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Tuesday, December 19, 2006

Annals of the Sham Economy

Kommersant reports:

Rosstat, the state statistics service, published data on industrial development in Russia for the first 11 months of the year on Friday. The end of the year doesn't look rosy for industrialists. Industrial growth slowed down to 1.5 percent in November, as opposed to 2.9 percent in October. The chief cause of the slowdown of industrial growth this November was a fall in manufacturing from 7.5 percent in October to 2.9 percent in November as compared to the same period of last year. It was manufacturing that pulled industrial growth up in the first half of the year, growing five to seven times faster than mining and creating approximately 2.4 times more added value. In October and November, however, mining experienced growth from 0.6 percent to 2.5 percent. The decline in manufacturing reflects the lower competitiveness of Russian products as compared imports in the course of a year.
Meanwhile, RIA Novosti reports:
Russia's inflation rate will not exceed 9% in 2006, and GDP growth will be 6.9-7%, the economics minister said Monday. "GDP growth was 6.8% in 11 months," German Gref said, adding that the figure may be 6.9-7%, depending on the results of December. He said in November that GDP growth was 7.8%, year-on-year. In early December, the Economic Development and Trade Ministry increased the 2006 GDP growth forecast to 6.8%. The ministry has forecast 2007 GDP growth at 6% and inflation at 6.5%.
This clearly illustrates the sham nature of Russia's economy. There is virtually no growth connected to productivity, but rather only a rise in GDP attributable to the rising price of oil. Meanwhile, inflation continues at nosebleed levels and eats away even those gains. What's more, the actual inflation rate on the basket of basic good that ordinary people in Russia can afford to buy (people who earn $300 per month or less) is much higher than the general rate of inflation, as La Russophobe has previously documented, meaning that the vast majority of the population continues to live in abject poverty. As reported by La Russophobe, the tiny Baltic nations with no oil or gas revenues to speak of still post higher rates of economic growth than Russia, and it occurs on more significant base to begin with.

Let's resort to a sports analogy to further explore the dimensions of Russia's sham economy:

The U.S.'s National Basketball Association has six divisions in two conferences, each with five teams.

As of Wednesday, December 13th, with 20 games having been played, every team in the Atlantic Division had a losing record. The best team in that division was four games below .500 -- the worst teams in three of the other five divisions had a better record than the best team in the Atlantic Division. The worst team in the Atlantic Division was the worst team in the NBA, the Philadelphia 76ers -- a team so woeful that its star player Alan "the Answer" Iverson simply refused to play with them any more, and is being traded. They had a .250 win percentage.

But you know what? In the wretched Atlantic Division the 76ers were only three games out of first place and an automatic birth into the playoffs. The second-place teams in two of the other five divisions, both with winning records, were further out of first place than the godawful Sixers. So, if you were so inclined (to dishonesty), you could make an argument that the Sixers are actually one of the best teams in the country -- despite the fact that they could win nine games in a row and still not have a winning record.

On the whole, to paraphrase W.C. Fields, La Russophobe wouldn't rather be a sports fan in Philadelphia.

It's the same in Russia. People (well, Russophile propagandists and Russian stock brokers) tout Russia's rate of economic growth (5-8% per year) as if it meant something (it's like talking only about how many games out of first place the Sixers are, as if their division were the only one in the sport). If Russia were America, it sure would. But it isn't. Russia has an economic base that is less than one-tenth the size of America's, but it's population is only one-half as big. That means economic growth in Russia is five times less significant than in America. 5% economic growth in Russia is the equivalent of 1% growth in America, a level that would be viewed as a national crisis and grounds for regime change.

It's time we stopped being fooled by this gibberish from the Russophiles, which is designed to say our hand of opposition when Russian outrages appear before us, as they regularly do.


Anonymous said...

Dec 15 2006 4:28PM
Russia ups industrial output 3% in Nov - Rosstat

MOSCOW. Dec 15 (Interfax) - Russia raised industrial output 3% year-on-year in November after achieving growth of 5.4% in October and 4.1% in September, the Federal State Statistics Service (Rosstat) said on Friday.

Output grew 4.1% year-on-year in January-November 2006 compared to growth of 3.9% in the same period of last year. Industrial output grew 6.1% year-on-year in November 2005.

Analysts polled by Interfax forecast said that industrial output would grow 5.2% in November 2006.

The sharp drop in industrial output in November from the previous month can be attributed to calendar factors. There was one working day more in October 2006 than in October 2005, but the number of working days was the same in both November 2006 and November 2005. Moreover, there was a higher base in November 2005 than in October 2005. Growth was 6.1% in November 2005 and 3.8% in October 2005.

The slowdown in industrial growth in November was due to a drop in the growth rate of the manufacturing sector to 2.9% in November from 7.5% in October. The manufacturing sector is more sensitive to calendar factors than the production sector. There was a drop in production in November for cellulose and paper, busses, tires, and a slowdown in production of ferrous metals. Growth in the manufacturing sector was 4.5% year-on-year in the first eleven months of 2006.

La Russophobe said...

Interesting, I wonder who is right, independent Reuters and Kommersant and ZheZhe or Interfax, mouthpiece of the Kremlin. I guess we shall just have to wait and see. Meanwhile, I guess you'll be making some heavy investments in Russian industry, will you Jonathan?

MOSCOW, Aug 15 (Reuters) - Russia's industrial output grew at a slower than expected annual rate in July, according to data published on Tuesday, as manufacturers struggled to compete with growing imports. Industrial production fell by 0.4 percent in month-on-month terms, while the year-on-year growth rate was 2.9 percent, unchanged from June and well below consensus expectations in a Reuters poll of 4.8 percent. The data, released by the Federal Statistics Service, showed manufacturing output grew by 2.5 percent year-on-year in July, compared with 2.8 percent in June, while mineral extraction output grew by 3.1 percent from 2.4 percent in June.

"In one of his speeches, President Putin expressed the idea that Russia ought to become an energy power - but in order to do that, 'mindless digging' isn’t enough. Russia also needs to develop machine-building, high-tech sectors, and science; it should export petroleum products, not crude oil. However, as everyone knows, we’re still a very long way from that situation."