Concentration is the Name of the Game
In an effort to get to know the Russian markets, I’ve been doing a good bit of research during my first few days at work. At first, I was daunted by the prospect of trying to learn a whole new universe, but it’s becoming clear that all you need to do is get a grip on the top 10% of things – or even less. In Russia, that seems to be nearly the whole story.
There are 50 components of the RTS Index, one of the main stock market indices in Russia. The top 4 names account for 58.3% of the total $285 billion capitalization of the market. The top 3 oil companies account for 31% of the index. And this all excludes Gazprom, the state-controlled behemoth – excluded from indices because of the limits on foreign ownership.
But concentration in the economy doesn’t stop there. In 2004, the 23 largest businesses in Russia accounted for 57% of all industrial production. It gets even wilder when exploring who owns and controls these assets. One estimate is that 44 families and industrial/financial groups own or control over 80% of the country’s GDP. No surprise, then, that Moscow’s population of 30 billionaires puts it at the top of the list of cities in the world where billionaires live.
Of course, for a more balanced picture let’s look at the other end of the spectrum. Despite the surfeit of billionaires who no doubt drag up the averages, at year end 2004 the average Russian income was about $310 dollars a month. The average Russian also identified a salary of $1500 a month as “having it made.” At the same time, about 21 million Russians earn less than $86 a month.
Concentration is a powerful theme, and it extends into the political sphere as well. There are 89 Federal Districts in the Russian Federation, each with a governor and regional government. In a new move, the Kremlin has carved out 7 super districts, each with an appointed administrator to coordinate activities between the Federal Districts. Sure. That’s why 5 of the 7 new “administrators” are former Security organ agents, and why about 70% of the staff of this new layer of government is from the security services.
The public’s perception of politics also falls prey to the same phenomenon. When a May 2005 opinion poll asked “Which politicians do you have confidence in?” the answers came back in like this:
Putin 40%
No one 28%
Zhirinovsky 10%
Zyuganov 10%
And the poll allowed you to vote for more than one politician.
With this much power and money concentrated in so few hands, it should make the next election to succeed Putin a very interesting one indeed.
There are 50 components of the RTS Index, one of the main stock market indices in Russia. The top 4 names account for 58.3% of the total $285 billion capitalization of the market. The top 3 oil companies account for 31% of the index. And this all excludes Gazprom, the state-controlled behemoth – excluded from indices because of the limits on foreign ownership.
But concentration in the economy doesn’t stop there. In 2004, the 23 largest businesses in Russia accounted for 57% of all industrial production. It gets even wilder when exploring who owns and controls these assets. One estimate is that 44 families and industrial/financial groups own or control over 80% of the country’s GDP. No surprise, then, that Moscow’s population of 30 billionaires puts it at the top of the list of cities in the world where billionaires live.
Of course, for a more balanced picture let’s look at the other end of the spectrum. Despite the surfeit of billionaires who no doubt drag up the averages, at year end 2004 the average Russian income was about $310 dollars a month. The average Russian also identified a salary of $1500 a month as “having it made.” At the same time, about 21 million Russians earn less than $86 a month.
Concentration is a powerful theme, and it extends into the political sphere as well. There are 89 Federal Districts in the Russian Federation, each with a governor and regional government. In a new move, the Kremlin has carved out 7 super districts, each with an appointed administrator to coordinate activities between the Federal Districts. Sure. That’s why 5 of the 7 new “administrators” are former Security organ agents, and why about 70% of the staff of this new layer of government is from the security services.
The public’s perception of politics also falls prey to the same phenomenon. When a May 2005 opinion poll asked “Which politicians do you have confidence in?” the answers came back in like this:
Putin 40%
No one 28%
Zhirinovsky 10%
Zyuganov 10%
And the poll allowed you to vote for more than one politician.
With this much power and money concentrated in so few hands, it should make the next election to succeed Putin a very interesting one indeed.
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