Socio-economic status of Russia

At present, the condition of the Russian economy is far from satisfactory and does not meet the requirements of national security. The results of measuring the indicators of the socio-economic status of Russia against the critical threshold values established as a result of scientific research[201] indicate an unsatisfactory status of socio-economic security (a critical threshold value means such value of the indicator, the moving of which beyond the limit indicates a threat to the economy functioning and societal life due to violation of a normal flow of the processes reflected by this indicator).

It is necessary to distinguish between the critical threshold values that determine the system capacity for simple reproduction, and its capacity for development. Going of the former beyond the limit means that the system loses its self-preservation ability, that is, there is a threat of either its destruction or transition to a qualitatively new state. Going of the latter beyond the limit reflects the loss of competitiveness by the system, entailing a threat of its subordination or absorption by another socio-economic system. This concerns the indicators of reproduction of both human and economic development potential of the country. The level is considered ultimately critical if its achievement makes it impossible to maintain its simple reproduction.

Thus, both key indicators of human potential dynamics, that is, birth rate and mortality rate, for a long time were outside the critical level (Table 5). This resulted in a steady depopulation, which stopped only in recent years and resumed again in the last year. Similarly unsatisfactory is the public health, which is reflected in the values of such indicator as the average life expectancy. Despite the growth in recent years, it is still below the critical level, which is estimated at 78 years (based on a contemporary view of the normal life expectancy, taking into account the health care opportunities and the time of creative activity, as well as the world average values of this indicator). The average life expectancy is a generalizing indicator that characterizes the state of society, reflecting the level and quality of life of the population.

In general, as can be seen from Table 5, Russian society has existed for a long time under the conditions of an extremely critical status of not only physical reproduction of the population, but also of the quality of life. This is evidenced, for example, by statistics of alcoholization of the population. Excessive consumption of alcohol and other drugs is also a characteristic feature of the unsatisfactory quality of life. The ultimately critical level of pure alcohol consumption per capita, the excess of which leads to the degradation of society and the prevalence of deaths over births, is 8 liters per year. In modern Russia, this figure reaches 13.5 liters. According to WHO, the condition covering 11% of the population is qualified as a critical pandemic, which threatens preservation of the society. The degradation of society is also evidenced by its excessive criminalization: the crime rate in our country exceeds the ultimately critical level more than 1.5-fold.

Exceeding the ultimately critical figures in the level of crime and alcoholization is a sign of demoralization of society and loss of value guidelines. The share of homeless people and other social groups that have fallen out of normal social life testifies to the fact that the population percentage who have lost their basis of life is beyond the critical limit. According to sociologic estimates, about 15% of Russian citizens have reached a " social bottom, " where the basic[202] moral values and limitations are lost. The most important reason for this condition is loss of the opportunity to work and the meaning of life, as the proportion of people caught in a state of stagnant unemployment and absence of chances to fulfill themselves has far exceeded the critical limit.

According to the calculations on basis of the ILO methodology, the share of the unemployed among the economically active population exceeded the critical level established by the Scientific Council of the Security Council of the Russian Federation.

 

 

Table 5. Estimates characterizing the reproduction of human potential in Russia	Actual value against ultimately critical	1.6-fold worse	1.04-fold worse	62-fold worse	1.1-fold worse	2-fold worse	1.4-fold worse	1.5-fold worse	Within normal limits	1.5-fold worse	Within normal limits	1.3-fold worse	Within normal limits	Within normal limits	1.7-fold worse	Within normal limits	Within normal limits
	Actual status 2013	13.3	13.1	0.2	70.8	16.3	0.42	10.8	5.2	1539	3.5	1.71	12.9	0.778	13.5	6	19.6
	Ultimately critical value	22	12.5	12.5	78	8	0.3	7	5	1000	3.5	2.15	7	0.800	8	7	20
	Indicator	Fertility rate (per 1, 000 residents)	Death rate (per 1, 000 residents)	Natural increase (per 1, 000 residents)	Life expectancy (years)	Gap between the income of 10% of the wealthiest and 10% of the poorest groups (by times)	Gini index	Population rate with income below the subsistence level (%)	Unemployment rate	Crime rate (number of recorded crimes  per 100 thousand residents)	Relation between average per capita monetary income and subsistence level (times)	Total fertility rate (average number of children born to women in fertile age)	Aging factor (rate of persons with age of 65 years and more in overall population, %)	Human Development Index (HDI) (points)	Alcohol consumption level (liters of absolute alcohol per capita)	Rate of persons who use drugs (%)	Number of suicides (per 100, 000 residents)

