https://www.youtube.com/watch?v=pG5vhXgIMMM
Thursday, February 27, 2025
Tuesday, February 25, 2025
Monday, February 24, 2025
Russia-Ukraine war: three years on
Michael Roberts
https://thenextrecession.wordpress.com/2025/02/24/russia-ukraine-war-three-years-on/
Ukraine: a human disaster
Today marks the end of the third year of the Ukraine-Russia war. After three years of war, Russia’s invasion of Ukraine has caused staggering losses to Ukraine’s people and economy. There are various estimates of the number of Ukrainian civilians and military casualties (deaths plus injuries): 46,000 civilians and maybe 500,000 soldiers. Russian military casualties are about the same. Millions have fled abroad and many more millions have been displaced from their homes within Ukraine. A confidential Ukrainian assessment earlier in 2024, reported by the Wall Street Journal, placed Ukrainian troop losses at 80,000 killed and 400,000 wounded. According to government figures, in the first half of 2024, three times as many people died in Ukraine as were born, the WSJ reported. In the last year, Ukrainian losses have been five times higher than Russia’s, with Kyiv losing at least 50,000 service personnel a month.
Ukraine’s GDP is down 25% and an additional 7.1 million Ukrainians now live in poverty.
The damage to those staying in Ukraine is immense. Learning losses by Ukrainian children are a particular worry: Ukraine will end up with lower quality additions to its workforce due to war-caused (and prior to that, Covid-caused) disruptions in the learning process. These losses are estimated to be in the order of $90 billion, or almost as much as the losses in physical capital to-date. Studies also show that a war during a person’s first five years of life is associated with about a 10% decline in mental health scores when they are in their 60s and 70s. It’s not just war casualties and the economy that’s the problem, but also the long-term damage to those Ukrainians staying.
Despite the war, there has been some modest economic recovery in the last year. Energy exports have jumped. Ukraine’s ports on the Black Sea are still functioning and trade is flowing west along the Danube, and to a lesser extent by train. Meanwhile, agriculture has staged a recovery. Even so, manufacturing of iron and steel still remains at a fraction of its prewar level; down from 1.5m tonnes a month before the war to just 0.6m a month.
But Ukraine badly lacks able-bodied people to produce or to go to war. Ukraine’s unemployment rate was 16.8% in January, but that still leaves a shortage of workers because skilled people have left the country and most others have been mobilised into the armed forces. So bad is the situation that there has been talk of mobilising 18-25 years olds who are currently exempt, but this is highly unpopular and would reduce civilian employment even more.
Ukraine is still totally dependent on support from the West. It needs at least $40bn a year in order to sustain government services, support its population and maintain production. It is relying on the EU for such civil funding, while relying on the US for all its military funding – a straight ‘division of labour’. In addition, the IMF and World Bank have offered monetary assistance but, in this case, Ukraine has to show it has ‘sustainability’, ie it is able at some point to pay back any loans. So if bilateral loans from the US and EU countries (and it is mainly loans, not outright aid) do not materialise, then the IMF cannot extend its lending programme.
That brings us back to what will happen to Ukraine’s economy, if and when the war with Russia comes to an end. According to the latest estimate of the World Bank, Ukraine will need $486bn over the next ten years to recover and rebuild – assuming the war ends this year. That’s nearly three times its current GDP. Direct damages from the war have now reached almost $152 billion, with about 2 million housing units – about 10% of the total housing stock of Ukraine – either damaged or destroyed, as well as 8,400 km (5,220 miles) of motorways, highways, and other national roads, and nearly 300 bridges. About 5.9 million Ukrainians remained displaced outside of the country and internally displaced persons were around 3.7 million.
What is left of Ukraine’s resources (those not annexed by Russia) have been sold off to Western companies. Overall, 28% of Ukraine’s arable land is now owned by a mixture of Ukrainian oligarchs, European and North American corporations, as well as the sovereign wealth fund of Saudi Arabia. Nestle has invested $46 million in a new facility in western Volyn region while German drugs-to-pesticides giant Bayer plans to invest 60 million euros in corn seed production in central Zhytomyr region. MHP, Ukraine’s biggest poultry company, is owned by a former adviser to Ukrainian president Poroshenko. MHP has received more than one-fifth of all the lending from the European Bank for Reconstruction and Development (EBRD) in the past two years. MHP employs 28,000 people and controls about 360,000 hectares of land in Ukraine — an area bigger than EU member Luxembourg.
The Ukrainian government is committed to a ‘free market’ solution for the post-war economy that would include further rounds of labour-market deregulation below even EU minimum labour standards i.e sweat shop conditions; and cuts in corporate and income taxes to the bone; along with full privatisation of remaining state assets. However, the pressures of a war economy have forced the government to put these policies on the back burner for now, with military demands dominating.
The aim of the Ukraine government, the EU, the US government, the multilateral agencies and the American financial institutions now in charge of raising funds and allocating them for reconstruction is to restore the Ukrainian economy as a form of special economic zone, with public money to cover any potential losses for private capital. Ukraine will also be made free of trade unions, severe business tax regimes and regulations and any other major obstacles to profitable investments by Western capital in alliance with former Ukrainian oligarchs.
Ukrainian sources estimate the cost of restoring infrastructure: financing the war effort (ammunition, weapons, etc.); losses of housing stock, commercial real estate, compensation for death and injury, resettlement costs, income support, etc.) and lost current and future income will reach $1trn, or six years of Ukraine’s previous annual GDP. That’s about 2.0% of EU GDP per year or 1.5% of G7 GDP for six years. By the end of this decade, even if reconstruction goes well and assuming that all the resources of pre-war Ukraine are restored (ie eastern Ukraine’s industry and minerals are in the hands of Russia), then the economy would still be 15% below its pre-war level. If not, recovery will be even longer.
Russia: the war economy
Russia’s invasion of Ukraine in early 2022 to take over the four Russian-speaking provinces in the Donbass in eastern Ukraine has ironically given a boost to the economy. In 2023, real GDP growth was 3.6% and over 3% in 2024. Russia’s war economy is holding up.
