Russia Income Inequality = Greatest in the World? – Part VII

Dear Readers:

Today finishing off this piece from Komsomolskaya Pravda.  Where we left off, reporter Evgeny Chernykh was interviewing author Elena Larina about the Grand Theft Combination.  The scheme, as a whole, resulted in the looting of over $1 trillion dollars of Soviet national wealth into private pockets.  In the West, this scheme was known as “bringing democracy” to the Russian people.

The scheme, like most criminal schemes, was most likely hatched in a back room, the number of participants not even exceeding Danny Ocean’s team as they plotted their heist in an ordinary Vegas hotel room.

The curious thing about the Vouchers portion of the scheme is that it entailed a “de-industrialization” of Russia.  Larina mentions how heavy-machine factories were converted into light manufactures of, say, furniture.  Technically speaking the Privatization could have been carried out without De-Industrialization.  Putting on rosy glasses, one could claim that the conspirators feel sorry for Russian consumers, who have been left in the lurch for many years and need to buy more light goods, to make their lives easier and more convenient.  Which is certainly a true statement.  Or, there could be a more sinister motive, namely the de-industrialization of Russia may have been one of the demands of the foreign “partners” of the conspirators.  But Larina has a more prosaic answer to this riddle.

Chernykh:  This is a riddle, indeed.  They (=the new privateers) purchased a factory and immediately sent everything away to the scrap heap.  And thus they destroyed our industry, especially in the provinces.  Who were these guys?  Saboteurs?  Diversionaries?

Larina:  The answer is simple.  The property was purchased for pennies on the dollar.  Even after the liquidation of the active portion of the main funds, the buildings and equipment were worth a lot more than was paid for them.  Consequently, for a long time the main business was the re-sale of privatized [equipment] to the large trade and warehouse networks, to foreigners, to the oligarchs.

From the middle of the 2000’s, there began the formation of a third generation of Takers, namely the Kings of the State Procurement.  According to Igor Artemiev, the head of the Federal Anti-Monopoly Service (ФАС России), the share of the government and state-owned companies in the GDP of the country grew from 35% in 2005, to 70% in 2015.  According to the data of experts, at the current time it has reached approximately 75%.
Given this, the effectiveness of the work of the state-owned companies, is not that great.

[Larina goes on to quote economist Tatiana Golikova.  Every year state-funded Development Institutes receive around 500 billion rubles.  Money which dissipates almost without a trace, as private auctioneers circle around the perimeter of these state-owned companies.  State purchases take place almost without oversight.  Only 5% of state purchases take place on a competitive basis.  At a minimum, 10% of the market is controlled by cartels.  Prices are artifically raised, and the state budget loses up to a trillion rubles a year, as a result of these Purchasing shenanigans.]

Chernykh:  In a word, they continue to rob us!  Even on strategic objects such as the Eastern Cosmodrome!  There was a reason why President Putin recently said people should go to jail for 10 years for the mis-use of state defense funds!

Larina:  The changing generations of Takers have, in our time, completed the process of utilizing the heritage of the Soviet Union.


Chernykh:  And have stashed the loot away in offshores.  Which was shown by Thomas Piketty in his monograph, From Soviets to Oligarchs:  Inequality and Property In Russia, 1905-2016.

Larina:   Piketty’s book came out in August.  Soon after was published Brooke Harrington’s best-seller, Capital Without Borders.

[Also mentions best-selling book by]  Nicholas Shaxson entitled Treasure Islands:  Tax Havens and the Men who Stole the World.  By “Treasure Islands” Shaxson means Offshores, of course.]

If one combines the data of Harrington and Shaxson, then one can see exactly the structure of the wealth of the Russian beneficiaries:  30% for cash on hand, over 35% for commercial assets, over 15% for the so-called “conspicuous consumption”, including personal estates, yachts, planes, cars, jewelry, etc.  And given all of that, the level of investments on the part of the Russian Takers, in high-tech, is one of the lowest in the world, compared with the portfolios of (investors) from sub-tropical Africa and the Andes Belt.

Rockefeller Center, New York City

Chernykh:  A life of luxury has dampened feelings of patriotism within our pseudo-elite.  But then, what can one expect from people who, by a whim of fate, were raised up from paupers to princes, and brought right up to the trough?

Larina:   One should note that the utilization of the Soviet heritage did not even bring about a primary accumulation of capital.  The social wealth of a giant and great nation was wasted on castles, super-jets, and football teams.  The stolen money did not go towards the development of production, purchase of equipment, let alone for the development of science, for the creation of new universities and museums.  All of which was characteristic of America at the end of the 19th-beginning of the 20th century.

Chernykh:  The Rockefellers…

Larina:   But not for the likes of us.  The people’s money was spent, in essence, either for just personal things, or for an insane display of wealth, characteristic of the nouveaux riches.  I have to say, however, that to everything there finally comes an end.


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3 Responses to Russia Income Inequality = Greatest in the World? – Part VII

  1. Lyttenburgh says:

    Relevant. According to the latest poll by VTSIOM 73% of Russians think that 90s privatization was more harmful than beneficent (18%) to the country. 56% support re-nationalization of the strategic industries, like oil-gas extraction ones. The largest demographic of those who support such re-nationalization – among 18-24 y.o.

    More at the link.


    • yalensis says:

      Well, of course most Russians WANT re-nationalization.
      And a goodly number probably even want a restoration of Soviet Union.
      But WANTING and GETTING are 2 different things!
      Like my dear old mom likes to say, “You can’t put the toothpaste back into the tube!”


  2. Pingback: Cheesed off, but not because of sanctions. Immiseration, elite disconnect and neoliberal convergence — Dr. Jeremy Morris | Postsocialism | Taking Sides

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