Citizens of Russia Slide to Poverty Due to Destruction of Oil and Gas Titani

Citizens of Russia Slide to Poverty Due to Destruction of Oil and Gas Titani
Zhukovsky Vladislav 23.01.2014

Apparently, year 2013 will enter history not only as year when steadily high prices of oil ceased to help the Russian de-industrialized two-sector economy of pipe and real sector fell down into crisis state together with investments. It will also enter history as year when real standard of living of overwhelming part of "dear Russians" managed to decrease against inflow of petrodollars.

We will note that in the year passed analytical dysfunction and enormous incompetence of the Government clearly showed itself. W don’t need enemies in Washington and the IMF with such "experts" and "economists" in the cabinet, the Russian officials excellently cope with function of destruction of the remains of the non-oil industry, giving away sovereignty and preservation of the status of raw colony of industrially developed countries. It is road to nowhere - straight to the abyss of at first economic and monetary crisis, and then of system crisis.

All validol forecasts and expectations of the high-ranking officials which were necessary condition of realization of good wishes and election pledges of the authorities - from innovations and reindustrialization to modernization and overcoming of raw dependence - collapsed. Instead of growth of economy by 3,6% there is hardly distinguishable from statistical error of 1,3% difference. At that monthly recession is recorded in August and September with removed seasonal and calendar factors, in November the Ministry of Economics reported about zero dynamics.

Domestic offshore and raw economy of one-and-a-half repartitions today is in crisis, the Soviet heritage is successfully eaten up, petrodollars are plundered and taken out to offshore, infrastructure is in catastrophic condition, corruption, apparently, became basis of the approved political system and backbone ideology of dominating ruling class.

Probably, strategically significant decisions (from retraction of Russia in the WTO on conditions incompatible with life to the next large-scale sale of strategically significant objects of state property and carrying out of antisocial reforms in the spirit of monetization of social benefits and commercialization of social sphere) in Russia are made only proceeding from logic of prospects of personal enrichment of notorious "offshore aristocracy".

Nothing personal, only business: the most profitable type of activity in post-reform Russia alongside with sale of subsoil, trade in import consumer goods and the Chinese calculators and monetary speculation is the deepest and the most cynical robber of thin pockets of the population. It’s not important, if it is carried out by means of increase of tariffs for housing and communal services, gas prices and electric power and rise in price of passenger traffic or by means of universal corruption and doubling of prices for retail sales from the part of networks and dealers.

Probably, Russia is perceived by ruling liberal and cosmopolitan oligarchy as a raw colony and trophy space which is subject to plunder and robber in especially urgent and cynical way. Such behavior is peculiar of favourites and colonial administration - kleptomania and personal enrichment at operational and tactical level with preservation of Russia in critical dependence on petrodollar system, in the status of a de-industrialized raw appendage of the transnational capital at system and strategic level. It is worked out mechanism of keeping of the state in system of neocolonial dependence on the American press and system of nonequivalent external economic exchange which means for economy and financial system of Russia annual losses at a rate of 300-350 bln. dollars: net - capital outflow of 60-80 bln. dollars, net investment losses of 66 bln. dollars., inflow of import goods and destruction of the remains of the processing industry (50-60 bln. dollars), dependence on import services (60-65 bln. dollars), growing net - payments of migrants abroad (12 bln. dollars), negative balance of the secondary income (8 bln. dollars), getting into a loop of external loans, leakage of the best minds, degradation of infrastructure and scientific and technical potential, etc.

Decay of the real sector of economy

Situation in economy is critical, decrease in release by 0,1% in the physical expression in industry, processing productions fall by 0,6%, capital investments - by 0,8%, freight transportation on railway transport – by 1,9%. At that growth rates of economy have been falling for seven quarters at a run (since the end of 2011) and following the results of 2013 they made less than 1,3%. Whereas the growth by 3.5% is put into the budget and the Ministry of Economics for the first time for many years had to reconsider forecast for the worse fourfold – from 3,6% at the beginning of the year to 2,4% in spring, 1,8% in the fall and 1,4% in the end of the year. At that import of the goods from abroad grows by 2,5% and export falls by 1,8% placing Russia on a needle of import goods even more densely.

