The Telegraph, January 31, Roger Bootle
With a Russian invasion of Ukraine a serious danger, I have been musing on the links between military and economic strength. Some countries’ military strength is a straight reflection of their economic size. But in many other cases, their military strength is disproportionate.
It is not at all surprising that America and China are the world’s two military super-powers. After all, they are the world’s two largest economies. But Russia is a different case. Most people in the West don’t realise how comparatively small Russia is economically. At market exchange rates, its GDP is about half of the UK’s, making it the eleventh largest economy in the world, just below South Korea.
Mind you, the use of market exchange rates systematically under-states the GDP of less advanced countries because their general price level tends to be lower. Accordingly, when making international comparisons, economists usually use an artificial exchange rate, called Purchasing Power Parity, that corrects for this. If you measure GDP using this rate, then the Russian economy comes out roughly a third larger than the UK’s, ranking as the world’s sixth largest economy.
Despite this still surprisingly unimpressive economic weight in the world, it is able to field substantial armed forces because it spends a relatively high proportion of its GDP on defence. At the latest count, the figure was 4.3pc, a fair bit ahead of the US, which spends 3.7pc. And I suspect that because of very different relative prices, a given amount of money spent on defence by Russia produces much more bang per buck.
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