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UPS And The Logistics Revolution




The word “logistics” has somewhat of an impersonal ring to it. When you hear it, you think: massive container ships, cranes, eighteen wheelers, aircrafts, conveyor belts, spreadsheets, contracts, and of course, boxes. It’s almost as if all of this infrastructure that moves our goods around the world, around the clock, is running by itself. 

But undergirding “logistics” is one indispensable element: Workers. Millions of them, without whom the colossal flow of goods and services would come grinding to a halt.

In this episode of The Upsurge, we ask how our modern logistics giants, like UPS – and the Teamsters that keep it running – came to wield so much power. It’s a story of gradual but gargantuan changes in the global economy, the “modernization” of production and distribution. But it’s also a tale of struggle over the management and organization of work between unions and corporations

We spoke to Joe Allen, a historian, activist, and truck driver who was a UPS Teamster for almost a decade. He is the author of The Package King: A Rank and File History of the United Parcel Service (Haymarket: 2020). Joe unpacks some of the history of UPS as a company, how it fits into the larger Logistics Revolution in global capitalism, and what it means for workers’ potential for building economic, political and social power. 

Additional links/info below…

Hosted by Teddy Ostrow
Edited by Teddy Ostrow
Produced by NYGP & Ruby Walsh, in partnership with In These Times & The Real News
Music by Casey Gallagher
Cover art by Devlin Claro Resetar


The following transcript has been edited for length and clarity. 

The word “logistics” has somewhat of an impersonal ring to it. When you hear it, you think: massive container ships, cranes, eighteen wheelers, aircrafts, conveyor belts, spreadsheets, contracts, and of course, boxes. 

It’s almost as if all of this infrastructure that moves our goods around the world, around the clock, is running by itself. The wonders of technology.

But undergirding logistics is one indispensable element. Workers. Millions of them, without whom the colossal flow of goods and services on which we’ve grown dependent, would come grinding to a halt.

Teddy Ostrow: Hello, my name is Teddy Ostrow. Welcome to the Upsurge, a podcast about UPS, the Teamsters, and the future of the American labor movement.

This podcast unpacks the unprecedented labor fight this year at UPS. In July, the contract of over 340,000 UPS workers will expire and if those workers strike, which is a real possibility, it will be the largest strike against a single company in US history.

The Upsurge is produced in partnership with In These Times and The Real News Network. Both are nonprofit media organizations that cover the labor movement closely. Check them out at and where you can also find an archive of all our past episodes.

And now for our episodic plea: Please remember, we are an entirely listener-supported podcast. We don’t play ads. We depend on you to keep the show going. So if you like the show, please become a supporter of our Patreon at You can find the link in the description. 

Hairspray for Houston. Dog food for Dallas. Samples to Sydney. A contract for Kansas. Sorting parcels seems so simple. The goods come in, they’re sorted, but then they leave. But when your warehouse is bigger than 90 football fields and you’re handling 2 million packages a day, there’s no room for a snooze at UPS.

You can hear the CNN newscasters’ awe with the truly breathtaking infrastructure of UPS’s Worldport air hub in Louisville, Kentucky.

Assisted by 155 miles of conveyor belt, 20,000 UPSers work here, sorting up to 416,000 packages per hour, loading and unloading trucks and planes at the facility’s 70 aircraft docks, where millions of packages are delivered to more than 220 countries and territories around the world. 

The head-spinning operations at Worldport make clear that UPS is not simply a package delivery company, but a multi-national logistics corporation.

Some of us may remember UPS’s ad campaign a decade ago, with the tagline “We Love Logistics”.

In this episode of The Upsurge, we’re zooming out and looking at UPS within a larger process that has occurred over the last several decades: the logistics revolution. 

The Teamsters, a union founded in 1903, has come a long way since its humble origins representing workers who drove carriages pulled by teams of horses.

That story is one of gradual but gargantuan changes in the global economy, the “modernization” of production and distribution. That is, a revolution in how goods are transported to markets, and in how goods are then sold to consumers. 

But it’s also a story of changes in how workers are organized and managed, by both their unions and their companies.

I could think of no better person to talk about this than Joe Allen, a historian, activist and truck driver who was a UPS Teamster for almost a decade. He is a contributor to the online publication Tempest and the author of The Package King: A Rank-and-File History of the United Parcel Service, published by Haymarket Books.

Now, I just want to say that The Upsurge is seriously indebted to Joe Allen and his work. 

So much of my personal learning came from The Package King and from talking with Joe directly. And I know I’m not alone in that.

I really think if you want to understand the importance of the Teamsters’ contract campaign this year, there’s no better work than The Package King. This episode is based on a chapter in the book.

Which is why I was so excited to finally bring Joe on the show to discuss some of the history of UPS as a company, how it fits into this larger logistics revolution in American capitalism, and also how the Teamsters fit into that process too. 

As Joe makes clear, the rise of logistics in the global economy has also meant the rise of workers’ potential for wielding serious economic, political and social power. The Teamsters contract campaign is one major juncture on the road to work power. 

