The Russian “middle class” remains an elusive and rather unclear category. It’s an entity that is recognized, but what exactly are its contours is rarely clearly defined. Kommersant has fitted one piece into the Russian middle class puzzle. The Russian middle class, at least as defined by Kommersant, is purely monetary. I’ve never been satisfied with defining the middle class by income. Income brackets just doesn’t provide the human stuff that make up class relations. Numbers don’t say much about how people act or collectively define themselves. I tend to side with E. P. Thompson’s notion that class is first and foremost “an historical phenomenon, unifying a number of disparate and seemingly unconnected events, both in the raw material of experience and in consciousness.” Most importantly, again following Thompson, class is “something which in fact happens in human relationships.”
Nevertheless, income is part of the story, even if it is not the whole story. And given the income brackets Kommersant provides, we can posit a Russian middle class that is broad as it is internally stratified. Below is a break down of middle class growth and stratification accompanying Kommersant’s article.
|Income more than $16,000 a year||19.4||14.6||33%|
|Income more than $25,000 a year||9.19||5.56||65%|
|Income more than $50,000 a year||4.5||2.12||113%|
|Income more than $125,000 a year||1.76||0.7||151%|
|Income more than $250,000 a year||0.86||0.36||138%|
|Income more than $500,000 a year||0.42||0.19||126%|
|Income more than $1 million a year||0.21||0.1||114%|
|Income more than $2 million a year||0.1||0.05||103%|
|Income more than $3 million a year||0.07||0.03||97%|
|Income more than $4 million a year||0.05||0.03||93%|
|Income more than $5 million a year||0.04||0.02||89%|
The first thing to notice is that the middle class is approximately 36.6 percent of the Russian population. Interestingly, the figures cut off the middle class at an income $5 million a year. Those who make above this inhabit a wholly different strata suggesting that the ideology of middle class, as reflected in income, does not have the universality of a place like the U.S. where everyone seems to be of the “middle class.” The fact that there is not just a bottom to the middle class, but a top suggests that class still matters, even if it is demarcated by income.
Second, that there is great stratification within it. About 28.59 percent of the middle class makes between $16,000 to $50,000 a year, while 0.47 percent makes between $1 million to $5 million. Unfortunately, one can’t get a sense of how or how far a family jumps between brackets. How many families, for example, are earning so much wealth so fast that they are able to jump over strata in one year?
Also, like in most cases, money begets more money. Therefore, once a family hits the $125,000 a year bracket they are sure to continue moving up. For example, the number of families earning $1 million doubled from 100,000 to 200,000 between 2006 and 2007. This rapid reproduction of the top income brackets also suggests that there is an increasing gap between the lowest and the highest rungs of the middle class. The poorest section of the Russian middle class (earnings from $16,000 to $25,000) numbers about 10 million families. The number of families earning $1 million is about 5,000. This increasing concentration of wealth is further reflected in Rosstat’s adjustment of Russia Gini Index. In just one year, it rode to 42.2, up from 41.6 (Total equality is zero. The latest Gini for the United States is 45, whereas in Sweden it’s 23).
So that is one piece of the puzzle. The real question however is how this income corresponds to politics, attitudes, lifestyle, geographical location, age, and other factors the late E. P. Thompson would have used to determine the making of the Russian middle class.
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By Sean — 12 years ago
Apparently Vladimir Putin is not just President of Russia. He’s not just a karate expert. Or just a lover of blondes. He’s also Vladimir Putin, PhD. According to a REN TV report on February 2, Putin wrote a dissertation, “Strategic Planning of Regional Raw Material Operations in a Market Economy,” in 1997 as a student of the St. Petersburg Mining Academy. Anyone can go read it. It’s stored at the Leninka. REN TV took a trip to the Leninka to see if the dissertation was in fact there. Apparently the work has seen some heavy traffic. “Last year the thesis was lent for reading eight times,” reported REN TV’s Aleksandr Zhestkov. “Librarians say it is a lot: some theses remain without anybody’s attention for years, whereas here there is a clear interest.” So much interest that it is rumored that it is required reading by Kremlin staff.
