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China Overtakes US, Russia Overtakes Germany

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world-gdp-ppp-1990-2015

 

At least according to the latest revision of the World Bank’s PPP-adjusted GDP estimates.

China has long been expected to overtake the US economy (one economist dated it to as early as 2010), and there had already been a flurry in the media when the IMF claimed the same thing in December last year. The World Bank’s new figures just confirm the new reality and scaremongering about a bad night at the irrelevant casino that is the Chinese stockmarket is not going to materially change the fact. Annual growth continues at 7% per year, much the same as South Korea when it was at a similar stage of per capita development in the 1980s.

Russia’s PPP-adjusted GDP actually marginally overtook Germany’s back in 2013, and it managed to maintain this small lead into 2014 despite falling into recession. Of course with GDP expected to fall by around 3% this year, there will almost certainly be a reversal of this, but not by any radical amount – the hystrionical pronunciations of the Western media regardless – and will likely be temporary anyway import substitution really kicks in.

Financial, military, and cultural power are all ultimately functions, if lagging functions, of productive economic power. Although it would be a bad idea to go overboard with it, the spectacle of the same year (give or take) seeing both Russia overtaking the former biggest economy in Europe, and China overtaking the former biggest economy in the world, is really quite symbolic.

 

67 Comments to "China Overtakes US, Russia Overtakes Germany"

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  1. Russia had a bigger GDP than GDP up to the late 80´s didn´t it? So Russia seems to have somehow recovered from the end of the Soviet Union finally.
    I am not sure whether military strength is a function of economic strength, or whether it is the other way round. I guess the military advancement of Russia in recent years will pay out, and in the long run this will be more important than the current recession.

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  2. Yes, it has recovered in relative terms.

    Military power being largely a function of economic and financial strength would appear to be commonsensical. You need output/money to produce (or buy) weaponry and to pay for soldiers to train on them. Paul Kennedy’s The Rise and Fall of the Great Powers is a large book that covers European history from this approach.

    One can imagine specific cases in which military power might beget economic power, especially in the deep past, but today with all the humanitarian restrictions and the access to resources available thanks to globalization, the costs of war tend to greatly outstrip whatever benefits might accrue from the resultant looting.

  3. The FSU’s GDP was a monumental work of fiction, when it collapsed the rotten carcass was exposed. An edifice on the verge of collapse.

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  4. -It is widely admitted that Russia had a Great Depression during the 1990s and only managed to surpass its 1990 level of output during or after 2003. This indicates Russian GDP per capita in 1990 was higher than that of China today, as Russia today is a richer nation than China. Either that, or growth during the World Boom was underestimated.

  5. says:
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    So Germans will now in droves emigrate to Russia for work, as will US Americans to China, right?

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  6. What you say is untrue. This false idea is promoted by two kinds of people:

    1) Thieving post-Soviet oligarchs. Their argument is “we didn’t break it, it was going to fall by itself”. No, they broke it by looting it. I watched it happen. There were no signs of impending collapse. Unlike its Wesern rivals the late USSR was not deeply in debt. Unlike them it was economically self-sufficient, meaning that it produced most of the things it consumed.

    2) Westerners who were emotionally involved in the Cold War. They’re engaging in wishful thinking and in trash talk against opponents. Great fun I’m sure, but it has nothing to do with truth. Robert Heinlein claimed during the Cold War that Moscow only had 800,000 people. Then some American general visited Moscow and “confirmed” this with “observations”. It was what they wanted to believe. Very, very hard.

    In reality the late Soviet GDP greatly underestimated the late Soviet standard of living. I’ll give you an example. There was no advertising in the USSR. Advertising adds to the GDP but subtracts from customer (and citizen) satisfaction. In a capitalist economy it’s possible to add to the GDP by scamming and annoying people. You couldn’t do that in the Soviet Union. The gambling industry adds to the GDP. Wall Street speculators add to it. Such stuff did not exist in the USSR. Compared with the capitalist world, a greater share of Soviet economic activity went towards things that normal people wanted.

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  7. It’s not a graph of per capita GDP. In per capita terms the US is still well above China and Germany is above Russia.

  8. Glossy raises a very good point here that few Americans know: the GDP measurement is highly misleading. It basically measures all (legal) transactions in a country regardless of their nature, so that industrial and agricultural output are lumped in with service transactions that may do little or nothing to raise the standard of living.

