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The Rise of Income Inequality in Russia 

Income Inequality in Russia
In 2015, 111 people controlled 19 percent of all household wealth in Russia. Russia’s wealth and income inequalities have drastically increased in recent years, surpassing the U.S. Historically, income inequality in Russia has fluctuated. Towards the end of Tsarist Russia, the top 10 percent of earners made about 45 to 50 percent of the national income. During the Soviet period, this dropped to about 20 to 15 percent. However, it rose back up to about 45 to 50 percent in 1990 with the fall of the Soviet Union.

Income Inequality in Russia

Recently, income inequality in Russia has risen so that the top 1 percent of earners’ combined income is as high as 20-25 percent of the national income. This is comparatively much higher than Eastern European countries, where the top 1 percent income shares of wealth make about 10 to 14 percent of income. Since the fall of the Soviet Union, socioeconomic stratification has exceeded that of other formerly socialist economies, including China. Wealth inequality is even more drastic, with the richest 10 percent of Russians owning 87 percent of the country’s wealth, making it the most unequal of the world’s major economies.

Causes of Income Inequality

The transition from communism to capitalism after 1990 is the primary cause of increased income inequality. Specifically, housing played an important role in the rise of private wealth and increased from less than 50 percent of national income in 1990 to 200 percent of national income in 2015. This results from housing privatization and the rise of real estate prices. In turn, these shifts in housing prices significantly increased rents for a large fraction of the population. Their income didn’t increase to help account for the raised costs, exacerbating socioeconomic inequality in Russia.

The rise of the oligarchs, a group of individuals who control most of the productive assets and the capital in Russia, also contributed to the severe inequalities in income and wealth. Oligarchs formed ties with political figures, giving them a foothold in politics. This, combined with their economic power, allowed them to influence governmental and market structures.

Oligarchs have contributed to development and economic growth, but they also play a critical role in increasing inequality in Russia. The political and economic power of the Russian oligarchs enables corruption. Oligarchs want to lower competition, avoid taxation and keep wages low. Because of their political influence, they are able to support policies that will further their own interests. These interests maximize their profits while keeping taxes and wages low and preventing redistribution, which increases inequality.

Resistance to Corruption

In 2017, about 60,000 people protested inequality on the streets of almost 80 different cities. This isn’t a large percent of the population but does show people’s anger with the current socioeconomic inequalities. Alexei Navalny, who has been the face of Russian opposition to President Vladimir Putin, called these anti-corruption protests. Over 1,000 protesters were detained as a result and Navalny was sentenced to 30 days in jail. While many people are scared to protest in Russia, a significant number of young people were among the demonstrators who turned out for the anti-corruption protests, showing promise for intensified anti-corruption activism in the future.

– Maia Cullen
Photo: Flickr

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Free Markets Can Reduce Poverty

The development of free market economies has been accompanied by a large decrease in poverty around the globe. Extreme poverty is virtually nonexistent in the most industrialized countries.

Many people believe that after the fall of the Soviet Union more than 20 years ago, the world went through a wave of globalized development. Capitalism spread and free markets were adopted in numerous countries. Industries became a focus of countries everywhere.

Thirty years ago, 50 percent of people in poor nations were living in extreme poverty. Since the development of global markets, however, 21 percent of people in poor nations around the world are considered to be living in extreme poverty.

Capitalism has some clear effects on a country’s economic system, and therefore on its citizens. Free markets open up trade opportunities, increase competition for jobs and extend life expectancy.

When countries use free markets, they immediately become a global partner in trade. They are more able to import and export their products to a larger market, thus increasing their economic wealth greatly. Countries with higher economic success generally see less poverty in their citizens.

In a capitalistic system, jobs are given to those who work for them, and the workers only get paid when they complete their requirements. When there are more people than positions available, people will increase their efforts to rise above the rest and claim that position. Creating a competitive environment can increase the effort people put forward. Efforts to alleviate poverty must come from a system that rewards productivity and industriousness.

