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Regular version of the site

Life of the Russian Regions is Hidden from the Government

About 40% of the Russian able-bodied population are employed in the informal sector of the economy. This is a competitive market economy. Subsistence production, distributed manufacturing, ‘garage production’, seasonal work and various cottage industries flourish in the Russian regions. The economies of many small cities feature strict specialization and developed cooperation, in the context of internal competition between families and clans. These are the findings of HSE professors Simon Kordonsky and Yury Pliusnin in their study ‘Social Structure of the Russian Provinces’.

There is a widespread opinion that the social stratification of Russian society is class based, and an individual’s position in the social structure is determined by the level of their income. The stratification introduced by the state, such as differentiation into governmental officers, employees of public institutions, and individuals employed by business companies, remains an external differentiation and is not a basis for people’s self-identification.

Various research has shown that Russian citizens’ social status is determined not by the level of income, but by the correlation between the source of income (public service or commercial sector) and their type (salaries of governmental officers, public service employees, employees of business companies, pensions etc.), as well as relationships between neighbours and inside families and clans.

The state has introduced a certain social structure in the Russian regions, but there are also other types of social division, which are often archaic in origin but were revived in the post-Soviet period in almost the same forms as they existed during Tsarist Russia. Subsistence production, distributed manufacturing, ‘garage production’, seasonal work, various cottage industries and other forms of ‘survival economy’ generate a specific social structure, which is invisible to the government.

HSE sociologists and economists, supported by the Khamovniki Fund of Social Studies Support, tried to find out how things work in the Russian regions.

Simon Kordonsky, HSE professor and head of the Khamovniki Fund expert council, and Yury Pliusnin, HSE professor, presented the results of their study on ‘Social Structure of the Russian Provinces’ at the roundtable discussion ‘Russian society outside big cities: class structure, distributed way of life, informal economy’.

This study of the structure of society in the Russian provinces was based on field data collected in 2011-2015. Over 30 expeditions took place during the five years, and, thanks to the conducted interviews and observations, original field materials have been collected describing social relationships and social structure in about 50 local communities in Russia.

The authors revealed that the studied local communities are not attached to existing administrative divisions of settlements, municipal districts, or urban boroughs. Historical connections and socio-political factors are much more important for establishing a local society as a separate unity. Its territory may exist within the borders of municipal districts or urban boroughs, or be larger, or, more frequently, include several districts. ‘There are reasons to believe that territories of many local communities still preserve the connection with district (uyezd) division of the Tsarist Russia, and even more ancient borders (those of ethnic tribes)’, Kordonsky said.

Government sees only public service employees

The main conclusion made by the project authors is that the real life of the Russian provinces, both economic and social, is hidden from the government. The official view on how Russia is organised has little to do with the true state of things.

Russians often feature a distributed lifestyle, which means several types of employment, several social statuses, and inconstancy of living and work. An officially unemployed individual, pensioner, or even employee of a public institution can at the same time be involved in gardening, have a garage and repair cars in it, travel for seasonal work in other cities, and be employed in a family business. Most of their employment is in the shadows, and thus, it’s rather difficult to monitor their activities.

Formally, there are four class groups in Russian society: the government (state service classes) – about 5% of the population, common people (serving classes) – about 60% of the population, entrepreneurs (profit-making classes) – 15%, and marginal groups (out of classes) – 13%.

Most of the population of the Russian provinces are common people, who are most often divided into two big categories:

  • ‘Rent’ – working people (employed in public institutions) and some young pensioners – people who attend to various public tasks, including political, administrative, social, and economic;
  • ‘Active’ people, or entrepreneurs, independent and self-employed, who are often outside of the official and local economy and not registered in it: local small businesses and seasonal workers (people who go from small cities and settlements to large cities in search of work).

The state is focused on interacting with social groups from the ‘rent’ category, while the ‘active’ population is totally outside its field of vision.

Entrepreneurship flourishing

It is a widely-held view that entrepreneurship and business in Russia are not developing and the economy is concentrated under state ownership, but this is not true, the authors claim. According to their calculations, up to 40% of the country’s able-bodied population are employed in the informal sector of the economy, and the number of entrepreneurs is twice as high as in official statistics. Informal business is competitive, it conforms to market rules, implements innovations, and helps the population survive economic crises, inflation, devaluation and other macroeconomic shocks. ‘This is proved by the ease with which the country is surviving the current economic problems. The country hasn’t even really stirred as a result of recent sanctions and the fall of the rouble’, Pliusnin emphasized.

Informal forms of economic activity, which in some communities have become a special type of life support for a considerable part or even the whole local population, according to the researchers, include subsistence production, distributed manufacturing, ‘garage production’, and seasonal work.

Many families are involved with ‘distributed manufactures’ (regulated by market mechanisms exclusively). They produce local specialities from local raw materials, which are often unique. Such enterprises feature strict functional specialization and developed cooperation in the context of fierce internal competition between groups of families and clans.

‘Down manufactures’ in Uryupinsk and Novokhopersk are examples of such ‘distributed manufactures’. According to Pliusnin, 100% of these cities’ residents are employed by these manufactures. Some of the households grow goats, others shear them, still others prepare the down, still others knit, and still others sell. The production ‘machine’ works accurately without fail. Certain innovations, such as machine knitting, are sometimes introduced into the production, which improve its profitability. And all this happens outside the formal economy.

Another example is ‘fur manufacture’ in Labinsk, which works according to the same principle. Up to 25000 families employed there dominate the national fur market.

‘Garage production’ means shadowy, unregistered diversified production of goods and services, which are situated mainly in garage complexes. ‘Garage production’ is widespread exclusively in cities, both small and big ones. Such ‘garage economy’ is as developed a model of life support in the provinces as ‘distributed manufacturing’, as well as subsistence production and cottage industries. Kordonsky said that, according to data from researchers in Ulyanovsk, 30% of all PVC window frames, as well as a lot of spare parts for imported cars, are produced in garages.

Seasonal work is a way of earning a living by means of recurring labour migration to the country’s industrial centres. Seasonal work is the basis of survival for 20 to 50% families in the Russian provinces. This model is closely connected to local small entrepreneurship and usually evolves due to inadequately high costs for the governmental regulation barriers to people’s economic activities. A consequence of the redundant ‘risk payment’ is potential entrepreneurs’ outflow into the grey economy, which seasonal work largely is.

Everyone is fine with informal workers

Such large-scale economic activity of the population remains out of sight not only for state statistics and control, but also is regulated neither by local nor by federal government. These phenomena are not something completely new: they are historical and were widespread in Tsarist Russia as a means of survival means for people in the provinces. In the Soviet times they were ‘lost’, excluded by the industrial economy and full compulsory employment. But as soon as times changed, society ‘remembered’ these former ways of living and went back to them after evaluating their effectiveness and competitiveness on external markets.

The informal structure of society and the informal economy today is convenient for everyone, both the people and the government, the authors believe. The government loses taxes but saves on social security payments. Informal employees survive crises and don’t protest against cuts in state expenditure on health care and education, since they are used to solving problems using their own efforts and money. At the same time, the population has the opportunity enjoy their lives. A distributed life style gives freedom and independence, plus sufficient earnings without taxes. In addition to that, it unites society. Unity of the local community is provided by high level cooperation between families, kins, clans, cliques, and corporations, and the lack of ‘aliens’ among them.

The solidarity among society in the provinces is high, and this society is homogenous in terms of origin, everyday life style and economic practices. ‘Civil society in Russia has no organization, but has formed institutions. They include saunas, fishing, restaurants, and so on. This society is stable and mobile, but it is not developing’, Simon Kordonsky summarized.


June 10, 2015