A modest bourgeoisie buds in Russia

On a recent snowy day, 45,000 people converged on a new Scandinavian furniture store here, the hordes so vast that they paralyzed area roads.

The stampede at the IKEA outlet left the latest footprints of a group slowly gaining clout as Russia lurches into its second decade of capitalism: the middle class.

Their growth is crucial to fostering economic and political stability in Russia. As Michael McFaul, a Russia expert at Stanford University, puts it: "No middle class, no democracy."

While surveys reporting the number of middle-income Russians vary wildly - from less than 10 percent to 30 percent nationally - and some experts question the strength of their moorings, one thing is clear: These Russians think differently both from the nouveaux riches, who often got rich quick by stealing wealth from the state, and from the 30 percent of the population living in poverty.

"Their distinguishing characteristic is their inner drive," says Elena Koneva, director of COMCON, a Moscow market research agency whose consumer surveys put middle-class membership at 7 percent of the country's 144 million population, with 20 percent of Muscovites classified as sredny klass. These energetic Russians have little patience for the way things were done in the Soviet past.

Take composer Alexander Bakshi, whose avant-garde works for theater are in tune with his bold approach to life: "It's not a popular thing to say, but I don't feel sorry for the Russian intelligentsia," says Mr. Bakshi of many of his colleagues who are now bitter. "They are still waiting for someone to take care of them. If the books or the music they're writing are not finding an audience, then they must figure out a way to become competitive. And maybe that means switching to another line of work." Bakshi is spending some of his recent earnings on an apartment renovation.

Concentrated in a few urban areas, particularly the capital, middle-income Russians commonly work in the finance, insurance, or legal sectors. Some are managers at large Russian or multinational firms. But, as yet, most are not entrepreneurs - a group that in the West forms the bedrock of the intermediate class.

Snapshots from several surveys show that a typical middle-class Russian is in his or her 30s or 40s, as likely to be male as female, has a college degree, and has an apartment and a car. What's missing are mortgages and car loans, since most Russians live in apartments they inherited for free from Soviet times - and since credit, the currency of choice in middle-class America, is only in its infancy in Russia.

The bourgeoisie prizes its property: Insurer AIG Russia reports a 75 percent increase in sales last year in its personal lines department - an indication that more Russians have apartments and cars worth safeguarding - and evidence of the middle-class habit of thinking long term.

Two surveys define a middle class household's monthly per capita income as between $150 and $2,000. But, because of the Russian tendency to hide earnings, actual income is assumed to be higher. So consumer spending is used as a more accurate yardstick of wealth. Researchers count washing machines, computers, cars - and even lawn mowers - to gauge middle class status.

But these Russians are distinguished by more than material possessions: They've got a go-getter mentality. In a country where for decades, the government assigned jobs and handled most everything else in a predictable, if minimal way, the middle class is embracing the open market with dogged determination.

Although she makes only $400 a month at her environmental analyst's job at the Moscow Design Research Institute, Alyona Inyakina is able to save enough to buy a new computer and a vacation in Finland. While previous generations tended to marry by 19 or 20, Ms. Inyakina wants to get on her feet professionally first. "By 30, I want to have a family and an interesting job. I want to reach my potential," she says. And she does not expect anyone to help her. "People must solve their problems themselves."

Elena Anfimova did just that. Once a schoolteacher and assistant principal in Ryazan, a city about 125 miles from the capital, she found work as an office manager in Moscow four years ago. She left a career of 14 years, along with its meager state-paid salary. "Of course, I miss teaching," Ms. Anfimova says. "But at the same time, I don't regret leaving. I've learned a lot, and I like that."

But when experienced professionals abandon their fields for better opportunities, it's a double-edged sword for a society, she says. "The people who are leaving [teaching] are some of the most decisive and energetic."

State-paid teachers, doctors, and employees in the cultural sector, particularly those past mid-career, are among the 50 percent of Russians now hovering between poverty and middle class, says Tatiana Maleva, director of the Independent Institute of Social Policy in Moscow. While they are middle-class by education and values, their salaries do not measure up. "They could become middle class if the conditions are right," says Ms. Maleva, adding that the government must help them find ways to earn more, through, for example, continuing education modeled on Western programs that support professional mobility. Maleva's December 2000 middle-class survey is to be published this spring.

But some doctors are thriving by either moonlighting in the private sector or leaving their state jobs. Moscow dentist Elizaveta Yanovskaya felt the stirrings of personal initiative early: She joined a private dentists' co-op in the late 1980s, when such things were first allowed under Gorbachev's perestroika. Ms. Yanovskaya now works at one of a chain of Masterdent clinics, where starting prices range from $10 for an silver amalgam filling to $450 for braces - prices affordable for fellow middle-class Russians.

