Is There a Russian Middle Class?

Under the rule of the Czars, Russia once tried (and failed miserably) to develop a sustainable middle class. That failure ultimately helped pave the way for the Bolshevik Revolution of 1917.

It is now possible to look back and see that this lack of a middle class had a profound impact not just on 20th century Russia. No, it is fair to say that this lack influenced world history.

That is what is so puzzling about the current focus of international public attention on thrilling stories of political corruption and wealth-grabbing oligarchs.

Where attention needs to be paid is to the fundamental processes that underlie Russian economy and society — especially in the middle of society.

In the decade since the collapse of the Soviet Union, Russia has once again had the opportunity to build a strong middle class.

Indeed, one may point to the emergence of a Russian middle class as one tangible positive result of the painful transformations caused by the democratic and pro-market reforms of the 1990s.

Unfortunately, from a purely economic point of view, Russian society today more strongly resembles Brazilian society than that of the United States. In both Brazil and Russia, a very few own a lot — and many own nothing at all.

The wealthiest 10% in Russia, for example, earn nearly 40% of the national income. While not quite as bad as the 48% that Brazil’s wealthiest 10% take home, it is a full third more than the share of income that America’s top earners receive (31%).

That is quite a transition from the (pseudo-) egalitarian society of the old Soviet Union.

But not all the news is bad. The 70% of Russian households that fall between the wealthiest and the poorest now earns about 45% of the national income.

In the United States, where one expects its large middle class to earn much of the national income, the corresponding figure is not much higher — at 52%.

Interestingly, the poorest 10% in Russia and the United States also have some in common: they both received less than 2% of national income.

But aside from such numbers, there are many other signs that Russia indeed has an emerging middle class. Today, many young Russians are working like crazy.

Twenty years ago, Russian university students might have played a leisurely game of chess during a lecture. Now they cut class to go to work.

The middle class is a complex phenomenon that is based not only on income, but on education, occupation, property ownership and general democratic values.

Indeed, the 20% to 25% of Russians whose income puts them in the middle class very closely mirrors the 25% to 30% of Russians who have staunchly voted for democracy in the past decade.

But just how does one become a member of the Russian middle class? There are three ways.

One is to find a stream of income for those already educated and who share democratic values.

A second route is more conventional: invest in the education of those who need it, especially children.

Unfortunately, the third way for a Russian to become middle class is by emigration — leaving the country to join the thousands of Russian-born professionals who now live somewhere else.

Russian society has a very specific pool of relatively educated people — along the lines of 30% to 35% — with a long-term possibility of becoming middle class.

These are the Russian who already have some of the requisites necessary to qualify as middle class, but many lack a sufficient amount of stable income currently to be counted as middle class.

Unfortunately, this is a direct result of the structural changes and economic crises of the Russian economy over the past decade — the very changes that were supposed to build strength in such a class.

In the long run, the enlargement of Russia’s middle class will depend on two major factors: economic growth — and how well the rich, the poor and the middle class share the benefits of that growth.

Economic growth can strengthen the position of the current affluent strata — or it can support the poor.

Russia desperately needs democracy, stability, deregulation and easy access to resources for its entrepreneurs to support the formation of the middle class.

But if economic growth only benefits the current affluent class, it will be some time yet before the middle class will be strong enough to assure social and political stability.