Posted on 08/07/2022 10:09:11 AM PDT by dennisw
Western leaders undervalued the size and global reach of the Russian economy Headlines concerning the collapse of the Russian economy under sanctions have been many and varied, although more recently observations have been made that sanctions imposed by the West aren’t working to the extent intended.
Writing this from Moscow, I can observe that supermarkets are full, there are no shortages, and gasoline is US$3.1 a gallon. That compares with Washington at US$4.99, London at US$8.16, Berlin at US$6.73 and Rome at US$7.31.
Why has the effect of sanctions upon Russia been so widely misunderstood? It’s a complicated question yet comes with a simple answer: politicians aren’t economists.
The French economist Jacques Sapir has recently explained the mistakes politicians have made when assessing Russia, with the United States constantly stating the Russian economy as being insignificant when compared to the US and being about the same size of Italy’s. That is a miscalculation.
According to Sapir, the reason for this disparity is exchange rates. If you simply convert Russia’s GDP from rubles to dollars for comparison, it would be seen as an economy as large as Italy’s. However, such comparisons are meaningless without adjusting for purchasing power parities, (PPP) which account for productivity and living standards, and thus per capita welfare and resource use. In fact, PPP is the preferred measure of most international institutions, from the IMF to the OECD.
So what happens when the PPP methodology is used to compare the actual size of the Russian economy?
Doing so reveals a much larger and significant beast – it becomes clear that Russia’s economy is rather more similar to the German economy at about US$4.4 trillion versus Germany’s US$4.6 trillion.
This means that the West’s politicians has grossly under estimated Russia’s economy as being a small, somewhat sickly European economy to being close to the largest in Europe and one of the largest in the world.
Concerning Russia, Sapir also asks: “What is the share of the services sector compared to the share of the products and industry sector?” In his view, today’s services sector is grossly overvalued compared with the industrial sector and commodities such as oil, gas, copper, and agricultural commodities, all of which Russia possesses in massive amounts.
If we reduce the importance of services as a proportion of the global economy, Sapir says, “Russia’s economy is much bigger than Germany’s, and accounts for up to 5-6% of the world economic output.”
That puts Russia on a par with Japan rather than Italy.
This makes intuitive sense. When times are tough, it is common knowledge that it is more valuable to provide people with the things they need, such as food and energy, rather than intangibles such as entertainment or financial services.
When a company like Netflix trades at a price-to-earnings ratio three times higher than Nestle, the world’s largest food company, that is more likely a reflection of frothy markets than actual reality. Netflix is a great service company, but as long as some 800 million people in the world are undernourished, Nestle still offers more value. And Netflix shares and earnings have indeed begun to slide post covid as consumers concentrate on the essentials. (Netflix also recently exited the Russian market).
There are lessons to be learned from this – the current situation in Ukraine helps to clarify values on what have been regarded as “archaic” aspects of the modern economy, such as industry and commodities, but whose prices have soared this year; compared with overvalued services and “technology” whose value has recently diminished, such as Netflix and Facebook.
There is more. The size and importance of the Russian economy has been further distorted by ignoring global trade flows, which Sapir estimates Russia’s portion “may account for 15%”.
For example, while Russia is not the world’s largest oil producer, it has been the largest oil exporter, surpassing even Saudi Arabia. The same is true of many other basic products, such as wheat, the world’s most important food crop, of which Russia controls about 19.5% of global exports, as well as nickel (20.4%), semi-finished iron (18.8%), platinum (16.6%) and frozen fish (11.2%).
This means that Russia has such an important position in the production of so many basic commodities, that along with several other countries, is in fact a key part of the globalized supply chain.
The United States has largely failed to acknowledge this and persuaded the European Union to follow the same thinking over sanctions while grossly underestimating both the size of the Russian economy and the role Russia has in global trade. The US has had success in imposing “maximum sanctions” on countries like Iran and Venezuela but trying to cut Russia off from world markets has resulted in and will continue to bring about a huge restructuring of the global economy that may take several years to absorb.