It seems that Putin’s PhD is not simply a thesis on raw material; it is a object that lends to his emerging cult. “You are holding in your hands something that was typed by the person who wrote it,” said Aleksandr Soshnin, the Leninka’s head librarian after handing the text to Zhestkov. “It is like an old manuscript. You are touching something that Vladimir Vladimirovich [Putin] also touched.” Such an experience is bound give you the chills.
But the cult of personality goes beyond that. Putin’s thesis is also characterized as a “prophecy of the gas war with Ukraine, obviously expressed in a coded fashion.” Or so thinks Vladimir Litvinenko, Vice Chancellor of the St. Petersburg Mining Academy:
One can indeed find if not a direct answer to those processes that are today taking place with Russian gas which passes through Ukraine, then general views on the state’s presence in the system of regulating the activities of large companies.
Prophecy or not, one thing is for sure. The thesis gives some idea of what Putin thinks about the relationship between energy, the state, and the market. One part of the text reads, “Irrespectively of who owns natural, namely mineral, resources, the state has the right to regulate their development and use.” This is enough to make the free marketers at the G-8 meetings quiver.
Perhaps Putin was on to something. Or so thinks Professor Vladimir Shlapentokh of Michigan State University. Energy exports and exerting influence over the global energy market is one way for Russia to reemerge as a superpower.
“In the last few years,” writes Shlapentokh,
The Kremlin has realized that Russia, with its expansive oil and gas resources, can reclaim its superpower status. A few of the president’s myrmidons have recently suggested that Putin had actually predicted this turn of events as early as 1997 when he worked as Petersburg’s deputy mayor and wrote a doctoral dissertation entitled, “The strategic planning of the natural resources in the region.” In any case, on December 22, 2005, at the meeting of the Russian Security Council, Putin proclaimed that the country was back on top and playing a key role on the world stage. A few days later, Moscow decided to settle the score with Ukraine for choosing the West as an ally after the Orange Revolution in 2004. The Kremlin sent an ultimatum to Kiev, forcing it to accept a five-fold increase in the price of gas. One month later, the Kremlin sponsored a rather primitive spy scandal against Britain in the style of the Cold War. It accused the British special services of helping human rights organizations destabilize Russia.
To do this, the Putin government had to overcome a series of “dogmas.” First if the economy was going to rely on energy exports, it had to create a reserve of hard currency to prevent default if oil prices dipped. Putin succeeded in this by creating the “Stabilization Fund” which contains over $35 billion, almost 10 percent of Russia’s GNP. With energy prices on the rise due to the combination of possible “peak oil” and increasing demand from emerging industrial giants of China and India, there is no indication that Russia will have to dip into that fund to stave off a default.
The second dogma concerns “backwardness” or Russia’s reliance on energy exports like other Third World countries as a negative refection on its potential to join “civilized nations.” The fear was that this “backwardness” would prevent the development of alternative export sectors in the economy like manufacturing like so many industrial economies had. The dangers of backwardness have since been rejected by the Putin Administration:
Though strong in the past, the dogma of backwardness is now being rejected by the Kremlin. Putin’s team sees its enormous oil and gas reserves as a blessing that will allow them to solve many of the country’s problems without increasing the production of manufactured goods for export (an unrealistic goal for a country that is unable to make structural economic reforms). However, the high export revenues have allowed Moscow to forget about the times when it had to scrounge for money from world financial organizations. Moscow can now boost military expenditures, pay salaries and pensions regularly, increase social benefits, make some improvements in infrastructure and refurbish not only Moscow and Petersburg, but all major cities in the country.
I hesitate to embrace Shlapentokh’s optimism that capital from energy exports will be redirected to improving Russia’s infrastructure. It’s a possibility, though not without consequences. When Stalin used grain exports to generate capital for industrialization, it increased domestic grain prices and as a result discontent among the population. It also drove the regime to collectivize agriculture to avoid the fluctuations of grain supply the Politburo perceived was a result of peasants withholding grain to get a better price. I should state that I am in no way saying Putin is Stalin-like. I know that placing anyone next to Stalin invites all sorts of political enmity. My point is that Stalin’s move required the centralization of grain production. Such seems to be the case with the energy sector in Russia. The trick seems that the Russian government has to balance exports with domestic consumption. That is, dependence on energy exports requires high energy prices on the global market, but at the same time the state must somehow keep the domestic prices low. Russians have already seen a steady rise in energy costs. The question is how high they can go before cutting into the increased standard of living Shlapentokh hopes an energy export based economy can produce.