Over the past three years of war, Russia has managed to steer through sanctions, while investing nearly a third of its budget in defence spending. It’s also been able to increase trade with China and sell its oil to new markets, in part by using a shadow fleet of tankers to skirt the price cap that Western countries had hoped would reduce the country’s war chest. Half of its oil and petroleum was exported to China in 2023. It became China’s top oil supplier. Chinese imports into Russia have jumped more than 60% since the start of war, as the country has been able to supply Russia with a steady stream of goods including cars and electronic devices, filling the gap of lost Western goods imports. Trade between Russia and China hit $240 billion in 2023, an increase of over 64% since 2021, before the war.
However, the war has intensified an acute labour shortage. Like Ukraine, Russia is now desperately short of people – if for different reasons. Even before the war, Russia’s workforce was shrinking due to natural demographic causes. Then at the start of the war in 2022, about three-quarters of a million Russian and foreign workers, the middle class in IT, finance, and management, left the country. Meanwhile, the Russian army is recruiting tens of thousands of working-age men. Somewhere between 10,000 and 30,000 workers join the army every month, about 0.5 percent of the total supply. That has benefited those Russian workers not in the armed forces with security of employment as managers are reluctant to let anyone go.
Wages have soared by double digits, poverty and unemployment are at record lows. For the country’s lowest earners, salaries over the last three quarters have risen faster than for any other segment of society, clocking an annual growth rate of about 20%. The government is spending massively on social support for families, pension increases, mortgage subsidies and compensation for the relatives of those serving in the military.
But inflation has spiralled and the ruble has depreciated significantly against the dollar, forcing the Russian central bank to hike its interest rate to over 20%.
A war economy means that the state intervenes and even overrides the decision-making of the capitalist sector for the national war effort. State investment replaces private investment. Ironically, in Russia’s case this has been accelerated by Western companies’ withdrawal from Russian markets and by the sanctions. The Russian state has taken over foreign entities and/or resold them to Russian capitalists committed to the war effort.
Spending on new construction, higher-tech equipment, new kit has hit a 12-year high of 14.4 trillion rubles ($136.4 bn), up 10 percent from the previous year. Investment growth rate topped the GDP growth rate by a wider margin than at any point over the previous 15 years, according to the Moscow-based Center for Macroeconomic Analysis and Short-term Forecasting.
The main destinations for the country’s hitherto-unseen investment are import substitution, eastward infrastructure, and military production. Mechanical engineering, which includes manufacturing finished metal products (weapons), computers, optics and electronics, and electrical equipment, is one of the fastest-growing areas for investment.
Many Western economists are forecasting a collapse in the Russian economy – as they have been saying for the last three years. The acute labour shortage, persistent and rising inflation caused by soaring military expenditure and ever-tightening sanctions will – it is claimed – finally bring about an economic crisis that will force Moscow to abandon its aims in Ukraine and bring about an end to the war on terms more acceptable to Kyiv and its allies.
Many analysts have attributed these signs of overheating to elevated spending on the war in Ukraine, pointing to record-high military expenditure which is expected to have reached over 7% of GDP in 2024. With defence spending expected to rise by nearly 25% this year, accounting for around 40% of federal government expenditure, some have raised the prospect of Russia slipping into ‘stagflation’, combining high inflation with low to no growth.
But despite fighting the most intense war in Europe since 1945, Moscow has managed to fund the war with modest budget deficits of between 1.5–2.9% of GDP since 2022. As a result, the Kremlin has barely had to borrow to fund the war. Tax revenues generated by domestic activity have soared since the war began. At around 15% of GDP, Russia has the smallest state debt-to-GDP ratio of the G20 economies. So, despite being cut off from most external sources of capital, Russia remains more than capable of financing domestic investment and government expenditure with its own resources.
Over the past two years, Russia has recorded a surplus on its current account of around 2.5% of GDP. For as long as Russia can continue to export large volumes of oil, this is unlikely to change. Russia’s oil and gas revenues jumped by 26% last year to $108 billion even as daily oil and gas condensate production declined in 2024 by 2.8%, according to Russian government officials cited by Reuters. Despite remaining the world’s most-sanctioned country in 2024, Russia exported a record 33.6 million tons of liquefied natural gas (LNG) that year, which is a 4% increase from the previous year.
The Institute of International Finance (IIF) has forecast a decrease in Russia’s fiscal breakeven oil price (the amount to balance budget spending) to $77 per barrel by 2025, supported by a recovery in oil and gas revenues. At the same time, the external breakeven oil price (the price needed to balance the external current account), at $41 per barrel, is the second lowest among major hydrocarbon exporters. That means the current Urals oil price more than meets these breakeven points.
But none of this ‘war economy’ investment will support Russia’s long-term productivity growth. Russia’s war economy will revert to capitalist accumulation when the war ends. And the Russian economy remains fundamentally natural resource linked. It relies on extraction rather than manufacturing. War production is basically unproductive for capital accumulation over the long run. Russia remains technologically backward and dependent on high-tech imports. Even with massive fiscal stimuli, it has yet to produce technologies fit for a competitive export market beyond arms and nuclear energy, with the former already sanctioned and the latter on the brink of being so. Russia is not a substantial player in any of the cutting-edge technologies, from artificial intelligence to biotechnology.
The demographic trough, the declining quality of university education and severed ties with international schools and a brain drain exacerbate these problems. The technological gap will likely widen, with Russia increasingly relying on Chinese imports and reverse engineering (copying). Russia’s potential real GDP growth is probably no more than 1.5% a year as growth is restricted by an ageing and shrinking population and low investment and productivity rates.
The Russian war economy is well placed to continue the war for several years ahead if necessary. But when the war is over, Putin may face a significant slump in production and employment. The underlying message is that the weakness of investment, productivity and profitability of Russian capital, even excluding sanctions, means that Russia will remain feeble economically for the rest of this decade.
The peace
President Trump has declared that he is seeking a peace settlement through direct negotiations with Russia. That would mean the end of US financial and military support for Ukraine. The current Ukraine leadership is opposing any deal that means the loss of territory and any veto on future membership of NATO. European leaders have declared that they will back Ukraine and continue to finance the war and provide military support.
Trump wants back what the US government has spent on Ukraine up to now, as well collateral for future spending to reconstruct the economy. He has complained about the huge transfers of funds to Ukraine unaccounted for. This is misinformation. The majority of the funds the US allocated for Ukraine stayed at home to fund the domestic defence industrial base and replenish US stockpiles. US arms manufacturers are making huge profits from this war.
