Long thread.
Let's go over what may be at the origin of the current crisis: the economic depression of the early 1990s in Russia (and Ukraine).
All graphs and data are from my 1998 book which is freely downloadable here:
stonecenter.gc.cuny.edu/files/1998/02/…
My objective in writing the book was to document what happened to real incomes, inequality and poverty in "transition countries" in what was obviously a period of historic importance. All the relevant data for the period 1987-1995 are in my book.
Start with real GDP. The decline in Russia was 40%. This is significantly more than the decline in the US or Germany during the Great Depression. Note also that Russian depression lasted longer. (The years on x-axis are 1927-35 or 1987-95 whatever is applicable.)
Some people say: "Oh, but the depression measured by GDP was exaggerated: queues disappeared, military output was cut etc". It is true but to a marginal extent: we find about the same real decline when we look at surveys of consumption of RUS population in 1987 & then in 1993-4.
How does that depression compare w/the past Russia's catastrophes? It was not as bad as the disaster wrought by WW1, Civil War. The industrial output in the latter case dropped to 18% of its pre-war level; in the 1990s, Russia lost "only" half of its industrial output.
What happened to real wages? They were cut to 1/2 of their 1987 level: much worse than what happened in Poland in the 1990s, and much, much worse than in the US & Germany during the Great Depression (real wages in these two cases went up).
But while during the Great Depression, unemployment went through the roof (note Germany with the rate of unemployment ~40% in...1932), unemployment in Russia remained manageable at <10%. But in many cases people worked without getting paid: wage arrears ballooned.
How about inequality? I divided countries into 3 groups: those where lower wages were not compensated by social transfers at all, those where they were (to some extent), and countries where transfers become much more important ("populists").
Russia and Ukraine were non-compensators and had by far the largest increases in inequality (on the vertical axis). Poland, Slovenia and Hungary tried to soften the blow; they had the smallest increases in Gini.
Ok, we now know: Russia's real incomes were cut by 40% and its inequality skyrocketed. If you are in the lower part of income distribution, you lose not only 40% of your income (the average), but more: perhaps 60-70% as inequality change moves against you. So poverty went "wild"!
The number of people in poverty in Russia (measured by using the same poverty line of 4 international dollars) went from 2.2 million people in 1987-88 to 66 million in 1993-95; from negligible to more than 40% of the population.
It was caused by two negative devts: lower overall income & its more unequal distribution. Here we decompose the two effects: the dark red shows the effect of lower incomes; light red, higher inequality. Compare Poland and Russia.
In Poland, poverty increase was at first driven by lower incomes only; higher inequality began to matter only when growth resumed (dark red area is shrinking after 1993).
But in Russia both lower incomes and higher inequality went together: both areas expand continuously after 1991. It could not have been worse.
I hope you have enjoyed this modest knowledge refresher.

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Branko Milanovic

Branko Milanovic Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @BrankoMilan

Mar 16
Putin's today's long speech is remarkable by showing that he now lives in the world of his own.
Until the late 1940s, Stalin worked regularly w/ the Politiburo; even when his power, at the end of his rule, was immense he would still see his "minions" almost every evening.
Plus, he would receive foreign delegations (eg Djilas). Plus, speak at Party events.
But Putin clearly does not see nor talk to anyone. Gives orders to the govt the way one give orders to somebody he has hired to clean the house (or worse).
Speaks of people who make money in RUS, but keep it abroad as traitors--presumably forgetting that it applies to himself and all those around him.
Speaks of great infrastructural plans forgetting how little was done under much better conditions.
Read 4 tweets
Mar 12
“You know,” he mused, “in Soviet days most of us were really quite happy with a dacha, a colour TV and access to special shops with some western goods, and holidays in Sochi. We were perfectly comfortable, and we only compared ourselves with the rest of the population,
not with the western elites. “Now today, of course, the siloviki like their western luxuries, but I don’t know if all this colossal wealth is making them happier or if money itself is the most important thing for them.
I think one reason they steal on such a scale is that they see themselves as representatives of the state and they feel that to be any poorer than a bunch of businessmen would be a humiliation, even a sort of insult to the state.
Read 4 tweets
Mar 10
Russian frozen assets (state and private) are probably over $1/2 trillion, and possibly ~$600-700 billion. Now, a fair guess is that money will never be seen by Russia again, no more than Iranian money was seen. It represents a coerced transfer of wealth of unheard of proportions
It was the outcome of dilettantism on the Russian part since they had a 2-month warning that the "mother of all sanctions" is coming.
But how big is that loss in relative terms? It is equal to almost 1/3 of Russia's annual GDP.
More interestingly, it is about equal to US annual defense budget. So, probably in the first time in history one side has decided to cover the defense budget of the other side with which it is likely to go into a conflict, and perhaps even war.
Read 4 tweets
Mar 6
We do not know what would be the outcome of this war, but we know that (unless we are all die in a nuclear war), Russia faces a significant shock to its GDP and also a very high inflation.
Whether that inflation would be 50%, 100% or 5,000% (on a yearly basis) we do not know, but Russia has many historical experiences with hyperinflation.
Raging hyperinflation between 1917 and 1922 when the gold-based chervonets was introduced as part of the NEP.
Preobrazhensky called the ability of the govt to print money, "the machine-gun in the hands of the proletariat."
Stalin was very conservative in fiscal and monetary matters.
So were Khrushchev and Brezhnev.
But with "transition" inflation came back.
Read 4 tweets
Feb 26
Section 5.4 in "Capitalism, Alone" is called:
"The Two Scenarios: War and Peace"
The melancholy thought is that capitalism at its previous highest point of global spread and power generated the most devastating conflict in history up to that time; and there is a more than negligible chance that similar internal mechanisms might lead to another such conflict.
Under this gloomy scenario global capitalism would be both a cause of devastation and the savior of civilization. In other words, Einstein’s supposed quip that the Fourth World War would be fought with rocks would not be proven true.
Read 5 tweets
Feb 25
We still do not know what's the political objective of the war. If you read Putin's yesterday speech it is never said clearly. There are at least 4 possible interpretations:
1 "Liberate" the newly recognized republics within their oblast borders. But then why attack the whole country?
2 "Denazify" Ukraine. This is a code word for regime-change. Impose a new govt.
3 "Our objective is freedom to let anyone decide" implies referendums
that may split UKR into a part that goes to RUS and one that stays.
4 But then P. says, we should be friends even "across borders". So should there be a pro-RUS govt in the rump Ukraine?
Read 4 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!

:(