by Arcturus Le for the Saker Blog
In the west, there is perennial bluster about the putative ‘weakness’ of the Russian economy. It is widely accepted as ‘fact’ that the Russian economy is somewhere miserably outside the ‘Top 10’ global economies by GDP, sinking ever deeper year by year towards #15, embarrassingly behind such smaller countries as South Korea, Canada, Italy and on par with countries like Spain, Australia, and Mexico. In fact, many a snarky joke is bandied about on the Atlanticist web about how ‘Russia’s economy is barely the size of Texas’, etc.
This is a total western generated fabrication. In this article, I will prove the following points: that the Russian economy is actually ranked around the top 5 (and arguably even much higher) most powerful on Earth only behind China, US, Japan, and India; that the 2014 western engineered Ruble crisis crashed the specious ‘Nominal GDP’ of Russia by half while not affecting the true GDP nor economic output of Russia—and how this was affected by the geopolitical factors of the time; and that ‘Nominal GDP’ is a spurious canard that does not apply to Russia due to the fact that Russia is a trade surplus economy, and in fact PPP GDP is the accurate way to measure economies like Russia.
First, let us prove the opening point. Around 2014, oil was pricing steadily in the ~$100-115 per barrel range, as can be seen in the graphic below. Then, in 2014 a major geopolitical crisis developed. The U.S. and the CIA staged the Ukrainian coup called ‘Euromaidan’ that overthrew the legitimate Ukrainian government in the opening months of that year. A month later, Crimea held a democratic referendum and became once again Russian. This was a massive blow to the U.S. geopolitically for which Russia had to be punished as it had now grown too strong, winning a major warm-water port in Sevastopol that could now be used to threaten the western Imperialist/Atlanticist designs in the Middle East by way of a conveniently placed fleet access to the Mediterranean.
The Atlanticists took action and with their Saudi Arabian ‘partners’ (underlings) carried out a plan to crash the price per barrel of oil in order to hurt Russia as much as possible, since its economy at the time was still a bit more dependent upon oil and not as diversified as it is today. Such large tectonic shifts take time so their designs took a year or two to fully percolate down into the markets and by 2015-2016 the price of oil crashed from the aforementioned ~$100-115 per barrel range to the ~$40-50 per barrel range, becoming roughly ~50% of its original price. This chart below clearly demonstrates.
As can be seen, at this exact same time, the Ruble to Dollar conversion rate went from a low of roughly ~37 Rubles to 1 Dollar in 2014 (chart above) soaring to the range of ~60-75 Rubles to 1 Dollar the very next year to exactly coincide with the oil price crash. Miraculously, the devaluation corresponds to the exact timeline and severity of the crash of oil—oil dropped by half from ~$100 to ~$50 and Ruble went from ~35 to ~70 against the Dollar by 2015-2016.
As can be seen by the chart below, Russian GDP according to this source was $2,060 billion in 2014, and like magic by 2016 it was reduced to $1,282 billion. This represents a roughly ~40% decrease in line with the Ruble crash.
But, did Russia change overnight in 2015-2016? Was there panic on the streets, disorder and chaos, complete depredation and disintegration of society? After all, a halving of your GDP almost overnight is of such catastrophic proportions as to be unprecedented in history. Imagine, almost overnight the U.S. GDP going from its current figures to that of its 1960 figures (when it was half of today). What kind of chaos would ensue?
Of course, no such thing occurred in Russia, in fact it was barely noticed. Why? Because, the “Nominal GDP” is a fake, currency manipulated, symbolic number that has no actual basis in reality as pertains to the Russian economy. You see, the Nominal GDP in each country is priced in U.S. Dollars. This works for countries which are Trade Deficit countries. A brief discussion of the difference between Trade Deficit and Trade Surplus must ensue in order to fully understand this point. A country which operates on a Trade Deficit (which is most country’s in the world including the U.S.) simply imports more items than it exports. It is a country that relies on importing goods from other countries to survive. The reason this is important is because, since the global financial system operates on the U.S. Dollar basis in accordance with ‘Dollar Hegemony’ i.e. the Dollar as the reserve currency of the world, this means that when your country IMPORTS items, it is pricing them usually in Dollars. So, in short, this means that the price of your country’s native currency to Dollar conversion is important.
Let’s say you are a Trade Deficit country like India, and let’s say hypothetically that the Indian Rupee converts against the Dollar at 50 Rupees to 1 Dollar. That means, if you are buying an imported item that hypothetically costs $100, if your currency is magically crashed to where the Rupee now trades at 100 Rupees to 1 Dollar, instead of that $100 item costing you (50 x 100) 5,000 Rupees, it now costs you (100 x 100) 10,000 Rupees. So, if your country / entire economy thrives on imports, then one can clearly see how a currency devaluation of 50% can destroy your economy. It means every essential item you import, items vital to the economic engine of your country, have overnight become TWICE as expensive as before. This would lead to economic devastation.
