Russia’s Average Joe No Longer Spared
By Sean at 20 November, 2008, 11:08 am
Oil drops below $50 a barrel. The global auto industry slashes jobs in France, Thailand, Japan, and the United States. The world’s investors look for a safe haven to run to but none is to be found. Perhaps it’s time to stop referring to the current economic situation as a “financial crisis” and call it a general economic crisis? For those still wondering what the hell has happened, I suggest reading Niall Ferguson’s cogent explanation of how “Planet Finance” imploded in his “Wall Street Lays Another Egg.”
And what of Russia? It was only a few weeks that we were told that the crisis was sparing Russia’s “average Joe.” After all, few average Russians have invested in the stock market so the losses were concentrated at the top. Very true. But I’m sure Russia’s oligarchs can withstand having a few billion shaved off their paper stacks. However, for the average Russian, or even the average global citizen, the journey to an economic nadir is not so far.
In fact, there are some indications that Russia’s “average Joes” are no longer as safe as they were assumed to be. Yesterday, I already mentioned how many Russians are panicking and removing their savings from banks. Economic pessimism is in the air. A recent poll by VTsIOM shows that 2/3 (69 percent) of Russians have pessimistic view toward the future of the global economy. Russians see the main evidence for the crisis as: high inflation (23 percent), the decrease in the population’s standard of living (22 percent, a seven fold growth from September when only 3 percent of respondents gave this answer), and unemployment (10 percent, up from 2 percent).
There are other indicators of how the crisis is impacting the average Russian. According to one prognosis, the cost of medication rose by 30 percent this year and is expected to rise another 27 percent in the next.
The other day, the Russian government announced it would raise the minimum employment benefits to 850 rubles ($31.05) from 781 and the maximum to 3,400 rubles, up from 3,124 rubles, beginning next year. The average monthly wage is 17,847 rubles. The government expects that next year about 350,000 people will lose their jobs.
The Ministry of Education announced that it will not reduce credit to university students struggling to pay student loans. The aim is to prevent students dropping out of school if they can’t meet education costs. A good way to stave off unemployment is to keep people in school.
Even Putin set out to calm the public in his speech at United Russia’s Congress. He announced plans to give mortgage relief, tax incentives, maintain and increase pensions, promised to prop up the ruble, and ensured the safety of Russia’s banks.
And just to symbolize how touchy things are politically in the provinces, Pavel Verstov, a journalist and member of United Russia, was expelled from the party as an “instigator of instability” and “for activities inconsistent with the interests of the party.” Verstov’s violation of party ethics was an article he wrote for Verstov.info (which appears to be shut down) reporting that there has been four cases of suicide at the Magnitogorsk Metalworks (MMK) as a result of the economic crisis. Kommersant reports that Verstov wrote the following:
This is the fourth case of suicide at OAO MMK and its sister companies during the crisis. People could not endure the credit burden as their pay constantly shrank. The metallurgists chose the noose out of fear that they and their family would be thrown out onto the street for defaulting on their mortgage payments. A few others, who are less scrupulous laborers at MMK, preferred robbery and armed raids to suicide. Now they agree to participate in [robberies] even more.
Officials from MMK are calling for some blood of their own. Namely, Verstov’s. MMK has sent a request to the local courts demanding that criminal charges be filled against the journalist for publishing “lies.”
So perhaps the immunity of the average Russian “Joe” from the global economic crisis is becoming a thing of the past.
Popularity: 5% [?]
Comments
Sorry, the comment form is closed at this time.
“Yesterday, I already mentioned how many Russians are panicking and removing their savings from banks.”
Russians with savings in banks are not average. The middle class does that. Part of the middle class.
Average Russian Joe is a misnomer. The term to use is ’srednestatistichesky Ivan’.
And just to symbolize how touchy things are politically in the provinces, Pavel Verstov, a journalist and member of United Russia, was expelled from the party as an “instigator of instability”…
How long before they’re calling them “wreckers”?
The aim is to prevent students dropping out of school if they can’t meet education costs. A good way to stave off unemployment is to keep people in school.
————————————————
isn’t it what they’ve been doing in France, Germany and other European countries? Let young people enroll and stay at schools (often until they are in their 30s), so that the unemployment figures are down? While the majority of these students take political science and sociology to harness their leftist views.
Come’n, buys, – will you grow up and stop trashing Mother Russia?
To: “A good way to stave off unemployment is to keep people in school.”
Medvedev replied:
“isn’t it what they’ve been doing in France, Germany and other European countries?”
Yes.
“Come’n, buys, – will you grow up and stop trashing Mother Russia?”
