Vladimir Putin has presented Russia as a hegemonic force reasserting its legitimate claim to imperial glory in order to justify invading Ukraine. Even before the invasion, Russia’s economic capacities were insufficient to support an empire.
With international sanctions ruling over a collapsing Russian currency, Russia’s economic position has deteriorated even worse. Russia’s economy would be the 22nd biggest in the world if assessed at today’s exchange rates, with a gross domestic product (GDP) not much greater than Ohio’s.
That’s a far cry from Russia’s former status as a legitimate international power. It was the world’s fifth largest russian economy in 1913, according to figures compiled by the late economic historian Angus Maddison, after the United States, China, Germany, and the United Kingdom. When the Soviet Union beat the United States to launch the first satellite into orbit in 1957, it was the world’s second-largest economy behind America’s.
Putin’s Aspirations For Grandeur
Following the tumultuous dissolution of the Soviet Union and the 1998 financial crisis, during which Russia defaulted on its debt and abandoned its fixed currency rate, Putin was elected president.
Russia’s market-value GDP had dropped to US$210 billion at the time, making it the world’s 24th biggest economy, trailing only Austria. (All current GDP estimates come from the International Monetary Fund’s World Economic Outlook for October 2021.)
Putin and the Russian people have an unspoken social compact predicated on his ability to provide significant economic development. Russia’s GDP in market exchange rates increased tenfold under Putin’s administration, bolstered by a commodity price supercycle that lasted far into the twenty-first century, restoring Russia’s worldwide significance and providing spending power to its middle class.
However, when russian economy began to falter after a high in 2013, Russia experts believed that Putin sought new legitimacy to rule through foreign policy moves to re-establish Russia’s reputation as a “great power.” The annexation of Crimea in 2014 exemplified these attempts.
Putin’s approach of seeking legitimacy through “great power status,” rather than economic achievement, has been bolstered by Russia’s invasion of Ukraine, which comes as Russia’s market-rate GDP has lost a third of its value between 2013 and 2020.
The West’s unyielding financial and economic sanctions, on the other hand, have only hastened Russia’s economic decline.
Russian equities on the London Stock Exchange have dropped 98%, wiping off US$572 billion in value, while stocks on Russian markets have remained frozen.
The Russian currency has plummeted to 155 rubles per dollar, down from 75 rubles per dollar before the invasion.
The Effect Of The Dominoes
The market-rate GDP of a country is its GDP translated into a global currency such as the US dollar. While there are alternative ways to calculate GDP. The market rate is what matters when it comes to global commerce and investment — and economic dominance.
In 2021, Russia’s market-rate GDP was US$1.65 trillion, making it the world’s 11th biggest economy, trailing only South Korea. If we apply the average exchange rate used last year to convert Russia’s 2021 predicted GDP by March 7, 2022,. And compare it to the 2021 market-rate GDP chart, the rankings shift and Russia falls to 22nd position, sandwiched between Taiwan and Poland.
This figure is most likely an underestimation. While a dropping ruble reduces Russia’s GDP exchange rate to US dollars, a failing russian economy reduces ruble GDP directly. In the near run, Russia’s isolation will degrade its economic competitiveness, expanding the economic gap even further.
When faced with an invading russian economy force, Ukrainians were well aware of Putin’s chimaera plan. “Don’t you have problems to handle in your own country?” “Are you all wealthy there, as in the Emirates?” a Russian soldier said.
The Next Step For Putin
Many things that we care about, like as health and education, are not accounted for by GDP, as Robert F. Kennedy memorably stated. The human catastrophe unfolding in both Ukraine and Russia is far worse than the drop in Russia’s market-rate GDP.
However, these numbers demonstrate that Putin’s claim to legitimacy based on economic achievement has been shattered. Putin’s back-door source of legitimacy from whipping up nationalist pride now appears to be closed as well. With “great power status” connected so closely to economic dominance.
Putin may have guided Russia out of one “Troubled Period,” but he has now led it into another. That will come as cold consolation to Ukrainians. As well as the rest of the world, who are waiting to see what Putin’s next move will be.
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