But, what if your country is a TRADE SURPLUS country, a rarer breed of highly self-sufficient economies—a list comprising only the most advanced first world nations such as Germany, Japan, China, etc. Russia is in fact amongst this distinguished list. It has one of the largest trade surpluses in the world, while the U.S. is the world’s biggest Trade Deficit, by far.
So, what happens if you are a Trade Surplus country? This means that your country Exports more than it Imports. It means, in short, that the price conversion of the Dollar to your country’s currency is irrelevant because if you are generating everything your country needs within your own borders (self-sustainability), you are naturally pricing those items you yourself create in your own currency. So, what does it matter if the Russian Ruble goes from 30 Rubles to 1 Dollar, to 1000 Rubles to 1 Dollar? If you’re Russian and you’re not importing anything that’s priced in the Dollar, and you’re buying things within your own country priced in Rubles only, then it makes literally zero difference what the Ruble trades against the Dollar. Inside the borders of your own country, a Ruble is a Ruble, its price conversion to the Dollar has no relevance.
It can be seen here that a native currency devaluation does not have much meaning to a Trade Surplus economy. When a Russian citizen goes to a store and buys items, or a Russian company orders equipment or products, they are ordering them in Rubles because Russia makes their own goods and is self-sustaining. So even if the Ruble skyrocketed to 1 million Rubles to 1 Dollar it would be meaningless if you are not buying anything priced in Dollars.
This means that when the Russian Ruble crashed against the USD in 2015-2016 following the manufactured and engineered geopolitical crisis and massive currency manipulation by the corrupt U.S. global financial system, and the Russian Nominal GDP was shown to crash the equivalent rate (because the Nominal GDP is priced in USD), it was actually meaningless and the Russian economy in fact did not take any such major hit at all. The Russian GDP was shown to devalue from ~2 trillion to 1.2 trillion almost ‘over night’ only because it is being fraudulently priced in USD. All that happened was a mathematical calculation of irrelevant Dollar conversion, but actual Russian production and economic power and output did not experience any such effect whatsoever, it was a smoke and mirrors currency manipulation that existed only in the digital bits and bytes of a computer screen.
So, if we now know that the Russian GDP calculation was incorrect, what is the true way to measure it and what is the real Russian GDP? Since we know that Nominal GDP (which is priced in USD) is a fraudulent way to measure the economic power of Trade Surplus countries like Russia, the answer lies in PPP GDP. And of course, as expected, Russian PPP GDP is so high that it was announced by the IMF itself to have overtaken Germany for the #5 spot last year.
But what is most interesting is, prior to the fake ‘on paper’ devaluation of Russian Nominal GDP following the manufactured crisis of 2014-2016, even Russian Nominal GDP was near the Top 6-8 place (depending on which source you used, IMF, Worldbank, etc.). And now we see the PPP figure matches this rightful, accurate position.
But how do we know the PPP figure is accurate? Can we prove that PPP value is more in line with Russia’s true economic standing than the Nominal GDP value? Well certainly there are a few correlational indicators that can prove this for us. There are several indirect tell-tale signs that experts can use to look past fraudulent currency manipulated GDP numbers and gauge the real economic strength and productive virility of a country.
Let’s take a look at annual oil and electricity usage by country. These are important indicators that very closely correlate with a country’s economic power for reasons that should be self-evident: the more robust one’s economy, the more that country will be utilizing oil and electricity in the daily function and growth of that economic engine.
Some may be unconvinced, until looking at the chart above and seeing how well it correlates to the typical GDP standings. The chart shows oil consumption by country and in fact, the top 10 all looks quite similar to and closely mimics the PPP GDP chart. Russia here is seen at #6 just like in the PPP economic standings (where it is either #5 or #6 depending on source), NOT in #11-15 place as the fraudulent Nominal GDP would have you believe. The skeptic might ask, well wouldn’t a large population country be misrepresented on this chart because they use a lot of oil? To answer that, take Indonesia as an example, it has a population almost double that of Russia, yet it is somewhere in the ~15th place in the oil consumption chart, and not surprisingly that also roughly reflects its place in the GDP standings as well. So, as one can see the size of your country or population count is not reflected in the oil consumption chart, in fact it correlates directly to a country’s GDP, with one or two outlier/flukes such as Saudi Arabia which appears high on the chart owing to its over-reliance on gratuitously consuming vast amounts of oil in the process of producing oil and gas in their oil centered economy. The skeptic might similarly ask, well doesn’t Russia also produce a lot of oil? Yes but in this case, as I’ve said, its position in the oil consumption perfectly matches its GDP PPP position AND there are further indicators below that lay the doubts to rest.
Now let’s look at two other indicators of a robust economy, electricity production and consumption.
