Dear Russia: Please Stop Fighting Poverty, We Liked You Better When You Were Impoverished and Dying

Uncle Volodya says,”At the funeral, they all said, ‘What a shame; he died penniless’. I don’t know – to me, that sounds like perfect timing on a hell of a budget. “

In an unprecedented (for this blog) double shot of duplicity and dissembling, The Moscow Times is up for a second consecutive turn at bat.

Mikhail Dmitriyev and Svetlana Misikhina appear to have stirred up a hornet’s nest of spiteful fury with their “Good Bye, Poverty – Russia’s Quiet Social Revolution” article, released under the joint auspices of the Center for Strategic Research – of which Mr. Dmitriyev is President – and the Social Policy Center, the Institute of Applied Economic Research , of which Ms. Misikhina is Director. This upbeat article inspired a prompt and vindictive rebuke from Vedomosti, which was promptly picked up by The Moscow Times (thanks to Moscow Exile for the link), where they evidently like the cut of Vedomosti‘s jib – as they do that of anyone prepared to testify that Russian state statistics are just pre-rolled sunshine suppositories to be blown up the people’s asses, totally fabricated and manifestly unbelievable, and that the only agencies fit to assess Russian progress are American or British. And the default position of many of those is, there shall be no mention of “progress” and “Russia” in the same sentence unless that sentence reads, “Russia has made no progress”. Amplifiers such as “whatsoever” or “observable” or “worth noticing” are encouraged.

Funny thing, though. Just a few months ago, when Mikhail Dmitriyev co-wrote “Political Crisis in Russia and Possible Mechanisms of its Development“, he suddenly found himself with credibility up the wazoo – to quote respected Russia-watcher Eugene Ivanov, “All of a sudden, Dmitriev found himself in high demand: he became a frequent guest on political TV shows; his articles now are regularly published in both Russian and international print media.” The report was gleefully cited by Freedom House in its annual exercise in navel-gazing, Nations in Transit 2012, in which – you guessed it – Russia has made no observable progress whatsoever, in which corruption in Russia is growing faster than an expensive haircut and in which everything bad that happened, including the Domodedovo suicide bombing, is the fault of the country’s incompetent and flailing government.

Then, then, Dmitriyev had so much juice – as far as adoring western worshipers were concerned – that you could have squeezed his head and made yourself a credibility smoothie.

Now, apparently, Dmitriyev has blown all that off, and has turned into an idiot. Sad, really: he showed such promise, back when he insisted a political crisis in Russia was not only inevitable, unstoppable – in fact, it had already begun.

I’m sure I don’t have to draw you a picture. When the President of a Russian think tank co-writes a report that says the Russian government is in big trouble, and that a groundswell of public unrest is building that will surely sweep all before it like a cleansing wave, western analysts are comforted and satisfied, and pat him on the head – figuratively speaking – with benevolent pride, and shop him around the talk-show circuit so he can tell more people what a political dead man walking the Russian government is. The western media likes to hear that the Russian government is in trouble. When that same individual co-writes a report which says the Russian government has more or less eradicated poverty in Russia, according to benchmarks established and substantiated by the World Bank and adjusted for Purchasing Power Parity (PPP), he is suddenly speaking a language nobody understands. Mouthpieces of Anglospheric policy like The Moscow Times are beyond disappointed – if Dmitriyev were an ice cream flavour, he would be Pralines and Dick.

Well, perhaps I’m being unfair: let’s take a look at it. Uh, oh. Right away, Pierre Avril pissed in the pickles when he suggested, “…Russians buy cars, luxury goods and food items as though they were unaffected by any economic problems at all”, in Le Figaro. I don’t suppose he realized at the time that it would cause a collective cerebral tipover at Vedomosti, but he probably ought to have known that westerners do not want to hear smack like Russians buying cars and luxury goods when there is a widespread economic crisis in their own countries and their governments are trying to make “austerity” sound like “good times”. In fact, they would probably rather it was most anyone else than Russia. And Vedomosti and The Moscow Times often specialize in telling westerners what they like to hear. Quod erat demonstrandum. Get a grip, Pierre.

Perhaps in an attempt to confuse the reader that the author of the report is not that Mikhail Dmitriyev – the bright up-and-comer who co-wrote that great report about political unrest in Russia – but is instead some federal drone alcoholic chowderhead who is just sucking up to the Kremlin, both Vedomosti and The Moscow Times credential him as Head of the Federal Center for Social Development. Social Development actually comes under the Ministry of Health, overseen by Veronika Svortsova; I could not find any Federal Center for Social Development in Russia, and Dmitriyev is clearly listed in the original article as President of the Center for Strategic Research.

