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© RIA Novosti. Valeriy Melnikov

Super-rich not so super

by Mikhail Delyagin, ValdaiClub.com at 19/04/2012 21:11

Over the next five years, the number of rich Russians worth over $100 million is set to grow by 76 percent, ahead of the global figure of 37 percent. That’s according to a new survey by the Knight Frank real estate consultancy and Citi Private Bank.

The forecast appears to be based on inertia-driven development, and does not take into account a possible economic recession and the resultant decline in oil prices. But, accurate or not, the forecast that the wealthy in Russia stand to grow richer much faster than their counterparts around the world deserves scrutiny.

The rapid growth of the superrich in Russia has not been accompanied by solid development, to say nothing of modernization. Last year, an increase in the price of oil by nearly 40 percent was not accompanied by accelerated economic growth, as GDP rose by just a steady 4.3 percent. Given the bonanza for the super-rich, the negligible growth in real wages of 0.8 percent, coupled with the apparently underestimated official inflation rate, means that real living standards for the majority of Russians fell.

The wealthiest Russians are amassing capital also through the redistribution of income from the majority of the population. This widening income gap points to deep internal fissures in society. Last December’s election protests were an indicator of how social tensions are growing. But even without this relatively new phenomenon, we would still have had no grounds to celebrate the growing prosperity of our richest compatriots, because their accelerated enrichment means greater consolidation of public wealth in their hands. This disproportionate concentration hinders development because it deprives many spheres of public life of money.

The money spent on luxury yachts, sports teams, palatial residences all over the world, is money that can’t be invested in Russia’s development – road construction, upgrading rundown utilities, restoration of the countryside, and the creation of modern jobs. The rich in Russia not only consume a disproportionately large amount of foreign goods and services, their consumption is excessive. They cannot be blamed for the inadequate level of investment in Russia because their opportunities to improve the unfavorable business climate here are restricted. However, by acting in the interest of capital rather than their country as a whole, they are promoting the development of the world’s prosperous countries probably more than Russia. This trend does not, of course, take into account the vast criminal fortunes made in Russia.

One more feature of wealth in Russia is its weak connection to merit. Nepotism and the orientation of many businesspeople toward federal funds are not only destroying social mobility. Since the era of privatization many of the wealthiest people in Russia are not “self-made,” but were either appointed “oligarchs,” as in the 1990s, or have been given access to the immense sources of profit in the country. Understandably, their abilities and motivation for promoting development are low on average. In this environment, competition is conducted by administrative and political, rather than commercial, methods and is having a destructive effect on society.

The inadequate protection of property and the informal dictatorship of the country’s criminal bureaucracy mean that the rich do not put their abilities and capital at the service of their country.

Let’s hope that the state will recover before the growing antagonism between the rich and the poor leads to new social upheavals in Russia. 

The views expressed here are the author’s own.

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