As can be seen here, the figures also mimic and correlate the GDP PPP figures. The same countries that dominate the Top 10 economies are seen either producing or consuming electricity at rates that correlate to their economic power. Not coincidentally, here too we see Russia placing near the Top 5, just like in the GDP PPP and quite unlike the fraudulent ~#11-15 placement we see in Nominal GDP. Now remember, these figures are not merely a product of population size. If that was the case, then countries with far larger populations than Russia like Indonesia, Nigeria, Brazil, Bangladesh, and Pakistan would all be way ahead of Russia on the list of energy consumption—yet they are no where on the list. Similarly, countries with SMALLER populations like Germany would not even be in the top 10. Yet Germany is an economic power house and despite having a much smaller population than Russia, appears close to it on the list in perfect accordance with its place on the GDP PPP chart. This clearly indicates that a country’s energy production/consumption is more closely tied to its economic power than mere population size.
Another indicator we can use is total Gold Reserves. These figures also mimic economic standing as only the most economically powerful countries appear in the top 10 in roughly a similar makeup as to their official GDP standings. Gold has long been a telltale indicator of a country’s might, prestige, and economic status. In the chart below, we can see once again, Russia ranks in almost the exact position of its GDP PPP standing as in all the other charts above.
Of course we can use many other indicators, for instance, global military standings. It is widely accepted Russia is at minimum the 2nd most powerful military force on Earth, and the military standings roughly correlate with the same countries in roughly the same positions as they are economically—with the familiar faces of U.S., Russia, China, India, Japan, et al, making up the top of the list. Would you really believe that a country with the acknowledged #2 military on earth is only ranked #15 economically, as per the fraudulent, currency manipulated Nominal GDP list? It beggars all logic. Of course the only rational explanation is that only a country whose economy is in the top 5 powerhouses can maintain the 2nd most powerful military in the world.
One can see that all indicators point to Russia being in the top 5 global economies and that even the fraudulent Nominal GDP figure had Russia at #7 or #8 (depending on source) prior to the artificially engineered oil crisis and currency manipulation that plummeted the Ruble in 2014-2016.
And one last important thing to note. All this discussion revolves around speaking of the Russian economy as if in a vacuum. But one can quickly forget that the Russian economy is arguably the most flagrantly assailed, beleaguered, manipulated, and sabotaged in the world by western/Atlanticist forces. The Russian economy has been under massive sanctions, sabotage, embargoes, etc, since the 2014 crisis began, and yet I have just shown that it is still roughly at the #5 spot right next to the powerhouse of Germany. So, what does this mean? Clearly, that even under intense sabotage and global economic warfare by the entire western political and financial system, even greatly weakened by western forces, the Russian economy is still roughly even with Germany, and only “behind” the U.S., China, Japan, and India (3 of which have vastly larger populations than Russia). Which makes the obvious point that the TRUE Russian economic power, adjusted for the various sanctions and sabotage, is even greater than we can imagine, most likely well ahead of the German and arguably even the Japanese economies.
Russia doesn’t have the debt burden that the rest of the world has. That should be considered also.
That is correct. It has almost entirely payed off it’s debt. Another point are Russia’s gold reserves. The article states that Russia has 2,279.2 tonnes of gold. This is highly debatable, bearing in mind Russia has for years been buying gold, as well as extracting gold from it’s gold fields. According to one analyst, both Russia and China have more than 30.000 tonnes of gold each, and both are waiting for the right time to introduce gold backed currencies. You can then imagine what will happen to the US dollar.
Finally, for years I have been reading biased comments on the Russian economy and industry, namely that Russian technology is “inferior” to Western, and that Russia is a “gas station” masquerading as a country. Yet when Russia introduced it’s latest military high tech, everybody pointed their fingers at the high tech and a resurgent Russia without explaining how this happened.
“Yet when Russia introduced it’s latest military high tech, everybody pointed their fingers at the high tech and a resurgent Russia without explaining how this happened”.
Some Western “experts” declared that the Rusisans must obviously have copied US know-how. Like the Chinese, the Russians are deemed to be so stupid, ignorant and backward that they could never produce any technology except by copying it from the USA. (Rich, apart from anything else, in view of how much technology the USA copied – usually with acknowledgement or payment – from other countries).
Nobody has explained the Russians could create highly accurate hypersonic missiles, for instance, by copying US examples which do not exist.
Absolutely correct and — still more inportant — Russia doesn’t parasitize on other countries’ natural resources and labour output.
A decline in GDP is extremely harmful – for a debt dependent country. In a world where everyone’s assets are someone else’s liability, the inability of a debtor to ‘pay up’ can start a chain reaction of zeroing out assets on balance sheets.
Look what happened with the LTCM crisis when Wall Street’s looting of Russia had a hiccup and almost wiped out trillions in dark pool derivatives.
