By Matt Underwood Russia’s Putin denies economy is stagnating, as evidence suggests otherwise, and this is a narrative that feels increasingly familiar. It’s like a broken record, where the leader insists everything is fine while the facts on the ground tell a different story. The similarities between this and certain situations in the US are striking. It seems the denial of economic realities has become a common tactic in some leadership circles.
The current economic situation is, frankly, concerning. Reports indicate that Russia is planning to significantly increase its borrowing, likely to offset the massive government spending. This spending is, at least in part, propping up the economy, so without it, things could get much worse, and rapidly. Projections suggest their pre-invasion funds might be exhausted relatively soon, which could trigger a significant economic downturn.
One of the core problems seems to be the disconnect between the leadership and the people. The wealthy, who often benefit most from the current system, create laws that protect their wealth, which in turn removes resources from the very people who drive the economy. This creates a system where the labor of the people is restricted, and that, in turn, curtails the economy’s true potential.
The fundamental driver of economic growth is not the ultra-wealthy but the workforce. However, when wealth creation is concentrated in the hands of a few, while the working class does not benefit, and even suffers, then the economy will eventually stagnate. This pattern of inequality is a recipe for instability, both economic and social.
It’s not just that Putin is denying the problem; it’s that the response feels eerily familiar. The comparison to a child arguing with their mother – “I’m not dirty!” even with mud dripping down their face – is apt. There is a clear disconnect between the claims and the observable reality. It’s like the emperor’s new clothes, where the only people who can see the truth are those who aren’t afraid to speak it.
The looming autumn could be a particularly tough period for the Russian economy. Restrictions on withdrawals and limits on cash are classic indicators of economic strain. The massive budget deficit is not going to vanish on its own, and predictions of a significant economic downturn by a certain date are not encouraging.
The vast amounts being spent on “defense” – 30% of GDP – are unsustainable. When the war ends, the economic reckoning will be brutal. The country’s resources are being poured into the war effort, not into productive investments. The longer this goes on, the worse the damage will be.
The parallels between the US and Russia are getting more and more uncanny. The leaders share a similar pattern of deflection and denial. What’s worse, the “mirror images” are appearing in more areas than just economic matters. And it’s not just about denial. There’s a real question of when denial becomes pathological, when the lies become so frequent and so blatant that they no longer have any connection to reality.
The strategy of maintaining a large military at the expense of the economy, with expendable soldiers, is a familiar, though not necessarily successful, Russian doctrine. It has been done for centuries, and for centuries Russia’s citizens have paid the price for it.
The Russian housing market also offers a peek at the economic stress. With high interest rates and significant down payment requirements, the market is locked out for the vast majority of the population. This is a sign of economic problems, not a sign of economic strength.
It’s important to recognize that the ultra-wealthy accumulate wealth through assets that generate passive income, which does not benefit a majority of the citizens. These assets don’t require labor, but generate additional wealth, widening the gap between rich and poor. That’s a problem.
Finally, there’s the question of whether the oligarchs, the Russian elite, are being forced to contribute to the war effort through loans. This creates a credit crisis, similar to the US financial crisis of 2008. When the economy collapses, they, as well as the population, will be left holding the bag. This is what happens when a country is engaged in active war. In this circumstance, a country’s economy can’t grow, because its resources are being drained. The longer it goes on, the more the economy will suffer.