Western pundits love to compare Russia’s GDP to that of small European nations. But once you factor in purchasing power, shadow economies, and statistical quirks, the picture looks very different.
The whole GDP measure is pretty much useless for any serious analysis in my opinion.
GDP analyzes wealth production but not wealth distribution. Almost like it was invented as a tool of propaganda
GDP analyzes wealth production
It doesn’t even do that. It includes a lot of financial activity that generates absolutely no wealth at all and instead just shifts money from one place to another. It includes non-productive parasitical activity, financial manipulation in the FIRE sector, rents and other forms of unearned income.
There is also a ton of double counting involved even on the production front. All while failing to count unpaid labor that does create tangible value. And of course it ignores debt and liabilities, as this article: Why GDP is Fake points out. In fact it’s even worse than that, because it doesn’t just ignore debt, it counts interest on debt positively toward GDP.
The classic example of how nonsensical GDP is as a measure of wealth formation is this: imagine if everyone suddenly sold their houses to their neighbor. The GDP would go way up because of all the new loans and financial activity, but in reality nothing has changed at all about the housing situation, except people are more indebted.
Another classic example from Michael Hudson: the US Department of Commerce counts the rental value of homes owned by their occupants toward GDP in a concept known as “imputed rent”. Meaning if you own the home you live in and as a result don’t pay rent, the GDP includes the rent you don’t pay to yourself. So GDP goes up when real estate asset values go up. It is utterly absurd but that’s how it works.
GDP is “wealth production” only as seen from the point of view of bankers and speculators. It is objectively speaking a bad metric, yet liberal economic orthodoxy has universally embraced the “Cult of GDP”, so much so that they are unable to comprehend why, if line go up, are people still insisting that the economy is not doing well. We’ve seen countless articles of that sort in western publications.
And no, the problem isn’t fixed by switching to a GDP adjusted for PPP (although that is better) because the fundamental problems of the metric still persist.
I would suggest that a good place to look for an indicator of real productive output is energy consumption. The total energy consumption of a society roughly correlates with the level of real economic activity, though an adjustment for “energy deflation” is needed, that is improvements in energy efficiency thanks to technological advancement. If you do that you get a decent approximation. Not ideal but it’s a start.
Every stock bought or sold is a “service”.
Stock activity is not included in GDP calculations and never has been.
No, but dividends and investments are. The latter of which is particularly problematic because there is a well known problem with double counting investments: https://cepr.org/voxeu/columns/double-counting-investment
But point taken, you are right, i will remove that misleading formulation. Thank you.
When measuring the true economic strength of a country I think you should simply just look at what it actually produces. Actual things like electricity, food, construction materials, etc. Russia is far above Spain in all those metrics.
Russia is above not just Spain but most of Europe combined in those metrics.
Take electricity for instance. Russia produces more electricity than Germany, France and the UK combined, and if they wanted to they could outproduce the entire EU, the only reason they don’t is because they don’t need to. Their population only uses so much, so they just export their massive surplus of energy resources, whether it’s nuclear fuel or fossil fuel.
Russia is also food self-sufficient, and a major food exporter. Not many countries can say that, certainly not the Europeans.
In terms of industry it’s true that modern Russia doesn’t have anywhere near as much as they used to in Soviet times, but they still have a substantial industrial base. The Ukraine conflict has shown that they can still outproduce all of NATO on the munitions front. The ineffectiveness of the sanctions has also shown that they can largely substitute almost any imports with domestic production.
So yeah, no European country can compete with Russia when it comes to the real economy. I think even their fourth place ranking in PPP metrics doesn’t quite do it justice. While they are definitely smaller than China and probably slightly below the US, i do think they probably beat out India in the sectors that actually matter. I don’t think India could pull off what Russia has managed to do militarily and economically these past few years.
(Not saying India doesn’t have that potential, it definitely has, i honestly believe India could be China 2.0 if it had a better political and economic system, whereas Russia is naturally limited by its lower population…)
EU countries has a German economy as a backup. For example Greece, They did so many mistakes and Germany bailed out Greek officers and give them relatively cheap credit and they pumped the German products into Greece. In case of a crisis in Spain, Portugal, Italy Northern EU countries are ready take their market and crush the competition while the Russia needs to handle imperialist occupation and they don’t have cheap credit options like Spain.
I think you have it the other way around. Germany totally ripped off Greece during their debt crisis. Varoufakis has written extensively about how that whole thing went down and how badly Greece got screwed. The idea that “Germany bailed out Greece” was a talking point pushed by German right wing nationalists but it could not be further from the truth. German banks came out of that with huge profits because those “cheap credits” came with horrible conditions for Greece.
And it’s not just in regards to Greece. Germany profits a lot off of exploiting the poorer EU members, especially Eastern but also Southern European labor. For example in Romania they have bought up a large portion of the industries and the extraction rights to the country’s natural resources. For all intents and purposes the EU treats its poorer members as neocolonies for the benefit of core states like Germany. The EU is an absolute scam for the weaker economies of the bloc.
And at the end of the day it is a prison for Germany too, because even Germany can no longer set its own monetary and economic policies, and is instead permanently locked into the neoliberal paradigm that the EU forces on all its members. The only beneficiary is Washington who gets to control a bloc of dozens of countries with only a handful of US subservient atlanticist bureaucrats in Brussels. Russia is infinitely better off having sovereign control over its own economy.
Thanks for your deprogram efforts comrade
Just setting the record straight. The Greek debt crisis was quite some time ago and younger leftists may not even remember it or how it really went down. Others may only have become leftists relatively recently and still have internalized left-overs of the many false narratives which were widespread in the mainstream media at that time. And most people don’t have the time to do a historical deep dive into the topic since so much bigger things are happening at the moment. So it’s entirely understandable that there are misconceptions about this subject. If i can help clear some of those up i’m glad to do so.
I still do. I remember the PIGS and whole lazy entitled southern europeans who dont want to work because siesta and wanting to retire at 50. That full propaganda package. Bonus point was when greek workers were being totally meanies to Opachen schäuble who totally was just stating the facts.
Also the weird time when people claimed that Brexit happened due to english solidarity with greece. Despite the UK being one of the top austerity pushers in the EU.
And they say Greeks are lazy, even though Greeks work the most hours in the EU, while Germans work the fewest.
We need a paper for this comrade. I had no material to read on that but I’ve seen that crisis very closely.