I hope you’ll learn from Joe as I have.

Teddy Ostrow: Joe Allen, welcome to the Upsurge. 

Joe Allen: Thank you. I’m glad to be here. 

Teddy Ostrow: You should probably file a grievance against me for not getting you on the show sooner.

Your work has really inspired us and I’m really excited to chat with you on the show. To get started, I’d like to ask a deceivingly simple question. What is logistics? I feel like the pandemic injected this phrase into our psyches, our everyday conversations, as well as the phrase, “supply chain”.

Can you explore that concept for us? 

Joe Allen: Well, I think it’s become a buzzword. You know that, on one hand if you say it, it implies that everybody knows what you’re talking about. To some degree, the idea behind it is pretty simple and pretty basic, in its most simple form.

It’s, you know, how do you get goods to consumers; from the plant, the manufacturing facility, to the people who have bought it? That’s still in some sense the basic idea of logistics though, for some people at least, it has a kind of military ring to it. 

That’s not an accident. But I think the modern discussion of logistics is on a much grander scale. It means talking about the organization of entire supply chains, which has, you know, occurred for two reasons. One, technological changes: that is, modern air fleets, containerization, the vast expansion of ocean transport, the vast expansion of trucking. All these things come together, but it also means a kind of reorganization of production that allowed for the emergence of these enormous retail giants. Walmart being the kind of trendsetter for this, starting in the late sixties through the seventies, and then becoming a massive corporation during the course of the 1990s, becoming one of the largest private sector employers in the country, which it remains today.

Of course, Amazon, which is both a delivery company and a retail operation. This also applies to the big transportation giants. So, Amazon, Walmart, UPS,, FedEx, DHL, and major post offices in the United States and other countries have emerged as major players and major employers. They sell themselves to major corporations as not just people who just deliver your goods, but they can organize your whole supply chain from where something is manufactured, through how it’s distributed. In the case of the big retail giants over the years, what they’ve tried to do is cut out more and more and more middlemen.

The supply chains themselves have become lean, to use another buzz phrase. They’re exchanged with fewer and fewer hands, and they move quicker and quicker across the globe. It’s clear that the breakdown of global manufacturing and distribution caused by the covid pandemic means that there’s gonna be a reassessing and, and in some sense, we’ve begun to see this reassessing of where production takes place.

So, we’re seeing the reshoring of a lot of manufacturing that used to take place overseas, back in the United States. I think we’re only at the very beginning, but I think we have turned a corner on that.

At the center is the emergence of these huge retail corporations. Walmart, Amazon, Home Depot, Target, and the various transport companies, whether they be UPS, FedEx, DHL, and a whole array of what we call freight.

The industrial working class and the industrial labor movement, which through the late nineties went through these gut-wrenching changes, where unions such as the old Teamsters and the UAW and the steel workers, and you know, related industrial unions who were seen at the heart of the industrial working class really were hollowed out.

Now we’ve seen a kind of regrouping of industrial workers in large workplaces, particularly in the big distribution companies, like Amazon or UPS. So the potential for building a new industrial labor movement is here. The question is, can it be done by the existing unions; do they have to be really changed fundamentally to take advantage of it? Or do we have to create new ones? I think that’s really the big question out there, and I don’t think we have an answer to that yet.

Teddy Ostrow: Part of the goal of this podcast is to unpack what brought us to this moment, when 350,000 Teamsters could shut down a massive pillar of US logistics, UPS and you dove into this history already a little bit. But let’s go back a little bit further in time, and describe this longer process that could be called the logistics revolution.

Can you help us understand what that is? More specifically, how do these courier companies, with an emphasis on UPS, fit into that?

Joe Allen: If you look at UPS, here’s a company that begins in 1907 in Seattle as a bicycle messenger service. So how is it that 125 years later, it’s a global corporation employing half a million workers, that flies to 220 countries and territories a day, and has a massive delivery fleet of 60,000 package cars?

I mean, it has to tell us about something that changed in manufacturing and distribution over the last century. UPS in particular for a long time was a kind of boutique delivery service. It was oriented mostly towards department stores, when people would go in, there was a certain glamor. Part of that was that department stores would wrap your packages and you wouldn’t take them home. And you would be handed off to a UPS, which would then a day or two later deliver these to your home.

That went on for a very long time. And UPS was very good at it. UPS starts out on the West Coast and then in the 1930s makes a leap to New York City. It buys out a lot of local delivery companies, or it just kind of takes over their contracts with many of the big department stores, and that’s what kind of UPS was known for, for the first quarter-century of its existence.

What happens really is World War II, and you have a global war in which the major powers of the world launch a war to see who’s going to be the dominant power, which necessarily requires production, the moving of goods and the moving of armies all across the globe.

This produces a kind of revolution in thinking about the role of distribution and shipping for warfare. You saw some of this during World War I, but it’s on a much grander scale in World War II and afterwards. Much of this new thinking was brought into the business world.