Now Trump is demanding that Ukraine sign over 50% of its ‘rare earth’ mineral rights to the US in return for delivering the $500bn needed for post-war reconstruction. Trump: “I want them to give us something for all of the money that we put up and I’m gonna try and get the war settled and I’m try and get all that death ended. We’re asking for rare earth and oil, anything we can get.” As US senator Lindsey Graham said: “This war’s about money…The richest country in all of Europe for rare earth minerals is Ukraine, two to seven trillion dollars worth…So Donald Trump’s going to do a deal to get our money back, to enrich ourselves with rare minerals…” The problem is that around half these deposits (worth some $10-12 trillion) are in Russian-controlled areas.
All this is just another indication that Ukraine’s assets are going to be carved up by the Western powers. Last month, Ukraine President Zelenskyy signed a new law expanding the privatisation of state-owned banks in the country. It follows the Ukrainian government’s announcement in July of its ‘Large-Scale Privatisation 2024’ programme that is intended to drive foreign investment into the country and raise money for Ukraine’s struggling national budget. Large assets slated for privatisation currently include the country’s biggest producer of titanium ore, a leading producer of concrete products and a mining and processing plant. Ukraine envisaged privatising the country’s roughly 3,500 state-owned enterprises in a law of 2018, which said foreign citizens and companies could become owners. Hundreds of smaller-scale enterprises are now being privatised, bringing in revenues of UAH 9.6bn (£181m) in the past two years. This involves a seven-year sub-programme called SOERA (state-owned enterprises reform activity in Ukraine), which is funded by USAID with the UK Foreign Office as a junior partner. SOERA works to “advance privatization of selected SOEs [state-owned enterprises], and develop a strategic management model for SOEs remaining in state ownership.”
British capital is also licking its lips. Recently-published UK Foreign Office documents noted that the war provides “opportunities” for Ukraine delivering on “some hugely important reforms”. “The UK is hoping to reap benefits for UK firms from Ukraine’s reconstruction”, observes a report on British aid to Ukraine earlier this year by the aid watchdog, ICAI.
Putin’s invasion has driven the Ukrainian people into the hands of a pro free market, anti-labour government that will allow Western capital to take over Ukraine’s assets and exploit its diminished workforce. Maybe that was inevitable – from pro-Russian and pro-West oligarchs before the war, now to Western capital afterwards.
The war has not only destroyed Ukraine; it has seriously weakened the European economy as the costs of production have rocketed with the loss of cheap energy imports from Russia. But it seems that the European leaders want to continue the war even if Trump pulls out. They are desperately scrambling for funds to do that and to provide more military aid to the beleaguered Ukrainian government. Some leaders are proposing to send troops to Ukraine. So ‘war not peace’.
Just as bad is the decision of NATO and Europe’s mainstream leaders to double defence spending from about an average 1.9% of GDP by the end of the decade, supposedly to resist imminent Russian attacks if Putin gets a winning peace this year. This is ludicrously justified on the grounds that spending on ‘defence’ “is the greatest public benefit of all” (Bronwen Maddox, director of Chatham House, the international relations ‘think-tank’, which mainly presents the views of the British military state). Maddox concluded that: “the UK may have to borrow more to pay for the defence spending it so urgently needs. In the next year and beyond, politicians will have to brace themselves to reclaim money through cuts to sickness benefits, pensions and healthcare…In the end, politicians will have to persuade voters to surrender some of their benefits to pay for defence.” We get the same message from the leader of the winning party in the German election.
This will mean a huge diversion of investment from badly needed public services and benefits and from technological investment into unproductive and destructive arms production. That puts a huge uncertainty about Europe’s future as a leading economic entity through the rest of this decade and beyond.
https://thenextrecession.wordpress.com/2025/02/24/russia-ukraine-war-three-years-on/
Ukraine: a human disaster
Today marks the end of the third year of the Ukraine-Russia war. After three years of war, Russia’s invasion of Ukraine has caused staggering losses to Ukraine’s people and economy. There are various estimates of the number of Ukrainian civilians and military casualties (deaths plus injuries): 46,000 civilians and maybe 500,000 soldiers. Russian military casualties are about the same. Millions have fled abroad and many more millions have been displaced from their homes within Ukraine. A confidential Ukrainian assessment earlier in 2024, reported by the Wall Street Journal, placed Ukrainian troop losses at 80,000 killed and 400,000 wounded. According to government figures, in the first half of 2024, three times as many people died in Ukraine as were born, the WSJ reported. In the last year, Ukrainian losses have been five times higher than Russia’s, with Kyiv losing at least 50,000 service personnel a month.
Ukraine’s GDP is down 25% and an additional 7.1 million Ukrainians now live in poverty.
The damage to those staying in Ukraine is immense. Learning losses by Ukrainian children are a particular worry: Ukraine will end up with lower quality additions to its workforce due to war-caused (and prior to that, Covid-caused) disruptions in the learning process. These losses are estimated to be in the order of $90 billion, or almost as much as the losses in physical capital to-date. Studies also show that a war during a person’s first five years of life is associated with about a 10% decline in mental health scores when they are in their 60s and 70s. It’s not just war casualties and the economy that’s the problem, but also the long-term damage to those Ukrainians staying.
Despite the war, there has been some modest economic recovery in the last year. Energy exports have jumped. Ukraine’s ports on the Black Sea are still functioning and trade is flowing west along the Danube, and to a lesser extent by train. Meanwhile, agriculture has staged a recovery. Even so, manufacturing of iron and steel still remains at a fraction of its prewar level; down from 1.5m tonnes a month before the war to just 0.6m a month.
But Ukraine badly lacks able-bodied people to produce or to go to war. Ukraine’s unemployment rate was 16.8% in January, but that still leaves a shortage of workers because skilled people have left the country and most others have been mobilised into the armed forces. So bad is the situation that there has been talk of mobilising 18-25 years olds who are currently exempt, but this is highly unpopular and would reduce civilian employment even more.