The “Great Recession” that almost wiped out the American financial system was a mere 2% decline in GDP!
Good article, but however Ruble is too low valued, should be stronger.
Apparently, Ruble is undervalued 68%.
Anyway, Russia is doing relatively well, but it can be much, much, much better.
And GDP growth should be much stronger.
The GDP of the US is a fiction. As, incidentally, are its gold reserves.
A large part of the US GDP is unproductive (in fact negatively productive) FIRE. And when Govt debt (funded by FED printing) contributes to GDP, then the metric is worse than useless.
Gold reserves of US is zero. Militarily, Russia is in first place by a large margin.
I believe they have about 8,000 tons of gold-plated tungsten stored away somewhere for a rainy day.
Plus whatever gold they managed to loot from Libya and Iraq.
Is there any corner of the American economy that isn’t shrouded in smoke and mirrors?
How did it all end for Al Capone?
Marshall McLuhan had a powerful insight called “Living in the Rear View Mirror”. The idea is that we think we are looking forward in time to (at least) the present, when we are really looking at and thinking about the recent past.
America’s greatest days are all behind us, and details of Russia’s sorrowful past are still viewed as the basis for “current” analysis. By the way this phenomenon is entirely separate from the fact that everything about the US is fraudulent.
I have long suspected that Russia is doing vastly better than it appears through Western analytical tools. And the US is doing not just badly but catastrophically. All kinds of things are concealing what is really going on. Thanks much to the author of this article for dispassionate and fact-based information.
What I really wonder is – do they in the West really believe in all their propaganda BS about Russia
Sometimes it looks like they really believe in their own idiotic propaganda …but sometimes I cannot imagine that they can be such imbeciles
I do not know for sure
”What I really wonder is – do they in the West really believe in all their propaganda BS about Russia”
Here in Sweden, a common pattern is that the very same people who swear and rage against all the greed, incompetence, degradation, and lying in society at home are more than happy to internalize all the braindead inanities and slanders which the same morally bankrupt society tells them about the world. I don’t really know whether this serves to offer some kind of perverted ”consolation”, like ”at least, I can solemnly trust the wise judgment of my betters on any international issues”. However that may be, I see them 100% as part of the problem; not the solution. My approach is to make fun of them, but not with any other expectations than to have a good laugh at their expense. It’s pathetic, really.
Interesting analysis. One thing caught my attention, though. You mention that, since Russia is a trade surplus economy, the impact of the currency devaluation was not significant since most items were made within Russia, and were already priced in Rubles, and not dollars. This protected Russia from a potentially large increase in the prices.
I’m from Brazil. We are also a trade surplus economy (mostly because we impose tariffs on imports), and we export lots of agricultural commodities, like soybeans and corn. Last year (2020), we’ve had a fairly significant devaluation (about 15%) in our currency, the Real. Interestingly, we’ve had an increase on the price of some food items (like soybean or corn oil) of similar magnitude, even though the items were locally produced. The reasoning was that we were competing for the corn or soybean with the foreigners, and had to pay the premium if we didn’t want to be outbid and had all production exported (actually, it seems we were initially outbid, because we had to import soybean and corn later in the year, something we never did, but that’s a parenthesis). Thus, even though we were producers/exporters of these items (the same happened with petroleum), our local prices in Real did see an increase because of the currency devaluation (this is still ongoing, both the currency devaluation and the inflation).
It really seems unfair to pay more for something we produce locally, but I guess if we “want” to be in the global “free market”, that’s the price to pay. Or maybe not, and that’s the reason I’m writing this post. How was Russia able to avoid local inflation because of currency devaluation? Did Russia enact export restrictions? Did the country have such a surplus that could also feed the local market? Or am I missing something?
Thanks for the article, anyway.
“The reasoning was that we were competing for the corn or soybean with the foreigners, and had to pay the premium if we didn’t want to be outbid and had all production exported…”
Hey, at least that makes plausible sense.
Here in Australia, we pay the highest energy prices in the world, at the same time that we export coal that we are not allowed to use and export uranium that we are not allowed to use and our energy companies are exporting LNG to other countries at a fraction of the price that Australians pay.
Thank your lucky stars that you live in Brazil, one of the world’s rising giants, and not in an idiotic kleptocratic bum-boy for Uncle Sam run by the rich for the rich like Australia.
Hey mate, ain’t Australia the lucky country ”run by second rate people who share its luck”? That was in the 60s, now is third, fourth? shooting themselves in the foot. No worries, we’ll have more wine than we can drink.
I thought Jair Bolsonaro was one of Uncle Schmuel’s guided drones like Juan Guiado.
