“There is no need to grieve, you’ll make yourself ill. After us, the deluge.” Madame de Pompadour, mistress of King Louis XV, 1757
With an economy smaller than Italy’s and going nowhere except down; a long-lasting demographic crisis shrinking his military recruiting base; a nation looted, impoverished, dummied-down, repressed, and wary of additional wars; neighboring countries seeking the overthrow of his authoritarian sycophants and a Kremlin political elite averse to reform as long as the state can suppress civil society and media, Putin’s threats against Ukraine and NATO – if carried out – would be the most monumental of Putin’s several earlier follies. An invasion and occupation of Ukraine would result in Russia’s economic collapse, long-standing “pariah” status, and a military debacle. Quite possibly the loss of his throne.
It wasn’t supposed to happen that way. Fourteen years ago – in Putin’s 2nd term – the Kremlin approved a national economic strategy that envisioned Russia becoming one of the world’s top five economies by 2020 and establishing itself as a major financial center and global leader in technological innovation. After 14 years it is still stuck in 11th place and has been overtaken by Italy and South Korea. It ranks 45th in global innovation (42 rankings below the U.S.) and remains a net exporter of capital ($47 billion in 2020) rather than a magnet for international finance; and has precipitated a 10% decline in living standards.
But it only gets worse.
During those 14 years, while the world as a whole enjoyed average annual 1.5% increase in its economic output (GDP) and a total increase of 51% from its $58 trillion base in 2007, Putin’s Russia actually showed a decrease from its 2008 base of $1,661 to $1.647 trillion (est) for 2021. Its economy makes up only 1.6% of global GDP compared to the U.S. 24.7%. The economic output that provides Russia with the means to sustain the nation and maintain its military force is less than four cents for every dollar of productivity by NATO countries. A pint-size economy, even if concentrated on military priorities, still leaves Russia far behind the defense budgets of NATO countries.
However, it gets even worse. The statistics above demonstrate that the Russian economy is, and has been, in full stagnation for the last 14 years of Putin’s rule, boosted periodically with higher oil and gas prices. But a number of external and unavoidable factors have begun to converge and gather increasing momentum over the next 30 years, creating additional problems for Russia, the Kremlin, and its military.
Russian military
Russia’s military might is part hype and part real. It does have nukes, but they are largely useless unless Putin is ready, in pursuit of “greater security,” to risk devastation to his own country, fortune, and power. Putin is anything but reckless, so let’s put this one aside.
Russia does have a large conventional force, but the U.S. and NATO far outmatch it in quality and quantity. Russia still relies heavily on Soviet-era ordnance but its decisive competitive advantage over Ukraine is in its aerial power which may overwhelm Ukrainian forces in a “shock and awe” assault, but not without a severe mauling. It may take Russia years to recover.
An occupation force of 800,000 is needed to occupy Ukraine.
But Russia can barely scrape up more than 900,000 personnel for its whole active-duty force (30% of which are 1-year conscripts) because of financial and demographic constraints.
Russia’s demographic crisis severely impacts both its labor force and mobilization potential. In 2020 there were 14.25 million men in the 20-34, draft-eligible age group. The U.N. estimates a 20% decrease during the 2020s. Its current militarization rate to maintain a 900,000 military force is 6.31% which will increase to 8.01% by 2030. By comparison, very few nations are even close to 4%.
Putin’s Empire
The Russian Federation is comprised of 81% ethnic Russians (117 million) and 19% other ethnic groups (28 million), half of which are from the CIS -former Soviet Republics (such as Kazakhstan and Belarus) with a combined population of 92 million. These nations and ethnic groups had been incorporated into the Russian empire by force and are now beginning to demand separation as much of the world had witnessed this past century. We saw it in Ukraine and are now seeing it in Belarus and Kazakhstan. Putin, an ardent Russian nationalist, pretends to speak for a “Commonwealth” that is nearly evenly split between Russians and non-Russians; but Russians are aging and declining, while non-Russians are growing. His ability to send “peacekeepers” in defense of autocratic regimes will be over extended.
Furthermore, almost all Russia observers have noted the colossal decrease in the quality of Russia’s “human capital.” The competitive advantage it inherited in its education system and respect for human capital, has been squandered. Its educated people are leaving. There is little demand for professional skills. Low-end universities grant shoddy degrees. There is a high degree of social apathy and mistrust, falling incomes, poverty, lack of basic medical care, and shortage of working-age laborers. Russia is ill-prepared for the challenges it faces, least of all for wars and body bags.
De-carbonization
Oil and gas export is the life-blood of Russia’s economy, providing a quarter of Russia’s GDP and fiscal revenue and 40% of its federal budget. But its political elite gives very little thought to the world’s transition to a post-carbon future. Since fossil fuel accounts for nearly 2/3 of Russia’s exports, it is acutely exposed to coming shifts in global demand.
State’s Aversion to Reform
The prevailing sentiment of the Russian ruling class (“there’s enough to last for our lifetimes”) seems to mirror Madame de Pompadour’s “after us, the deluge.” They share a “consensus of inaction” by failing to take action or speak openly about problems lest they risk their positions in the establishment. They believe in authoritarianism and state capital so long as the state can suppress civil society and media, and keep propaganda channels open. Why risk reforms if such measures jeopardize political stability?
A Losing Hand
Putin may be one of the world’s best poker players, but the reality is that he holds a losing hand. And – when he lays out his cards by ordering an invasion – the stakes may be much higher than he and Russia can afford to lose. Despite Putin’s pretensions and sabre rattling, he cannot turn back the clock to Russia’s “glory days” of the USSR. Russia will have neither peace nor prosperity as long as it allows itself to be ruled, abused, and manipulated by the likes of Putin and his associates. The long-exploited Russian people deserve better….much better.