Ukraine is still totally dependent on support from the West. It needs at least $40bn a year in order to sustain government services, support its population and maintain production. It is relying on the EU for such civil funding, while relying on the US for all its military funding – a straight ‘division of labour’. In addition, the IMF and World Bank have offered monetary assistance but, in this case, Ukraine has to show it has ‘sustainability’, ie it is able at some point to pay back any loans. So if bilateral loans from the US and EU countries (and it is mainly loans, not outright aid) do not materialise, then the IMF cannot extend its lending programme.
That brings us back to what will happen to Ukraine’s economy, if and when the war with Russia comes to an end. According to the latest estimate of the World Bank, Ukraine will need $486bn over the next ten years to recover and rebuild – assuming the war ends this year. That’s nearly three times its current GDP. Direct damages from the war have now reached almost $152 billion, with about 2 million housing units – about 10% of the total housing stock of Ukraine – either damaged or destroyed, as well as 8,400 km (5,220 miles) of motorways, highways, and other national roads, and nearly 300 bridges. About 5.9 million Ukrainians remained displaced outside of the country and internally displaced persons were around 3.7 million.
What is left of Ukraine’s resources (those not annexed by Russia) have been sold off to Western companies. Overall, 28% of Ukraine’s arable land is now owned by a mixture of Ukrainian oligarchs, European and North American corporations, as well as the sovereign wealth fund of Saudi Arabia. Nestle has invested $46 million in a new facility in western Volyn region while German drugs-to-pesticides giant Bayer plans to invest 60 million euros in corn seed production in central Zhytomyr region. MHP, Ukraine’s biggest poultry company, is owned by a former adviser to Ukrainian president Poroshenko. MHP has received more than one-fifth of all the lending from the European Bank for Reconstruction and Development (EBRD) in the past two years. MHP employs 28,000 people and controls about 360,000 hectares of land in Ukraine — an area bigger than EU member Luxembourg.
The Ukrainian government is committed to a ‘free market’ solution for the post-war economy that would include further rounds of labour-market deregulation below even EU minimum labour standards i.e sweat shop conditions; and cuts in corporate and income taxes to the bone; along with full privatisation of remaining state assets. However, the pressures of a war economy have forced the government to put these policies on the back burner for now, with military demands dominating.
The aim of the Ukraine government, the EU, the US government, the multilateral agencies and the American financial institutions now in charge of raising funds and allocating them for reconstruction is to restore the Ukrainian economy as a form of special economic zone, with public money to cover any potential losses for private capital. Ukraine will also be made free of trade unions, severe business tax regimes and regulations and any other major obstacles to profitable investments by Western capital in alliance with former Ukrainian oligarchs.
Ukrainian sources estimate the cost of restoring infrastructure: financing the war effort (ammunition, weapons, etc.); losses of housing stock, commercial real estate, compensation for death and injury, resettlement costs, income support, etc.) and lost current and future income will reach $1trn, or six years of Ukraine’s previous annual GDP. That’s about 2.0% of EU GDP per year or 1.5% of G7 GDP for six years. By the end of this decade, even if reconstruction goes well and assuming that all the resources of pre-war Ukraine are restored (ie eastern Ukraine’s industry and minerals are in the hands of Russia), then the economy would still be 15% below its pre-war level. If not, recovery will be even longer.
Russia: the war economy
Russia’s invasion of Ukraine in early 2022 to take over the four Russian-speaking provinces in the Donbass in eastern Ukraine has ironically given a boost to the economy. In 2023, real GDP growth was 3.6% and over 3% in 2024. Russia’s war economy is holding up.
Over the past three years of war, Russia has managed to steer through sanctions, while investing nearly a third of its budget in defence spending. It’s also been able to increase trade with China and sell its oil to new markets, in part by using a shadow fleet of tankers to skirt the price cap that Western countries had hoped would reduce the country’s war chest. Half of its oil and petroleum was exported to China in 2023. It became China’s top oil supplier. Chinese imports into Russia have jumped more than 60% since the start of war, as the country has been able to supply Russia with a steady stream of goods including cars and electronic devices, filling the gap of lost Western goods imports. Trade between Russia and China hit $240 billion in 2023, an increase of over 64% since 2021, before the war.
However, the war has intensified an acute labour shortage. Like Ukraine, Russia is now desperately short of people – if for different reasons. Even before the war, Russia’s workforce was shrinking due to natural demographic causes. Then at the start of the war in 2022, about three-quarters of a million Russian and foreign workers, the middle class in IT, finance, and management, left the country. Meanwhile, the Russian army is recruiting tens of thousands of working-age men. Somewhere between 10,000 and 30,000 workers join the army every month, about 0.5 percent of the total supply. That has benefited those Russian workers not in the armed forces with security of employment as managers are reluctant to let anyone go.
Wages have soared by double digits, poverty and unemployment are at record lows. For the country’s lowest earners, salaries over the last three quarters have risen faster than for any other segment of society, clocking an annual growth rate of about 20%. The government is spending massively on social support for families, pension increases, mortgage subsidies and compensation for the relatives of those serving in the military.
But inflation has spiralled and the ruble has depreciated significantly against the dollar, forcing the Russian central bank to hike its interest rate to over 20%.
A war economy means that the state intervenes and even overrides the decision-making of the capitalist sector for the national war effort. State investment replaces private investment. Ironically, in Russia’s case this has been accelerated by Western companies’ withdrawal from Russian markets and by the sanctions. The Russian state has taken over foreign entities and/or resold them to Russian capitalists committed to the war effort.
Spending on new construction, higher-tech equipment, new kit has hit a 12-year high of 14.4 trillion rubles ($136.4 bn), up 10 percent from the previous year. Investment growth rate topped the GDP growth rate by a wider margin than at any point over the previous 15 years, according to the Moscow-based Center for Macroeconomic Analysis and Short-term Forecasting.
The main destinations for the country’s hitherto-unseen investment are import substitution, eastward infrastructure, and military production. Mechanical engineering, which includes manufacturing finished metal products (weapons), computers, optics and electronics, and electrical equipment, is one of the fastest-growing areas for investment.
Many Western economists are forecasting a collapse in the Russian economy – as they have been saying for the last three years. The acute labour shortage, persistent and rising inflation caused by soaring military expenditure and ever-tightening sanctions will – it is claimed – finally bring about an economic crisis that will force Moscow to abandon its aims in Ukraine and bring about an end to the war on terms more acceptable to Kyiv and its allies.