With the increase of economic prosperity in countries with many people living in poverty, they can move from the lowest global income bracket to the middle-income bracket. Data shows that by moving up in economic status, life expectancy increases. When people are in the lowest bracket, life expectancy is around 40; however, in the middle bracket, it increases to 60.

As seen in past experience, developing the free market system may be the best solution for the countries that are facing large amounts of poverty.

Ismael Hernandez, a writer for News-Press.com, said, “Wherever culture and institutions focus on creative and productive activity, you put in motion processes where great civilizations emerge and the lives of people are enhanced.”

— Hannah Cleveland

Sources: Market Oracle, News-Press
Photo: BlogSpot

The Cost of Christmas

christmas_spending
Beyond the messages of goodwill and the narratives of birth and rebirth, Christmas inevitably turns into an Olympics of materialism and consumerism. For now, there are only the hard questions on which to ruminate: What are the top ten gadgets we cannot live without this holiday season? What is the Cost of Christmas?

A Gallup Poll released November 14 revealed that the average amount an American plans to spend on Christmas presents this year totals to about $704. In 2012, Americans individually spent about $764 on average. To put it all in perspective, a Think Progress info-graphic revealed in 2012 that the amount Americans spend on Christmas (about $25 billion) is roughly equal to the cost of permanently ending homelessness in the United States ($20 billion).

The amount that Americans spend on Christmas presents and decorations entirely eclipses the $3.2 billion that the World Food Programme calculates is needed per year to feed all 66 million school-age children living in extreme poverty around the world. The American Christmas budget also dwarfs the annual budgets of the UNHCR, the World Food Programme, the UNDP and UNICEF combined.

Only $60 billion is needed to end world poverty.

The message here is that the extraordinarily privileged people of United States are entirely capable of leading the crusade against global poverty. Within the span of only one month of the year dedicated to holiday shopping, Americans spend enough money to permanently abolish global poverty by 50%.

While Christmastime may mean scrambling to the tree to unwrap the new Playstation 4, Xbox One and Apple products, perhaps it is time to additionally consider that that money can buy lasting world peace and equality—that these are gifts that are worth the investment and within our budget.

– Malika Gumpangkum
Sources: TIME, Forbes, Business Insider, NY Times, Think Progress, Oxfam
Photo: Telegraph

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Was Karl Marx Correct?

Karl Marx Correct Income Inequality Communism Socialism Wealth Redistribution
Was Karl Marx correct? Considered one of the fathers of modern communism, Karl Marx is not exactly a celebrated figure in western culture. Nor is he well understood. It is not possible to provide an adequate summary of his political or economic theories in this space, but a general discussion of some of his ideas may prove beneficial to understanding the current global economic crisis and the growing crisis of income inequality. Whatever our preconceived notions about Marx may be, one cannot deny the thought-provoking nature of his ideas.

Marx envisioned history as a kind of evolution in the modes of production, each mode being defined or characterized by class struggle. Marx theorized that the capitalist mode of production relies on profits that are generated by the exploitation of workers’ time and labor. The desires of the workers–higher wages and better working conditions–will always be pitted against that of the capitalist, who seeks only to maximize profits.

Naturally, this idea is not popular in western societies where “free markets” and “capitalism” are considered canon. But Marx’s theories may need to be revisited. Since 2008, the world’s economies have experienced sluggish growth, stagnant incomes and widening gaps in income inequality. As a result, there is an increasing tension between the rich and working classes as evidenced by movements such as Occupy Wall Street and the fast-food workers’ strike in the United States and the garment workers’ protests in Bangladesh. Though these events garner little mainstream media attention, they are worth exploring and understanding.