A number of advancing macroeconomic indicators testifies to large-scale recession of production and investment activity. First of all, freight transportation on railway transport is reduced by 1,8% in annual expression more than the amount. And on a number of commodity groups (vehicles, cars, equipment, etc.) recession exceeds 5-15% in annual expression. Besides, for the first time since crisis 2009 they fixed falling of electricity consumption in Russia, even officials were compelled to recognize it - instead of planned growth of electricity consumption by 1,5% they recorded falling by 0,6%.

Alongside with it Ministry of Energy predicts recession of production of the electric power by 0,7%, while System Operator Unified Energy Grid even by 0,8%. Landslide reduction of power consumption is caused by growth of crisis tendencies in industry and decline of science-based hi-tech productions. It is indicative that even metallurgical complex, being one of the largest industrial consumers of the electric power, reduced electricity consumption by more than 5%. It shocked both metallurgists and energy workers and their curators in the Kremlin. Similar crisis tendencies are observed in agrarian and industrial complex, machine-tool construction, instrument making, transport mechanical engineering, aviation industry and other science-based productions suffering from expensive credits, scientific and technical backwardness, corruption quitrent and inflow of import connected with Russia's accession to the World Trade Organization.

Now we are undergoing things which were predicted by independent economists: default and crash of resource and raw comprador and oligarchical extensive model of "growth without development" on oil and gas dope, on foreign loans and inheritance of the Soviet era. We have things which ruling officials refused to see with rare obstinacy: real sector of economy promptly gets derailed. It forces ruling bureaucracy to put off pink glasses, putting which they with rare convenience rejected criticism in their address against becoming rather aggravated degradation of economy, decline of non-oil industry and arkhaization of production.

It is very indicative that alongside with it over 450 bln. dollars (i.e. annual budget of Russia) were taken out of Russia for last 5 years, over 560 thousand individual entrepreneurs either went bankrupt or withdrew into shadow for first nine months of the current year. It’s also the result of macroeconomic policy pursued in Russia using templets of the IMF and in the best traditions of the Washington consensus.

It is worth reminding of some "miscalculations" and foreasting and analytical "mistakes" of Medvedev’s cabinet. Instead of growth of investments by 5-5,5% we an register investment crisis with recession of capital investments by 0,8% and collapse of investments by 2-5% in siene based non-oil productions. Instead of growth of industry by 4-5% we observe zero depressive and crisis dynamics with decline in production in manufacturing industry by 0,6%. All mythological forecasts of the cabinet, as independent experts, free from pseudoscientific and destructive postulates of the doctrine of vulgar liberalism predicted, turned out in reality unattainable day-dreaming and unrealizable hopes. Those were noncommittal "promises" as officials live in parallel reality, they refuse to get out of it.

At that we an observe aeleration of inflation and loss of control by the Government over price level, it put into the budget inflation in 5,5% and following the most optimistical estimates of Rosstat reeived consumer price index more than 6,5%. That allowed the Ministry of Finance to continue realization of destructive policy of a kudrinizm and insufficient funding of the domestic industry, infrastructure, housing and communal services, science and social sphere.

At all this the Ministry of Finance manages to pursue policy of fiscal fetishism and budgetary Darvinism, artificially dealaying money transfer, breaking fulfilment of the federal budget and refusing to direct those bits whih were put into the budget on financing of economy, industry, agriculture, housing and communal services, infrastructures, sciences, educations, health care, etc. According to the official data of the Ministry of Finance contained in its monthly report on preliminary budget performance, following the results of 11 months of 2013 profitable reord of the federal budget was executed on 91,1%, whereas cost reord less than on 83,3%.

In other words, thanks to the effort of Anton Siluanov – ideological follower of Gaydar and the pupil of Alexey Kudrin - state expenses lag behind imome on almost 8%. Thanks to keeping of economy and social sphere on "dry ration" the Ministry of Finance also manages to report about surplus of the budget in 599,9 billion rubles and primary surplus in 928,7 billion.