This didn’t all happen overnight. If you go back and look at what the United States looked like at the end of World War II, its ports were pretty backward. There was no GPS, there was no barcode, there were no computers. There was no satellite information system.

Containerization was just a thought in some people’s heads. There was no auto industry on that scale that we saw later; after the war, trucking exploded. So here are parts of the puzzle working their way towards a common goal, but in a very jerky fashion.

It’s really in the 1960s and 1970s that some of the technological changes; the growth of an interstate highway system, this new level of air and ocean transport, create the possibility of reorganizing production on both a global scale, and quickening the pace of getting goods from the plants and manufacturing facilities into the hands of consumers.

In a lot of ways, Walmart becomes the model for that. Sam Walton took what was a fairly small regional company and turned it into a massive American-style, corporate entity, cutting out the middlemen so that he could sell products as cheaply as possible.

He became very successful at that. That was later taken over and extended on a different level by Amazon. During this time, UPS goes from being a boutique delivery service to slowly but surely becoming a 48 and then 50-state corporation. 

Because remember, one of the things about the New Deal is that it tightly regulated the trucking industry for a period of 40 years. It, microscopically, organized the industry which created both stable jobs, and it was something that the Teamsters Union relied upon. It created a stable industry and allowed them to grow, to be really the dominant force in the trucking industry.

They had 2 million members about the late sixties, early seventies. Most trucking companies were tiny compared to it. But underneath this surface, there are the things you see, the things you partially see, and the much bigger historical forces that you don’t really see in the background, but are animating something else that’s gonna produce a big change.

During the 1960s, the Teamsters reached the height of their bargaining power under Hoffa, with the National Master Freight Agreement. And UPS is still a growing company, but on the edge of the freight industry, underneath all that, there are these big changes going on, that the union’s partially aware of, but partially ignoring at the same time.

During the course of the 1970s and 1980s,  there’s a big push to deregulate the trucking  industry. UPS had become known as the quiet giant of the freight industry. It explodes from the late sixties, employing about a hundred thousand people to by late 1990s employing nearly 200,000.

One of the things that makes UPS different is that it had a fairly uniform system of what it took for packages, what were called parcel post, but they had a national system for bringing them in, distributing them, and so forth.

It was a very streamlined, very focused business, and they did it very well. They basically created a situation where they were one of the major benefactors from deregulation of the industry. At the same time, what made them an anomaly is that they were a union company.

Most of the modern big transport and  retail companies are non-union. The older logistics, industry, rail, are union. They’re highly regulated, but they’re union. Most of the current modern ones are non-union. So UPS inhabits this kind of odd space of both being one of the great benefactors of deregulation and being a unionized company at the same time.

What  this means politically is that within the Teamsters, they’ve become a kind of union within a union. Right now they make up anywhere from 330,000 to 350,000 members, depending on seasonal fluctuation.The Teamsters have about 1.2 million members, so over a quarter of the union are UPSers. Even though the Teamsters have national contracts with other trucking companies, there’s nothing that compares to the size and importance of UPS. 

So they’ve become heavily dependent on it and through most of their recent history, unfortunately, the Teamsters have had a cooperative relationship with the company. In exchange for concessions—for example, the difference between the pay for part-timers and full-timers; where part-timers still make up nearly two-thirds of the workforce—they’ve helped subsidize the massive growth of UPS, at every stage of the way during its modern history. From the 1980s onward, really quite at the expense particularly of part-timers in terms of wages, but also in terms of the working conditions that whether you’re full-time or or part-time are quite horrendous and exploitative.

During this time, we’ve seen this kind of retail revolution. We’ve seen a logistics revolution. We’ve also seen something of a revolution in labor relations where the Teamsters have both declined in terms of their presence overall, but have grown more dependent on UPS to be a viable national union, which creates all sorts of contradictory pressures.

Teddy Ostrow: That’s a really good point, and I want to dig more into the Teamsters in a few minutes. But first, you sort of began to mention this: what has the pandemic done for UPS? I think also this may be a good time to bring in the question of how Amazon fits into this landscape.

Joe Allen: I think one thing that the pandemic did was accelerate trends that already existed. On a global scale, it accelerated the rivalry between the United States and China in particular. 

Since 2018, and this obviously accelerated during the pandemic, both Amazon and UPS—and I’m sure this is true of FedEx—their workforces have substantially expanded.

During the first year of the pandemic especially, but I think it’s been true overall, more people were at home and they had to order online for the things that they would have previously gone to local shops or department stores or supermarkets to get.

Even companies like Walmart, Target and others, who still have a substantial brick and mortar presence, had to shift towards making more and more home deliveries of their products. I think since 2018, UPS claims that they’ve put on 50,000 more workers, most of whom are Teamster members. At the same time, we should recognize that at both Amazon and UPS, the turnover rate, particularly among part-timers, is incredible. There are some estimates that if you look at it annually, there’s something like a 90% turnover rate. As somebody who was around the 1997 strike and has written about it, when the union achieved a hands-down victory, creating 10,000 new jobs out of existing part-time positions…if you were to tell me 25 years later, that the model for the logistics industry was a 90% annual turnover rate, I wouldn’t have believed you. And yet they’ve been able to do that and sustain that model for all these years, and that creates real organizing problems, whether it’s Amazon or organizing an existing union workforce like UPS. If you have so many people who leave on such a constant basis, that creates a very difficult situation for organizing. 

