Over a decade on from the economic shambles Russia was left with on the disintegration of the Soviet Union, its economy is now looking comparatively healthy. In 2001 Russia saw its third consecutive year of real growth with Gross Domestic Product (GDP) up by 5%, fuelled mainly by high oil prices. Inflation – rampant in the 1990s – is now under control, with a consequent stabilisation of the rouble. Three-quarters of state enterprises have either fully or partly been privatised (with much corruption along the way), and the days of central planning are more or-less over. In Moscow, St Petersburg and several other major cities you’ll notice a burgeoning middle class with the economic trappings that go with it.
The effect of the 1998 rouble devaluation was far less terrible for the economy and the middle class than originally thought. Following the initial shock, the middle class, which was mostly paid in untaxed cash dollars, suddenly realised that their salaries had increased threefold overnight (if counted in roubles) while prices largely remained the same. This led to a huge boom in consumer goods and services. Things such as dining out, fitness clubs and mortgage schemes that were previously only for the rich, suddenly became available to many more people. The situation also gave a great chance to Russian consumer goods producers; 1999 saw imported products being rapidly substituted by high-quality local ones.
Still, despite these improvements and the attempts of Putin at better economic management and introducing the rule of law, Russia’s economy still has a long way to go before it can be said to have fully capitalised on its astonishing natural resources. The country’s debt still hovers around US$150 billion, and corrupt, inefficient bureaucracy deters all but the most bullish of foreign investors.
The boom and bust period of the late 1990s as well as the abandonment of the social safety net provided by communism has left many people worse off. An estimated 20 million Russians live below the official poverty line, with salaries of US$31 per month, and at least nine million people are unemployed, although many others considered ’employed’ have jobs with little work and less pay. One consequence of these declining living standards is that the best and brightest young Russians are emigrating with their talents. Many Russians get by as they did for decades under the Soviet system by growing their own food at their dachas and bartering various goods and services.