This is not CGI. It’s neither a
Sci-Fi video game, nor a movie. This is the town of Vorkuta, Russia and it’s all
too real for the 70,000 people who call it home. Virtually everything about Vorkuta
screams “Don’t live here.”, starting with the extreme
difficulty of getting there. Nearly a hundred miles north of the Arctic
Circle, it’s the easternmost town in Europe. With no roads in or out, the only ways to
or from Vorkuta are a 40-hour train ride or one of the two to three weekly flights…
assuming they’re unimpeded by blizzards. Because of this, those who move away are
liable to just leave behind their cars and apartments with everything in them — which
is how you get apocalyptic scenes like these. During the winter, temperatures can
drop as low as -58 degrees Fahrenheit. The sun appears for just an hour
on the average December day. Then, after enduring this for 8 long months,
residents are rewarded with a brief, 70-day intermission when the snow melts, revealing the
city’s bright, Soviet-era buildings underneath. Clearly, mother nature would prefer Vorkuta
remain a vast, untouched reindeer sanctuary. So, why does the city exist at all?
What kind of person would move here? Initially, the kind who didn’t
have a choice — prisoners. Chosen precisely for its isolation,
the town was once home to one of the largest and most notorious of the
Soviet Union’s forced labor camps. Later, after Stalin’s death
and the end of the Gulag, Moscow invested billions of
rubles transforming distant, arctic settlements like Vorkuta into
shining, triumphant symbols of the empire. Conquering nature was no less a political as a
practical project. Like Mao’s obsession with dams, Vorkuta and places like it were irrefutable
physical testaments to the power of Socialism. These towns — some, though not
all in Siberia — were usually designed around a single industry.
Sometimes even a single factory. In Vorkuta, that industry was coal mining. Further south, another one produces asbestos. In fact, the town is named after the known
carcinogen, which it still mines to this day. In total, there are about 300 Russian ‘monotowns’, of which Vorkuta is neither the furthest
north, most remote, nor even the coldest. Take, for example, Norilsk, a nickel mine
masquerading as a city of 200,000 people. Entry is strictly off-limits to foreigners, which may be a good thing, considering it’s
one of the world’s most polluted cities. Its hazy, brown air and toxic, discolored water
make Vorkuta, by comparison, look like Disneyland. Despite this, thousands packed their bags
and cheerfully moved to places like Norilsk and Vorkuta in the 70s and 80s thanks
to the Soviet system of social welfare. Although the retirement age was set very
generously at just 55 for women and 60 for men, you could retire even earlier and collect an even
larger pension if you met certain conditions. …Conditions like working in a mine, or, better
yet, working in a mine… in the middle of nowhere. That placed Vorkuta right in the
bulls-eye of the Venn Diagram. Young Russians could move to the arctic, do a few years of hard labor, and then
retire early down on the Crimean beach. But all that came to an
end on Christmas Day, 1991. The collapse of the Soviet Union meant the collapse of the entire economic model
on which these monotowns were based. Suddenly, these mines, factories,
and power plants were thrown out to the wolves, forced to fend for
themselves on the global market. After a lifetime of artificial state
support, how could they possibly compete? So, what happened next was as
predictable as it was tragic. Bankruptcies led to layoffs. Layoffs led to poverty. Poverty to crime.