Teddy Ostrow: I think in general when we think about logistics, you get the sense that these processes of moving things around the world are almost automated. You know, everything’s on a belt sorted by machines, but people or labor, does have an enormous role in this that you’ve touched on. How does labor fit into this process that you’ve been describing over the last hundred years, and specifically how do the Teamsters fit into it?

Joe Allen: I think in general, people who see themselves as socialists or labor activists shouldn’t fear technology because technology should always be used to do away with the most dangerous of work, to do away with drudgery, things that could lead to illness or injury.

That’s the promise of technology. Of course, the problem is that in the hands of the capitalist class, it’s used for increasing exploitation and surveillance. For most people, every time you hear technology, it either means I’m gonna lose a job or I’m just gonna get screwed over more and more.

When you look back over the last 100 years, there’s a couple of things to keep in mind. While technology can be devastating in particular fields like the mining industry, much of the talk of technology just wiping out whole workforces has really proven not to be true.

Overall what we see is that workers are more important than ever before. It’s not really about technology replacing workers, it’s about technology being used to exploit people more and more. Whether you are a UPS driver or a package car driver doing a pickup, it goes into a warehouse where they have to be unloaded by people unloading trucks to people who are sorters, who are then sorting them into trailers for another hub. Or they’re being sorted to be loaded onto trucks, which then have to be driven out by drivers who have to hand them to businesses and workers.

So, workers are still absolutely essential to the system. One of the things that UPS tries to do is to try to introduce as much technology as possible to minimize the amount of hands on packages. When you look back to 1968, UPS delivered more parcel posts in the post office. They had about a hundred thousand employees at the time when Ron Carey led the strike against UPS. In 1997, 185,000 Teamsters went out on strike.

Here we are, 25 years later, and despite all the talk of technology replacing workers, there are something like 330,000 to 350,000 workers who are members of the Teamster Union at UPS. The power of workers to shut down UPS has been demonstrated, though it has been muted and underused since. We’ll see come July 31st whether it’s used for the first time in the modern history of UPS.

Teddy Ostrow: Well, let’s bring the conversation more specifically now to the UPS Teamsters contract campaign. I’ve asked a couple times on this show, what a teamsters strike would mean for the broader labor movement, and I’d like to ask you the same question, but perhaps you can emphasize why it’s so significant that this is happening or could happen in the logistics industry.

What are the potentials we’re seeing here? 

Joe Allen: The national contract between the Teamsters and UPS doesn’t end until July 31st. We won’t really know until mid July where things are at, but I think there’s obviously a different model that UPS wants to impose on its workforce, that the teams rightly are resisting.

People call it Uberization, or the digitizing of the UPS workforce, they want a much more casual workforce. Something that doesn’t have what the heart and guts of the union are, particularly package car drivers who have fairly well defined wages and benefits and working schedules.

The Hoffa administration last time around made a series of concessions about creating a lower tier full-time package car driver and several other concessions about personal vehicles and contingent workers during some parts of the year that rightly inflamed a lot of people, which is why the contract was voted down, but then undemocratically imposed on the membership.

UPS is a very important corporation because on a daily basis, it moves something like two to 3% of the global economy. FedEx does a similar amount. So these are really important corporations.

UPS was a trendsetter in labor relations, both in terms of its repressive culture and the concessions wrangled out of the Teamsters in the early 1980. UPS today is so ubiquitous, it’s hard to think of a country without it.

It is just present and necessary for so many people. Under Hoffa, you went from kind of a high point of the Teamsters in 1997, where Ron Carey was the leader of this reform movement, this big strike that seemed to herald the rebirth of the American labor movement, and then found himself witch hunted out of the union. In this almost semi-coup, the federal government helped bring Jim Hoffa to power; the Teamsters then sunk back into this very predictable and languishing position for two decades. So the last couple of years, one of the things the pandemic produced was that these workers were absolutely essential, particularly industrial workers and truck drivers.

We’ve seen something of a strike wave in industrial America starting about two years ago. The Old Guard leadership split and Sean O’Brien and Fred Zuckerman came to power with a promise of a change in the fundamental direction of the Teamsters. The Teamsters are both important in terms of what they are as a union, but they’re also kind of culturally important.

Sometimes not for the best of reasons, in terms of Hollywood movies and films, but everybody knows the Teamsters. It’s hard to find someone who goes, I don’t know anything about the Teamsters. I mean, everybody knows something about the Teamsters.

So a strike at UPS not only has the potential of putting into motion something like 340,000 workers, and shutting down a very important corporation. It has the possibility of elevating the struggles that we’ve already begun to see throughout the industrial sector of the economy and some of the new organizing and the possibility of  injecting that spirit and organizing into  the larger non-union sector of the logistics industry, most notably Amazon.