While Yanovskaya enjoys the material rewards of her profession - including the occasional designer dress and the $1,500 a year it takes to send her daughter to a private school - she says that market psychology took some getting used to. As part of her career development, she took courses on how to explain and sell services to patients. "We all grew up on the idea that medicine should be free," Yanovskaya says. "But now I know the value of my work."

Despite all the success stories, the overall economic picture in Russia is mixed. The gap between haves and have-nots is widening. In 1980, the richest 10 percent of Soviets had 3.2 times the income of the poorest 10 percent. The latest government statistics show that ratio up to 13.9 to 1. But UN figures for 2001 put the gap at 23 to 1.

Another issue, some analysts say, is how solidly those clinging to the middle ground are rooted. Nascent before 1998, the middle class was battered by the ruble devaluation of that year. While the economy has since stabilized and shown encouraging growth, it still relies heavily on volatile oil revenues. Despite a number of recent reforms, key structural problems in the economy remain unsolved.

Perhaps the greatest weakness of the middle class, Maleva says, is the low number of small businessmen - an engine of middle-class prosperity in the West.

Figures compiled by BISNIS, a US government resource center for American firms considering investing in the former USSR, show that small- and medium-size enterprises employ only 10 percent of the Russian workforce. In the US, they employ 52 percent of the workforce, in the European Union, 72 percent.

Business owners have a stake in stability, notes Anders Aslund, an expert in post-Soviet economic transitions at the Carnegie Endowment for International Peace in Washington. He notes there is 1 enterprise for every 20 people in Russia. That compares to 1 for every 7 in Ukraine, another emerging market, where he says the figure matches the US rate.

In some ways, Russia's struggle toward a larger middle class represents a battle between corrupt officials and entrepreneurs. "The security police, the tax police and other law enforcement agents are the organized crime in Russia today, so you have to get the state-sponsored organized crime under control," Mr. Aslund says. "They're the reason there are so few enterprises."

Observers disagree on whether the middle class itself is developing the kind of law-abiding culture that goes with Western-style democracy. A majority of COMCON's respondents say that they do not see obeying the law as crucial. Many Russians continue to receive part of their salaries in envelopes of cash that leave no taxable trail. Kiosk owners often sell pirated merchandise.

The middle class is partly a product of the hidden economy, says Maleva. "More than a third of our respondents admit that they have informal income," she says. "They have grown accustomed to making a living in the informal sector."

Yet, in a market where financial transparency often invites corrupt local officials to grab a share, skirting the law is often seen as a legitimate survival tactic. President Vladimir Putin has decried official "legalized corruption" that stifles small and medium businesses. Russian lawmakers are considering ways to streamline licensing, registration, and other bureaucratic choke points.

Aslund says that, as further reforms are enacted, entrepreneurship will grow - and so will the habits of good citizenship. He points to last year's introduction of a 13 percent flat tax rate, which resulted in a 50 percent increase in collections.

Several experts see the political imprint of the middle class at the ballot box. From a study he and a Harvard colleague made in 2000, Professor McFaul at Stanford notes a strong correlation between those who identify themselves as middle class and those who vote for centrist and right-of-center parties. McFaul says that this is an indication that, like their counterparts elsewhere in the world, the Russian middle class shuns extremes. "They don't vote for the Communists; they don't vote for the fascist party," McFaul says. In his survey, 30 percent of the respondents identified themselves as middle class.

In the past five years, Aslund sees healthy signs in a four-fold increase in nongovernmental and volunteer organizations, which are part and parcel of democratic civil societies. "In the past, nobody felt any responsibility for anyone outside their immediate family," Aslund says. "Now, charity toward other people is developing, because people see that no one is taking care of these needs."

Sergey Shporkhun is among those new volunteers. Working 15 hours a day, first in sales and marketing for a multinational that manufactures machine-cutting tools, and then at his own import business, he finds time to fund-raise for a charity that serves free meals to Moscow's poor. "I have always admired the way Americans help each other out," he says.

Like many other up-and-coming Muscovites, Mr. Shporkhun, an engineer by training, is earning an additional degree, in this case an MBA. He sends his mom on vacations abroad, is about to buy a car, and recently bought $2,000 worth of furniture from the new IKEA store (though not on its tumultuous opening day). He is saving money to eventually launch local production of the items he now imports - microfiber products used in cleaning and in makeup removal.

Shporkhun and many of his peers are markedly upbeat about their possibilities in the new Russia, a signal that this generation is not thinking about leaving.

Andrey Subbotin, an advertising and public relations specialist with Loko Bank in Moscow, expresses the difference between Russia's past and present in color. "I was born toward the end of the Brezhnev period, the era of stagnation," he says. "It was a time when everything was gray, not just the dimly lit streets, but life in general."

Today, he describes a kaleidoscope of opportunities that turns on the dynamism of the middle class. In a sentiment often echoed by fellow members of Russia's budding bourgeoisie, Subbotin beams, "Life has become interesting."