14234 - 4,5 - 0,13 - 0,The results of the analysis of expenditures related to the past military activities are presented in Table 3. Among these expenditures, the amount earmarked for military pensions was increased most significantly by 52 %, since the size of these pensions had been risen.

Some expenditures presented in the tables, for instance, for mobilization preparedness of the economy, conversion of the defense industries, and the financing of the program State housing certificates (SHC) nominally remained at the same level as in 2002. However, respective expenditures in comparable prices were reduced by the rate of inflation, which is expected to be at % on the average. No explanations were given as concerns the fact that these expenditures of FB-03, especially expenditures for SHC, had not been adjusted for inflation.

Table Code Amount in Difference between Share / change in share in FB-03 (Rub. expenditures of FB- comparison with FB-02 in % No. Sections and subsections So- mil.) 03 and FB-02 (Rub.

urce Same in mil.) and increment In relation to In relation of prices of 2002 in expenditures (in RFB to GDP inform %) ation 4.1 Military pensions 1804 67721 20826 2,9 0, 61100 + 52 + 0,6 + 0,1* 4.2 Utilization and liquidation of armaments, including the fulfillment of 2200 10760 - 621 0,5 0,international obligations 9694 - 6,0 0,0 0,1* 4.3 Conversion of defense industries 0704 250 - 25 0,0 0,1* 225 - 0,1 0,0 0,4.4 Financing of the SHC program (in addition to the expenditures set forth in 4* 5400 - 535 0,23 0,the section Military reform) 4865 - 9,5 - 0,06 0,Different aggregate indicators of expenditures, including expenditures for national defense, law enforcement, maintenance and development of other troops, military formations and agencies, and, sometimes, expenditures related to past military activity, are often used for the analysis. Some of these amounts are presented in Table 4.

Table Share of expenditures in FB-03 in % (share / change in share in comparison with FBNo.. Expenditures Amount in FB-03 02) (Rub. mil.) In relation to the In relation to amount of GDP in FB-expenditures in FB-1 Total direct military expenditures 441889 18,8 3,+ 0,2 + 0,2 Aggregate direct and indirect military expenditures 525950 22,4 4,related to the present and past military activity + 1,0 + 0,3 Total expenditures for national defense, law enforcement, 575372 24,5 4,and state security + 1,3 + 0,4 Amount of direct and indirect federal expenditures related to present and past military and law enforcement 32,9 5,activity and state security 770594 + 4,5 + 0,Whatever method of summing is chosen (see for the results in the Table), the increase in expenditures in whatever way relating to military activity of the state is noticeable. This trend is characteristic not only in comparison of FB-03 and FB-02, it is a stable trend.

This trend is noticeable over a long period starting after 1998, when Russia overcame the consequences of economic turmoil and later attempts of terrorist, bandit formations to ruin the state.

The nation has realized the importance of strengthening of its military potential and creation of stability not only for its own survival, but also for normal development of civil economy.

The data on the dynamics of expenditures for defense and security in 1999 through 2002, and comparisons with the expenditure levels in 2003 are presented in Table 5.

Table Sections of the Federal Budget Years 1999 2000 2001 2002 Expenditures listed in section 93702 140852 214688 281970 national defense (in prices of the budget year / in prices of 93702 117181 150598 173504 1999), Rub. mil.

Increase in relation to the preceding year, - 25,1 28,6 15,2 10,% Increase in relation to 1999, % 0 25,1 60,7 85,2 104,Expenditures listed in section 51324 79802 131621 165999 Law Enforcement and State Security (in Sections of the Federal Budget Years 1999 2000 2001 2002 prices of the budget year / in prices of 51324 66391 92329 102144 1999), Rub. mil.

Increase in relation to the preceding year, - 29,4 39,2 106 32,% Increase in relation to 1999, % 0 29,4 79,9 99,0 164, In the course of calculation there were used data on the dynamics of consumer price indices, presented in the Prognosis of social and economic development of the Russian Federation in 2003, submitted by the RF Government to the State Duma as a supplement to the draft FB-03.

However, taking into account the apparent favorable influence of state security on the national economy, it shall be once more refer to the statement made in the beginning of this analytic study. Any favorable process of the type we study in this paper can not be permanent. The experience of the Soviet Union is an evidence that overmilitarization may ruin national economy.

Therefore, in the course of substantiation of the budget, it is necessary to take into account the totality of interests, the totality of threats, and parrying measures. It is absolutely inadmissible and damaging for national interests to separate the review of processes of substantiation of civil and military spheres of the economy.

The draft FB-03 makes excessively secret military expenditures of the federal budget. Secret expenditures made 23 % of the total budget expenditures. As concerns expenditures for development and maintenance of the RF Armed Forces, 99.88 % of their total amount were classified, while all the data on the expenditures for internal troops and border troops were secret.

In accordance with the IET proposal, a considerable part of these expenditures was declassified.

It would be feasible to use the results of the present analysis in different sectors of the economy cooperating with the military sector or those planning to establish such cooperation. Besides, it seems useful for state agencies to take into account these results in the course of working out the next draft budget.

E. Ya. Lyuboshits, E. Yu. Khrustalev, V. I. Tsymbal

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