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Tuesday, September 11, 2007

Annals of Russian Poverty

Kommersant reports the shocking reality of Russian poverty:

Five million families in Russia annually earn more than $30,000, according to the report of Rosgosstrakh insurer. The number grew by over 60 percent over a year. Given that the family size averages 2.7 persons here, roughly 13.5 million have the income above the medium one. Besides just wealthy, Russia has 160 families that are the millionaires in terms of the U.S. dollars and 12,000 families have revenues above $5 million. It isn’t surprising that 80 percent of millionaires live in Moscow and in the Moscow region. The wealthiest category of the Russians (revenues above $5 million) widened by a half past year. The families with revenues of $30,000 to $100,000 manifested the highest growth of 71 percent. The analysts calculated the revenues of the Russians by using indirect data, including the worth of the cars and real estate. The survey of Rosgosstrakh shows that the nation expects the revenues to go up by 46.1 percent in the following five years to seven years.
Translation? 95% of the Russian population has an income of less than $30,000 -- a figure which would qualify you as super-rich in Russia but would hardly even make you middle class in the United States. A tiny class of super-rich is aggressively forming like a bacteria culture in Russia just like the one that formed before the Bolshevik revolution that destroyed Russia and replaced it with the USSR. That's a sign of the apocalypse for Russia, especially since these people aren't even truly rich by world standards.

A shockingly unprofessional article from Reuters states: "an expanding middle class is enjoying prosperity unimaginable in the Soviet era." The article gives no details as to the alleged size of Russia's middle class, nor does it offer any definition of what constitutes "middle class" in Russia. If $30,000 is considered super-rich, then it's quite scary to contemplate what that definition might be. If you click through the link, you will see that this Reuters "news story" is actually a puff piece of self-advertising for a conference Reuters is going to sponsor, and quotes only Russian stock brokers. In other words, it's basically propaganda.

Finally, the Wall Street Journal reports:

The economy grew 7.8% in the first half of the year, according to official data, mainly driven by investment spending growth of more than 20% for the year and consumer demand, spurred by the increase in disposable income. Mr. Ulyukayev also echoed Mr. Gref in saying that consumer prices won't rise by more than 8% in 2007, the lowest annual rate since the breakup of the Soviet Union.

In other words, the rate of overall consumer price inflation exceeds Russia's rate of economic growth, totally destroying its value for the population. And, in fact, the inflation rate on the basket of goods that can be afforded by Russia's average monthly income is far higher than the overall rate, as we've repeatedly documented, and Russia's rate of growth occurs on such a tiny economic base, with such a huge population, that it is totally meaningless even without considering inflation.

It's classic neo-Soviet propaganda. They will compare rates of economic growth between the U.S. and Russia and claim that Russia is doing better (without acknowledging the obvious differences of scale between the two economies or the fact that Russian growth is dependent on oil prices), yet when the inflation rate is raised they will ignore the fact that if such inflation as Russia experiences occurred in the U.S., it would be viewed as an utter catastrophe.

Having read this, now look at what Russophile propaganda screed Russia Blog (which routinely publishes material from stock brokers and other businessmen seeking to profit by inducing foreign money into Russia) does with these three articles, and be outraged. Be very outraged.


Timothy said...

Yes, Russia was, and remains, largely a land of poverty by first-world standards; a bit of growth in the oil sector primarily enriching a few top executives will take an awful long time to trickle down to the average Russian, while skewing the GDP per capita statistic terribly. My family in Russia spent perhaps 50% of their income on foodstuffs and basic survival.

Do you really think massive inequality lead to the Bolshevik revolution? If so, then might not such a problem be a GOOD thing now, when the government in-power is one you want gone?

La Russophobe said...

Thanks for the comment. It could very well be a good thing, if only in the sense of being the only way these barbaric people can possibly affect change. But we are not great fans of communism, and important thing is that Russia may be fundamentally unstable under Putin, which is the opposite of what many believe. We're trying to warn the people of Russia about this, because changing regimes by collapsing their predecessors will sooner or later destroy the nation. At some point Russia has to reach a higher level of civilization if it is to survive long term.

Yes, we think massive income inequality was the key to the Bolshevik revolution, it provided the scintillating anecdotes that get people's blood flowing and move them to action. But more important, it made the rich power elite oblivious of the need to govern, and they became insulated and aloof, unable to preserve themselves. Of course, this same thing happened to the Soviet elite, which was quite ironic. Perhaps, it's the endless wheel of Russian history which will continue until the country is crushed to pulp.

Anti said...

One correction: consumer price inflation is usually factored into the economic growth indicator, i don't think Russia is any different in that regard. So the 7.8% growth is probably not eaten up by inflation.

La Russophobe said...


Thanks for the comment. It would be nice if you could actually document your claim beyond your suppositions (without this, it's not appropriate to use the term "correction"), and even if it is true the inflation rate being used as the "factor" is not the one that matters to the vast majority of Russians (i.e., the basic basic rate) but rather the overall rate, so the value of the growth rate is still being dramatically overstated.

Then too, a huge amount of Russia's growth is due exclusively to random rises in the price of oil, which is not in fact "growth" at all. On top of that, all this data comes from a government presided over by a proud KGB spy trained to lie, with a great motive to do so. His figures are a best case scenario, to say the least. It would be nice if you looked at both sides of the issue of overstatement.