We shouldn’t forget about FedEx and a lot of the big major trucking companies. I think people tend to be attracted not necessarily to the specifics of any contract settlement, because, you know, companies can be very different in terms of job classifications and pay; what they’re attracted to is a sense that there’s a union that’s fighting and moving forward.

So if we do see the type of struggle that could take place—and I still lean towards there being a strike right now—it could capture the imagination of people who want a union, but want to join something that they feel is fighting for them.

Teddy Ostrow: I think we all agree that a Teamster victory at UPS would be pretty huge. But looking beyond the Teamsters, what do you think is needed? To expand organizing and to build power in that industry, including on the rails and the air, on the docks, just across logistics.

Joe Allen: I think one of the things about the rail contract dispute last fall is that, for the first time, at least in my political life, discussions of the conditions in the rail industry were national news for several months.

That was extraordinary in and of itself. Part of that was because the working conditions of rail workers were shocking to most people because if there’s one industry in the country that’s had unions for over a hundred years, it’s the rail industry. I myself found it shocking.

But it also goes to show you that the labor laws that existed in this country, specifically the Railway Labor Act, but this is also true of Taft Hartley, which governs most private sector, is highly repressive. And really, it’s used to squash the fights that we need to make things better.

But we’re not gonna get real labor law reform until we have millions of more workers who are not only in unions, but are also prepared to fight for that type of political agenda. I keep coming back to some of the lessons from the 1930s and the 1970s. There’s always gonna be sentiment to fight, and we’ll always see workers prepared to kind of take action to do stuff, but we also need people with radical politics who have a broader vision of how to shape the labor movement and move it forward and to overcome a lot of the divisions that exist within the movement.

One of the reasons why UPS has been so successful over the decades, has been able to push through a lot of these concessions, is not just having a compliant leadership, but having a highly divided membership, There are few workplaces, particularly a unionized workplace like UPS, where you have on one hand extremely, highly paid feeder drivers, the best working conditions you can get as a truck driver, through a myriad of jobs down to the lowliest part-timer, unloading trucks in the middle of the night, in the middle of nowhere. Trying to bring that kind of highly divided, very disparate workforce where issues of race and gender and immigration status intersect, and weave through all these issues into one group of people who can fight around common demands is not an easy task. It was achieved in 1997. We need it to happen now, but that just reflects the broader divisions that exist within the American working class in any major industry, in any major trucking or transport company.

We need people who have a political vision of that. A labor movement is not just about wages and working conditions, but it’s also about fighting racism and sexism and fighting against anti-immigrant bigotry or transphobia. Those are the things that divide, or potentially can unite workers on a daily basis in a workplace. That lack of imagination, that lack of politics is still kind of marginal to the labor movement, and I think that’s one of the things that has to change.


Teddy Ostrow: What didn’t make it into this episode, but I think is important to note, is that there are complicated and contradictory relationships between all of the logistics giants mentioned in this episode. For example, UPS and Amazon both rely heavily on the US Postal Service to deliver a large number of their products, in many ways exploiting a beloved public institution that has suffered political attack over the decades, which has created the opportunity for these private companies to expand so rapidly.

Meanwhile, Amazon is UPS’s biggest customer. UPS delivers a huge portion of Amazon parcels, even as it fears the exponential growth of Amazon’s own delivery infrastructure. So while there’s competition between these companies, Joe emphasized that there’s also significant cooperation.

Because of that, workers at each stop on the supply chain, at each logistics pillar, have remarkable leverage against the whole system. The power of these workers is immense and right now we are watching how the Teamsters will choose to wield it.

The podcast was edited by Teddy Ostrow

It was produced by NYGP and Ruby Walsh.

Music is by Casey Gallagher.

The cover art was done by Devlin Claro Resetar.

World News

Australian National Review – Putin’s Response To WSJ’s Ann Simmons When Asked If He Wants To Rule The World





Putin’s Response to WSJ’s Ann Simmons When Asked If He Wants to Rule the World

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Click Here To Play the Video


Vladimir Putin’s annual news conference


The President’s news conference was broadcast live by Rossiya 1, Rossiya 24, Channel One and NTV, as well as Mayak, Vesti FM and Radio Rossii radio stations.

Television channel Public Television of Russia (OTR) and its site ( provided live sign language interpretation of the news conference.

The host broadcaster of the event is the National State Television and Radio Broadcasting Company (VGTRK).

* * *

President of Russia Vladimir Putin: Good afternoon, colleagues, friends.

Let us begin our traditional end-of-year meeting that we call a news conference.

As always, I will spend just a few brief seconds to sum up the results of the outgoing year. A lot has been said already, but I have the latest data reflecting the most recent results, some just a couple of days old.

Before the beginning of Vladimir Putin’s annual news conference.

