Tag Archives: extractive turn

People as the New Oil. Or, ‘как жить дальше’ in Russia? Part I

Savelii Kramarov - 'I have more than thirty half-litres of vodka left to live on'

Savelii Kramarov in a satirical sketch on the cost of living in 1971. It has become a viral meme in the last year.

Phrases on the variation: ‘people are Russia’s replacement oil’ represent a new extractive and punitive turn in domestic politics, a shift to harvesting economic rents in more intensive ways focused on the daily doings of ordinary Russians. The interpretation goes like this: consistent oil prices over $70 – not seen since 2014 – are needed to maintain Russia’s state budget. After four years of expensive foreign policy adventures and a longer term lack of progress in creating a diversified economy at home, the government has resorted to ‘farming’ the ordinary population in earnest. This is the corollary of the ‘intense struggle access to budget money’ among the elite since 2016 that [paywall] Svetlana Barsukova details. Since most Russians have seen stagnating income levels for the last decade, and witness a noticeable deterioration in state-provision in general (in health and education and importantly the entitlements connected to them – these were the top ‘concerns’ of Russians in 2018), they can’t help but feel acute injustice at the sudden zeal for extracting fines and increasing taxes on unavoidable expenses like transport and utilities, even non-existent land holdings.

While the increase in pension age gets a lot of attention, it is worth mentioning what are more pressing issues, like the price of petrol and the raise in VAT from 18 to 20 percent, and not least inflation on staples, which is likely understated by a factor of three in official statistics. Indirect taxes hit the poorest most, and VAT is levied on utility bills, which already take up around half the income of a person on the ‘minimal income’ ($170) and are now adjusted more frequently for inflation. A second issue is largely untaxed income from self-employment which cuts across classes, from nannies and tutors to taxi drivers and  tradesmen. The government declaring ‘war on the nannies’ was a recent headline. However, most people see these incomes as topping up their meagre primary incomes and interpret the state’s renewed interest in personal taxation as profoundly unjust. Third is the more general ratcheting up of the punitive tax potential of fines on motorists, late payers of utilities, and other minor law breakers. Russian roads are densely covered by enforcement cameras in comparison to most European countries.  Moscow Region alone quadrupled its count in 2018 with 1300 cameras garnering $150m in fines (this is as many active cameras as in the whole of the UK).  400 more are on the way in Moscow in 2019. But the most telling indicator for me was a national park suddenly deciding in 2017 levy a ‘user fee’ of 400 rubles a year from hikers, anglers and even villagers whose abodes happen to lie within the park, the only interest shown in the park by the ministry of natural resources since 1995. It is as if suddenly a player in the ministry decided that previous milking of the parks (through lumber harvesting and guided tours) was now insufficient.

Therefore it is of no surprise to me that a recent Levada poll showed that while Russians’ pessimism is not as bad as it was even as recently as 2013, 46% of Russians cannot plan for even the immediate future. This was published at the same time as another poll that saw presidential ratings fall back to below 2014 levels. Furthermore, the unpopularity of the government and the Prime Minister is as high as it has ever been in the post-2000 world (a record high for the Prime Minister). Perhaps more importantly, for the first time since 2013 more surveyed people respond that the country is ‘moving in the wrong direction’ than the right one (45% versus 42%).

 

Making impossible ends meet

Bear with me here but it’s really unavoidable that we dig down into the reality of existence for the majority of Russians – poorly paid and already highly taxed before these changes. Indeed, it’s bordering on the irresponsible that the ‘human face’ of working poverty is largely absent from much discussion (which I’ll discuss in the follow-up post). To do this, let’s look at a portrait based on a real research participant I have worked with for the last ten years.

‘Dima’ worked as a loader in a brick factory in his small industrial town for the last ten years, but there his wage was static and never rose above 18,000 rubles a month. His wife works in a food shop part time and takes home 8000 rb. They have a pre-school-age child. The household income was recently therefore less than $400 a month (26,000 rb). Dima thought he’d got lucky, in 2018 he got a job at the Samsung washing machine assembly, on the road between Moscow and Kaluga. This gave him 24,000 rb a month, a 30% pay increase. However, he needed to use a car to commute to work, the costs swallowing a lot of the wage increase. With petrol going up, now he’s earning less than he used to. Before the new tax increases come into effect these were the outgoings of the family: 7000 on utilities, and 15,000 on food, which is skimping on all but the essentials. The family relies on relatives who work a garden plot for fresh fruit and vegetables, as well as jars of preserves in the winter. 5000 a month goes on petrol, just to get to work and back (there are better paid jobs, but they’re further afield). That’s already 27,000 gone, not accounting for clothes, medicine, other motoring costs, or anything for the child. What’s left is 5000 rb – or $75.

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When trying to measure relative poverty a robust measure is how much a family spends on food and other essentials. In the bitter current debate on how to quantify poverty, a frequently cited level is an income of least 8 dollars a day to maintain survival, and at least 15 dollars for any kind of dignified existence (especially in a ‘middle’ income country). It’s interesting to note that these two figures map closely the lower and upper range of blue collar wages a man like Dima can expect to earn. These kind of figures are criticised for not taking into account local prices (purchasing power), but as you can see, while wages are very low, living costs are relatively high and even bear comparison with many EU countries.

Just to take the example of the occasional treat of eating fast food, an example that resonates because of the supposed utility of the BigMac Index, for Dima to treat his child to a Happy Meal once a month will cost him more in dollar terms than either the UK or US! Indeed it will cost him 5% of his disposable income for the whole month. [And I can’t resist the personal aside here: my own family of four cooks its own meals and drinks little alcohol. When in Russia we make local-style meals. But our outgoings on food are significantly higher in Russia than in W. Europe]. A more ‘traditional’ measure of one’s finances could be in vodka ‘halflitres’.  Dima can afford 18 bottles of vodka with his 5000 rubles. In the classic routine of Savelii Kramarov from 1971, he complains of only having 30 bottles a month left over after all his expenses! Our real Russia example shows how even with two earners and only one child, no kind of dignified existence is possible. And that is before the significant increases expected in 2019. I often put it like this, Russia is a ‘middle income country without middle-incomes’. And of course Dima is substantially better off than pensioners or the many in much lower-paid work.

In the next post I will try to unpack some of the conclusions observers like Valerii Solovei and Vladislav Inozemtsev draw about what I will call the ‘extractive turn’. Overall they reveal a deep pessimism about alternative futures. Most of all though they continue to view their own countrymen as passive and lacking any agency (beyond a destructive ‘buntovat’ mentality), despite the obvious evidence to the contrary – the massive informal economy that sustains livelihoods and habitability above the bare subsistence level.

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