- How important is the problem of economic polarization (rich vs poor) for modern Russia as compared to other countries of the world?

 

- I would say that this problem is not so topical for Russia. The polarization is much higher in less-developed countries where a part of the population is languishing in poverty. The well-known statistical data show that 10 to 25% of the world population still live in slum dwellings. You should take notice of the fact that slum dwellings are not similar to Russian ramshackle houses that often remain in terrible conditions, but are provided with heating and sometimes water supply facilities while slum dwellings are absolutely unsuitable for living. There is no such problem in Russia which is a developed country that was being modernized over 150 years in the XIX and XX centuries. That is why the lower strata of our society live in not so catastrophic conditions as the poor in the majority of states.

However, Russia also differs from the most developed countries such as the USA, where there is a tendency for middle class erosion, especially in the last decade. I could even say that we observe the impoverishment of the middle class. There are some interesting statistics that are given in particular in the book “Aftershock. The next economy and America's future” by Robert Reich who, by the way, was invited to participate in the Forum but was not able to come because of his previous commitments. The statistics he provides show that the real incomes of the American middle class have sharply reduced while the real incomes of the American upper class have dramatically increased over the last thirty years.

The polarization has remarkably grown and this leads to the destabilization and slowdown of the economic development, because the American middle class shaped a few decades ago as the main driving force of the economic growth is eroding, losing its power and opportunities to earn more money. At the same time a significant part of the national income is being ‘sucked out’ by the upper class, especially by the financial elite. At the height of the crisis we saw how the Wall Street wheeler-dealers were writing out billion dollar bonuses for themselves while the middle class was becoming poorer. This was outrageous. It could be accepted if these managers were the owners of the companies, but actually they are only hired workers.

A similar, though less harsh situation is observed in Europe. The social unrest in Great Britain, Germany and other countries is partly caused by above-mentioned tendencies. Migration is not the main cause of the unrest; in fact, the erosion of the social structure shaped after the Second World War of the world’s leading countries had much more profound impact on it. The situation is different in Russia where the middle class was growing in the last decade before the crisis. According to the “Expert” research, 7% of the Russian people could be labeled as the middle class in 2000 on the basis of their income and/or their lifestyle as against 20-25% of the population labeled as the middle class after 7-8 years of the fast economic growth. In those years Russian policymakers set a task to bring the share of the middle class up to 60%. Nevertheless, the growth of the middle class has stopped. Some people even claim that the middle class is degrading, because Russia cannot provide enough jobs, appropriate education and desired lifestyles for dozens of millions middle class candidates. In whole, our country is non-modern and not modernized in accordance with the XXI century demands. Roughly speaking, only a smaller part of the country is modern. This suggested the Russian president the idea of modernizing the country. When the president started to speak about the modernization, he meant by that not only the economic modernization. The middle class is the bearer of modernity, thus in order to modernize our non-modern country we should ensure that the modernization of institutes, economy, education and health-care system and the fast growth of the middle class go hand in hand. It is from this perspective that Russia is different from both developed and less-developed countries. We have our own tasks.

 

 

- Do we have any successful examples of narrowing the gap between the rich and the poor that could be used by Russia?

 

- Yes, certainly. The XX century demonstrated, especially after the Second World War, tremendous results in the narrowing of social gaps, particularly between the rich and the poor. It is exactly the XX century that has resulted in the large-scale growth of the middle class. The growth process began before the Second World War and was initiated to a large extent by the social democratic movement. A very good example is the Swedish social democracy that introduced new institutions of pension, insurance, minimum wage and etc. These innovations were promoted in part due to the socialist revolution in our own country, though it is unpopular to speak about this in Russia today. A lot of new social practices that were adopted in our country for the first time began to spread around the world. The next important factor is the implementation of new methods of economic management. Keynesianism that flourished after the Second World War contributed to the explosive growth of wealth of the world’s leading nations. However, leadership and elites of these countries did not fear to impose high excess profits taxes. There were periods in the US history when the income tax amounted to 90%. Naturally, it applied only to enormous, many million-dollar incomes, but it is still difficult to believe that. And it was OK. Despite such taxation, the American rich did not rise in rebellion to overthrow the authorities.

