The Poor in Developed Countries - Eastern Europe: The Russian Federation

The Russian Federation is the largest country by land area in the world, at almost 6.6 million square miles. It is a loose federation of eighty-eight separate republics, territories, and other political subdivisions, each of which has two delegates in the Russian parliament and varying degrees of political and economic autonomy. The Russian Federation's 142.9 million people are extremely diverse culturally and ethnically: there are believed to be about 160 distinct ethnic groups throughout the country. This diversity has fueled violent conflicts at times since the dissolution of the Soviet Union in 1991. The Russian Federation is more commonly referred to as Russia, but Russia was actually the largest of the republics that made up the Soviet Union. Both as a part of the Soviet Union and as a member of the Russian Federation, Russia accounts for more than half of the country's population and at least 60% of its gross domestic product (GDP).

The Transition from Soviet Control to Free Market

The Russian Federation emerged as an independent nation late in 1991, when the Union of Soviet Socialist Republics (USSR, or Soviet Union) of which it had been a major component collapsed. The Soviet Union was a communist country with a centrally planned and tightly controlled economy. In theory, this system ensured that all citizens received the basic necessities of life, and as such there was no poverty. In reality, however, the Soviet system had been struggling to meet the basic needs of its citizens for years prior to its downfall. Mikhail Gorbachev, who led the Soviet Union from 1985 to 1991, introduced the concepts of glasnost (openness) and perestroika (reconstruction) in an attempt to reform and repair the Soviet system.

The pace of reform under Gorbachev proved too slow to satisfy critics of the Soviet system, and too fast to be satisfactory to its defenders. Communist hard-liners launched a coup in August 1991 in an attempt to remove Gorbachev and end his reforms. They were resisted and defeated by reformers, most notably Boris Yeltsin, the president of the Russian state within the Soviet Union. Having defeated the hard-line Communists the reformers were left as the most powerful force in the country, and they moved quickly to end the Soviet Union.

The Soviet Union was officially dissolved on December 21, 1991. Boris Yeltsin was now the president of an independent Russia. Yeltsin had already embarked on a program of radical economic reforms, known as "shock therapy," to end the Communist economic system and force the country into a Western-style free-market economy. The result of these major changes, implemented quickly, was massive economic disruption. Inflation soared, wages for average Russians fell, manufacturing output declined, and many Russians became unemployed. Some Russians were able to take advantage of the new system to become quite wealthy, but many more sunk into poverty. In subsequent years the economy recovered somewhat, but poverty remains a serious problem.

Russian Poverty since the 1990s

According to the World Bank report Russian Federation: Reducing Poverty through Growth and Social Policy Reform (February 8, 2005), poverty in

TABLE 6.6 Percentage of the poor in Russian Federation by individual types, 1997–2002 "Table 6.8. Percentage of the Poor by Individual Types, 1997–2002," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU, World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006)

TABLE 6.6
Percentage of the poor in Russian Federation by individual types, 1997–2002
Year	Active males	Active females	Elderly	Children 0-6 years	Children 7-15 years	All persons
SOURCE: "Table 6.8. Percentage of the Poor by Individual Types, 1997–2002," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU,World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006)
Persons Percentage of poor
1997	23.9	22.8	17.9	33.6	29.9	24.2
1998	31.5	29.6	25.4	41.0	38.4	31.4
1999	40.6	39.8	37.7	49.8	48.8	41.6
2000	35.0	33.9	32.5	42.6	43.9	35.9
2001	25.6	24.8	21.5	32.5	33.7	26.2
2002	19.4	18.3	15.1	26.2	26.8	19.6
Percentage change in poverty
1998	31.9	29.7	42.0	22.1	28.3	29.9
1999	29.0	34.3	48.5	21.6	27.2	32.3
2000	−13.8	−14.7	−13.7	−14.4	−10.0	−13.6
2001	−26.8	−26.9	−33.8	−23.8	−23.2	−27.1
2002	−24.5	−26.3	−29.8	−19.4	−20.4	−25.1
1997–2002	−4.1	−4.3	−3.3	−4.8	−2.1	−4.1

Russia was reduced by approximately 50% between 1999 (when it was at 41.5%) and 2002 (when it was 19.6%), with an estimated thirty million people lifted above the poverty line during this time. (See Table 6.6.) The unemployment rate has also dropped dramatically, from a high of 13.2% in 1998 to 8.6% in 2002. The report notes that poverty in Russia is "shallow," meaning that most of the poor have incomes somewhere around the poverty line, with many people living just above it. While this makes for less depth of poverty, it also means that a greater number of people are vulnerable to economic fluctuations: the risk of falling into, or deeper into, poverty is greater for far more people.

