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Economic preconditions for peace

Boris Kagarlitsky (Rabkor) 20 December 2025

Assessing the economic situation in Russia at the end of 2025, Ekaterina Shulman, a recognized foreign agent, suggested that the country is running out of money and people. And, indeed, by all indications, something is running out. But at the very least, it's not money. The state will never run out of money. A peculiarity of liberal experts' thinking is that they reduce everything to money. Meanwhile, money is merely a tool used to redistribute other resources. Of course, if it's simply mindlessly printed, it depreciates. We know of eras when even gold and silver depreciated. But the fundamental question is which resources are distributed through government spending and how. And these resources are always limited (which is the essence of economics as a science of working with limited resources); they do, indeed, have a tendency to run out.

People, the reserve of personnel for both war and production, are also a resource, and an extremely limited one at that. The days when, like the 18th-century Russian officer, one could rely on the assumption that "women will give birth to new ones," are long gone. But no less problems arise during military operations with other resources—metal, fuel, electricity, railway capacity, equipment that is prone to obsolescence and wear and tear, etc. The outcome of a military campaign depends largely on how all these resources are allocated.

The renowned Soviet economist Yury Yaremenko, developing the concept of a multi-level economy, noted that there are also differences in resource quality. Just as metal can be of good quality and not so good, so too can specialists be highly skilled and not so competent. In the USSR, the military-industrial complex plundered all the best resources in unlimited quantities. Other sectors of the economy were forced to compensate for the lack of quality with quantity. And the lower the priority of a sector, the worse the situation.

Returning to the issue of labor resources, it turns out that with this approach, civilian production begins to experience a chronic personnel shortage, even if there seems to be enough people. After all, the best specialists are needed precisely where resources are scarce, and with their intelligence, talent, and experience, they can remedy the situation, figure out a way to get around it, and invent something new. But the opposite is true. The best technical minds are already concentrated in the military-industrial complex, while other industries are starved.

The problem is that the growing crisis in civilian production is beginning to affect the economy as a whole, spreading from the bottom up. After all, defense industry workers also need to buy clothes and eggs, take their children to kindergarten and school, get treatment at clinics, and so on. The country's leadership is aware of the problem, but this is where financial difficulties arise. Moreover, in the Russian market-capitalist economy, these difficulties are even greater than in the centrally planned economy of the USSR.

As already mentioned, liberal economists, including those working in the government, view every problem as a financial one and solve it accordingly. This works more or less well under "normal" conditions, but not during crises. Crisis situations are distinguished by the fact that conventional methods not only fail to produce the expected effect but often worsen the situation. The specificity of the current crisis is that economic authorities are concerned (in full accordance with the doctrine of financial management) not only with injecting additional funds to cover the objective resource deficit, which will not disappear, but also with maintaining sustainability until 2025. Financing of priority sectors and projects is combined with austerity and even more stringent fiscal policy in an attempt to contain price increases and balance the budget. The main result of this approach is the widening of imbalances in the economy and society.

Modern Monetary Theory (MMT), an alternative to classical liberalism, takes a much more lenient view of money printing, ignoring the major catastrophe of the growing budget deficit, which by the end of 2025 will already exceed four trillion rubles. But an important nuance is that MMT theorists propose directing additional funds to where there are unclaimed resources that could be put into circulation with government funding. For example, if you have a mine but no investors, or if there are many unemployed people who could be employed in socially useful labor. In our situation, however, the opposite is true. The Central Bank and the Ministry of Finance are throwing money not where there is resource potential, but where available resources are no longer available. And increased funding won't create them. Metal won't smelt itself, and soldiers won't emerge from the earth, even if it's sown with dragon's teeth, as the heroes of ancient myth did.

Moreover, there is another limited resource: time. Only God has infinite time, and that's only if He exists. For mortals, time is not only limited but also non-renewable. In other words, due to previous mistakes and missed opportunities, it is often impossible to make up for it. In the spring and summer of 2024, when it seemed the domestic economy was coping well with both the sanctions and the burden caused by military spending, measures could have been taken to ration resources to protect the civilian sector from shortages and the financial system from spontaneous price increases. But why bother, when everything was already going well? And if, as many expected, a peace agreement had been reached between the fall of 2024 and the spring of 2025, the temporary difficulties most likely would not have escalated into a full-blown crisis. But that moment is now in the past. The resource shortage has worsened, taking the form of a critical financial shortage for the authorities.

Further increases in funding for priority sectors and programs will only lead to further disparities and a final imbalance in the monetary system, as well as to a worsening social crisis, when entire sectors of the economy and social groups, finding themselves on a starvation diet, will be unable to provide even the minimum necessary level of investment for their own reproduction.

The authorities are acutely aware of this situation, and therefore the peacefulness of the ruling circles is growing strictly proportional to the escalation of the crisis. However, the problem is not only that the escalation of the crisis will inevitably require a reverse redistribution of resources to civilian sectors, but also that political and ideological issues arise that can be brushed aside as long as military action continues. Furthermore, this reverse redistribution will entail a number of difficult decisions. It can be carried out through market or administrative methods, effectively or not, but in any case, it is no longer compatible with the escalation of military efforts.

And even if everything is done competently, the emergence of numerous difficulties and conflicts along the way is inevitable. This understanding by those in power also contributes to a desire to leave things as they are for the time being, avoiding irreversible steps. However, postponing decisions into the indefinite future not only does not make the choice easier, but also exacerbates existing problems. Ultimately, the authorities will have to make political decisions. Perhaps we can put an end to this.
https://rabkor.ru/columns/analysis/2025/12/10/economic-preconditions-of-the-world/?

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