Above the critical level is also the indicator widely used to characterize social inequality, the income gap between 10% of the wealthiest and 10% of the poorest groups, which provokes social conflicts, reduces human potential and blocks its development.

Maintaining the current tendencies in human potential degradation deprives Russian society of even simple reproduction possibilities, not to mention the capacity for sustainable development. At the same time, it is impossible to determine the exact time during which these tendencies will become irreversible, as there are no reasonable estimates of the maximum duration of exceedance of the ultimately critical parameters that still allows preservation of the society. There is significant time latency between a condition characterized by extremely critical loads and a transition to the " point of no return, " when changes become irreversible and a self-sustaining process of destruction of the socio-economic system begins.

Ultimately critical values of the main society development indicators should be interpreted taking into account the integration interdependencies of the social system. There are at least three important features of the functioning of society, which should be taken into account in the establishment and use of a system of ultimately critical indicators of its development: the compensatory mechanism of interaction between structures and elements of the social system, the synergetic effect and the " domino" effect[203]^{, [204]}. The latter acts as a " chain reaction" to release the destructive social energy after disintegration of the institutions that link society into a single whole, as a result of termination of its reproduction mechanisms. The situation in this case resembles the course of pathological brain conditions, which become apparent after destruction of more than half of its cells. Up to this point, the person looks normal, although the nervous system performance indicators for a long time exceed the ultimately critical limits. When the condition becomes apparent at last, the degradation of the brain becomes irreversible and incurable.

Historical experience shows that disintegration of the social system usually occurs unexpectedly both for most ordinary citizens, and for the management elite. This is due to the nonlinearity and fundamental complexity of social processes. They can run for quite a long time exceeding the critical values of the main indicators imperceptibly for the public consciousness until the system reaches the bifurcation point, in which the reproduction mechanisms that bind it are destroyed resulting in either a transition to a new state, or  absorption by more viable systems, or death.

The key importance in determining the possible duration of the society functioning beyond the limits of the ultimately critical values of the indicators characterizing it belongs to selective ability of the management system. It should be sufficient to timely detect emerging threats, neutralize them, stop destructive processes, overcome emerging limitations and open new prospects for development. Characteristics of its condition also have their own ultimately critical level.

According to reputed researchers C. Jung[205] and M. Dogan[206], if more than 40% of citizens are extremely dissatisfied with the socio-political structure of society and believe that the existing political system must be radically changed, then the legitimacy of the political regime is lost, and the probability of its collapse sharply increases. This does not mean the automatic disintegration of the entire social system, but makes it extremely vulnerable to external and internal threats. According to the RAS Institute of Socio-Political Research, while in the 1990s this indicator exceeded 40%, by 2008 it dropped to 20%, after which it again went up and currently approaches 30%.

To a large extent, the society status indicators are determined by the state of its economy, its ability to expanded reproduction (Table 6). The Russian economy has been degrading for a long time, including its structure, production, technological and investment potential. Although by the volume of GDP and labor productivity the Russian economy reached the pre-reform level of 1990, in terms of investment in fixed assets it is inferior to it by 40%. This means that for the last two decades, the economy has been working itself ragged due to excessive exploitation of production facilities created in the Soviet era.

Exceeding the 1990 level of production by the volume of GDP does not indicate a restoration of the economic potential, as its quality has significantly worsened: the share of machine-building and other branches of manufacturing industry and material production as a whole decreased sharply, while the share of distributive sphere and raw materials sectors that have been reoriented for export increased. While the volume of energy carriers production significantly exceeded the level achieved in the Soviet period, the volume of machines and equipment production is 40% lower than the pre-reform level[207].