 

- Is it possible to make these models work again today?

 

- I think that these models should be used again in one form or another. People should have enough opportunities to work productively and earn money. Moreover, the narrow upper stratum should not ‘suck out’ money, especially through financial mechanisms only. For example, Henry Ford was one of the wealthiest persons in the world, but along with that he founded large industrial enterprises and created hundreds of thousands of new working places that let workers become a part of the middle class and buy cars. Nowadays financial wheeler-dealers create almost nothing and money goes into pockets of the very narrow circle of people. Undoubtedly, we will see early or late the ‘renaissance’ of the social policy that led to such prominent results. The enthusiasm for excessively liberalized model of globalization is becoming a thing of the past. It is clear that capital itself with open borders is not able to solve social problems. Capital is only the force and instrument that governments should use in their territories or abroad through coordination of actions with each other in the name of development of the whole world.

 

- When the ‘rich vs poor’ problem is under discussion, it often turns to the suggestion that the poor are partly responsible for their economic state. In your opinion, how legitimate is this statement? Is it possible to say that they share the responsibility, but not the blame (for example, sometimes the poor take bad economic decisions, because they do not have an access to information, etc.)?

 

- I have quite a pragmatic approach to this problem. I believe that there aren’t any groups of the Russian population that could be blamed for their poverty. For instance, some groups of people in Europe, especially large and unemployed immigrant families, seized on social benefits and they live almost only at the expense of them. Decent standards of their living are ensured with the help of money that is given to them by the state. Thus, unemployed migrants who receive social benefits can live abroad better than they lived at home. There is no such tendency in Russia. Nobody extorts money from the state through the social sphere. Russian regions live in completely different conditions due to the strong geographical heterogeneity. If someone lives in the depressed region, he has much less opportunities to achieve the success than in Moscow, Yekaterinburg or any other developed city. I think this is one of the biggest problems in Russia. In such a huge country as Russia it is necessary to aspire to creation of more equal opportunities for citizens who live in different parts of the country. We observe the outflow of population from the Far East and the majority of Siberian regions. The conquest of these territories was a historic mission for Russia for centuries and now it seems that we don’t need them anymore. If these territories are not needed, we will lose them sooner or later. However, Russia cannot exist without Siberia and the Far East. It is the historical challenge. If we understand this challenge, we should ensure decent working and living conditions for those millions of people who live beyond the Urals.

 

- There is such a painful problem in Russia as the fate of senior citizens who worked honestly during all their life in the USSR and then found themselves below the poverty level in new Russia. The transition to democracy and a better life turned out to be very different from what they expected, because they became ‘collateral damage’ in the reform process. Today, when revolutions are happening in the Middle East and North Africa, what we can say about this problem? How we should approach such problems that appear as a result of the democratic transition? How is it possible to alleviate such defects?

 

- There is no way to do it. I think that it is impossible to alleviate heavy social consequences of the revolution in those cases when the democratic transition is brought about by it. The revolutionary processes have nothing in common with regular governance of the state, especially strong and democratic. When it comes to the revolution, the majority of the population inevitably suffers losses. However, it is necessary to strive for the fastest transition from the revolution to the reconstruction. In the last decade we saw how quickly the country could be recovered. After 1999 we saw how fast the income and pensions could grow. All countries that are being undergone revolutions should take into consideration this experience and seek to achieve the same objectives.

 

- These and other problems will be debated in the Yaroslavl Global Policy Forum that you are attending this September. What are your expectations from these debates? What do you plan to say and what would you like to hear from other participants?

 

- I would like to see some so to say radicalism. I do not mean destructive radicalism, but rather harsh opinions on the current state of affairs and more radical proposals. A lot of participants of the past forums understood the need for deep changes. They were talking about that in lobbies and sometimes even in public, but these demands for serious changes were not heard on the political level. Politicians in the majority of countries are still indecisive. From my point of view, it is impossible to overcome existing difficulties with current political indecision, so crisis will only become more acute. I hope that our Forum will encourage decisive changes.

 

By Yulia Netesova

 

Translated by George Plaschinsky

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