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spectrum. In a war, having a large industrial base is a big advantage, as the rate a country can produce arms is a key factor in the fight. In these terms Russia is even bigger than Germany, itself no mean industrial country, according to research by Jacques Sapir.
“Simple GDP statistics have arguably lulled the West into a false sense of security. By GDP, Western economies appear dominant and their capacity to impose sanctions decisive. But the West’s reliance on service sectors – and the relative weakness of directly productive sectors like manufacturing, mining, and agriculture – introduces critical vulnerabilities in goods production and supply chains. In times of peace and unimpeded trade, such vulnerabilities may seem insignificant. In periods of deglobalisation, geopolitical competition and state-versus-state conflict, however, these weaknesses can have profound impacts, while basic productive sectors take on greater importance,” Sapir said.
GDP measures wealth, but it fails to capture the real value of the buying power of the currency in the way the Big Mac index does. But both these measures fail to capture the productive capacities of a country from its industry. Put more simply: the Big Mac index tells you how many burgers you can buy with a ruble but it says nothing about how many burgers a day Russia can make and how that compares with the US burger-making capacity.
Looking at just nominal GDP, then Russia’s share of the global economy was 1.9% in 2019, against US’ 24.4% and China’s 16.4%, according to the International Monetary Fund (IMF).
In PPP terms Russia does better with a 3.1% share of adjusted global GDP, with the US falling into second place with 15% against China’s 17.3% as the world leader.
“The exchange rate method [nominal GDP] significantly underestimates the size of the Chinese and Russian economies,” says Sapir. “Using the exchange rate method, the size of the Russian economy is half that of Germany’s and around 130 percent of Spain’s. China, while growing more rapidly, is around two-thirds of the US economy in 2019. With the PPP method, however, the profile of the Russian and Chinese economies changes drastically. The Russian economy almost becomes the equal of the German economy, while the Chinese economy reached parity with the US economy in 2016 and has since taken a slight lead.” The importance of the productive sector Productive capacity skews the picture even further towards Russia and China. The service sectors have grown more rapidly than goods production and form an increasing share of Western economies, which during the globalisation drive of the last two decades exported an increasing number of their productive work to emerging markets, and China in particular. That has become relevant in the last three years as first the global pandemic and then the clash with Russia has started to undo the globalisation in an increasingly fractured world. Nearshoring has taken over as the driver of emerging market investment that looks for cheaper labour, but also shorter supply chains.
“During wartime, services lose their importance relative to agriculture, industry and construction. It then becomes necessary to calculate the share of the
RUSSIA Country Report September 2023 www.intellinews.com