It’s not the rostbif and svinina (“roast beef” and “pork”) that caught my eye. They’ve long been part of the great and mighty Russian language.
What caught me eye was the word ban (bun). Why were “Russia’s Jamie Oliver” (not my coinage) and Co. unable to condescend to the perfectly Russian, extremely ordinary, and utterly comprehensible word bulochka (“bun”) when writing up the menu?
Because that would have sounded too common. For €6.77 a pop Mnatsakanov’s diners expect something “fancier” (as Mum would have put it) than a plain old bulochka their babushkas could have baked for them out of the kindness of their lonely hearts.
Mnatskanov’s customers don’t want kindness. They want conspicuous consumption. And they want it labeled, at least partly, in English, even if that English is as supremely common and humble as “bun” (ban). TRR
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How the Partisans of Suna Have Spooked Karelian Officials
Valery Potashov Bilberry (Muistoi.ru)
February 7, 2017
It seems the Presidential Human Rights Council’s visit to Karelia, scheduled for February 8, has frightened the republic’s authorities so much that they have made every possible effort, if not to disrupt the council members’ meeting with the defenders of Suna Forest, who for several years running have been trying to assert their constitutional right to a healthy environment, then, at least, to discredit their better-known activists. Several days before the HRC’s on-site meeting, Karelian news websites loyal to the republic’s leadership published articles, written under pseudonyms, meant to persuade the council members that the conflict over Suna Forest had been “sparked” not by the pensioners from the village of Suna, who are opposed to clear-cutting to make way for a sand and gravel quarry in a forest where villagers have traditionally harvested mushrooms, berries, and medicinal herbs. And during a February 6 meeting with members of the Karelian Legislative Assembly, Alexander Hudilainen, head of the republic, stated outright it was not the village’s pensioners who were standing watch in the forest in winter, but young people whom someone had supposedly “stimulated.”
Actually, we could expect nothing else from the current governor of Karelia. Several years ago, when a grassroots campaign calling for his resignation kicked off in the republic, Mr. Hudilainen saw the machinations of “foreign special services” in the mass protests of the Karelian people. However, when a resident of the town of Kondopoga phoned the governor live on Russian Public Television (OTR) and asked him what solution he saw to the issue of Suna Forest, Hudilainen promised to “sort out” the situation.
“We will not allow the environment and the residents to be hurt,” the head of Karelia told the entire country.
In the intervening two and a half months, however, neither Mr. Hudilainen nor anyone from his inner circle has found the time to visit the Suna Forest and see for themselves who exactly is standing watc in the minus thirty degree cold in a tent to stop the clear-cutting of a forest the village’s old-timers call their “provider” and “papa forest.” Moreover, when it transpired that members of the Presidential Human Rights Council planned to meet with the defenders of Suna Forest, Karelian officials attempted to move the meeting to the administration building of the Jänišpuoli Rural Settlement, which includes the village of Suna. But the so-called partisans of Suna insisted council members come to the forest and see what the village’s pensioners have been defending.
“Why should we meet in the administration building? We have been standing vigil in the forest for over six months, in the rain and the frost, and we will stay here until the bitter end,” said pensioner Tatyana Romakhina, one of Suna Forest’s most vigorous defenders.
Romakhina also told Bilberry that the day before she had got a call from the Kondopoga District police department, and a man who identified himself as Captain Viktor Korshakov had cautioned the old-age pensioner against unauthorized protest actions during the visit by the Presidential Human Rights Council. Romakhina regarded the phone call as yet another attempt to put pressure on the defenders of Suna Forest, noting the partisans of Suna had long been ready for anything.
Translated by the Russian Reader. Thanks to Comrade Koganzon for the heads-up
Residents of the Village of Suna Address President Vladimir Putin (October 2016)
There are different means of combating inequality, including progressive taxation and raising unemployment benefits. But as soon as someone proposes a solution to the problem, he is immediately dubbed a populist.
This fate has befallen Alexei Navalny. In his presidential election program, he proposed setting a minimum wage of 25,000 rubles a month [approx. 400 euros at current exchange rates].
Is This Populism?
Let’s see how the structure of Russia’s GDP would change if this measure were implemented under current macroeconomic parameters. And let’s compare Russia’s GDP with the GDPs of the G20 countries.
GDP is the market value of all goods sold and services rendered in the country during the year. Costs are always someone’s income, so GDP can be calculated not only in terms of consumption, investment, government expenditures, and net exports but also in terms of income.
STRUCTURE OF RUSSIAN GDP IN TERMS OF INCOME IN % (PER ROSSTAT)
GROSS DOMESTIC PRODUCT
Compensation of employees, including wages and mixed income not captured by direct statistical methods
Net taxes on manufacturing and imports
Gross economic profit and gross mixed income
There are three types of income:
Compensation of employees, includes expenditures on insurance and pensions.
