What has Putin done for Russian economy - 10 years in power

10 posts


The explanation which is usually pushed is that in 2009 Russia was still wallowing in oil dependency, relying on its oil and gas exports and the world price of oil. There’s plenty of truth in this. But in that case, how come Saudi Arabia, the world’s largest oil producer, whose economy is even more dependent on oil than Russia’s, not only did not suffer a fall in GDP but actually manage a slight growth – of 0.2%?

The decline is Russia was one of the sharpest seen in the CIS . In fact, 8 of the 12 CIS actually achieved economic growth in 2009! Apart from Russia, only the Ukraine, Armenia, and Moldavia suffered declines.
Yet while the economy trends ever down, Russia retains relatively high inflation of 9% a year, while in Western Europe prices are not rising at all and in the US, Japan, and China they are actually dropping.

What sort of economic monster has Putin actually built that it can produce both deep depression and high inflation simultaneously?


Putin’s “economic miracle” for his second presidential term was built on the influx into Russia of short-term speculative money from abroad. This did indeed lead to the high economic growth rates of 2005-2008 when over $140 billion flowed in. But this money was mainly in the form of loans. So when the crisis started, capital poured back out of Russia and the “economic miracle” finished.

Putin’s growth model was rickety because it was not founded on investments in modernising production, increasing labour productivity, or conducive to the development of small and middle business.
Economies like this can only “rise from their knees” if they get constant injections in their joints in the form of cheap credits from the West.

Looking back we can therefore see for ourselves that the main myths of Putinite economic success were outright lies. Russia’s development rates did not stand out in any particular way from the other CIS countrie s. This means that the economic growth of the 2000s was more probably the result of the post-Soviet countries riddingthemselves of Soviet economic ways. Growth rates in oil-rich Russia were amongst the lowest in the CIS. Back in 2000, Russia enjoyed the 2nd highest GDP growth rate in the CIS. By 2008, it was in 8th place. By 2009, we led the pack for rate of decline.

Having been granted a spectacular gift from heaven – unprecedentedly high oil prices – the Russian economy should have grown considerably faster. Export oil prices were three times as high under Putin as they had been under Yeltsin (average $47pb in 2000-2009 and $60-90 during 2006-2009 as against $16.7pb in the 1990s).
With a windfall such as this, our economy should have shown growth of 9-15% a year, like our oil-exporting neighbours Kazakhstan and Azerbaidzhan.

Furthermore it is not Putin we have to thank for what economic growth we did show. All he did was hitch onto the positive trends that had appeared before he came to power. Economic growth resumed in Russia as early as 1997 and then again, after the default, in 1999, when the country GDP grew by 6.4%. Putin had nothing to do with this.

If only the last decade had been used to really modernise the country, to make long-term investments in the renovation of industry, to build roads and airports, to create a modern army and pension system… We may never again be presented with such a chance and painful changes (for example, pensions reform) will be far harder to carry out.

Structural reforms were needed in order to modernise. But everything was done back to front and inside out: assets were expropriated – from Yukos to Sakhalin-2 to Euroset while more and more was spent on paying for the growing apparatus of state, the special service, and financing the newly reformed state corporations.
Putin began the 2000s with a budget surplus and and ended the decade with a growing deficit (which in 2009 amounted to 5.9% of GDP) . How to patch the holes? Putin found an answer: raise social security payments and the pensionable age. Russia also went back to borrowing abroad .

Based on Putin: What 10 years have brought by Nemtsov
President Camacho

Fuck this silly graph. There's no way you can tell me that Germany-- or even Japan or Canada-- is doing "worse" than America because of an arbitrary "GDP growth" number based on government agency statistics.

Just because America fudges its inflation metrics and counts trillion dollar corporate bailouts and gangster loan sharking as "economic growth" doesn't make the problems go away. America has more of a vested interest than any other country in downplaying its economic woes because it understands that the power of a global hegemon rests first and foremost on perception.

The Russian government has basically no debt, yet they are financing their economy with money borrowed from abroad?

Where is this alternate reality?

GDP is a shitty measure. GDP shrank partly because economic activity slowed down, but in large part because of repayment of debts. As a government focuses on paying off debts, and as monetary policy starts to tighten, GDP will shrink or stay stagnant.

Now Russia isn't crippled or burdened with debt. The countries with "higher GDP" are. It's a no-brainer which situation is better for a government.

Do you understand the difference between short-term speculative corporate loans and long-term government loans?

And that is why Putin himself proclaimed the doubling of GDP to be the core target since 2000.

Don't be silly, this has nothing to do with repayment of debts as can be easily seen, when you measure also production output in different branches of Industry.

http://www.gazeta.ru/tabs/table_2.html according to data, published by Institute for Economical Analysis for the Russian government

As Illarionov, president of the Institute for Economical analysis, noted, the rates of industrial output collapse in the November-December period, are unprecedented in modern Russian history, even when compared to two previous crises, one of which led to economical default.

A shortfall of 8%, which would be a sign of a heavy crisis of economy and industry of a country if it happened within a year, happened in December 2008 within a month.

As Illarionov notes, all the results of economic growth of the last 5 years were destroyed. Similar collapse was observed in Russia only once - in the later 1941 - early 1942 during war. Putin gave us this collapse during peace time.

Russia was not only crippled - it came back to 1993 in terms of industrial development.