The economy functions in a unity of labor, natural-resource, production-technological, macroeconomic and institutional subsystems. During the post-Soviet decades, the natural-resource subsystem has been operating in a mode of contracted reproduction, which is characterized by the ratio of the increase in the reserves of natural resources and the volume of their extraction. For a long time, practically for all types of mineral resources, this ratio has been below the ultimately critical limit of 1. Despite this fact, the resource provision of the Russian economy and Russian society is not particularly worrying due to a significant number of previously discovered and equipped mineral deposits, as well as extensive land and water resources.

The status of the production-technological subsystem is characterized by post-critical wear of fixed assets. According to official statistics, their depreciation is 50%, but experts are warning that physical wear of fixed assets in many sectors of the economy, including backbone ones, reaches 80%, far exceeding the ultimately critical limit. In the conditions of modern scientific and technological progress, the latter is estimated at 35%, including 25% for the active part and 40% for the passive part of fixed assets. Although the economy retains its ability to expanded reproduction if these figures are exceeded, it loses its competitiveness, giving in to other countries in scientific and technical level and efficiency.

The Russian economy has been operating for a long time in the mode of contracted reproduction, and many vital branches of machine building and manufacturing industry have actually ceased to exist. The share of machine building in industry has almost halved in relation to the ultimately critical level, estimated by the Non-governmental Council for National Security of Russia at 25%. In general, the share of manufacturing sectors in industry fell by 9% below the ultimately critical level, estimated at 70%. The degradation of Russian industry is reflected in the share of Russian high-tech products in the world market, which has been floating around 0.2% for a long time already. The loss of the country's ability to develop independently is shown by its extreme external dependence (Table 7). The share of equipment imports has exceeded the critical limit more than 2-fold, which means the reorientation of the reproduction processes to a foreign technological base. This also leads to a loss of the country's ability to develop independently and its being drawn into nonequivalent foreign economic exchange, fraught with the erosion of national wealth.

Exceeding the 35% share of imported goods in the total consumption means that the country is critically dependent on the outside world. At the same time, a 25% share of imports is regarded as the ultimately critical level for food products, and its further increase creates a threat to the country's food security. By both indicators, Russia has been beyond he ultimately critical level for a long time already. This fact is disregarded for the time being due to a stable high positive balance of payments and excess foreign reserves, which cover many times over the country's need for imports at the current level of effective demand.

Table 6. Estimates characterizing the reproduction of economic potential in Russia	Correlation	1.2-fold worse	1.2-fold worse	1.79-fold worse	1.05-fold worse	1.1-fold worse	1.9-fold worse	2.4-fold worse	Within normal limits	Within normal limits	1.3-fold worse	1.6-fold worse
	Actual status 2013	20.7	48.2	14	66.6	26.8	7.7	5.0	11.4	about 15	40	45
	Ultimately critical value	25	40	25	70	25	15	12	15	15	55	75
	Indicator	Amount of investment in fixed assets (% of GDP)	Depreciation of fixed assets (%)	Share of machine building in industry (%)	Share of manufacturing sectors in industry (%)	Proportion of unprofitable organizations (% of total number of operating organizations)	Cost effectiveness of production (%)	Cost effectiveness of assets (%)	Inflation rate (%)	Social inflation rate (%)	Share of material production in GDP (%)	Monetization level (M2) at the end of the year (% of GDP)

 

In conditions of high openness and lack of a purposeful development policy, the Russian economy has been actually split into two sectors: internal, which degrades, and export-oriented (mainly raw materials), which by its reproduction mechanisms acquires enclave features and shifts to funding from foreign sources. As a result, the Russian economy specializing in exports of primary goods in exchange for finished products acquires colonial features, which leads to an inequivalent foreign economic exchange and deprives it of the ability to independently reproduce and develop. This is reflected in the share of primary goods in overall exports, which significantly exceeds the ultimately critical limit estimated at 40%. The high share of energy carriers exports relative to the volume of their production, equal to 2/3, reflects the actual degradation of the manufacturing industry. Because of this, as well as switching to a foreign technological base and a high level of consumer goods imports, the Russian economy finds itself in the tight clutches of external dependence that determine its evolution in accordance with the needs of the external market, rather than internal development.