Net taxes on production and imports. Essentially, this is revenue from the extraction of natural resources and their subsequent import abroad.
Business income: company profits, capital gains, incomes of individual entrepreneurs.
The table shows that business income is nearly equal to the income of all employees.
Indirect taxes (e.g., income tax and VAT) are not included in GDP in order to avoid duplication, since they are based on the same profits and wages.
This is what average income distribution looks like in the G20 countries:
The labor share in Russia is 6–7% lower than the average for the G20 countries. The reason for the difference is the weakness of democracy and civic institutions in Russia. Election results do not depend on the opinion of the populace, trade unions are weak, and protests against social policy are far and few between. So it makes no sense to redistribute incomes to benefit employees.
How Much Would We Spend?
72,323,000 people are employed in Russia. We have to subtract entrepreneurs [i.e., the self-employed] from this figure. According to the Unified State Register of Individual Entrepreneurs (EGRIP), they amount to approximately 3.5 million people. We also have to subtract those people who work part-time: according to Rosstat, there are around one million such people, if we discount those involved in small business. So the upper limit of full-time employees in Russia is 67,820,000 people. Within this group, 50.3% earn less than 25,000 rubles a month.
However, 1.4% of employees earn between 5,000 and 5,000 rubles a month, and 20.9%, between 17,000 and 25,000 rubles a month. Another 50 percent of employees receive an average monthly wage of 15,329 rubles [approx. 240 euros].
Accordingly, the poorest wage earners would benefit most of all from the introduction of a mandatory minimum wage. On average, every employee currently earning less than 25,000 rubles a month would be paid an additional 9,671 rubles (i.e., 25,000 rubles – 15,329 rubles = 9,671 rubles ).
We would thus have to reallocate almost 3.96 trillion rubles annually: 9,671 rubles (the average pay rise) x 67,820,000 (the number of employees) x 50.3% (the share of those currently earning less than 25,000 rubles a month) x 12 (months) ≈ 3.96 trillion rubles.
Let us add in insurance premiums and pension contributions, which amount to 30.2%. The overall total would be around 5.15 trillion rubles (3.96 trillion x 1.302).
Russia’s GDP in 2015 was 83.23 trillion rubles. If we reallocate 5.15 trillion rubles from profits to wages, we arrive at the following ratio.
GROSS DOMESTIC PRODUCT
83.233 trillion rubles
Compensation of employees
37.471 trillion rubles
42.621 trillion rubles
Net taxes on manufacturing and imports
9.272 trillion rubles
9.272 trillion rubles
Gross economic profit and gross mixed income
36.489 trillion rubles
31.339 trillion rubles
In the resulting structure, the share of labor income is slightly higher than the average figure among the G20 countries.
Obviously, many people would lose their jobs after a minimum wage of this kind was introduced, primarily those people who dig pits with a shovel where an excavator should be doing the work. These jobs are safe nowadays only because you can pay people almost nothing in Russia.
In turn, employers would seek to maintain profits by increasing prices for finished products. In aggregate, these effects would shape an economy typical of developed countries.
What Do We Risk?
Many people fear inflation. Let’s evaluate the risks. To introduce a mandatory minimum wage of 25,000 rubles a month, according to the structure indicated above, we would have to increase wage costs by 13.7%. The share of labor costs in the economy is 45%. Accordingly, to cover the increased costs, the price of finished products would have to be increased by 6.165% (13.7% x 45% = 6.165%). That would be the upper limit of possible inflation.
In reality, however, a rise in prices decreases consumption and forces prices to creep downwards. In addition, unemployment and inflation are inversely proportional to one another, meaning the higher the unemployment rate, the lower the rate of inflation.
Additional inflation would be two or three percent, and for the most part it would be spread out over the whole of society, meaning that people who earn a lot would forfeit this percentage of income, while the incomes of the poorest workers would increase significantly.
Of course, such a drastic rise in wages is a rather radical measure, given that the minimum wage is currently even below the subsistence level, and it is bound up with a variety of social benefits that would also automatically increase. But the tenor of the reform is absolutely correct and corresponds to successful examples in world practice.
The introduction of a statutory minimum wages in Germany has lead neither to inflation nor unemployment. In the US, increases in the minimum wage have increased the salaries of low-paid workers while maintaining employment.
Translated by the Russian Reader. Thanks to Alexei Gaskarov for the heads-up. For another take on the Russian economy’s performance and the figures provided by Rosstat, see yesterday’s featured post, “Lies, Damned Lies, and Statistics,” a translation of an op-ed piece by liberal economist Sergei Aleksashenko.
