Paul Goble
Staunton, Nov. 16 – Vladimir Putin has been able to convince many that he has been able to increase the size of Russia’s GDP despite Western sanctions. Russia’s GDP numbers have in fact risen but almost entirely because of expanded military spending, a pattern that is leaving Russian per capita incomes lower and the country’s economic prospects worse.
Government spending whether on the military or for other purposes “automatically increases GDP,” Igor Nikolayev, a senior scholar at the Moscow Institute of Economics” (profile.ru/economy/kak-voenno-promyshlennyj-kompleks-mozhet-stimulirovat-ekonomiku-no-razoryat-gosudarstvo-1415485/).
But overall GDP growth “in itself does not mean an increase in the well-being of citizens or of the state,” he continues. And in this regard, military spending and spending on consumer needs have very different impacts, with the former not multiplying in its impact in most cases while that on the latter almost invariably does.
Thus, unless weapons are sold abroad, they are typically single-use items, while spending on infrastructure, for example produces long-term and multiple increases – and even spending on immediate needs is typically respent once or even more with a multiplier effect for the GDP as well.
At the same time, spending on military goods as now with the war in Ukraine can beggar the state treasury, leaving it in an ever worse position even though the leadership will point to the growth in GDP as evidence that everything is going well and that efforts by the West to limit Russian economic growth by means of sanctions have failed.
Current Russian leaders should know better, he suggests, because of the experience of the Soviet Union at the end. “The disproportionally large military budgets became one of the cause of the economic collapse of the USSR,” even though this spending kept the GDP growing and allowed the Kremlin up to the moment of collapse that it was the second largest in the world.
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