While this Louis-Vuitton-grabbing, Hennessy-swigging orgy of consumerism might sound like things are going well, the Twin Talking Heads Of Disaster Pending (Vedomosti and The Moscow Times) want you to know that it’s all just another cheap facade, behind which lie misery and damnation. This epic of Caligulan excess is being fueled, we are told, by a massive increase in consumer borrowing, outpacing corporate borrowing by 300%.  Ominously (insert creepy organ music), borrowing rates like these were last seen just before the 2008 global financial crisis. Nothing good can come of this.

Uh huh. Let me ask you something: when was the last time you were in a bank, to get a loan? Know a bit about how banks work, do you? Now, I want you to imagine for a minute that you’re in a bank in Russia, and you want a loan. You’re going to have to see a loans officer, or some similar representative. He or she is going to want to know (1) how much money you want to borrow, (2) what you want it for, and (3) how much you earn, so the bank can decide if you’re a credible risk.

I should pause here to say we’re not talking about an American financial organization, where quite recently you could get a loan to buy a 4-bedroom house even though you couldn’t prove you had either a job or a fixed address. We’re talking about a financial institution in Russia, which has the lowest debt in the G20, the world’s third-largest cash reserves, and which bounced back from the global financial crisis like a rubber ball while its western rivals are groaning under debt loads of truly scary proportions, and trying to make austerity sound like fun.

Okay – back to the bank. I want you to look the loans officer in the eye, and answer, (1) $30,000.00 USD, (2) I need it to buy myself a new car, some Louis Vuitton luggage to put in it for my vacation, and a case of cognac to celebrate with my friends, and (3) I’m poor, and I can’t possibly pay it back.

Ha, ha. Whew, my ribs hurt a little.

Let me get this straight. The poverty problem has not actually gone away in Russia, people really are no better off, there’s just a pile of cash floating around that poor Russians are borrowing. Which is being lent to them by banks who have no hope of getting it back, but were hoodwinked by clever paupers who convinced them they had high-paying jobs which the bank never thought to check on.

Hmmm….I’m going to file that under “B”, for Bullshit. Or maybe “A”, for “As if”.

Agreeing enthusiastically with me is Natalya Zagvozdina, a commodities analyst at Renaissance Capital: ” The more credible explanation for the present upswing in consumer spending is that Russians are taking loans to buy high ticket items like houses, cars and furs, which they couldn’t afford while the crisis lasted…If Russian consumers will keep on dishing out cash, that in turn will keep the economy humming.” You remember Renaissance Capital; they were the biggest rivals of Bill Browder’s Hermitage Capital Management, and also the firm that Browder accused of being implicated in a similar tax fraud case to the one allegedly uncovered by Sergei Magnitsky. Except in this one the owners of the fake companies, who were Renaissance CEO Steven Jennings (the “Kiwi Oligarch” – God, I love how everyone the west wants to paint as a crook is an “oligarch”, while Browder himself is simply a “businessman” although his company was a thinly-disguised corporate raider) and Richard Olphert, former head of Merchant Banking at Renaissance Capital, simply stole the tax money back for themselves and hid it in front companies.

Anyway, let’s not go down that road, or we’ll be here all day. Poverty. Is Dmitriyev just making stuff up? Apparently not. Most readers by now will be familiar with the Gini Coefficient, which rates countries on distribution of income, from the poorest to the wealthiest. A figure of zero would imply perfect income distribution, and everyone starts out with the same disposable income – ergo, there are no rich, and no poor. A figure of 100 (or 1, for the national Gini Index) suggests one person has all of it; perfect inequality. So, keep in mind that a higher figure implies greater inequality.

According to the World Bank, Russia in 2009 had a more equitable distribution of income than the USA had in 2000 – Russia 40.1 in 2009, the USA – chief critic and self-appointed inquisitor of Russia – 40.8 in 2000. Russia has since made even greater strides toward reducing poverty. Has the United States? Not according to the CIA World Factbook. The Gini Coefficient for the USA grew to 45 by 2007, while Russia’s was 42 in 2010. But those figures don’t tell the whole story; going back for a moment to the Wikipedia table (figures from the United Nations Development Program), we see that the ratio of income of the richest 10% to the poorest 10% for Russia is 12.7, while it is 15.9 for the USA. The same criteria, for the richest 20% versus the poorest 20%: Russia, 7.6 – the USA, 8.4. Once again, this is Russia in 2009 versus the USA in 2000.

