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Hello from London. In my very first economics lesson at school, we began with the basics of the theory of demand. “Demand”, I recall Mr Hills saying, “does not mean ‘need’ or ‘want’. It means ‘demand backed by money’.” Put another way: we should understand that economics was an unsentimental discipline. See the world first as it is, not as you might like it to be. That lesson came back to me when I read our analysis of Russia’s economy, published at the weekend. However much you sympathise with ordinary Russians, you might wish that two and a half years after Vladimir Putin’s full-scale invasion of Ukraine, Russia would be paying a high economic price for its aggression, giving the dictator cause to think again. But no: it is thriving, thanks to a splurge of public spending—not only on the war but also on welfare, pensions and more. The one cloud (or, for those wishing Russia ill, bright spot) is rising inflation. But with incomes rising faster than prices, Russians’ patience isn’t wearing out yet. On the battlefield, Russia’s unannounced summer offensive is yielding advances in the Donbas, in eastern Ukraine, as we reported last week. But Ukraine has made a foray of its own—not into territory captured by Russia since 2022, but into the Kursk region of Russia itself. On August 12th Russia’s defence ministry said tha... |
