West Attacks Russia with Piketty’s Overblown Claims About ‘Oligarch’ Wealth
Blowing
Thomas Piketty’s academic fraud, Awara’s new study debunks the myths
about overreaching oligarch grip on the Russian economy and supposed
extreme economic inequality in a global comparison
There
is no love lost between the Russian people and the oligarchs. You just
can’t erase from history the theft of the century when the 1990s
oligarchs looted the country through sham privatizations staged by the
liberal government. The press has done its best to imprint the memory of
those years of robber capitalism on the Western public. It’s a
scandalous memory all too easy to exploit and rehash for the purpose of
vilifying Putin and “his cronies.” At the same time, everybody seems to
have forgotten how the present ruling plutocrats of America made their
capital a century earlier.
The
United States has already slapped sanctions on influential Russian
businessmen, which they refer to as oligarchs. They are supposedly
punished for their proximity to the Russian president who is
incriminated with imaginary charges of meddling in US elections, a nerve
agent attack on a former Russian spy and his daughter in England, and
other fabricated allegations. And echoing antisemitic racial slurs of
Hitler’s Germany, now with the Russians as the villains, the UK
parliament has launched a crusade against “dirty Russian money” of the
Russian “super-rich kleptocrats.”
But,
the real reasons to go after Russian “oligarchs” and the “super-rich”
have nothing to do with a newfound sense of social justice or their
supposed ties with the Russian president. (By the flawed logic of the
accusers anybody who is rich in Russia must be connected with the
president). This time around this image of malign Russian oligarchs is
used by the West in a full-frontal attack on Russian capital and
Russia’s industry as the United States is hysterically trying to find
ways to contain the country. By attacking Russian business tycoons, in
addition to the state corporations, the US strives to block out Russian
industry from the West and the wider world.
New study demonstrates that talk about Russia’s economic inequality has been greatly exaggerated
Yet, the idea that the rich own a vastly disproportionate share of the Russian national wealth has been disproved in a recent study by the Moscow based https://www.awaragroup.com.
The study takes aim at Thomas Piketty’s high-profile report about
Russia’s economic inequality. The Awara report does not aim at
deflecting from the problem of economic inequality in Russia as the
authors merely want to put the problem in its right global proportion.
Economic inequality is not any more “extreme” in Russia — as Piketty
falsely claims — than in the major Western countries in general. In
fact, the Awara study shows that it could be less.
The
Awara report exposes the bias and reveals the multitude of
methodological errors, distortions and misrepresentation of data, which
have informed the Piketty report. After identifying the deficiencies,
Awara adjusted the main findings to reflect the actual data. The
corrected data shows that instead of owning more than 70% of the
national wealth, the share of the top 10 percent of the population was
39% of private wealth and 32% of total national wealth.
Below
charts demonstrates the differences in the Piketty study and the
corrected data of Awara. Top chart from the Piketty report, bottom,
Awara’s corrected findings.
Correspondingly,
instead of earning 45–50% of national income as claimed by Piketty, the
top 10% of Russians earned less than 30% of the income. The Piketty
research team had said that their study expressly replaces the findings
of earlier income inequality studies like that of the EBRD, which had
allocated 30% of income to the Top 10% richest. After revealing the
multitude of flaws in the Piketty study, Awara found it natural to
return to those earlier findings. his also puts the wealth figures in
perspective as it is obvious that the share of wealth must closely
correlate with the share of income.
Western propaganda can’t decide if Russia is owned by oligarchs or by the state
A
big contribution towards mitigating economic inequality is delivered by
Russia’s substantial public property. But in his study Thomas Piketty
has written off the value of Russia’s public wealth as if it did not
play any role as an equality inducing factor. It is actually very
strange when one set of Western propagandists claim that Russia’s state
sector has totally taken over the economy comprising 70% of the total,
and another (like Piketty) maintains that the super-rich owns 70% of
Russia’s wealth. It seems to us that the propagandists better make up
their mind.
The
Awara study reports that experts conclude that the state sector makes
up a much higher share of the Russian economy than it is the case in all
Western countries. The estimates vary from 35% — 70%. The European Bank
of Reconstruction and Development (EBRD) has estimated that the share
of the public sector (state sector) of the total economy was 35% in
2009. Experts agree that the state sector share has grown since. The
Russian competition authority, the Anti-Monopoly Committee, estimated in
its annual report for 2015 that the state sector had grown to comprise
70% of the Russian economy.