    For example, if you break your leg and go to the hospital and pay your bill, you have just contributed to a (slight) increase in GDP. Why? You’re no better off than you would be if you hadn’t broken your leg at all. But you had to pay the hospital some money. Thus, a measurable, legal transaction was created. Presto! More GDP.

    Another example: if your schools are so crappy that some parents feel compelled to pay out-of-pocket for private tutoring on the side, that would also count as a GDP increase. But if the schools were actually good enough on their own and no one hired private tutors, GDP would be lower.

    See how weird a measurement GDP is?

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  9. The late Soviet economy was in a sort of “high level equilibrium” state that could have been maintained there but at decreasing rates of growth since (1) labor inputs were drying up since urbanization process had finished/TFR had fallen to basically replacement level rates from the 1960s and (2) productivity growth was also falling – though never reaching zero – presumably because for all intents and purposes that centrally planned economy had “converged” with its maximal possible level at the world’s current level of technology.

    I sort of think both sides have a point here. No there is nothing obvious either then or now in respect to it being “doomed” to collapse. It would have simply remained more or less stationary at its the RSFSR’s level of ~40% of US GDP per capita. Neither could we have expected it to break much above that ceiling either, short of some scifi-like cybernetic revolution that would have made central planning much more economically efficient. Now the Soviet Union actually did do some really good and original research in cybernetics, but moved towards markets just as these techs started coming into their own. It would have been a fascinating what-if had it continued.

    Russia today is approximately back at the ~40% level of US GDP per capita that the RSFSR enjoyed in the late 1980s. Essentially, a lot of socio-economic trauma but no real relative progress in the past 30 years. I do think Russia has the longterm potential under the current market system to converge to 70-80% of the US level just based on its level of human capital and by analogy to European countries, but I accept that I might be wrong and that there is something in Russian society/culture/genetics that puts it at a permanent cap of 40% of US GDP per capita regardless of whether the economic system is centrally planned or market based. If that is the case, then the whole perestroika and shock therapy experiment must be regarded as a colossal, world-historical mistake.

  10. The USSR committed suicide, but the self-image of many Americans is bound up with believing that they murdered it.

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  11. Yep. Similarly, East Indians, Malaysians, etc. believe that they chased out the Brits, Angolans believe that they chased out the Portuguese, South African Blacks believe that they defeated the Apartheid, etc. It’s funny. I remember reading about the late Turkmenbashi giving himself an award for achieving Turkmen independence. What did he do to achieve it? Watch TV news coverage of the Belovezhskaya Puscha agreement?

    Believing that kind of stuff makes people feel better.

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  12. says:
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    Well the American public did support Cold War policies and increases in military spending that strained the USSR. They were the electorate, served in the military, paid the taxes, worked in the military-industrial complex, etc. That’s not nothing. Also the national liberation movements did often involve political mobilization and guerilla warfare that played some role in chasing out the colonials.

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  13. The USSR was not srained. That’s a fairy tale that you told yourself in order to feel better. That was the point of my earlier comment. And East Indians didn’t strain the British Empire. And animal sacrifices don’t bring rain.

    The ultimate reason why the USSR was abolished was that Gorbachev was a vain fool who wanted to seem like a hip, forward-thinking, fashionable reformer. The British Empire died for similar reasons. And so did Apartheid.

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  14. says:
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    I actually agree that Gorbachev caving in was a major factor, but that didn’t happen in a vacuum, but in a particular context. That context was US economic growth, military spending, support of mujahideen in Afghanistan, the Reagan Doctrine of supporting anti-Soviet guerrillas internationally, etc.

    The British started making concessions to Indian nationalists during WW2 when the Indian nationalists were supported and motivated by the Germans and Japanese. The British and other European empires, despite being Allies, basically lost WW2 to the US and USSR and gave up their colonies which became nominally independent areas in US or USSR or competing spheres of influence. In some areas, national liberation movements backed and aided by the USSR or PRC involved significant national consciousness raising, mobilization, and guerilla warfare, and this played some role in chasing out the colonials.

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  15. We’re repeating ourselves. I disagree. I think that a particular conception of what is cool, hip, and forward-thinking had a decisive role in all these cave-ins. Including the colonial ones. Vanity. Wanting to be praised as a reformer. I don’t consider lefty, globalist politics cool or hip but most people do.

