Lately a news story has been making the rounds which suggests that the famous Captain Obvious must have recently retired from his military career to take up a career in journalism. The story cites a study by Credit Suisse which tells us….wait for it…waaaaait foooooor iiiiiit…Russia has alarming wealth inequality. I realize that the story is linked to the findings of the most recent Credit Suisse annual report, but truth be told massive wealth inequality in Russia has pretty much been the norm since 1991.
Given that these reports are annual, it’s hard to believe that the situation changed dramatically in the space of a year. As far as I’m concerned, the most startling fact revealed in the story is the finding that 35% of Russia’s wealth is concentrated in the hands of about 110 people. Immediately the Team Russia fanatic will squeal, “But America also has terrible wealth inequality too!” At this point it is easy to point out why this “argument” fails, like so many other “America also blah blah…” responses. The Occupy movement acquainted many Americans with the fact that 1% of America controls 40% of the country’s wealth. That’s bad for America, but 1% of America’s current population is over 3 million people. Based on Russia’s population of about 142 million, we find that about 0.00008%(rounded up) control 35% of the nation’s wealth.
Now before commenting on this matter further I must go on a brief digression about another version of this story I encountered, which came from the AP. This blog is supposed to highlight incompetent reporting on Russia, after all. The article is here and it contains this interesting line:
The fall of Communism saw Russia’s most prized assets sold off to a small circle of businessmen later known as oligarchs. President Vladimir Putin allowed them to keep their wealth in exchange for their political loyalty.
Hmmm… It seems like something is missing here. It’s as if they skipped nearly a decade of Russian history so that someone not familiar with the topic might logically come to the conclusion that Putin is somehow connected to the rise of the oligarchs. In fact the name Yeltsin does not appear anywhere in the article. The truth is that Putin did not create Russia’s oligarchs, but he also did not drive them out as Team Russia fanatics would like you to believe. In reality Putin owes his position not only to Yeltsin but Boris Berezovsky, who advised the former to choose Putin for the post of prime minister. Berezovsky was one of Russia’s worst oligarchs, but after falling out of favor with Putin he fled to the UK and suddenly developed a deep concern with “democracy” in Russia. Putin indeed allow certain oligarchs to stay in power for “loyalty” as the article states, but the poor construction of this sentence leaves out all sorts of vital information and leads the unaware reader to believe that Putin is possibly responsible for the rise of oligarchs. In the case of poor journalism like this always remember who benefits- Putin. Stories like this are scooped up by Team Russia fans who then use them as proof that there is an “information war” against Russia, even though the real explanation has more to do with laziness.
Returning to the topic of the article, I’m going to be carefully noting any reactions to this “revelation.” Some are easy to predict, while others aren’t. Team Russia will no doubt respond with denial and inaccurate comparisons with America, but that’s pretty much their response to anything. I think this is going to be especially problematic for Russia’s liberals, since they have a long history of not showing adequate concern about wealth inequality. What is more, they have often thrown in their lot with people like jailed oligarch Khodorkovsky and more recently presidential candidate Mikhail Prokhorov, also an unbelievably rich individual if not an oligarch in his own right. Exchanging Putin for the 90’s is not an attractive campaign promise. Typical liberal criticism on Russia from within and without the country tends to imply that with more “democracy” Russia’s economic problems would be solved, but they don’t seem to have a rational explanation as to why this would happen. First, if we imagine that all corruption in Russian elections disappears, realizing this liberal dream would mean that a liberal party would have to come to power both in the Duma and the office of the president. What party would that possibly be? If past Duma elections had been fair, KPRF would most likely be controlling the country. I doubt this would lead to any restoration of socialism but it sure wouldn’t lead to the economic liberalization(read: privatization) that non-Russian pundits and some Russian liberals seem to think would help the country.
For the sake of argument, however, let’s imagine that somehow the liberal opposition miraculously wins and then all those buzzwords like civil society and rule of law magically appear. How is this supposed to deal with the problem of wealth inequality, something which many mainstream economists don’t consider to be a problem? Supposedly Russia would benefit from a more business-friendly environment in which corruption is subdued so that foreign investment isn’t limited to all but the largest corporations, which can handle all the bribes and pitfalls of doing business in Russia. At the same time, this is supposed to make it easier for Russian entrepreneurs to start their own businesses and thus diversify the Russian economy rather than keeping it centered around natural resources. And as we all know, entrepreneurship solves everything. The problem I see with this plan is that attracting capital means remaking Russia to fit the needs of investors, something that has nothing to do with fighting wealth inequality. In fact the policies which make a country attractive to investors often lead to wealth inequality, which is something that few investors care about. More importantly, if capital flows into Russia, it can just as easily flow out. Russia might experience a boom for some time but in capitalism nothing lasts forever.
All over the world more and more people are waking up to the fact that capitalism is inherently flawed and cannot be fixed. Bourgeois ideology tells us that changing a country’s government is significant while leaving out the question of changing the system that government serves. This is largely the reason why liberal opposition in and outside of Russia sees no problem with lining up behind figures like Khodorkovsky. Rhetoric about “civil society” and “democracy” trumps questions of class and substance. Even if Russians could easily change their government, nobody is offering them a realistic way to change the system.