Tag Archives: tax

Putting in a good word for the Russian bourgeoisie

small shop in Russia

A typical small independent shop in a provincial town now under a lot of pressure from cartel-like supermarket chains.

A shorter version of this post appeared on Ridl.io

As anthropologist James Scott once said, ‘it’s time someone put in a good word for the petite bourgeoisie’. Shopkeeper-owners, small independent professionals and traders fulfil essential social and economic functions in any society but are especially important in modernizing ones. Sooner or later they turn into a middle-class with property rights and economic interests to defend. They are seen, even by Marxists, as a motor of political change.

However, in Russia the growth of a real middle-class and a healthy private sector is hindered at every step, largely in favour of a state-big business nexus. Whole industries – particularly in strategic sectors, are managed by state-owned monopolies, and have preferential access to banking finance, as Ilya Matveev points out.

The idea that the Russian political economy is a hybrid form of ‘state capitalism’ is widely accepted. However, less attention is paid to how these processes affect entrepreneurship generally and the wider implications for society. Coercion to gain access to wealth and the violent form of corporate raiding are also widely studied. However, elite insiders’ appetites for unearned wealth and sources of economic rent mean that even small businesses are subject to ‘taking’, rather than ‘trading’, to use Gerald Easter’s terms. This reflects a ‘maturing’ stage of insider elites and the way natural resources have already been ‘gathered back in’ by the state.

In most societies, the diversity of small and medium sized businesses – made visible in town and city centres – is seen as a key indicator of the health of the economy, and society more generally. If ‘mom and pop’ businesses are driven out of business, goes the logic, it’s because bigger capitalists have preferential access to power or the state, and because taxation and regulations are too burdensome for smaller operators. Russia suffers from both these structural obstacles and things are getting worse rather than better. To explore this we can start from the big picture and progressively narrow our focus to show how entrepreneurs are increasingly squeezed out and how informal ‘micro businesses’ are now one of the only viable alternatives for those without patronage from system insiders.

One way of understanding this is by looking at the share of ‘entrepreneurial incomes’ versus employment wages.  In 2000, it was 15%, but in 2018 it had dropped to 7.5%. Incomes from property are microscopic – 5%. So much for a broad property-owning class. The number of small and medium-sized enterprises (SMEs) is falling by 6-7% a year. We can also look at the average size of firms as an indicator. Labour researcher Stephen Crowley argues in a forthcoming book that Russia is an extreme case of the privileging of large enterprises. 80% of employment in manufacturing firms is in large companies, only 10% of the country’s workforce is employed in SMEs, versus 70% in the EU. Moreover since the Russia-Ukraine conflict and its economic side effects, consolidation has intensified, with the vast majority of closures in small and medium firms. There is plenty of evidence that monopolies and cartels are growing and competition falling. David Szakony reports that 14% of firms in 2016 reported they had ‘no competition’, a rise from 1% in 2013. Yet the number of ‘unfair competition’ court cases heard has fallen over the same period, while the Federal Monopolies Commission is notorious for pursuing SMEs in bureaucratic actions. Szakony summarises: Since 2014, SMEs have been squeezed by ‘skyrocketing interest rates, unsustainable tax burdens, and uncertain protection for their property rights’.

That the conditions and prognosis for SMEs are so bad is very visible in the Sisyphean efforts of the Minister for Economic Development, Maksim Oreshkin. Today Oreshkin is quoted as saying that preventing the stagnation of small business requires ‘work to increase the confidence of the business community in the state (both in regulation and in the system of enforcement) and reduce administrative costs.’ The report carrying the quote adds, ‘According to him, all these areas are enshrined in the list of key structural reforms.’ The problem is that all the signs are that for good reasons smaller businesses don’t trust the state.

Schemes like low interest loans for restaurants and small shops are a drop in the ocean ($30m), and almost exclusively go to ‘connected’ insiders at regional level. Indeed, this scheme is in fact a policy reversal – a similar scheme was discontinued because it mainly benefited the banks and was abused by businesses with political connections. In Kaluga region in 2017 (where my fieldwork sites are), for example, all the subsidized loans went to four companies owned by a single individual.  But even if the scheme provided fair access, an individual entrepreneur in a low-margin business (which is most shops) would find this a risky proposition.