  16. How would strain on the Soviet system have looked like? A decrease in living standards, an increase in foreign debt. That didn’t happen. How would strain on colonial systems have looked like? Major human and territorial losses to insurgencies, economic problems. That didn’t happen either.

    What happened was that with time nationalism and imperialism became increasingly unhip and uncool. And in Gorby’s mind Brezhnev and co. were uncool. And if he did the opposite of what they did, he’d be cool, democratic and forward-thinking. Globalism relies on vanity and perverted understanding of what’s cool.

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  17. says:
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    As you suggest, Gorbachev was demoralized and wanted to join up with the winners. That perception obviously depended to some extent on America and Americans.

    “Strain” on competing social and political systems will depend on significantly on perception and relative position and prospects, not simply on objective measures.

    The colonial systems were obviously under significant strain by WW2, at home on the Continent by Germany and in Asia by Japan. The US and USSR won the war for the Allies, and naturally they, along with the PRC to a lesser extent, inherited the colonial areas as their spheres of influence after the war. After the war, the French tried to hang on to Indochina, and lost almost 100,000 men trying to do so with US support fighting communist backed nationalists. It wasn’t globalism that did them in. The French had never really regained control of Indochina in the first place. It was the US, not the French, who had defeated Japan in Asia and the Pacific. The US supported Vietnamese nationalists during WW2 because they were anti-Japanese, and FDR didn’t want the French to regain control after the war. At any rate, the French fought to regain control after the war and were supported by the US, who eventually dropped support. The US figured that the French would not be able to decisively defeat at a reasonable cost USSR and PRC backed, politically awakened nationalist, anti-colonialist guerillas, and wanted to salvage a nominally independent, nationalist Vietnamese regime that would be anti-communist and pro-US/West.

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  18. As you suggest, Gorbachev was demoralized and wanted to join up with the winners.

    Winning an ad war or a propaganda war is very different from winning a real war, from producing a better product or a better-functioning society or a more-advanced civilization. Winners at what? At brainwashing? Do you respect such winners? Do you respect the people who join them?

    You’re commenting on a blog here. The most popular blog in the world is Perez Hilton’s I think. I’m sure he has a community of commenters. Why don’t you join them? Isn’t he a winner?

    A bunch of people created a crude, perverted idea of what’s cool and what isn’t. And it spread like a virus. And Gorby, being a vane man incapable of independent thought, caught it. Similarly, lots of teenagers have been convinced by the music and fashion industries that drugs are cool. Heroin chic, etc. The point that I’m trying to make is that not all sorts of winning, not all sorts of mind-capture, are laudable. Do you agree with that?

    You talked about the French in Indochina. They really, really didn’t have to leave Black Africa. There was no armed resistance there. Yet they left it. The British really, really didn’t have to leave India. Or Black Adrica. Or Malaysia/Singapore. Most of these cave-ins were unforced. As I said before, most of them happened because nationalism and imperialism gradually became uncool.

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  19. …so why did the USSR break up?

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    Absolutely.

  21. Because its leaders were foolish enough to accept its enemies’ advice on what they should be doing.

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    Information war is a part of real war. Propaganda obviously depends to a large extent on the larger context of real variables such as economic and military strength. You can believe that US economic and military strength was a complete illusion and that Gorbachev was thus completely delusional, but most people would dispute this view. The USSR’s legitimacy and prestige around the world depended on its promise that its system could deliver better material progress than the capitalist West could.

    Indochina is an extreme example of similar trends elsewhere. The Brits started making concessions in India as a result of pressure from WW2 and Axis support of Indian nationalists. They lost control of Malay/Singapore, and these areas were won back by the US victory in the Asia/Pacific. After the war, there was communist infiltration and support for national liberation movements. It wasn’t simply about following what was cool. The Rhodesians, for example, did not care about looking “uncool”, and were doing well fighting the black nationalist ZANU militia until ZANU started being trained and aided heavily by the communist bloc. There were similar examples elsewhere in Africa. The colonials were urged to leave by the US not simply because it was “uncool”, but because their continued presence would have strengthened the anti-colonial, communist backed nationalists and united the native populations in anti-colonial national liberation. The US, not unreasonably, calculated that this would lead to many more countries going communist, to communist domination of the planet, and Soviet victory in the Cold War. The US figured that it would be better to try to cultivate and use pro-US/anti-communist nationalists, which it had been doing for decades already e.g. Chiang-Kai-Shek and the Chinese Nationalists, various anti-Japanese nationalists in WW2, etc.