In the first nine months of 2018, GDP increased by 1.7 percent, while the Economic Development Ministry expects the annual increase to total 1.8 percent. Industrial output was growing at a faster pace, totalling 2.9 percent in the first ten months of 2018, with the annual results expected at 3 percent, up from a 2.1 percent growth in 2017. In addition, processing industries have been growing at a somewhat faster pace of 3.2 percent.

In the first three quarters fixed capital investment increased by 4.1 percent. Cargo shipments and retail trade are on the rise, having increased by 2.6 percent. Consumer demand growth has been apparent. This is a positive factor. After a lengthy interval, the population’s real income has shown some, albeit very moderate, growth. According to the latest statistics, real incomes will increase by 0.5 percent. I hope that this momentum will be maintained, since real pay levels are on the rise, having grown by 7.4 percent in the first nine months, which is expected to give us 6.9 or 7 percent by the end of the year.

Inflation remains at an acceptable level, although it has increased a little in the past week, by 0.5 percent, I think. Therefore, we will be able to reach the Central Bank’s reference rate of 4 percent and will have an inflation rate of 4.1 percent to 4.2 percent – somewhere just over 4 percent.

The unemployment rate is going down, which is good news. If last year it hit a historical low of 5.2 percent, this year it will be even lower – 4.8 percent.

The trade balance surplus is growing. In 2017, if you remember, it was around $115 billion. Over the three quarters of this year we already achieved $157 million. As of the end of the year, we expect it to reach $190 billion.

Our finances are growing stronger. Our gold and foreign currency reserves have grown by over 7 percent. In the early 2018, they amounted to $432 billion while now they stand at almost $464 billion.

For the first time since 2011, we will have a budget surplus. We are about to reach the federal budget surplus of 2.1 percent of the GDP. The National Welfare Fund has grown by around 22 percent.

The average annual insurance component of the retirement pension stood at 13,677 rubles in 2017. By the end of this year, it will be 14,163 rubles.

Life expectancy has also increased slightly compared to 2017, from 72.7 to 72.9 years.

These are the general results that I wanted to mention in the beginning. Let’s not waste our time and proceed to your questions and my attempts to answer them.

Presidential Press Secretary Dmitry Peskov: Let us begin by giving some priority to the Kremlin pool. Its members worked with us throughout the year, following the President both in Russia and abroad.

ITAR-TASS, the state news agency.

Veronika Romanenkova: Thank you.

The year 2018 arguably went by under the sign of new national projects that you launched with the May Executive Order. They are expected to cost an enormous amount of money. However, some experts, members of the State Council, as was mentioned in Yalta only recently, have questioned the feasibility of these national projects and whether they are needed. How well thought out are the performance assessment criteria for the national projects? For example, the Accounts Chamber Chairman said that there is no way to assess their effectiveness. What can you say to counter this?

Before the beginning of Vladimir Putin’s annual news conference.

Vladimir Putin: I will have to begin by saying a few words on whether these projects are needed, since you said that some question this.

I have said it on numerous occasions, and I will repeat it today. We need a breakthrough. We need to transition to a new technological paradigm. Without it, the country has no future. This is a matter of principle, and we have to be clear on this.

How can this be done? We need to focus the available resources, find and channel them to the essential development initiatives. How can these efforts be organised? By simply distributing money, and that’s it?

First, we had to find this money. It took us the entire year 2017 to articulate the objectives and find the resources. Both the Government and the Presidential Executive Office contributed to this effort. By the way, when some call for more changes within the Cabinet, we have to understand that it was the Government’s financial and economic block that developed the national development programme to 2024. For this reason, they are the ones who must take responsibility for the plans they made. There is no way around it.

So how should this effort be organised? By simply distributing money? After all, as much as 20.8 trillion rubles are expected to go into the national projects alone, and another 6.5 trillion will be invested in a separate infrastructure development plan. Of course, the allocation of these resources has to be set forth in documents of some kind on achieving breakthroughs. You can refer to these development plans any way you wish. We call them national projects. After all, it makes it clear that there are goals that have to be achieved. If there are no objectives, you will never achieve the final outcome, no matter how you manage these investments. It is for this reason that the 12 national projects were developed alongside an infrastructure development plan. Let me remind you of the main vectors.

Healthcare, education, research and human capital come first, since without them there is no way a breakthrough can be achieved. The second vector deals with manufacturing and the economy. Of course, everything is related to the economy, including the first part. But the second part is directly linked to the economy, since it deals with the digital economy, robotics, etc. I have already mentioned infrastructure.

Why did we have this meeting in Yalta, Crimea, to discuss with our colleagues from the Government and the regions how we will proceed in these efforts? Because there are questions on how to assess performance under these projects. We need effective controls, while making sure that all efforts by the federal centre to monitor what is happening in the regions are effective. It is true that there are challenges in this regard, but we are working on them. So what is the tricky part? The tricky part is that funding mostly comes from the federal centre, and this applies to all programmes, while most of the efforts are undertaken in the regions. The regions must be ready to work constructively. Instead of simply hiking up prices in response to an increase in the available funds, they must focus on achieving concrete results that will be clearly visible. This is the first point I wanted to make.

