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Friday, May 11, 2007

In Russia, Two Inflations . . . No, Make that Three

It's horrifying enough for a Western consumer to contemplate living with the overall consumer price inflation rate faced by Russians, which the country's Federal State Statistics Service (Rosstat) projects will be 7-8% in 2007.

But as La Russophobe has previously reported, the overall inflation rate is not the one that really matters in Russia. Rather, the one that matters is the price rise on the small "basket" of goods and services that the average Russian, who earns $2.50 per hour, can actually afford to buy.

Rosstat says Russian overall prices rose 0.6% in April, and 4% in just the first four months of 2007. That puts Russia on pace to experience 16% overall inflation this year, yet Economic Development Minister Herman Gref has said he believes actual price increases will be only half that total.

But the price rise on the basket of basic foodstuffs purchased by average wage earners didn't increase by 0.6% in April, its price rise was 30% higher -- 0.8% -- and for the first quarter the price rise for the basic basket of food was not 4% as for the general economy, but 5.5% (nearly 40% higher than the overall total).

Fruit Institute FreshPlaza states the the price of fresh fruits and vegetables rose at an even faster clip:

In January of 2006 fruit and vegetables amounted to 22% of the cost of the minimum food basket in Russia. Fruit and vegetables are the products which prices rose the most rapidly in between January and April of 2007. Vegetables prices rose by 6.5% on the average, including cabbage – by 14.5%. Prices of the fruit grew by 1.9%. Bananas and lemons became dearer - respectively - by 6.2% and 4.3%.
This is the same as saying that the average person's wage of $2.50 per hour became 5.5% less valuable in the first quarter of 2007 -- declining to about $2.35 per hour. Based on this precedent, an average wage earner could expect the value of his salary to fall because of inflation below $2.00 per hour by the end of the year.

And this is all based on data that the Kremlin admits -- but the Kremlin is the sole source of the data. Anyone even casually familiar with Russia knows perfectly well that the Kremlin would have no problem whatsoever fudging this data to hide the most embarrassing facts and make itself look better. In other words, this is the rosiest possible picture of the state of Russian consumer prices. The actualy reality is undoubtedly far bleaker, as anyone who spends time living with actual Russian people in the actual country of Russia knows full well.


Anonymous said...

This is Hector,

Well, I've said it before and I'll say it again. This is the result of capitalism in Russia, oh I mean "freedom and democracy". They were told their lives would be a paradise under capitalism, but instead got total economic misery. And again: those who hailed the fall of the Soviet Union have no right to criticize Russia on its current practices.

Alex said...

Hector you are a naive fool. Capitalism does not equal automatic improvement in the standard of living, without the Rule of Law and good governance - it leads to the trampling of the people, history shows this time and time again. When has Russia ever had the Rule of Law, or good governance for that matter? Simply 2 Oligarchy based governments (Putin has not destoryed or punnished the Oligarchs, simply transfered from one set of Oligarchs to another) leads to the individuals submission to will of the state and the states submission to corporate interests - this is what is currently happening in Russia. Capitalism, the Rule of Law and good governance can exist without democracy (probably not on a sustained basis), but democracy cannot exist with the Rule of Law and good governance (in States with real political competition, democracy encourages good governance, which is why this is more a sustainable form). Give up your freedom for a sense of security, you will end up with neither and the boot of tyranny will be stamping on your face before you know it.

Anonymous said...

This is Hector,

Alex, you are obviously a deluded stooge who can't make a clear comprehension to save your life. Capitalism only equals good living for a small minority ruling class. Site me one form of capitalism that has the "Rule of Law". My point is that people who attack Russia today have no right to do so. Putin and his ruling class are part of that very same clique that was cheered as upholding "freedom and democracy". The Soviet Union was not an oligarchy, but a degenerated workers state government by a bureaucratic caste, which is not a ruling class. Furthermore, capitalism is capitalism no matter how much deluded fools like you try to convince yourselves. Your apology for capitalist restoration in Russia is truly amusing if not sad. Soviet Russia under Lenin and the Bolsheviks was a workers democracy developing before the degeneration of it Stalin's bureacracy. The workers of Russia didn't not give up their freedom (what freedom?) for tyranny. The security and gains of the October Revolution still existed, but were underminded by bureacratic mismanagement and corruption. Years of these practices the system then becomes bankrupt, and the bureacrats then choose: defend the working class from counter-revolution or join the counter-revolution. No security in the USSR? Hmm, Soviet male life expectancy was 80 years (in the U.S its 70 years), one month paid vacation for workers (U.S two measly weeeks), free medical care (many Americans struggling with medical mills), free education (in the U.S education available only if you have money). No security? Sorry, try again. A lot of people in the ex-USSR and post-socialist Europe want the socialist system back. I saw plenty of nostalgia for it when I was in Prague.

Anonymous said...

This is Hector,

Typo correction: I meant to say "medical bills".

Alex said...

Hector, you are mistaken, male life expectancy in the USSR as a whole peaked at just above 70 in 1987, (the figure for Russia was 65 years), it never even reached anywhere near 80 (women's life expectancy approached it) - that is seen approaching in some Western European countries. Like I said before, capitalism is a system of economics, it can exist without the rule of law (system of justice), or representative democracy (political system). They can exist independently of each other, just as the rule of law can exist (although is much more fragile) without democracy, democracy can exist (again it is far more fragile) without the rule of law.
Your claim:
"Soviet Russia under Lenin and the Bolsheviks was a workers democracy developing before the degeneration of it Stalin's bureacracy."
Proves this point, No Rule of Law = no democracy when the whims of the (untouchable) elite decide it is inconvenient. The elite are untouchable precisely because they do not come under jurisdiction of the law. When the elite come under the jurisdiction of the law that is known as the rule of law. Like I said Russia has never had the rule of law - it has only ever been ruled by the whims of its elite - the Russian people seem quite happy with this, so the world could let them have it, and when the tyranny returns they will only have themselves to blame, while the world hopes that their tyranny will not be spread abroad....

It is my personal opinion that capitalists cannot be trusted (as the are naturally monopolists), and therefore must be moderated - so the rule of law is essential for the well being of society.
"The security and gains of the October Revolution still existed"
Civil war? Great idea of gains and security you have....

By the way I van give credible citations for my figures, can you?