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  23. You can believe that US economic and military strength was a complete illusion and that Gorbachev was thus completely delusional, but most people would dispute this view. The USSR’s legitimacy and prestige around the world depended on its promise that its system could deliver better material progress than the capitalist West could.

    Let’s go over some things that were completely absent from the late USSR: drugs, homelessness, pornography, prostitution, gambling, advertising. Let’s list some things that were many times less prevalent in the late USSR than in the US: crime, official corruption. You can believe that the USSR’s moral and civilization strength was a complete illusion, but most people with direct knowledge of these matters would dispute this view of yours.

    Unfortunately globalism’s prestige in the world depends neither on its capacity to deliver civilizational progress, nor even on its capacity to deliver better material progress ceteris paribus (look at the 1990s dip in Russia’s GDP on Anatoly’s graph), but instead on the skill of the liars who produce its propaganda.

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  24. I think it’s pretty clear that Gorbachev was delusional. He thought that his reforms would produce an economic boom among other things. Instead they led to the biggest peace-time decline in the standard of living of any country ever. How is it possible to dispute that he was a dupe and that he was duped?

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  25. So everything was great in the late USSR; but it only took one guy to destroy the whole thing, and then only because he wanted to be “cool.” Do I read you correctly?

  26. After the war, there was communist infiltration and support for national liberation movements.

    Western elites decided after WWII that they needed to subjugate the USSR in order to do everything that they eventually did to it in the 1990s: loot it, partition it, spread socially liberal ideology on its territory, get rid of a rival offering a civilizational alternative to the rest of the world, etc. Sure, there wasn’t much loot to take in 1946, but as time went on the USSR accumulated more and more resources that could be looted. And a part of the plan was always to take away the areas that the Russian Empire acquired in past centuries. De-imperialization, in other words.

    It was smart for the USSR to resist. Look what happened when it stopped resisting. And in the course of this resistance the USSR supported anybody who opposed its enemies, including third-world nationalists. And the US supported third-world nationalists if its own, as you admit.

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  27. Yes.

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    Yes, but obviously this was in the context of the very real economic and military progress and strength of the US.

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  29. Propaganda obviously depends to a large extent on the larger context of real variables such as economic and military strength.

    There’s no such requirement. You need access to printing presses, airwaves or the Internet, depending on the period. You need a message and some skill in packaging it. Some staff too. How naive of you to think that there must be anything real underneath propaganda. No wonder that you’ve swallowed so much propaganda.

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    Yes, I basically agree with everything here. And this is consistent with my comments on how and why the colonial empires were lost after WW2.

  31. There was military parity.

    The standard if living issue is split. Americans had more personal vehicles, the USSR had better public transport, Americans had bigger homes, the USSR had less crime, no drugs or homelessness and a better education system, etc. The West’s popular culture was already tacky and cheap, the USSR’s more traditional and digified.

    I’m repeating myself as are you. Which means that the argument is exhausted. I haven’t convinced you and you haven’t convinced me.

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  32. says:
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    Unfortunately globalism’s prestige in the world depends neither on its capacity to deliver civilizational progress, nor even on its capacity to deliver better material progress ceteris paribus (look at the 1990s dip in Russia’s GDP on Anatoly’s graph), but instead on the skill of the liars who produce its propaganda.

    I agree, but a major factor in globalism’s strength and resilience is that it’s not really an explicit, formalized ideology with specific promises like communism was. It’s simply based on the basic human desire for profit and gain, and its ideological justification and propaganda have been malleable and changed to suit the times and conditions. 500 years ago, when modern “globalism” arguably began in earnest, a major drive for globalism was seeking alternative trade routes to the east for the purpose of profit and gain. Spreading Christianity was the major ideological justification. Later on with mercantilism and imperialism, national power was a justification. Today it’s human rights. Etc. The relative winners and losers of globalism have changed over time. Because it’s had changing ideological justifications without promising specific material well being and progress for all, it’s been able to persist by providing enough relative winners.

