Economic Cleavage
"Russia is Rich but the People Remain Poor" - Mark Hollingsworth, reporter at RussiaMind
Why Russia?
Russia's economic disparity has always been a deep-rooted problem. According to the World Bank, Russia's Gini coefficient*, which measures the equality of income, reached up to 40.1% in 2009, worsening since. (Wider income gap = higher coefficient) Once one of the biggest 'empire' of the world, strongest of the Eastern Bloc, and the superpower of Europe, Russia now staggers from the economic situation that it faces. Then, how, and why, did such happen? What were the historical causes for Russia economic downfall, and what are the dangers Russia faces due to it?
Historical Causes of Disparity
Poor v. Rich
- In 1991, when USSR was about to be disintegrated into thin air, newly elected president, and a reformist, Yeltsin announced that Russia will shift its economic stature into a market-oriented form.
- The transition from a state-controlled economy into a market-oriented economy caused great fluctuation, with many disruptions and opportunities for some.
- Using this chance, some oligarchs got rich quickly by “snapping up the country’s choicest assets in the turbulent post-Soviet period”, or in other words, they seized the opportunity to establish their own markets that would dominate the economy.
- Most Russians in the wealthy class control the raw material and their associated industry
- The conversion allowed more purchasing power for the average Russians, but the income gap has widened 8 more times than that of Hungary, 5 times more than that of Czech Republic.
- Now, Russia’s National Statistics Office categorizes a grand total of 31 million people, 22% of the population as below poverty line (which is not really credible)
Why Russia?
Russia's economic disparity has always been a deep-rooted problem. According to the World Bank, Russia's Gini coefficient*, which measures the equality of income, reached up to 40.1% in 2009, worsening since. (Wider income gap = higher coefficient) Once one of the biggest 'empire' of the world, strongest of the Eastern Bloc, and the superpower of Europe, Russia now staggers from the economic situation that it faces. Then, how, and why, did such happen? What were the historical causes for Russia economic downfall, and what are the dangers Russia faces due to it?
Historical Causes of Disparity
Poor v. Rich
- In 1991, when USSR was about to be disintegrated into thin air, newly elected president, and a reformist, Yeltsin announced that Russia will shift its economic stature into a market-oriented form.
- The transition from a state-controlled economy into a market-oriented economy caused great fluctuation, with many disruptions and opportunities for some.
- Using this chance, some oligarchs got rich quickly by “snapping up the country’s choicest assets in the turbulent post-Soviet period”, or in other words, they seized the opportunity to establish their own markets that would dominate the economy.
- Most Russians in the wealthy class control the raw material and their associated industry
- The conversion allowed more purchasing power for the average Russians, but the income gap has widened 8 more times than that of Hungary, 5 times more than that of Czech Republic.
- Now, Russia’s National Statistics Office categorizes a grand total of 31 million people, 22% of the population as below poverty line (which is not really credible)
How does it effect the society?
- Russia's rich oligarchs keep around 30% of the whole country's wealth, which, compared to countries, is around 15 times higher.
- Putin himself lamented that the richest Russians earn 16 times higher than those of the poorest citizens.
- However, he said the minimum wage would increase to meet the standard cost of living "in the next few years."
- Only the rich get sufficient education to reach higher degree of education, thus creating gap between chances in jobs.
- Russia's health care is available for everyone, but those who can actually afford private clinics get state treatment, and those who can't afford it are being shortchanged.
- There are egalitarian groups such as the hospital Saint Alexei, and Sisters of Mercy which offer free medical treatment for all citizens, but much more would be needed to salvage the helpless Russians.
- Russia's rich oligarchs keep around 30% of the whole country's wealth, which, compared to countries, is around 15 times higher.
- Putin himself lamented that the richest Russians earn 16 times higher than those of the poorest citizens.
- However, he said the minimum wage would increase to meet the standard cost of living "in the next few years."
- Only the rich get sufficient education to reach higher degree of education, thus creating gap between chances in jobs.
- Russia's health care is available for everyone, but those who can actually afford private clinics get state treatment, and those who can't afford it are being shortchanged.
- There are egalitarian groups such as the hospital Saint Alexei, and Sisters of Mercy which offer free medical treatment for all citizens, but much more would be needed to salvage the helpless Russians.
