Vladimir Putin held a meeting of the Council for Strategic Development and National Projects, in which he noted that “the West's plan to destroy the Russian economy hasn’t materialized.”
“Price levels in Russia - after a serious spike in March-April - have remained virtually unchanged since May, and the Russian ruble has become one of the strongest currencies in the world since the beginning of the year. <...>
As a result, the poverty rate fell to 10.5 percent in the third quarter. Of course, this is a small movement, but it’s a movement in the right direction. The income of the poorest part of the population also rose by 27.8 percent in nominal terms – in nominal terms, I want to emphasize this, and I’ll say once again that we are talking about people with the lowest incomes - which allowed us to reduce the level of inequality a little bit.”
Of course, it is much better for Putin to compare price levels not with last year's pre-war figures, but with spring prices, when after the start of the war, amid unprecedented sanctions, prices surged and have never rolled back to their previous level. However, it should be borne in mind that prices are also subject to “public monitoring” and the numbers look much less rosy than in the official statistics: for example, the price of cabbage went up 41% on average during the year, flour 40.6%, tea 39%, and sugar 29.9%. If we compare with the May levels, as Putin wanted, then even in that case one cannot say that prices have not changed at all: for example, the price of meat increased 11.9% over the six months, fish 10.4%, and tea 22.6%.
In addition, it should be noted that the government is trying to limit retailers' margins so that food does not become too expensive, and retailers simply reduce the packaging sizes in response. In other words, a person buys less goods for the same price.
As for the “strong ruble”, this myth has been repeatedly debunked by economists. Here is what Vasily Solodkov, Director of the Banking Institute of the Higher School of Economics National Research University, told The Insider in May:
“The ruble is strengthening for several reasons. First, exporters are required to sell 80% of their foreign currency earnings and there are restrictions on the purchase of foreign currency, primarily cash. There are also restrictions on the transfer of foreign currency abroad, that is, non-residents may not receive income on any securities that may hold. Secondly, we have a catastrophic drop in imports for various reasons (ranging from logistics to the fact that someone just has stopped selling us something). And lastly, if before people used to plan vacations and travel, now it's difficult. You can actually fly to a very limited number of countries; the main tourist hubs now are Turkey and Dubai. At the same time, airfares have increased manifold, so citizens plan vacations within the Russian Federation, without creating demand for foreign currency.
The low ruble rate only reflects the fact that we do not have a normal market economy with free supply and demand.”
And finally, about the reduction of poverty in Russia. This has been happening since the beginning of 2021 and coincides with the introduction of a new calculation methodology by Rosstat - now a person is considered poor not if his or her income is below the subsistence minimum, but if his or her salary is below a certain “poverty line” - that is “the subsistence minimum for the fourth quarter of 2020, which will be increased quarterly based on the inflation rate”. In turn, the subsistence minimum is now calculated by the median per capita income and median wage (previously - the food basket). Also, since 2021, the cost of living is set annually. In other words, the government simply shifted the poverty line downwards, thereby arbitrarily reducing the number of poor people. In addition, the new methodology does not show how much money one needs to survive, financial consultant and head of E.M. FINANCE Evgeny Marchenko said in a commentary to RIA Novosti.
As for “reducing the level of inequality”, it can also be explained quite simply. Experts say that Rosstat simply does not have the tools to obtain data on rich Russians.
“Rosstat estimates revenues without taking into account revenues from owned property, which as a rule it is unable to count. These include, for example, income from shares, which are often traded on Western exchanges. Rosstat does not have the tools to see them,” says <professor at the Government’s Financial University Alexander> Safonov. In 2022, after the West imposed harsh sanctions, investments of Russians in foreign financial instruments, which were being cleared through the Euroclear and Clearstream European systems, were frozen.
We should also distinguish between income inequality and wealth (asset) inequality. Russia is believed to have one of the world's highest rates of concentration of wealth in the hands of its richest citizens.
Data on the richest people are poorly collected around the world, as they have more means of accumulating wealth and often consciously try to avoid undue attention from statistical and tax services, says Dmitry Kulikov, Director of the ACRA Group of Sovereign and Regional Ratings. In addition, the exchange of data between countries is far from universal, so a person who owns assets in different states has the opportunity not to disclose any of them fully enough.
Louis Chauvel, professor of sociology at the University of Luxembourg, has previously drawn attention to the incompleteness of data on rich Russians. Rankings such as Forbes Billionaires cover only the super-rich in Russia, and those are just journalistic estimates. Consultants with access to information on their VIP clients rarely disclose even depersonalized data, and providers of Russian private banking services for VIP-clients only observe a segment of millionaires who keep their money in the national banking system”.
Incidentally, even propaganda outlets such as Tsargrad have reacted to the story of a reduction in the number of poor people with skepticism and indignation.
“Turning to economist Mikhail Delyagin, the host asked:
- Why have you reacted so harshly to this topic?
Mikhail Delyagin: One can only comment on this with swear words. I’ve already joked about how our government battles the poor. Not the poor, but in fact paupers. Because what people in power call poverty is actually pauperism. And if you have an income below the subsistence level, you are officially being killed, but slowly. Such a bitter joke.
The number of poor people in the country has dropped by 300,000. And what was last year’s mortality rate? Well, compare it with the data on super mortality.
- Half a million people.
- They died, and the mortality rate dropped, I mean the poverty rate dropped, they’ve died out. <...>“
Earlier, at a meeting of the parliamentary committee for state building a United Russia deputy Nikolay Rybushkin criticized the executive authorities of Tatarstan for their inability to curb the rise in prices. The deputy said that the majority of the population is impoverished and can only buy half a loaf of bread in stores. Mr. Rybushkin warned that if the government does not address this problem, “people might eventually get sick and tired of it.”