Instrument Failure: Why It Is Hard to Trust Rosstat’s Data on the Recession’s End
Sergei Aleksashenko RBC
February 6, 2017
Over the last year, Rosstat has ceased publishing a number of important indicators for judging the economy’s real performance.
The other day, Rosstat published its updated assessment of the Russian economy’s performance over the past two years. Strictly speaking, there is nothing surprising about the fact that Russia’s official statistics agency amends its previously published assessments. It happens constantly in other countries, too. The fact is that the initial assessments, which are released a month or a month and a half after the the end of the latest quarter, are derived from on-the-spot information that is subsequently corrected.
A Rubik’s Cube
But what is really surprising is that, according to the updated view of Rosstat’s statisticians, the economy’s performance over the last two years was significantly better than had been thought. Rosstat now claims that, in 2015, Russia’s GDP decreased only by 2.8%, rather than 3.7%, as indicated in earlier assessments, and that 2016 basically saw no decrease whatsoever. This new take has been a surprise to everyone, including the Economic Development Ministry, whose experts have said they don’t understand why Rosstat has so radically revised its own assessments. They have been seconded by experts at Vnesheconombank (VEB), which nowadays employs a large team of macroeconomists led by ex-deputy economics minister Andrei Klepach. Rosstat’s assessement has also been a surprise to the prime minister and president, who have expressed no joy the economy had been doing much better than they thought only a couple of weeks ago.
As in many other cases, the different indicators in GDP figures do not exist in isolation from one another. They are closely linked, and it is almost never possible to change one of them without changing another. In very simple terms, it looks like this. GDP is the sum of the added value produced in different sectors of the economy, such as industrial manufacturing, agriculture, transportation, finance, etc. If the figures for manufacturing have suddenly improved or deteriorated, then, with all other things being equal, the figures for GDP should change just as much. But in addition to a manufacturing element in GDP, there is an end use element in GDP, which shows the level of demand for what the economy produces. In this case, the factors of demand are the populace, the state sector, nonprofit organizations, accumulation (investment and inventories), and net export (the difference between exports and imports). If the figures for manufacturing have deteriorated, not only should the total amount of GDP change but one of the components of demand should change as well, meaning we should be able to understand not only what manufacturing sector produced more added value but also who paid for it.
But that is not all. There is a third component of GDP, sources of income: added value divided by household income, net taxes (on manufacturing and imports), the gross operating surplus, and mixed income. That is, after we have determined from GDP figures for manufacturing who has produced more, and from figures for use who has bought what has been produced, the figures on sources of income tell us who earned money from this. It is a kind of Rubik’s Cube, which has only one correct (objective) combination. We see it clearly at once, just as see clearly when the cube has not been put together correctly.
The Quarterly Maze
There are other subtleties in GDP figures. For example, one of the big problems is calculating GDP in real terms, that is, adjusting it for inflation. Rosstat publishes deflators for individual sectors and, naturally, when they are used with sector-specific nominal data, the grand total should converge. So everyone has a good sense of the state of the economy, Rosstat should assess each quarter’s GDP performance in terms of the previous quarter. We are well aware that the first quarter, in which half of the month of January is taken up by holidays, and cold weather puts a halt to many kinds of work, bears no resemblance to the third quarter, when the weather is warm and the harvest is underway in the countryside. Nor does it bear any resemblance to the fourth quarter, when builders are trying to bring on line as many completed (or almost completed) buildings as possible, and the government spends at least twice as much money from the budget as in other months. When all these things are factored out, we arrive at the most important indicator, which tells us how things stood in the previous quarter.
Don’t laugh, but Rosstat has not published this figure since April 2016. At the recent Gaidar Forum, I needled one of the heads of Rosstat to find out why this had been happening. For fifteen minutes, he tried to persuade me I had simply not been able to locate the right table on his agency’s website. Rosstat’s website leaves a lot to be desired, of course. To fish out the right information, you sometimes have to spend an hour or two figuring out the poorly organized databases. In this case, however, I insisted the information was simply not there. A couple of days later, I received a letter from Rosstat saying that, indeed, Rosstat did not calculate this figure and did not know when it would be doing so again.
That alone is enough to take Rosstat’s published data about the Russian economy’s improved performance at less than face value. If we add to this the fact that Rosstat stopped publishing monthly investment figures in the spring of last year, and announced in November that revised figures for the manufacturing sector’s performance (figures that would, of course, be revised upwards) would be published only in the spring, it becomes obvious that Russia’s official statisticans cannot actually put the Rubik’s Cube together, and they don’t really know what is going on with the Russian economy. Meaning that all the instruments that should be telling us where the ship of our economy is sailing and how fast it is sailing there have failed.