Second, we need to understand whether they will be able to succeed. This is a real question. Some argue that this would be impossible. But this is what we hear from those who must deliver. Instead of having these thoughts they need to work on delivering on these objectives, and if they feel that they are unable to do so, they have to clear the way for those who are positive about their ability to deliver and are ready to work. To tell you the truth, I have not seen anyone who did not want to do it or said that it was impossible. These messages come from outside observers.

Without ambitious goals we will never achieve anything. For this reason, I do hope that the federal centre and the regions will be able to work together in a consolidated and positive manner. Yes, some indicators have to be adjusted. Our colleagues from the regions have submitted their proposals to this effect, and I have high hopes that the Government will take them into consideration and adjust specific indicators so that we can move forward effectively…

Before the beginning of Vladimir Putin’s annual news conference.

Pavel Zarubin: Rossiya TV channel.

I would like to expand on a topic that has already been raised. Many economics experts, including Alexei Kudrin, assert that in reality, the Russian economy has been growing just by one percent on average over the past ten years, and if so, this is essentially marking time, or stagnation. You set the goal of making a breakthrough, a leap, but for this, even if we take the lowest estimate, the growth rate should be at least four to five times higher. The Government promises to achieve the goal, but that same Government acknowledges that in the next few years, GDP growth rates will not exceed even 2 percent. In this regard, here are my questions: what does the Government rely on in its forecasts, in the planning of its work? Is a breakthrough possible at all, in this context, or will the economy continue operating like this: we make some money on oil surplus, put it aside, then spend it when there is a need for it? In general, are you satisfied with the Medvedev team?

Dmitry Peskov: Friends, I would ask you please to respect each other – ask only one question each.

Vladimir Putin: Look, economic growth has been one percent per year for a certain period of time. But, first of all, it was while Mr Kudrin was Deputy Prime Minister, so you must not blame the mirror for showing a crooked face, as they say. This is the first point.

The second is, one should not just count mechanically. I have great respect for Mr Kudrin, he is my friend and a good professional, and as a rule, I listen to his recommendations. He is a reliable specialist, a good one. But look, from 2008 to 2018, the economy grew by about 7.4 percent. In simple maths – yes, it equals one percent, a little more. However, let us not forget how the economy developed. There were higher growth rates, alternating with recessions associated with the global crisis. In 2009, after the crisis in the global economy, not in ours – Russia was not the cause of the global financial crisis of 2008–2009, it came to us from the outside – the decline was about 7.8 percent. Then little by little, we were crawling out of it for many years.

Then, in 2014–2015, another meltdown occurred – a collapse in the oil prices, our main exports. That is why I am saying we should not simply count mechanically.

However, of course, the country’s GDP, the GDP growth rate is one of the main indicators. But we will not be able to achieve the GDP growth rates necessary for this breakthrough unless the structure of the economy is changed. This is what the national projects are aimed at, and why such enormous funds will be invested, which I have already said – to change the structure and build an innovation-based economy. The Government is counting on this, because if this happens, and we should all work towards this, then the growth rates will increase and there will be other opportunities for development.

By the way, you mentioned the projected 2 percent growth for the next two years. Yes, in the next years, 2019–2020, two percent each, but from 2021, the Government is already planning 3 percent, and then more. Therefore, I strongly hope that we will manage to do all this. Some fluctuations are probably possible, but, I repeat, the most important thing is that we need… Do you see what we need to do? We need to join another league of economies, and not only in terms of volumes. I think that taking the fifth place in terms of volume is quite possible. We used to rank fifth in terms of the economy, in purchasing power parity, and we will do it again, I think. However, we need to ascend to another league in terms of the quality of the economy. This is what our national projects are aimed at.

Pavel Zarubin: Are you satisfied with the Medvedev team?

Vladimir Putin: Overall, yes.

Question: Good afternoon.

Mr President, in my city of Volgograd we had a wonderful year. We celebrated the 75th anniversary of the Battle of Stalingrad. You made it a federal holiday and we really appreciate it. You also paid us a visit.

Vladimir Putin’s annual news conference.

We successfully hosted the World Cup and our region indeed began to breathe and develop.

There is a lot that still needs to be done. I think the economy will be extensively discussed. But Volgograd residents have a big wish and a great favour to ask. In 1998, the Kacha Higher Military Aviation School of Pilots, which had a very long history, was shut down.

It was established at the Tsar’s decree in 1910 and we were truly proud of it and want to be proud of it further. We want the military traditions to live on. Please consider re-opening it.

Vladimir Putin: In which year was it shut down?

Remark: In 1998, unfortunately. It had the Order of the Red Banner and a long history.

Vladimir Putin: You see, it is already 2018. It happened 20 years ago and I do not quite know what is left of this legendary school.

You are right, it was indeed a legendary school. But the Russian Defence Ministry plans personnel training resources based on whether there is a demand for specific types of personnel in the Armed Forces.

