Staunton, June 8 – 2020 and 2021 show that Russians are seeing their standard of living decline whether the economy as a whole falls or rises, Sergey Shelin says. Last year because of the pandemic, they lost work and thus income; this year, because of a mismanaged economy, they are seeing their real incomes decline because of inflation even as the economy grows.
Real disposable incomes in 2020 fell in Russia by 3.5 percent, the Rosbalt commentator notes. In the first quarter of 2021, however, “real incomes turned out to be 3.6 percent lower than in the first quarter of last year.” The explanation: inflation ate up more than the nominal increases in wages and salaries (rosbalt.ru/blogs/2021/06/08/1905678.html).
Inflation is a real scourge because it cuts real incomes and allows the government to extract more money from the population, Shelin continues. Last year, inflation for the year was 4.9 percent. So far this year, it has increased six percent, according to officials and far more according to independent analysts and the experience of the population.
Inflation has accelerated so quickly because the Central Bank miscalculated. It expected inflation to burn out quickly and thus acted in ways that when that didn’t happen, price rises would only accelerate faster. And these have hit Russians harder than inflation has in other countries because their government has behaved differently than other governments.
Wealthy countries distributed to the population 15 to 25 percent of GDP last year to cushion the impact of pandemic and economic crisis. People got the money and could spend it. In Russia, the government spent no more than three percent of GDP and gave it to businesses. As a result, the people did not and do not have the cushion people elsewhere do.
The government compounded this problem by deciding to ban exports of consumer goods whose prices were rising quickly. But that had two negative consequences. On the one hand, producers continued to set domestic prices on the basis of worldwide ones. And on the other, protected from competition, they began to shed some of their employees.
Had Russia been in a normal situation, its own currency would have strengthened against other currencies and that would have provided some protection for the population. But because of sanctions, the ruble has continued to fall and so what looks like good news for the Russian economy as a whole has not been good news for the Russian population.