  33. https://en.wikipedia.org/wiki/Nikolai_Ogarkov

    In 1984 the chief of the Soviet general staff was sacked for publically complaining about the backwardness of Soviet productive capacity. Reaganomics was military Keynesianism with the added benefit of running up such huge debt that social spending in future was forestalled.

    Soviet bosses did not live well by Western standards. Russian bosses subsist like kings now, and because that is the case, the whole perestroika and shock therapy experiment must be regarded as very far from a colossal, world-historical mistake from the bosses’ point of view.

    Germany is not an independent power centre, so its military capacity in a thought experiment where it became a a great power is anyone’s guess. Back in reality the Germans are not the Germans any more according to William S. Lind so their theoretical capabilities are irrelevant.

    Russia has to stand alone. If it fights a great power it will be China. A Chinese rout of Russian forces followed by Russian use of i some of its huge no of battlefield nukes and Russia Chinese strategic exchange is the most likely way for WW3 to go. Russia is not an existential threat to the US but a war between Russia and China is, because Russia would not let the US emerge unscathed.

    https://www.traditionalright.com/the-view-from-olympus-wtf/

    Russia’s aggressive behavior and its nuclear arsenal make it the single greatest national security threat faced by the United States…

    Throughout the hearing, when asked about threats, General Dunford returned repeatedly to Russia…

    “If you want to talk about a nation that could pose an existential threat to the United States, I’d have to point to Russia,” he said. “And if you look at their behavior, it’s nothing short of alarming.”

    So the real question is not whether Russia has more military potential than Germany, but is China overtaking Russia?

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  34. This “I tie your shoes for a dollar, you tie mine for the same price–together we produced 2 Dollars of GDP” is THE foundation of monetarism and, thus, overstates the actual GDP greatly, sometimes–manifold. The true measure of the GDP is its structure, from which the actual size could be calculated, including the service economy. Productive labor (manufacturing) also has a profound cultural ramifications–from education to the overall mental state of the society. I am talking, of course, about the economy of the closed technological cycles. In the end–these are goods, in all their variety, which define the economy. It is difficult, very often, as an example to explain to some MBA that Hi-Tech is not what they think it is and that economy of Saudi Arabia, for all of its per capita GDP is, basically, not an economy at all.

    Western “economists” and most of their, say, Russian liberal off-springs from such sewer as High School Of Economics have no concept of real productive labor and what real INDUSTRY is about. In related news, Russia doesn’t produce surfing boards (a booming multi-billion dollar industry in the US) since, well, surfing around Murmansk or Petropavlovsk-Kamchatsky is not really great;-) Russia, however, produces a lot of the prepregs which go both for production of the surfing boards (in US) and Sukhoi T-50. Calculating Russian GDP is a tricky matter but it is military, which is always a good indicator of the structure and size of the economy.

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  35. It’s worse than that. Modern life has, as per Marx(!), commoditised lots of activities while actually lowering living standards.

    Take the delicious home cooked meal. Many fewer of these are consumed, and many ready meals have replaced them. Since the ready meals cost a lot more than a home cooked meal, GDP goes up a lot just as quality of life goes down.

    All forms of non-market social interaction are uncounted by GDP. That is ‘why growing the economy’ so often seems to be destroying society.

    Add in the fact that all of this boosts tax receipts and it is easy to see why there is little institutional protection from this commoditising force.

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  36. I don’t know about the USSR, maybe communism worked there, at least if we are to believe Glossy, but in case of my country, former Czechoslovakia, you are right. The notion that official statistics underestimated the standard of living of Czechs and Slovaks is absurd.

    A couple of numbers. The Czechoslovak Crown (Kčs) wasn’t freely convertible, the official exchange rate, which had nothing to do with economic reality of course, was 15 Kčs/USD. Economic estimates of the international institutions were based on this bogus number. The exchange rate on the black market in 1980-84 was on average 29.10 Kčs/USD, in 1989 47.40 Kčs/USD. When the communists allowed a foreign exchange auction for state enterprises during perestroika in 1989, the exchange rate reached 121.24 Kčs per 1 USD.

    In 1948 Czechoslovakia and Austria were on the same level economically, Czechoslovakia may even have been a bit richer. After 40 years of communism, the average monthly wage in CS was 3170 Kčs, the average wage in Austria was 13 500 schillings. The exchange rate on the black market was 3.50 Kčs per 1 schilling, so the average austrian wage was 47 250 Czechoslovak crowns. This doesn’t take price levels into account, but it’s very telling nonetheless.