The Secret GDP
I don’t want to argue the problem I want to touch on in my conclusion prevents Rosstat from adding everything up correctly. I suspect there are many more problems, and I fear that even the heads of Rosstat are not aware of all of them. But we cannot avoid talking about the fact that vast amounts of data relating to the work of the military-industrial complex and the security agencies are classified.
In fact, if this secrecy keeps anyone from understanding anything, it is the Russian authorities and Russian society. When it receives classified information, Rosstat has to hide it amidst its tables in such a way that not a single spy will guess it is there. To do this, Rosstat inevitably distorts the performance indicators for different sectors, adding something here, and trimming something there. But since hiding the truth from spies is much more important than telling the truth to Russian society, don’t shoot the piano player, as they say, for the poorly assembled Rubik’s Cube. He is playing as well as he can.
If you think about it, it is obvious the financial figures for the military-industrial complex’s performance are no state secret. The technical specs of weapons, the technology used to produce them, and, maybe, their locations can be secrets, but not the amount of money spent on their procurement (the classified section of the budget) or the amount of added value generated by the military-industrial complex.
I am confident that under the current Russian president we should not expect any progress in declassifying these figures. That was not what he was taught at the Higher School of the KGB. Since that is so, we are unlikely to find out in the coming years what is up with the Russian economy.
Hunger Strike, Strike, Pressure on Workers: Protest by Workers at Moscow Restaurant Chain Grows Novoprof
February 3, 2017
Workers at the fastfood chain Pizzeria (formerly known as Sbarro) who have not been paid continued their hunger strike for the third day in a restaurant on Krasnoprudnaya Street in Moscow. All the tricks played by the “strange” management to make the workers flinch and stop their protest have failed.
Other restaurants in the chain have joined the protest of their comrades on Krasnoprudnaya. Workers at Pizzeria in the Vegas Shopping Center on Kashirka have not worked for three days since joining the trade union. Novoprof has taken calls from a number of other restaurants in the chain, as well as from restaurants in the Yolki-Palki chain.
The workers are desperate because they do not know how to get their hard-earned money. They have been kicked out of rented flats and have no way to pay back their debts, and there is no one and nowhere they can borrow any more money.
Instead of doing everything they can to pay the money they owe their workers, the real employers have been hiding behind “strange” managers. Practically speaking, there is no one with whom workers can negotiate. Trade union members suspect the Yelashvili brothers (Murab and Georgy) are still the actual proprietors of the chains. Instead of solving the problems that have arisen at the restaurants, management has attempted to divide workers by paying out tiny sums on their bankcards, but not everyone’s. They have been trying to throw them a bone, as it were, thus making the workers shut up and return to work. There have also been attempts to mentally coerce the workers who are on hunger strike.
We have found out that the former Sbarro, Yolki-Palki, YamKee, and other chains have been re-registered as new legal entities with names like Italian Eatery, Ltd., One-Stop Service, Ltd., and so on. These legal entities have different executive directors, but surprisingly they have the same official address. They do not have their own websites. Similarly, we have been unable to find a website for Rus RST Holding Company, which, allegedly, had taken over management of the restaurants from the Yelashvili-owned G.M.R. Planet of Hospitality.*
Novoprof will continue to support the protesting workers with all their their might, uniting them in the fight for their hard-earned money.
Translated by the Russian Reader. Thanks again toComradeIvan Ovsyannikov for the heads-up. Novoprof is short for the New Trade Unions Interregional Trade Union. It was founded in 2011 by brewers from the Baltica plant in Rostov-on-Don, and printers and heating plant workers in Petersburg. Photos courtesy of Ivan Ovsyannikov and Novoprof
* Merab Yelashvili
Born in the Georgian village of Kulashi in 1974 to the family of a Georgian Jewish community leader. At the age of 19, he came to conquer Moscow, where, with his brother Georgy Yelashvili and brother-in-law Roman Shamilashvili, he founded GMR, which distributes products by leading European producers, in particular, Kinder Surprise chocolate eggs. He then moved into real estate. In 1997, he persuaded American franchisors to give him a master franchising agreement to open Sbarro pizzerias in Russia. Since 2007, he has been president of the company G.M.R. Planet of Hospitality.
In September 2008, on the eve of the Jewish New Year, he and his relatives opened a Sephardic synagogue in the Triumph Palace residential complex in the north of Moscow. In April 2016, Yelashvili set tongues wagging when he organized the wedding of his eldest daughter Anna in Tel Aviv. The two thousand guests who attended the festivities were entertained by Nikolay Baskov,Soso Pavliashvili, and American rapper Ryan Leslie. A year earlier, Merab’s brother and business partner Georgy had celebrated the wedding of his son in the Moscow Manege, inviting over one and a half thousand people.