Certain segments of the Russian population are more likely to be poor than others—in other words, they have more poverty risk factors than others. For children younger than sixteen the poverty rate is quite high, at 26.7%. (See Table 6.7.) People living in rural areas in the central and eastern parts of the Russian Federation have a poverty rate of 30.4%, versus 15.7% for urban dwellers. (See Table 6.8.) However, because there are so many more people living in the western, urban areas of the federation (around Russia's capital city of Moscow), 15.7% of this much greater number actually translates into more people than 30.4% of the smaller population living in rural areas. It makes sense, then, that the majority of impoverished Russians are members of urban households with children. Figure 6.5 shows the geographic distribution of poverty in the Russian Federation, with the highest concentration in the most populous, western areas. In fact, 58.5% of the poor live

TABLE 6.7 Children face greater risk of poverty in Russian Federation, 2002 "Table 2.3. Children Face Greater Risk of Poverty (%)," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU, World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.

TABLE 6.7
Children face greater risk of poverty in Russian Federation, 2002
[In percent]
	Poor, incidence	Depth of poverty	Severity of poverty	"Near poor", incidence	Share of poor	Share of "near poor"	Share of population
SOURCE: "Table 2.3. Children Face Greater Risk of Poverty (%)," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU,World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.
Children (below 16)	26.7	7.4	3.0	10.4	24.9	20.4	18.3
Working	18.8	4.9	1.9	8.9	62.0	62.1	64.8
Elderly	15.1	3.5	1.2	9.7	13.0	17.5	16.9
Total	19.6	5.1	2.0	9.3	100.0	100.0	100.0

TABLE 6.8 Poverty in Russian Federation, urban and rural differences, 2002 "Table 2.1. In Russia Poverty Has a Rural Face (%)," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU, World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.

TABLE 6.8
Poverty in Russian Federation, urban and rural differences, 2002
[In percent]
	Poor, incidence	Depth of poverty	Severity of poverty	"Near poor", incidence	Share of poor	Share of "near poor"	Share of population
SOURCE: "Table 2.1. In Russia Poverty Has a Rural Face (%)," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU,World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.
Urban	15.7	3.9	1.5	8.5	58.5	67.0	73.2
Moscow	6.6	1.1	0.3	7.4	3.1	7.3	9.2
Other urban	17.0	4.2	1.6	8.7	55.4	59.7	64.0
Rural	30.4	8.6	3.5	11.5	41.5	33.0	26.8
Total	19.6	5.1	2.0	9.3	100.0	100.0	100.0

in large cities, and—perhaps more surprisingly—89% live in a household in which at least one person is regularly employed. (See Table 6.9.)

The states of the Russian Federation also experience greater disparities in regional income, in part because the country is so large and has such a diversity of geographical features and varying degrees of remoteness, ranging from the huge metropolitan city of Moscow to the most isolated, inhospitable parts of southern Siberia. As Figure 6.6 shows, urban and rural Russians live with very different basic services—an indicator of poverty and standards of living. While at least 60% of all five income categories in urban areas have access to most infrastruc-tural and utilities services, in rural areas access ranges from less than 20% of the poorest with access to hot water to just over 60% of the richest with running water.

The Russian Federation in the post-Soviet years has seen a decline in education equity across income groups. During the Soviet years, literacy was near 100%, and free, compulsory education was open to all. With increasing competition in more recent years, however, the poor have been largely left out of preschool and post-compulsory education. Furthermore, government spending on education has fallen behind that of most other former-Soviet countries in Central and Eastern Europe: in 2002 Russia spent just 3% of its gross domestic product on education, whereas Estonia had the highest GDP education spending, at more than 7%; the Central and Eastern European average was about 4.5%; and the European Union/North American average was about 5.5%. The World Bank's Russian Federation: Reducing Poverty through Growth and Social Policy Reform reports that about 8% of poor children in Russia complete higher education, versus 21% of nonpoor children.

Perhaps most troubling is the decline in overall Russian health and its link to poverty since the economic transition. According to the World Health Organization, life expectancy in the Russian Federation in 2003 was fifty-eight years for men and seventy-two for women. Healthy life expectancy was 52.8 years for men and 64.3 for women. According to Oleksiy Ivaschenko in Longevity in Russia's Regions: Do Poverty and Low Public Health Spending Kill? (United Nations University, World Institute for Development Economic Research, June 2004), life expectancy throughout the Russian Federation declined substantially between 1990 and 2000, by as much as seven years in some of the regions hit hardest by the depression of the 1990s. Working-age men accounted for the majority of premature deaths—an estimated 1.3 to 1.6 million between

FIGURE 6.5 Poverty map of the Russian Federation, distribution of the poor, 2002 "Figure 2.2. Poverty Map of the Russian Federation, 2002: Distribution of the Poor," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU, World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.

