Most of all, Putin and his cronies seem preoccupied with the demographic decline of Russia. Correctly predicting that this is the number one reason for Russia's declining geopolitical fortunes.
Russia's demography is actually worse than the numbers suggest. It is true that Putin has succeeded in keeping the population sort of stable by lowering mortality and welcoming immigrants from post-Soviet nations. But the main problem, low fertility rates, are still there.
These low fertility rates contain a demographic bomb of sorts. The end of the Soviet Union meant a collapse in Russian fertility. The number of births in Russia halved between 1987 and 1993. I know of no other advanced country at peace that has experienced something similar. The bomb here is that the girls born in 1987 are still adding to the birth numbers of Russia while the girls from 1993 are only now entering motherhood in force. Halving the number of potential mothers will of course wreak havoc with birth numbers.
All this is known to Putin and his government. Most probably, demographic considerations have played a part in recent Russian foreign policy. When unable to manufacture new Russians themselves, Russia is simply conquering Russians from neighboring countries that have some to spare.
One crucial element that I think you miss is the impact of outward migration, which saw many of Russia’s best and brightest go to Israel and the US (and even a few to Australia). This has now accelerated again.
This counter-thesis against the Russia-is-great-because-Putin is substantiated, but there's a too-ready dismissal of factors that could go just fine or even well for Russia: 1/ Why *can't* Russia just replace any US or EU imports with Chinese (or other East Asian) ones? China is a more relevant exporter of manufactured goods than either, all the way up and down the value chain! China's right next door and it wants exactly the stuff that Russia is selling: energy, minerals, and agricultural commodities. And Russia is still managing right now to import many Western goods by circumventing sanctions, anyway. How many times in the last year-plus have we heard that their war machine will run out of fuel immanently, when it appears that it's actually ours that's dangerously depleted, owing to our "efficient" industrial base that's hardly fit as the any Arsenal for Democracy in near-peer fights like in Ukraine? 2/ Russia's own looming demographic collapse is bad, yes, but it's the exact same demographic collapse that is happening in the entire developed world, so why is it remarkable? The problem is even worse in places like South Korea or Germany. It's now nearly as bad in the United States, itself, now that we have paired a deadly epidemic with a decade of "deaths of despair," our own remarkably poor health outcomes as a wealthy country, and the low-key bipartisan anti-immigration consensus! 3/ Lastly, the "Russia is a stagnating petrostate" line seems both exaggerated and overstated: If Russia is a petrostate... so is the UAE. And it's also disproportionately dependent upon other mineral extraction... just like Australia. Its exports to places like China are mostly oil and food... just like the United States'. Is this really such a terrible fate? In reality, Russia's economy is more complex: it has a higher percentage contribution of manufacturing than the US and the global average (14.5% vs. 12%). Its value-added services economy is no slouch, either, even with the (perhaps temporary) exodus of some highly-educated Russians who might invent the next Yandex. Russia is ranked pretty middling on the Global Innovation Index, but better than the likes of fast-growing middle-income Vietnam and Mexico, and about the same as Greece or Slovakia.
All of which is to say that Russia won't be "great," perhaps, but it will continue to be *good enough,* and with a scale of geography, resources, hard power, and population that most other countries cannot match. In our schadenfreude, we can tend to mistake our eagerness for adversaries to be basket cases ripe for collapse with the reality that they're just fine and will remain formidable. We indulge in patriotic triumphalism at our own peril.
Has there ever been an international system that could deal with declining powers without war? A rising power can be 'invited to the table' of existing power structures, as the USA, USSR and China have been, not without friction or rivalry obviously, but plausibly without conflict. Declining powers, though, often don't see their decline and demand to be treated as though they had their former power. So either you humour them, which is unsustainable and costly, or they become revanchist, as Hitler's Germany or Putin's Russia, and try to reassert their power. Hitler almost succeeded, Putin has failed, but ultimately declining powers will reject the balanced order under which they're declining. I'm genuinely not sure how this can be managed at all.
Good description of Russia under Putin. However, the last paragraph left me a little puzzled.
It's true that China became the leading producer of cobalt, rare earth metals, and batteries, as well as solar panels and windmills. This only happened because China had some cost advantages, coupled with a willingness to subsidize export industries. What, exactly, does Noah think the US and Europe should have done to prevent this? Should we have subsidized our own domestic producers, or made it easier to import from places like the Democratic Republic of the Congo? Should we have undermined the WTO and enacted domestic content rules?
And, what exactly is the cost? Would it really be difficult to restart domestic production if Chinese supplies were cut off?
"A country that lets itself be led around by the marginal logic of comparative advantage will end up with short-term economic gains, but these gains may be offset by the loss of deeper technological capabilities."
