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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Putin and his Paradise of Corruption

A staggering 35 percent of household wealth in Russia is owned by just 110 people, the highest level of inequality in the world barring a few small Caribbean islands, a report by a major investment bank says.  By contrast, billionaires worldwide account for just 1-2 percent of total wealth, Credit Suisse said in its report published Wednesday. Russia has one billionaire for every $11 billion in wealth while in the rest of the world there is one for every $170 billion.

The above report, from the Associated Press, lays bare the myth that Vladimir Putin is serving the interests of the people of Russia.  Instead, the report makes clear, Putin is serving the  interests of a tiny group of oligarchs, despite being brought to power to cleanse Russia of oligarchs.  When Putin attacked men like Berezovsky and Gusinsky, he was not doing so like Robin Hood to return looted billions to the Russian people. Rather, he was simply transferring assets to oligarchs who were more friendly to him and his desire to restore a neo-Soviet state in Russia. Putin’s Russia is not a nation, it is a Ponzi scheme.

And where has this paradise of corruption led Russia as a nation? It stands on the precipice of a double-dip recession, mired in neo-Soviet stagnation.  It does not innovate, and its level of production is a pathetic, laughable 40% of the average achieved by the Fortune 500 corporations.  Instead of weaning itself off dependence on oil, under Putin’s leadership Russia’s addict-like dependence has only become stronger.