Consumption Patterns, Reflecting Income Differences, Vary Widely Among Russia’s Regions, Zubarevich and Safonov Say

Paul Goble

            Staunton, March 4 -- In federal subjects where incomes are higher, people spend a smaller percentage on food and more on services, whereas in those where incomes are lower, the reverse is true. But the two categories evolve depending on whether the economy is growing or not in different ways, according to Natalya Zubarevich and Sergey Safonov.

            The two Moscow State University scholars draw these conclusions in a new article covering the period 2000 to 2017 (“People and Money: Income, Consumption and the Financial Behavior of the Population of Russian Regions” (in Russian), Izvestiya RAN. Seriya Geograficheskaya 5 (2019): 3-17 at publications.hse.ru/articles/323359961 summarized at iq.hse.ru/news/346566904.html).

            Their findings mean that policies that may help people in one category of regions may or may not help those in another, something that both complicates policy making in the kind of highly centralized state Putin’s Russia is and may give rise to protests by those in different regions at different times.

            “Today,” the regional economists write, “Russians on average spend about a third of their family budgets on food.” But in the three regions with the highest incomes – Moscow, Khanty Mansiisk, and Yamalo-Nenets -- that share is far smaller. When the economy was growing, the decline in wealthier areas was greater than in poorer ones.

            That allowed the wealthier ones to spend more on property and services, although the services figure is anomalous because most of the change has had to do with changes in the prices for electricity, water and heat rather than services in the usual commercial sense, Zubarevich and Safonov point out.

            When the economy declined, the share of incomes going to property fell dramatically in the wealthier areas, from 12 percent to less than three percent in Moscow, for example; but in poorer areas, such as Ingushetia, where people were spending only about one percent of income on property, it had very little room to fall further.

            “Investments in human capital,” the scholars report, “regardless of the region, have not been high. Russian spend on education and medicine a small part of their incomes, four to five percent overall.” In the poorest regions, it is even less: in Ingushetia, for example, it is only one half of one percent.

            According to Zubarevich and Sofonov, “Russians are not prepared to invest in themselves.” They expect the state to do that. But they are increasingly prepared to take out loans. “The credit burden (debt to incomes) up to 2018 increased in the majority of subjects of the Russian Federation regardless of their level of development.”

            Per capita credit was highest in the wealthiest areas and in the very poorest, they say statistics show.  Between 2010 ad 2018, the extent of credit debt increased 3.6 times to some 15 trillion rubles (250 billion US dollars). “In 2015-2016, it barely rose and then began again to gather force.”

            “People are not rational,” the regional geographers say. “Having tightened their belts in the first two years of the crisis, they then took out more loans in order to maintain their level of consumption, despite declining incomes.” The North Caucasus, the country’s poorest region, leads this trend, setting the stage for more problems there in the future.