Privatization of Soviet Monopolies Behind Extreme Inequality in Russia Today, Matveyev Says

Paul Goble

            Staunton, July 10 – The extreme inequality in incomes and wealth between the richest people in Russia and everyone else is a product of the fact that the Soviet economy was based on monopolies and their privatization was in most case carried out by insiders who became wealthy monopolists themselves, Ilya Matveyev says.

            That inequality now is far greater than Moscow says, the specialist on incomes at the Russian Academy of Economics and State Service points out, because Moscow calculates income inequality on the basis of what Russians tell pollsters instead of on more objective sources of information (russian.eurasianet.org/россия-причины-и-последствия-экстремального-расслоения-на-богатых-и-бедных).

            Russia’s wealthiest are unlikely to tell the truth, and their claims suggest that Russia is not an outlier on these measures. But a study prepared by foreign experts which relied on tax declarations shows that Russia’s income inequality is far greater and that Russia is now one of the most unequal countries in the world in terms of income and wealth.

            That paper, by Filip Novokmet, Thomas Piketty, and Gabriel Zucman, “From Soviets to Oligarchs: Inequality and Property in Russia, 1905-2016” (an NBER Working paper) is available at nber.org/system/files/working_papers/w23712/w23712.pdf).

            Matveyev says that the monopolistic pattern in sectors of the economy that were privatized became the model as well for new sectors such as finance that were created when Russian shifted from state socialism to capitalism, and that fact exacerbated the pattern elsewhere in which the leaders of such new sectors are often super rich in many countries.

            Eurasianet’s Ivan Aleksandrov (a pseudonymous Russian journalist) points to yet another reality: “Inequality,” he says, “is not a synonym for a low standard of living. In certain countries, like the US, China or Saudi Arabia, large-scale inequality is combined with a high or rapidly growing well-being of the population.” That is not the case in Russia.

            There are other causes for extreme economic inequality in Russia, including stagnation in productivity and low wages and salaries, corruption, government policies designed to protect the wealthy and not redistribute incomes during the coronavirus, and attacks on opponents who seek to challenge these arrangements.

            But up to now, Matveyev says, the Putin regime by its actions has succeeded in keeping the population divided and leaderless and the elite dependent on itself. That makes it hard for the people to unite against the oligarchs and gives the oligarchs compelling reasons to support Putin and his government.

            Indeed, the Russian scholar says, the situation now can best be described as one in which “everyone understands everything” that is going on but no one is able to do anything about it.”