See data. For real, this time.
While it is perhaps a big strange to start thinking of Russia as a high-income economy, it’s not so surprising when looking at concrete statistics such as vehicle consumption, Internet penetration, etc. – all of which are now at typical South European and advanced East-Central European levels (even if there’s still some way to go to converge with the likes of France or the US).
In per capita terms, this means that the average Russian is now about as rich in terms of real goods he can buy on domestic markets as a typical citizen of Portugal, Greece, Estonia, Poland, or Hungary (though with the caveat that most of the latter places have a lot less income inequality). Below is a table showing the GDP per capita, PPP (current international $) of Russia and comparable countries:
Furthermore, it’s looking as if Russia might have a real chance of overtaking Portugal next year. Just as Putin promised in 2003! (Double GDP; overtake Portugal in 10 years). But even if that fails, at least overtaking Greece is all but assured, so even if Russia misses out on Portugal it will still get to say it is no longer the poorest “proper” European country.
any particular data you want to refer us to? A link? A statistical website?
In terms of GDP by purchasing power parity it isn’t too far off.
Very interesting information Anatoly.
Being in a position to compare economic conditions in Greece and Russia I know which country I would rather at this most be a citizen of even if GDP per capita is still higher in Greece.
Russia’s economic progress is not yet fully appreciated. Once it is it will start to have a big psychological and political impact. I don’t think there has ever been in modern history a time when Russians have been richer than Czechs. I can remember watching a Czech dissident say on television in the 1970s that Czechoslovakia belonged to central rather than eastern Europe because it was so much more developed and richer than Russia. Yet with the Czech economy flat it now seems only a question of time before Russian living standards overtake those in the Czech lands.
The figure that is most upsetting is the Ukraine’s, which seems to be falling further and further behind. I presume that twenty years ago at the time the USSR collapsed living standards at least in the industrialised eastern Ukraine were similar to Russia’s. I remember how when the USSR broke up many predicted that it would be the Ukraine that would most benefit economically. That most certainly has not proved true up to now. In the Ukraine at least the 1990s seen never to have ended.
As AK correctly notes there is indeed much greater income disparity in Russia than in the Czech Republic or in Poland. Although Russia has surpassed Poland in terms of per capita GDP PPP and is approaching the Czech Republic for that measure, it is not quite there yet in terms of average or rather typical Russians being as well a off as typical Poles or Czechs. Even in the Moscow region 30 km outside the city (the city itself, is as wealthy as the wealthier parts of western Europe, never mind Poland or Czech Republic) the locals – that is, not dacha owners from the city – by their cars and clothes don’t appear to be much better off than typical Ukrainians. Not poor, but still driving old Zhigulis, wearing (Vietnamese?) clothes from markets, etc. In Poland one is struck by the widespread middle class normality that one finds even well outside Warsaw or Krakow.
As for Ukraine – the sheer banditry of the 90’s has ended although the economy is still bad. Westerners don’t often appreciate just how scary those times were. Under the Yanukovich regime even there are evens some light reappearances of criminality – the practices of small businesses having to pay having to pay krishas has reappeared and mutliplied.
I mentioned this somewhere before but I’ll mention it ago: While average Ukrainians are certainly poorer than average Russians (even accounting for income inequality by taking the median, not the mean. values), I am also likewise certain that the differential is not on the order of 3x as indicated by the GDP PPP figures above.
Why am I quite certain of this? Because when the World Bank/OECD revised their databases of relative prices around about 2010, Russia (and to a lesser extent Mexico, and Turkey) jumped up in the ratings. However, Ukraine didn’t budge at all. I suspect that that new survey simply didn’t cover it.
As AP says Ukrainians are not very markedly poorer than Russians outside the two capitals. While according to official statistics mean wages are a lot lower in Ukraine than in Russia (something like $400 vs. $900 IIRC), this has to be adjusted for higher inequality and higher prices in Russia.
I was visiting relatives in an oblast capital in central Ukraine and a week later spent time at my in-laws’ dacha outside Moscow. I was struck by the similarity between the Russian village locals and the provincial Ukrainians. The local handyman/caretaker for the dacha drives the same kind of car as my uncle in Ukraine, he and his wife dress similarly to my aunts and uncles, etc. I’m sure the caretaker’s home 30 km outside Moscow has a market value several times that of the provincial Ukrainians’ place, and that he is paid much more than a caretaker at a dacha outside the Ukrainian provincial city would be paid. But in purely physical terms I saw little difference. Both were a noticeably poorer than the people I saw in provincial Polish towns.
