Facing growing industrial and manpower constraints, Russia must soon decide whether to forcibly mobilise its economy and society for its war against Ukraine. The consequences for Russia’s stability and Europe’s security will be profound.
  • Sepia@mander.xyz
    6·
    6 days ago

    The paper makes a lot of good points (here is the pdf version).

    The price of labour is the wage rate. In the absence of forced mobilisation, the [Russian] state must offer very high pay to induce civilians to risk an early and violent death. It must also attract them to work in military enterprises to raise war production. In some regions, the army and the defence industry thus compete to attract a diminished labour force. The resulting wage growth, in excess of any productivity gains, is another source of inflation –and helps keep the interest rates high as an anti-inflationary measure. And China’s price-gouging of Russia means these goods are far more expensive than domestically produced goods would be, or than imported ones were before the imposition of Western sanctions.

    This and many other points form a very convincing argument against the economic policy pursued by Russia’s defense minister Andrei Belousov, a trained economist who is what is called a 'military Keynesian" (Military Keynesianism is an economic policy that claims that the government should raise military spending to boost economic growth).

    I also like the conclusion that Russia will face financial crisis, not output collapse, a prediction many economists have made soon after the war broke out.

    [Edit typo.]