And crime to mass migration. A quarter of the Vorkuta fled in the
four years between 1998 and 2002. Meanwhile, the 1998 financial crisis had reduced
the value of Russian pensions by nearly 50%. In short: seniors were on
the verge of financial ruin. And what little social welfare remained
was often inconsistent or ineffective. Retired teachers might be entitled to free bus
rides where public transit no longer existed. These but not those veterans might be
granted free phone service… etcetera. This was the Russia that Vladimir Putin
inherited at the turn of the millennium. The entire social welfare system
was in dire need of an overhaul. And his first attempt to fix it was
called the “monetization of benefits”. Rather than maintain 230 different complex,
outdated categories of benefits — the idea was — why not just give people cash
and let them decide what to do with it? In truth, it was a fairly modest proposal
with entirely reasonable intentions. But, the government failed to communicate
its plan effectively. What’s more, the Kremlin delegated implementation to individual
regions, leading to geographic disparities. Russians — everywhere from downtown Saint
Petersburg to rural Siberia — were. furious. Thousands of protestors descended on the streets, shouting “Down with Putin!” and
waving nostalgic Soviet flags. In their eyes, this was not a mere
change in policy. It was nothing less than a giant middle finger to their
years of hard labor and national service. These coal miners traveled all the way from
Vorkuta to protest in the streets of Moscow. That’s like swimming from
Guam to the White House lawn. For Putin, the message was loud and clear: don’t touch pensions — or anything
resembling pensions — with a ten-foot pole. Pensioners became a critical base of
support for his party, “United Russia”. In 2005, on the subject of raising the retirement
age, Putin declared unequivocally on television, quote, “this decision will not
be taken while I am president.” He later called pensions the Soviet
Union’s greatest achievement. And after seeing how the issue of social
welfare inspired political interest even in Siberian coal miners, his government
paid particular attention to these remote, decaying monotowns, home to
a large number of retirees. The Kremlin was so concerned that it tasked
the Federal Protective Service — Russia’s equivalent to the Secret Service — with
conducting, quote, “sociological surveys”. These undercover agents identified
54 monotowns as having the greatest risk of unrest, with another 104 not far behind. Thus, while other ex-Communist
countries like Poland and Hungary encouraged the residents of their “rust
belt” towns to slowly migrate toward jobs, Russia saw them as delicate kindling, waiting
for the tiniest spark to ignite a wildfire. Less risky to simply keep these
dying regions on life support, handing out just enough busy work to ensure
scarce time for any… “extracurricular activities”. These factories may not produce
anything tangible of value, but what they do produce
are votes for United Russia. High employment plus rising
pensions equals harmony. The first way it achieves this harmony
is with a wildly bloated bureaucracy. In 2011, nearly 20% of the entire national
labor force was employed by the state. And that’s not counting state-owned
companies — another 12%. In fact, the pension fund itself employs
over 100,000 people — 60% more than its American counterpart — despite
serving a population half as large. You know there’s a problem when the American government looks like an efficient,
well-oiled machine by comparison. Secondly, the Kremlin “collaborates” with —
or, more accurately, threatens — businesses. Oligarchs may be given an
incredibly long leash in Russia, but one red line they definitely don’t
dare cross are excessive layoffs. Shut down an unprofitable factory in
a politically sensitive area and you might suddenly develop a dangerous
habit of falling out of windows. When times are tough, oligarchs wisely
try just about anything under the sun before resorting to lay-offs,
including deferring paychecks, slowing down recruitment, and giving
workers unplanned, extended holidays. Finally, monotowns are directly
subsidized. In 2010 alone, $846 million U.S. Dollars
were allocated to 27 towns. That’s how the Kremlin keeps the
baseline dissatisfaction low. But, Putin also sprinkles in some sweet carrots,
particularly before an important election. As you can see, pensions have increased
substantially since the year 2000. They more than doubled between 2012 and ’22. Now, Russian pensions have never been large. The
average amount is only $222 US Dollars a month. But remember, this is a country where
the mean annual income is about $8,000. For 93% of its 46 million pensioners, this is
the only thing keeping them from extreme poverty. To call these retirees “single-issue
voters” is a massive understatement. Either they receive these pensions
or they starve. It’s that simple. And given the sheer size of this
voting block — one-third of the whole country(!) — Putin’s extraordinarily
high approval should be no surprise. Over the course of his career, Putin
perfected this high employment, rising pension social harmony formula. But this incredible success was deceiving. Beneath this bandaid, the infection
was getting worse. A lot worse. And to see why, we need to take a brief step back. In their simplest form, the way pensions work
is that one group pays in to a giant pool of money and another group withdraws
out of that same pool of money. In other words, the whole concept
requires a balance of payers and payees. This is what that balance looked like
before the Soviet Union collapsed. The 1991 population broken down by age,
from young at the bottom to old on top. Better yet, let’s ignore the kids, combine
everyone aged 20-54 into one “contributor” group, and anyone older into a single “recipient” group. Take it all in and now compare that
1991 balance to this 2021 balance. As you can see, the Soviet Union
was playing welfare on “easy mode”, with much fewer recipients. Immediately after its fall, the