It looks like the data you posted seems to support my anecdotal observations.
According to this article/blog post, ordinary Belorussians live a bit better than Russians. Have you been to Belarus as well, and if so what would you say about it?
I haven’t been there – it would be quite interesting, but I stay with my family or with my wife’s family (Poland was a trip to a friend’s hometown wedding) when we go to that part of the world and we don’t have relatives in Belarus.
So basically you’re observing that the standard of living is the same between Russian villagers and Ukrainian big city (not capital) dwellers? That makes sense, I guess.
I can speak for my relatives, who all live in ~1,000,000 cities in Ukraine and in Russia. Based on what they tell me, the incomes in Russia are at least double those in Ukraine. It’s not that apparent in necessities such food, clothing, or even transportation. But the gap becomes very apparent in luxuries such as smartphones, foreign vacations, and even in the ability to eat out (despite the fact that in Ukraine restaurants are so much cheaper). And my Ukrainian relatives are from the east, I believe in relation to the western part of the country they’re as wealthy as Russians are to them.
I was comparing residents of a sleepy central Ukrainian oblast capital (population around 300,000 – not a big city) with villagers 30 km outside Moscow. You are correct that incomes are probably double in Russia, but everything is much more expensive. This may indeed leave enough extra money for Russians to be more likely to own expensive foreign items such as smartphones (which cost the same regardless of where they are sold), but not enough to lead to a real difference in large items such as type of car or in overall lifestyle.
Although one often hears about eastern Ukraine being more wealthy than the western part of the country (it certainly is, per capita) I suspect that the typical eastern Ukrainian does not live better his western peer. There is much higher income inequality in the east (ever hear of a western Ukrainian oligarch?). Lviv is loaded with restaurants and cafes – much more than even Kiev per capita – and judging by the Ukrainian language spoken by most customers these are locals going out.
I must be piss poor then, because I earn 60,000 rubles a month, have two school-age children and one that attends kindergarten and I don’t have a car. I am the sole breadwinner in my family.
I live in central Moscow as well, at Taganka. However, we own our own 3-room flat that is on the third floor of a house built in 1971. We also own a dacha situated 50 miles southwest of Moscow as the crow flies.
We use public transport. The cost of a one-way elektrichka ticket to our dacha is 132 rubles.
We do all our grocery shopping at a neighbouring Pyatyorochka or Monetka supermarket. We never eat out.
As regards travelling abroad, we’ve only done that 3 times since the children started to arrive, namely since 1999: twice to my home country, where we lived at my sister’s, and to Eurodisney near Paris last November. True, we’ve had three holidays in the Ukraine – at Kerch, Evpatoria and Sergieva near Odessa – but I don’t really count that as abroad. This year we spent 3 weeks in Anapa.
Funny thing is though, I feel better off here than when I lived in my home country. Bear in mind, that was over 25 years ago.
I never had a foreign holiday until I left England and went on honeymoon to Paris with my wife in 1997, nor did I ever have a car in the UK, where I lived in a rented council house. I never learnt to drive because I used to walk to work. And I only first opened a bank account in the UK two years before I left Merry England. Never had need for an account before that, because what I used to get paid weekly on Fridays for working down the pit was usually gone before the following Tuesday, if not earlier. Bear in mind, I wasn’t wed then and I used to piss most that I earned against a wall. I don’t drink now. Haven’t done for 6 years. Don’t smoke either.
God, life is hell in the Evil Empire!
Congratulations, your flat by Taganka may be worth a million dollars, if you choose to sell it.
I was thinking of that after reading a previous comment in this thread re. Moscow property values. However, having sold our flat, where should we all live? At our dacha?
I used to think of this during the house buying boom that occurred when I last lived in England and heard of folk who were continuously buying and selling properties and moving from one property into another and wonder if this were really such a smart thing to do, for if their most recently bought property had been sold for a far greater price than that which they had paid for it, surely the price of the new property into which they had moved had also increased in price; unless, of course, they hadn’t “moved up” but rather “moved down” into some hovel and deposited their “profit” into a bank account.