    There were chronic shortages of most consumer goods. When a delivery of new fridges or washing machines was to arrive, people waited hours in lines in front of the store, sometimes they even slept there in sleeping bags over night because they knew that there would only be a very limited number of these goods available.

    The system collapsed as quickly as it did because most people, including the ruling elite, no longer believed in it. The main source of its legitimacy was a promise that it could deliver better quality of life for the average person than capitalism. It manifestly failed to do so. Most Czechs and Slovaks knew in the 1980s at the latest that the standard of living was much higher in the West. The only thing that could have kept the communists in power was use of force, basically what the Chinese did. The Czechoslovak communists didn’t have the balls and/or the blind faith to send in the tanks.

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  37. I know what you say is nonsense when you claim that there was no prostitution. That is obviously false. How naive are you?

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  38. I doubt there has ever been a society that totally suppressed prostitution. You’d have to castrate the entire adult male population to achieve that.

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    Take the delicious home cooked meal. Many fewer of these are consumed, and many ready meals have replaced them. Since the ready meals cost a lot more than a home cooked meal, GDP goes up a lot just as quality of life goes down.

    It’s not actually true that ready meals necessarily cost more. You have to take into account all costs and tradeoffs. Furthermore, what you describe as “home-cooked meal” is also a “ready meal”. It’s just a difference of degree. The “home cooked meals” you’re talking about don’t, for example, involve directly raising the animals and growing the plants, butchering, etc. They’re purchased from the grocer and butcher in a “readier” form.

  40. “I don’t know about the USSR, maybe communism worked there, at least if we are to believe Glossy, but in case of my country, former Czechoslovakia… ….The system collapsed as quickly as it did because most people, including the ruling elite, no longer believed in it.”

    My only experience in the Warsaw Pact was the summer of 1984 in Poland (with very quick sidetrips to Prague and Budapest). What I noticed almost immediately was that no one even tried to pretend they believed in the official system. It seemed like a car running on fumes with people peering into the distance looking for a gas station.

    Even at its worst Poland supposedly had overall higher living standards than the USSR so if Russians miss the Soviet Union I basically assume they just have very, very low standards of what they find acceptable living conditions.

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  41. There was absolutely zero prostitution.

  42. The standard of living in Poland fell in the 1990s, like in Russia. It rebounded later, like in Russia. The Poles did not complain about the 1990s downturn as much as the Russians because they got a nationalistic boost out of what happened.

    Life in India, Algeria, etc. got worse after decolonisation too, but independence gave them a compensatory nationalistic boost. You can say the boost was based on an illusion. And Eastern European countries have really only exchanged one master for another. But perceptions are important.

    The reason that nostalgia for the pre-1990 situation is greatest in Russia and East Germany is that neither country got a nationalistic boost to compensate for the 1990s decline in living standards. Nationalism is literally verboten in Germany.

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    I don’t understand your comment. Why would China attack Russian forces if it would lead to nuclear exchange, and why would Russia then attack the US?

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  44. […] ethnic groups’ public associations. (transcript continued) 5. The Unz Review: Anatoly Karlin, China Overtakes US, Russia Overtakes Germany. 6. http://www.opendemocracy.net: Russian press digest (19 August 2015). 7. Bloomberg: Putin Said Ready to […]

  45. Declining living standards leading to a loss of legitimacy as well as the rise of nationalism in the respective countries (including most importantly Russian nationalism).

    Sorry but a factory that can barely keep running due to degraded machinery, uncertain supplies and an inability to compensate its workers producing goods no one even wants in the first place will still show in the GDP but it really shouldn’t. The biggest mistake the IMF made, from the mouth of Stanislav Gomulka, was that they underestimated the state of disrepair both physically as well as institutionally in Russia, hoodwinked by neocons hyping the Soviet threat and delusional Western fellow travelers.

  46. A multipolar world (the West Nazi Germany and the USSR) is fundamentally less stable that two power blocks. Demographic and commercial infiltration of the Russian East and territorial disputes would be the cause. If China is overtaking Russia then it will not gain by waiting. Why would Russia use nuclear weapons? Because as Ellis says in Brute Force, Russians think sledgehammers are ideal for cracking nuts and in fact what sledgehammers are designed to do. They used a radioactive sledgehammer on Litvinenko. Chinese may not understand Russia.

