Russia has Entered ‘a Great Depression,’ Rozhankovsky Says

Paul Goble

            Staunton, January 5 – Most Russian officials say that Russia is in a recession, but it has been without growth for so long and lacks the domestic demand necessary to restart growth and recover; and consequently, it is time to call things “by their own names,” Vladimir Rozhankovsky says, and acknowledge that “a great depression has begun in Russia.” 

            One indication that Vladimir Putin at least recognizes this is that this year in his address to the Federal Assembly in ten days he plans to focus on how to raise the incomes of Russians rather than talk about national security and super weapons as he did a year ago, the head of the International Financial Center says (svpressa.ru/economy/article/253653/).

            Other analysts agree. Araz Agalarov, president of the Crocus Group, says that “the incomes of the population are now very low and increasing GDP without an increase in the incomes of the population is in principle impossible.”  People simply don’t earn enough to make the kinds of purchases that would boost the economy.

            Some predict, he says, that Putin will simply continue as he has and gradually increase incomes and thus demand by indexing salaries and pensions. But if that is the case, the country’s economy will not grow “more than two percent” in the most optimistic projections and likely by far less.

            A second idea being discussed is tapping into the reserves put aside from earlier oil revenues. That could help, although it would be important to distribute this money in ways that would not spark inflation. But whatever is done, the government must keep its focus on “consumer demand” because that is “the foundation of any economy.”

            Right now, things are terrible. Vladislav Zhukovsky, an economist with Delovaya Rossiya, says that declining incomes are leading to an increase in poverty. “If we look at Rosstat data, then it turns out that today, 40 percent of the citizens of the country have incomes lower than 20,000 rubles (300 US dollars) a month, that is, less than ten dollars a day.”

            “This is a level of life approximately on par with Zimbabwe, Mozambique or somewhere in Equatorial Guinea. That is, with us, 60 million people live like Africans south of the Sahara.”

            It thus turns out, Zhukovsky says, that “every third Russian cannot purchase winter shoes because there simply isn’t any money for that. Sixty-two percent of Russians do not have any savings but live from paycheck to paycheck, from pension to pension, and do not have the chance to save for a rainy day.”

            And what is especially horrific, he continues, is that “today, 26 percent of all children – that is, each fourth child in Russia – lives in poor families where incomes are below the required minimum. This means that every fourth child in Russia is poor. In rural areas, that figure is 46 percent.”  And in those with more than three children, 52 percent are poor.”

            “That is a death sentence,” Zhukovsky suggests.  But what neither he nor the other economists Svobodnaya press spoke with mention is that the last time major countries fell into depression – in the 1930s – most of them escaped only by military mobilization and war, a prospect that is even more disturbing than the ones they do point to.