Stably high value of the positive balance of payments and the multifold excess of the critical level by the amount of foreign exchange reserves are often perceived as signs of a stable and independent external economic situation in Russia. However, an analysis of cause-effect relations in the mechanisms of interaction between macroeconomic and external economic subsystems reveals the opposite situation.

 

Table 7. Estimates characterizing Russia's external economic dependence	Correlation	4.4-fold worse	1.4-fold worse	2.18-fold worse	2 -2.4-fold worse	1.14-fold worse	1.08-fold worse	1.44-fold worse	1.24-fold worse	2-fold worse	2-fold worse	1.35-fold worse		Within normal limits	5-fold worse	4-fold worse	10-fold better	1.8-fold worse
	Actual status 2013	40	34.8.	65.6	12.6%	61.3%	27	36	31	50	60	27	Proficit	107	50	100	1.9	53
	Ultimately critical value	9	25	30	25-30	70	25	25	25	25	30	20	15	100	10	25	20	30
		International reserves adequacy index (% of the three-month volume of imports of goods and services)	Cumulative external debt (% of GDP at the end of the year)	Share of imported equipment in domestic demand (%)	Share of imported food in consumption structure (%)	Share of domestic production in formation of meat and meat products resources in the domestic market (%)	Share of exports in material production (%)	Share of foreign capital in investments (%)	Foreign liabilities of commercial banks and other sectors (% of GDP)	Share of overdue and unrecovered foreign loans (% of total loans received)	Share of foreign investors in the ownership structure of free-floating shares (%)	Share of foreign loans to M2 (%)	Trade balance deficit	GDP per capita (%) relative to the global average	Volume of foreign currency relative to the ruble weight in national currency (%)	Volume of foreign currency in cash relative to the volume of rubles in cash (%)	The share of expenses on servicing the external public debt (% of the total volume of federal budget expenditure)	Ratio of the volume of foreign trade turnover (% of GDP)

The positive Russian balance of payments is a consequence of the structural degradation of the economy that acquires raw material specialization, along with a systematic undervaluation of the ruble's exchange rate relative to its equilibrium value, and restraining of the final demand by limiting the monetary stock with sterilization of a part of budget revenues.

In other words, the mechanisms of monetary and foreign exchange policy have subordinated the Russian economy to the interests of raw materials exporters and foreign capital, predominantly American-European, making it critically dependent on the global market situation. This dependence is exacerbated by binding the money supply to the growth of foreign exchange reserves, as a result of which the reproduction of the Russian economy is channelized by the external demand for its goods and the supply of foreign loans. At the same time, as foreign exchange reserves grow and capital outflow reaches exorbitant amounts, external debt also grows, since the Russian economy becomes super-critically dependent on external loans. Although the share of foreign banks in Russia's banking assets has not yet reached a threshold level, the weight of foreign loans to Russian corporations relative to the monetary stock far exceeds the critical limit reflecting the ability of country's banking system to withstand external shocks.

Thus, despite good values of the indicators that traditionally reflect the external economic status of a country (balance of payments, state external debt relative to GDP, foreign exchange reserves adequacy index, etc.), in reality, due to objective results of the macroeconomic policy conducted, the country's economy experiences a super-critical dependence on world prices for energy carriers and raw materials, and on foreign creditors. To this should be added the " offshorization" of property rights to key Russian enterprises, as well as a significant share of depositary receipts in their authorized capital, which in total gives up to 60% share of foreign capital in a number of backbone sectors of the economy, which is 5-fold higher than the critical level established on the basis of objective requirements to the selective ability of the national economic management system. The share of foreign investors in the ownership structure of shares circulating in the Russian is consistently 1.5-fold higher than the critical limit, calculated taking into account the requirements to the financial market resistance to fluctuations in the inflow of foreign speculative capital.