Inadmissibly expensive credits (by 2,5-3 times exceeding standard of profitability in agriculture and mechanical engineering), excess monopolization of economy, privatization of the budgetary sphere, cannibal monetization of social benefits, legitimization of paid education and health care under conversations about need of overcoming of heavy inheritance of "hungry" Soviet era, impetuous rise in price of fuels and lubricants by 9-12% annually, prompt increase of tariffs in adjustable branches (electric power, heating, housing and communal services, rail transportation, etc.) by socially focused Government in words, growing extortions of corrupted officials at all levels of power vertical and other "delights" of the Russian reality untwist flywheel of inflation and depreiate incomes and savings of critically significant for social stability of the power part of the population of the country.

Level of life of the Russians speedily falls

In this regard, it would be quite silly and shortsightedly to perceive seriously and closely to heart semi-official reports of Rosstat that "it became better to live, life became more cheerful". While representatives of ruling bureaucracy report about "growth of standard of living of the Russians" and "rising from knees", the overwhelming part of the Russians faces decrease in purchasing power of their incomes and simplification of contents of their pockets.

From the formal point of view Rosstat reports about growth of standard of living of "dear Russians", allegedly it beame better and more cheerful to live. Other thing is that the social and labor majority doesn't feel advertised improvements. The real standard of living of overwhelming part of the Russians in 2013 decreased.

Yes, formally Rosstat reported about growth of nominal salary by 12,7% and pensions by 9,7%. Moreover, taking into account inflation in real terms the salary grew by 5,5% and pensions by 2,8%. Even real incomes of citizens formally grew by 3,6%. Not so badly against falling of growth rates of gross domestic product from 3,9 to 1,3%, reduction of industrial production by 0,1%, processing productions by 0,6%, investments by 0,8% and argo turnover on railway transport by 1,9%. It seems, there is reason for optimism.

However not everything is so unambiguously iridescent – it’s “average temperature”. Rosstat summarizes incomes of needy Russians with superincomes of large businessmen. Official statistics has no relation to life of 73% of the Russians whose income doesn't hold out up to the average size in the country (29,2 thousand rubles). For them the rise in prices makes 10-13% annually, that is the real growth of pries for goods and services of prime necessity. It is indicative that in January-November, 2013 bread rose in price by 13,5%, pasta - by 10,3%, eggs - by 13,8%, fruit and vegetable production – by 9,3%, butter – by 9,2%. Worse than that, housing and communal servies rose in price by 11,5%, hot water supply - by 12,5%, gas supply - by 14,1%, heating - by 11,9% and electric power – by 9,4%. and Policy of monetization of social benefits and commercialization of the social sphere also devastates pockets of the Russians - medical services grew in price by 8,1%, passenger transport - by 9,2%, education – by 9,4%, preschool education – by 7,2%, cultural leisure - by 9,1%.

In such case it’s pertinently to speak not about growth of standard of living of overwhelming part of the Russians, but about its falling by 3-5% only in 2013. No wonder that notorious property abyss - a gap in level of incomes of 10% most and least wealthy Russians – signifiantly grew for the last year in Russia, it’s called coefficient of funds and it grew from 16,2 to 16,4 times.

At that overwhelming part of citizens whih didn’t fit into archaic hydrocarbonic "pipe economy" appeared on life roadside, they live on ridiculous money not compatible to normal existence of a person. Thus, the salary in agriculture (16,5 thousand rubles) is 47% lower than average about the country, in textile industry it makes 55% (13,9 thousand), in production of plastic and plastic products - 27% (22 thousand), in wholesale and retail trade - 18% (23,8 thousand), in restaurant and hotel business - 37% (18,6 thousand), in education - 24% (23,7 thousand), in health care – 20% (25 thousand), etc. Whereas in the sphere of financial operations (55,4 thousand rubles), pipeline system (49,4 thousand), production of oil products (59,6 thousand) and in fuel and energy complex (56 thousand) level of the salary 3-5 times exceeds the salary in siene based industry, education and health care.