It seems that to get out of this bind there needs to be a concerted effort by the state to reinvest the income from energy exports back into the domestic economy. Given the general increase in the gap between rich and poor, the increasing concentration of wealth in the hands of a thin layer of the Russian middle class, and the geographical concentration of wealth first around Moscow, and then urban centers, one wonders how Russia will break this cycle and redistribute its vast capital more evenly. My guess would be increased state intervention. But if Andrei Illarionov’s charges that the Russian economy and politics is based on “nashism” are correct then how will this redistribution happen?
But does it need to? A lot of the ill effects caused by robber barons can be quelled with ideology. If Russians imagine themselves and their country as a “superpower” then the increased concentration of wealth might not matter. On this, Shlapentokh is right to note the importance of the fact that “the price of oil itself has become a sort of national symbol in Russia, a country that has been searching for a national idea for twenty years.” Oil is the road in which all former glories can rise again: Russia’s military strength, the sanctity of its cultural institutions and traditions, its modern role as a global player. The belief in oil might return the national confidence lost after the collapse of the Soviet Union and the instability of the Yeltsin years. If Putin’s gamble pays Russia will continue on its steady path of regaining its international footing. But, a sole reliance on energy is not a feasible long term strategy. Energy prices will certainly rise in the coming decades. But what will happen if they rise so high they create a scissors crisis with the costs of living? What will sustain the Russian economy then?Post Views: 116
By Sean — 2 years ago
Three graphs speak to the plight of the Russian consumer in 2015: the ruble-dollar exchange rate, inflation, and real wage growth:
“The price of potatoes in Russia has risen by 300 percent . . .”
What will happen to the price of groceries in 2016. Znak.com presents an alternative to the official forecast.
The Kremlin doesn’t think that the economic crisis has significantly affected Russians’ incomes. According to the Sverdlovsk statistical bureau, since the beginning of the year food prices have increased by an average of 15.2%, slightly above the inflation rate (13.5%). Znak.com decided to conduct its own market research and found out that the prices for some products grew by 300 percent. The details and expert predictions for 2016 are in our survey.
Milk, buckwheat, vegetables, and meat are our food basket
We took a simple approach to confirm exactly how much food prices have increased: hunt down old receipts from November and December 2014 and make a test purchase. The supermarket Yabloko on Botanika was the place for the first phase of our experiment. The total amount on the receipt from December 30, 2014 was 2355.90 rubles. It wasn’t possible to find all the items on the receipt because for some reason the market didn’t have the usual chicken eggs on that day (the salesclerks were not able to explain why), and there were no rollers for cleaning clothes and notebook paper from exactly the same company, so the total sum of the purchase was even less, 2104.20 rubles. But if you compare the prices on the rest of the receipt, the increase turned out to be 17.6% in total.
However, at some places, we found a significant increase, and this is not just for imported goods. For example, the price of Polyanka milk increased from 32.9 rubles to 56.4 rubles, or 71.4%. A two-liter bottle of Fanta rose from 49.9 rubles to 95.8 rubles (almost two times), tangerines increased from 76.6 rubles to 110.2 rubles per kilogram. At the same time buckwheat and tomato prices slightly fell: from 71 rubles to 66.8 rubles, and 184.9 to 173.2 rubles respectively.
However, we were able to confirm that the price situation varied at other stores. For example, in comparison with November 2014 the price of buckwheat in the Ashan market on Metallurgov Street rose by 77.56% from 37.44 rubles per kilogram to 66.48 rubles (the price on 12/08/2014 for the Don Gusto brand is the same). Also at Ashan the price for rice from the same brand rose from 40.11 rubles to 58.54 rubles (an increase of 45.94%). Ashan’s own brand of fusilli pasta rose by 51.58% (from 96.54 rubles for a four kilogram box to 146.34 rubles), a package of Russian Sugar by 29.62%, and liter of Korona Izobiliia cooking oil by 37.4%.