See the following table.

http://www.gazeta.ru/tabs/table_2.html it details industrial collapse for each industry.
Depends on what you take as estimation of how bad a country is doing.

If you measure industrial output, which I agree, is a more independent indicator


Japan is three times worse off, and Germany is two times worse off. Why do you think that America has it the worst anyway? Just because several banks busted? Man, Iceland almost went totally bankrupt, and Romania has to raise its VAT by more than 5%. You have nothing of a kind.
President Camacho
An incredible amount of America's GDP is derived from the finance industry, which isn't "productive" in any meaningful sense. See this quality New Yorker article :
The government bailouts have finished off the process so well that Wall Street, instead of being humbled, now seems to have embraced its role as chief parasite.

Manufacturing and export ratios give a country economic leverage--hence the primary means of punishing "rogue" states is to embargo them, depriving them of your exports. Germany, Japan, and even England have better export ratios and manufacturing industries than America-- we have the smallest manufacturing sector as a % of any "developed" country in the world, and still shrinking. Not to mention the largest debt and credit problems anywhere.

It is already obvious that America's various embargoes against Iran have barely effected that country's economy. Yet it was less than 20 years ago when Bush Sr initiated and then Clinton twisted the world's arm into extending the embargo on Iraq-- with quite devastating results. Even in tandem with certain European countries, America is no longer powerful enough to project power through embargoes, because the real fulcrum of manufacturing power has moved East-- in Japan, China, and India-- where, more importantly, there is no longer reliance on American economic patronage. Iran can get all it needs from these places and remain unphased by any American economic initiatives.

America was built on its industrial might and it will fall with it as well. The American economy is now a house of cards; it continues to function only in spite of massive government efforts to cannibalize it.
Yes. What does that have to do with the fact that the Russian debtload is essentially none in comparison to other countries?

So what? GDP is just some flawed measure, and people like it when it goes bigger.

A short-term deflationary collapse. That's what happens when credit-educed growth ends.

Narrative fallacy. "By these metrics, something similar to this happened in the past, therefore the exact same thing is going to happen again!"

You really need to learn the limitations and flaws of most economic measurement. What does an "8% decrease" in an industry entail? 8% less people work? More people are working, but prices have fallen due to a deflationary shock? Really, what does it mean, and what can we draw from that number? Essentially, nothing. Did the buildings that were built disapear? Did the goods sold to people abroad just vanish into thin air?

You should look less at GDP and more at the economy.

Sorry, I just do English.

Other countries got duped. They put in money, things were built in Russia, and now their money is gone, while those things built in Russia are still there.

Russia used money to pay off debt, and now they have infrastructure left behind. It's not as bad as you make it out to be.
US exports of goods accounted for 1.0 trillion in 2009. For Germany its 1.1. If you also include export of services, the US might be the biggest exporter - I couldn't find the number for German and Chinese export of services, but I wouldn't be surprised if its so.

Debts are not a problem, when they are in your own fiat currency, when you can simply devalue it.

Somebody pointed out, that a similar move to devalue currency to get rid of the debt was made under Nixon. All these big numbers are just bogeyman.

That's because the US never actually introduced serious sanctions against Iran. The plan to introduce crippling sanctions was reviewed and rejected.

You haven't shown any numbers at all. You have no case to make.
Do you follow your own argument? You asked, why is Russian growth about loans, when Russian state debtload is very low, suggesting, that me and the head of the Russian institute of economical analysis are from some alternate reality.

I explained, that the credits and debts, which spurred growth, were corporate, not state-owned.

Since Putin considered it to be the single most important measure for his economical success, I take the fight to the enemy and show his brilliant economic results on his own terms. Yet again, try to follow the argument, it gets boring, when I have to retell you, what was being discussed two posts ago.

lol? You make it sound like its business as usual, when this 'short-term collapse' throws the country 17 years back.

Not necessarily 8% less, but it is a very good indicator, that a lot of people have lost their jobs, because fewer production output means fewer production capabilities used -> factories closed or shutdown -> people fired or on indefinite leave

Wonderful idea, only Russia had strong inflation growing throughout the whole crisis, no deflation.

That economy went down the toil in three months increasing unemployment by 2% in 1 year with according to official data more than 32 000 companies reporting, that they've had to layoff workers due to crisis and that the 'prospering' putinist economy had no leg to stand on and collapsed like a house of cards with the first wind blow.

I looked at it from the POV of GDP and industrial output, what other measure do you propose?

Who cares, when there's no money. No money = no business = no jobs. We had hundreds of plants and factories standing during and after the Soviet economical collapse. Didn't help in any meaningful way, other than to those who salvaged them and sold the salvage abroad.
President Camacho
Yes, and Germany's population is slightly over 80 million compared with over 300 million for America. Which means that Germany has roughly 4 TIMES more exports per capita than America. Duh.
When you are creditor to the rest of the world, devaluing currency is not really a problem--witness China, while the US can only whine to Jintao about this "unfair" practice. When you are by far the world's largest debtor, it is a problem. IIRC OPEC already switched their reserve currency from dollars to Euros several years ago. When the world stops holding American dollars as a sort of "gold standard" (which is what happens when you don't export anything and are increasingly perceived as a immature gambling addict), America's currency devaluations place more and more stress on only the American economy instead of distributing the misery across the world.