Russia is a perennial political issue for most of the Western world, yet has a GDP somewhere around that if Spain. They’re not China- if they try to make internet giants now to their authoritarian norms, the giants are going to realize they come out best by just packing up and leaving the country.
But Russia has nukes and a sizable military. How can they afford to have such a large military, if their gdp is like Spain's? Russia population is around 144 million, Spain's around 46 million according to google, so about 3x the population, but 1/3 gdp per person. Are the poor so starved in russia that they can afford to have jet fighter development, nukes, air craft carriers, etc? I'd never thought hard about how Russia can afford to have such an apparently dangerous military while being relatively small and poor.
They can't really "afford it" in the common sense of it. Russia is just so big and has so much left over hardware and factories from soviet days as well as people with the know how that things will get done alone almost automatically by scale and diversity of options. Somewhere there's always someone able that's willing to do it for less.
Its difficult to explain this concept/phenomenon, but Russia just works very differently compared to other countries and has a lot of underpaid skilled people, information and older tech to fallback on.
That's a good observation, and it highlights that the GDP has its problems as a measure of wealth/output.
A big part of the reason why Russia's GDP is so low is that it's measured in dollars. And now you say "who cares what the currency is, when you change from one currency to the other you're just changing the units, you're not changing real wealth measured". Well, yes and no.
Even 20 years ago the currency exchange was about 1USD = 4 Rubles, then sanctions happened, now it's about 1USD = 50 Rubles [0].
Now, do you think the amount of stuff Russia produces in a year shrinked 10 times over in 20 years? Of course not, it's just that the amount of stuff they can buy from the rest of the world shrinked 10 times. And this is the crux: Russia is mostly self-sufficient. GDP is a good measure of a country's size if that country interacts with the global markets a lot. If they have low GDP in dollars, then they can't buy much and they're a weak country. But Russia is mostly self-suffient they can produce a lot of guns and oil which measured in rubles is dirty cheap. But then they sell it in dollars in order that they can then buy the stuff they need.
A country like Spain is tighly integrated with global trade, and so even when you're converting their GDP from EUR to USD, it remains a good measure of the country's wealth (here it applies that you're just changing the units).
Compare Russia's situation with Venezuela. Venezuela has a minuscule GDP measured in dollars. But since they don't produce anything basically (other than oil, and even that is not enough), they have to import a lot and so then measuring it in dollars gives you an accurate idea of how much they can buy from the rest of the world: not much.
This said, there is also an element of truth to another commenter who said that a lot of their stuff is left over from the soviet union. Yes, that is part of the story, but it's still true that they produce a lot. Obama famously said [1] "They are a smaller country, they are a weaker country, their economy doesn't produce anything that anybody wants to buy except oil and gas and arms." Turns out that that's exactly enough for them to buy the things they need, the rest they produce themselves.
Here's another interesting nugget. The GDPs of Russia and Spain are respectively $1.5Tr and $1.3Tr. Similar. But the PPP-adjusted GDPs (i.e. GDP adjusted to account for the amount of stuff that can be bought within that country for that amount of money) are $4.1Tr and $1.3 Tr. So while the stuff that Russia and Spain produce is worth similar amounts in dollars, the stuff that you can buy with it with those dollars within those countries, is about 3 times larger in the case of Russia. Since Russia also has about 3x the population of Spain, it follows that Russia's per capita PPP-adjusted GDP is roughly that of Spain.
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[ 3.2 ms ] story [ 22.7 ms ] threadIts difficult to explain this concept/phenomenon, but Russia just works very differently compared to other countries and has a lot of underpaid skilled people, information and older tech to fallback on.
A big part of the reason why Russia's GDP is so low is that it's measured in dollars. And now you say "who cares what the currency is, when you change from one currency to the other you're just changing the units, you're not changing real wealth measured". Well, yes and no.
Even 20 years ago the currency exchange was about 1USD = 4 Rubles, then sanctions happened, now it's about 1USD = 50 Rubles [0].
Now, do you think the amount of stuff Russia produces in a year shrinked 10 times over in 20 years? Of course not, it's just that the amount of stuff they can buy from the rest of the world shrinked 10 times. And this is the crux: Russia is mostly self-sufficient. GDP is a good measure of a country's size if that country interacts with the global markets a lot. If they have low GDP in dollars, then they can't buy much and they're a weak country. But Russia is mostly self-suffient they can produce a lot of guns and oil which measured in rubles is dirty cheap. But then they sell it in dollars in order that they can then buy the stuff they need.
A country like Spain is tighly integrated with global trade, and so even when you're converting their GDP from EUR to USD, it remains a good measure of the country's wealth (here it applies that you're just changing the units).
Compare Russia's situation with Venezuela. Venezuela has a minuscule GDP measured in dollars. But since they don't produce anything basically (other than oil, and even that is not enough), they have to import a lot and so then measuring it in dollars gives you an accurate idea of how much they can buy from the rest of the world: not much.
This said, there is also an element of truth to another commenter who said that a lot of their stuff is left over from the soviet union. Yes, that is part of the story, but it's still true that they produce a lot. Obama famously said [1] "They are a smaller country, they are a weaker country, their economy doesn't produce anything that anybody wants to buy except oil and gas and arms." Turns out that that's exactly enough for them to buy the things they need, the rest they produce themselves.
Here's another interesting nugget. The GDPs of Russia and Spain are respectively $1.5Tr and $1.3Tr. Similar. But the PPP-adjusted GDPs (i.e. GDP adjusted to account for the amount of stuff that can be bought within that country for that amount of money) are $4.1Tr and $1.3 Tr. So while the stuff that Russia and Spain produce is worth similar amounts in dollars, the stuff that you can buy with it with those dollars within those countries, is about 3 times larger in the case of Russia. Since Russia also has about 3x the population of Spain, it follows that Russia's per capita PPP-adjusted GDP is roughly that of Spain.
[0] http://fxtop.com/en/historical-exchange-rates.php?A=1&C1=USD...
[1] https://www.politico.com/story/2016/12/obama-russia-weaker-c...