In addition, for retail businesses there will be a broadening of the ‘compulsory barcoding’ of products to allow the state a real-time assessment of turnover.   While the idea behind these changes is to simultaneously prevent tax fraud and help small businesses by taxing their actual turnover, it is expensive for small shops to install and service. An online ‘cash register’ requires much more work in marking stock and inventory control . Finally, proposals like ‘inspection holidays’ to protect ‘conscientious’ business from excessive regulatory attention, only underline how much predatory and corrupt power bureaucrats have over small businesses. While the rate of some inspections is falling, there has been a sharp rise in ‘unplanned’ visits by regulators – up 74%). Regulatory inspection in Russia remains  a key area where bribe-taking can occur.

These dynamics are most observable in the changing patterns of shops and SME employment in small and medium sized towns. In the town of 20,000 people where I conduct field research, only two independent grocers remains, down from more than a dozen in the early 2000s. Three chains of mini-markets have taken their place – very convenient, but a classic example of cartel-like behaviour. One is owned by a state bank, the other two by oligarchic interests. This pattern is mirrored more widely – around 40% of trade is controlled by large retailers and the trend is increasing. The poorest areas do without the chains completely but even here a genuine local entrepreneur will struggle.  A vocal observer in this has been the controversial business commentator Dmitrii Potapenko, who in 2017 offered a stark analysis – ‘a seven rouble difference in the price of a loaf of bread is a critically significant sum’ (then around 10 US cents) illustrating the extreme price sensitivity of consumers. Potapenko has been in the limelight again just recently, commenting on cryptocurrencies. This was against the backdrop of discussions about the self employed ‘going into the shadows of cash only’, [ушли в кэш], the merits of employees demanding the option of payroll in cash, and the use and abuse of the Federal Law 115-F3 on money laundering that allows banks to freeze business accounts. While there’s more heat than light in the discussion, it highlights how trust of the banking system is still highly relative, and, as we’ve seen with even high-ranking politicians, cash is king!

But back to the suffering of small business under insurmountable pressures…

A similar trend to that seen among small shops is observable in employment, whether in services or manufacturing. In my town, small producers of steel, building materials, and plastic manufactures have either gone to the wall or sold up in the last ten years. Some of this is a natural process as many of these businesses were left-overs of large and outdated Soviet-era enterprises. A few with very special niches will hang on, but most are dying out. The local owner of a steel fabricators employing around 100 people, recently sold out to a conglomerate, tired of bureaucratic sword of Damocles, fed up with competing with Chinese imports, but mostly exhausted by the experience of being an entrepreneur in Russia: ‘in business you need to know when it’s time to leave,’ he told me. Another more optimistic entrepreneur had just opened a high tech laser-cutting materials workshop with around 20 employees – just the kind of business Russia needs, making good use of its still impressive human and technical capital. However, it turns out this venture was more out of necessity than choice. His prefabricated building business had been ‘taken over’ by competitors, against his will, and another side-line in printing merchandising materials and school textbooks was frozen due to a seemingly endless tax inspection.

However, this doleful picture is not the whole story. There has been a statistically measurable rise in start ups – in micro-businesses – defined as having 15 employees or less. While starting small is typical the world over, in Russia it has specific connotations. The smaller the business, the more potential there is for it to disappear into the informal economy and escape taxation and regulation partly or entirely, especially as the law on self-employment is unclear, as discussed in a previous blog post. Indeed, one informal fix to burdensome and predatory state regulation is spinning off part of a business into the underground, a phenomenon I’ve witnessed first-hand. A large proportion of the informal economy is connected to micro-businesses – largely made up of sole-traders.

