Russia's Middle Class

Written by Sam Vaknin

A conference held, atrepparttar beginning ofrepparttar 132299 month, in St. Petersburg, was aptly titled "Middle Class - The Myths andrepparttar 132300 Reality". Russia is way poorer than Slovenia,repparttar 132301 Czech Republic, Hungary, or even Poland. But, as income disparities grow, a group of discriminating consumers withrepparttar 132302 purchasing power to match, is re-emerging, having been submerged byrepparttar 132303 1998 implosion ofrepparttar 132304 financial sector.

The typical salary inrepparttar 132305 large metropolises is now more than $600 per month - four timesrepparttar 132306 meager national average. Some 20 percent ofrepparttar 132307 workforce in Moscow earns more than $1700 a month, comparable to many members ofrepparttar 132308 European Union. Real average wages across Russia have surpassedrepparttar 132309 pre-1998 level in May.

Moreover, Russians are unburdened by debt and their utility bills and food are heavily subsidized, though decreasingly so. Few pay taxes - lately dramatically reduced and simplified - and even fewer save. Every rise in disposable income is immediately translated to unadulterated consumption. Takings are understated - Russia's informal economy is probably half as big as its formal sector.

A study, financed byrepparttar 132310 Carnegie Foundation, found that only 7 percent of Russians qualify as middle class. Another 12 percent or so have some bourgeois characteristics. Sixty percent of them are men, thoughrepparttar 132311 Komkon marketing research agency says thatrepparttar 132312 genders are equally represented.

Figures culled fromrepparttar 132313 census conducted this year throughoutrepparttar 132314 Russian Federation -repparttar 132315 first since 1989 - are expected to confirm these findings. About one fifth to one quarter of all Russian households earn more thanrepparttar 132316 average monthly income of $150 per person.

Political parties which purport to representrepparttar 132317 middle class - such asrepparttar 132318 Union ofrepparttar 132319 Forces ofrepparttar 132320 Right (SPS) - garnered 10-15 percent ofrepparttar 132321 votes inrepparttar 132322 1999 parliamentary elections. Direct action groups ofrepparttar 132323 "third estate" may transformrepparttar 132324 political landscape in forthcoming elections.

In a recent study by sociologists fromrepparttar 132325 Russian Academy of Sciences' Institute of Philosophy, more than half of all Russians self-flatteringly considered themselves middle class. This is delusional. Evenrepparttar 132326 optimistic research firm Premier-TGI pegsrepparttar 132327 number at 19 percent at most.

Businesses adapt to these new demands of shifting tastes and preferences. The St. Petersburg-based cellular operator Delta Telecom, owner ofrepparttar 132328 first license to provide wireless-communications services in Russia, intends to testrepparttar 132329 market among middle class clients.

Ikea,repparttar 132330 Swedish home improvement chain, has plunged $200 million into a new shopping center. French, German and Dutch cash-and-carry and do-it-yourself groups are slated to follow. Russian competitors, every bit as sleek, have erupted onrepparttar 132331 scene. The investment spree has engulfedrepparttar 132332 provinces as well.

Last month, Citibank opened a retail outlet for affluent individuals in Moscow - though its standards of transparency may yet scare them off, as observed astutely. A private cemetery in Samara caters torepparttar 132333 needs ofrepparttar 132334 expired newly rich. Opulently-stocked emporiums have sprouted in all urban centers. TV shopping and even online commerce are onrepparttar 132335 up. According torepparttar 132336 Washington Post, Moscow retail space will have tripled byrepparttar 132337 end of next year from its level atrepparttar 132338 beginning of 2002.

The Russian Expert magazine says thatrepparttar 132339 middle class, minuscule as it is, accounted last year for a staggering 55 percent of all consumer goods purchased and generates one third of Russia's gross domestic product. The middle class is Russia's most important engine of wealth formation and investment, far outweighing foreign capital.

Russia's post-1998 fledgling middle class is described as young, well-educated, well-traveled, community-orientated, entrepreneurial and suffused with work ethic and a desire for social mobility. It is almost as ifrepparttar 132340 crisis four years ago served as a purgatory, purging sins and sinners alike and creatingrepparttar 132341 conditions forrepparttar 132342 revival of a healthier, longer-lived, bourgeoisie.

But being middle class is a state of mind more than a measure of wealth. It is an all-encompassing worldview, a set of values, a code of conduct, a list of goals, aspirations, fantasies and preferences and a catalog of moral do's and don'ts. This is where transition, micromanaged by western "experts" failed.

The mere exposure to free markets was supposed to unleash innovation and entrepreneurship inrepparttar 132343 long-oppressed populations of east Europe. When this prescription - known as "shock therapy" - bombed,repparttar 132344 West tried to engender a stable, share-holding, business-owning, middle class by financing small size enterprises. It then proceeded to strengthen and transform indigenous institutions.

