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. Last Updated: 07/27/2016

The Shaky Ground of Poverty

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Today, many believe that economic growth and state social policy are incompatible. I am convinced, however, that improving the quality of people's lives is no less important than the ups and downs of economic indicators. It is not only important from a moral perspective, but also for profoundly practical reasons. Society must be stable to ensure successful, long-term economic development.

If economic policies proceed from investors' interests alone and ignore social priorities, growth will be very short-lived, or in any case it will not last long in a democratic state. Economic development can only be called healthy when a large portion of the population reaps the benefits of this growth and when the lives of the majority of families change tangibly for the better.

Count Sergei Witte, one of Russia's most eminent 19th-century politicians and finance minister under Tsar Nikolai II, had some interesting reflections on this subject in his memoirs. From his point of view, the most important problem facing Russia in the 20th century was that Russians thought of themselves economically as only half or a quarter of the average European. Looking back on his very eventful life, Witte saw that the glory and might of the Russian Empire was standing on shaky ground. The poverty and illiteracy of the majority of peasants at the time were not merely problems afflicting the poor themselves. They were problems for the entire country. Yet Russia had neither the money nor the qualified specialists needed for the kind of large-scale modernization projects that would have put the country on par with more progressive nations. This remains a common problem in poorer countries, just as it was a hundred years ago.

With its rickety social structure, Russia has developed by the sheer force of the government. It was the government that, by means of proactive economic policies, created the conditions for the industrial boom in the early 20th century, a boom that in many ways has not been surpassed to this day. The country had a chance to develop a stable society with a large middle class. But all the state had to do was weaken for a moment, and it broke down right where Witte said it would.

I do not want to draw direct comparisons between the revolutionary era and our own. Only 15 years ago, at the beginning of the economic crisis, Russia had a fairly uniform society. Today, Russians generally have a very high level of education and training. The country has everything it needs to develop an efficient modern economy. But let's take a look at the economic status of the average Russian compared to a European or American. If we compare GDP per capita, we end up with precisely the infamous quarter Witte noted: $8,000 per year versus $30,000 in Europe or the United States. This is the result of 10 years of economic crisis.

The minority of citizens capable of fitting into the market enjoy all the creature comforts of modern civilization. The rest are not only deprived of all the benefits modern technology has to offer; they are falling further and further behind its constantly growing demand for new skills. We could end up falling into a trap where the successful minority and the poor majority will become like two separate nations in a single country.

A significant portion of the younger generation is not getting the knowledge and skills needed to work in today's economy. In other words, the skill potential of the Russian population is not being reproduced. This is a serious problem. Poverty is terrifying for more reasons than its material deprivation and personal suffering. Poverty of this kind will end when the economic crisis that spawned it ends. Yet if poverty drags on for decades, if it is handed down to coming generations, it will also be terrifying because there will be no way to escape it. When the growing economy offers all sorts of excellent jobs to young people, they will not be properly prepared to fill them.

Russia has yet to confront this problem in its full-blown form. Poverty here has yet to become persistent. The problem will begin to loom on the horizon, however, if the government does not begin to take action right now.

This does not mean that Russia should become a government of the poor and for the poor. Quite the contrary. We must take decisive measures to pull people out of poverty, as well as creating the conditions for them to return and reintegrate into contemporary society and the modern economy.

The key to solving this problem is untangling one of the most astounding paradoxes of the Russian economy. The majority of people who are poor and need state support have steady, full-time employment, and some of them even have post-secondary educations. This reflects the twisted nature of how personal incomes evolved during the years of economic crisis.

The state needs to implement a consistent and logical policy to increase Russians' incomes. There needs to be a state program to create a large middle class. The government should take an interest in the class of people that could become the main source of stability for the country. An expanding middle class would furthermore help accelerate economic growth. Middle-class consumer demand would boost the domestic market. Highly qualified and highly motivated middle-class workers would create highly competitive goods and services.

Government policy at present is phrased in terms of support and assistance. This is understandable when we are discussing help for the disabled and the elderly, for those who cannot always provide for themselves. Yet tens of millions of workers are creating the national income that allows Russia to survive. If they nonetheless need state assistance, this means we need to re-examine and revise the government's economic policy.

The absurd expression "business aid" has become a clich?. Business by definition is an activity that makes money. Business activities and the taxes they generate are the material basis for state assistance to those who truly need it.

We have to change our approach to fighting poverty. Healthy workers and entrepreneurs do not need aid. They need normal working conditions. To provide them, the government should implement policies to increase the wages of state employees, to develop small business and to create a system for encouraging companies that are working on innovative products and creating jobs with decent salaries.

In today's world, economic growth is defined as never before by a country's scientific potential, level of education and the skills of its labor force. A high-tech economy makes certain demands of a society. It will not take root in an impoverished and internally divided country. For this reason, ending poverty and forging a single, integrated society are not only the preconditions for political stability, but also for successful economic development. This is the most important aim of government policy. By solving it, the government stands to increase, not diminish, Russia's national wealth.

Sergei Mironov is Federation Council speaker. He contributed this comment to Vedomosti, where it first appeared.