Many analysts have attributed these signs of overheating to elevated spending on the war in Ukraine, pointing to record-high military expenditure which is expected to have reached over 7% of GDP in 2024. With defence spending expected to rise by nearly 25% this year, accounting for around 40% of federal government expenditure, some have raised the prospect of Russia slipping into ‘stagflation’, combining high inflation with low to no growth.
But despite fighting the most intense war in Europe since 1945, Moscow has managed to fund the war with modest budget deficits of between 1.5–2.9% of GDP since 2022. As a result, the Kremlin has barely had to borrow to fund the war. Tax revenues generated by domestic activity have soared since the war began. At around 15% of GDP, Russia has the smallest state debt-to-GDP ratio of the G20 economies. So, despite being cut off from most external sources of capital, Russia remains more than capable of financing domestic investment and government expenditure with its own resources.
Over the past two years, Russia has recorded a surplus on its current account of around 2.5% of GDP. For as long as Russia can continue to export large volumes of oil, this is unlikely to change. Russia’s oil and gas revenues jumped by 26% last year to $108 billion even as daily oil and gas condensate production declined in 2024 by 2.8%, according to Russian government officials cited by Reuters. Despite remaining the world’s most-sanctioned country in 2024, Russia exported a record 33.6 million tons of liquefied natural gas (LNG) that year, which is a 4% increase from the previous year.
The Institute of International Finance (IIF) has forecast a decrease in Russia’s fiscal breakeven oil price (the amount to balance budget spending) to $77 per barrel by 2025, supported by a recovery in oil and gas revenues. At the same time, the external breakeven oil price (the price needed to balance the external current account), at $41 per barrel, is the second lowest among major hydrocarbon exporters. That means the current Urals oil price more than meets these breakeven points.
But none of this ‘war economy’ investment will support Russia’s long-term productivity growth. Russia’s war economy will revert to capitalist accumulation when the war ends. And the Russian economy remains fundamentally natural resource linked. It relies on extraction rather than manufacturing. War production is basically unproductive for capital accumulation over the long run. Russia remains technologically backward and dependent on high-tech imports. Even with massive fiscal stimuli, it has yet to produce technologies fit for a competitive export market beyond arms and nuclear energy, with the former already sanctioned and the latter on the brink of being so. Russia is not a substantial player in any of the cutting-edge technologies, from artificial intelligence to biotechnology.
The demographic trough, the declining quality of university education and severed ties with international schools and a brain drain exacerbate these problems. The technological gap will likely widen, with Russia increasingly relying on Chinese imports and reverse engineering (copying). Russia’s potential real GDP growth is probably no more than 1.5% a year as growth is restricted by an ageing and shrinking population and low investment and productivity rates.
The Russian war economy is well placed to continue the war for several years ahead if necessary. But when the war is over, Putin may face a significant slump in production and employment. The underlying message is that the weakness of investment, productivity and profitability of Russian capital, even excluding sanctions, means that Russia will remain feeble economically for the rest of this decade.
The peace
President Trump has declared that he is seeking a peace settlement through direct negotiations with Russia. That would mean the end of US financial and military support for Ukraine. The current Ukraine leadership is opposing any deal that means the loss of territory and any veto on future membership of NATO. European leaders have declared that they will back Ukraine and continue to finance the war and provide military support.
Trump wants back what the US government has spent on Ukraine up to now, as well collateral for future spending to reconstruct the economy. He has complained about the huge transfers of funds to Ukraine unaccounted for. This is misinformation. The majority of the funds the US allocated for Ukraine stayed at home to fund the domestic defence industrial base and replenish US stockpiles. US arms manufacturers are making huge profits from this war.
Now Trump is demanding that Ukraine sign over 50% of its ‘rare earth’ mineral rights to the US in return for delivering the $500bn needed for post-war reconstruction. Trump: “I want them to give us something for all of the money that we put up and I’m gonna try and get the war settled and I’m try and get all that death ended. We’re asking for rare earth and oil, anything we can get.” As US senator Lindsey Graham said: “This war’s about money…The richest country in all of Europe for rare earth minerals is Ukraine, two to seven trillion dollars worth…So Donald Trump’s going to do a deal to get our money back, to enrich ourselves with rare minerals…” The problem is that around half these deposits (worth some $10-12 trillion) are in Russian-controlled areas.
All this is just another indication that Ukraine’s assets are going to be carved up by the Western powers. Last month, Ukraine President Zelenskyy signed a new law expanding the privatisation of state-owned banks in the country. It follows the Ukrainian government’s announcement in July of its ‘Large-Scale Privatisation 2024’ programme that is intended to drive foreign investment into the country and raise money for Ukraine’s struggling national budget. Large assets slated for privatisation currently include the country’s biggest producer of titanium ore, a leading producer of concrete products and a mining and processing plant. Ukraine envisaged privatising the country’s roughly 3,500 state-owned enterprises in a law of 2018, which said foreign citizens and companies could become owners. Hundreds of smaller-scale enterprises are now being privatised, bringing in revenues of UAH 9.6bn (£181m) in the past two years. This involves a seven-year sub-programme called SOERA (state-owned enterprises reform activity in Ukraine), which is funded by USAID with the UK Foreign Office as a junior partner. SOERA works to “advance privatization of selected SOEs [state-owned enterprises], and develop a strategic management model for SOEs remaining in state ownership.”
British capital is also licking its lips. Recently-published UK Foreign Office documents noted that the war provides “opportunities” for Ukraine delivering on “some hugely important reforms”. “The UK is hoping to reap benefits for UK firms from Ukraine’s reconstruction”, observes a report on British aid to Ukraine earlier this year by the aid watchdog, ICAI.
Putin’s invasion has driven the Ukrainian people into the hands of a pro free market, anti-labour government that will allow Western capital to take over Ukraine’s assets and exploit its diminished workforce. Maybe that was inevitable – from pro-Russian and pro-West oligarchs before the war, now to Western capital afterwards.
