Where the Soviets suffered from an exploding budget deficit, financed by money creation, today’s Russia has pushed through an aggressive austerity program, slashing spending on social programs and pensions to balance the budget. The Bank of Russia has hiked interest rates to double-digit levels, driving inflation down to 6%, a respectable figure for an emerging market. The Kremlin’s budget deficit will be a bit more than 3% of GDP this year, even though oil—which previously provided half of government revenues—is now selling for half its price two years ago. And Russia’s government debt remains less than 20% of GDP, according to Russian government statistics. America’s public debt, by contrast, is more than 75% of GDP, according to the Federal Reserve.
This conservative fiscal posture helps explain why, unlike the U.S.S.R., Mr. Putin’s Russia has proven so unexpectedly resilient. Despite Western financial sanctions, large Russian firms continue to attract the foreign-currency funding that they need. Despite the commodity crash, Russian oil production is at a post-Soviet high. Russia’s economy is returning to growth even as Russia’s military wages war in Ukraine and Syria. The Kremlin has mustered the resources that it needs to deploy power at home and abroad, even amid conditions similar to those that bankrupted the Soviets.
Russia’s economic accomplishments shouldn’t be overstated, of course. Mr. Putin has expropriated his rivals, tolerated epic corruption and sent investors fleeing. The Russian state plays a far larger role in the economy today than it did when Mr. Putin took power—not to provide useful services such as health or education but to monopolize oil production and fund his patronage networks. Russian wages grew rapidly in the 2000s, but growth has since slowed—and even reversed.