I've been teaching international trade to my civics & econ students for the last 2 weeks and this was exactly how I summarized it to them. 3 weeks straight you and I agree on something major. Remarkable. :-)
When comparative advantage is primarily latitudinal and climactic, it's geographically fixed. But comparative advantage is primarily technological and educational, it's quite changeable over time. *(In both directions.) It's ironic that as Smith and Ricardo were devising anti-mercantilist theories for their agrarian world, the world was industrializing underneath them and rendering many of those theories less accurate.
I'm not as worried about the US being over reliant on certain imports and falling prey to "comparative advantage-itis"
Unlike Russia, America has an incredible array of best in the world economic activities and attributes that are desired by both our own citizens and other countries.
I believe our recent foray into industrial policy is motivated by short term politics, not long term economic strategy. And industrial policy is where we have a comparative disadvantage.
I wrote the below brief post, specifically about our CHIP policies, motivated in part by Noah's own post yesterday morning.
It is interesting that Russia decided to become a petropower as the rest of Europe decided to shift to clean alternative energy sources. Not only did Russia take up the slack as Europe mothballed its North Sea oil fields, but it welcomed Europe exporting its environmental problems to Russia. Europe could continue to use hydrocarbons without the messy job of extracting and refining. Russia was making a living off being Europe’s petrochemical sewer, a convenient means of offshoring environmental damage.
As Noah’s post points out, it is economic suicide to trade short term gains for long term declines. Russia rode an opportunistic wave for a short while and squandered it on this foolish war in Ukraine. Europe will bite the bullet and accelerate its transition away from petroleum dependency and China is leading the way in Asia to do the same. The writing is on the wall yet Russia persists in repeating past mistakes. Perhaps China can sort it all out after this next collapse. There is not much worth saving here and it is likely to be a total tear down. The toxic cleanup is likely to take decades. It is little wonder that Russia’s best talent is heading for the borders.
Why did I get blocked on Noahpinion's Twitter today for citing the CBS story that more than half of weapons donated to Ukraine have gone unaccounted for? Due to pressure from multiple government officials, CBS has altered their report. Still not grounds to block people.
We might also just be starting to realize the cost of deglobalization, Trump’s trade war, Trump’s and now Biden’s self-flagellating tariffs costing taxpayers $250,000 annually for every steel union job saved according to the peterson institute and hiking up prices in the midst of high inflation, immigration quotas and a decline in foreign labor making inflation much worse by overheating the jobs market. Or Biden’s industrial policy. Our attempts to transition to clean energy which involves cutting down on oil production and paying fossil fuels out of existence with massive subsidies for semiconductor and electric vehicle domestic manufacturing. And “Friendshoring.” You make the point that there will be costs for exposing ourselves to the chinese in terms of manufacturing critical technology. That’s true. But there are arguably bigger and broader risks that with our trade protectionism we are actually moving towards that autarky you just described as weakening and perhaps dooming Russia’s economy. It’s much more disturbing than critical technology exposure, that we’re just scrapping international trade rules to save the god damn planet and protect steel jobs, or gratify partisan sensitivity to incoming immigration. Or our ballooning deficit largely because of our unchecked spending on entitlements which we desperately need to cut and reform but it risks great backlash that is if you look at what’s happening in France. Forget about critical technology. If we can’t get our finances in order, and if we can’t get politicians to actually lead and do so and put down the ridiculous culture war for a minute, it won’t even matter if China has an edge on us in terms of microchips or AI, which they don’t and they won’t, because China is economically screwed in their own way. Indeed China is screwed if the party just acquires more and more authority and they can’t escape the middle income trap. China is no match for the free world as long as the free world remains free
>"dependent on a temporary burst of immigration from countries with rapidly shrinking, aging populations"
What? Central Asian countries like Uzbekistan, Tajikistan, and Kazakhstan - main sources of Russian migrant labor - are in 2.9-3.2 TFR range. They aren't shrinking or aging yet.
Many people did think of Putin as a sort of Basil the Macedonian for Russia, but instead he was like each other Basileus who followed a long reign of decline. A brief flourishing, then more withering
Controlling people's short term economic interest is difficult in the best of times. The richer the country, the more likely it is to take its eye off of a potential danger, especially if it enriches its supporters.
Heh, I love your work, but the comment that communism "did manage to hold down inequality" is the kind of insight I expect from ChatGPT ;)
Like that should only come up in discussions about why inequality isn't always that big a deal, to point out how ridiculous it has been when countries pursued low inequality without concern for the overall standard of living.
Most of all, Putin and his cronies seem preoccupied with the demographic decline of Russia. Correctly predicting that this is the number one reason for Russia's declining geopolitical fortunes.
Russia's demography is actually worse than the numbers suggest. It is true that Putin has succeeded in keeping the population sort of stable by lowering mortality and welcoming immigrants from post-Soviet nations. But the main problem, low fertility rates, are still there.
