Staunton, Jan. 2 – “2022 may turn out to be one of the most fateful years ever for Russia,” Vladislav Inozemtsev says; “and how the coming year turns out is almost entirely dependent on the Kremlin [because] it has become obvious that all the resources of Putin’s growth model have been exhausted … a state of affairs that is not sustainable.”
Consequently, the Kremlin must choose between satisfying the appetites of elites and its own geopolitical ambitions, on the one hand, and improving the standard of living of Russians, on the other, the Russian economist says. Doing the former may promise short-term benefits for Putin; but only doing the latter will put Russia on track for longer-term stability.
Unfortunately, even tragically, Inozemtsev suggest, it appears that Putin has chosen the former with little regard for the dangers of not doing the latter (ridl.io/ru/nuzhno-vybirat-geopoliticheskie-ambicii-ili-stabilnost/).
At a superficial level, it appears that the coming year does not threaten Russia economically, he continues. The world economy is recovering, and Russia’s has been in part as well despite difficuties in its export markets. But the main problem this year is the declining standard of living that Russians now face.
Russian government statistics say that Russians have experienced a 4.4 percent growth in disposable income during the first three quarters of 2021. But “that doesn’t mean that life in the country has become better for the majority of Russians for at least three important reasons that are often neglected.
First, that growth is based on government estimates of inflation which almost certainly are far too long at least for most Russians. Second, income inequality is not only extreme but increasing with benefits going to the richest and not to the rest. And third, what growth there may have been last year is unlikely to extend into this.
“The Russian authorities have every chance to change this situation,” Inozemtsev argues; “but they have no serious desire to do so.” They prefer to ensure rising profits for state enterprises and engage in geopolitical aggression. But while they do that, the people suffer and ultimately the country will as well.
On the one hand, Russia’s biggest economic problem is extremely low aggregate demand. If people’s incomes don’t rise, that problem will only intensify. And on the other, the population will be increasingly angry as it sees the Putin regime enrich itself and spend their money without any benefits coming to themselves.
Whatever else that means, Inozemtsev concludes, it is not a recipe for stability at home however dramatic Putin’s “gains” abroad may appear to be.