In addition, at Ashan a two-kilogram packet of Uvelka flour produced by the Chelyabinsk firm Resurs became 35% more expensive over the year, rising from a price of 44.7 rubles to 60.38 rubles. By the way, at Yabloko on Botanica the price of the same package of flour didn’t rise as much, only by 8.4%, but its price is still significantly higher at 74.4 rubles (compared to 68.6 rubles last December).
Some items have come down in price at Ashan, though there are not so many of them (but would like more). From our grocery list there is perhaps only oatmeal and Per’ya pasta. The first (the Don Gusto brand) fell 14.98% to 14.92 rubles per half a kilogram, and the second by 22%, to 15.41 rubles for the same amount.
We can conclude that at Ashan, prices for many products have significantly risen more in terms of percentage, than in other supermarkets. Nevertheless, the same prices were traditionally far lower.
We also turned our attention to the rise in prices for chocolate and champagne, which is important on New Year’s Eve. For example, in late 2014 Alenka milk chocolate bars (produced by Red October) cost 82.2 rubles, now its 32.76 rubles more expensive, an increase of 39.85%. The Krasnodar champagne Abrau-Durso (semisweet, 0.7 liters), costs 250 rubles a bottle, a price increase of 35.47% to 338.68 rubles.
We also examined meat products and eggs in more detail. Chicken from the Reftinskaya poultry farm increased by 10.27%. In January, in Supermarket №2 [the chicken] sold at 159.15 rubles per kilogram. Now it costs 175.5. The price of a dozen eggs from the Sverdlovsk poultry farm (like Reftinskaya, it is located in the Sverdlovsk region) has increased by 10.67% and now sells for 56 rubles. Molochnye sausages (sold under the brand name Zhukovskye sausages) rose by 6.19% to 377 rubles per kilogram. GOST brand beef stew has risen by 24.22% over the year from 115.22 to 143.13 rubles per jar (525 grams). By the way, a similar pork stew rose only 9.51%, from 117.37 to 128.54 rubles. Interestingly, the Vetchina dlaya zavtraka and Zhukovsky sausage brands did not increase in price over the year and is still 478 rubles per kg.
There was a significant rise in prices for virtually all types of toiletries.
For example, the cost of Colgate Triple Action toothpaste (an American brand from the Colgate-Palmolive Corporation) at Ashan has increased by 41.93% from a year ago. It was 22.97 rubles, now it’s 31.61. In November, Pantene Pro-V Shampoo (the brand originates from Switzerland and is now owned by the American Procter & Gamble) cost 145.6 rubles per bottle (400 gr.). Now it’s 188.45, an increase of 29.42%. The domestic soap, Dlya vsei sem’i, became more expensive by 22.53%. The price of the cheapest toothbrush has increased from 13 to 18.86 rubles.
“We live from pension check to pension check”
Almost all of the shoppers Znak.com managed to talk to in Yekaterinburg stores also noticed a significant rise in prices. “The price for dairy products has risen, and sausagehave also become very expensive. I spend 500-700 rubles in the store, and have to come back the next day,” retiree Ekaterina Borisovna quickly began to list off. We met her on the doorstep of one of the Kirov supermarkets in the center of the Urals’ capital. “We live from pension check to pension check. But I still only feel it a little bit because my son helps me,” she said. If it wasn’t for him, the old woman would have had to give up “fruits, some sausages, and meat” a long time ago. “My pension is10,883 rubles a month and 1773 rubles for (third tier) disability. Half of it goes to medicine straightaway, and the rest goes to pay rent,” she explained.
We meet two young mothers with strollers at the Megamart store. “Before [Putin’s sanctions] decree, I generally didn’t keep track of prices, now I do my best to buy more on sale,” says one of the parents. Cottage cheese is the first thing on the list of more expensive items– “It’s at 7 rubles,” bread “from 18 to 22 rubles,” and Huggies diapers are now 911 rubles for a pack of 68.” She says that her family has recently completely given up on cheese. “There’s no regular cheese, and what’s there is impossible to eat,” she describes the sanctions’ impact. In the store we meet an elderly man among the shelves of canned meat. He, judging from the conversation, loves fish, but because it’s now more expensive he’s had to follow the advice of Ilya Gaffner, a deputy in the Sverdlovsk Legislative Assembly, “You need to eat less.” “I buy less,” says the man.