Russia had a food surplus, an energy surplus and a military arms surplus. It could export all of these while still meeting domestic demand. But it did have inflation anyway, which it partly contained by high interest rates, and partly by increasing food production so much that it brought food prices down, which had the greatest benefit to lower income families in Russia. The reason that it could increase food production so much was that for 70 years since the mid-1930s it had been developing new varieties of wheat by normal cross-breeding methods. This programme finally got to the point where the new varieties of winter wheat could be brought to market in 2014. These varieties could be grown on poorer soil and in cooler conditions, and were free of a disease called ‘wheat rust’ which for example kills about 25 per cent of the UK wheat crop annually. Since 2014, Russia has continued to diversify agricultural production, and when China reduced its imports of Brazilian soya, Russia was able to step in immediately and provide 5 per cent of China’s demand.
It was entirely a coincidence that this happened when the price of oil was collapsed by the USA and Saudi Arabia. What it meant was that, exactly as Putin predicted in 2014, the Russian economy had recovered from what was a mild recession by 2016. While this showed how resilient and increasingly diversified the Russian economy had become, it should now be showing higher growth rates, despite all sanctions, and this relative failure is largely down to the policies of the Atlanticist neoliberals in government. Yet even that influence has been further curtailed owing to the mistake they made in pushing for a pensions reform that was unsuitable for Russian conditions. Russia is increasingly moving into high-tech areas that will foster further economic growth.
Interesting comment from Brazil. I’ve seen what you describe before, and it happened in Russia just recently. I don’t know the outcome but suddenly the sugar prices just soared and yet, Russia is sufficient in sugar from their sugar beet industry.
It would be interesting to dig into this question – how does this happen?
This looks very like the actions of the Atlanticist neoliberals. They have been publicly accused of pandering to the interests of some large-scale agricultural producrs (not the exact language used). These food prices should not be so high now.
One possible explanation is a regulated versus unregulated market. In a regulated market, preference may be given to local supply and demand with only the surplus exported. In that case prices locally would be less affected or even unaffected. Several countries have used a regulated system for their agricultural products, for example the Ontario Milk Marketing Board.
In a less regulated or unregulated market the foreign buyers would be able to snap up all supplies and the local distributors would have to adjust their commodity buying prices accordingly, passing that cost onto the consumer.
I’m not sure how the Russian versus Brazilian systems work, but I have some experience in both regulated and unregulated markets and there are advantages and disadvantages to each.
“Interestingly, we’ve had an increase on the price of some food items (like soybean or corn oil)…”
It seems to me that neither soybeans nor corn oil are food (for human beings at least). And I wouldn’t like to eat meat, eggs or dairy from animals that ate them either.
Easy answer to the “Brazilian Paradox”: The class of people who live from exporting Brazilian produce to the world market also constitute the social segment of ‘better-offs’ that strive to thrive on foreign luxury imports, foreign travel and who invest their earnings in dollar-oriented economies in Europe and north of Rio Grande del Norte (i.e; North of Mexico). And they thus live from ripping off the wee wealth earned by the working classes and poor beggars and prostitutes.
It wasn’t able to. The food related price inflation is quite palpable, about 15-20% y-o-y. People are not happy about it, but the economy is turning, and the life looks vastly better than here in Europe
GDP only measures the “churn” going on in any particular country. If the churn accomplishes nothing, then no wealth or real economy is gained. So, measuring a country’s well being by GDP is actually senseless. As far as oil/fuel consumption, that only measures how inefficient a country can be with its resources, or how cold it gets in winter. I know there is a lot of worthless churn going on in the U.S., and quite a lot of energy wasted. (I know because I live in the U.S.A.) Quite honestly, I do not know what is happening in Russia, but my understanding is that it does get cold in the winter over there. Question is what is the overall well being of the average Russian compared to say the average U.S.A.er, or citizens of other countries? Where are the “happy” campers?
well you can argue this equalizes because in cold countries they must spend electricity on generating warmth in winter but in hot countries they have an equivalent expenditure in needing to generate cooling / air conditioners and thus need a lot of electricity for that, so in a sense one can argue it equalizes and thus Russia is not particularly exceptional in this regard.
Actually, air conditioners (AC), and the “need” for cooling in the summer is an energy waste. People if they try can get along just fine without air conditioning. Most people in tropical countries don’t use AC. AC is mostly used by pampered U.S.A.ers who are too lazy to build proper housing, and too uptight to sweat. Heat in the winter is quite another matter. Freezing to death is an ugly matter.
We in the U.S. already have asphalt solar panels on every rooftop that work wonderfully in the summer for passive solar heating, just not in the winter when such is actually needed. So we need lots of electricity in hopes of using air conditioning to keep our brains from becoming as fried and impaired as Biden and Mike Pompous.
Doesn’t seem to be working out so well.