I should also like to add that those people who live in the nearest settlement (Dorokhovo) to where our dacha is situated some 84 kms. from Moscow all seem to live in run-down Krushchevkas and very many of them seem to earn their crust in Moscow, judging by the packed and very frequent elektrichkas that run between Mozhaisk and Moscow early in the morning and in the evening. The first one to Moscow is at 5 a.m. and is full of locals, mostly fast asleep. The market there, however, has been totally re-vamped with new, well-built brick buildings containing all varieties of shops: originally one could only buy local produce there on an open square, This market is frequented mostly by Muscovite dacha dwellers who park their big new vehicles in front of the railway station: the locals drive old bangers. Goods are more expensive in the oblast’ as well. I know Muscovites who have chosen to live in the new dormitory town Odintsovo (Navalny’s neck of the woods) who tell me that prices in the shops there are higher than in Moscow. The air is fresher though.
And my Ukrainian relatives are from the east, I believe in relation to the western part of the country they’re as wealthy as Russians are to them.
Oh boy, AP will have a lot to take issue with there. *Looks at reply below* Indeed.
@AP,
This may indeed leave enough extra money for Russians to be more likely to own expensive foreign items such as smartphones (which cost the same regardless of where they are sold), but not enough to lead to a real difference in large items such as type of car or in overall lifestyle.
I can’t judge personally, not very regrettably having been to Ukraine, so I can only resort to statistics. You seem to be broadly correct as regards for instance Internet (where Ukraine only lags Russia by a couple of years) and cell phones (penetration is pretty much universal in both countries now).
One problem however is that since the crisis ended, their trajectories seem to have significantly diverged. As of 2012 Russians were again buying as many cars (to take one major good) as they were in 2008, Ukrainian consumption however was stilll however at only slightly more than a third of its 2008 peak. One hopes this pattern doesn’t last much longer, or else real differences will start appearing.
I don’t disagree with you.
According to information I found once while doing some research and am too lazy to look up again right now, something like 70% of Ukraine’s GDP is still in the hands of oligarchs. I’ve never forgotten a conversation I had at New Years this past year with a Ukrainian family friend (he works with my wife) regarding his last visit back to the country of his birth. He looked for Ukrainian souvenirs to take back as gifts, but “to my shame” as he put it, he could not find anything made in Ukraine. He mentioned a large factory in his home town that had manufactured and sold perfumes, soaps and other beauty products – now, he said, only one small section was still operating, and it stamped designs on T-shirts that came from China. The picture he painted was a bleak one that aroused only pity.
I would certainly not endorse the coming to power of a grifter like Tymoshenko, as she herself is one of the biggest oligarchs and moreover a co-inflictor of the plague of the Orange Revolution that crushed the hopes of so many, but it is apparent that Yanukovych is incapable of resolving Ukraine’s problems. I don’t see any energetic, committed, charismatic and non-ideological candidates on the horizon, either.
In IMF list (the most considered)all is different.Russia is behind Germany and russian Gdp PPP is much lower and behind to many other.Write also it Russophile.
To give you an idea the net wealth (the savings in money and housing) of a french or an italian is 18.5 times bigger than a russian onew.An italian has a net finacial wealth 25 times bigger than a russian.Gdp is what you earn in a year.Net wealth is much important.A greek is 5 times richer than a russian and a portuguese 15 times.Poorer than russians in Europe are only Latvians,Belarusians,moldovans and ukranians.You can’t compare wealth with GDP PPP but with net wealth where Swiss is 1st.Italy ranks 10th in the world per capita (not as household
Your information is obviously false given current Russian and European real estate prices and the fact that absolute majority of Russian households own their housing outright.
Consider this factoid for a moment. Average Russian household owns an apartment worth about 60 thousand USD (the figure is much greater in Moscow where average apartment is worth two-three hundred thousand USD)
Are you seriously suggesting that average French or Italian household has assets worth a million USD?
Of course not. Net financial worth of Russian households should be about half of European average or higher with Moscow households being considerably richer than average Europeans
You are dreaming.Read Allianz ag and Credit Suisse wealth report.A russian net financial wealth per capita is 1549 € (Allianz) and same for Credit ssuisse (September 2012).An italian is 42875€ and a french just less per capita.About net wealth including houses a russian has 12821 $ an italian or a french above 230000 $ per capita.What do you want to compare?
According to alòlianz an italian is =25 russians as net finacial wealth per capita.According to Credit Suisse an italian=18.5 russian as global net wealth per capita (houses included).I’ve official sources from these institutes and so from caentral banks.You are just talking.A russian net average wage from the 0/01/2013 is around 585€,an italian 1614€.