“Everything … (is very bad – Znak.com), I say this to you in Russian,” says 65-year-old Valentina. She’s from Kushva, she worked 25 years underground in a mine, now her pension barely exceeds 12,000 rubles a month. “I’m amazed by our government. I was in the Party and on the shop committee, but I couldn’t even imagine the kind of life that awaited us,” she continues. Like the others, she notes the sharp rise in food prices. But this is not the main reason for her displeasure. “It’s the quality! That’s the problem. Take sausage—they’re absolutely flavorless; there’s no quality. We pay money for nothing,” says Valentina. She herself did not have to cut her shopping list, but she’s been forced to earn a decent bit on the side while retired.
“Prices have risen, are rising and will rise”
Retailers and economists are confident that in 2016 the increase in prices will continue, and according to various estimates, they will go up an average of 16 percent. “It’s difficult to make predictions, but no one expects anything positive. I think that inflation will continue to rise and the population’s purchasing power will decrease, ” says Leo Kovpak, deputy of the Sverdlovsk Legislative Assembly and former vice president of the Kirovskii chain. According to him, the next year’s official forecast for inflation in Russia is 6.5 percent, but, according to the deputy, it will reach at least 10 percent. “It certainly affects the prices in the stores, but yet they’re very much reflect the various kinds of bans and embargoes on cooperating with other countries. For example, on the day when the import ban on goods from Turkey was decided, contractors from Abkhazia raised the price of tangerines by 20 rubles, or by about a quarter. In general, the price of tomatoes and mandarins now looks dreadful,” Kovpak says.
On the need for competition in the market, Alexander Ogloblin, the owner of the Elisei chain, says, “Recently, at the level of various government structures are bragging that the absence of Turkish products in stores after the New Year will have no serious impact. It is inconceivable how this is possible given the significant market share, conditionally from 10% to 30%, Turkey has in some types of fruits and vegetables,” Ogloblin says. However, he recalls that when Russia imposed an embargo on food from Europe and the United States, illegal Polish apples were imported under the guise of being Serbian.
“I expect that after the New Year, out of nowhere, we will begin getting deliveries of huge Azerbaijani hothouse tomatoes,” says the retailer.
According to him, of course, they will in fact be Turkish tomatoes prepackaged in Azerbaijan. “And the question is how customs will deal with this. If they close their eyes and provide an example of a successful import, the prices will slightly rise, but if the fight against Turkish products goes full hilt, the rise in prices will be even more tangible,” Ogloblin says. The retailer shies away from giving specific predictions, but he also says, “prices have risen, are rising, and will rise.” “Inflation of 6 to 15 percent in Russia has not ceased over the past few years. In addition, utility and transportation costs are also rising which are piled on the cost of goods,” he says.
Viktor Sychev, the owner Yekaterinburg Urozhai vegetable warehouse believes that of the 15% rise in food prices this year, 7-8% of it is due to the “sanctions.” “Rotten potatoes” make up a major part of statistics on vegetables. “There was a poor harvest, and the result is potatoes are mainly imported, causing a price increase from 8 to 30 rubles. That’s 300 percent”, he says. According to Sychev, food prices will continue to rise in 2016. “15%,” he projects will be the ceiling, “it all depends on the exchange rate.” And he stresses: “No analyst can precisely predict a fluctuating market.”
In the near future, our interlocutor assumes a reduction in citrus prices because vendors are now trying (until January 1, 2016) to bring in as much from Turkey as possible.
In contrast, tomato and cucumber prices will grow. “Citrus needs temperatures of 5 degrees, and they normally keep. The cucumber is water, and can’t be stored for a long time,” Sychev says. Retail chains play a role by adding their own mark-up. For example, our interlocutor presented the actual wholesale prices for his company: “Oranges are 65-70 rubles [per kilogram, depending on the manufacturer and grade], bananas are 60-65 rubles, grapefruit are 80, pears are 80-90, limes are 100, clementines 95, mandarins from 70, Grammy Smith apples are 75-80, Simirenko apples 50, squash are 70 and gourds are 30.”
