With little comment and no fanfare, the Russian government did a peculiar thing on December 11th: it extended operational permission for old landfills lacking proper documentation until 2028.
In 2017−2018, landfills became a hot political topic because of the risks posed by gross mismanagement of municipal waste across the country. Protests against pollution and toxic exposure could not simply be brushed under the rug. They were largely «apolitical» in nature—an appeal directly to Moscow—which responded by creating a system of regional operators awarded no-bid contracts and driving up prices. The episode highlighted one of the biggest structural obstacles to Russia’s economic development: the inheritance of Soviet-era assets by private owners who had no incentive to invest in efficiency or modern technology, preferring instead to run those assets into the ground while extracting profits.
The latest delay illustrates just how slowly Russian governance moves and, for all its technocratic flourishes, how little Mishustin’s «fool-proofing» of Putinism has achieved in the most basic aspects of economic governance. Officials are meanwhile claiming a major victory: the lowest poverty rate on record at 6.5%. Reducing poverty has been a recurring policy focus since the 2020 constitutional amendments explicitly targeted the issue. That so few people now live in absolute poverty does reflect progress, but it comes with major qualifications. The subsistence minimum has been tied to the minimum wage for the past six years, yet those benchmarks remain miserly and often inadequate. Putin set the ostensibly lofty goal of bringing poverty below 5% by 2036—a target that is simultaneously unambitious and increasingly irrelevant amid the distortions caused by the war.
What do landfills and the official poverty statistics have in common? Both reveal a shared crisis of investment in productivity-enhancing capital.
Russia’s labor market is not only structurally strained by the war’s demands; it is being compressed by repeated minimum-wage hikes and the absence of productive job growth outside military-related industries. Median wages have risen 14% year-on-year, even as officials insist annualized inflation is running at just 6.64%—implying significant real wage gains that are not clearly visible in aggregate data. State wages and pensions are being indexed at 7.6%, technically a real-terms increase. At the recent Russia Calling! forum we heard the polite version of the economy’s slide into painful recession: it is merely finding a «new balance.» The Ministry of Economic Development, Putin, and Minister Maxim Reshetnikov have all adopted the language of a soft landing to paper over the cracks. Yet these figures do not add up when one looks at retail turnover, the housing and auto markets, or countless grassroots anecdotes.
Instead of making Russians richer, what appears to be happening is compression. Wages at the bottom are being lifted, but those increases feed straight into higher prices for staple goods, which have risen far faster than headline inflation. Worse, the economy’s decade-long pattern of low-productivity job growth, mostly in hospitality, retail, and low-value services—cannot be reversed while so much investment remains clustered in the defense sector and overall fixed investment continues to decline.
Whether one calls it a «new balance,» a recession, or something harsher, the landfill extension and above-inflation indexations are part of a tired, recurring formula. Whenever the federal budget tightens, cash transfers to the population are prioritized at the expense of capital investment. Officials then inevitably find ways to squeeze more life out of aging infrastructure and utilities. Finance Minister Anton Siluanov, hypersensitive to accusations that his budgets are harsh, now justifies renewed spending pressure as «thinking ahead.» The new budget rule lowers the reference oil price from $ 60 to $ 55 per barrel through 2030—one dollar less each year representing money that will have to be found elsewhere. This is less «thinking ahead» than an admission that raising taxes further would risk severe near-term economic shocks.
Revenues are hardly an idle concern. For the past three years, January-November federal budgets have looked relatively balanced, only to be blown apart by a massive year-end spending spree to pay contractors and kick-start projects. With oil markets uncooperative and sanctions biting, the deficit already stands at 4.3 trillion rubles before the traditional December deluge. These deficits are not yet punishing, but they generate inflation without relieving any of the bottlenecks that keep pushing prices higher in an economy that is somewhere between tepid and rapidly cooling.
Rather than raising taxes openly, the authorities are targeting the informal sector, aiming to raise an extra 1 trillion rubles by 2027 by shrinking its share of GDP by 1.5 percentage points. The irony is stark: the more successful the government becomes at formalizing activity—a drive that began in earnest after Crimea to secure revenue—the more obviously absurd the overall budget structure, spending priorities, and attempts to crowd in private capital will appear.
Some people are still making money in the wartime economy. The Central Bank’s regional survey shows that the «gains» remain heavily concentrated in Central Russia, though there is still no clear explanation for supposedly strong real wage growth nationwide. Demand for warehouse space is forecast to fall more than 43% in 2025, more than halving the boom levels of 2023. This cannot be dismissed as mere rationalization after an unsustainable surge. Overall, Russians are getting poorer in real terms even as Moscow continues its usual gravitational pull, vacuuming up capital and the zero-sum spoils of the regime’s wealth redistribution.
We began with landfills because they symbolize a deeper failure: the failure to build, to invest, to nurture private markets, and to develop the economy beyond the needs of immediate expediency. Since 2012 it has been standing policy to believe that low interest rates alone could overcome the shortcomings of the 2000s energy-financed growth model. Yet with so much infrastructure decaying and so many areas crying out for productivity-enhancing public goods, the distributional politics of lower inflation remain punishing.
As long as the average household spends roughly 40% of its income on food and basic staples, and as long as there is no credible capital-investment plan to lift growth—1% GDP growth projected for 2026 looks absurd as job vacancies plummet and most sectors see declining earnings—the anti-poverty campaign is mainly spreading misery more evenly.
Just as the UK has discovered that repeatedly raising the minimum wage without accompanying public investment or productivity gains improves income equality but not actual living standards, Moscow is only now confronting the costs of its 2020 pivot. These losses from past policy choices keep compounding until the price of doing anything substantive becomes prohibitive. At that point, policymakers respond by persuading citizens they do not deserve more, do not deserve better, and should expect no real help from above. Instead, the system will stretch the useful life of whatever it already has to the breaking point—whether that be landfills, transport networks, or, in the case of those working on military assembly lines or sent to the front, the workers and soldiers themselves.