In fact, both poverty and income inequality are continuing to grow in the USA, and a powerful unequalizer in both instances is the U.S. Tax Code. Quite apart from being so complicated that it defies description, it is regularly manipulated by government to skew more tax breaks to the wealthy. This results in a national Gini Index (not coefficient) of .469 for the USA in 2010 – a figure which, according to the Center for American Progress, puts the United States in a disadvantageous position against Malaysia (.462) and Uganda (.443). In an example cited by the same reference, in 2007 the before-tax (federal) Gini index for the USA was .524. After taxes, it had decreased (improved) to .489, which represents a 7.2% reduction. The tax system has the power to reduce income inequality, but is not doing so to anything like the extent it could. The USA has made no observable progress whatsoever against income inequality, you might say.

After that, Vedomosti and its parrot, The Moscow Times, dissolve into farce as they cast about in a paroxysm of mean-spirited bitchiness for something negative that they can use to shore up their contention that Russians are still poor. The amount of space they live in, for instance; according to the article, this is “an accurate indicator of Russians’ real standard of living”, because if they were really doing that well, everybody would live in a big house. More than half of Russians, however, live in an average living space per person of only 7 to 30 m2. A few more are jammed in like sardines at home, says the Moscow Higher School of Economics, which I would not believe if they said their name was the Moscow Higher School of Economics, and would not trust to forecast the outcome of the War of 1812 today.

Let’s unpack that a little, as a blogger I admire used to say. First of all – which is it? 7 m2 is pretty tiny, but 30 m2 is more than 4 times the space, and is quite generous. Compared to Hong Kong, say, where the average is 13 m2 of living space per person, I’ve been to Hong Kong and Kowloon, and I have to say poverty was not my impression at all, although their living space is likely to get smaller, if anything. But according to Vedomosti and The Moscow Times, those folks might as well abandon all hope, because they are poor as churchmice. The government should be ashamed of itself. Likewise in the Czech Republic, where it’s only 14 m2 per person, or in Hungary, where it’s 20 m2, or Poland where it’s 24.21 m2 (nationwide average), according to Eurostat.

But forget that, because even if your living space in square meters really reflected how poor you are, Vedomosti and The Moscow Times are still shooting you a line. They offer nothing to substantiate their claims that “the level of ‘housing poverty’ has not changed appreciably in the last 20 years.” In fact, the average living space per person in the Russian Federation has risen every year since 1999 (when it was 19.1 m2) to the latest available figure, 22.4 m2 according to Statinfo.biz (the Russian Federation is number 220 in the table).

According to the Intelligent Energy Europe Program, (Section 6, Buildings) living space per square meter in the Soviet Union by the end of the 1950’s was only 4 m2, which had expanded to 15.8 m2 by 1989. The construction method used by policy in the Soviet Union, called large-panel construction, made it difficult to expand the living space of apartments without knocking down the whole building and starting over, and that construction method continued long after European countries had abandoned it because of heating inefficiencies. The same source reports 15% of the current dwellings in Moscow were built after 1998. Also, “Much of the construction is aimed at the new wealthier classes; a development which has been accompanied by a significant reduction in municipal housing. A new phenomenon appearing in a number of cities is the suburban district containing low density detached housing or luxury residential blocks. This style of urban living is particularly popular on the outskirts of Moscow (Boret et al., 2004)”.

I’m not even going to get into the cheap shot that “morbidity statistics for 2000 – 2010” suggest a steady upward trend in illnesses, which supports the contention that poverty is widespread. Suffice it to say the source contends the “real illness rate is even higher when you take into account the shrinking population” when the population is not shrinking and is in fact growing. I imagine you could find some illnesses which were worsening, and quite a few which were reduced dramatically. As was quite knowledgeably discussed by Mark Adomanis at Forbes, based on Rosstat data – tuberculosis, specifically mentioned by Vedomosti, way down. Social diseases, way down. Hepatitis, nearly eradicated, all of these during the 2000-2010 timeframe. Diabetes, up. Cancer, up, although neither as high as the rate in the USA. HIV, up. Are any of these exclusively poor people’s diseases? If so, why are the rates higher in the USA (not including HIV, which is a serious problem in Russia because of intravenous drug use)?

Simply put, when things are bad in Russia, The Moscow Times crows in triumph and makes them sound worse, not to mention a direct result of government incompetence, even if the incident under discussion is a natural disaster. When things are good in Russia, The Moscow Times crows in triumph that they are actually bad, and invents supporting information which it expects you to take at face value. It caters to a western audience, and is a reliable spreader of disinformation as well as a go-to reference for Russophobes.

Strike two, Moscow Times.