In “Travels with Charley” a reprt on travelling in with a camper and his dog Charley — a book by John Steinbeck from the early nineteen-sixties — Steinbeck laments that whenever he stops at a drive-in restaurant anywhere between Boston and Los Angeles, wherever it is, he gets not the “fresh eggs” announced on the menus, but eggs that have been refrigerated for weeks after weeks. That was close to 60 years ago. When I visited New York some fifteen years ago (not having lived in the States since 1967), I only tasted acceptable-tasteing eggs in queer restaurants managed by old hippies. I wow never to return.
I’ve passed through Russia in 1972, 1975, 1977. 1984, 1989, 1990 and 2007. All the time, eggs were more fresh and tasty than even in Norway, Polen, the Baltics or Finland. Still the case by now?
As a scientist and engineer, accustomed to material reality, I like the author’s views for two reasons. Firstly, because he reminds us that the word ‘economy’ comes from the Greek word ‘oikos’ a house; so a country’s economy is literally its housekeeping. PPP (domestic purchasing power) is thus the correct measure of parity. As Harold Wilson, Britain’s last good prime minister said when Anglo Zio Capitalists crashed the pound sterling, “The pound in your pocket has not been devalued”. Unfortunately for Britain, the AZC and its finance-oriented MSM pursuaded the country that Britain’s future did not lie in self-reliance and material production but in “invisibles”, (financial manipulation by AZC banks eg, money laundering and other “offshore” havens of nonproductive capital for private “investors”) and Wilson was followed by the egregious neo-Liberal, Thatcher, who “sold off the family silver” by crashing Britain’s material production and sending the population out on a spending spree of imported goods with borrowed money. Same applies to U$A. Russia has done just the opposite.
Secondly, as a scientist, I like the author’s use of energy rather than currency as a measure of real wealth. This concept goes back to the chemist, Findlay; our professor of thermodynamics wrote a little book about a country’s “energy slaves” as the source of its prosperity.
Of course there are other sources of wealth: cultural and spiritual; naturally the author does not mention these because they find no place in the ranking tables of conventional economics (aptly called, “the dismal science”).
Lastly, from the author’s tables, I am pleased to see so many diverse countries included. It reminds me of my professor in the school of mines. He said he had visited many different mines for many different minerals in many different countries, some were highly automated, some were primitive, some were big some were small — but they all made a living. Reminds me of Russia and China’s concept of a Multi Polar World.,
I think the term energy slaves should be attributed to buckminster fuller.
Here drawn as a story: https://www.stuartmcmillen.com/comic/energy-slaves/#page-1
Thanks for that correction, Anadinous; our prof.Ubbelohde being the second. But the concept of energy as currency goes back to Nicola Tesla and beyond. From WikiPedia:
“In 1940, Buckminster Fuller was the first to use the term “energy slave” in a map in Fortune. In 1950, Fuller revised his calculations upwards and estimated that, on average, each human holds 38 energy slaves.
In 1963, Alfred René Ubbelohde also used this concept in his book Man and Energy. In Germany, the physicist Hans-Peter Dürr used this concept. The term is also mentioned in a 1975 book and has become popular in the scientific literature.
The energy slave is a unit of measurement that allows us to evaluate the economic consequences of human life choices. The average human, at rest, produces around 100 watts of power. Over periods of a few minutes, humans can comfortably sustain 300-400 watts; and in very short bursts, such as sprinting, some humans can output over 2,000 watts. Thus a standard energy slave would work 24 hours a day at an average power of 100 W (ie, produce a total of 875 kWh/year either in short bursts of 300-2,000 W or at a continuous low rate of 100 W).
The joke is, that almost nothing this “dismal “””science”””” produces is related to reality. Most of it is pure propaganda.
Instead of using real world concepts based on natural sciences like Joule, technology trees with its elements (optimizing for energy inputs) and provide analytical statistics (like f.e. a real time vector map for all “resources” in your country), you are left with DSGE, interest rates, wages, other input factors.
Why anyone with a brain is still paying any attention to those secular priests…
This brings me to Russia. It has everything it needs to build a new country, new industry etc. Because education and the economy is firmly in liberal hands, even in patriot circles, you will find only liberal concepts of the economy.
So, yeah, keep on whining about schwab, gaidar, liberals, etc. but there is no alternative provided, everything from the language down to the anthropology is based on their paradigm.
A thought experiment:
You can have a theoretical country of a billion people with half of them constantly living in virtual reality and the rest servicing them, inc. energy generation etc. Say a 20 trillion GDP. Now is this a superpower?
No, this would be ridiculous. So are all comparisons by GDP. I argue this parameter is almost useless. It tells you nothing about the structure of the “economy”. A civilization can be viewed as a heat engine and transforming energy. What is the free enthalpic energy used for? For the purpose of building planes, spacecrafts etc. or playing all kinds of games from the stock market to the one armed bandit in Las Vegas? More importantly, what are your people really occupied with? The so called contemporary world economy is primarily servicing all kinds of nonsense and more or less for the purpose of (conspicuous) consumption.