These low fertility rates contain a demographic bomb of sorts. The end of the Soviet Union meant a collapse in Russian fertility. The number of births in Russia halved between 1987 and 1993. I know of no other advanced country at peace that has experienced something similar. The bomb here is that the girls born in 1987 are still adding to the birth numbers of Russia while the girls from 1993 are only now entering motherhood in force. Halving the number of potential mothers will of course wreak havoc with birth numbers.
All this is known to Putin and his government. Most probably, demographic considerations have played a part in recent Russian foreign policy. When unable to manufacture new Russians themselves, Russia is simply conquering Russians from neighboring countries that have some to spare.
One crucial element that I think you miss is the impact of outward migration, which saw many of Russia’s best and brightest go to Israel and the US (and even a few to Australia). This has now accelerated again.
This counter-thesis against the Russia-is-great-because-Putin is substantiated, but there's a too-ready dismissal of factors that could go just fine or even well for Russia: 1/ Why *can't* Russia just replace any US or EU imports with Chinese (or other East Asian) ones? China is a more relevant exporter of manufactured goods than either, all the way up and down the value chain! China's right next door and it wants exactly the stuff that Russia is selling: energy, minerals, and agricultural commodities. And Russia is still managing right now to import many Western goods by circumventing sanctions, anyway. How many times in the last year-plus have we heard that their war machine will run out of fuel immanently, when it appears that it's actually ours that's dangerously depleted, owing to our "efficient" industrial base that's hardly fit as the any Arsenal for Democracy in near-peer fights like in Ukraine? 2/ Russia's own looming demographic collapse is bad, yes, but it's the exact same demographic collapse that is happening in the entire developed world, so why is it remarkable? The problem is even worse in places like South Korea or Germany. It's now nearly as bad in the United States, itself, now that we have paired a deadly epidemic with a decade of "deaths of despair," our own remarkably poor health outcomes as a wealthy country, and the low-key bipartisan anti-immigration consensus! 3/ Lastly, the "Russia is a stagnating petrostate" line seems both exaggerated and overstated: If Russia is a petrostate... so is the UAE. And it's also disproportionately dependent upon other mineral extraction... just like Australia. Its exports to places like China are mostly oil and food... just like the United States'. Is this really such a terrible fate? In reality, Russia's economy is more complex: it has a higher percentage contribution of manufacturing than the US and the global average (14.5% vs. 12%). Its value-added services economy is no slouch, either, even with the (perhaps temporary) exodus of some highly-educated Russians who might invent the next Yandex. Russia is ranked pretty middling on the Global Innovation Index, but better than the likes of fast-growing middle-income Vietnam and Mexico, and about the same as Greece or Slovakia.
All of which is to say that Russia won't be "great," perhaps, but it will continue to be *good enough,* and with a scale of geography, resources, hard power, and population that most other countries cannot match. In our schadenfreude, we can tend to mistake our eagerness for adversaries to be basket cases ripe for collapse with the reality that they're just fine and will remain formidable. We indulge in patriotic triumphalism at our own peril.
Has there ever been an international system that could deal with declining powers without war? A rising power can be 'invited to the table' of existing power structures, as the USA, USSR and China have been, not without friction or rivalry obviously, but plausibly without conflict. Declining powers, though, often don't see their decline and demand to be treated as though they had their former power. So either you humour them, which is unsustainable and costly, or they become revanchist, as Hitler's Germany or Putin's Russia, and try to reassert their power. Hitler almost succeeded, Putin has failed, but ultimately declining powers will reject the balanced order under which they're declining. I'm genuinely not sure how this can be managed at all.
Good description of Russia under Putin. However, the last paragraph left me a little puzzled.
It's true that China became the leading producer of cobalt, rare earth metals, and batteries, as well as solar panels and windmills. This only happened because China had some cost advantages, coupled with a willingness to subsidize export industries. What, exactly, does Noah think the US and Europe should have done to prevent this? Should we have subsidized our own domestic producers, or made it easier to import from places like the Democratic Republic of the Congo? Should we have undermined the WTO and enacted domestic content rules?
And, what exactly is the cost? Would it really be difficult to restart domestic production if Chinese supplies were cut off?
"A country that lets itself be led around by the marginal logic of comparative advantage will end up with short-term economic gains, but these gains may be offset by the loss of deeper technological capabilities."
I've been teaching international trade to my civics & econ students for the last 2 weeks and this was exactly how I summarized it to them. 3 weeks straight you and I agree on something major. Remarkable. :-)
When comparative advantage is primarily latitudinal and climactic, it's geographically fixed. But comparative advantage is primarily technological and educational, it's quite changeable over time. *(In both directions.) It's ironic that as Smith and Ricardo were devising anti-mercantilist theories for their agrarian world, the world was industrializing underneath them and rendering many of those theories less accurate.
