Russia. A History

The prosperity of the Putin years significantly raised living standards. That meant, above all, a significant drop in the poverty level, as the number of those with incomes below the subsistence minimum fell from 40 to 16 per cent during Putin’s two terms. Not only the economic boom but government policy accounted for this decrease, especially its decision to raise pensions and keep pace with inflation. Unemployment, similarly, fell by half (from 12.4 to 5.9 per cent between January 1999 and January 2008). The rise in personal income (12 per cent per annum) reduced the army of poor and created a small, but growing, ‘middle class’, with 20 per cent of the population self-identifying themselves in this category. But the social sphere also offered negatives: the demographic crisis deepened, as the population continued to decline (from 146.3 million in 2001 to 142.0 million in 2008).

Prosperity also failed to diminish inequality. The decile ratio (the proportion of the richest 10 per cent to the poorest 10 per cent), which had already jumped from a relatively egalitarian 4.5 (1991) to 13.8 (2001), edged upward to 15.6 by late 2007 (compared to 15.9 in the United States and 13.6 in the UK). Another measure of inequality, the Gini coefficient, rose from 0.399 in 2001 to 0.415 in 2008. And, apart from the handful of ‘oligarchs’ (such as Khodorkovskii) who ran afoul of the regime, the rich became the super-rich, with the number of billionaires increasing from 17 (2003) to 53 (2006) and controlling some 400 billion dollars in assets (or about one-third of the GDP).

A stronger, richer state could afford more social services, but Putin’s government was no spendthrift, preferring instead to build up foreign exchange reserves and a stabilization fund. The state budget allocated 3 to 4 per cent of the GDP for health and education; and nearly 6 per cent for social security—in real terms, a marked improvement over the 1990s. In education, for example, the number of students in higher education (including new private universities as well as state institutions) rose from 4.7 million (2000–1) to 7.5 million (2007–8). Such gains were reflected in the World Bank’s ‘Human Development Index’ (HDI), an aggregated numerical rating that calculated a host of different variables (such as health services, education, and gender empowerment): Russia, while still significantly below other developed countries, none the less lifted its rating from 0.776 in 1995 to 0.806 in 2006.

But Russia still lagged far behind the developed countries. That was apparent in its rank in the World Bank’s HDI: despite the improved score, in 2006 Russia was only 73rd of 179 countries and, over the entire post-Soviet era (1990–2006), had actually suffered a 0.014 drop in its aggregate HDI indicator (compared to a 0.156 rise in China). That decline was due mainly to the disastrous 1990s, but also reflected Putin’s reluctance to invest in the social sector. Thus in public health Russia’s ranking was even below its HDI score; revealingly, the World Health Organization ranked Russia 127th out of 192 countries. Official reports cited serious deficiencies: much of the medical equipment was obsolescent, the drug supply met only 30 to 40 per cent of demand, and more than two-thirds of those polled (in August 2006) complained that they could not get ‘good’ health care. The result was a decline in life expectancy; during Putin’s tenure, 2000–8, it dropped from 67.2 to 65.9 years. Russia, like other developed countries, also faces a looming pension crisis; by 2010 sheer demography—the widespread phenomenon of population ageing, with a higher mean age—dictated that the pension costs would rise steeply (50 per cent in a few years, according to some projections), and precisely at a time when the proportion of working population to retired elder would shrink. Another dark side, crime, also significantly worsened under Putin: the number of reported crimes rose 21 per cent (from 2.95 million to 3.58 million in 2000–8). In short, the Putin era witnessed some improvements in the social sphere, but the country still faced major challenges—some were due to the ‘catastroika’ of the 1990s, some reflected budget austerity, and others (in particular, demographic) resulted from long-term processes that were hardly unique to Russia.