I don’t know about your sources but I do know Russian real estate prices and that most Russians own their real estate outright, as SFReader stated. This means someone in Moscow living walking distance from the metro probably has at least $500,000, and likely more, in assets.
Some hard data on Moscow residential real estate.
Total stock of Moscow residential real estate – 215 mln square meters.
Average price per square meter – 5250 USD.
So Moscow residential real estate is worth about 1,13 trillion USD.
There are 3.7 million households in Moscow, so we get about 305 thousand USD per average Moscow household
Thanks!
So the average Italian has only 2/3 as much assets in terms of real estate as the average Muscovite.
I wonder what planet are you living on? If Credit Suisse and Allianz ag really wrote such nonsense, I pity their clients and shareholders…
I’ve looked at Italian property prices. Average price was 1,583 euros per square meter (2012 report from Agenzia del Territorio). Average apartment size – 96 square meters (2001 census data).
This translates into about 200,000 USD per average Italian household (as I understand, in Italy, as in Russia, household ownership rates are very high)
Compared to 62,000 USD in Russia (average apartment size – 62 square meters, average price per square meters 32 thousand roubles or 1000USD) or about three times as high.
This sounds more like it.
G7 in fact is composed by the 7 wealthiest statess (as statal wealth).Usa.Germany,Canada,Italy,France,Japan.UK.Italy alone with its net financial wealth can buy Russia 3 times.The Portugal alone or Singapore have the same net wealth of Russia.Gdp is like a wage,net wealth is what the people saved in decades or centuries.Russia isn’ in G7 in fact.Italy alone has a net wealth 8.5 times bigger than Russia that is 2.4 times larger as population.It’s only propaganda talking only of Gdp of WB hehe (and IMF?????)))))
Gdp nominal and PPP grow faster at the beginning…but then spaces become smaller and smaller….it’s saturation of growth.
You can compare a frog to caws.))))
Italy owns 11.2 trillons $ as total net wealth ,Russia only 1.35.Italy could buy 8.5 times Russia.Only by financial wealth (2.8 trillions €) italy could buy Russia about 3 times.Even if italy would cancel its public debt,the net financial wealth in exceed that woul remain would be able to buy Russia.There’s nothing to compare.Russia is second world as wealth.
1. You missed, $1.35 trln is not Russia but Moscow City only – and housing only. Moscow is about 9% of Russian population. However housing prices are 3-4 times higher than Russia’s rest average. Assuming 3.5 times we receive $5.2 trln for the whole Russia. Houses only!
2. What part of these $11.2 trln is being actually owned by banks? Russia has several times less debt pressure than Italy. Most of households are debtless unlike Italian.
3. Land in private use. Despite average prices are uncomparable to Italian, however the sizes are also uncomparable 😉
4. We even don’t touch here what part of Russian and Italian economies is being controlled by foreign capital. This is a complex question because of Cyprus etc. money which are actually Russian. But my point is Russian economy is controlled by Russian citizens (incl. ‘oligarchs’ – they are also households, btw only 110 Russian billioners have about $700 bln net wealth) and Russian state on 75-80%. What about Italian? I have no data but I suppose foreign control on Italian economy is much higher
So at first look (w/o looking statistical info) Russian households are as rich or richer than Italian. This is private sector. Because public sectors are uncomparable. Russian state and state-controlled companies owns plenty of actives. What costs only lands in usage of Russian millitaries, Russian railways and state agricultural, forest and water lands! This is millions of sq. kilometers!
I don’t have time for a very detailed reply, but there are two problems with Lorenzo’s commentary.
(1) The IMF’s GDP (PPP) figures are based on an older set of international price comparisons than the World Bank’s/OECD’s joint effort. As such, we can be reasonably sure that the latter are more accurate.
(2) It is simply not true that higher net asset prices necessarily reflect a proportionately greater standard of living or even economic importance. By that logic Germans are poorer than Italians, Spaniards, and Greeks. That is just nonsense. One suspects most of it comes down to Germans keeping their housing reasonably affordable and not having access to Mediterranean beaches.
Financial system has gone awry. That is the only useful data we ca draw from that the numbers indicating household assets.
According to this “numbers” Cyprus for example is very wealthy. An oasis of wealth and prosperity.
Of course reality is very different.