Huge imbalances in branch level of compensation and distortions of level of profitability of productions cause continuous process of deindustrialization of economy, disintegration of the national economy, decline and rotting of the domestic siene based industry, primitivization of production, brain drain in search of the best life, etc. Capital and manpower run from industry brought to the state of deep ruin and decline, yesterday's scientists and professors are compelled to go into the sphere of foreign consumer goods trade or the sphere of financial speculation trying to support family. As soon as profitability and salaries in speculative, trade and intermediary, low-reefficient and unproductive spheres of economy is higher, than in siene based productions, Russia will remain raw colony, financial tank and sales market for production of multinational corporations.

It is very indicative that accelerated compression of consumer activity of the population even despite proceeding inflation of a bubble in the market of consumer crediting of the population is observed. Yes, growth rates of crediting of the population fell from 35-40% in previous years to 15-17% in 2013. However even this "dope" of credit money isn’t enough at least to hold level of expenses (even in nominal terms) at the level of previous years. Not only tips and transfers from budgetary system, but also growth of credit leveraging don’t help.

According to estimates of the research company "Romir", following the results of the 4th quarter of 2013 consumer expenses of the Russians fell for the first time for many years to 5%. Worse than that, even in nominal terms following the results of December, 2013 expenses of the Russians grew only by 1% in annual expression. I.e. taking into account even official and quite validol assessment of inflation was reduced by very noticeable size. As “Romir” notes, so depressing dynamics of expenses of the population in Russia was never observed for all history of carrying out researches of this sort, i.e. since 2008. Yes, really in the 4th quarter 2013 consumption volume in monetary terms in nominal prices was all the same 85% higher than in the corresponding period of crisis 2008.

Thus, nominal growth of expenses by 20% outstripped rate of inflation that speaks about quite high growth rate of real expenses for last 5 years. However not everything is so smooth and unambiguously iridescent as could seem at first sight, it is necessary to realize that real growth rates of prices for overwhelming part of the population of the country significantly, 1,5-2 times differ from official estimates of Rosstat.

So-called "social inflation" for 73% of the Russians with incomes below average about the country (29,6 thousand rubles) makes not 6-6,5% as high-ranking officials in the Government try to depit, but all 10-15. Such are the rates with whih goods and services of prime necessity (food, housing and communal services, gas, electric power, heating, passenger traffic, education and health care services, etc.) which make overwhelming part in the structure of consumer basket of needy citizens rise in price. In this case it’s quite appropriate to say that over last 5 years from the moment of crisis collapse of 2008-2009 in real terms (i.e. in physical expression with exception of cost components) consumer expenses of the average Russian not only didn't grow, but even fell by 15-20%!

It is natural result of policy of Kudrin’t eonomy, monetizations of social benefits, privatizations of the budgetary sphere, commercialization of social services, introduction of the soial norms of electricity consumption, increase of tariffs of natural monopolies. The Russians even taking into account repeatedly increased credit loading (more than by 3 times) in real terms began to live worse, level of solvency of their incomes and savings got reduced practically by a quarter. It’s different thing that thanks to statistical manipulations with consumer price index and calculation of "average temperature” (i.e. summing up of incomes of needy Russians with superincomes of raw oligarchs, top managers of state companies and the State Banks and other corrupt officials) the authorities manage to put up a brave front and to report about growth of standard of living of the Russians.

Moreover, by estimates of the same Romir center, expenses of the population with average level of incomes in December, 2013 ompared by December of 2012 were cut down by 6% in nominal prices and by 12% in real. In other words, even 25% of the Russians whom Rosstat by a streth of imagination tries to include into the structure of notorious "middle class" (really there are only 15% of citizens with income more than 40 thousand rubles) and which would have to become a stronghold and base of the Russian consumer society, fall not only in real, but also in nominal terms that is unprecedented phenomenon in the history of "rising from knees" Russia.

In other words, consumer activity of the Russians whih allowed to hold domestic deindustrialized "pipe economy" afloat promptly collapses after fading of the Russian economy and entry of real sector into condition of deep crisis. It is obvious that washing out of this base will provoke strengthening of crisis tendencies in economy and still bigger recession of production and investment activity having aggravated recession scales. If in 2013 the Russian economy thanks to financial sector, mining industry, wholesale and retail trade and the market of real estate managed to keep afloat and not to fall down into negative zone, in 2014 of such miracle won’t happen.

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