It’s quite common in today’s politically charged world to hear western leaders say something to the effect that “Russia doesn’t matter.” The facts, though, do not confirm their story.
Here is a look at five indicators that paint a picture of a Russian economy that’s highly important to global economic growth.
The first is global employment growth. In fifth place is the Russian economy at 3 million net new jobs, accounting for about 5 percent of all net new jobs since 2009 (sample size = 65). Hurting Russian employment will certainly have a multiplier effect on connected nations.
Since 2007, the fourth fastest growing retail sales economy is Russia at 61 percent, bested only by China at 183 percent, Brazil at 148 percent, and Canada at 68 percent. Hurting the Russian consumer will provide no benefit to European or American businesses.
As with the growth in retail sales, productivity growth in Russia since 2009 has been quite high on a globally comparable basis, with productivity up 11 percent. The productivity growth in Russia is bested only by Chinese workers at 38 percent and Indonesia at 15 percent.
Over the past five and a half years, Russian businesses have shipped almost $3 trillion in product. With the newly imposed sanctions, some of this may dry up. Certainly, large importers of Russian exports will feel the pain.
Companies exporting product to Russian-based businesses and individuals over the past five and a half years have shipped approximately $1.85 trillion in product. It’s certainly not China size, but 20% of China’s size matters. Presuming just a few hundred billion dries up, that’s unlikely to made up from consumer demand in other countries.
Overall, regardless of what western leaders are peddling, the Russian economy matters a good deal to global economic growth.
With the global importance of the Russian economy established, why would Americans and Europeans care so much about an area that’s almost entirely Russian and wants to simply shift governance from a less desirable Ukraine to Russian?
As every observer well knows, it likely comes down to two issues. First, a quarter of GDP in Ukraine stems from what is yet to be formally recognized the People’s Republic of Novorossiya (known as eastern Ukraine to governments). The massive industrial base in the People’s Republic of Novorossiya leaves the question of where Ukraine would develop a “hard” industry such as coal mining if it gave up control of Novorossiya.
The second issue is with Putin himself. Western leaders generally dislike a powerful leader, instead opting for weak “leaders” that generally give in to the popularity contest known as democracy. This difference is an irreconcilable difference.
Overall, Novorossiya (east Ukraine) could end up as a defining moment in Putin and Obama’s political life. Who will come out ahead remains to be seen. Right now it appears to be Putin. He’s expanded Russia’s geography with Crimea, while western leaders imposed self-inflicted wounds in a tit-for-tat sanctions game.