Super-rich expected to multiply in Russia
According to one of the world’s largest real estate consulting agencies Knight Frank and the well-known Citi Private Bank, in the next five years the share of Russians worthy over hundred million dollars will grow by 76%. This forecast could have prompted jokes about the dollar’s decline had it had included the corresponding figure of just 37% for the world in general.
Obviously, the forecast is based on inertia-driven development and does not account for a possible global economic depression and the ensuing decline in oil and gas prices. However, regardless of our attitude to this forecast, the fact that the wealthy in Russia stand to grow richer much faster than their counterparts in other countries in the next five years warrants scrutiny.
The rapid growth of the super-rich in Russia is not accompanied by solid development, to say nothing of modernization. Last year, a nearly 40% increase in the price of oil was not accompanied by accelerated economic growth (it remained at 4.3%). Moreover, real wages grew by a negligible 0.8%, and the accelerated enrichment of the wealthiest (not to mention the apparently underestimated official inflation rate) mean that the majority of the people earned less.
Thus, the wealthiest Russians are amassing capital also through the redistribution of income from the majority of the Russian population with very modest incomes to them. This is a very unpleasant fact, pointing to deep internal fissures in society that are fraught with the escalation of social tensions, which were laid bare last December.
But even without this relatively new phenomenon, we would still have had no grounds to celebrate the growing prosperity of our richest compatriots, because their accelerated enrichment means greater consolidation of public wealth and financial flows in their hands. This disproportionate concentration hinders socio-economic development because it deprives many spheres of public life of money.
The money spent on luxurious yachts, foreign sports teams, palaces all over the world and even “simple” private jets is money that can’t be invested in Russia’s development – road construction, upgrading rundown utilities, restoration of the countryside and the creation of modern jobs.
The rich in Russia not only consume a disproportionately large number of foreign goods and services, their consumption is excessive in general. They cannot be blamed for the inadequate level of investment in Russia because their opportunities to improve the unfavorable business climate here are restricted. However, by acting in the interest of their capital rather than their homeland, they are promoting the development of the world’s prosperous countries probably more than Russia (of course, we are not counting the considerable criminal fortunes in Russia, the criminal side of privatization or by stealing from the budget, although their motives are even more anti-social).
One more feature of wealth in Russia is its weak connection to merit. Nepotism and the orientation of many business people toward federal funds are not only destroying social mobility. Since the era of privatization many of the wealthiest people in Russia are not “self-made” but were either appointed as “oligarchs,” as in the 1990s, or have been given access to the immense sources of profit in the country. Understandably, their abilities and motivation for promoting development are below other business people on average. Moreover, in this environment even competition is conducted by administrative and political rather than commercial methods and is having a destructive effect on society.
The inadequate protection of property and informal dictatorship of the criminal bureaucracy in Russia do not allow the rich to put their abilities and capital at the service of their homeland and prevent ordinary people from celebrating their success.
Let’s hope that the state will recover before the growing antagonism between the rich and the poor leads to new social upheavals in Russia.
Mikhail Delyagin, PhD in Economics, is director of the Institute of Globalization Problems
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.