The long shadow of austerity

Nick Trickett is an associate director with S& P Global Commodity Insights’ Investing in Energy service. Previously editor-in-chief of FPRI’s BMB Russia and his own blog and newsletter OGs and OFZs, he has nearly a decade’s experience following, analyzing, and writing on Russia’s political economy. He holds a BA in comparative literature from Haverford College, an MA in Russia/Eurasian regional studies from the European University in St. Petersburg, and an MSc in international political economy from the London School of Economics. An American by birth and Chicagoan by the grace of god, he lives in London with his wife Ella.

Since the start of 2023, coverage of the Russian economy has consistently invoked a wartime ‘boom’ driven by war spending. This ‘boom’ is the lens through which the country’s resilience under sanctions is explained, a means of justifying the impressive figures the Kremlin touts as proof of successes. Yet quality of services and life is visibly worse for most Russians in wartime. Years of underspending, underinvestment, and a failure to reform institutions can’t be undone by blood money for families who’ve lost their loved ones at the front.

Appeals to a boom are not only questionable based on available evidence, they suffer from collective amnesia about the Russian economy over the last twenty years. Russians and Russian businesses’ economic memory does not begin the day of the full-scale invasion. Elites’ obsession with austerity, the core economic principles that defined the economic consensus of “Putinism,” explains much of the gap between perceptions of an economy charging ahead under sanctions and the privation repeatedly visited on Russians by the regime since 2008.

These principles were cemented by the country’s post-Soviet technocracy, the collection of ministers, officials, civil servants, and academic economists serving in ministerial roles, predominantly at the Ministries of Finance and Economic Development or Bank of Russia, or in advisory roles to the presidential administration in the Kremlin or Duma.

In the 1990s and 2000s, many of the members of this technocracy came from the same social and ideological spheres as the economic liberals like Yegor Gaidar and Anatoly Chubais, educated to be market fundamentalists. But once they were incorporated into the regime after Yeltsin’s exit from power, they steadily lost any influence as ‘liberal’ voices, instead enforcing restrictions on policy intended to avoid the destabilization of the economy Russians suffered in the 1990s.