Small business enterprise value exceeds that of the Russian billionaires
A
remarkable finding in the Awara report is that the total value of small
and medium businesses (including shadow business) at 35% of total
business assets stands way higher than all of “oligarch” wealth, and
even at the same level as the combined wealth of the top 10 percent
(39%). (Hereby, it should be noted that there is overlap between the
categories of small and medium business wealth and top 10 percent
wealth).
The
35% share assigned to small and medium businesses (SMEs) is backed up
by reference to a study done by the global consultancy EY together with
the European Investment Bank, which assessed that SMEs cover 20–25% of
Russia’s GDP, in addition to estimates of the size of the shadow
economy. The Russia statistics authority (Rosstat) has the shadow
economy at 10–14% whereas liberal economists assess it at 32%.
When everything else failed, Piketty conjured up Russian “offshore wealth”
When
all the other methodological biases, misrepresentations and distortions
failed to produce the screaming inequality — which the scholars
undoubtedly had set out to prove — they resorted to adding, some
supposed “offshore wealth” to the possessions of the top 10% of
Russians. We have all heard about assets Russian “oligarchs” have
abroad, like the Chelsea football club, villas and yachts, therefore
this one would seem like a safe bet. When the figures don’t prove that
the superrich in Russia are so much richer than the Western plutocracy,
throw in their offshore wealth. What Piketty therefore did was to add
offshore wealth to the tune of the equivalent of 75% of the GDP to the
richest top 10%. And Voila! The Piketty figures show extreme inequality
for Russia in comparison with other countries.
Not
only is there no evidence on the amounts and distribution of such
“offshore wealth,” but it also represents a major transgression of
Piketty’s own method as such assets abroad have not been taken into
consideration in the studies concerning any of the other countries that
his research team has examined. After all, the Piketty studies are
supposed to represent global comparisons of economic inequality — the
comparison is the very point they make. Yet Piketty blatantly breaches
his own method just to make Russia look bad. See, no such “offshore
wealth” has been summed up to the wealth of the rich in any of the other
countries studied.
Piketty’s colonial ideal model
Obviously,
the offshore wealth (i.e. assets outside home country) of the
capitalist classes of the major Western countries is vastly more (as a
share of) than that of the Russian rich. Just think about the holdings
of the Western transnational corporations around the world. But Piketty
et co. don’t even want to consider the Western transnational capital,
going so far as to totally exclude foreign owners as factors of
inequality in a given country. In their colonial model foreign owners
are a benign class, above criticism. With this kind of logic, Piketty
runs into total absurdities. Praising the relative inequality of Eastern
European countries, he puts the success down to their colonial economic
model, as the Pikettys express it: “the fact the holders of top capital
incomes tend to be foreigners rather than domestic residents
contributes to lower top income shares in countries like the Czech
Republic or Poland or Hungary (as compared to countries like Russia or
Germany). I.e. foreign owned countries tend to have less domestic
inequality (other things equal).”
So,
in Piketty’s perverted logic it is good that foreign capitalists own
everything, because that makes the natives more equal between
themselves. But in case of Russia it is the other way around, because
some nasty rich Russians own property in third countries, it makes
Russia’s wealth distribution more inequal.
Why would you call the Russian rich “oligarchs” but those of the West “billionaires”?
Why
does the media call the Russian rich “oligarchs” while their peers in
the West are just “billionaires”? The reason is obvious, oligarch sounds
nastier and therefore it must be reserved for the Russians. That’s what
Piketty does, too, calling his report “From Soviets to Oligarchs,”
thereby clearly flaunting his biases. This is precisely what drove him,
to tarnish the Russian state by alleging it’s a country ruled by a vile
oligarchy and Putin’s cronies.
The
Awara study demonstrates that the true income and wealth figures on
Russia — especially when considering Russia’s substantial state
sector — does in no way qualify Russia as an oligarchy any more than any
of the other major economic powers in the world. But even if that would
not have been the case and Russia’s wealth distribution would be as
Piketty mendaciously claims, then still there would be no reason to pick
on Russia by calling it an oligarchy. An oligarchy is foremost a
political concept signifying that real power in a given country rests
with a small number of super-wealthy people termed oligarchs. But, the
fact that a country would have a skewed division of wealth with a
disproportionate share of billionaires would yet not mean that the
country is an oligarchy in the true political meaning of the concept.