I don’t know why you saw that statement as trashing Russia.
Although it’s doubtful one can say that the “average Russian Joe” (Pasha pol-litra, if you will) is going to be moaning about his economic fortunes online, here’s a website set up to do something like that.
And although Sean’s political persuasion perhaps means he’s not likely to have sympathy for folks working in financial institutions, consider the fate of rank-and-file and workers and middle management at Moscow banks. These folks probably can’t be called average in Russia, most of them don’t have money in the stock market and they are hardly high rollers – more like the backbone of the nascent middle class – nevertheless, according to what I’ve heard and read (and the online “test” that’s been in the sidebar on Vedomosti’s website for at least a few weeks that allows people to seek the answer to the question “will they fire me or not?”) their jobs and salaries have been getting cut for over a month now, so fear of being fired is not exactly a new phenomenon.
Perhaps it’s time to stop referring to the current economic situation as a “financial crisis” and call it a general economic crisis?
I’d agree with this. Nobody could predict what what the effect of a global financial crisis would be on ordinary Russians, but a global economic crisis is going to hit ordinary Russians like a hammer blow.
a global economic crisis is going to hit ordinary Russians like a hammer blow.
Or like a plummeting oil barrel to the back of the head. Hopefully, for everyone’s sake, things are not as bad as the worst forecasts.
I think the main saving grace in Russia will be the fact that most people own their own homes, and many have ploughed money into refurbishing them. At least most will have somewhere to live.
Other than that, I think the Russian people are in for a rough ride. Far too many people are dependent on earnings – both legitimate and otherwise – from state institutions financed by the government which will find its budget being squeezed considerably at the same time as the illegitimate revenue squeezed from businesses and people is reduced by the shrinking economy.
The ordinary people and small businesses are going to be less than impressed at having to hand over daily bribes in a period of economic hardship, whereas when times were good they were prepared to overlook this, and the glaring inequality between those in power in any city and everyone else, normally unsubtly presented in the form of fancy German cars and huge dachas.
The public might also be entitled to ask why the new, improved, independent Russia is experiencing severe hardship when the refrain from the government for the past few years has been that Russia doesn’t need anybody else to stand strong. I expect the appetite for nationalistic soundbites and crude criticism of America in place of domestic improvements will diminish as ordinary Russians feel the pinch.
past few years has been that Russia doesn’t need anybody else to stand strong.
————————————————
You mean that Western countries want Russia to be strong? Normally, those who are strong (and clever) are ignored “and worse” (c) [Condolezza Rice).
According to Vedomosti (citing a fairly broad-based survey), 30% of companies in Russia are planning layoffs.
According to Vedomosti (citing a fairly broad-based survey), 30% of companies in Russia are planning layoffs.
———————————————
How many American companies are planning layoffs? I rephrase, how many American companies may cease to exist in 2009 (with or without the government support)?
Dima, you can play the but what about America game all you want. But the point is that there will be layoffs in Russia and United States. I don\’t know how pointing out which one is worse or better matters.
Lyndon, thanks for the Vedomosti article. I think it is important to note that the high percentages of companies planning layoffs are in the provinces.
I wonder how this experience of layoffs will play over with Russians. I also think another thing important to note is companies a rising arrears in the payment of wages. I read an article about this last night but now can\’t remember where.
“Far too many people are dependent on earnings … from state institutions financed by the government …”
What you meant to say was: Russia’s wealth producing population has been supporting far too many wealth consuming people in recent years, and now those will – hopefully – have to find ways and means to make a living not based on robbery from those who create wealth.
The government has been slashing taxes, I hear. Good.
The falling ruble will encourage domestic production to supply domestic needs.
Most Russians don’t have much debt, and maybe this crisis will teach them a lesson or two about not saving. Lessons Americans have obviously forgotten decades ago.
Russia will get out of this just fine, provided the government doesn’t screw things up with massive ‘intervention’, ’stimulus’, or other such Keynesian crack-pot ideas.
I hope the current ruling class in Russia will dig out their Hayek and von Mises, and maybe some of Friedman’s later writings, and understand that the best they can do to help the economy is a) provide for stable money, and b) get out of the way of economic production.
One can dream, no?
How many American companies are planning layoffs? I rephrase, how many American companies may cease to exist in 2009 (with or without the government support)?
U.S. employment was 6.5% in October and Goldman Sachs is predicting 9% US unemployment by the end of 2009.
That doesn’t exactly equate to “how many companies will lay-off or cease to exist” in the US, but it is a more accurated tally of the consequences of the current economic/financial crisis.