None of it worked. Transition had no grassroots support and its prescriptive - and painful - nature caused wide resentment and obstruction. Whenrepparttar 132345 dust settled, Russia found itself with a putative - and puny - middle class. But it was an anomalous beast, very different from its ostensible European or American counterparts.

To start with, Russia's new middle class is a distinct minority.

Prism, a publication ofrepparttar 132346 Jamestown Foundation, quoted, in its August 2001 issue,repparttar 132347 Serbian author Milorad Pavic as saying that "the Russian middle class is like a young generation whose fathers suffered a severe defeat in a war: with no feeling of guilt and no victorious fathers to boss them around,repparttar 132348 children of defeat see no obstacles before them".

But this metaphor is misleading. The Russian middle class is a nascent exception - not an overarching rule. As Akos Rona-Tas, Associate Professor inrepparttar 132349 Sociology Department atrepparttar 132350 University of California, San Diego, notes correctly in his paper "Post Communist Transition andrepparttar 132351 Absent Middle Class in Central East Europe", a middle class that is inrepparttar 132352 minority is an oxymoron:

Entrepreneurship and Workaholism - Part I

Written by Sam Vaknin

The Dutch proudly point to their current rate of unemployment at less than 2%. Labour force participation is at a historically high 74% (although in potential man-hour terms it stands at 62%). France is as hubristic with its labour policies -repparttar 35 hours week andrepparttar 132297 earlier reduction in employers' participation in social contributions. Employment is sharply up in a host of countries with liberalized labour markets - Britain, Spain, Ireland, Finland. The ECB brags that employment inrepparttar 132298 euro zone has been rising faster than inrepparttar 132299 USA since 1997.

This is a bit misleading. Euro zone unemployment is far higher and labour force participation far lower than America's. The young are especially disadvantaged. Only Britain is up to American standards. The European labour market is highly inefficient in matching demand and supply. Labour mobility among regions and countries is glacial and generous unemployment benefits are a disincentive to find a job.

Reforms are creeping intorepparttar 132300 legislative agendas of countries as diverse as Italy and Germany. Labour laws are re-written to simplify hiring and firing practices and to expandrepparttar 132301 role of private employment agencies. But militant unions - such as Germany's IG Metal - threaten to undo allrepparttar 132302 recent gains in productivity and wage restraint.

The European Commission - a bastion of "social Europe" - has just equalizedrepparttar 132303 rights and benefits of temporary workers (with more than 6 weeks of tenure) and full-time ones. Yet another reformist adviser torepparttar 132304 Italian Minister of Labour was assassinated. This was followed by a million-workers strong demonstration in Rome's Circo Massimo against minor reforms in firing practices.

Butrepparttar 132305 most successful and efficient labour market inrepparttar 132306 world, inrepparttar 132307 States, is associated with a different ethos and an idiosyncratic sociology of work. The frame of mind ofrepparttar 132308 American employee and his employer is fundamentally at odds with European mentality. In Europe, one is entitled to be employed, it is a basic human right and a public good. Employers - firms and businessmen - are parties to a social treaty within a community of stakeholders with equipotent rights. Decisions are reached by consensus and consultation. Peer pressure and social oversight are strong.

Contrast this withrepparttar 132309 two engines of American economic growth: entrepreneurship and workaholism.

The USA, according torepparttar 132310 "Global Entrepreneurship Monitor", is behind South Korea and Brazil in entrepreneurial activity prevalence index. But 7 percent of its population invested an average of $4000 per person in start-ups in 2000.

A 10-country study conducted in 1997-9 by Babson College,repparttar 132311 London School of Business, andrepparttar 132312 Kauffman Center for Entrepreneurial Leadership found gaping disparities between countries. More than 8 percent of all Americans started a new business - compared to less than 1.5 percent in Finland. Entrepreneurship accounted for one third ofrepparttar 132313 difference in economic growth rates amongrepparttar 132314 surveyed countries.

Entrepreneurship is a national state of mind, a vestige ofrepparttar 132315 dominant culture, an ethos. While in Europe bankruptcy is a suicide-inducing disgrace bordering onrepparttar 132316 criminal - inrepparttar 132317 USA it is an integral and important part ofrepparttar 132318 learning curve. Inrepparttar 132319 USA, entrepreneurs are social role models, widely admired and imitated. In Europe they are regarded with suspicion as receptacles of avarice and non-conformity. It is common inrepparttar 132320 States to choose entrepreneurship as a long-term career path. In Europe it is considered professional suicide.

Inrepparttar 132321 USA, entrepreneurs are supported by an evolved network of financial institutions and venues: venture capital (VC), Initial Public Offerings (IPO's) in a multitude of stock exchanges, angel investors, incubators, technological parks, favourable taxation of stock options, and so on. Venture capitalists invested $18 billion in start-ups in 1998, $48 in 1999, almost $100 billion in 2000.

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