HAYASHI Hiroaki
University of Shimane

COMPARATIVE STUDY ON CHANGES IN THE MIDDLE CLASS BETWEEN RUSSIA AND JAPAN1

Forward

These days in many countries centering on advanced capitalist countries, we can see growing tendencies to enlarge economic differentials. It is often said that the rich is becoming richer and richer, the poor is becoming poorer and poorer, and as a result, social classes are fixed between generations.

When we consider income distribution and economic differentials, we have to notice two points below. First, as for relation between economic systems and economic differentials, in capitalist countries differentials are larger than in socialist countries in general. In socialist countries, people don't admit large economic differentials. However, we have to know that within capitalist countries there are various types, from countries that large differentials are admitted by inhabitants, such as USA, to countries that have small differentials, such as the Scandinavian countries. Secondly, economic differentials differ from one another according to the extent of economic development. Economic differentials in developing countries are more unequal than in advanced countries.

When we analyze economic differentials, we consider the middle class as a key term. Middle class is a group of people located between the upper and lower class. The role of the middle class is to suppress conflict between the upper and lower class and to develop social stability. When we look back histories of capitalist countries, we can see that the middle class developed civil society and market economy. In modern Russia too, middle class is very important as a factor to develop market economy and as merkmal of transition to capitalism.

The aim of this paper is to compare present situation of economic differentials in Russia with that in Japan, and to analyze the meaning of the change in the middle class.

1. Economic development and differentials in Japan after the Second World War

In this section, I want to look back Japanese economic history after the Second World War, and show the relationship between economic development and differentials. I divide into two parts, before 1970"s and after that.

(1) Period of high economic growth (before 1970"s)

Before the Second World War (around 1940), Japan had extremely unequal income distribution, not only between professions but also between one's positions. Gini coefficient was high, from about 0.4 to 0.6 (see Table 1). A few peers and capitalist monopolized wealth, so property differentials were also very large.

After the Second World War, because of some postwar reforms2, situation changed greatly and economic differentials diminished considerably. In addition to the effect of the postwar reforms, because of economic effect of special procurement demand due to Korean War, effort and diligence of citizens, Japan had achieved high economic growth3 since the middle of 1950"s. Many people moved from rural areas to cities and industrial workers, in place of farmers, occupied in the center of occupational structure. In this way, Japan could attain both high economic growth and equal income distribution. This situation continued by the time 1970"s. Gini coefficient dropped to the level 0.3 in 1960-70"s (see also Table 1).

Table 1. Income Distribution in Japan in Pre and Postwar Period4
Year Gini Coefficient
1990
1910
1920
1930
1940
1962
1968
1974 		0.417
0.420
0.463
0.451
0.641
0.376
0.349
0.344

Here I show two different investigations (from 1900 to 1940, from 1962 to 1974).

In this way, although Japan was capitalist country, it had also a socialistic character, namely equality. It was often said that Japan was most successful socialist country in the world. A famous expression "Ichioku Sou Chuuryuu (all citizens are in the middle class)"5 appeared and many people thought themselves to be in the middle class. Japanese unique employment system also played an important role. For example, permanent employment system, seniority order wage system, enterprise welfare system and so on. This shows that in Japan whoever worked hard was rewarded, regardless of one's parents' occupations.

(2) Change in recent times (after 1980"s)

After the Oil Crisis in 1970"s, Japan entered into period of stable economic growth. From the middle of 1980"s, Japan went through the Bubble Economy, therefore inequality of income and property distributions rapidly enlarged. Table 2 shows the extent of inequality in Japan after 1980"s (Gini coefficient). We can see that economic differentials were enlarging year by year. Because statistical data differ from one another, we cannot carry out international comparison. Although many researchers have their own opinions, it is often said that Japan has more than average inequality level recently. Anyway, now Japan is not a country that had distinctive equal income distribution as before.

We can show causes of this inequality as follows. First, the Bubble Economy, after the middle of 1980"s, effected the inequality of income and property distribution. But, as the Bubble popped at the beginning of 1990"s and after that we could see reduction of property differentials, we have to find another cause. Secondly, especially for the upper class, social classes are fixed. T. Sato indicated that recently in Japan tendency of fixed social classes could be seen, especially for the upper classes (10-20%), based on the SSM (Social Stratification and Mobility) investigation6). The rich becomes more and more rich, the poor vice versa.

