Putinomics: Stagflation Hits Russia
The economy is primed to fail as Vladimir Putin looks to distract with show trials.
April 20, 2013 - 12:00 am
Remember “stagflation,” the knight in shining economics that slew the USSR dragon? It’s back with a vengeance. Russian GDP growth has fallen consistently for the past two years; the pattern has continued for the first two quarters of this year.
Even Kremlin mouthpiece Russia Beyond the Headlines admits the dire reality:
Energy prices were the only reason why Russia avoided a recession trough [so far]. Despite all the promises, or, to use the government’s rhetoric, “strategic plans” to reduce oil sales proceeds to 5.6 percent of GDP, its share is still at least double that.
Ksenia Yudaeva, Putin’s representative to the G-20, now says that Russia is probably already in a recession. And oligarch Mikhail Prokhorov, owner of the New Jersey Nets, also believes the Russian economy has lost forward momentum.
As economic growth has been plummeting, inflation has been soaring. It is now double what it was a year ago, a startling 7.5%. The lowest level of consumer price inflation recorded by the Putin economy in the last two years is roughly the same as the highest recorded level in the U.S., a level Americans would view as cause for panic.
Russians simply can’t afford this kind of inflation bite. Although Americans and Russians spend about the same amount each week on food and drink, for Americans it accounts for less than 10% of the weekly budget. For Russians, it is a stunning 40%.
Radio Free Europe reports:
A 20-year-old man in Russia has just a 63 percent chance of reaching the age of 60, as compared to a 90 percent chance in the EU.
The New York Times reports:
The blue-glass skyscrapers of Moscow City — fragments of Russia’s boom-time dream — are visible from the Kremlin walls, within which there was once hope that those towers could supplant the West’s financial centers. When the sun sets behind them, you can see that many of the offices lie empty. In fact, the real hubs for Russian banking are in other countries.
Another Kremlin mouthpiece, Russia Today, admits that fully half of Russia’s workforce has now gone underground to avoid Russia’s morass of taxation and corruption, and now dwells in a vast shadow economy that rivals the one the USSR used to nurture.
Putin is starting to feel the heat. For the first time since it began asking the question in 2004, the respected Levada polling institute was told by a majority of Russian respondents that Putin having unlimited power was not good for Russia’s future. Russians didn’t stop there: For the third time in the past year, a clear majority told Levada that they did not want to see Putin claim a fourth term as president in 2018.
Is Putin panicking? He has launched a bloodcurdling wave of attacks — echoing the behavior of Stalin — on nongovernmental organizations that receive foreign funding or criticize the Kremlin. In doing so, he polarized former Russian friend Germany, catching a blistering earful from the German chancellor on a recent visit.
Putin is also spewing neo-Soviet rhetoric in response to the Magnitsky blacklist drawn up by the U.S. Congress. The blacklist bans the most egregious Russian human rights offenders from America’s shores.
The clearest sign of Putin’s panic has been the launch of two shocking criminal trials. Putin has put deceased corruption-fighter Sergei Magnitsky — for whom the congressional blacklist was named — on trial in a pathetic effort to prove him deserving of torture and murder in the Kremlin’s dungeons. He also has put the still-alive opposition leader Alexei Navalny on trial for embezzlement — the charges bear an unmistakable resemblance to the ones that sent Putin foe Mikhail Khodorkovsky to prison for a decade.