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Putin and his Oligarchy

When Credit Suisse published its blockbuster report last week revealing that just 110 people control 35% of the wealth in Vladimir Putin’s Russia, it was predictable that there would be a frenzied, desperate effort to impugn the bank’s research. What’s surprising, however, is that the first such effort would come from Putin critic Leonid Bershidsky.

Bershidsky claims that Credit Suisse got it wrong because the bank didn’t pay enough attention to the value of Russian homes.  Bershidsky claims, without citing any source material, that there are millions of Russians in Moscow who own apartments given to them free when the USSR collapsed, and that the value of these apartments isn’t properly reflected in the Credit Suisse data. If it were, he opines, the 35% figure would drop significantly. He also claims that the GINI figure for Russia published by the CIA shows Russia’s income inequality figure isn’t that bad.  Finally, he claims it’s very hard to get good data on wealth distribution in the opaque, corrupt quagmire that is Putin’s Russia.

Bershidsky completely misses two major points in his analysis.

First, it’s somewhat ironic that while pointing out the complexities of measuring wealth in Russia that he says could have misled Credit Suisse, Bershidsky makes no effort to ask whether those complexities might affect his own analysis of the issue, including the GINI numbers he provides from the CIA, as well as those of Credit Suisse.

Second, and more important, the whole point of Credit Suisse’s work was to show that such complexities might mean that the world vastly misunderstands the extent of economic polarization in Russia. One thing is perfectly clear: Russia has a shockingly high number of billionaires and they absolutely dominate the nation’s non-real-estate wealth. That is, its liquid, spendable wealth. People who received free apartments after the collapse of the USSR can’t sell them, it’s their only place to live. They can’t borrow on them, because they have extremely low income (average wage in Russia less than $5/hour) and cannot replay the balance. And these apartments are tiny, oppressive little closets. While they may have value on paper in places like Moscow where wealth has accumulated and housing construction is delinquent, they are far less valuable elsewhere, and you can’t eat paper value.  To give a practical example: The fact that you own an apartment in Moscow doesn’t mean you are able to give a political contribution to Alexey Navalny out of the apartment’s value.

Nothing in Bershidsky’s commentary challenges Credit Suisse’s finding that the real money in Russia, the money that can be spent to achieve power, is held mostly by a tiny class of oligarchs. Nothing changes the fact that Putin was brought to power supposedly to liquidate this class, and instead only liquidated members (Gusinsky, Berezovsky, Khodorkovsky) who opposed his grab for power. Nothing challenges the widely held view that Putin himself reaps enormous financial benefits from this oligarchy, and indeed may be one of the richest men in the world (allowing him routinely gift watches worth tens of thousands of dollars to strange children).

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