Accordingly, after 1970"s Japan changed greatly from a country with high economic growth and small economic differentials, to the one with low growth) and high differentials. We cannot say directly that the middle class broke down, but maybe we can say that now in Japan, people aren't rewarded for the effort as before. Besides, now in Japan unemployment rate is more than 5%, so more than 3 million people lose their jobs wholly. Some of them kill themselves because of their hard living. We can see that in Japan reduction in income directly connect to lowering of living standard.

Table 2. Extent of Inequality of income distribution in Japan(Gini coefficient)
Year Redistributed Income Original Income
1980 0.314 0.349
1983 0.343 0.398
1986 0.338 0.405
1989 0.364 0.433
1992 0.365 0.439
1995 0.361 0.441

Source: The Ministry of Health and Welfare, Investigation of Income Redistribution.

*Public pension is not included here.

2. Transition and economic differentials in Russia

In this section, we survey the situation of Russia. We divide into two parts, period of USSR and modern Russia. We compare each other and analyze how situation changed before and after transition.

(1) Economic differentials in USSR

It is usually said that income differentials are comparatively small in USSR. From official statistics, we can see economic differentials were equalizing time by time (see Table 3). As average income grew, differentials diminished not only between spheres of national economy, e.g. industry, agriculture and construction, but also between laborers, technical officers and officers in each spheres.

In addition, standard living cost was cheaper in USSR than in capitalist countries, e.g. cost of housing and transportation, electric and water chares, food cost, cost of heating etc. In this respect, minimum standard living was assured for almost all inhabitants. There was no unemployment officially. So, we could consider differentials in USSR to be more equal.

Of course, we cannot overlook many negative phenomena in USSR, e.g. lack of labor incentives, problems of perverted equality, namely there was few income differentials between who worked harder and who worked little. Moreover, as there were many black activities, not included in official statistics in USSR, the actual state of economic differentials may have been more complicated. Therefore, it is also an important subject how we understand social stratification in USSR, how we estimate scale of the middle class7) and so on.

Table 3. Income statistics in USSR (per month, unit: ruble)
Year Average income All mining and manufacturing Laborers (a1) Technical officers (b1) Officers Differential(a1/b1) All agriculture Sovkhoz laborers and officers Laborers (a2) Technical officers (b2) Officers Differential(a2/b2) All construction Laborers (a3) Technical officers (b3) Officers Differential(a3/b3)
1940 33.1 34.1 32.4 69.6 36.0 0.46 23.3 22.0 20.7 50.4 31.1 0.41 36.3 31.1 75.3 0.41
1960 80.6 91.6 89.9 135.7 73.8 0.66 55.2 53.8 51.9 115.5 65.7 0.45 93.0 89.2 45.8 0.63
1970 122.0 133.3 130.6 178.0 111.6 0.73 101.0 100.9 98.5 164.3 95.6 0.60 149.9 148.5 139.9 0.74
1980 168.9 185.4 185.5 212.5 145.8 0.87 149.2 149.2 148.5 185.5 122.8 0.80 202.3 207.9 90.3 0.97
1986 195.6 215.7 216.4 239.0 172.2 0.91 192.0 194.0 189.3 266.9 197.1 0.71 244.6 253.2 200.0 1.02

Source: Narodnoe Khozyaistovo SSSR za 70 let, p.431

(2) Enlargement of economic differentials due to transition

Before and after transition, how economic differentials changed? From Table 4, we can see changes of monetary income and income differentials after 1991. As for decile ratio and Gini coefficient, we can see radical enlargement of economic differentials immediately after transition8). Between 1992 and 1994, decile ratio changed from 8.0 to 15.1, Gini coefficient from 0.289 to 0.409. When we also see changes of real money income, it is clear that transition greatly lowered living standard of people. But, we have to notice that after 1994 differentials showed no marked fluctuations. However, official statistics don't always show the real state of income differentials in Russia. Like in the period of USSR, people earn income from side jobs and income in kind from private farms. So, when we examine disposable income included money from side jobs etc, economic differentials diminish a little. In addition, when we take into consideration low price of public utility charges (electric charges, cost of heating, food cost and so on), enlargement of income differentials in Russia doesn't connect directly to the lowering of living standard. May be we can think that in Russia, people guard themselves against lowering of living standard due to disorder by transition.