I would love it if you did a deep dive into S. Africa as well, which has also completely imploded. I've seen political commentators talking about it (https://thepsmiths.substack.com/p/review-south-africas-brave-new-world), but I would love a serious economist's take on it.
I'm not as worried about the US being over reliant on certain imports and falling prey to "comparative advantage-itis"
Unlike Russia, America has an incredible array of best in the world economic activities and attributes that are desired by both our own citizens and other countries.
I believe our recent foray into industrial policy is motivated by short term politics, not long term economic strategy. And industrial policy is where we have a comparative disadvantage.
I wrote the below brief post, specifically about our CHIP policies, motivated in part by Noah's own post yesterday morning.
https://robertsdavidn.substack.com/p/chips-a-few-brief-thoughts
It is interesting that Russia decided to become a petropower as the rest of Europe decided to shift to clean alternative energy sources. Not only did Russia take up the slack as Europe mothballed its North Sea oil fields, but it welcomed Europe exporting its environmental problems to Russia. Europe could continue to use hydrocarbons without the messy job of extracting and refining. Russia was making a living off being Europe’s petrochemical sewer, a convenient means of offshoring environmental damage.
As Noah’s post points out, it is economic suicide to trade short term gains for long term declines. Russia rode an opportunistic wave for a short while and squandered it on this foolish war in Ukraine. Europe will bite the bullet and accelerate its transition away from petroleum dependency and China is leading the way in Asia to do the same. The writing is on the wall yet Russia persists in repeating past mistakes. Perhaps China can sort it all out after this next collapse. There is not much worth saving here and it is likely to be a total tear down. The toxic cleanup is likely to take decades. It is little wonder that Russia’s best talent is heading for the borders.
Why did I get blocked on Noahpinion's Twitter today for citing the CBS story that more than half of weapons donated to Ukraine have gone unaccounted for? Due to pressure from multiple government officials, CBS has altered their report. Still not grounds to block people.
https://www.cbsnews.com/news/ukraine-military-aid-weapons-front-lines/
We might also just be starting to realize the cost of deglobalization, Trump’s trade war, Trump’s and now Biden’s self-flagellating tariffs costing taxpayers $250,000 annually for every steel union job saved according to the peterson institute and hiking up prices in the midst of high inflation, immigration quotas and a decline in foreign labor making inflation much worse by overheating the jobs market. Or Biden’s industrial policy. Our attempts to transition to clean energy which involves cutting down on oil production and paying fossil fuels out of existence with massive subsidies for semiconductor and electric vehicle domestic manufacturing. And “Friendshoring.” You make the point that there will be costs for exposing ourselves to the chinese in terms of manufacturing critical technology. That’s true. But there are arguably bigger and broader risks that with our trade protectionism we are actually moving towards that autarky you just described as weakening and perhaps dooming Russia’s economy. It’s much more disturbing than critical technology exposure, that we’re just scrapping international trade rules to save the god damn planet and protect steel jobs, or gratify partisan sensitivity to incoming immigration. Or our ballooning deficit largely because of our unchecked spending on entitlements which we desperately need to cut and reform but it risks great backlash that is if you look at what’s happening in France. Forget about critical technology. If we can’t get our finances in order, and if we can’t get politicians to actually lead and do so and put down the ridiculous culture war for a minute, it won’t even matter if China has an edge on us in terms of microchips or AI, which they don’t and they won’t, because China is economically screwed in their own way. Indeed China is screwed if the party just acquires more and more authority and they can’t escape the middle income trap. China is no match for the free world as long as the free world remains free
Thanks for the article! I did not realize how high the homicide rate and how low the mortality rate was in russia in the mid 90s.
Do you think that Russian attitudes towards Ukraine is due to how much of the manufacturing sites they have developed?
Ugh, there is one mistake i just cannot pass:
>"dependent on a temporary burst of immigration from countries with rapidly shrinking, aging populations"
What? Central Asian countries like Uzbekistan, Tajikistan, and Kazakhstan - main sources of Russian migrant labor - are in 2.9-3.2 TFR range. They aren't shrinking or aging yet.
And that immigration is still ongoing.
Many people did think of Putin as a sort of Basil the Macedonian for Russia, but instead he was like each other Basileus who followed a long reign of decline. A brief flourishing, then more withering
Controlling people's short term economic interest is difficult in the best of times. The richer the country, the more likely it is to take its eye off of a potential danger, especially if it enriches its supporters.
Heh, I love your work, but the comment that communism "did manage to hold down inequality" is the kind of insight I expect from ChatGPT ;)
Like that should only come up in discussions about why inequality isn't always that big a deal, to point out how ridiculous it has been when countries pursued low inequality without concern for the overall standard of living.
Good Assessment.