How To Turn Economic Loss Into Political Gain: Putin's War Economy

I have been struck by an outpouring of commentary on Facebook and elsewhere by professional economists just flabbergasted that Vladimir Putin has responded to the tightening of economic sanctions by the US and EU (and some other nations also) by all but forbidding food imports from those nations.  The flabbergast comes from realizing that the impact on the living standards of most of the Russian population will be noticeably hit by this move, with the total  economic costs to the Russian economy and population far exceeding (certainly in percentage terms anyway) the costs of this on the exporting nations, not to mention substantially exceeding the costs of the western sanctions put in place so far.  For the US, probably the worst hit sector will be poultry, where 7% of chicken exports go to Russia, where the frequently imported drumsticks are known colloquially as "Barbara Bush legs," a reminder that it was under George  H.W. Bush that the Cold War came to an end the Soviet Union collapsed, not during the presidency of Ronald Reagan, as many Americans seem to believe.

In today's Washington Post, a column by Masha Gessen, "Putin's War Economy," explains what is up and how Putin is making political hay out of all this.  The crucial quote is "Russians are to think of their losses as heroic sacrifices made for the war effort."  This becomes a way of reinforcing the narrative that has been relentlessly propagated to the population that this is the Great Patriotic War (aka WW II) redux, that the Ukrainians are a bunch of fascists, and so just like their forebears, patriotic Russians must do without to overcome the evil fascist foreigners.  Most Russians probably will go along with this, as most are apparently buying what has already been sold, even when this amounts to looney bin stuff such as the seriously reported claim that the bodies in the MH17 flight were already dead, and were shot down by Ukrainian fighter planes anyway. (I do note that one of the minority parties in the Ukrainian government, Svoboda (ironically meaning "Freedom") can be reasonably accused of being effectively neo-fascist.  But then the same can be said about several parties in Western Europe that are loudly supporting Putin, such as France's National Front.)

Gessen adds a further twist I had not seen reported on elsewhere.  Along with the banning of many food imports (and it must be recognized that some of these foods can be obtained from nations not under the ban), PM Medvedev has also banned free Wi-Fi in restaurants.  Gessen says that a sub-text of all this is attacking "the cafe society" in Moscow where those who know foreign languages and have access to foreign media and have demonstrated in the past against Putin hang out and hatch their plots.  Some of the fancier food imports that are coming, which also grace the tables in the fancy restaurants where some of these intelligentsia dissidents do their internet plotting, mostly go to Moscow and St. Petersburg.  The solid rural supporters of Putin who might see their farm products selling for higher prices will not be negatively affected by not being able to buy "Italian mozzarella, Australian rib eye, Finnish yogurt and even cheap American drumsticks."  Those unpatriotic big city whiners can take the hit and also be partially silenced at the same time.  Let them eat good Russian bread and potatoes!

Barkley Rosser