    No country would leave a rival to dominate the world. If things got to an all out nuclear exchange, the US could expect to be hit even if it was neutral.

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    I don’t understand why you believe Russia will behave that way if it will lead to it being nuked by China and the US and thus destroyed, leaving the US to dominate the world.

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  48. Glossy raises a very good point here that few Americans know: the GDP measurement is highly misleading. It basically measures all (legal) transactions in a country regardless of their nature, so that industrial and agricultural output are lumped in with service transactions that may do little or nothing to raise the standard of living.

    GDP isn’t ‘misleading,’ but it’s easy to misinterpret. GDP doesn’t aim to measure the standard of living; it’s just a proxy for it.

    GDP attempts to measure the total amount of production in an economy in a given year. If a broken window is replaced with a new window that window will have to be produced and will thus be measured. A related measure is NDP, net domestic product, which does subtract the production of replacements. Many feel that GDP is a better measure of the productive capacity of an economy, however, because it measures the total amount of economic activity that occurred in a given year.

    This fact sometimes gives rise to the criticism that all you have to do to grow your economy is break all your windows, but this ignores the other, more preferable, uses to which the resources used up in replacing windows could have been put if the windows remained unbroken.

    It is incorrect to say that services do not raise the standard of living. For example, people pay for restaurant meals because they believe they will be better off after eating at the restaurant than they would by holding onto the money, not because anybody forced them to. If people perceive they have benefited from eating at the restaurant then it’s logical to conclude that their living standard is improved.

  49. It was smart for the USSR to resist. Look what happened when it stopped resisting. And in the course of this resistance the USSR supported anybody who opposed its enemies, including third-world nationalists. And the US supported third-world nationalists if its own, as you admit.

    That is only one half of the story. The other half is that the communist party viewed the capitalist world as a civilizational alternative which it had to denounce, oppose, and, if possible, destroy both for ideological reasons as well as to – as convincingly argued by George Kennan – legitimize its own dictatorial rule. It’s completely unreasonable to pin all the blame on America for the relationship that existed between the two states.

  50. The standard if living issue is split. Americans had more personal vehicles, the USSR had better public transport, Americans had bigger homes, the USSR had less crime, no drugs or homelessness and a better education system, etc. The West’s popular culture was already tacky and cheap, the USSR’s more traditional and digified.

    There is no comparison whatsoever between American capitalism’s ability to provide consumer goods and the USSR’s. That was an indisputable American victory and, in the 1980s, became an important cause of disillusionment among the communist citizenry. Why is America the most appropriate comparison, anyway? All of western Europe had market-based economy, and I would rate the public transport, crime rate and education system as at least as good as the east’s, and public health a good deal better.

  51. This “I tie your shoes for a dollar, you tie mine for the same price–together we produced 2 Dollars of GDP” is THE foundation of monetarism and, thus, overstates the actual GDP greatly, sometimes–manifold.

    If your implication is that GDP measures money passing back and forth between two parties with nothing of value being exchanged, then you are simply wrong. GDP counts the production of new goods. It doesn’t matter how many times two parties exchange, say, a used car – GDP doesn’t count it.

    If you meant to assert something other than this, you will have to explain it because I don’t see any other meaning in your statement.

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    I don’t think the USSR had better public transportation. The US had better roads, which made buses better. And US subways and trains were fine. And if you include affordable air travel in public transportation, then obviously the US had the edge there as well.

    As far as crime goes, the US has a significant minority that’s significantly crime prone. Up to the 50s even in places like DC, people didn’t lock their cars or houses because they didn’t need to.

    I wouldn’t say the USSR had a better education system.

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    Actually, I think two people buying something back and forth from each other, like a used car, is counted in GDP each time there’s a transaction and the good and money change hands.

    The assumption is that each party is benefiting himself with each transaction and values what he is exchanging for more than what he’s exchanging, otherwise he wouldn’t be making the transaction.

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  54. Each party benefits from the exchange, but GDP only counts newly produced goods. I should have made that clearer in my reply to smoothie.

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    What about real estate and financial transactions? Are those counted in GDP? only for newly built houses and newly issued stock?

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  56. No, GDP does not include the sale of used goods. On that point, silvio’s correct. But by the same token, it includes a lot more than just the production on new goods.

