Actually, the Russian Economy Is Imploding

Source: Foreign Policy.

Don’t believe the headline. This is one of those articles that begs for skepticism.

To see why, contemplate this basic economic question: Is a man richer for possessing a hoard of gold, or for selling it? The premise of the article is that Russia’s economy is imploding in the sense that Russia isn’t selling enough of its “gold.” That’s a dubious proposition.

It is only common sense to acknowledge that Russia’s economy is experiencing significant disruptions as the result of the war in Ukraine and in consequence of western sanctions. But is its economy “imploding”?

If it were, we should be hearing about shortages of food, clothing, shelter and energy as bad, at least, as the shortages of such things we see in the U.S. But Russian economic implosion of this kind is nowhere documented in the article.

I have a theory that every penny of military spending represents a deadweight loss to the economy in which it occurs. According to this view, every second Russia spends in Ukraine, every bullet it fires is directly damaging to Russia, both immediately and in the long run. But the same is true for Ukraine and for the western powers who provide military support.

Similarly, western sanctions burden Russia by reducing its commerce with the west. The same is true for the west — our own commerce is reduced.

In light of these considerations it makes little sense to delude ourselves that Russia is somehow being crushed beneath the weight of our righteousness.

7 thoughts on “Actually, the Russian Economy Is Imploding

  1. Well, thanks for sharing. I find the article far more compelling than your rebuttal a lot of which revolves around the word “imploding.” You want to deny that word unless everyone is starving, homeless and naked.

    “If it were, we should be hearing about shortages of food, clothing, shelter …”
    From whom? Russia no longer has anything remotely like a free press.

    I do not follow your gold analogy. Russia IS selling its “gold” – oil and gas. It’s problem seems to be in not being able to buy what it needs with the proceeds.

    Liked by 1 person

    1. RE: “It’s problem seems to be in not being able to buy what it needs with the proceeds.”

      Needs, or wants? Also, what is the timeframe?

      Russia certainly can be self-sufficient in terms of food, clothing, shelter and energy if it needs to be. I watched a video a few months back in which a Russian woman described how the sanctions affected her grocery shopping. She said that a lot of western products — like soap, toothpaste and shampoo — were no longer available, but Russian-made substitutes had quickly replaced them and she is quite happy with the change. Even proud that her own country’s products were as good as the imported brands.

      The point is to not confuse a change in import patterns with fundamental damage to the economy. Given secure (internal) sources of food, clothing, shelter and energy, there’s no real limit on how long Russia can wait out economic sanctions.

      Like

      1. “Given secure (internal) sources of food, clothing, shelter and energy, there’s no real limit on how long Russia can wait out economic sanctions.”

        I am sure you are right about that. But it will not be pleasant and over time people will begin to wonder why they are living like serfs.

        In the end, war is a contest of will. Ukraine is defending their homeland in their homeland. Russia is suffering massively in blood and treasure for nebulous reasons. Our experience in Vietnam should instruct us on how that might go.

        Liked by 2 people

  2. An article in NYT says this “The Russian economy contracted steeply in the second quarter as the country felt the brunt of the economic consequences of its war in Ukraine, in what experts believe to be the start of a yearslong downturn.

    The economy shrank 4 percent from April through June compared with a year earlier, the Russian statistics agency said on Friday.”

    The RUSSIAN statistics agency. So now YOU want us to be skeptical of Russia’s own reporting?

    Getting confused here. SMH

    Like

    1. RE: “The RUSSIAN statistics agency. So now YOU want us to be skeptical of Russia’s own reporting?”

      I’m sure the statistic is valid. Try to grasp that the statistical economy and the real economy are two different things. To illustrate, by statistica measures, the Russian economy could shrink by 50%, but if food, clothing, shelter and energy remained abundant, no one would care, except the NYT.

      Like

      1. “… but if food, clothing, shelter and energy remained abundant, no one would care, except the NYT.”

        So if our GDP shrinks by 50%, so long as there is bread, water, shelter and clothing available no one would care?

        We have citizens who get apoplectic over hikes in gas prices, plane tickets and ice cream. They are willing to overturn our government for those reasons. Are Russian citizens that much different?

        Liked by 2 people

      2. But it is YOUR source that provided the headline.

        Nice attempt to bad mouth NYT for reporting NEWS and FACTS, while trying to spin EVERYTHING you come across as truth.

        Like

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