Viktor Galkin, the general director of Elitfrut (trademark of Globus) partially agrees with Sychev. “A stronger dollar means produce will be more expensive. The dollar drops and prices will be lower,” he says. He also mentions another factor—in reaction to the sanctions against Turkey, “Our Chinese friends have already raised prices by 30%.” However, a serious rise in prices in 2016, in his opinion, is only possible on the imported products. Vegetable prices will remain unchanged: “A lot of these crops did well this year. Our farmers even left them in the fields. The [potato] market didn’t pay higher than 8-9 rubles per kilogram.” All the more so, the potato supply disappeared in Moscow and St. Petersburg, and “they started to actively grow them” themselves.
“As for the fruits, it’s hard to predict. Yes, the price goes up. But you can only speculate if there’s a market,” Golkin continues. “People aren’t buying at the moment. Subjectively, purchasing power has been reduced by 30 percent and many vegetables have replaced fruit in people’s basket.” “Pyaterochka is an example. They buy tangerines from us for 105 rubles [per kilogram] but sell them at 69.9. At a loss. Magnit does the same. Also they do the same with bananas, the output price ranges from 65 to 75 rubles, and in Ashan it held at 49.9 for a year. Thanks to this, at least this way there’s some volume,” are specific examples the businessman offered.
Aleksandr Tatarkin, the director of the Institute of Economics of UrO RAN, says that, according to various forecasts, by 2016, food prices will rise by 9% to 16%. “This will affect the most in-demand goods: meat, milk, buckwheat, vegetables, and sour cream,” he says. The expert points out that, in addition to the sanctions, additional store mark-ups should be taken into account. “In my opinion, this area needs more rigid state control. Though, apparently, the state is not going to take drastic measures to curb prices. Russia’s 2020 development strategy put the rising cost of various services, including utilities and transportation, at 8% to 30% annually,” he says.Post Views: 644
By Sean — 10 years ago
I can’t help taking a minute to return to Lionel Beehner’s “Why Russia Matters Less Than We Think.” In regard to how Russia’s as energy colossus shouldn’t worry Americans, he writes:
Russia is an energy powerhouse. Maybe, but little of its natural gas goes toward American consumers (indeed, Stolichnaya ads notwithstanding, we do remarkably little trade with Russia). Even Moscow’s energy imports to Western Europe are dwindling, as its share in natural gas imports shrunk from 50 percent to 42 percent between 2000 and 2005. Better to pay closer attention to the politics of Nigeria or Venezuela.
It seems that Beehner might have spoke too soon when suggesting that we should look at Nigeria at the expense of Russia. According to the Financial Times, America’s watchful eye over its imperial domains need also glance at Russia when peering at the politics of Nigeria. FT’s Matthew Green writes, “Gazprom, Russia’s state-owned energy group, is seeking to win access to vast energy reserves in Nigeria in a move that will heighten concerns among western governments over its increasingly powerful grip on gas supplies to Europe.” An unnamed senior Nigerian oil official says that Gazprom has offered to invest in Nigeria’s oil infrastructure in exchange for having a large stake in developing the West African country’s natural gas reserves. Says the unnamed Nigerian oil official:
“What Gazprom is proposing is mind-boggling. They’re talking tough and saying the west has taken advantage of us in the last 50 years and they’re offering us a better deal … They are ready to beat the Chinese, the Indians and the Americans.”
Gazprom’s entrance into Nigeria would put it up against Royal Dutch Shell, Chevron, and ExxonMobil, three Western companies that have long dominated Nigeria’s vast oil reserves. Given that Nigeria is a top supplier of liquefied natural gas to the United States, if the Gazprom-Nigeria deal goes through, the notion that “Russia doesn’t matter” will sound far more nonsensical that it does now.
If Gazprom does enter Nigeria, I wonder how long it will take before they are paying Nigerian troops to crush anti-corporate activism in the Niger Delta as Chevron has been accused of doing. I would imagine not long at all.Post Views: 270