The Duran Podcast - Russian economy surges. Full employment, labor challenge

Episode Date: November 5, 2023

Russian economy surges. Full employment, labor challenge

All right, Alexander, let's do a show on the Russian economy. Every now and then, we like to focus in on the Russian economy and see how it's progressing along. And how is it progressing along? The ruble. The ruble was down, then it was up, bounced back. It lost a bit. I mean, everyone is so hyper-focused on the rubble. Yes.

But there's a lot more to focus on when it comes to the Russian economy. economy. I mean, is, the ruble is the least part of the story. I mean, the first thing to say is that we are, we are in the process now in Russia of a very, very, very major investment surge. I mean, industrial production, the manufacturing output is now up 7% apparently in the year overall. in some sectors, it's growing much faster than that. And I'm talking now about the civilian economy, by the way, the civilian manufacturing sector, not the military side of things,

but the civilian manufacturing sector is surging. Some sectors are now registering double-digit growth. Some of them, you know, absolutely stunning growth figures. The electronics are growing at about 50%. You know, it's a huge investment surge. We're also seeing a big increase in surge in services, in consumer sales, that sort of thing. And over the last two months,

well, over August and September, the economy was growing at a GDP growth rate of over 5%. Now, all of that, however, this incredible, search is causing overheating and what we're seeing is that inflation has gone higher than the central bank

likes and the government likes and Putin called together all the various officials yesterday or the day before yesterday and the central bank is now trying to cool the economy down further and they're trying to and that they've had to jack up interest rates

to do that which is by the way what a central bank should try should do when inflation starts to take off you nip it in the bud quickly by increasing interest rates now i don't think this is going to bring the economy to a complete stop or anything like that i mean the momentum that has been building up now is huge but it will slow it and it will try to it will cool down consumer spending the surge in consumer credit and i'm it will affect sales of things like cars and property sales and that kind of thing. But that's the immediate story.

The biggest story is that we're seeing a huge sea change in the way that the economy is now operating. I mean, until a couple of years ago, five or six years ago, the Russian economy, the priority for the Russian government, was sorting out the banking financial system creating a strong financial system within Russia remember in the

1990s Russia had no real financial system at all Russian banks at that time were basically phony institutions they were fake institutions they didn't function

like proper banks do so the government spent a huge amount of time sorting out banks, sorting out the financial system. They spent a huge amount of time rebuilding living standards, creating a functioning consumer market, sorting out services.

What they're now doing, the focus that they have at the moment is on industrialisation, on industrial expansion. And this is now the primary focus and we see investment, as I said, in industry, surging. And this, I think, is going to be the future now. We're going to see industrial expansion, probably for the next couple of years. And alongside that, what goes with that, which will be capital controls.

and this period when the ruble was freely convertible is, I think, coming to an end. And I think people need to understand that. So that makes the way in which the Russian economy is going to be run from now, this point on. It's going to make it more like China and indeed India than it has been previously. Yeah, but how do you address the labor shortage? the population because China, India, you're talking about two countries with a massive population. There are reports that Russia is is having trouble filling all of the demand for labor and for the growth with actual people.

This is going to be a challenge. This is by far the biggest. And Russia's not the easiest country to, just on a side note, Russia's not the easiest country to migrate to because it's very strict in its, It's my great. So this is not something that can be solved by saying, okay, well, we'll just, you know, bring people from the outside. Russia's hard to move to. It's not simple. It is, it is a political, I mean, this is the big, this is the single biggest economic challenge. I mean, to all intents and purposes, Russia has full employment. I mean, anybody who wants a job in Russia has a job in Russia. So, I mean, there's little you can do. there to increase the available pool of labor by, you know, there's no great, you know,

there's not a vast army of unemployed or underemployed people that you can bring into the workforce. In fact, at the moment, because of the war, there are people who are leaving the workforce, basically to join the army. So that, that, there is that issue. As you correctly said, immigration is a very full political issue into Russia. Putin has made it very clear that he's not looking to try and solve this problem through immigration. You can increase productivity. And of course this is something actually Russian productivity levels have been steadily rising ever since Putin became president, but you could try to increase the speed with which

productivity grows and investment plays a role in that. And of course, you can do that by increasing automation in industries. And one of the sectors that is now registering double-digit growth is machine tools and machine building. And that does work towards increasing productivity. But ultimately, the solution that I think the Russians are going to have to come to is that they have no real choice, it seems to me, if they're going to fill all of this, you know, meet the need for demand,

sustain growth and production. What they have to do is either open plants in friendly countries, and there's already talk about building factories in Uzbekistan and Kazakhstan and those sort of places, which will service the Russian market, car factories and that kind of thing and by the way North Korea as well there's some talk of that going on Iran is also

another possibility or you do what the Germans did in the 50s and 60s you start bringing in guest workers from those countries in other words you offer jobs in Russia to workers from

Central Asia from North Korea from those sort of places bring them to Russia you don't grant them citizenship, they don't become immigrants as such, but they become guest workers who operate factories inside Russia and fill up the gaps in the labour pool. And I think we're going to see more of that also. Now, of course, what happened in Germany is that though these people were normally guest workers, they nonetheless, a lot of them stayed, and we could see that too. but I suspect that those will be the two plans.

Those would be the two things that the Russians do. Yeah. There's not much else they can do in this instance. I mean, there's the automation, there's... Yeah. Automation. Technology, AI. There's all kinds of stuff like that, but, I mean, that only goes so far.

That only goes so far and it takes time. I mean, you're talking about, you know, investments that will take at least five, ten years before they produce results. So in the meantime, you have to either bring in workers from abroad as guest workers, or you have to open factories in other countries and work that way. Now, what will happen with the Russians is they do start building factories in Central Asia and trying to attract workers from there, which of course they have done in the past. We've had guest workers from Central Asia working in Russia, and that's been a common thing. But what the Russians will probably want to do

is that they will want to move further towards some kind of political integration with these countries. I don't mean a European Union or Soviet Union type thing. But they will want to lock these countries more firmly into the Eurasian Economic Union and things of that kind. And I think we are already seeing signs that that is happening.

Putin has been having all kinds of meetings with Tokayev, from Kazakhstan, the president of Uzbekistan, whose name I can never remember exactly. But anyway, they will be doing much more of that over the next couple of months and years. I personally think myself that this is what a lot of these visits and discussions with the North Koreans are about as well. North Korea has large numbers of trained workers, so you can perhaps start to see North Korean workers, especially in construction programs in the Far East being brought in to do that kind of thing. It works well for those countries because they get remittances from guest workers as well and things of that's all.

And it helps the Russians with their labor shortage. All right. We will end it there. The durand.com. We are in Rumble, odyssey, butchute, Telegram, Rockfin and Twitter X and go to the Duran shop. use the code of the Durant 20 and get 20% off all merch. Take care.