And certainly, the Russia of today does not qualify as one. It has been
widely acknowledged that since his ascendance to Russia’s presidency
(2000) Vladimir Putin has effectively stripped the super-wealthy
individuals from the political power they actually wielded in the 1990s.
Throwing around that disparaging epithet, Piketty has completely
omitted any analysis of the political aspect of supposed Russian
oligarchy. This clearly demonstrates his ideologically bias to revile
the Russian nation and to flag his politically motivated preconceived
conclusions
Piketty relies on Forbes billionaire gossip
Apart
from the trickery with “offshore wealth,” Piketty builds his case on
“data” drawn from the Forbes’s billionaire gossip. Of course, the Forbes
billionaire data is an interesting and entertaining source and
certainly can serve to guide the reader in the direction of who are the
billionaires of one or another country. However, it seems that the
Forbes exercises considerable editorial discretion in its reporting
exposing and exaggerating the wealth of some billionaires while choosing
not to disclose that of certain other billionaires. In any case, it is
not a scientific study. The methods of compiling the data are not
explained and sufficient details of the composition of the alleged
wealth is not disclosed. The validity of that data would then at best be
dubious, even in a transparent study.
Lies, damned lies, and statistics
The
Awara report is not only a criticism of the dubious studies of the
Piketty team, but also more in general an attempt to reveal how scholars
manipulate public opinion under the cover of statistical methods to
advance their ideological or pecuniary objectives. In this regard, the
Piketty studies excellently illustrate the old adage “Lies, damned lies,
and statistics.” A perfect case of how authority combined with the
persuasive power of numbers is employed to bolster false arguments.
Awara
explains the glaring differences in its findings with gross
methodological errors and skewed or even fabricated data in the Piketty
study. When the transparent data sources failed to back up Piketty’s
prejudices about Russia, he resorted to blatant distortions.
In
general, the Piketty reports never demonstrate to what extent the
scholars have relied on one or another set of source data, rather their
method is like a recipe for a potpourri, throw in generous amounts of
Forbes billionaire data, a bit of survey data, some homemade tax
tabulations, and stir everything with a Pareto spatula. The scholars
merely tell that they have relied on those sources to make the blend,
but the share of emphasis on one or another set of source data is not
given and the choices are not discussed. There are also no
scientifically falsifiable computations, which would show how the
various data sources would supposedly have been mathematically combined
to yield the results that these scholars claim to be their science. This
is in itself renders the Piketty reports invalid as academic science
and relegates them merely to the level of personal opinions.
Their
starting point is said to be earlier household income survey data,
which then is “corrected,” as they claim, with income tax data on
high-income individuals, supposedly drawn from the referenced fiscal
data. But the fiscal data does not represent any “raw tabulations by
income bracket” as the scholars wrongly maintain. Furthermore, that data
source does not contain any data on “high-income-taxpayers income tax
data,” as was further gratuitously claimed. The national accounts and
wealth inequality data is then somehow applied to all that in order
to — supposedly — “impute tax-exempt capital income.”
Obviously,
there cannot possibly be any mathematical model that could achieve the
feat of combining the multitude of those disparate and overstretching
data sources. In reality, the Piketty scholars have by an artful
manipulation of the sources picked and chosen what aspects of all that
welter of data to refer to in order to verbally motivate their
conclusions. All the references to statistical models serve only as
smoke and mirrors designed to lend academic credibility to the resulting
computations.
The Piketty study is a potpourri of sources without any falsifiable scientific method to combine them.
Propaganda for war
There
is no doubt that the scandalous history of Russian “oligarch” wealth
and contemporary urban legends about the malicious grip of oligarchs on
Russia have initially informed the Piketty scholars in their quest to
prove “extreme inequality” in Russia. More than that, I am inclined to
see the Piketty report as one more installment in the Russia bashing
propaganda in line with notorious propaganda hoaxes like Assad’s
supposed chemical attacks, the Salisbury incidents, Russian Olympic
doping scandal, invasion of the Ukraine etc. At the end of the day, the
question is about propaganda for war, which we must expose.
The Piketty research team is financed by the European Union, needless to say.
Here is the link to the full Awara Study: The Case Against Thomas Piketty. Lies, Damned Lies, and Statistics.
Liberteon
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