Development of the country needs to focus on modernization of the economy and increasing the proportion of high-quality jobs

7 february 2018 | Rossiyskaya Gazeta

Over the last 20 years, the level of global welfare has increased by more than 150% to an incredible 1,143 quadrillion dollars (a number with 15 zeros). In an ideal world, every person on Earth would possess about 153.5 thousand dollars, but this is not the case: the richest countries in the world today control about 52 times more wealth than the poorest countries. The World Bank came to this conclusion after analyzing the volume of natural resources (forests and minerals), human capital (total income over a citizen's lifetime), physical capital (buildings, infrastructure) and net foreign assets of 141 countries over the period from 1995 to 2014.

Leonid Grigoryev
Leonid Grigoryev
Chief Adviser to Head of the Analytical Center

The conclusion is disappointing: inequality persists not only within, but also between countries. This statement is not entirely new: it has been widely discussed by economists, especially in recent years, noted Chief Advisor to the Head of the Analytical Center Leonid Grigoryev in conversation with a journalist from Rossiyskaya Gazeta. Despite the fact that, in general, global welfare is evidently increasing, the level of inequality remains extremely high.

"The problem of inequality emerged in Russia only relatively recently – during the 1990s and 2000s," said Mr Grigoryev. "After GDP fell to 9.2-9.9 thousand dollars per capita in the 1990s, this indicator rose to 26.5 thousand dollars in 2016. However, this transformation began with the radical impoversihment of a significant portion of the population. According to the World Bank, from the years 1988-89 to 1992-93, the total number of poor people in Russia rose from 2.2 million to 74 million people. The current state of inequality began with loss of income – for workers, as a result of unemployment; and for government employees, as a result of depreciation of wages."

Towards the end of the 1990s, the rate of growth of social inequality in Russia decreased, and from that time through to 2008-09 it remained fairly constant, only slightly exceeding that of the USA and matching that of China, remarked Mr Grigoryev. The analyst suggests that the 2008-09 financial crisis had no significant impact on the trend towards rising inequality due to the fact that new forms of ownership and economic institutions which had been formed after the fall of the Soviet Union did not facilitate a reduction in the level of inequality in the country.

Since 2013, the income gap between the richest and poorest segments of the population of Russia has begun to decrease. One of the explanations Mr Grigoryev sees for this is that salaries in the financial sector, the leading sector of the economy, have ceased to differ radically from those of other sectors.

"With growth accelerating, the future development of the country needs to be focused on modernization of the economy and increasing the proportion of high-quality jobs," says Mr Grigoryev, "Assistance for the poor is essential, but a significant increase in the standard of living (without high oil rent) can be made possible by increasing the level of development and competitiveness among businesses in Russia, in addition to primary industries."

Source: Rossiyskaya Gazeta