Capitalism Finally Takes Root in Russia

Russia's pay packages for its president and Putin show that capitalism is finally at work in the nation.

Dmitry Astakhov / AFP / Getty

• Share

The people in a perfect society should all earn nothing, or alternatively, should all earn the same amount, depending on the interpretation of the most important Communist manifestos. The exception is in the section of the documents regarding "to each according to his needs." In that case, in theory, one person could earn more than another if he really required the extra money.

A hallmark of capitalism, before the government got involved in what car company and bank executives were to be paid, was that employees could make as much as management felt they were due based on their contributions to the firms where they worked. The best salesman at a company could earn more than the CEO. The best investment banker at a brokerage firm could earn more than the head of investment banking. Just because a CEO held the highest title at a company did not mean that he had to be paid more than everyone who worked for him. Annual compensation data from the SEC has shown that a number of chief executives have not taken any of this to heart. They simply take every last dime they can get. Not everyone who runs a company is that greedy. Proxy reviews from a large number of American corporations underscore that subordinates can make more than their bosses and that merit is still often awarded above rank. (See pictures of the global financial crisis.)

The Russian government recently admitted that Vladimir Putin earned 11% more than his superior President Dmitry Medvedev. Putin is only the premier, but he was the head man before that, so some of his pay package may have been grandfathered. The Russians did not say. (See pictures of Putin's patriotic youth camp.)

Reuters looked at the figures and said that Putin's income amounted to $137,300 and Medvedev's totaled $124,000. By the news service's reckoning the men make about thirty times what the average Russian citizen does. The American president does not do nearly so well. He makes $400,000 and the media income of Americans over 25 is $32,140.

Medvedev has learned what most capitalist CEOs have known for years. Putin plays the heavy. He is the ex-KGB bully who is willing to say that invading neighboring countries is fine. Medvedev gets to play the role of the leader with balanced views, the cooler head, the man that foreign leaders would like to meet. And, for the privilege of being loved, Medvedev is paid $13,300 less than Putin. It shows the flaw in the US system. Of the people in the Administration President Obama is clearly the most well-liked as well as being the best paid. Geithner should ask for a raise.

— Douglas A. McIntyre

See TIME's 2007 Person of the Year package on Putin.

For constant business updates, go to 24/7wallst.com.