'Five Years of President Putin: An Assessment' - Foreign Policy Centre

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Winners & Losers: Has Putin Delivered a More Equitable Society? Top Dr. Anastasia Nesevtailova The devaluation of the rouble in 1998 witnessed devastating social consequences. The savings of the middle classes were wiped out in an instant, reducing the majority of Russians to poverty. Compared to the USSR in 1989, Russia had fallen over a hundred places in the world rankings of GDP by 1999. While Africa, Asia and South America actually reduced poverty, European Russia was one of few regions where poverty actually during the 1990s. The Putin administration has seen a drastic change from the misfortunes under Yeltsin and the admittedly failed techniques of shock-therapy. The former KGB officer appeared as a reformer, a populist and the solution to Russia’s problems, but it is likely that anyone following Yeltsin would have appeared so. His popularity polls remained astronomical during most of his time in the Kremlin, as high as 60-70 per cent, falling only recently to 40-60 per cent with the unpopular monetisation of pensions. Yet this still compares favourably compared to Yeltsin’s 9 per cent. On the surface, Russia has come a long way since the troubles of the last decade. Reforms have ranged from budget and tax to labour, pensions and social benefits. Structural reforms have also been tackled with legislation on the land code, anti-monopoly and money laundering. It seems to be working, with the budget looking healthy with growth, surplus and large reserves. Russia has one of the lowest income taxes in the world, with the implicit meaning that people should take care of themselves, thereby reducing the government’s social responsibility. On closer inspection, however, gains made do not seem so clear cut. The taxable fund is structured so that 70 per cent comes from salaries and wages, 20 per cent from basic revenues and 5-10 percent from natural rent. This system makes for uneconomical business and should in fact be the reverse, with natural rent at a higher rate. The statistics on poverty highlight two different trends. On the one hand, poverty decreased from 26.5 per cent to 16.1 per cent during 2003, dropping still further to 14.6 per cent in 2004. Real incomes increased during 2004, with the poorest 10 per cent actually up 6 per cent. On the other hand, however, 80 per cent of Russia’s poor are poorer compared to the Yeltsin era. In reality, the gulf between Russia’s rich and poor has widened since 1999. Before Putin became president, the difference was fourteen-fold, while by 2004 this had risen to fifteenfold. Even though Russia is ranked fourth in the world for the number of super-rich, its GDP still resides at a lowly 78 th place, worse than the nadir of the USSR. Bridget Kendall In 1999, the wealth gap was already substantial, with notable geographical differences as well. Many Russians suffered as savings were lost, wages held in arrears, pensions went unpaid, jobs were lost and businesses closed after a decade of instability. Top 4
To counter this, the last five years have seen big changes, with economic reform to increase investment, create stability, reduce poverty and even have back-wages paid. Russia witnessed impressive macroeconomic growth, the stabilisation of the rouble, the growth of the middle class, wages doubling and a rise in the housing market. These created positive impacts on the people, but has life become more equitable? The wealth gap is of primary concern here. Eight per cent of Russians cannot afford food, while a further 34 per cent cannot afford anything beyond food. Unemployment has not fallen, and statistics do not include those unregistered to receive benefits. Geographically there are only pockets of extreme wealth. Moscow is six times richer than the countryside and there have been protests against local authorities. The maintenance of infrastructure in remote regions has depended on the potential for economic development. Those towns that cannot supply jobs remain without decent lines of communication. Roads are so bad and travel so expensive that migration has become too difficult, even for the sponsored. There is also a new worry about stagnation. Kudrin has admitted that the economy is slowing down. Capital flight, the Yukos affair and lack of foreign investment have all taken their toll. Small businesses that are critical to the community are the only ones to regularly make a profit. This can be seen by the bankrupt local authorities tapping their wealth to help improve the area. On a macro scale, long term prospects look good. Yet there is a mismatch with microeconomic forecasts. There is concern that there is a certain complacency with the optimism based on oil, where in fact Russia’s best reserves are in people. Yet educational standards are eroding and urgent demographic trends show a falling birth rate and shortening life spans for men. So the long term will in fact be too late. Russia should be viewed, not as the new Chile, with its descent into dictatorship, but as the new Nigeria. Top 5
Page 1 and 2: The European Think Tank with a Glob
Page 3: Who Pulls the Strings in the Putin
Page 7 and 8: Putin’s Foreign Policy Goals and
Page 9 and 10: Dr. Vadim Malkin was appointed Dire

'Five Years of President Putin: An Assessment' - Foreign Policy Centre

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