number of new births collapsed. And for every one of the last 32 years
since, Russia has gotten considerably older, tilting pensions off-balance, with 44% more
recipients and slightly fewer contributors. The writing has been on the wall for three decades
— the math simply doesn’t add up. And there’s no doubt Putin knew this. But to peel back the
band-aid and confront the root cause would mean risking a larger, potentially regime-threatening
version of what happened back in 2004. So, he waited. And waited. And waited. Until
the inevitable could be delayed no longer. To regain balance, the “recipient” group
had to shrink and the “contributor” group had to grow. Which meant Putin had to
do what he vowed never to do 13 years earlier on television — raise the retirement age. This time, however, he had a plan. On June 14th, 2018, while Russian soccer
fans were busy cheering their defeat of Saudi Arabia on the opening day of
the World Cup, Putin made his move. The retirement age was quietly increased from
60 to 65 for men and from 55 to 63 for women. With this one change, the Russian retirement
age went from one of the world’s most generous, unchanged since its establishment
by Joseph Stalin in the early 1900s, to one of the world’s least generous. To make matters worse, these changes were
implemented much faster than in most countries. The United States, for example, is
very slowly raising its retirement age by just 2 years in total
over the course of two decades. Needless to say, this… was not well received. This is Putin’s popularity since 1999 and this 15% drop in approval is when
the announcement was made. In days, Putin lost most of the surge in support
he gained from the annexation of Crimea in 2014. This was, in fact, the largest short-term collapse
in approval he’s ever seen — before or since. And by January, the public’s level
of trust in Putin fell to just 33%, with a full 50% preferring the
resignation of his cabinet. The backlash was so intense that
his administration eventually lowered the retirement age again,
this time from 63 to 60 for women. Though this concession failed to address
one of the most common complaints: a huge number of Russians will never see a dime. Earlier, we saw this population pyramid
dividing the country into age groups. But this graph obscures a massive imbalance. To see it, we have to split
each age cohort by gender. In case it’s still unclear, let’s show only
the excess men or women for each age group. Notice the pattern? Down here, men very slightly outnumber
women. Here, between ages 30-34, the two groups are roughly equal. And then
from there, women start to rapidly eclipse men. By the time you reach age 70, there
are three women for every one man. The simple, unfortunate reality is
that Russian men don’t live very long. Poor healthcare, physically arduous labor, plus
off-the-charts alcohol consumption will do that. To be clear, its life expectancy
has increased substantially in recent years — credit where credit is due
— but that comes after decades of decline. You heard that right. Between 1960 and 94, the
average Russian lost three years of their life. But that’s both men and women. The male life expectancy is dramatically
lower — a mere 66 years today. And even that’s just a national
average! In poor, rural regions, the male life expectancy is much, much lower. Remember Norilsk from earlier? Its
life expectancy is 59 and almost certainly lower for men, most
of whom work in nickel mines. That leaves its average resident
with a retirement of… -6 years. Even the average Russian
male can only expect a year. So, you can probably see why the
2018 change wasn’t met with glee. Now, I won’t bore you with the
implications of Russia's invasion of Ukraine, the pandemic which overwhelmed
its already underfunded healthcare system, or the Western sanctions on
all manner of its exports. …But suffice to say: whatever demographic and fiscal problems the country had five
years ago, things are much worse now. The beautiful thing about demographics is
that they allow you to peer into the future. There are fewer Russian teenagers today, so there
will be fewer pension fund contributors tomorrow. But the devastating thing about demographics
is that, for the most part, they’re fixed. Today’s teenagers are 13-year-old
ripples of actions past. Unless Putin invents a time machine
or immigrants flock to a country whose passport is becoming less powerful by
the day, there’s no short-term solution. The ratio of old to young
will only continue to grow, shifting the pension balance ever more
precariously toward a large number of seniors. …Which means the 2018 change won’t be the last. Sooner or later, Putin will
be forced to confront reality. This is not unique to Russia. Far from it.
Most of Europe has it even worse. Pension protests will soon be a regular
feature of the global news cycle. But there’s one, critical difference. Take a second look at Putin’s approval rating. Now consider everything Russians
have tolerated during these 24 years. Election fraud. A failing education system.
Rampant corruption. Crackdowns on civil society. Rising inflation.
And most recently, a draft. And yet, throughout all of it, Putin
maintained an average approval of 74%. The one. thing. that did move
the needle were pensions. No retiree in any corner of the globe favors
a decrease in their income — of course! But only Russian retirees have
put up with so much in exchange. Take away pensions and the trade
becomes everything for nothing. …Take away pensions and the entire social contract
supporting the modern Russian state falls apart. That is the challenge facing Putin. He might find some solutions with the help of
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So he’s just posting Joe Rogan-certified “experts” and their fake TED Talks as his only source for entire videos now?
The boy who can go from telling you what “Putin Fears The Most” is onto “Why Cheasecake Factory Isn’t a Factory, but Good” in 23 days. You’d walk out of this if it was a classroom