How does this affect the political participation?
There are numerous parties in Russia, and many different groups of people supporting different parties. However, that does not mean that the common people of Russia gets to influence the politics. For most of the common people, while many take part by directly voting and indirectly protesting, their voices are rarely heard in the real political scene, as the Oligarchs take full control of the the policy-making process. From 1991, wealthy Oligarchs have been keeping good relationship with the president, either by corruption or by undercover business, and had their full influence over Russian politics, when Putin was elected.
Until Putin came along, many Oligarchs were omnipotent, holding power in government and wealth at the same time. When Putin was elected president, he immediately struck down one of the most powerful Oligarch, Mikhail Khodorkovsky, threatening the Oligarchs to put them under control. Now, the Oligarchs must submit themselves to Putin, while they hold the real power in the economy and in the political scene. For Putin, to keep economy and politics balanced, he has to both control the Oligarchs' tyranny and keep their freedom to an extent.
All in all, the political participation of the common has decreased to voting in relatively small communities, and mostly in seats during elections. However, the real choices are made for the benefit of the Oligarchs and the rich people, with Putin on the top controlling to the best of his ability.
There are numerous parties in Russia, and many different groups of people supporting different parties. However, that does not mean that the common people of Russia gets to influence the politics. For most of the common people, while many take part by directly voting and indirectly protesting, their voices are rarely heard in the real political scene, as the Oligarchs take full control of the the policy-making process. From 1991, wealthy Oligarchs have been keeping good relationship with the president, either by corruption or by undercover business, and had their full influence over Russian politics, when Putin was elected.
Until Putin came along, many Oligarchs were omnipotent, holding power in government and wealth at the same time. When Putin was elected president, he immediately struck down one of the most powerful Oligarch, Mikhail Khodorkovsky, threatening the Oligarchs to put them under control. Now, the Oligarchs must submit themselves to Putin, while they hold the real power in the economy and in the political scene. For Putin, to keep economy and politics balanced, he has to both control the Oligarchs' tyranny and keep their freedom to an extent.
All in all, the political participation of the common has decreased to voting in relatively small communities, and mostly in seats during elections. However, the real choices are made for the benefit of the Oligarchs and the rich people, with Putin on the top controlling to the best of his ability.
Statistics
Graph 1: Y- axis: in dollars, X-axis: years
Graph 2: Y- axis: Gini Coefficient (0-100) X-axis: years
As shown from the graphs of (1) annual GDP per Capita, and (2) Gini Coefficient, from 2004 to 2007, when the economy was soaring up for Russia, the Gini Coefficient reached its peak. Thus, even though Russia is getting richer, the gap between the rich and the poor are widening.
Graph 1: Y- axis: in dollars, X-axis: years
Graph 2: Y- axis: Gini Coefficient (0-100) X-axis: years
As shown from the graphs of (1) annual GDP per Capita, and (2) Gini Coefficient, from 2004 to 2007, when the economy was soaring up for Russia, the Gini Coefficient reached its peak. Thus, even though Russia is getting richer, the gap between the rich and the poor are widening.
*Gini Coefficient: measures the income difference inside a country, mostly used by the World Bank. Zero equals perfect equality in income distribution.
Useful sites:
http://www.theguardian.com/world/2011/apr/11/russia-rich-richer-poor-poorer
http://www.wsws.org/en/articles/2005/03/russ-m11.html
http://en.ria.ru/russia/20120411/172748598.html
http://www.globalpost.com/dispatch/news/regions/europe/russia/130119/health-care-russia-income-inequality
http://rt.com/business/russia-households-wealth-creditsuisse-169/http://www.ibtimes.com/another-jailed-russian-oligarch-says-he-crossed-putin-796217
Useful sites:
http://www.theguardian.com/world/2011/apr/11/russia-rich-richer-poor-poorer
http://www.wsws.org/en/articles/2005/03/russ-m11.html
http://en.ria.ru/russia/20120411/172748598.html
http://www.globalpost.com/dispatch/news/regions/europe/russia/130119/health-care-russia-income-inequality
http://rt.com/business/russia-households-wealth-creditsuisse-169/http://www.ibtimes.com/another-jailed-russian-oligarch-says-he-crossed-putin-796217