Most economic analyses of Russia at war focus on the shift in productive capacity toward military factories and the rewards for relatively socially marginalized men who sign up to fight. This is understandable, because the degree to which real resources—the most important of which is human workers—can be rechanneled to armaments and the military is a key test of the regime’s durability, given its decision to stake everything on the ability to sustain or even expand the conflict. However, as any economic historian of major wars will tell you, short of extreme repression, workers and their families need substantial material motivation to participate in war economies, because patriotic propaganda is never sufficient on its own. More than exhortations to «work» at the front or in the factory, they need visions of a more equitable peace and promises of opportunities for their children’s social mobility and social reproduction.
Yet in Russia, measurable inequality and the visible and invisible gaps between the economically protected and the vulnerable remain as stark as ever. How should this factor into assessments of the wartime political economy? It is relatively easy to argue that the state has played a smart card by emphasizing the benefits to weaker citizens of so-called military Keynesianism—that spending heavily on military technology, soldiers’ pay, and benefits has a «multiplier» effect, especially in poorer communities and in their pockets.
However, promoting «military Keynesianism» masks a reality of exacerbated inequality in Russia and that this stores up further political problems for the future—problems the regime created for itself through twenty-five years of anti-populist economic policies, such as raising pension ages and narrowing social benefit eligibility. It is a shortfall in analysis if we do not dwell on this angle: visible unfairness and the calculated economic division of the population into winners and losers matter now and will matter at the end of the war and beyond.
First, though, we need to review the debate about the effects of military spending on the economy and on the «plurality» of Russian workers—those who live paycheck to paycheck, have few if any assets beyond an inherited Soviet-era apartment, and who, most importantly, see themselves as both the backbone of the nation and yet express discontent about the broad economic course taken since 1991. After 2022, cash was «sloshing around the system» at the same time as Russia accelerated its demographic decline. This meant that, at least in theory, structural power was shifting in favor of labor. Real incomes increased, albeit from a very low base, and peaked in 2024.
Military Keynesianism is about redistribution of incomes and transformation of societies—in this case, toward «peripheral Russia,» with war money as a potential «social elevator.» However, even those who make the strongest version of this argument acknowledge that it has created enormous imbalances even in those same peripheries. They also concede that the beneficiaries in the military-industrial complex represent a relatively small group that is geographically delimited (for example, only parts of the enormous Urals region benefit from military production, while to the south, in the coal and chemical industrial areas, recession has already set in).
Other analyses of wartime spending argue that uncontrolled inflation is the main result and that this hurts household economies rather than aiding them in the aggregate. As is well known, austerity policies before the war depressed demand in the general economy—the one used by the majority of Russians—while the metropolitan real estate and consumption economy operates largely separately. Thus, the war indirectly led to a correction of at least ten years of faulty fiscal policy. However, as Nick Trickett pointed out over two years ago, fiscal reflation quickly met real capacity limits in the Russian economy, owing to demographics, geography (logistics and migration problems), and a long history of poor levels of investment and automation. The result was rising inflation.
While GDP (per capita or otherwise) is a notoriously problematic way of measuring the real economic effects of change, measures of inequality offer a different perspective on the war. Economic measures of inequality have remained stubbornly high. Even compared with the peak income inequality in 1999 (a Gini coefficient of 50), the official 2023 figure was, by European standards, still a high 40. As Ilya Matveev has pointed out, highly contradictory Gini estimates for Russia make the exercise somewhat futile while probably confirming that inequality is higher than official statistics suggest and broadly more similar to levels in BRICS countries than in the developed world. Thus, both the Gini coefficient and median income measures are not seen by researchers as particularly reliable overall indicators of inequality. Indeed, the relatively steep decline in the Gini from the cherry-picked date of 1999 is often used as propaganda to claim the great success of Russia’s pro-social policy—which is very much at odds with observed reality.
But what about wages? We hear a lot about enormous real increases in some industrial settings since 2022. Yet the fact remains that, in aggregate, real wage growth has been stubbornly sluggish when viewed from a longer-term perspective. The Russian Longitudinal Monitoring Survey—itself accused of distorted sampling—found that while real incomes rose nearly 5% in 2023, this followed a long period of stagnation and a sharp fall in 2022, a phenomenon we have written about before in relation to what Natalia Zubarevich has called «the law of small numbers»: what seems like a decent percentage rise is much less significant because of the low absolute starting point.