Table 4. Changes of monetary income and economic differentials (unit: %)
Year Monetary income* Real money income rate (against previous year,%) Sum 1st (mini) 2nd 3rd 4th 5th (max) Decile ratio Gini coefficient
1991 0.466 115.7 100 11.9 15.8 17.6 22.8 30.7 - 0.260
1992 4.0 53 100 6.0 11.6 18.8 26.5 38.3 8.0 0.289
1993 45.2 116 100 5.8 11.1 17.6 24.8 41.6 11.2 0.398
1994 206.3 111.9 100 5.3 10.2 16.7 23.0 46.3 15.1 0.409
1995 515.4 83.9 100 5.5 10.2 15.2 22.4 46.9 13.5 0.381
1996 769.2 100.8 100 6.2 10.7 15.0 21.6 46.4 13.0 0.387
1997 940.8 106.3 100 5.9 10.2 15.1 21.6 47.5 13.5 0.401
1998 1007.8 83.7 100 6.0 10.4 15.1 21.2 47.6 13.8 0.399
1999 1629.6 86.8 100 6.1 10.4 14.8 20.9 47.9 14.0 0.400
2000 2192.9 110.9 100 6.0 10.4 14.8 21.2 47.6 13.8 0.399

Source: Goskomstat (2001a), p.171, 187 and Goskomstat (2001b), p.130.

* Unit: ruble (from 1991 to 1997, unit: 1000 ruble)

(3) Formation of the middle class

In modern Russia, ten years after transition, how is the situation about social stratification? Just after transition, many researchers said that in Russia there was no middle class, only few rich people and many poor people. But, now most of researchers agree that also in Russia there are some people included in the middle class. However, about the scale and standard of the middle class, we can see various ideas. According to the journal "Ekspert", income of the middle class is from 6000$ to 40000$ a year9). One thousand households (about 20%) are classified to the middle class, e.g. enterprise managers, engineers and so on. Besides, lower rate of food supply, higher rate of service in household expenditure, possession of consumer durables are characters of the middle class. In addition, the middle class in Russia is divided into two parts, lower (income below 12000$) and upper (above 12000$). It is said that recently lower middle class is enlarging rapidly.

In this way, we can see that also in Russia the middle class is being formed that has its own way of living and sense of values, and that scale of the middle class is enlarging, although still smaller than in advanced capitalist countries. But, many researchers point that the upper middle class or elite class is stable10).

3. Discussion points from comparison of Russia and Japan

Finally, we propose some points about economic differentials in Russia and Japan, arisen from comparison of both countries.

  1. Russia and Japan have same tendency, in that they used to be more equalized countries, but now their economic differentials are enlarged. However, their problems resolved are not same.
  2. As problems of Russia, we can point out how to make up stable middle class, what kind of policies are to be carried out. I think that it is important for ordinary people to live a stable life, on the basis of some policies, e.g. protect of private property, maintenance of public peace and so on.
  3. Japan also changed to more unequal society than before, so intensification of social policy and social safety net is needed. We have to learn from original safety net system of Russia, e.g. income in kind from private farms, low price of public charges and so on.
  4. In Japan, decrease of monetary income, due to unemployment and so on, connect directly to lowering of living standard. But, in Russia, some ways of protection against lowering of living standard are embedded, e.g. income from side jobs and private farms, low price of public charges, and so on. Maybe we can say that Russia society is more stable than Japanese society.
  5. How do we have to judge USSR and socialism? We think one of the reasons of stability in Russian society exists in policies in the period of USSR. Although there were many negative phenomena in the time of socialism, we think that we have to judge some aspects of socialism positively, as a kind of welfare state11.

Conclusion

In this paper, we try to compare inner mechanism to lead social stratification in Russia and Japan. Both countries are in the process of change, so it's important to understand the other party's process each other.

References

Japanese

  1. Sato T. Unequalled Society Japan. Chuukou shinsyo, 2000.
  2. Tachibanaki T. Japanese economic differential. Iwanami shinsyo, 1998.
  3. Hayashi H. Transition and social stratification in Russia, in S. Mizobata and M. Yoshii eds. Theory of Transition to Market Economy. Sekaishisousya, 2002.

