Poor in Russia Too Numerous, Shadow Economy Too Large, and Centralization Too Great for Targeted Aid to End Poverty, Gontmakher Says

Paul Goble

            Staunton, June 3 – Officials in the Kremlin are now talking about using targeted government assistance to cut poverty by half by 2030 as Vladimir Putin has promised, but the share of poor in Russia is too great, the shadow economy too large, and government centralization too great for such an approach to work, Yevgeny Gontmakher says.

            Moscow officials prefer to use the minimum living wage as the measure of poverty, the economist says; but a better measure is the minimum consumer budget which is set at twice that. If the latter is used that nearly a third – 33,4 percent in 2019 and 31.8 percent in 2020 – are poor (mk.ru/economics/2021/06/03/recept-ot-bednosti-kak-reshit-problemu-maloimushhikh-rossiyan.html).

            That is, in Russia today, “almost a third of the population consists of poor people who are struggling to survive.” Those are Russian government figures. If one uses World Bank data, the number of Russian families who are on the brink of survival may be as much as 70 percent. Given those numbers, talking about targeted assistance is absurd. Who would give to whom?

            But that is hardly the only problem. Another is that many Russians survive by relying on the black or gray markets, but it is all but impossible to measure real total incomes at the all-Russian level. Such measurements are possible only if they are carried out by local officials who can take into account local conditions.

            And that brings Gontmakher to focus on the third problem. The hyper-centralized Russian government doesn’t leave enough money in the hands of local officials to distribute it fairly and equitably among the poorest Russians. To change that would require changing the entire Russian political system which is why it isn’t happening.

            The best and most effective way to address poverty, the economist says, is not to offer targeted assistance to individuals in particular category but rather to promote economic development so that the wages and incomes of all Russians rise. But that too is a goal that the Russian government at best gives only lip service to.

            But at the very least, Gontmakher says, Russians both in the population and in the government need to recognize that all talk about overcoming poverty by targeted assistance will not lead to real progress and that if Russia wants to address the problems of the poor effectively, it must consider broader and more radical change.