The artificial binding of monetary issue to acquisition of foreign currency has significantly limited the development opportunities of the Russian banking system. Reproduction of the economy is not ensured by its financial subsystem. Banks do not have sufficient credit facilities for development of the economy, which is reflected in the ratio of loans to the non-financial sector to GDP, which is 3-5 times lower than in developed countries. The total scope of the economy monetization throughout the entire post-Soviet years remains significantly below the ultimately critical level necessary to ensure a normal circulation of capital, estimated by experts as 50% of GDP. At the same time, as mentioned above, the Russian financial system is a donor of the world economy. While we give our foreign exchange reserves to the external environment at 2-3% per annum, our enterprises and banks attract foreign loans at 7-8% per annum. The financial system is losing significant resources due to the inequivalent foreign economic exchange (Fig. 13).

Fig. 13. Evaluation of the Russian transfers

in favor of the global financial system.

(Source: D. Mityaev)

Such is the result of the economy disintegration into the domestic sector that determines the reproduction of economic and human potential, and the external raw-materials and financial sectors that focus on the export of capital and do not actually participate in the reproduction mechanisms of the internally oriented sector of the economic system that ensures its functioning.

The underdevelopment of the banking system and the absence of mechanisms for its refinancing by the Central Bank are among the main reasons for the prohibitively low rate of accumulation, which for a long time has been considerably inferior not only to the level required for simple reproduction, but also 1.5-fold to the rate of savings. At the same time, the reduction of inflation to an acceptable value in the absence of mechanisms for refinancing the banking and credit system precludes raising the investment activity to a normal level.

The internal mechanisms of reproduction do not ensure preservation of the existing economic potential, not to mention its development. The established price structure blocks the opportunities for simple reproduction of manufacturing and construction sectors, a significant part of production facilities is unprofitable or low-profitable, and this makes it impossible to invest in the renovation and modernization of their fixed assets. For example, the profitability of such key industries that determine investment opportunities as machine building and construction, is below the key rate determining the price of banking system refinancing by the Central Bank. This means that borrowed capital is not available for reproduction of these industries, resulting in their contraction and degradation.

Most indicators of the state of the Russian economy are beyond critical values of the indicators reflecting its ability to reproduce itself. It has been operating in the contracted reproduction mode for a long time already, despite the existing opportunities to transform the accumulated savings into investments and convert giant natural rents into technological development. Even worse is the situation with indicators reflecting the ability of the Russian economic system to develop and its competitiveness. According to the share of innovation-active enterprises, the share of new products in the total volume of machine building products and the ratio of R& D expenditure to GDP, the Russian economy is 4-fold inferior to the level of developed countries, which in this case should be taken as ultimately critical. According to the indicators of economic efficiency, this gap amounts to a multifold figure (Table 8).

Over the past two decades, there has been a multifold decline in Russia's scientific and technological potential, and its share in the global system has sharply decreased. After a 20-fold fall in the early 1990s, R& D expenditure increased somewhat and stabilized at a low level of 1.5% of GDP, which fails to ensure both reproduction and preservation of the available scientific and technological potential. At the current rate of building up new knowledge, the total volume of which doubles every quarter of a century, the cessation of scientific research for a single year leads to a 25% depreciation of the available knowledge. The rapid lagging behind the global level of institutions that form the intellectual potential makes it difficult to overcome the trends for degradation and create the necessary conditions for sustainable development of the economy. The share of Russia in the world science-intensive economy has decreased to a marginal level.

Given the current status, there are no prerequisites for restoring the economy's ability to reproduce normally, since the rate of accumulation is well below the critical level of 25%, and the labor productivity growth rate is 6-fold beyond the ultimately critical figure determined in view of the need to overcome the backwardness of the Russian economy in the foreseeable future. The way to the sustainable development trajectory requires, according to our estimates, an increase in the rate of accumulation at least up to 35%. This is possible, as the volume of savings in the economy is 1.5-fold higher than the volume of investments, and there are other reserves that are unused due to many reasons, including uncontrolled export of capital.

