Russia’s Richest Regions Growing Richer while Poorest Ones Grow Poorer, Academy of Sciences Study Documents

Paul Goble

            Staunton, Mar. 18 – The 10 richest federal subjects of the Russian Federation – the two capitals and eight resource extraction locations – are all growing richer while the 10 poorest – consisting exclusively of non-Russian republics in the North Caucasus and southern Siberia – are all growing poorer, according to an Academy of Sciences study.

            That pattern threatens to trigger conflicts between members of these two groups as well as to leaving much of the rest of the Russian Federation in stagnation and demographic decline as the population leaves for the better-off regions of the country, all of which are creating serious problems for the country, the study says.

            (The study appears in the current issue of the Academy of Sciences journal Narodonaseleniye, and a full text is available online at journal-socjournal.ru/index.php/socjour/article/view/10974/10620. It is discussed in detail by Nakanune journalist Yevgeny Chernyshov at nakanune.ru/articles/124483/.).

            Sergey Dokhonin and Mariya Vershina, researchers at the Federal Research Center of the Academy of Sciences, classified the more than 80 federal subjects into three groups based on what they suggested were their key economic characteristics: the 10 wealthy leaders, the 10 most impoverished, and the rest whom they described as “middle of the pack.”

            As Chernyshov points out, “the very composition of these groups speaks volumes: the top 10 list includes the two national capitals along with primarily the leading resource-extraction autonomous districts and regions where per capita income significantly exceeds the national average.”

            This leading ten as counted by the two Academy of Science experts thus includes the Chukotka Autonomous Okrug, the Yamalo-Nenets Autonomous Okrug, the Nenets Autonomous Okrug, the Khanty-Mansi Autonomous Okrug, and the Sakhalin, Magadan, Moscow, and Murmansk Oblasts.

            The 10 poorest federal subjects include the republics of the North Caucasus and Southern Siberia, areas with the lowest levels of fiscal capacity, high unemployment and as a result the lowest per capita incomes. These are Ingushetia, Tuva, Karachay-Cherkessia, Altai, Kalmykia, Kabardino-Balkaria, Mari El, North Ossetia, Chechnya, and Altai Krai.

            The per capita incomes of those in the top 10 exceed those in the bottom by 95,000 rubles a month to 25,000 rubles and the poverty rate in the former is less than six percent while in the latter it is more than 21 percent. The Gini coefficient is higher in the former than in the latter, meaning that in the latter the population is generally poor across the board.

            In the bottom ten, mineral extraction counts for only three percent of the gross regional product while it accounts for 25 percent for Russia as a whole; and traditional manufacturing contributes very little in the poorest regions. And the top 10 receive 4.3 times more investment per capita than do the bottom 10.

            Moreover, Chernyshov says, “the situation is only worsening.” In 2014, per capita incomes in the top ten exceeded that figure for the bottom 10 by a factor of three. Today, that advantage is nearly four. “Over the past decade, nominal incomes in wealth regions have nearly doubled while in poorer ones, they have risen by only 50 percent.”

            According to the Nakanune writer, “experts argue that current regional policy is predominantly compensatory in nature—relying on various subsidies—and fails to address underlying structural problems “ -- or as the Narodonaseleniye article puts it. "An excessive concentration of resources risks permanently 'depopulating' vast tracts of the country and exacerbating the effect of 'spatial compression' already in evidence.”

And they continue: “It is a paradox: on the one hand, the advancement of technology and transport networks ought to 'compress' space, rendering it more homogeneous and accessible. In practice, however, we observe the opposite effect: intensifying polarization. Economic space does not compress uniformly; rather, it 'collapses' around a few select agglomerations, siphoning off resources and human capital from the vast periphery.”

In short, the authors of the study conclude that unless radical changes are made in state policy, “the ‘rich get richer’ mechanism is indeed at work in Russia … Russia’s economic space constitutes ‘an archipelago’ of a few prosperous ‘islands’ … within ‘an ocean’ of stagnating or deteriorating periphery.”