Russia between fantasies and reality (2)

Paper kindly  translated by Anne-Marie de Grazia

The Russian government has distinguished itself by rather thunderous « liberal » declarations for many years.  Taken at face-value, they would imply that Russia is a paradise for the rich and an inferno for the poor. But if one is to look at statistics about the nature, the dispersion and the origin of revenues, the picture changes. In fact, Russia has taken a « social bend » since 2005. This bend has never been the subject of loud declarations on the side of the authorities. It is nevertheless evident today.  It has been made possible by the income from exports and through the general enrichment of the country. But it is also witness to the considerable sensitivity of the authorities, local as well as federal, to the social question.

Chart 1

Source : Comité d’État aux Statistiques de Russie

The existence of a small category of « super-rich » is well known. But the “oligarchs” should not hide from view the general enrichment of the population. In 2011, if the average income amounted to 713 euros per month, the median income hovered around 530 euros1, that is a relation of 1.34 between the average and the median. In 2005, this relation was of 1.39. Similarly, the threshold of poverty was at 37.2% of average income, when it fell in 2011 to 30.8%, and the number of persons living below this threshold, which was 21% in 2005 has dropped to 11% in 2011. Granted, one may challenge the criteria used by the Russian authorities and consider a higher poverty threshold. But even then, the dynamic of poverty reduction would be perceptible.

Of course, the average level of income remains low, and considerably inferior to what it is in  Western European countries. But the general level of prices is also low in Russia, with considerable differences between the Moscow area, where prices approach those in Western Europe, and the other areas (Volga, Urals, Siberia) where the price-levels are far lower. The emergence of a “middle class,” defined here by its consumption structure, is a reality in Russia, even if it still remains hardly developed outside the big cities of Western Russia.

One interesting point is that the average salary is 14.4% higher than the average income in 2011. This indicates that salaried incomes are higher overall than those of peasants and small shopkeepers. One must see in this the effect of the policies of salary-adjustments which have been carried out since 2005 in the area of services as much as in the administration and in industry, and due in the latter sector to the relative shortage of qualified workers.

A second significant observation resides in the composition of these incomes. It must be remembered that these numbers relate only to revenues originating in Russia. The relatively small part of revenues from property explains itself by the fact that many large private companies are no longer under Russian law, but under Swiss, Luxemburgish or other “tax-haven” law. Part of the income from property therefore does not appear in the accounts, a phenomenon which exists also in France and in the EU countries. Nevertheless, and even if one takes into account this problem of a minoration of revenues from property, one can see fairly distinctly the « social bend » taken by the authorities since 2005-2007 taking shape.

Graph 1

Source : Idem Tableau 1

Social transfers were low in 2005-2007. They have progressed considerably since, reaching no less than 18.2% of the total incomes in 2011. One of the reasons of this increase has been of course the crisis of 2008-2010. The steep hike in unemployment has forced the government to increase unemployment benefits. But the progressive return to full employment which one observes since 2010 has not translated into a decrease of social transfers, quite in the contrary. In other words, their increase was not only short-term and it did indeed signal a turn in government policies. Pensions for instance were upgraded by 35% in real terms during 2010. New benefits, federal as well as regional, have appeared (targeting isolated mothers in particular). The result of all this has been on the one hand a decrease of the percentage of the population living under the poverty threshold and,  on the other hand, a very steep rise of benefits in the origin of revenues, of which they made up, as said, 18.2% in 2011.

This raises another question, that of the share of the State in the origin of incomes in Russia. The share of salaries originating directly from the State (salaries of government employees, military pay) and from State companies (Gazprom, Transneft, Rosneft, etc…) is of 40% minimum, and probably higher. Indeed, since 2005, some salaries, like those of the medical personnel and of the teachers have been strongly upgraded in real terms (i.e. beyond the effects of inflation). In other words, considering the fact that salaries represent 67.5% of incomes, if the share of the State is 40%, it would represent 27% of the origin of incomes. When one adds to this the social transfers, as much as 45% of incomes would originate with the State, and this estimation must be viewed as a minimum. This should relativize the idea of a Russia totally converted to liberalism. Indeed, we are in orders of magnitude equivalent, if not superior, to those of the countries of continental Europe said to be of social-democratic tradition (France, Italy, Germany, Sweden). One can understand the ideological reasons which lead Russian authorities to stress their commitment to liberalism. But reality remains nevertheless quite different. Given the fact that the Russian tax system relies largely on exports (of oil and gas, especially), this does not translate into too heavy a fiscal burden for the population, but rather into a foreclosure on a share of the revenues from commodities, which is thus recycled into income for the population. It is therefore not misguided to ask oneself if Russia, since 2007, is not evolving towards a social (welfare-) State model which would match, in the area of incomes, the interventionist turn which has been observed in the areas of investments and production.

In so far as investments allow to improve productivity and to increase production in the rentier sector – and from this point of view, the rapid development of Rosneft and other companies in the hydrocarbons sector, as well as in that of metals, is a good example – such a model of a social State could prove quite sustainable. The implementation of this model of a social State does not appear to follow, seemingly, a well-made out plan. It is the result, on the one hand, of adaptative policies in response to the 2008-2010 crisis, and on the other hand, of the consolidation of social measures dictated, among others, by the demographic crisis Russia is going through. But, never mind it’s being the result of a non-intentional evolution, it confronts us nevertheless with a global development model. We would therefore be dealing, within the framework of a semi-authoritarian regime, with the development of a discourse totally disconnected from reality and serving only to reassure western markets.  When in reality, an interventionist-social model is developing, making use of the gains in productivity and in production of the commodities-sector, and of their valuation on external markets, with a more and more pronounced bend in the direction of Asia.

The Russian reality reveals itself, once more, quite different from appearances. The Depardieu affair, while reactivating fantasies of all kinds as well as the anti-Russian core of part of the French press, does not contribute to the objective examination of this reality.

Citation

Jacques Sapir, “Russia between fantasies and reality (2)”, published on the blog Russeurope 09/01/2013, URL: http://russeurope.hypotheses.org/709

Read the first article

Russia, between fantasies of “l’Affaire Depardieu” and reality, published 09/01/2013.

Translation

This article is a translation of Jacques Sapir, “La Russie entre fantasmes et réalité (suite)”, billet publié sur le carnet Russeurope le 05/01/2013


 

  1. We are reminded that the average is the relation between gross income and the total number of persons, whereas the median divides the sample into two equal parts. In a population in which the « super-rich » accumulate an important part of the income, the discrepancy between the average and the mean will be more important. []

Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s'est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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