    The standard formula for calculating GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M). For a more detailed overview of each variable, see Wikipedia: https://en.wikipedia.org/wiki/Gross_domestic_product#Components_of_GDP_by_expenditure

    But it should be obvious at first glance that there’s a lot more going on here than just the production of new goods.

    Consider crime, for example. A dramatic increase in crime usually moves the govt. to hire more cops and build more prisons–more ‘G’. Ka-ching! But only a fool would argue that more crime, which diminishes your safety and degrades your community, actually improves your life or community.

    Another example would be externalities like pollution. Let’s say a local factory is poisoning the drinking water. The factory’s output itself is counted towards GDP, and when people drink the polluted water, get sick and have to pay more for doctor/hospital visits, that too counts towards GDP (medical expenditures would fall under ‘C’). But from a quality of life standpoint, there is obviously something wrong with this picture.

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  57. Good points well said.

  58. I’m guessing that China’s GDP figures include all those “ghost cities” that they’ve built but which are sitting empty. I’m not an economist or any kind of “expert” but it seems to layman me that those ghost cities are only slightly less preposterous than “one person digging a hole and another person filling it in” as far as GDP goes. Then there’s the issue of the maintenance that those empty cities would require and how that factors in to GDP.

  59. No prostitution? Are you kidding me? As a merchant seaman traveling to Leningrad, Odessa, Novorossiysk, and Poti (Georgia) and partying in all of them for a couple months at a time from 1973-1977, I can assure you that Levis, Lux bar soap, Marlboros, Salems, Contac antihistamines, cheap Maybelline cosmetics, lipstick, and dollars could attract a fair amount of affection from otherwise respectable girls.

    And I can also assure you that the Militzia and Politzei hanging around Restauran Bratislav in Novorossiysk waiting for us guys to leave with our dates at bar time damn well knew what was going on, too.

    Natalia and Alla were caught with us when we left one night, thrown into one of those little green paddy wagons they had and I never saw them again.

    The other girls told us that they were arrested and beaten/raped (the other girls were uncomfortable getting very explicit) by the cops for hanging around with us and chose to disappear. Embarrassment? Shame? I will never know.

    Apparently, being caught cuddling/consorting with foreign sailors was prima facie evidence of prostitution and made them fair game … for being counterrevolutionary hooligans or something.

    God! Those were the days. As a 20 something fireman/oiler, I had one hell of a time! And I still have some beautiful bronze icons as mementos.

  60. Well Russia has a huge number of tactical nukes. So they have some scenario in mind for them coming in handy. Maybe just as a threat, however, if they were losing they might decide to use one. But after going nuclear war could would likely go to escalation. Russia may not be reconciled to progressively becoming a second or even third rate power and decide to roll the dice as there is nothing to gain by waiting.

  61. I wouldn’t say the USSR had a better education system.

    Well, yes, because you have no idea what you are writing about. Just to give you some feel–what MIT students were studying in Physics in first year was studied in USSR in the 9-10th grades.

  62. If you meant to assert something other than this, you will have to explain it because I don’t see any other meaning in your statement.

    Yeah, single word–Facebook. Several hundred pages of code and a bunch of morons exposing themselves. Ta-da, IPO through the roof. What a “value”. GDP all the way!

  63. Real estate transactions that represent the purchase of new buildings or newly developed land are counted. Sales of existing land and buildings are not. “Financial transactions” is a somewhat vague term. Basically, it’s the income that a financial asset produces that is counted towards GDP. So the interest received by the purchaser of a bond counts, as does a dividend received by a stockholder. But the purchase of the bond or the stock doesn’t count.

  64. But it should be obvious at first glance that there’s a lot more going on here than just the production of new goods.

    No, that is not obvious. Production is what GDP measures. Well, GDP can also be calculated by measuring income, since someone’s expenditure is always someone else’s income, but the resulting total will be the same figure, so ultimately it’s measuring production.

    The issues you raise don’t have anything to do with GDP per se. They only relate to the usefulness of GDP as a proxy for national well-being. Quite clearly, if GDP is the only measure relied on then it’s possible for well-being to be overstated.

  65. Good post.

    In 4th generation war theory terms, the European colonial empires were defeated at the moral level after WW2, as was the USSR after 1989, and these defeats are just as real in their consequences as military defeat in war. Whether the victors were ‘laudable’ is a different question.

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