Russia has amazingly managed to update its military sector to world class, while expending very few resources and loosing 100000s of scientists to the West in the 90s. This is an example that seemingly a few in the West can comprehend. Everything depends on your people. You can have 100s of millions consumers or 1 million highly motivated / talented engineers, physicists, chemist, biologists etc. and beat anyone. One Alexander Vasilyevich Suvorov is worth 10 generals. One Sergei Pavlovich Korolev is worth 100 scientists.
More important than just world class education, is a civilization with a higher metaphysical purpose in which the people are in-bedded in and given a chance to realize themselves to their fullest potential.
Some social relations conflate quality with quantity thereby posing that one standard of measure is possible to “evaluate” them.
I realise that your exposition attempts to circumvent this practice although in some assay remaining immersed as illustrated by your sentence:
“One Sergei Pavlovich Korolev is worth 100 scientists.”
where the one standard of measure deemed possible to “evaluate” them is “worth”, the unit of measure of “commodity relations”.
Some “scientists” in the 1990’s in Russia also resorted to what they perceived to be “the one standard of measure deemed possible to “evaluate” them is “worth”.
Soviet science in theory and sometimes in practice, was based upon and continued the ethical and rigorous methodological practices/standards including the acceptance of doubt, of the Russian Empire which were deemed to be necessary to be designated by peers as a scientist.
Consequently whilst accepting doubt, framing in long-term evaluation horizons, and context, many of the scientists were of the view their former colleagues had temporarily de-emphasised science and relied on other factors in context to make their decisions which many would likely change when the context changed.
The strategies of various organisations in the Soviet Union, the CIS and subsequently the Russian Federation were based on such understandings, facilitating through time the return of more perceptive scientists, whilst developing and protecting science as one of the priorities.
The perception ” loosing 100000s of scientists to the West in the 90s.” was/is that of the opponents and informed their practices from the 1980’s onwards.
For example in the energy related fields in “The United States of America” in 1993 even former members of the Soviet Academy were being offered salaries of circa $ 1,000 per month, facilitating the complicity of some in “The United States of America” in
“The strategies of various organisations in the Soviet Union, the CIS and subsequently the Russian Federation”
opportunities which continue as a function of your observation
” This is an example that seemingly a few in the West can comprehend.”
including those “non-scientists” who pose “questions” such as
“The Russian economy – ‘small’, ‘impotent’, ‘insignificant’: true or false?
“is based on their paradigm.”
Perhaps a more illuminating rendition would read “Is a function of their reliance on frames/paradigms ?” facilitating the illusion that “there is no alternative”?
As to “schwab, gaidar, liberals” they did have some educational utility, although slightly less than Mr. Mavrodi and MMM in the assessment of some versed in assessing the lateral complexities of “useful foolery”.
Some will concede that as a function of attempted iterations over time, it is “highly likely” that the “oligarchs” had greater educational utility than Mr. Mavrodi and MMM in “useful foolery”, despite Mr. Khordokovsky, unlike other “oligarchs”, failing to recognise his role post March 2000.
“” This is an example that seemingly a few in the West can comprehend.” and to a more limited degree in the Russian Federation.
It’s interesting that Russia, which has about 50 times the land area of Japan, has only slightly higher population: about 146 million to 125 million.
What’s even more interesting is that Russia’s population level makes it indefinitely sustainable, while Japan’s is decidedly not.
The future will be all about resources. Japan has none, Russia has the most
What is the ration in terms of flat usable land? Wait a minute, from my vague understanding of Japan’s terrain, I do not think I really want an answer to that. It is hard enough to sleep at night as it is. Probably like 500 or 5000 to one.
“The Russian economy – ‘small’, ‘impotent’, ‘insignificant’: true or false?”
Perhaps a more informed question would read
What is the utility of the opponents’ beliefs on the Russian economy ?
Perhaps as in the 1970’s and subsequent, the opponents could refer to Mr. Paul Craig Roberts’ Alienation and the Soviet Economy published in 1971 ?
This is a very informative article about Russia’s economy. Some of the acronyms mentioned need explanation to better understand the meaning of the terms used when discussing global financial markets.
“Nominal” means the unadjusted rate (change in value) without the usual economic modifiers (seasonality, monetary inflation, compounding of interest, etc.) included in the number.
“GNP” means the measurement of gross national productivity of a sovereign country owned by the countries’ citizens minus the productivity of foreign residents in that country.
“GDP” means the GNP of a sovereign country plus the productivity owned by its foreign residents.
“PPP” means Purchasing Power Parity an algorithm that economists use to compare economic productivity between countries.
Here is an Internet link to a statistical database that lists the GDP of Country economies
See: http://statisticstimes.com/economy/gdp-indicators-2020.php .
Notice the U.S.A. ranks first in GDP and that number equals its PPP.
