People's Democracy

EVEN though the Russian Federation is currently witnessing a growth in its gross domestic product (GDP), giving rise to euphoria among the political bosses and policy-makers of the country, the hard fact remains that millions of Russians are still caught in the quagmire of a miserable existence. According to some estimates, the proportion of the deprived sections in the Russian population increased by a hefty 15 million during the first quarter of 2001.

The current growth in the Russian Federation’s GDP follows a steady decline in it during the decade 1989-98, when it came down to half of the 1988 figure. The process got further accelerated after the disintegration of the USSR. Such a sharp decline was not witnessed even during the Great Patriotic War against Hitlerite Germany (1941-1945).

That is why the current GDP growth --- more than 18 per cent over the last two years and a quarter --- is not that enthusing as it could have otherwise been. It is taking place against a very low base figure, beginning from the bottom of the pit in 1999.

In other words, despite the growth rate figure being the highest over the last four decades, the current GDP accounts for just about 66 per cent of the USSR’s GDP before 1989.

Russian leaders are today very enthusiastic that the country’s GDP has now reached back the 1994 level. But, as usual with all GDP figures, this figure too does not say anything about the distribution of wealth among various classes and sections of the population. The fact is that, even in 1994, the common people of Russia faced a host of problems because of the merciless economic "reforms" that accompany the return to a capitalist market economy. The situation was further aggravated by the blunders committed by the political authorities, in the form of reckless privatisation and the like.

Another important fact is that the foundation of the current Russian recovery is extremely weak. It has been possible mainly because of the very high crude oil prices in international market. This made the Russian oil exports more competitive and enabled the Russian economy to temporarily come out of the precipitous economic-financial fall of August 1998, when the new ruble introduced by Boris Yeltsin took a nosedive.

But the billion-ruble question is: what will happen to this short-lived bubble once the oil prices come down in international market?

Another factor being much tomtomed these days is that average monthly wages have risen by over 50 per cent since January last year --- from 1,830 to 2,867 rubles, on an average. But the reality is that these wage rises are not backed by corresponding increases in the volume of production. This will only give rise to a severe bout of inflation and lower down the people’s living standards in long term.

At the same time, the strengthening of the ruble tends to make Russian exports uncompetitive abroad. In contrast, imports are tending to become comparatively cheaper and are driving out the Russian-made products from the domestic market. The situation gets aggravated because production technologies and facilities in many of the Russian enterprises are obsolete, and their fixed assets have worn-out. In fact, this reality substantially contributed to the stagnation of the growth rate in November-December 2000 and in January this year. It was only in February this year that the growth rate began to pick up.

The sky-high volume of external debt owed by Russia makes the situation still more precarious. The country borrowed billions of dollars over the years and squandered the money in one way or other. A part of this money was also appropriated by business oligarchs who are called "New Russians." The country is today facing severe pressure of servicing these debts, and does not know where to get the required resources from.

All these make one point patently clear: that this shaky economic base is not in a position to sustain the social sectors. This is evident from the fact that, despite the wage rises, the quality of life has already started deteriorating.

This gets reflected in increasing prices of consumer items with which the Russians are most concerned today. According to the figures released by the State Committee on Statistics, these prices rose by 9 per cent in just three months since January this year. It is therefore evident that all the calculations made by the federal budget 2001 goes on the basis of an estimated 12 per cent inflation nationwide are bound to go awry.

Hardest hit have been the food prices, followed by service charges, that are growing at a breath-taking pace today. Over the first four months of this calendar year, bread prices have increased by 7.3 per cent; from April 2000 to March 2001, the rise in bread prices has been as high as 21 per cent. Meat and poultry prices increased by 14.7 per cent between January and April this year, and by 50 per cent during April 2000-March 2001. Fish prices rose by 10 per cent in the first four months of this year. Egg prices rose by 9.3 per cent in April alone, the highest rise for any single food item.

Among the vegetables, the price of cabbages --- most widely used vegetable item in Russia --- rose by 21 per cent in April alone and by as much as 120 per cent since the beginning of the year. Carrot prices rose by 9.2 per cent in April alone and by about 33 per cent since January this year. The corresponding rises in onion prices have been 7 per cent and 50 per cent.

All this means a more painful life for most of the poor Russian families. For, the overall result is that, on an average, a common Russian outside Moscow will have to spend 846 rubles or as much as about one third of his wage on food alone. The corresponding figure for Moscow comes to 1,054 rubles.

The gravity of these figures can be better understood if we break up the income figures further. According to the State Committee for Statistics, as many as 3.3 million poorest Russians have a per capita income of 400 to 500 rubles a month while another 7.3 million are in the 500-750 ruble bracket. Plainly, all these Russian citizens can hardly make both ends meet today.

Apart from food, the charges for municipal services too have skyrocketed in the meantime --- by over 50 per cent from April 2000 to March 2001. For example, hot water prices increased by 6.1 per cent over one month. Charges for cold water and sewer system rose by 5 per cent. Among other items, local postal service charges rose by 5.7 per cent in April this year alone.

The overall result is that more than 33 per cent of the Russian population is living below the official poverty line today. According to an estimate of the ministry of economic affairs, the income of 54.4 million Russians fell short of the subsistence level during the first quarter this year.

The remedy adopted by the Putin government, however, is likely to further worsen the disease. The government is printing additional rubles for the sake of meeting the challenge; over the last 14 months money supply went up by 405 billion rubles nationwide --- a 62 per cent rise. This gave a big push to the rate of inflation in the country, making the current recovery extremely shaky.

On top of all, the Putin government recently announced yet another hike in power tariffs which is bound to have a cascading adverse effect on the living standard of the people.

And now the Russians are in for more shocks. The government has announced its intention to completely do away with housing subsidy over the next nine years --- by 2010, to be more precise. Cheap subsidised housing has been one of the most important benefits the erstwhile socialist system provided to its citizens, and its end would mean one of the worst facets of Russia’s return to capitalism. Now one has to see how the Russian government proposes to cope with the discontent that this measure is likely to generate.