If there is one Marxist idea that is particularly relevant today, it is this–capitalism will impoverish the working masses and concentrate wealth in the hands of a very small but very powerful class of über-rich individuals. According to a study by the Economics Policy Institute, between 1983 and 2010, 74 percent of the gains in wealth in the U.S. went to the richest 5 percent while the bottom 60 percent suffered a decline. There are plenty of troubling statistics like these that evidence a crisis of wealth inequality in the United States and across the world.

Marx wrote, “Accumulation of wealth at one pole is at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole.” Any objective view of global economics today can see how this statement makes practical sense.

This is not to say that Marx developed a perfect worldview or flawless economic theory. But perhaps the critical question is not whether Karl Marx was correct, but whether western policymakers are (at best) the victims of dogmatic groupthink or (at worst) well-compensated puppets of the über-rich.

To change current economic trends, people everywhere will need to come together to generate new ideas and begin thinking about alternatives to capitalism. Marx might be a good place to start.

– Daniel Bonasso

Sources: Time, Economic Policy Institute, Stanford Encyclopedia of Philosophy
Photo: Critical Theory

The Widening Gap of Global Inequality

poverty-reductionThe gap between rich and poor is widening. It takes money to make money, and so inequality is becoming exacerbated as the rich get richer.

Rising inequality has impeded efforts to eliminate global poverty. With a greater share of wealth being captured by those in the highest income bracket, the amount reaching the lowest is continually decreasing. Two nations with equivalent GDP growth rates could have drastically different levels of poverty depending on income equality. For example, in India, the net worth of 46 billionaires is $176 billion. This number represents 12% of the GDP of India, as opposed to 1% fifteen years ago. Half of that amount would be enough to eliminate absolute poverty in India.

The irony of this unchecked growth of the upper classes is that eventually it can result in a restriction of growth. Extreme inequality slows the development of markets and limits investment opportunities for the poor. Inequality also diminishes the political power of the poor. This skewing of power can reduce government efficiency and allow for tax evasion by the wealthy, limiting the government’s ability to invest in necessary infrastructure to sustain growth.

If we’re to see success in the fight against global poverty, then rising equality must be allowed to play its part.

– David Wilson

Source: The Guardian
Photo: Global Post

Capitalism Is Helping End Global Poverty

Capitalism Is Helping End Global Poverty
1.1 billion people in the world still live in extreme poverty, which means surviving on less than $1.25 per day. While that may seem like bad news, the good news is that that number is half of what it was 20 years ago. Between 1990 and 2010, 1 billion people were lifted out of extreme poverty, and now we need to do it again to wipe out extreme poverty by 2030 to reach the goal set by the World Bank.

So, who is to thank for helping curb poverty around the world? Certainly, the leaders who proposed the Millennium Development Goals have contributed by raising awareness about the problem of poverty and encouraging advocacy by creating goals. And without a doubt, the nonprofit organizations that have raised money and volunteered to help raise less than privileged people out of extreme poverty should be applauded. But, the most significant hero in this scenario maybe capitalism.

One of the best ways to help people is to teach them how to help themselves. Sending food, medical care, and other supplies to help the poor helps greatly, but not as much as helping a country grow so that they can create their own food, become doctors to care for the sick, and buy or make their own supplies. When a country’s entire economy grows, individuals’ financial outlooks begin to look brighter as well.

China is a prime example of how capitalism is helping to end global poverty. The country has one of the most impressive “rags to riches” stories, bringing 680 million people out of extreme poverty from 1981 to 2010. Furthermore, a staggering 84% of China’s massive population used to live in extreme poverty, and that number has now been reduced to 10%. Most of the reasoning behind this incredible transformation lies in the fact that China’s productivity level drastically increased towards the end of the 20th century, supplying people with jobs to bring them out of extreme poverty.

There is much more to global poverty and the methods of ending it than simply providing jobs through capitalism. There are major issues with inequality and government systems, for example, and there’s not always a simple answer. But, growth remains one of the most significant ways to help a nation lift and keep itself out of extreme poverty.

– Katie Brockman
Source: The Economist