"The Politics of Inequality in Russia" is a study of the political processes underlining the steady rise in inequality observed in Russia since the end of the Soviet regime. Inequality has risen both across the regions of the country and across groups of the population. While all the post-communist countries have witnessed some growth in inequality as they have moved from a centrally planned economic system to a market-driven capitalist system, Russia's levels of inequality are higher than any post-communist country with the exception of Kyrgyzstan. If the full extent of unreported income were taken into account, actual inequality in Russia would certainly be still greater. By one measure--that of the ratio of the income of the top decile of the population to the bottom--Russia's level of income inequality considerably exceeds that of the United States (Russia's ratio in 2009 was 16.7, the US's was 11.4). Much as the United States stands out among the advanced industrial democracies for its high level of inequality, so Russia stands out among the postcommunist countries
for its high inequality. Although inequality levelled off briefly when the 2008-2009 recession struck, it has begun to rise again as the economy has recovered. Growing inequality has become a source of concern to Russian policy-makers.
Economic theories explaining the world-wide trend toward rising inequality between and across societies abound. Despite the growth in the average incomes of China and India, global inequality has risen in recent decades. Processes associated with the globalization of production are an important factor, as are shifts in the economic returns to education and skill. However, political explanations are required as well, because politics underlies many of factors affecting the organization of labor markets and the distribution of risk and reward within societies. In most democratic countries, redistributive institutions mitigate the trends toward increasing inequality in the labor markets, reducing the gap between rich and poor and providing universal public goods. Both Russia and the United States have relatively weak redistributive institutions, allowing differentials in earnings to be translated into differentials in incomes. In view of the well-established body of theory and evidence that democratization fosters pressures for income redistribution, the book attempts to explain how the political transition in Russia has affected income distribution.
To do this, the book takes advantage of the wide variation among Russia's 83 federal territorial units to explore the link between features of political regimes and trends in income formation, including levels and structure of earnings, poverty, social spending, and social dependency. It finds robust evidence that differences in the degree to which regional regimes are open and competitive affect the relationship between government and business, with consequences for the structure of earnings and incomes. It explores the relations between government and the big enterprises left behind after the end of the Soviet regime, and discusses the implications of the fact that Soviet enterprises were linchpins in the system of welfare provision for Russian society. Moreover, much social welfare provision under the old regime took the form of in-kind benefits, often administered through enterprises. Accordingly, enterprise managers had considerable power within their firms and in their dealings with government. The greatest impact of regime differences at the regional level, therefore, concerned the distribution of the burdens and opportunities of the transition among enterprises and government. More open, competitive regimes devised cooperative relations with enterprises, encouraging them to invest more, pay higher wages and taxes, and adapt themselves to capitalism. Closed, uncompetitive regimes tend to cultivate more predatory relations between government and economic enterprises, fostering greater social dependency, lower wages and incomes but also lower inequality. This pattern helps account for the central finding of the book: that the most democratic regions have the highest income inequality.
The book rests both on a large and unique body of statistical data, including official Russian data, World Bank household income surveys, and European Bank for Reconstruction and Development-sponsored surveys of business firms, and on close-up case studies by Russian and Western scholars. The book concludes by discussing the implications of the current economic crash for Russia's future.
The book contributes to the study of post-Soviet and post-communist politics by relating the features of the Soviet economic and social welfare system to the political and economic processes shaping the post-Soviet environment. It uses the issue of income inequality as a lens into the political processes that determine how incomes are formed. Ultimately it is a contribution to our understanding of the post-Soviet political economy. It also is the first study to address systematically the consequences of differences in the nature of regional regimes in Russia.