You pretty much nailed it with (2). Some years ago Berlusconi said that Italians are richer than Germans, and people called BS on him. Actually, he was reporting Italian Central Bank BS about Italy’s wealth. How did the central Bank got the numbers? They added the bank accounts with the market value of homes and subtracted the debt. The lion’s share of the wealth was due to the market value of homes which was, and still is, inflated by the policy of easy home loans. With the money I bought my current home in Messina, which is a rather poor Southern city, I could have bought a 20% bigger home in Graz, which is Austria’s second city.
As for repaying the public debt by taxing these properties, as implied by those that like to talk about the Italian wealth, it is a non-starter. People owning such wealth would have to sell it at rock-bottom price, if they actually can sell.
I’ll conclude adding anecdotal evidence. My parents have 2-3 times more wealth than me, but my income is 2 times higher than their combined.
I had the opportunity to travel a bit around Europe.
Disposable income has been reduced significantly. Starting a few years ago official GDP numbers have become more and more disconnected from reality.
It is something very easy to observe if you are interested and travel around often. Naked eyes are enough.
I do think that Russian GDP/PPP is close to European median +/-.
World Bank is making the necessary corrections but they can not put a 100% increase in a year. So they spread the correction across a few years.
Empirically :
1. Italians have very little disposable income. They have a very modest lifestyle. Very. And yet little money remain. Significantly less then Russians have.
This is the part involving consumption.
2. Italy is not involved in any large infrastructure or industrial investment spree to compensate.
Russia is doing both on a massive scale.
3. Italy spends very little on its military. Russia well you can put numbers by yourself.
So it is pretty clear that WB will continue to make significant corrections for the next few years.
I do not know the reasons for this but they are making an attempt to make stats match reality.
And in reality Russian GDP/PPP per capita can not be lower then Italy’s.
Who believes that has not been visiting Italy for the last few years. It has become a very poor country viewed from street level.
I am talking about the prosperous parts of the country like Milan. South was third world before so there is no big change. From poor to dirt poor is not a very big difference.
But in Milan and the North the changes are really huge.
If you want to really understand why Russia can do what it does – like taking stands on international problems and having the means to support itself in that position – you have got to use a more accurate set of data.
If you consider a number at least as large as the official Italian one per capita then the GDP numbers of Russia will make the economic base of the country quite large and will explain why it has such a large standing. It has a large economic base.
If someone corrects from 1.5 to 3.4 into a few years then somewhere something is very wrong. It wasn’t 1.5 few years ago. Just as it is not 3.4 today.
I expect that WB will continue their good job and in 3-4 years GDP/PPP numbers for Russia will move over 30 000 dollars/capita by a margin. Precisely what Nabiulina(or maybe also Putin, don’t remember exactly) said last year. They were promising to do what was already done.
A smart move to promise something you are sure you can deliver. Because it has already happened. Very easy to make accountancy corrections and take the credit.
I have noticed with great interest the data about automobiles acquisitions.
There is something I believe should be added.
Infrastructure patterns.
I shall use the same example – Italy. Northern Europe is simmilar I’d say but their economies have not been going through a correction yet. At least officially. So I’ll use the same as above.
Due to the illogical way residential and industrial/office facilities were positioned a car is not a luxury in Italy but a necessity. An absolute one. You simply can not go to work without one – valid for the largest majority.
In Russia having a car per family is a luxury acquisition. You can live easily without.
Due to this looking at Italian automobile possession numbers you might draw the conclusion that it is a sign of prosperity. It probably was a few years ago.
Now when all taxes have increased, all prices have increased and fuel has become expensive having and using 2 cars per family or even one has become a massive drain on people’s resources. But there is no other way if they want to have a job.
As GDP numbers this might seem a positive sign but it is not. If you have problems affording rent/utilities/food then having to use an expensive to maintain and to use car is the last thing you desire. But due to no planning of infrastructure you do not have a choice.
PS. Just to give you an indication of how very hard it is to interpret stats if you do not use your own head at all.
I used rent as a significant expense in Italy. But stats tell us that home ownership is very high in Italy.
Then why did I do that?
Because stats give us only a partial image of reality. It is true majority of Italians own houses.
But active population has migrated to major urban centers like Milan and Turin. And there the fact that their parents or themselves do own properties in other smaller or less economic active areas is of no importance.
They pay rent. I believe that for the economic active population the situation is very similar with Germany. If you have or you do not have a property somewhere in the countryside makes no difference.