Hello! Welcome to your weekly guide to the Russian economy — written by Alexandra Prokopenko, Alexander Kolyandr and Denis Kasyanchuk and brought to you by The Bell. To mark the second anniversary of Russia’s full-scale invasion of Ukraine, we take an in depth look at how Russia’s economy has
yeah exactly
the graphs are fine, their interpretations are objectively wrong. it seems like they’re trying to make russia look bad in every metric lmao.
Yup, I also loved this bit at the end:
The same people who’ve been consistently wrong about everything for the past two years, and can’t even predict what’s going to happen in the short term are now confidently predicting that economic stability in Russia is not likely to endure. Like sure yeah, we can totally take their prediction about what’s gonna happen 1-2 years from now seriously.
At this point it’s just copium, the toughest moment for Russia was immediately after the initial sanctions but it is clear they’ve managed to deal with the most important shortages, China doing some heavy ass lifting of course, and get buyers for their exports in the global south, they still haven’t completely recovered their export volume but the trend is clearly upwards.
I am sure there are some specific industries having problems replacing specialized part numbers, but they will eventually be produced by China or even produced locally in Russia.
If anything Russia will be in a better spot 1-2 years from now with the steady growth of BRICS and the increasing multi-polarity. Really the only way one can reach the conclusion that Russia will collapse anytime from now is from having internalized racism, thinking that Russians are too primitive to produce certain commodities or that the global south is too primitive to fill the gaps.
Exactly, if sanctions don’t work immediately there is zero chance they’re going to work later. Economy simply adjusts to work around them, and the longer it goes the more stable it becomes. I mean just look at Iran as an example. The main thing the sanctions are accomplishing is strengthening the BRICS.
The biggest loser in all this will end up being the EU because they genuinely lost something they can’t replace. US will be fine because they have their own energy and resources as well as access to whatever Canada’s got. I’m also expecting US to ruthlessly cannibalize Europe now that they manged to knock them down a peg. US oligarchs have always been really unhappy with Europe providing a social safety net, and the economic crash provides a perfect opportunity to finally dismantle it.
What he’s likely suggesting is that the guns vs butter model will at some point come to play.
Basically it assumes that any increase in defense spending will have to be diverted from social programs. This typically creates imbalances in the domestic economy, as wealth is more effectively distributed back into the economy from social programs when compared to defense spending. This is typically why most governments spend less than 4% on defense spending.
Military spending can be considered a liability unless it’s currently being utilized to leverage territory or wealth from an opponent. The returns can lift a country out of an economic slump, but once the war stops and government spending slows, the economic gains tend to collapse.
Now this theory is predicated on a bunch of assumptions, the main one being that an economic model created after WW1 may not be applicable to modern economics…and if that was what the authors intended, they should have led with it. But that’s the only legitimate argument I can think of based on the article.
I mean we also have the US where military spending has been propping up the economy for decades. There are whole states now where military industry is the main source of jobs. So, it’s a pretty tenuous to suggest that military spending can’t prop up an economy indefinitely.
Yes, and we have witnessed the general decline of social services and social safety nets in equal proportion. And while US spending is significant, it’s still only 3%of GDP.
It can, but it usually requires an indefinite war. It’s one of the reasons America is constantly at war. Why spend so much on obtaining an army if it isn’t going to be utilized? Especially when a little war can turn a 3 trillion dollar liability into a potential 3 trillion dollar investment?
And again, we are talking about macro economic theory from nearly a century ago. It very well could be a dead theory, we just haven’t really had a lot of data opportunities to rebuttal it with.
The decline in social services and social safety net is not the result of US military spending though.
Typically it does, and it’s easy to see how Russia could either end up in an indefinite war with the west or just become arms manufacturing hub for the BRICS and start arming countries in Africa, Middle East, and Asia, which is already starting to happen incidentally. Alternatively, the same industry that’s being used for weapons manufacturing could be turned to civilian use, which would be a much better scenario. Both the US and USSR ended up doing that to an extend after WW2 ended.
The key point is that there’s little evidence to suggest that high military spending will lead to an unstable economy down the road.
True, but I tend to give it a little extra weight due to my partiality towards historic materialism. Examined in those terms we could perceive the other causes as a byproduct or consequence of the industrial war complex.
You should read up the history of the guns vs butter model, it’s origin is surprisingly based for the 1920s.
Both are possibilities, but their both kinda hard things to plan an actual functioning economy around. Especially under their current preferred economic model. Both would be much easier to achieve under a fully centralized system.
It depends on your perspective. If you’re counting on future behavior to mimic your past data set, then you would probably utilize past behavior as “evidence”. But then again, if that always worked the rise of the Soviet Union would have been impossible to comprehend as a possibility prior to ww1.
Again, I’m not claiming that the guns vs butter model an undeniable fact. It’s just my best guess on how the authors in the article came to their conclusion. But again, they are probably operating on a limited framework that conceptually precludes new ideas or thought.
For the record, I very much agree that military industry isn’t the best way to develop the economy. Ultimately, any effort that goes towards producing weapons is effort that could be directed towards improving the lives of the people in the country. It’s just that you can get away producing a lot of useless stuff before there’s a serious drag on the economy. Incidentally, military industry is just one example of this. I generally agree with Graeber’s bullshit jobs thesis stating that a lot of work is basically just make work with no useful social purpose to it.
Russia is actually fairly centralized at this point. They pretty much had to move back to a planned economy after the war started.
A 2023 World Bank study gives a pretty good overview. In particular, it distinguishes between businesses of the state (BOS), that are at least 10% government owned by some government, and state owned enterprises (SOE), which are majority owned or more, and controlled, by the government.
Top line result is shown in the following chart:
And here’s another chart showing SOE in Russia compared with China https://cepr.org/voxeu/columns/state-owned-enterprises-global-economy-reason-concern
Russia’s high levels of SOEs is not far behind China by many measures.
Central bank plays a big role in Russia as well, and has large influence over the funding of the private enterprise. FT even moaned about state directed economy standing up to sanctions back in 2022.
And I agree with your assessment that the authors most likely did use the guns vs butter model as the basis for their argument. It’s not without merit, but I the devil’s always in the details. With the world changing as rapidly as it is, I think it’s pretty hard to make any predictions regarding what’s going to happen a year or two down the road. We’re kind of in terra incognita here.