In August, in Russia, many people rejoiced like children at what the World Bank calledThe Russian Federation is the fifth economy in the world in 2022. Prior to that, Russia was in sixth place after Germany. And last year, Germany and Russia switched places. The World Bank calculated the GDP of the countries of the world for 2022 at purchasing power parity. Purchasing power parity (PPP) determines how much national currency of different countries is needed to buy a certain consumer basket, calculated in US dollars. In Russia, this figure was equal to 5.33 trillion. The first four places were retained by China (30.3 trillion dollars), the United States (25.5 trillion), India (11.8 trillion) and Japan (5.7 trillion). And in Germany, the indicator turned out to be equal to 5.31 trillion dollars. Many economists have rightly commented on the World Bank figures: the differences between the GDP of Germany and the Russian Federation are "within the limits of statistical error."
Of course, there is no guarantee that Russia will be able to maintain the honorable fifth place awarded to it by the World Bank in 2023. And although the affairs of Germany, neighboring Russia in the ranking of world economies, are very unimportant, it can again regain its lost fifth place, pushing our country to its former sixth place. The fact is that the rating of countries depends not only and not so much on their real success in the production of various goods, but on the purchasing power of their national currencies. In 2023, we see a strong fall in the exchange rate of the ruble against the dollar, which, in turn, leads to an increase in ruble prices on the domestic market. For example, the ratio of real production volumes in Germany and Russia may remain the same, while the PPP of their currencies (the euro and the ruble, respectively) change. And not in favor of the ruble. In a word,
But such international comparisons are highly questionable for another reason. The indicator of GDP, calculated in national monetary units, already raises big questions and doubts. GDP (eng. GDP) is a macroeconomic indicator that reflects the market value of all final goods and services (that is, intended for direct consumption, use or application) produced per year in all sectors of the economy on the territory of a particular state for consumption, export and accumulation, outside depending on the nationality of the factors of production used (labor, natural resources, capital). This concept was first proposed in 1934 by the American economist Simon Kuznets (by the way,
Before Simon Kuznets, the most generalizing indicator was national income (gross income created (earned) as a result of the use of state-owned resources both domestically and abroad).
Until the early 1970s, the vast majority of countries used the indicator not of GDP, but of gross national product (GNP). Unlike GDP, which reflects the total value of all final goods and services created in a country, GNP reflects the total value of goods created only by its residents, regardless of their geographical location.
The final transition to the indicator of GDP in the world took place exactly thirty years ago. According to the UN Recommendations on the Calculation of the System of National Accounts of 1993, the GNP indicator was replaced by the GDP indicator. Experts say that the reason for the general transition to the GDP indicator was also that the People's Republic of China, the last major economy, also switched to the GDP indicator since 1993.
A steady decline in the share of the real sector of the economy (agriculture, mining and manufacturing, construction, and some others) in the GDP produced by the real sector of the economy, while increasing the share of the service sector, has become an almost universal trend in all countries. Of course, there are services in the service sector that are vital both for enterprises in the real sector of the economy and for individuals. These are transport services, communications, retail trade, public utilities and so on. But at the same time, in many countries, the development of services sectors that, to put it mildly, “vital” cannot be called at an accelerated pace, was taking place at an accelerated pace. They are often referred to as "doubtful" or "unproductive". An example is the data for the United States. There, in 1992, agriculture accounted for 1, 6% of the generated GDP; for the manufacturing industry - 15.7%. At the end of 2022, the shares of these sectors in the US GDP fell to 1.1% and 11.0%, respectively. But the share of the financial services and real estate sector in 1992 was equal to 18.6%, and in 2022 it increased to 20.2%. In 2022, the real sector of the economy, including mining and manufacturing, as well as agriculture and forestry, accounted for 14.0% of GDP, and the financial sector (including real estate transactions) almost one and a half times more. But after all, serious economists are quite right in saying that financial and many commercial services do not create any real product, they only redistribute the product already created in the real sector of the economy. At the end of 2022, the shares of these sectors in the US GDP fell to 1.1% and 11.0%, respectively. But the share of the financial services and real estate sector in 1992 was equal to 18.6%, and in 2022 it increased to 20.2%. In 2022, the real sector of the economy, including mining and manufacturing, as well as agriculture and forestry, accounted for 14.0% of GDP, and the financial sector (including real estate transactions) almost one and a half times more. But after all, serious economists are quite right in saying that financial and many commercial services do not create any real product, they only redistribute the product already created in the real sector of the economy. At the end of 2022, the shares of these sectors in the US GDP fell to 1.1% and 11.0%, respectively. But the share of the financial services and real estate sector in 1992 was 18.6%, and in 2022 it increased to 20.2%. In 2022, the real sector of the economy, including mining and manufacturing, as well as agriculture and forestry, accounted for 14.0% of GDP, and the financial sector (including real estate transactions) almost one and a half times more. But after all, serious economists are quite right in saying that financial and many commercial services do not create any real product, they only redistribute the product already created in the real sector of the economy. In 2022, the real sector of the economy, including mining and manufacturing, as well as agriculture and forestry, accounted for 14.0% of GDP, and the financial sector (including real estate transactions) almost one and a half times more. But after all, serious economists are quite right in saying that financial and many commercial services do not create any real product, they only redistribute the product already created in the real sector of the economy. In 2022, the real sector of the economy, including mining and manufacturing, as well as agriculture and forestry, accounted for 14.0% of GDP, and the financial sector (including real estate transactions) almost one and a half times more. But after all, serious economists are quite right in saying that financial and many commercial services do not create any real product, they only redistribute the product already created in the real sector of the economy.