In 2020, the Russian Federation ranks 11th in GDP and 6th in PPP. It can easily be seen the PPP of Russia compared to its GDP is roughly a ratio of 4:1.
Here is another Internet link that shows Russia’s trade statistics.
See: https://wits.worldbank.org/CountryProfile/en/RUS .
Here we see all categories of exports and imports for Russia and the total of exports exceeds its imports. This is further confirmation that Russia is a “trade positive” country.
We can also see the U.S. is a “trade negative” country.
So how can the U.S. have a PPP equal to its GDP when it has a trade negative balance? The reason is the U.S. Dollar is the reserve currency for which the cost of imports into a country is settled against that nation’s currency valuation. This is one of the reasons Russia and China are moving away from the U.S. Dollar that advantages the U.S. over other nations in the international economic trade markets.
Greetings from Russia!
Having lived through the 2014/2015 crisis, I must say that things here were not as rosy as the article suggests, but neither were they disastrous. Inflation went up very noticeably: a basket of groceries that cost 400 roubles before the crisis cost 700-800 roubles, 6 months later. Also, interest rates went up, and businesses or people involved in sectors like development had to put projects on hold. However, unemployment (especially in St. Petersburg and Moscow) was extremely low.
Following the initial inflationary shock, most Russians began to live more simply than they were used to doing: purchasing fewer imported products (which were often under sanctions anyways), traveling less abroad, and preferring purchases of smaller houses or apartments to houses.
Some of these trends have continued, but salaries have (to some degree) gone up to offset the impact of inflation, while import substitution and a range of new Russian SME’s have become the new reality here. Now, Russian products of daily consumption are often able to compete favourably with imported counterparts, regarding both price and quality. And, destinations in Russia and nearby (especially Turkey) are receiving tourism revenues that previously went to Italy, Spain and France. Recently, the Central Bank lowered interest rates and now there is a real estate boom happening throughout the country. Property values have increased by approximately 30% over the last three years (based on my own observation for St. Petersburg, but this figure is likely location-dependent).
Too much of uncontrolled export make pressure on domestic market and that leads to high prices.
That is why Russian government introduced export limits. So increase of sugar price is stopped according to the last reports.
Russia also has
5th most billionaires
5th biggest search engine (Yandex)
4th most FX reserves
One thing you neglect to mention is that the EU as a whole is also a surplus country, and there are countries outside of Germany with very large export surpluses (>10% GDP).
Also, oil/electricity usage are not completely accurate proxies for economic strength since the more advanced economies tend to employ these inputs more economically and thus competitively.
However, the bigger point is accurate. I have read many analyses about how the US bounced back from the GFC in 2008 much better than the EU countries did, but GDP growth measured in dollars, neglecting to mention that the Euro fell from almost $1,60 to $1,06 in the same period. A very large part of the economy is assets such as office space and houses, but the exact same house in Vancouver or the USA can go for much much lower prices in other countries. The wealth trapped in these assets can easily be reset in dollar terms with a shift in FX foreign exchange rates. Such wealth often does not correspond very well to long-term productivity/competitivity prospects.
What about how well energy is used? The U.S. has its goods shipped back and forth between the ends of the Earth at every stage of production. It relies primarily on single-family houses that are about as airtight and insulated as colanders and gasoline-guzzling vehicles. To get the same quality of life as an average European, we easily consume an order of magnitude more resources. We leak more resources faster than a Flash-enabled website.
Excellent article and kudos to the author…Bravo!
If I may surmise:
With PPP Russia outstrips Germany, Britain, France, Italy and Spain hands down.
The best analogy to state the absolute uselessness of GDP as a measurement is called the broken window fallacy. Let me elaborate.
If I was the leader of a country and was only focussed on GDP I would hire tons of guys and give them many rocks, crowbars and the likes. I would send them out and smash up as many windows as possible.
On the other hand, I would invest a lot in window repair businesses and glass making business. They be super employed and making lots of profits.
This all is great for GDP and employment. Making it look like your economy is skyrocketing economy wise even though nothing of value is added to society. Just people smashing windows and repairing them. Just keep that in mind when you see the GDP numbers.
The broken window fallacy can be applied to the US in a bit different way. Build a missile that costs $100s of thousands and then use them to blow up a tent in poor country that costed $100.
This is a big part of the reason why the US population is by far not as rich as the GDP numbers suggest.
The way GDP is calculated is different in each country (and changes all the time). It is an elastic yard and can be stretched at will. (A Chinese joke about Indian GDP is that it includes cow manure.)
Moreover, it does not measure the waste.
The Americans spend almost 18% GDP on healthcare vs the Chinese spend only 5.5%.
And the Americans spend 6% GDP on lawyers’ and litigation fees yet Chinese lawyers receive about 1% of the total income of US counterparts.