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Post-Soviet Russia Suffering 'Extreme' Wealth Inequality, Study Finds

The Russian national flag is flown at half-mast on top of the Senate Building in the Kremlin on the day of national mourning in Moscow, Russia, Nov. 1, 2015.

A new U.S. study has found an “extreme level” of wealth inequality in Russia that has increased much more significantly than it has in former Eastern European communist countries and in China since the fall of the Soviet Union in the early 1990s.

The study, conduced by the National Bureau of Economic Research, found inequality in Russia has been driven by the transition from communism, during which wealthy Russians accumulated offshore wealth about three times larger than the net value of the country's foreign reserves. This offshore wealth is comparable to all the financial assets held by households throughout Russia.

'Dramatic failure'

“The dramatic failure of Soviet communism and egalitarian ideology ... seems to have led to relatively high tolerance for large inequality and concentration of private property,” the study said.

It predicts inequality in Russia will persist “as long as billionaires and oligarchs appear to be loyal to the Russian state and perceived national interests.”

Russian living standards were between 60 percent to 65 percent of the Western European average in 1990 and 1991 and increased to 70 percent to 75 percent by the mid-2010s, according to the study.

Rent-based resources

The levels of inequality in Russia are in part the result of “a persistent concentration of rent-based resources, which are unlikely to be the best recipes for sustainable development and growth,” researchers said.

The study said official estimates of inequality in Russia greatly underestimate the concentration of income. Researchers said the report includes the “first complete balance sheet series” detailing private, public and national wealth and offshore wealth estimates in post-Soviet Russia.

The National Bureau of Economic Research is a nonprofit, nonpartisan research organization.