 

 

Table 8. Estimates characterizing the competitiveness of the Russian economy	Correlation	4-fold worse	1.07-fold worse	2-fold worse	3.7-fold worse	2-fold worse	11-fold worse 8.5-fold worse 11.6-fold worse	3.3-8.1-fold worse	10-fold worse	2.5-fold worse	6.3-fold worse
	Actual status 2013	10.1	46.6	8.9	2.6	1.5	1.65 0.17 1.16	10-65	0.3	10	0.8
	Ultimately critical value	40	50	15-20	7	3	0.15 0.02 0.1	3-8	3	25	5
		Share of innovatively active enterprises (%)	Share of manufacturing industry products in exports (%)	Shipped innovative products (% of all industrial products)	Share of new product types in the total volume of machine-building products (%)	R& D expenses (% of GDP)	Specific indicators of energy consumption (tons of oil per thousand dollars of GDP): total energy resource consumption electricity consumption oil and gas consumption	Losses of mineral resources in the process of extraction (% of total volume)	Specific weight of Russian high-tech products in the global market (%)	Share of intellectual property in business value (%)	Share of public expenditure on environmental protection in GDP (%)

 

Although the indicators of the socio-economic situation in Russia have improved significantly compared to the mid-1990s, the observed values of most of them are significantly worse than the ultimately critical level. The country has wandered out of the danger zone in terms of condition of its state budget and debt, but still remains beyond the red line by indicators of the condition of its monetary, industrial and technological spheres, human, and technical potential. Also extremely low are the parameters of investment and innovation activity, as well as other indicators that reflect the effectiveness of the economy and its ability to develop.

Restoring the capacity of the Russian economy for expanded reproduction and modernization requires taking into account the laws of long-term economic development and elaboration of the correct strategy along with the mechanisms for its effective implementation. To achieve this, it is necessary to qualitatively improve the management system, to overcome exorbitant corruption, shadow economy and losses. The latter, measured within the Russian economy as a whole, account for about half of GDP, many times exceeding the ultimately critical limit that corresponds to modern concepts of effective economic management. According to the estimate of V.M. Simchera[208], the level of full national economic costs in the Russian Federation on the basis of the intersectoral balance is a multiple of the GDP, which indicates a negative contribution of the management system to economic growth.

As a result of the unsatisfactory state of the management system, the indicators of the productive use of Russia's resource potential are more than 2-fold below the ultimately critical limit, including the indicators of utilization of mineral resources, agricultural and forest land[209]. Huge amounts of capital export, which in two decades have reached an astronomical value of $1 trillion, a " brain drain" not less devastating for the economy and society, the loss of a significant part of the scientific, production and human potential are a consequence of the unsatisfactory work of the market self-organization mechanisms and state regulation institutions.

Assessing the above measurement results, it should be noted that for a long time the country remains far beyond the critical values for most of the indicators characterizing the ability of the economy and society to both reproduce and develop. This testifies to existence of quite definite threats to national security, while the time for their neutralization and restoration of the country's ability to sustainable growth is bleeding off the clock. At the same time, the removal of measured indicators from the ultimately critical zone is not an end in itself. Society and economy are undergoing constant changes, and their dynamics is non-linear and non-equilibrium. The technological structure of the economy and the intellectual structure of the society are transforming rapidly. The attempts to ensure stability by maintaining simple and even extended reproduction of the existing social and economic subsystems in the context of drastic structural changes in the global economy are clearly not enough for successful or even simply sustainable development.

As was shown above, the current global crisis is associated with a transition to the new (sixth) technological paradigm. In this regard, the policy of modernization and development of Russia should include the task of the soonest formation of the new technological paradigm. According to the available estimates, the " embryonic" period of this paradigm has been completed by now[210]. In a few years, it will reach an exponential growth, resulting in commencement of the next long wave of economic development.

The core of the new technological structure is a complex of nano-, bio-, information-communication and social technologies. Although today the world is in depressed state retaining crisis turbulence, the complex of industries that determine the new technological paradigm is characterized by a steady growth rate of 35% per year. Taking this into account and relying on our capabilities and scientific and technical potential, we should strive to concentrate resources in these specific areas. It is necessary not only to simply renew the fixed assets, but also to focus primarily on the modernization of the technological structure, to invest in the development of fundamentally new areas, which today become the drivers of economic growth and formation of the sixth technological paradigm. After the world exits the economic depression and the long wave of development begins, the countries that have managed to take leading positions in key industries of the new technological paradigm will get a huge advantage and provide long-term sources of super-profit (intellectual rent) by building up their scientific and technological superiority.