If the state wants to support legal micro business, one way would be to bring back their most visible incarnation – the street kiosk – typically selling newspapers and magazines, hot food and beverages, or even clothes, domestic goods and toys. While long bedevilled by issues like mafia extortion and high rents, these micro-retailers are making a comeback outside Moscow and St. Petersburg. While the demand is clearly, there is a long way to go, and many municipalities are not keen on these small businesses. There are some 16,000 kiosks nationally, down from 42,000 some years ago. Certainly though, the resurrection of the kiosk, along with the high number of informal sole traders shows that entrepreneurialism is alive and well in Russia. However, that this is limited to the niche of individual self-exploitation – whether in street kiosk or shadow economy self-employment – is far from the dream of popular ownership of the means of production that James Scott lauds for its emphasis on autonomy, civic society potential and self-reliance. We’re back to the argument about Russia’s ‘missing’ middle-class (Balzer’s phrase)- or at least the entrepreneurial conception of it.

A tax-paying non-democracy? Or, ‘don’t touch people who live by their own resources’


Russian tax authorities boast of record collections in the last couple of years. In 2017 collections were 20% higher than in 2016. At the same time the number of taxes is expanding, with new ecology, waste and telecoms taxes, to name a few, as well as the consolidation of ‘duty’ payments into federally enforced taxes . There are signs the Tax Service is growing in confidence, recently proposing to expand its juridical scope to regain control of criminal cases against business.

Are these signs of more effective state, and thus the potential for its bureaucracies to serve more than a few citizens? Or are they examples of the centre’s fiscal cul-de-sac, as it seeks a human replacement for falling natural resource revenues (encapsulated in the recent idea of ‘people as the new oil’). In this post I will review the significant recent changes in taxes that affect individuals (businesses are important but will be dealt with another time). A shorter version of the post appeared in Ridl.io, along with a Russian translation.

First, we need a little history. Russia’s flat-tax is famous as one of the first, boldest reforms of this type in the world with a big cut in income tax from a higher rate of 30% to 13% in 2001. However, Putin’s first years were characterized by even more radical neoliberal taxation reform across the board that built on the IMF programme of 1998 in response to Russian debt default.  The flat tax was part of a package that included lowering corporation and other taxes, and increasing tax collection via VAT. These changes arguably helped small and medium businesses and gave a kick-start to both the legitimacy and bureaucratic logic of the Tax Service going into the 2000s. Employees and entrepreneurs alike were eased into the new economic system, all thanks to the flat tax and low profit taxes. Why was this important?  For ‘cultural’ as much as institution-building reasons. Income taxes in the late Soviet period had generally been very low. Taxes were less ‘visible’ as deductions in socialist societies, and the link between them and the provision of services was equally opaque (Alm et al 2006). People more often linked ‘social security’ to the visible and significant paternalistic obligation of their employer, not the state. Thus ‘tax morality’ was an issue in the 1990s, and arguably remain so today. (aside: it still surprises me that scholars don’t make more of the fact that for nearly 80% of the population, incomes declined year-on-year for nearly ten years, so the fact that tax ‘morale’ was low is hardly surprising – see Alm et al. 2006).

The fundamental idea of a flat tax generally is to expand the tax base – reports vary, but perhaps a majority of people who should have paid income taxes in the 1990s did not. This continues to be important in Russia because of the large size of the informal economy and the fact that it dominates in how people calculate their real incomes (perhaps the majority of people have a ‘white’ income – which is subject to income tax, and an informal extra income source, which is not taxed directly). Tax revenue has been always rising, but from a tiny base in 2000 and is thus not a very meaningful measurement considering GDP has grown much faster. Indeed, as a share of GDP, Ukraine better qualified now as a ‘tax-paying state’ than Russia.

Like other flat taxes, the Russian one has no allowances (which are typically set at a level around the minimum wage, as it is in the UK, for example the low). Therefore, even the very working-poor pay it. In addition, there is a ‘hidden’ regressive element in the form of the employer’s obligatory deductions for social insurance and pension contributions. The more you earn (starting from an income of around 14,000 Euro a year), the less as a percentage of income the employer contributes. Taking into account the employer and employee deductions, average income-related taxation is more like 33%. (Only medical insurance contributions are not regressive – hat-tip: Ilya Matveev).