The war has not only destroyed Ukraine; it has seriously weakened the European economy as the costs of production have rocketed with the loss of cheap energy imports from Russia. But it seems that the European leaders want to continue the war even if Trump pulls out. They are desperately scrambling for funds to do that and to provide more military aid to the beleaguered Ukrainian government. Some leaders are proposing to send troops to Ukraine. So ‘war not peace’.
Just as bad is the decision of NATO and Europe’s mainstream leaders to double defence spending from about an average 1.9% of GDP by the end of the decade, supposedly to resist imminent Russian attacks if Putin gets a winning peace this year. This is ludicrously justified on the grounds that spending on ‘defence’ “is the greatest public benefit of all” (Bronwen Maddox, director of Chatham House, the international relations ‘think-tank’, which mainly presents the views of the British military state). Maddox concluded that: “the UK may have to borrow more to pay for the defence spending it so urgently needs. In the next year and beyond, politicians will have to brace themselves to reclaim money through cuts to sickness benefits, pensions and healthcare…In the end, politicians will have to persuade voters to surrender some of their benefits to pay for defence.” We get the same message from the leader of the winning party in the German election.
This will mean a huge diversion of investment from badly needed public services and benefits and from technological investment into unproductive and destructive arms production. That puts a huge uncertainty about Europe’s future as a leading economic entity through the rest of this decade and beyond.
Sunday, February 23, 2025
Movie Keeper of the Flame (1943)
Journalist Steve O'Malley (Spencer Tracy) wants to write a biography of a national hero who died when his car ran off a bridge. Steve receives conflicting reports and tales that make him question what the truth about the hero is.
https://123chill.top/123chill-movie/keeper-of-the-flame-lvI4MQ
Saturday, February 22, 2025
End in sight for Ukraine war after Riyadh meeting
https://consortiumnews.com/2025/02/19/end-in-sight-for-ukraine-war-after-riyadh-meeting/?
At a meeting in the Saudi capital that included the U.S. and Russian top diplomats, the way was paved for talks to end the Ukraine war and to improve bilateral relations, while Europe is furious, reports Joe Lauria.
Feb.19, 2025
The Ukrainian war, which began in 2014 as a civil conflict and led to Russia’s intervention eight years later in February 2022, appeared headed to a resolution after top U.S. and Russian officials met in the Saudi capital Riyadh on Tuesday, incensing European and Ukrainian leaders who were excluded.
Speaking to reporters after meeting with Russian Foreign Minister Sergei Lavrov on Tuesday, U.S. Secretary of State Marco Rubio laid out what was accomplished in Riyadh.
He said four principles had been agreed to: restoring ties by reopening diplomatic missions; the U.S. would appoint a high-level team to achieve “the end of the conflict in Ukraine” that is “enduring” and acceptable to all parties; the countries would work together towards economic cooperation; and the participants at the Tuesday meeting to remain engaged.
U.S. National Security Advisor Michael Waltz told reporters after the four and a half hour meeting that the U.S. was seeking a permanent end to the war.
“The practical reality is that there is going to be some discussion of territory and a discussion of security guarantees,” Waltz said, adding that President Donald Trump wants the killing to end and is “determined to act very quickly.”
Walz pointed out that less than a week after a 90-minute call between Trump and Russian President Vladimir Putin, the first call between Russian and U.S. leaders since 2021, the two sides were meeting in Riyadh.
“We expect to continue to drive that pace, not only to end the war, but then to unlock what could be very productive and stalizing relationships going forward,” Waltz said.
Asked whether the U.S. would accept Russian retaining territory that it conquered, Waltz said that is “for the tough work ahead, but the important thing is that we have started that process.”
“President Trump has shifted the question from if the war is going to end, to how it’s going to end,” Waltz said.
“What happened in Saudi Arabia is the most positive news for Ukrainians in years,” Jeffery Sachs, the Columbia University economist and geopolitical analyst, told Democracy Now! “President Trump understands, and unfortunately previous presidents did not, that the U.S. provocations need to stop, so this war stops, so the deaths stop. That is the bottom line.”
Sachs pointed out the 30-year expansion of NATO towards Russia’s borders despite a promise not to and over strenuous Russian objections; the U.S. backing for the 2014 violent coup in Kiev; the U.S. rejection of implementing the Minsk accords that would have left autonomous Russian-speaking areas inside Ukrainian borders and the U.S. rejection
Europeans Furious
Secretary Marco Rubio, with from left, U.S. Middle East envoy Steve Witkoff and National Security Advisor Mike Waltz, attend a meeting together at Diriyah Palace in Riyadh, Saudi Arabia, February 18, 2025. (Official State Department photo/Freddie Everett)
Asked about sidelining the Ukrainians and Europeans from the process, Rubio told reporters that the “only leader in the world that could make this happen, to bring people together to seriously begin talking about it, is President Trump.” Rubio said every party to the conflict will have to agree to the settlement. “Nobody is being sidelined here.”
Russian Foreign Minister Sergei Lavrov told a press conference in Moscow before his departure to Riyadh that the Europeans don’t belong at the table. “I don’t know what they would do at the negotiating table… if they are going to sit at the negotiating table with the aim of continuing war, then why invite them there?,” he said.
The Europeans are furious that Trump is acting on his own after being solidly in line with the Biden administration on Ukraine, even at the expense of their own economies. The information, economic and ground proxy wars that the U.S. set in motion by provoking Russia’s intervention in the conflict have all been lost.
The Russian economy survived, but Europe’s, especially Germany’s, was badly damaged. It made Europeans appear to be vassals of the United States, ready to sacrifice everything to serve their masters. But the European reaction to the U.S. peace moves calls that notion into question. They are no longer obeying the U.S.
Vassals normally obey their masters. But the Europeans only obeyed the Americans when they agreed with a U.S. aggressive policy on Russia. When the U.S. now talks peace with Russia, Europe ceases to be vassals and rebels. It seems they were co-conspirators all along.
German rulers, for instance, went along with damaging the country’s interests, such as widespread de-industrialization and the destruction of Nord Stream, because the defeat of Russia was evidently more important to them than the interests of their people.
Ukrainian President Volodymyr Zelensky also complained bitterly that he was not being included in the negotiations. He went as far as trying to crash the negotiations, flying to the nearby United Arab Emirates from where he requested that the Saudis let him attend. When he was told to come on Wednesday, Zelensky arranged to go to Turkey instead.