English

  1. Balzer H. Russia's Middle Classes. Post-Soviet Affairs,1998, 14,2.
  2. Kryshtanovskaya O., White S. From Soviet nomenklatura to Russian elite. Europe-Asia Studies, 1996. Vol. 48. No. 3.
  3. Lane D., Ross C. The Transition from Communism to Capitalism: Ruling Elites from Gorbachev to Yeltsin. Macmillan, 1999.
  4. Milanovic B. Inequality During the Transition: Why Did It Increase? 2001.
  5. Havrylyshyn O., Nsouli S. A decade of Transition: Achievements and Challenges, IMF.
  6. Nelson J. M. eds. Transforming post-Communist political economies. National Academy Press, 1997.

Russian

  1. Narodnoe Khozyaistovo SSSR za 70 let. 1987.
  2. Goskomstat. Rossiiskii statisticheskii edjegodnik. 2001a.
  3. Goskomstat. Sotsial'noe polodjenie I uroveni djizni naseleniya Rossii. 2001b.
  4. Stil' Jizn' Sregnevo Klassa. Ekspert. 2002, No. 25 (331), 1 iyulya.

Notes

  1. This paper is part of research project on "Social stratification and formation of the middle class in transitional Russia", supported by Grant-in-Aid for Science Research, the Ministry of Education and Science (young study B, No.14730047) in 2002-2004. This paper is based on the report, which I presented at the Russian-Japanese seminar at Irkutsk State University on September 8th. I'm very thankful to prof. S. I. Kuznetsov and prof. G. N. Novikov for giving me opportunity to present and publish this paper.
  2. Dissolution of large economic groups (Zaibatsu) and anti-monopoly policy, agrarian reform, labor democracy, tax reform, equal opportunity of education etc. See Tachibanaki (1998), p.52-56.
  3. As the mechanism of high economic growth, we can point out these factors. Abundant private savings, functional banking system, active investment of enterprises, technical introduction from abroad, abundant working force, strong will to work of citizens, high growth of domestic consumption and so on. See Tachibanaki (1998), p.57.
  4. Source: Tachibanaki (1998), p.48.
  5. As the background of this expression, we can see, in official investigation in 1970, the fact that over 90% of Japanese identified themselves to be in the middle class.
  6. Many data are collected about the age 20-69 from all areas in Japan, e.g. occupational career, school career, social status, occupation and school career of parents and so on. See Sato (2000), p.12.
  7. We can see many opinions about the scale of the middle class in USSR. See Hayashi (2002) and Balzer (1998).
  8. B. Milanovic drew this enlargement of differentials as unprecedented in human history. See Milanovic (2001).
  9. Stil' Jizn' Srednego Klassa. Ekspert. 2002, No.25 (331), p. 56. 1 iyulya.
  10. See Kryshtanovskaya and White (1996).
  11. As for social security in the period of socialism, we have to notice discussion between J. Kornai and Z. Ferge. Kornai called Hungarian social security system just after transition as "premature welfare state", asserted its reduction. In the opposite, Ferge paid attention to the fact that real social security cost diminished and that GDP diminished much more greatly than social security cost, objected reduction of it. See Nelson eds. (1997).

ХАЯСИ Хироаки
Университет Симанэ

СРАВНИТЕЛЬНОЕ ИЗУЧЕНИЕ ИЗМЕНЕНИЙ В СРЕДНЕМ КЛАССЕ МЕЖДУ РОССИЕЙ И ЯПОНИЕЙ

В настоящее время во многих странах, в первую очередь капиталистических, мы можем видеть растущие тенденции к увеличению экономических перепадов. Часто кажется, что богатый становится более богатым, бедный становится более бедным, и в результате, возникают социальные классы.

Когда мы анализируем экономические перепады, мы рассматриваем средний класс как ключевой термин. Средний класс - группа людей, зафиксированных между верхним и нижним классом. Роль среднего класса в том, чтобы подавить конфликт между верхним и нижним классом и сохранить социальную устойчивость. Когда мы оглядываемся на историю капиталистических стран, мы можем видеть, что средний класс разработал гражданскую и рыночную экономику. В современной России также средний класс очень важен как фактор развития рыночной экономики и как атрибут перехода к капитализму.

Цель этой статьи состоит в том, чтобы сравнить экономические перепады на текущий момент в России и Японии и проанализировать изменения в среднем классе.