In fact, by controlling large sections of the oil, gas, food and other global commodities, the sanctions pain bought to bear upon Russia by the United States and its Allies has shifted to the originators of these – and their own populations.
Actually the two meet all the time for most purposes.
Wiki wouldn't be the most referenced and quoted reference site if “the two do not meet”
Did you happen to notice that several of the plants are in Ukraine and are now obliterated?
Only one on that list was in Ukraine, the Kharkiv. The rest were in Russia for the most part.
That some are making other things, some are closed or bankrupt? No probably not.
You claimed in your post # 88 and I quote , “The dear Motherland has 2 (TWO) tank factories. The small one makes mostly tractors and it shut down back in April, I believe. The big one shut down, after it churned out the last T-90Ms, a month or more ago.”.
So according to you, there are ZERO factories making battle tanks in Russia, which is obviously nonsense.
Check out the massive tank factory at Uralvagonzavod, which is, and I quote, “It is one of the largest scientific and industrial complexes in Russia[5] and the largest main battle tank manufacturer in the world.”
https://en.m.wikipedia.org/wiki/Uralvagonzavod
Can you get that into your rather thick head?
FWIF I read here at FR that Russia does make 90 nanometer chips and uses them in military and other items. Their 90 NM chips do the job. I don't know how much larger space its circuit board will take up compared to a 10 NM chip based circuit board.
58% of Americans are living paycheck to paycheck after inflation ..
Russia make their own chips, but then 70% of the chips they import are from China, who are happily refusing to impose any sanctions on Russia.
Yes Joe that is the largest factory and it has shut its tank production lines down.
Well the Russians would beg to differ with you and your precious wiki on the production shut downs - but maybe you should hop on the train and see for your self - you know get away from Mockva for a few days.
Try reading Russian publications and see if that will help.
Chip size is one metric - chip capability is another.
The ones they produce are antiques, when it comes to being able to use the products full designed capabilities - they just had to redesign their Orlan-10 to use an inferior chip, giving up significant abilities.
Not only that many of their weapons that use chips do not function correctly right off the bat - like 40% of the missiles either misfire or never reach their targets.
They are hurting badly in the chips department.
China cannot make 5NM chips but you are right. Russia can certainly deploy (just guessing) the 20NM chips that China can produce. 11th gen Intel mobile processors are at 10 nanometers
______
****** i5 1135G7 has been a very big seller the last few years. With a large jump in the GPU processing. Laptops with this sell like hotcakes.>>>>>>
The i5 1135G7 is based on the 10+ nanometers architecture with this the 11th Gen Intel CPUs have gained double digits IPC gains (instructions per cycle). The higher IPC allows the ice lake CPUs more performance at the same clock speeds. The TDP of this Chip as specified by intel can vary anywhere from 12 to 28 watts.
Says who?
You? Don't make me laugh.
Well the Russians would beg to differ with you and your precious wiki on the production shut downs
Of curse they would, because they are happily producing tanks even as you and your crazy Ukraine propagandists continue to insist its the exact opposite.
Orlan-10 - Banlon -Rayon-Nylon. You know lots more than I do. I am glad the Russkies chips and electronics are inferior when placed into their missiles and weaponry.
Russkies are very good at making steel and steel piping for their energy/gas/oil sector. Though no good at making mammoth gas line compressors for Nordstream etc. They buy these from Canada and Europe. They also use imported Siemens controls all over this sector.
Remember that part I mentioned about you going an reading Russian publications? Guess you omitted that step in your rush to prove you masters propaganda lies.
Without Western oil field supply companies, they would be producing significantly less oil than they are now, as they cannot slant drill nor frack - among other things in the modern oil production business.
The Orlan-10 is the drone the Russian artillery batteries use to find targets - a modern forward observer, if you will.
Decades of indoctrination through the big education/media complex.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.