There are other indicators that not everything is as simple as it seems. The number of working pensioners has risen sharply since 2020, because despite indexation, pensions remain inadequate for physical survival without family help—at an average of $ 290 in 2025. It is true that government transfers have risen slightly as a share of income over time, which has ameliorated the longer-term crisis. Looking back from 2025 at the last two years, it appears that the upswing in real incomes could not be sustained and is already being eroded by stubbornly high inflation in staple goods. Once again, it is worth stating the secular trend: in constant 2023 rubles, median private-sector incomes were 20,610 rubles in 2008 and 21,762 rubles in 2023—barely 5% higher over fifteen years. There is no point converting these into dollars because of high exchange-rate volatility in those years. Public-sector incomes are even less flattering, and government income transfers are only 2% higher than in 2014, reflecting a long period of non-indexation of family and social security benefits since the Crimean annexation. As Thomas Remington has argued, Russia does not genuinely follow a policy of socially redistributive allocation of benefits—most programs are not needs-targeted and focus only on staving off complete destitution (e.g., old-age pensions). Remarkably, there are even politicians in the United Russia party who argue that this universal benefit should be axed completely.
Of course, measures of income inequality or relative poverty need to be considered alongside the relative tax burden on workers and the poor. By any measure, this burden in Russia is high—particularly because of the VAT rises from 18% to 22% in a few short years (starting in 2019). VAT now comprises nearly 50% of the tax take that funds the federal budget. VAT is generally a double «tax» on poorer people’s budgets. The flat income tax, much lauded by neoliberals abroad and at home, is in reality regressive because, unlike in many European countries, even the very poor in work pay it—there is no untaxed income allowance. Only in 2024 did higher earners begin to face more progressive rates, but one would still need to earn the equivalent of $ 630,000 to pay the top rate of 25%. Earners up to $ 250,000 pay only 18%. Contrast this with the absence of a wealth tax and the relatively low taxes on unearned income and property. Inheritance tax was abolished in 2006. Dividend taxes (now 15%) provide a simple way to avoid even the low-income taxes. The system of mandatory financial levies on the population is designed to favor those with assets, movable or otherwise.
Indeed, it is in the area of wealth as assets that inequality in Russia is at its starkest. Wealth polarization in Russia is worse than in the US: the top 1% hold 70% of assets; the top 5%, 80%. By Putin’s second term, Russia had become a country where 10% of the population received half of all income—a far cry from the early 1990s. Even in Putin’s first term, it had become a resource-rich country full of poor people who owned no assets beyond their poorly maintained inherited Soviet apartments and perhaps a Russian-made car. Even beyond assets, looking at cash deposits is instructive. It is often said that Russians are cash-rich—making use of current high interest rates to save for the future—yet 90% of deposits are held by only 1% of the population, and 96% of savers have less than $ 12,000 on account.
This offers a different perspective from the one based too heavily on immediate polling about the war’s popularity. Prominent political polling suffers from a form of «presentism,» forcing respondents to react to an agenda far from their real concerns. The problem of salience is illustrated well by long-term trends in sociological research on values rather than opinions. The Russian Academy of Sciences regularly publishes research showing a large and growing demand for «social justice» (prior to the war, this was around 60%). By contrast, only a third of respondents favored a future built on making Russia a great power, and those favoring a return to «national traditions» were a shrinking minority (27%).
Elsewhere, the same RAS researchers report a fundamental shift of opinion away from a preoccupation with «stability» toward support for significant political and economic change, with a majority after 2018 in favor of the latter. Beyond personal misfortunes, poverty and destitution remain among the chief fears of most Russians. Despite the war appearing to «consolidate» society, a significant majority still cite «inequality,» «class stratification,» and «the people versus the authorities» as the three main sources of enmity in Russia. When asked what concepts should underpin Russian «revival,» the top responses were «fairness» (32%), «peace» (29%), and «order» (21%). Some of the smallest were for «autocracy,» «orthodoxy,» «Russian empire,» and «Great Power status.»
Russian society is, by any measure, an outlier among rich and educated countries. The contrast between the haves and have-nots is stark and a source of social discontent. It is also a brake on growth and diversification away from a natural-resources export model. More redistribution would have a much better multiplier effect in the real economy and spur small- and medium-business growth and employment. As it stands today, outside of some conspicuous consumption on goods and services in Moscow, the wealthy hoard or export their money, and it does not get recycled effectively into economic growth.
Of course, total elimination of income inequality in even a quasi-market economy is impossible. But even if the war ends and the regime continues, it has enough tools to reduce excessive stratification, with progressive taxation being the most effective. The point is that, more than any national-conservative ideology, Russia for twenty-five years and more has been governed in a way that protects privilege and unearned wealth. And this is something the current and future elites—and probably a majority of even middle-class critics—would not seek to change, because they are largely beneficiaries of a system of regressive redistribution set up in the 1990s.
