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12 July 2024

Putin’s New War Economy

Andrei Kolesnikov

In Russia, the tradition of making fun of Soviet economic planning is almost as old as attempts to improve the economic system. “What would happen if socialism were built in the Sahara?” an old joke asks. The answer: “At first, except for plans, there will be nothing. Then there will be sand shortages.” According to another—one that former U.S. Federal Reserve Chair Alan Greenspan liked very much—in the Brezhnev era, a group of people are walking in a military parade in Moscow’s Red Square, except that they are wearing baggy formal suits instead of military uniforms. An aide runs up to the Soviet leader: “Leonid Ilyich, we don’t know who these people are!” Brezhnev replies: “Calm down, comrade, these are our most destructive weapons—Soviet economists.”

After more than two years and six months of Russia’s “special military operation” in Ukraine, Russian President Vladimir Putin appears to be undeterred by the reputation of his country’s economic planners. The most striking outcome of his government reshuffle this spring was undoubtedly his replacement of longtime defense minister Sergei Shoigu with Andrei Belousov—a state economist with no military experience. A man not in a baggy suit but in an expensive and well-fitting one, Belousov previously served as minister of economic development, assistant to the president for economics, and vice prime minister. But there is a reason for his appointment: Russia’s military spending has now reached such gargantuan proportions—according to some estimates, nearly one-third of the 2024 budget is devoted to defense, reaching a higher portion of GDP than any other year in post-Soviet Russian history—that only an economist can make it efficient.

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