Friday, November 17, 2017

Russian Elites Sharply Increase Their Purchases of Housing and Business in Europe



Paul Goble

            Staunton, November 16 – In the first months of 2017, wealthy Russians doubled the number of purchases of housing stock abroad, especially near universities for their children, and increased by 600 percent their purchases of existing businesses that they may eventually move to and run, according to a report by Finanz.ru.

            Using figures from the international consulting company Knight Frank, the Russian financial affairs agency says well-to-do Russians are rapidly increasing purchases of property and businesses abroad as a result of Russia’s economic crisis and the deterioration of relations between Moscow and the West (finanz.ru/novosti/lichnyye-finansy/begstvo-rossiyskikh-elit-v-evropu-uskorilos-vdvoe-1008253826).

            But the company’s figures also show that the average amount Russians are spending to purchase housing abroad has fallen 38 percent over the last two years, a reflection of economic hard times at home and more important the fact that Russians ever further down the income pyramid are now working to emigrate.

            The purchases of businesses abroad, Marina Shalayeva of Knight Frank says, clearly indicate that Russian investors are no longer just looking for passive income but rather are focusing on places where they could work themselves. And the purchases of housing for their children suggests they are taking a genuinely long view about the future.

            These figures are significant because they indicate that those Russians who can are now voting with their feet and not planning to return anytime soon or perhaps ever, thereby depriving their country of birth much of the managerial talent and capital it will need to recover from the current economic malaise.

Russians Possess Less than One Percent of World’s Wealth



Paul Goble

            Staunton, November 16 – Last year, Credit Suisse reports, the total wealth of the people of the world increased 6.4 percent to 280 trillion US dollars. Of that, Russians had only slightly more than one half of one percent -- and most of that wealth is concentrated in a tiny segment at the top of the national income pyramid, with 80 percent of Russians not having any wealth at all.

            The total amount of personal wealth by this measure in Russia “has not reached two trillion US dollars,’ Nezavisimaya gazeta reports, noting in addition that over the last year, this measure has fallen by 28 percent in dollar equivalents while rising 73 percent when expressed in rubles (ng.ru/economics/2017-11-16/4_7116_dolya.html).

                At present, the paper continues, each Russian on average has 16,770 US dollars in wealth, up from less than 3,000 on that measure in 2000.  But there is enormous income and wealth inequality in Russia, with those in the top one-tenth of one percent have capital greater than a million US dollars, while 82 percent have “less than 10,000 US dollars” each.

            Viewed from another perspective, there are 132,000 dollar millionaires in Russia, and 69 billionaires, with 2.1 million Russians being in the top ten percent of the world’s wealthiest and 175,000 being in the top one percent.  Those at the bottom thus are far behind not only their wealthiest domestically but internationally. 

            While globalization and economic change have produced income inequality of unprecedented size, that development is now in Russia and elsewhere having a negative impact on economic growth, according to Moscow experts with who the newspaper spoke. 

            Andrey Klepach of Vsneshekonombank, points out that the level of income inequality in Russia is now just what it was at the beginning of the 2000s, but there is an important difference: Then incomes were growing and poverty was being overcome. “Now we have another situation: poverty is growing and incomes for the last three years have fallen 10 percent in real terms

            And according to Ivan Karyakin of Global FX, the situation in Russia “will only get worse.” Indeed, he argues, “the model of economic growth” Russia is following meaning that “the gap in incomes will only increase,” something that will create problems given that an overwhelming majority of Russians believe economic inequality there is too great.

Putin Needn’t Fear a Russian Stauffenberg, Aleksandrov Says



Paul Goble

            Staunton, November 16 – Yesterday marked the 110th anniversary of the birth of Klaus von Stauffenberg, the German officer who, as part of a broader conspiracy of military officers coded named Valkyrie, unsuccessfully attempted to kill Hitler on July 20, 1944 and was executed the following day, Viktor Aleksandrov recounts.

            Stauffenberg’s actions, the Russian commentator says, “are a clear example of the fact that love for the Fatherland and loyalty to the authorities are not one and the same thing. When a conflict between [them] arises, there is no question for a real patriot as to which side he should be on” (kasparov.ru/material.php?id=5A0C178AA3BF4).

            In recalling these events, Aleksandrov says, “it is impossible not to notice that the regime” which Stauffenberg sought to overthrow was “by its nature very similar to the regime which exists now in Russia,” albeit with one significant difference that makes the appearance of any Russian counterpart to the German officer unlikely.

            Hitler came to power not only because he played to German feelings about the need for revenge after the defeat of their country in World War I but also because he pledged to promote the well-being of ordinary Germans. It was no accident that his party was called the German National Socialist Workers Party, Aleksandrov says.

            It is one of the signal successes of Soviet ideologists that most people now call Hitler’s movement fascist, thus ignoring the socialist component of his actions, and that they have succeeded in suggesting that he and the Nazis occupied the extreme right on the political spectrum rather than being a fusion of various elements from across the spectrum.

            Hitler was prepared to compromise with business, allowing it to retain de jure control of property while requiring de facto support of himself and the state, a compromise very much like the one Putin has made with the oligarchs.  But at the same time, Hitler transformed himself into the embodiment of the state and “not simply its head.” That too has some Russian analogies.

            Under Hitler, there was no place for any independent institutions and the fuehrer based his unique power on direct communication with the population rather than having it mediated through any other arrangement, Aleksandrov continues. In this way too, Putin resembles the German leader.

            Putin rose to power when he was anointed by the Yeltsin “family” who very much feared the neo-Sovietism of Primakov and his allies would threaten their property and their lives. But those who thought they would be the puppet master of the new leader were rapidly outplayed by him and lost out as well.

            Drawing on nostalgia for the Soviet past and anger about the rise of income inequality in the 1990s, the nationalism and socialism of Russian conditions, Aleksandrov continues, Putin moved to create “a personalist regime in which ‘the national leader’ appeals to the masses directly” and in which institutions are largely irrelevant. 

            Even the presidency as an institution was rendered irrelevant when Putin installed Medvedev as a placeholder for himself and ran the country from the supposed office of prime minister.

            “Like Hitler,” Aleksandrov continues, “Putin successfully plays on both these components,” nationalist and socialist, talking about having Russia “rise from its knees” and showing himself willing to put the oligarchs in their place. And in the latter case, Putin has behaved much like Hitler, allowing businesses to retain their property in exchange for total loyalty and willingness to contribute to his causes.

            But despite all these similarities between “the two personalist regimes,” he says, “there is one important distinction which permits Putin to avoid having any fear of a conspiracy against him.” Knowing that he needed the military for his plans, Hitler didn’t destroy the old German office corps, many of whose members were from the nobility and had their own patriotism.

            They were prepared to compromise with Hitler but only to a certain point as most were offended by his ideas and knew very well that the fuehrer was leading Germany toward a catastrophe.  There is no such group in the Russian military, Aleksandrov says. “Seven decades of Soviet power has destroyed any will to resistance.”

            Consequently, he concludes, no Russian “Valkyrie” is going to fly, and Putin needn’t fear a threat from that quarter.