“I don’t know who is attending these talks, and I don’t really care. We are completely transparent in what we do,” he said in Ankara. “I decided not to travel to Saudi Arabia [on Wednesday], and I don’t pretend otherwise.’
Sachs noted that Zelensky had ruled out any peace negotiations in October 2022, saying it would be “illegal.”
“Now they want a seat at the table, [when] they said they didn’t want any table all along,” Sachs said. “And Zelensky rules by martial law, by decree when the opinion surveys show that a majority of Ukrainians want peace right now even at the cost of territorial concessions.”
The Meeting in Paris
German Chancellor Scholz with Emmanuel Macron in 2021 in Paris. (French President’s Facebook page.)
Miffed European leaders were called by French President Emmanuel Macron to an urgent meeting in Paris on Tuesday to coincide with the Riyadh discussions in an attempt to demonstrate Europe’s relevancy.
“This was supposed to be a meeting of friends, of people who are supposed to agree with each other,” said geopolitical analyst Alexander Mercouris on his YouTube channel. Macron and British Prime Minister Keir Starmer … “planned in advance … to cobble together a European force to send to Ukraine after a peace agreement is reached,” he said, but it “blew up in their faces” when the other participants in the summit outright rejected the idea.
Creating such a force was intended, Mercouris surmised, to show that Europe is still a power to be reckoned with and as an attempt to wreck the negotiations begun in Riyadh. But Russia once again rejected the European force idea.
In the end Starmer and Macron could not even get a unified statement out of Paris because of the disagreement. German Chancellor Olaf Scholz left the meeting early, issuing a statement that it was “highly inappropriate” and “completely premature” to discuss peacekeeping forces, Mercouris said.
The Financial Times said the five European leaders “clashed” at the meeting, as Italy, Poland and Spain also rejected the peacekeeping proposal. Anatol Lieven, writing in Responsible Statecraft, called the Paris summit “theater and much ado about nothing.” He wrote:
“The chaotic state of present European thinking on Ukraine and the Ukraine peace process reflects this underlying lack of public will, as well as the bewilderment of European establishments that for many years have left responsibility for their strategy in the hands of the United States, and now find themselves expected to think for themselves.”
Mercouris called the sidelining of Europe, brought about by the breathtaking change in U.S. policy towards Russia and the eventual end of the war, a major event in the past six centuries of European history.
“The end of the Ukrainian conflict is going to result in a significant rearrangement of the geopolitical pieces around the world,” Mercouris said. Though it isn’t clear yet how extensive that change will be, he argued it was “fair to say that the United States, Russia and China are indisputably emerging as the great powers. Europe, which has been the core continent in global affairs since the 15th century, and which dominated international affairs in the 20th century, is now definitely in eclipse.”
The Ukrainian war, which began in 2014 as a civil conflict and led to Russia’s intervention eight years later in February 2022, appeared headed to a resolution after top U.S. and Russian officials met in the Saudi capital Riyadh on Tuesday, incensing European and Ukrainian leaders who were excluded.
Speaking to reporters after meeting with Russian Foreign Minister Sergei Lavrov on Tuesday, U.S. Secretary of State Marco Rubio laid out what was accomplished in Riyadh.
He said four principles had been agreed to: restoring ties by reopening diplomatic missions; the U.S. would appoint a high-level team to achieve “the end of the conflict in Ukraine” that is “enduring” and acceptable to all parties; the countries would work together towards economic cooperation; and the participants at the Tuesday meeting to remain engaged.
U.S. National Security Advisor Michael Waltz told reporters after the four and a half hour meeting that the U.S. was seeking a permanent end to the war.
“The practical reality is that there is going to be some discussion of territory and a discussion of security guarantees,” Waltz said, adding that President Donald Trump wants the killing to end and is “determined to act very quickly.”
Walz pointed out that less than a week after a 90-minute call between Trump and Russian President Vladimir Putin, the first call between Russian and U.S. leaders since 2021, the two sides were meeting in Riyadh.
“We expect to continue to drive that pace, not only to end the war, but then to unlock what could be very productive and stalizing relationships going forward,” Waltz said.
Asked whether the U.S. would accept Russian retaining territory that it conquered, Waltz said that is “for the tough work ahead, but the important thing is that we have started that process.”
“President Trump has shifted the question from if the war is going to end, to how it’s going to end,” Waltz said.
“What happened in Saudi Arabia is the most positive news for Ukrainians in years,” Jeffery Sachs, the Columbia University economist and geopolitical analyst, told Democracy Now! “President Trump understands, and unfortunately previous presidents did not, that the U.S. provocations need to stop, so this war stops, so the deaths stop. That is the bottom line.”
Sachs pointed out the 30-year expansion of NATO towards Russia’s borders despite a promise not to and over strenuous Russian objections; the U.S. backing for the 2014 violent coup in Kiev; the U.S. rejection of implementing the Minsk accords that would have left autonomous Russian-speaking areas inside Ukrainian borders and the U.S. rejection
Europeans Furious
Secretary Marco Rubio, with from left, U.S. Middle East envoy Steve Witkoff and National Security Advisor Mike Waltz, attend a meeting together at Diriyah Palace in Riyadh, Saudi Arabia, February 18, 2025. (Official State Department photo/Freddie Everett)
Asked about sidelining the Ukrainians and Europeans from the process, Rubio told reporters that the “only leader in the world that could make this happen, to bring people together to seriously begin talking about it, is President Trump.” Rubio said every party to the conflict will have to agree to the settlement. “Nobody is being sidelined here.”
Russian Foreign Minister Sergei Lavrov told a press conference in Moscow before his departure to Riyadh that the Europeans don’t belong at the table. “I don’t know what they would do at the negotiating table… if they are going to sit at the negotiating table with the aim of continuing war, then why invite them there?,” he said.
The Europeans are furious that Trump is acting on his own after being solidly in line with the Biden administration on Ukraine, even at the expense of their own economies. The information, economic and ground proxy wars that the U.S. set in motion by provoking Russia’s intervention in the conflict have all been lost.