Lack of allowances and the relatively large burden of pension and social insurance deductions are major disincentives to register self-employment income because it is so variable.  Moreover, there is little or no evidence that the tax reforms really improved revenue collection, productivity, economic activity and trust in the general fiscal system (Kryvoruchko 2015; Appel and Orenstein 2013). More likely, the rapid improvement in the Russian economy after 1999 was the cause of higher revenues – incomes increased, not compliance (Ivanova 2005 et al [opens as pdf]). The fact that this story is rarely heard is a measure of the dominance of orthodox supply-side economics to this day. In fact, the IMF often criticised the introduction of flat taxes, citing the already weak fiscal position of former communist countries (Domonkos 2015).

Fast-forward to the late 2010s, and against the backdrop of inadequate natural resource revenues the Russian state has returned to the thorny issue of taxes in earnest. However record income tax receipts are only a small part of the story. In Russia personal income taxes have only ever been a small share of all tax-like revenues (Gaddy and Gale 2005), as in Soviet times. Direct personal taxes as a share of all taxes and as a share of GDP are around half of that found in other highly-educated, and industrialised market economies.  Despite this, there is little sign of any political will for a return to progressive taxation, even though it might raise significantly more tax from the 11 million ‘better paid’ Russians. More important is the repeated failure to tax the self-employed and the 2019 changes to taxation of land and property.

Let’s take the self-employed first – remembering that even for people with jobs, ‘side-work’ is an important category for making ends meet. Until the Ukraine/sanctions crisis in 2014, personal income derived from the informal economy was effectively ignored by both politicians and the bureaucracy. It is true that the most visible self-employed were ‘tax registered’, perhaps best symbolised by quasi-private transit operatives (marshrutki drivers operating as lone, or ‘small traders’ in tax terms). However, the vast majority of ‘tradespersons’ and individual service providers – from electricians to home-visit beauticians, operated in a black hole – their complete bureaucratic invisibility was part of a permissive deal with society. This ‘compensated’ for extremely low disposable incomes from formal work, at the same time as allowing ordinary people something of niche in an entrepreneurial climate increasingly dominated by large firms with ‘connections’ to those in power. However, that niche is rapidly disappearing due to the expansion of state-connected large firms.

After 2014 the government put more energy into pursuing the self-employed, to bring them into the formal purview of the state, including taxation, licensing, national insurance, pension payments, etc. The latest version of this is the ‘tax on professional incomes’ starting January 2019. However, each initiative has failed, but for multiple reasons. Firstly, much existing tax law is poorly written, especially concerning definitions of legal persons. Not only that, but the Labour Code too is lacking a clear definition of the self-employed.

Secondly, as mentioned above, the vast majority of ‘self-employed’ are actual ‘side-employed’, not reliant only on a ‘trade’ income. Consequently, they are extremely resistant to the formalisation of what they see as a ‘top-up’ income. In other words, informal work is ingrained as a kind of socio-economic right. This is a legacy of more than the 1990s’ economic disruption, but goes back to way incomes in the USSR were made of multiple components beyond the ‘wage packet’. (Actually there’s a more complex story here too about ‘cultural’ resistance to the term ‘self-employed’ (samozaniatyi) – the historical association with murky ‘trade’ is one reason (to be in trade is to be an exploiter of disorder). Also there’s something about the term ‘entrepreneur’ (the other legal term) and ‘self-employment’ that is devaluing and degrading to people who consider themselves versatile ‘masters’ of trades and ‘authoritative’ individuals in their meta-occupational communities – a term I find useful to talk about mutual-acknowledgement networks of skilled workers).

Thirdly, when the economy not growing and people are economically hurting, they rely even more on the informal ‘cushion’ of side-incomes. Fourthly, the state doesn’t really have as much of an incentive as it appears to squeeze for income tax, as it is regional budgets that depend on direct taxation revenue, not the federal centre (which only takes a cut of 15% of income tax collected).

Finally, and this is important because it contradicts the narrative of the ‘effective taxation state’, the Russia really lacks the political conditions to correct this situation. A fundamental tension in any society is the balance between taxes on incomes versus immovable and trackable assets. And the degree of success in taxing incomes is always a question of consent. In anything, ‘consent’ to the state taking a slice of one’s hard-earned crust is falling, against the backdrop of real declines over the last decade in incomes.