The revealed laws of long-term economic development make it possible to justify the strategy of outstripping development of the Russian economy on the wave of growth of the new technological paradigm[211]. For Russia, the industry and science of which have considerable resources in a number of areas that are crucial for the establishment of the sixth technological paradigm, it might be possible to master the promising directions of global economic growth ahead of others.

To actualize the opportunities for outstripping development and bringing the economic indicators out from the ultimately critical zone, the transition to a targeted development policy is necessary, supported by adequate monetary, industrial, scientific, technical and structural policies. The list of measures to ensure the outstripping development of the Russian economy was made by scientists from the Section of Economics of the RAS Division of Social Sciences[212]. It should be supplemented with measures to expand the opportunities for citizens to participate in the social management, as well as to create actual mechanisms of the responsibility of decision makers for the objective results of the pursued social and economic policy. Fundamental changes are also required in the state policy in the sphere of education and culture, which should focus on consolidation of the Russian society, harmonization of the moral values that dominate it and the guidelines for creative activity.

The experience of the 2008 crisis revealed a high degree of dependence and, consequently, vulnerability of the Russian economy to the situation on the world financial market that is regulated by methods discriminatory for our country, including downward biasing of credit ratings, unequal demands for openness of the domestic market and compliance with financial constraints, imposition of inequivalent foreign economic exchange mechanisms, through which Russia annually loses about $ 100 billion. Moreover, about $ 60 billion are leaving the country as a balance of income from foreign loans and investments, and about $ 50 billion represent an illegal capital outflow. The accumulated mass of the latter has reached $ 0.5 trillion, which taken together with foreign direct investments of Russian residents makes about $ 1 trillion of withdrawn capital. Losses of revenues of the budgetary system as a result of capital flight amounted in 2012 to 839 billion rubles (1.3% of GDP). The total loss of the budgetary system due to offshorization of the economy, capital flight and other tax evasion activities is estimated in 2012 at 5 trillion rubles[213]. (Fig. 14)

A particular threat to national security in the context of growing global instability is the current situation with the registration of ownership rights for a significant part of large Russian non-state corporations and their assets (up to 80%) in the offshore zones, where the bulk of transactions with their turnover take place. They also account for about 85% of accumulated foreign direct investments, both to and from Russia.

 

 

Fig. 14. Accumulated investments in Russia (+)

and abroad (-) by countries and types of jurisdiction

(offshores and onshores), $ billion.

Note: *) FDI from Russia include capital flight

(accumulated since 1992)

(Source: Y. Petrov)

 

The increasing issue of unsecured world currencies creates favorable conditions for the Russian assets transferred to offshore jurisdictions to be absorbed by foreign capital, which threatens the economic sovereignty of our country.

A noticeable drop in income since the beginning of this year is still perceived as temporary, although in some categories of workers, including state employees, it reaches 20-30%. However, the consolidation of this trend will soon lead to a tangible reduction in the level and quality of life for the majority of the population. In terms of poverty, the Russian society will recede by the beginning of 2016 to a decade ago, since the number of citizens with an income below the subsistence level has already reached 23 million and, judging by the forecast of inflation and household income, might increase by another third.

The subjective measurement of poverty by sociological methods reveals an even more disturbing pattern. According to ISPR RAS, prior to the current crisis, the share of citizens who regarded themselves as poor reached 30%[214]. About the same estimate of the level of subjective poverty was given by researchers of the RAS Institute of Sociology in 2012 – 32% of the population aged no older than 55 years[215]. At present, these figures can be increased 1.5-2-fold.

Russia is approaching the centenary of the Great October Socialist Revolution having social polarization parameters that are many times worse. We have returned to pre-revolutionary Russia, when 1% of the population owned about 30% of the national wealth[216]. Today, like then, the principal income and riches are concentrated in the hands of a hundred families. Like then, most of these families are closely connected with their interests and way of life to the countries of the West. Like then, the Russian economy is critically dependent on foreign capital and sources of credit. Like then, the West waged a hybrid exterminatory war with Russia, both open (Germany and Austria-Hungary) and covert (England and France).

