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Russia’s Military Keynesianism

In late September, Russian President Vladimir Putin announced a “partial” mobilization in Russia, while forcing the annexation of four occupied regions in southeastern Ukraine after bogus referendums. As many have pointed out, the draft broke an informal social contract between Putin and the Russian population, in which the Russian president provided substandard, but at least tolerable, standards of living and stability in exchange for political passivity.

Now, many hope the draft will change everything. Soon the corpses of poorly trained soldiers, sent as cannon fodder to the battlefield to stop the Ukrainian counter-offensive, will begin to return to their families, provoking public anger. According to this reasoning, this, together with the economic impact of the sanctions, could result in popular unrest, which would require further repression.

The Kremlin could not last long through sheer coercion. To achieve military victory, Putin may be tempted to use a tactical nuclear weapon or some other wild escalation option that would likely deprive him of his unreliable allies around the world. Then he would bury the entire world with him or be wiped out by a Russian elite fearful for their own lives.

The problem with this line of thinking is that more repression is not the only option for Putin and it is not the only basis of his regime. To understand the other direction he might take, it is important to look at the political economy dimension of recent developments.

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Declaring the mobilization “partial,” Putin emphasized that the conscripted Russian soldiers would be paid the same as the contract soldiers who have been the backbone of Russian forces in Ukraine so far. This means they must be paid at least $3,000 per month, based on military rank, bonuses, insurance, and a generous welfare package. This is between five and six times higher than the average salary in Russia. Recruiting 300,000, not to mention more than a million soldiers, as some media reports have claimed may be the real goal, would require the redistribution of billions of dollars from the Russian state budget.

There were reports of chaos in payment arrangements in the first weeks since the start of the mobilization. However, at a meeting of the Russian Security Council on October 19, Putin ordered that all issues with military salaries be resolved, showing that high pay for mobilized soldiers and support for their families is an important part of your strategy.

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Add to that the money flowing in for the reconstruction of dilapidated Mariupol and other badly destroyed Ukrainian cities in the newly annexed regions of southeastern Ukraine. Currently, workers from all over Russia are recruited for the reconstruction effort and offered double what they would earn at home. Even an unskilled construction worker gets more than $1,000 a month.

Recently, Russian Deputy Prime Minister Marat Khusnullin said that more than 30,000 Russian workers are employed in the reconstruction of the occupied Ukrainian territories and that the government plans to increase the number to 50,000-60,000.

In the next three years, the Russian budget is expected to allocate at least $6 billion for the reconstruction of the newly annexed Ukrainian territories. How much of that will not be lost to Russian crony capitalism remains to be seen.

There is also a lot of money flowing into the military-industrial complex. As the demand for weapons and ammunition has increased significantly, the number of workers has increased, as well as wages. At least partially, the growth of the military-industrial complex offsets the drop in production in Western-dependent and sanctioned industries. In other sectors, employees who have been conscripted into the military have left jobs to be filled by new workers, lowering unemployment.

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In total, state spending for “national defense” has already increased 43 percent from last year to this year and reached $74 billion. A planned cut for 2023 has been scrapped, and instead Moscow plans to spend some $80 billion. Spending on “national security and law enforcement” is also expected to rise 46 percent to $70 billion next year.

Looking at all these developments, we see something like military Keynesianism taking shape in Russia. Millions of Russians who mobilize to fight in Ukraine, are employed in reconstruction or military industry, or participate in suppressing riots in the occupied territories and at home, as well as their families, have become direct beneficiaries of the war.

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Among other things, this means the appearance of a positive feedback loop that did not really exist before. The Russian ruling elite started the war to pursue their own interests and managed to get only ritual and passive support from the Russian population.

However, this redistribution of state wealth through military effort is creating a new base for more active and conscious support within a significant sector of Russian society, which now has a material interest in the conflict.

The fact that a large-scale invasion and occupation of a large part of the Ukrainian territory would require some fundamental changes in the Russian socio-political order was predictable even before February 24. Shortly after the invasion began, I wrote the following: “[t]The Russian state would need to buy the loyalty of Russians and subjugated nations through less fiscally conservative and more Keynesian economic policies. […] Instead of the empty rhetoric of “denazification”, which has clearly been insufficient to inspire enthusiasm for war within Russian society, this would require a more coherent imperialist-conservative project that connects the interests of the Russian elites with the interests of the subordinate classes. and nations.”

The Kremlin’s strategy of combining coercion with bribery of a significant part of the population has helped keep anti-war protests relatively small, as most Russians have obediently accepted the mobilization. The disproportionate number of people recruited from the poorest parts of Russia could have to do not only with the Kremlin’s fear of protests by more oppositional big-city residents, but also with its calculation that the monetary incentives it offers would be of higher value. residents of the most disadvantaged peripheral regions.

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The crucial question, of course, is how long military Keynesianism will be sustainable in Russia. Classical imperialist positive feedback loops were based on technologically advanced industrial production. Conquered territories and colonies provided new markets and supplied the raw materials and cheap labor to further expand production.

The profits were then shared with the “labour aristocracy” at home who benefited from imperialist expansion and subjugation. The bloc formed between the imperialist ruling classes and segments of the working classes became the basis of hegemonic regimes and prevented social revolutions in the Western metropolises.

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It is highly questionable whether Ukraine can provide any of the above to the Russian economy. Furthermore, many expect the long-term impact of the sanctions to cripple the Russian economy and lead to its primitiveization.

That leaves the flow of petrodollars as the main source of financing to buy loyalty. That, however, depends on the successful reorientation and sufficient growth of the Chinese and Indian economies to sustain demand for Russian energy resources. No less important would be to reform Russia’s state institutions to manage revenue more efficiently rather than lose it through incompetence and corruption.

But if the Russian regime is able to transform and strengthen itself in response to the existential challenge instead of collapsing, it means that Russia could be ready for a longer and more devastating war.

Russian military Keynesianism contrasts sharply with the Ukrainian government’s decision to stick to the neoliberal tenets of privatization, tax cuts, and extreme labor deregulation, despite the imperative goals of the war economy. Some leading Western economists have even recommended policies for Ukraine that constitute what the British historian Adam Tooze has called “war without a state.”

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In a long war of attrition, such policies leave Ukraine even more dependent not only on Western weapons but also on the constant flow of Western money to sustain the Ukrainian economy. Making oneself fundamentally dependent on Western support may not be a safe bet, especially if your adversary will do so in the long run.

The views expressed in this article are those of the author and do not necessarily reflect the editorial position of Al Jazeera.

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