This brings us to the current phase. Alongside ‘regressive’ increases in VAT and ‘sin taxes’, as well as rise in taxes on fuel, the state has learnt that a source of ‘wealth’ that is more difficult to hide than income is immovable property. The real story of changes in the taxation landscape is the big switch to property and land tax, and the lack of awareness of the majority of people about this, as well as the potential ‘compounding’ effect over time of increases in these rates.

Since 2017 the government has undertaken fundamental reform in tax liability of property. One aspect is the shift to assessing immovable property on cadastral value. Cadastral assessment takes into account the real value of land, and so will mainly affect older properties in desirable areas.  Thus, an owner of a three-room Brezhnev era flat of 60 square metres close to a metro station in Moscow will have seen their taxes increase by a factor of six.

There has already been a clear impact, with revenues from this tax rising from 22bn rubles in 2013 to 144bn in 2017, a seven-fold increase. Phased in over five years, at the end of that period the Property Tax will have risen by 20%. This might not seem much given the low starting base of 0.1%, but for houses as opposed to apartments, the starting point of the tax is 0.3%. Strikingly, even structures like garages will be liable for Property Tax.

And this is in addition to Land Tax – in 2019 significant changes were made to this tax as well (local authorities keep this tax). With some exceptions, land with houses on it will attract a tax of 1.5%. This is doubly significant given that previously people only paid a symbolic amount of tax on their ‘country cottage’. Given how many people of different classes and incomes own ‘second’ properties in addition to an apartment, these tax changes are likely to prove onerous and perceived as unjust (pensioners and other groups are exempt from some of them). Property taxes are also likely to accelerate concentrations of wealth even more, and it’s easy to imagine Russia becoming a country of renters, rather than owner-occupiers in less than a generation.

People are now finding out the hard way that immovable property above an arbitrary norm the ‘izlishka’, dictated by the state can be subject to rapid increases in tax over a short period. The izlishka is calculated for all kinds of property and is quite miserly – if you own more than 10 square meters of a room you pay tax on the rest of that room, for example. It is quite common for flats to be divided into ownership by room, even by members of the same family. Thus, even a very modest flat of 42 square meters in a provincial city worth 1.3m roubles will attract a tax of 700 roubles. Not a lot, but given that all taxes fall due at the same time in November, it will be felt as one more example of the squeeze, alongside the near tripling of taxes on waste collection.

These increases have been in the offing since 2011. Back then, the average Land Tax paid was tiny – around 800 roubles a year. State income grew rapidly from such taxes despite the low base – nearly doubling from 2008-2012. Some regions did not apply all these land taxes but the significant change in 2018 is the harmonisation of all regions in the obligatory extraction of these taxes.

Ironically, recently Putin charged the government to investigate the problems of the growth in the ‘population’s tax burden’, asking Medvedev to investigate ‘what is happening in real life, and not just on paper’. What does this reveal? In reality the simultaneous ratcheting up of all kinds of taxes and quasi-taxes – excise duty, land taxes, personal taxes, transport-related taxes and indirect taxes make for a likely future confrontation of elite versus ‘populist’/social-justice political entrepreneurs – as yet unidentified. In the meantime we will observe an intensification of the struggle to formalise incomes, and the equal resistance to do so among self-employed in particular.

Even in  highly developed market economies with long-standing social solidarity and high personal taxes like Denmark see much political debate of the burden of direct taxation, the ‘value for money’ of the enormous tax revenues their systems provide. These are the fundamental tensions inherent in any tax-paying democracy where resource and indirect revenues are less important.  The scholar Simon Kordonsky deserves the final word. Writing about the role of the shadow economy in Russia, his response to the wave of measures to formalize the economy is this: ‘don’t touch people who live by their own resources‘ [za svoi schet]. What he means is that the majority only ‘survive’ today to the degree they can escape the ‘field of view’ of the state. He also gives the example of the rational response to a new tax on heavy goods vehicles’ use of highways: people simply shift to smaller trucks. Taxes are just a form of moving national income from one place to another, or in progressive scenarios, redistributing. But how is it even possible to build a tax-paying non-democracy, when the logic of redistribution functions mainly in terms of a vertical – upwards from the most active, but most powerless, to unproductive elites?

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.


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.