22 September 2020, Tuesday, 18:13
Sim Sim, Charter 97!

Who Does Make Money While Belarusians Are Getting Poorer?

Who Does Make Money While Belarusians Are Getting Poorer?

Social inequality has increased dramatically in the country.

In Belarus, the income gap of the population is growing: for the first three months of this year it made up 7.4 points between the rich and the poor. Although it was 6.8 points over the same period last year. Why is this happening and what may indicate in the economy?

Economist Leu Marholin answers questions of Charter97.org:

- There are global laws of economic development. If a country gets richer and the economy develops, then, despite the prejudice that only the rich benefit from it, the gap between the rich and the poor is actually decreasing.

If a country is poor, the gap is increasing. Dozens of examples from different countries prove this. Rich people can maintain their level of well-being and the gap increases not because they become richer, but because the poor are getting poorer.

And the growth of this gap is an essential symptom in the state of the Belarusian economy. Unless we break the trend of our economic development, we will not get rid of this and will watch the social inequality increasing.

- In this regard, can we say that Belarus has been trapped by poverty?

- The "poverty trap" is a bit different. It shows that the country is in the state of no way out - like a hamster in the spinning wheel. The country is trying to do something, but nothing works.

Belarus is getting poorer amid regular government actions. Economists have determined that if a country wants to escape from poverty, it should not catch up with more developed countries, but try to outrun them.

Not in all spheres, but in some relatively new ones. Because new economic clusters are developing, science and technology are becoming more and more involved in the economy. And if a country wants to break from the "poverty trap", it must invest primarily in education.

And it should not try to catch up with developed countries by "modernizing" woodworking or mechanical engineering, or by opening new enterprises in raw material and chemical industries. It should try to outrun them in science-intensive industries, Internet technologies, and so on.

The experience of other countries shows it is quite possible. It's unwise for the Belarusian authorities to look for investors who are going to erect plants and factories in our country: most often investors are trying to move environmentally harmful industries to other countries. And a country that does not create favourable conditions for private capital, like Belarus, has to accept doubtful and dangerous projects.

The most vivid example is the battery plant near Brest, which is poisoning the soil and atmosphere near a large regional centre.

- According to the latest data, half of entrepreneurs want to close their business in Belarus. Who does then form a rich layer in our country?

- To close up a business does not mean to leave the country. There are many entrepreneurs who have moved their business abroad but stay in Belarus. And they are not getting poorer. Moreover, they become even richer.

I know people who have moved their business to Russia, to Smolensk and Bryansk regions, to the Pskov region, to the neighbouring regions of Ukraine and Poland, and their position has only strengthened.

There is a certain correlation here, but in general capital outflow does not mean a sharp decrease in the number of rich people. Others usually take their place.

As for the richest strata, Belarus is characterized by the so-called "merging of power and property" - a phenomenon that 100% typical for all authoritarian, dictatorial countries.

It is absolutely common for Belarus, Venezuela and many countries with a similar political system. When there is no legal way to become rich, officials start to trade in their position and official powers.

On the other hand, when an entrepreneur does not feel safe in the legal field of his country, he starts looking for protection from officials and is ready to pay for it. This merging results in state oligarchic capitalism, when successful business is supported by officials, and an official takes his position as a way to get rich.

- What can the growth of social inequality in Belarus lead to?

- In theory, it can lead to the growth of social tension and protest moods. Probably, there is some "red line" after which the people will rise - but it is likely the issue of sociology than the economy.

In my opinion, here the "example of successful development" of our close neighbours is relevant - in particular, of Ukraine. If Ukraine steps up in the next couple of years, I think it may serve as a catalyst for changes in Belarus.