Twenty months ago, after Vladimir Putin had launched his full-scale invasion of Ukraine, many high-ranking Russians believed that the end was near. The economy faced disaster, as they saw it, and the Putin regime was on the brink of collapse.
Today, the mood has changed dramatically. Business leaders, officials and ordinary people tell me that the economy has stabilized, defying the Western sanctions that were once expected to have a devastating effect. Putin’s regime, they say, looks more stable than at any other time in the past two years.
-Real estate prices are rising, and construction is booming. At the beginning of 2022, most global brands left Russia, leaving empty storefronts in malls and streets. Now, the gaps have been filled by Russian counterparts, as the chief executive of one retail network told me. Putin’s spokesman, Dmitry Peskov, recently admitted that the Russian economy had faced “a threat of collapse” in the months after the invasion but said the country is now over the worst.
Before the war, Russian business executives generally kept their savings in the West. They also bought real estate, properties that sometimes served as second homes for their families. Now, as one Russian oligarch told me, that door has been slammed shut, sparking an investment boom at home.
-After the invasion, the International Monetary Fund estimated that the Russian economy would fall by 2.3 percent in 2023. In January 2023, the IMF changed its forecast, predicting growth of 0.3 percent. It changed its forecasts at least two more times during the year; in October, it finally settled on a figure of 2.2 percent.
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Isn’t war good for the economy in the short term?
The military industrial complex is definitely playing a role here, but it seems like the economy is growing even outside of that. One big reason is that western companies leaving along with the sanctions created voids that are now being filled domestically. For example, a lot of manufacturing that wasn’t competitive to do before all of a sudden started being worth doing.
In fact, it looks like Russian economy is actually overheating right now where they’re running into a problem of not having enough people to do all the labour. This is leading Russia to start leveraging partnerships with DPRK and former USSR republics to outsource manufacturing there.
I don’t think it’s quite so simple as war is good for the economy in any term. War can have loads of positive and negative effects on an economy. It seems to me the war is good for the economy idea is an American construction as military spending is the only jobs program our ruling class likes to support, and military intervention is necessary to defend western economic hegemony.
We should also be aware those effects will be experienced differently by the ruling and working classes. War can shift economic focus away from satisfying domestic needs and allow certain industries and their owners to flourish and gain influence while workers see increased austerity and reduction in rights.
