Russia's Coming Post-War Growth

Russia's economy is not doomed to suffer after the war.

Everyone knows Russia has suffered massive losses on the field in Ukraine. It has also seen massive emigration of the educated and liberal middle classes in protest to the war, and is suffering massive sanctions and trade restrictions from the west. Seems like a hopelessly bad economic situation, right? Well, perhaps the night is darkest before the dawn. Perhaps Russia is poised for a post-war growth miracle.

The argument for a post-war growth era is that exactly that which most observers see as deficiencies are actually strengths. A smaller working population tends to lead to higher wages and salaries which spurs consumption in what is often a virtuous cycle. The fact that there are fewer workers now than there was before the war produces both better compensation for workers and an incentive to modernize and update production processes to be more efficient. Russia has not been at the forefront of labour saving technology as it has had a big population which meant that employing a lot of people was not a problem. After the war though, many of the men who survived the Donbass will be accustomed to much higher compensation, and with the dearth of workers the scales may well be tipped in labours’ favour.

The fact that much of the educated middle classes emigrated means that there is potentially a lot of room for upwards social mobility. Someone still need to do those jobs, and in a more chaotic time deeply calcified structures can be loosened and open up new opportunities. Programmers, teachers, engineers, and middle managers are needed and the generous pay packages offered to soldiers could enable many from poor rural regions to invest in education or moving thousands of kilometers to a bigger city with better prospects. In short, Russia’s economy will likely offer far more social mobility after the war than it did before.

Even the sanctions could turn out to be a boon for Russia. As I’ve argued many times on the blog, trade restrictions work best as a threat as implementing them leads the sanctioned party to develop their own alternatives so as to never have to rely on the sanctioning party again. If EU sanctions stay on Russia then there is now a powerful incentive for soldiers returning from the frontlines to buy a lada instead of a dacia or skoda. We have already seen how western brands were domesticated after the war began when all the burger kings closed only to be replaced by burger czars in the exact same places using the exact same workers and equipment. The same process of taking technology and products previously imported and instead manufacturing it locally could become bug business; a form of import substitution imposed by foreign enemies.  

There is also the possibility that Russia ends up with the responsibility of rebuilding Ukraine which would provide a captive export market. Obviously, it remains to be seen whether Ukraine maintains its independence or not, but if the war continues on its current trajectory it seems likely that Russia will gain significant political influence in post war Ukraine which it would probably exert to make sure its companies get favourable export deals and corrupt infrastructure contracts.

I also think it makes political sense for Moscow to support a broad-based economic recovery, even at the expense of oligarchs. After the hardships of the war Russia will need time to breathe, and if I’m wrong and the economy continues trudging along at an unremarkable pace it once again opens the door to social unrest. If soldiers return home to much poorer paying civilian jobs and a continued elevated level of repression social unrest is inevitable. If however the soldiers return to well paying civilian jobs, better chances at social mobility, and a reprieve in repression then there would be a lot of goodwill to gain for the Putin regime, at home and abroad.

Given how often periods of strong growth follow traumatic events like plagues and wars there is no reason to doubt that the same will be true in post-war Russia. Normatively this is terrible, letting Putin and his gang of war mongers and war criminals bask in the glory of a growth miracle sends all the wrong signals. But that does not make it less likely. If this does come to pass the way to see it is as a reward for all those who had to suffer loss, pain, death, and dismemberment for the whims of Vladimir Vladimirovich Putin.

If you liked this post you can read a previous post about NATO here or the rest of my writings here. I also have a section for longer reads I call essays here, I particularly recommend my essay on Silicon Valley and AI called 'No Acoustic Guitars in Silicon Valley'. It'd mean a lot to me if you recommended the blog to a friend or coworker. Come back next Monday for a new post!

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I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.

Written by Karl Johansson

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Cover photo by Elina Fairytale from Pexels, edited by Karl Johansson