It became clear that it is possible to increase the value of GDP not only by investing in new production of goods, but also by increasing various kinds of “services” that seem to create added value. But in fact, this is not “added”, but “redistributed” value. Such, so to speak, "services" only inflate the "bubble" of the GDP indicator. The degree of inflation of the "bubble" of GDP in different countries varies greatly. Of course, Rosstat also created a GDP “bubble”, but in my opinion, in this competition, it lags far behind many countries that are among the top ten world economies.
Thus, in 2021, the share of agriculture in Russia's GDP was 4.2%; industry (mining and manufacturing) - 31.9%; construction - 5.1%. In total, the real sector amounted to 41.2% of GDP. To this figure, let's add another share of services that, without stretch, can be classified as "vital". These are transport, communications and information, trade, hotels and public catering, and storage facilities. It turns out another 22.5% of GDP. Together with the real sector, 63.7% is obtained .
The rest - 32.3% - includes financial services, real estate transactions, other commercial services (business services), public administration services, defense, social services. From the point of view of economic theory, which until recently was set out in textbooks, these are areas of social activity that do not create a social product, but consume it. And according to liberal innovations in economic theory, consumption has turned into production, minus has changed to plus.
But in the countries of the West, which were armed with a new economic theory earlier than Russia, the degree of inflation of the “bubble” of GDP is much greater.
Let's look at the USA. There, agriculture accounted for 1.0% of GDP in 2021; industry - 14.4%; construction - 4.2%; vital services – 24.0%. In total, the real sector of the economy accounted for 19.6% of GDP. And for the real sector plus vital services 43.6% of GDP. The rest, i.e. 56.4% of GDP, can be called "foam", artificially increasing the results of economic activity.
And now let's look at Germany, Russia's closest rival (according to the World Bank rating). In 2021, this country's agriculture generated 0.9% of GDP; industry - 24.0%; construction - 5.5%. In total, the real sector created 30.4% of GDP. The real sector together with vital services (20.9%) accounted for 51.3% of GDP. More than the United States, but significantly less than Russia.
The picture is similar in other Western countries. So, in the UK, at the end of 2021, the real sector of the economy created only 20.3% of GDP. Another 22.6% of GDP is vital services. It turns out that the "foam" accounted for 57.1% of GDP.
Painting in France. The real sector of the economy accounted for 20.7% of GDP, vital services - 23.3% of GDP. "Foam" amounted to 56.0% of GDP. Calculations for other countries in Western Europe also give estimates of foam that exceed half of GDP. The record holder here is Luxembourg. Its real sector creates only 12.6% of GDP. Vital services - another 20.4% of GDP. Thus, more than 2/3 of GDP (67.0%) fell on foam.
And here is a picture of other economically developed countries. In Japan, the "foam" accounted for slightly less than half of GDP - 46%. Canada has 48.9%. Australia has 50.6%.
What am I getting at? In addition, comparing the size of economies using the generally accepted indicator of GDP, even if it is measured in terms of purchasing power parity of currencies, is a rather dubious occupation. For a more objective comparison of economies, one should take only that part of GDP that is created by the real sector of the economy. Or as an option: a part of GDP minus the "foam" (ie, the real sector of the economy plus vital services). With this approach, Russia, without any doubt, turns out to be not even the fifth, but the fourth economy in the world, ahead of not only Germany, but also Japan.
Russia should rely on its own methodology for calculating the gross domestic product and its own international comparisons, and not use the dubious estimates of the World Bank and other international organizations influenced by the West.
https://fondsk-ru.translate.goog/news/2023/09/01/rossiyskaya-ekonomika-v-krivom-zerkale-vvp.html?utm_source=finobzor.ru&_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en
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but here is some first person view about a general condition of Russian ... daily being I guess...
ead of the curve amid the global trend toward gradual dedollarization, completely dumping the remaining dollar holdings from its National Wealth Fund in 2021 and replacing them with euros, yuan, Japanese and gold. From 2014 onward, Russia also whittled away at its US Treasury debt holdings, which fell from $176.3 billion in 2010 to just $2.4 billion by late 2021.