The Coming Russian Depression
Even by Russian standards, the economic news last week was exceedingly grim.
A new report released by Standard & Poors revealed that as Russia’s population crashes to near 115 million by 2050, a loss of well over 15% from today’s level, and as it ages while younger workers disappear, the country can expect national debt to soar to stratospheric levels nearly six times what Russia produces in value in a given year. Russia will produce less and less value with fewer and fewer productive workers (Russian workers are already among the world’s least productive and most corrupt), yet it will be called upon to pay out more and more to unproductive, aging workers.
S&P’s conclusion was stark indeed: “By 2035, we expect that Russia’s fiscal indicators will have weakened such that they would be more in line with sovereigns currently rated in the speculative-grade category, because, in our view, the projected improvement in GDP per capita would not be able to offset the potential fiscal deterioration.”
Unlike other countries with large economies, Russia’s finances depend entirely upon the sale of crude oil, a finite resource whose price Russia cannot control. We’ve repeatedly reported on the laughable manner in which the Russian stock market bounces around like a yo-yo at the whim of an oil market which is totally controlled by foreigners.
What this means is simple: Russia’s economy has no diversity and therefore no resiliency, no room to use innovation to make up for economic shortfalls.
And, as we report in another editorial today, Russia’s caught between a rock and a hard place. On one side it faces demographic decay, and on the other the fiendish effects of corruption. Russian interest rates must be far higher than they should be because nobody can trust the Russians, especially not other Russians, to do what they say. This wicked economic vice will surely crush the Russian economy, exactly as it did the Soviet economy. We will again see national depression and collapse.
Worst of all, the leaders Russians have chosen to guide them through these perilous shoals are utterly unqualified and indeed incompetent to do so. They are nothing but a clan of proud KGB spies, men who have never run any kind of business, much less a competitive one, and who accordingly have no idea at all what it takes to build a vibrant economy. Even if they did have a clue, they would not act on it, because that would risk creating independent centers of power that could challenge their dictatorial rule.
So Russia is doomed, just as the USSR was doomed, to wallow in inefficiency and corruption until paralysis sets in and the nation, once again, collapses into rubble.