If you think that, you may be right. Or you may be wrong. I really have no way of knowing and, much as it hurts me to have to say this, neither do you.
Neither – and this is the salient point – do Western economists who pronounce on the matter with all the weight of authority conferred by their degrees, grants and tenures. And you can confirm this scathing conclusion by giving them a simple test.
You’ll find that these chaps know exactly how to assess the state of an economy. They read charts, graphs, and indicators as easily as you read your morning paper.
They can juggle 10-digit numbers as dexterously as you can move the 10 fingers on your hands. Ask them anything about debt-to-GDP ratios, inflation rates, manufacturing indices, exchange mechanisms, stock market quotations, and they’ll talk your ear off, telling you more than you want to know.
And most of the time, they’ll be right – not necessarily in their predictions, but certainly in their analysis of the data in the public domain. That way they’ll pass the first half of our test, earning some right to pass judgement on the economy of any country from Spain to Sweden any everywhere in between.
That gives them the reason, albeit a rather spurious one, to look down on economic ignoramuses like you and me.
Want to wipe that smug smirk off their faces? Then ask them all the same questions about the drug economy in Venezuela, the people-smuggling economy in the south of Europe or the mafia economy in Italy. What exactly are their gross turnovers and net profits? Personnel costs? Staff fluidity? Growth prospects?
Ask them anything at all – they won’t have a clue. Yet they pass confident judgement about the state of the Russian economy, which is much closer to that of a mafia than that of any country from Spain to Sweden and everywhere in between.
The criminal government in the Kremlin casts a giant shadow on the economy, and it’s in this shadow that the economy operates. The Kremlin gang may have more or less accurate answers to the hypothetical questions we’ve asked our hypothetical economists. But no one else does.
That’s even in Russia herself, never mind the proverbial groves of Western academe or assorted consultancies and think tanks. They may know that a giant shadow economy exists there, but they have no idea about the production rates of shadow factories, the shadow profits enterprises derive by selling their goods in the shadow world.
But in spite of their understandable ignorance, they look at the figures published by the official Kremlin sources or in the Russian and Western economic journals, and make confident predictions about how soon that country’s economy will bite the dust.
They’ve been coming up with such prognoses since massive Western sanctions were imposed in 2022, supposedly giving the Russian economy just months before collapse. Yet there it is, still ticking along nicely, still churning out enough hardware to kill a most satisfying number of Ukrainians.
Speaking of the Russian armament industry, a groundbreaking report in the Italian newspaper Linkiesta has shed some light on the aforementioned shadow. Apparently, vast amounts of Russian infantry weapons, including both assault and sniper rifles, are reaching the Italian mafia through Sicilian ports and the Friuli province to the north of Venice.
The Kalashnikovs were manufactured by the state-owned Tula factory in 2010-2020, which makes them newer than most of the weapons used by the Russian frontline troops in the Ukraine. All these rifles miss a small but telling part: serial number.
Experts believe that at least 20 per cent of Russian weaponry is made specifically for international mafias and the black market. Moreover, mountains of arms and ammunition reach Russia from sanction-busting factories in China, North Korea, Azerbaijan and other countries. A good chunk of those illegal exports go straight into the shadow economy.
All this creates mighty financial streams, with numerous rivulets diverted into the shadow economy and, which is roughly the same thing, into the Kremlin coffers. The Russian army is doing its best to keep up.
As the war escalates, more and more weapons and ammunition reach army units, which then sell some of the arms on to third parties – and I bet these don’t include legitimate states. That’s partly why Russian troops often have to fight with antediluvian weapons: the newer ones disappear in the maelstrom of the shadow economy.
In fact, Linkiesta estimates that the army is right up there in the long list of corrupt Russian institutions.
The routes of arms traffic are roughly the same as those for transporting fuel, oil and other contraband. The principal transit points used to be in Syria, but now Egypt, Tunisia and Libya are the main intermediaries. Though Linkiesta’s investigation focused on Italy, it’s obvious that Russian weapon contraband reaches other European countries as well.
An important point is that this isn’t just a display of unsanctioned entrepreneurial spirit. The management of the state-owned Tula factory would never dream of making vast numbers of rifles without serial numbers barring a direct order from the Kremlin.
Illegal traffic in weapons and oil has always provided a source of finance for Russia’s war on the Ukraine. This has been going on for at least 10 years, since before the full-scale invasion.
Actually, the Italian mafia may not be the end user of illegal Russian weapons, not all of them at any rate. These days it’s not just legitimate economies that go global, but criminal ones as well.
In fact, more and more organised crime is so seamlessly fused with rogue states that it’s hard to tell them apart. Russia has taken advantage of some aspects of this convergence and pioneered some others.
Rogue regimes and criminal gangs flood international markets with arms and drugs, while residually civilised countries look the other way. Trump, for example, finds it easier to chastise Canada and Mexico for the smuggling of the synthetic narcotic fentanyl than to take issue with China that manufactures much of it.
Most of the income generated by smuggling bypasses the usual monitoring channels by being denominated in cryptocurrencies. This is an ingenious tool custom-made for contraband and money laundering. The Russians take full advantage.
Over 80 per cent of all Russian commercial transactions, including the official ones, are denominated in cryptocurrencies. This detail escapes the eagle eyes of Western economists, those who can’t understand why the Russian economy hasn’t collapsed yet, but nevertheless keep insisting that it soon will.
The Russian state is unique in history. It’s formed by a homogeneous blend of secret police and organised crime, combining the knowhow, methods and resources of both components. That’s why normal standards applied to above-board economies are useless when trying to understand Russia.
There is only one way to assure the collapse of the Russian criminal economy: destroying the criminal Russian state. But that’s a task for statesmen and generals, not economic consultants insisting that another tranche of sanctions will bring Putin to his knees. I hate to break the news, but it won’t.