TABLE 6.9 Poverty in Russian Federation, by household employment status, 2002 "Table 2.6. The Majority of the Poor Are Working Households (%)," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU, World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.

TABLE 6.9
Poverty in Russian Federation, by household employment status, 2002
[In percent]
Household employment	Poor, incidence	Depth of poverty	Severity of poverty	"Near poor", incidence	Share of poor	Share of "near poor"	Share of population
SOURCE: "Table 2.6. The Majority of the Poor Are Working Households (%)," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU,World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006). Data from the Russian Household Budget Survey.
One member working	22.3	6.2	2.5	9.3	27.6	24.3	24.3
2 or more working	18.0	4.5	1.7	9.1	59.7	63.3	65.0
Jobless households	47.3	15.3	7.0	12.7	6.8	3.9	2.8
Non-working age households	14.7	3.2	1.1	10.2	5.9	8.6	7.9
Total	19.6	5.1	2.0	9.3	100.0	100.0	100.0

1990 and 1995. Ivaschenko cites studies linking the rise in premature deaths to stress related to unemployment, low wages, poor diet, increased crime rates, and a dramatic rise in alcoholism, all associated with low income.

Furthermore, Russia has experienced an increase in the incidence of infectious diseases since 1990. In 2004 there were 126 new cases of tuberculosis per 100,000 people, according to the World Health Organization's Global FIGURE 6.6 Access to basic infrastructure services in Russian Federation, 2002 "Figure 8. Access to Basic Infrastructure Services, 2002," in Russian Federation: Reducing Poverty through Growth and Social Policy Reform, Report No. 28923-RU, World Bank, Poverty Reduction and Economic Management Unit, Europe and Central Asia Region, February 8, 2005, http://194.84.38.65/mdb/upload/PAR_020805_eng.pdf (accessed April 10, 2006)Tuberculosis Control. The emergence of drug-resistant strains in particular has caused concern among health care professionals worldwide. These strains accounted for about 8.3% of new cases in 2003. The incidence of HIV and AIDS has also increased since 1990, rising from 10,000 or fewer cases in 1997 to more than 250,000 in 2003. Analysts point to the breakdown of the health care and social services system, along with an increase in stress-related risky behavior, in the post-Soviet era.

ALCOHOLISM IN RUSSIA

Vodka has played an important role in Russian culture for centuries. Even prior to the economic crash of the 1990s and the shaky recovery of the early 2000s, alcoholism was common throughout the country. However, according to the World Health Organization, annual per capita alcohol consumption has increased more or less steadily from 1990, when it was 7.08 liters (6.22 quarts), to 2001, when it was 10.58 liters (9.31 quarts). The Australian Broadcasting Corporation's foreign correspondent Michael Brissenden reported on August 26, 2003, that beer consumption was increasing by 30% per year, largely due to government encouragement because taxes on beer generate much-needed income, and beer is marketed as more of a soft drink than an alcoholic beverage. Periodically the governments of Russian states attempt to curb alcohol consumption by implementing legislation, but these attempts have backfired. Mikhail Gorbachev's anti-alcohol campaign resulted in a huge black market, and a 2000 attempt to raise taxes on vodka by 40% ended in public rioting.

Beer and vodka are not the only threats to Russians' health. Cheap counterfeit alcohol, homemade moonshine, and even de-icing solvent and cologne contribute to the problem. In December 2005 Alex Rodriguez of the Chicago Tribune reported in "Alcohol Destroying Rural Russia" that as many as 40,000 Russians die of alcohol poisoning each year, and one-third of all deaths in the country are related in some way to alcohol abuse. By comparison, U.S. deaths directly attributable to alcohol poisoning alone averaged 317 annually between 1996 and 1998, according to the National Institute of Alcohol Abuse and Alcoholism; about 1,000 more fatalities each year in the United States had alcohol poisoning as a contributing factor, most often in a death that included poisoning from another drug.

In his Chicago Tribune article Rodriguez illustrated some of the reasons rural-dwelling Russians turn so often to alcohol:

Fifteen years of post-Soviet capitalism has left rural Russia straggling far behind. Russians in collective farms across the country's eleven time zones could count on a safety net of free housing and health care—and on regular paychecks—during the Soviet era. In today's Russia, those same villagers live day-to-day, shivering through stretches of winter without heat, cringing at the sight of their children in tattered school clothes.

In the extremely harsh winter of 2005–06, with temperatures exceeding twenty degrees below zero, the combination of poverty and alcoholism was particularly deadly. As of January 2006, 123 homeless people and alcoholics had frozen to death on the streets of Moscow, with the number expected to rise before winter's end (Andrew E. Kramer, "In Frozen Moscow, City Rescues the Homeless and the Drunk," New York Times, January 21, 2006).