Therefore, we need to look at what can be done not only to remember it but perhaps to preserve the remaining traditions. I will make sure to look into this and consult with the Defence Ministry.

Maria Balyuk: Mr President, good afternoon. My name is Maria Balyuk, I represent the Prime news agency.

Mr President, the budget in the current year and the next year will have a surplus. However, starting January 1, a number of decisions are coming into effect that may cause a significant increase in prices of a wide range of goods and services.

For example, the VAT will increase to 20 percent, which has already triggered a two-stage increase in the housing and utilities rates next year. There is also the new tax for self-employed persons in pilot regions. Please tell us how these measures agree with the state’s economic policy.

Vladimir Putin: Housing and utilities rates in two stages, and what else?

Maria Balyuk: And, for example, a tax on self-employed people in pilot regions.

Isn’t this amount of new measures too much of a burden on Russians and the economy?

Vladimir Putin: You said about the surplus.

Yes, this is indeed a good indicator of the Government’s economic block performance. As I said in my opening remarks, for the first time since 2011 we will have a budget surplus of 2.1 percent. And this is good.

Let us not forget that as an oil producing country and a country that derives much of its revenue from selling oil and gas, we also have what is called a non-oil-and-gas deficit. This is what the country earns from selling products and services other than oil and gas.

Let me remind you that this non-oil-and-gas deficit was 13 percent in 2009, which is a lot. In the early 2000s, it was at about 3 percent, but the global economic crisis forced us to use our oil revenues to meet our social commitments and finance the Armed Forces, so we had to tap into the oil revenues.

Vladimir Putin’s annual news conference before the beginning of Vladimir Putin’s annual news conference.

In this situation, the non-oil-and-gas deficit surged into the double digits almost reaching13 percent, I believe. This was a very serious challenge for the Russian economy. We have now reduced it to 6.6 percent, and next year it is expected to decline to 6 percent and remain at this level for the next few years.

This is a very important indicator of economic resilience for the Russian Federation. Therefore, the increase in the VAT rate, among other things, is due to the need to maintain the non-oil-and-gas deficit at a certain level.

Second, in many countries VAT is 20 percent or even higher. It used to be higher in Russia as well, but we reduced it at a certain point. Now we have returned to a 20-percent tax rate.

However, the effective VAT rate for the overall economy will be below 20 percent since almost all benefits remain in place: for pharmaceuticals, children’s goods, and so on, including for IT companies. Many benefits have been preserved. With this in mind, the effective rate will be actually lower.

Finally, I do hope that the rate hike will be only a one-off measure with a possible slight increase in prices and inflation in the beginning of the year, after which the inflation will go down.

The Central Bank also seeks to prevent inflation from picking up. Only recently, the interest rate was increased by 0.25 percentage points.

While there are definitely both benefits and disadvantages to this decision, all this is done in order to prevent inflation and prices from growing. For this reason, I believe that the overall decision was correct and balanced, creating additional budget revenue and the possibility to deliver on our development plans as part of the national projects.

As for increases in housing and utilities tariffs, over the past years they grew by about 4 percent per year. It is true that next year there will be two hikes: the first one will be at about 1.7 percent, and the second one I think will be about 2.4 percent, but in total this still makes up 4.1 percent.

Why will the increase be spread out in two stages? The reason is that with a higher VAT, prices of some goods and services are expected to increase, and we need to make sure that the utilities sector does not come under stress.

For this reason, in order to shield companies in this sector from these developments and ultimately in the interests of the people, we decided to proceed in two stages. That said, the overall increase should not exceed 4.1 percent.

In some regions, where the utilities infrastructure requires major upgrades and bigger hikes are required, this can be done as an exception, and subject to federal Government approval.

Yekaterina Gagarina: Good afternoon, Mr President. My name is Yekaterina Gagarina. I represent the Rossiya TV channel in Novosibirsk.

The importance of the Akademgorodok 2.0 [Academic Town] project that you supported during your visit to Novosibirsk is obvious not only to Siberian scientists. This project is unique for the entire country.

But behind the technological component of this project there are a number of tasks of a similarly large scale. They include building housing, roads, kindergartens and schools. My question is what if our scientific ambitions crash at daily living problems? Will the scientists have somewhere to live?

Vladimir Putin: I would not want them to crash.

I understand that it is a very important part of the entire process. Of course, we will be working on this with the regional officials. When I visited Novosibirsk, I also spoke about this with my colleagues.

The first objective of the federal government is to honour its obligations related to the facilities which trigger the development of Akademgorodok – which, by the way, is the opportunity to earn money on these high technologies. The social component will definitely be carried out after this.

But if any additional action is required to resolve the scientists’ social issues, of course, we will try to do it. By the way, the mortgage sector has been growing lately. We will support it as well. It is growing very fast for everybody. The growth of the mortgage sector stands at over 20 per cent.

Vladimir Putin’s annual news conference before the beginning of Vladimir Putin’s annual news conference.

Full transcript 


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