Of course, there are also significant differences. The external ones are against today's Russia. Then, the Russian Empire was the strongest on the continent. Its European " partners" waged war against each other, divided into open enemies and " allies." Today, Russia is by an order of magnitude weaker than the NATO countries, and they are united in their growing Russophobia.

Internal differences are contradictory. At that time, Russia did not have a strong-willed and perspicacious leader. Unlike Nicholas II, Vladimir Putin knows the worth of " partners" and understands threats to Russian statehood. Therefore, he does not allow Russia to be drawn into the war, skillfully using diplomatic methods to neutralize the U.S. activities to create an anti-Russian coalition. At the same time, then the ruling elite was not so obviously dependent on the West. Unlike the current comprador oligarchy, which openly hauls abroad its income, families and property rights, Western agents in tsarist Russia were hiding in Masonic lodges and posing as patriots. Moreover, there was no such information dependence on Western ideological influence, and the West itself was different.

While the current hybrid war is similar to the First World War in the methods of undermining Russian statehood, in the essence of the aggression of the united West against Russia it is rather a continuation of the Second World War. Like then, the West is united in its desire to destroy Russian identity and Russian statehood. It failed at that time because of the monolithic unity of the Soviet people with the communist leadership. Both the people and the ruling elite understood that they were at war of total extermination. And, thanks to the unity of the people, the army and the ruling party, they managed to defeat the enemy many times superior in strength.

It is no accident that President Vladimir Putin, well understanding the history, called for unity on Russia Day. But in order to achieve it, firstly, we need to have an ideology uniting the people; secondly, it should comply with the policy pursued by the state; thirdly, there should be a mechanism of responsibility of the ruling elite for adherence to the standards of this ideology. And, of course, there should be no antagonistic contradictions tearing society apart.

Today, the contradictions between the interests of the people and the ruling elite are potentially antagonistic. Their muffling by redistribution of natural rent no longer works both because of its reduction, and the current tax system. Its main burden falls on labor (the value it creates), while super-profits from speculation, exploitation of natural resources and status rent substantially avoid taxation. The main draught force of the Russian state remains the working population, the degree of exploitation of which is 2-3 times higher than the level existing in the West (calculated as the volume of output per unit of wages), and which bears the main burden of taxation.

The policy pursued by the state contradicts not only the interests of the working population, but also the interests of domestic commodity producers. For the latter, the deadly factors are both excessive costliness and inaccessibility of loans and sharp fluctuations in the ruble exchange rate. The very crisis of the Russian economy and its pulling into a stagflation trap was the result of a policy pursued by monetary authorities to serve the interests of the international capital, including the former Russian capital which had been withdrawn to offshores. Its cornerstone is complete freedom of cross-border and currency-exchange financial transactions. This predetermines the complete dependence of the Russian financial and economic system on external capital flows, even a small change in which causes destabilization of the macroeconomic situation in Russia.

The Russian financial system is hundreds of times smaller than the global one, dominated by the U.S. funds that specialize in monetary speculations. At the same time, the influx of money they are absorbing is growing exponentially as a result of their unrestrained issuance by the U.S. Federal Reserve, the ECB, the Bank of England and the Bank of Japan, which has grown 3-5-fold since the beginning of the global financial crisis. Having unlimited possibilities to destabilize open national financial systems, the Western speculators regularly attack them to manipulate the market and gain super-profits on the depreciation of national income and savings. Exactly such attacks were performed against the Russian financial system in 1998, 2008 and 2014. And each time the Russian monetary authorities, instead of protecting their financial system, only contributed by their policy to its destabilization.

The current policy of full openness of the monetary and financial market, refinancing of speculative foreign exchange transactions by the Bank of Russia, inflated interest rates and free floating of the ruble exchange rate also puts the Russian economy in complete dependence on the interests of international (mainly U.S.) speculators. In the context of the financial war waged by the U.S. against Russia, this dooms the Russian economy to heavy losses and imminent defeat.

 

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