Why Russia’s Economy Sucks

Will the international community’s sanctions succeed in bringing Russia to heel? Completely cutting them off from the world banking system has the potential to do a lot more damage to Russian oligarchs than previously, but it’s important to remember that the Russian economy was already sucking.

Some takeaways:

  • Russia’s transition to a market economy was badly bungled, with state enterprises being sold off to those well-connected oligarchs rather than people that could actually grow and modernize industry.
  • Foreign firms were largely excluded from the privatization process.
  • Lots of oligarchs took a look at the sad state of the Russian economy in the 1990s, and decided it was safer to park their money outside the country (hence all those Russians buying houses in London).
  • Russia still managed a lot of economic growth in the early 21st century, and was helped by rising oil prices.
  • By contrast, Russian banks were still so primitive that they weren’t hurt by the subprime meltdown of 2008, since they weren’t exposed to subprime mortgage bundles or derivatives. But they were hurt quite a bit by the subsequent decline in oil.
  • Limited economic sanctions following the invasion of Crimea did very little, because Russia was prepared for it with considerable foreign currency reserves, and most sanctions were quickly rolled back.
  • “Russia has never been a real democracy.”
  • Per capita GDP has dropped from $16,000 in 2013 to just over $10,000 today.
  • “Corruption, mismanagement and warmongering are rarely a recipe for success.” The Russian shrunk over the past decade.
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    14 Responses to “Why Russia’s Economy Sucks”

    1. Moo'n'Oink says:

      “Corruption, mismanagement and warmongering are rarely a recipe for success.”

      Perhaps not for ordinary people. For politicians, OTOH, that’s just good eating. If corruption, mismanagement and warmongering weren’t lucrative for our “leadership” then they wouldn’t be so common. In that sense, America is no different or better than Russia, China or any other crooked autocracy.

      Pretty much any criticism one can level at Russia over Ukraine can be turned right back on the US. We’ve been war-happy for decades, killed civilians with missile strikes and conducted invasions on flimsy pretenses. Government corruption is rampant and cancerous. “Oligarchs” have outsized influence over policies at the expense of ordinary citizens (cough Bill Gates cough cough George Soros cough Hollywood…) And after what happened with all the funny business in 2020, it’s challenging to argue we’re even a real democracy anymore, especially now that everyone knows what really went down with Hunter’s laptop.

      Yeah, it’s fun to slam Russia for being backward and crooked. But maybe we should be a bit more worried about our own problems for a change.

    2. Garrett Stasse says:

      Just after the USSR collapsed, western investors were lining up, looking for deals. Russians mostly told them to get lost, and the ones who got in were robbed. A home builder learned the hard way.

    3. blank says:

      Says “Moo’n Oink” comfortably ensconced in the USA and virtue signalling. Blame The USA first, has worked well for you over the last 60 years.

    4. cap'n fast says:

      always thought that when a guy considers that the leadership and money men of the CIS is a bunch of old time Mafia Dons, the actions they have taken since 1991 all make sense in a peculiar way.

    5. cap'n fast says:

      bunch of mafia dons doing what they know best…

    6. Moo'n'Oink says:

      Blank, denying the reality of our current situation does nothing to rectify it, and blind patriotism can only lead to a nasty reckoning when the bill comes due. We have no business lecturing any other country about corruption or war mongering. Especially not under Biden, but the truth is our foreign policy has been arrogant and belligerent for decades, our electoral system is broken if not outright rigged, and our elites have far too much power. And I am sick of pretending that any of that is acceptable.

      Our government is a disaster. Pretending otherwise is naive and dangerous, and it’s exactly that sort of blinkered jingoism that has gotten us where we are, following fools and knaves toward the obvious cliffs that lie ahead.

    7. Blank says:

      Moo’, Good rant!

    8. Tim says:

      I remember years ago McKinsey did a study on why a foreign company like Walmart did not expand into Russia. They found out the bribes were too high to make any money.

    9. Brandon G Yousef says:

      Why is it that a certain species of Leftist has only one mode of discussion, tendentious tu quoque, which they employ indiscriminately in every argument as though they’ve made a devastating point?

    10. JohnnyL says:

      Maybe the entire point of this war is to lure Putin into an invasion of Ukraine, set up a situation where he can be replaced with a more western friendly head of state. Then the globalists and there corporate lackeys who were denied their chance to pillage the Russian economy the first time can now get their opportunity. Considering the past history of these kind of wars I have no doubt that they have no problem in sacrificing the Ukrainian people.

    11. Chicago Vota says:

      The primary example of the Harvard School of Economics vs The Chicago School. Jeffery Sachs produced a corrupt mess. But I am sure he was paid well

    12. Lawrence Person says:

      If that’s the case, then Putin is certainly dumb to fall for it and deserves to be replaced.

    13. _Jim says:

      re: ” We’ve been war-happy for decades, ”

      Please, look which pol. party was responsible …

    14. […] There’s also this article on the Russian economy that’s backing this military effort. To put it bluntly, even before the sanctions, that economy wasn’t doing well: […]

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