THE BELL: Russians have never lived as well as they do today

THE BELL: Russians have never lived as well as they do today
Despite war, or because of the war, average incomes are rising twice as fast as prices as the Russian economy enjoys a military spending-driven boom. / bne IntelliNews
By The Bell March 24, 2024

Russian President Vladimir Putin would have probably won the elections even if they had been free and fair, as Russians have never lived as well as they do today. The economy would have powered Putin to victory.

Nor do people believe that things are about to get worse. This is particularly notable in Russia’s regions, far from the hipsters of Moscow and St. Petersburg, reports The Bell.

An economy that is growing because of the needs of the military and rising government spending has ensured that wages are outstripping inflation.

After the start of the war, inflation rocketed – but wages more than kept pace. Central Bank head Elvira Nabiullina said on Friday, 22 March that the economy’s “production capacity and labor reserves are almost totally committed.” In other words, there is no way of boosting production and the labour shortage is ongoing. That means salaries will continue to rise; it is the same with inflation.

The fact that Russians are living better is evident from their outgoings. Spending at cafes and restaurants, for example, is increasing.

Demand for non-food goods (i.e. items where purchases can be postponed or even cancelled) has recovered from its slump in the months after the full-scale invasion of Ukraine in 2022. Its rate of growth now exceeds both inflation, and wage increases.

This does not look like the sort of panic buying that happens in a crisis, when many rush out to buy whatever consumer durables they can afford. Instead, Russians appear to have sufficient confidence in their finances to take out personal loans. Consumer confidence is approaching record levels, Nabiullina told reporters on March 22.


Of course, increased prosperity is not universal. But those who have lost out are the more wealthy Russians. The average income of the richest 10% in Russian society has increased by 27% since the start of the war. While this may seem a lot, it’s the lowest rise of all 10 income groups, and barely matches the combined inflation rate for the past two years. Incomes for the poorest in society have grown much faster.

“A large-scale redistribution of resources in favour of the less well-off has prompted a widespread shift in perceptions of justice for the first time since 1990,” Denis Volkov, director of independent pollster Levada Center, wrote in an article last month. According to Levada, the proportion of Russians who feel that the distribution of material wealth in Russia is getting more unfair fell from 45% in 2021 to 25% in November 2023.

The war has caused disproportionate economic suffering for a small minority of privileged Russians living in big cities, working for international companies (or companies integrated into global networks) and regarding themselves as “citizens of the world.” The Kremlin has apparently given up on this group. Now, Russian citizens who once regarded themselves as forgotten and overlooked are ready to take their place. Both the war, and the Kremlin’s economic policies, resonate in the hearts and wallets of these people.

This comment first appeared in The Bell here.

Written by Alexander Kolyandr and Alexandra Prokopenko

Translated by Andy Potts, edited by Howard Amos