The Russian economy survived, but Europe’s, especially Germany’s, was badly damaged. It made Europeans appear to be vassals of the United States, ready to sacrifice everything to serve their masters. But the European reaction to the U.S. peace moves calls that notion into question. They are no longer obeying the U.S.
Vassals normally obey their masters. But the Europeans only obeyed the Americans when they agreed with a U.S. aggressive policy on Russia. When the U.S. now talks peace with Russia, Europe ceases to be vassals and rebels. It seems they were co-conspirators all along.
German rulers, for instance, went along with damaging the country’s interests, such as widespread de-industrialization and the destruction of Nord Stream, because the defeat of Russia was evidently more important to them than the interests of their people.
Ukrainian President Volodymyr Zelensky also complained bitterly that he was not being included in the negotiations. He went as far as trying to crash the negotiations, flying to the nearby United Arab Emirates from where he requested that the Saudis let him attend. When he was told to come on Wednesday, Zelensky arranged to go to Turkey instead.
“I don’t know who is attending these talks, and I don’t really care. We are completely transparent in what we do,” he said in Ankara. “I decided not to travel to Saudi Arabia [on Wednesday], and I don’t pretend otherwise.’
Sachs noted that Zelensky had ruled out any peace negotiations in October 2022, saying it would be “illegal.”
“Now they want a seat at the table, [when] they said they didn’t want any table all along,” Sachs said. “And Zelensky rules by martial law, by decree when the opinion surveys show that a majority of Ukrainians want peace right now even at the cost of territorial concessions.”
The Meeting in Paris
German Chancellor Scholz with Emmanuel Macron in 2021 in Paris. (French President’s Facebook page.)
Miffed European leaders were called by French President Emmanuel Macron to an urgent meeting in Paris on Tuesday to coincide with the Riyadh discussions in an attempt to demonstrate Europe’s relevancy.
“This was supposed to be a meeting of friends, of people who are supposed to agree with each other,” said geopolitical analyst Alexander Mercouris on his YouTube channel. Macron and British Prime Minister Keir Starmer … “planned in advance … to cobble together a European force to send to Ukraine after a peace agreement is reached,” he said, but it “blew up in their faces” when the other participants in the summit outright rejected the idea.
Creating such a force was intended, Mercouris surmised, to show that Europe is still a power to be reckoned with and as an attempt to wreck the negotiations begun in Riyadh. But Russia once again rejected the European force idea.
In the end Starmer and Macron could not even get a unified statement out of Paris because of the disagreement. German Chancellor Olaf Scholz left the meeting early, issuing a statement that it was “highly inappropriate” and “completely premature” to discuss peacekeeping forces, Mercouris said.
The Financial Times said the five European leaders “clashed” at the meeting, as Italy, Poland and Spain also rejected the peacekeeping proposal. Anatol Lieven, writing in Responsible Statecraft, called the Paris summit “theater and much ado about nothing.” He wrote:
“The chaotic state of present European thinking on Ukraine and the Ukraine peace process reflects this underlying lack of public will, as well as the bewilderment of European establishments that for many years have left responsibility for their strategy in the hands of the United States, and now find themselves expected to think for themselves.”
Mercouris called the sidelining of Europe, brought about by the breathtaking change in U.S. policy towards Russia and the eventual end of the war, a major event in the past six centuries of European history.
“The end of the Ukrainian conflict is going to result in a significant rearrangement of the geopolitical pieces around the world,” Mercouris said. Though it isn’t clear yet how extensive that change will be, he argued it was
“fair to say that the United States, Russia and China are indisputably emerging as the great powers. Europe, which has been the core continent in global affairs since the 15th century, and which dominated international affairs in the 20th century, is now definitely in eclipse.”
Chris Hedges: The Road to Dictatorship
https://consortiumnews.com/2025/02/19/chris-hedges-the-road-to-dictatorship/?
February 19, 2025
Donald Trump’s dismantling of the Deep State presages the formation of something far worse.
The Trump administration’s war with the deep state is not a purgative. It is not about freeing us from the tyranny of intelligence agencies, militarized police, the largest prison system in the world, predatory corporations or the end of mass surveillance. It will not restore the rule of law to hold the powerful and the wealthy accountable. It will not slash the bloated and unaccountable spending — some $1 trillion dollars — by the Pentagon.
All revolutionary movements, on the left or the right, dismantle the old bureaucratic structures. The fascists in Germany and the Bolsheviks in the Soviet Union, once they seized power, aggressively purged the civil service. They see in these structures, correctly, an enemy that would stymie their absolute grip on power. It is a coup d’état by inches. Now we get our own.
Rearguard battles — as in the early years of the Soviet Union and Nazi Germany — are taking place in the courts and media outlets openly hostile to Trump. There will be, at first, pyrrhic victories — the Bolsheviks and the Nazis were stalled by their own judiciaries and hostile press — but gradually the purges, aided by a bankrupt liberalism that no longer stands or fights for anything, ensures the triumph of the new masters.
The Trump administration has expelled or fired officials who investigate wrongdoing within the federal government, including 17 inspectors general. Federal law enforcement and intelligence agencies, such as the F.B.I. and Homeland Security, are being purged of those deemed hostile to Trump. Courts, as they are stacked with compliant judges, will be mechanisms for the persecution of state “enemies” and protection rackets for the powerful and the rich. The Supreme Court, which has granted Trump legal immunity, has already reached this stage.
“The original purge after the Shah’s fall sought to rid the ministries of senior-level holdovers from the former regime and to provide the revolutionary faithful with jobs,” reads a declassified C.I.A. memo, dated Aug. 28, 1980, on the then newly formed Islamic Republic of Iran. “The second wave of purges began last month after a series of Khomeini speeches. Lower-level individuals who had been part of the Shah’s bureaucracy, those with Western training, or those who were deemed to lack full Revolutionary fervor have been retired or fired on an increasingly large scale.”
The U.S. is repeating the steps that led to the consolidation of power by past dictatorships, albeit with its own idiom and idiosyncrasies. Those naively lauding Trump’s hostility towards the deep state — which I concede did tremendous damage to democratic institutions, eviscerated our most cherished liberties, is an unaccountable state within a state and orchestrated a series of disastrous global interventions, including the recent military fiascos in the Middle East and Ukraine — should look closely at what is being proposed to take its place.
The ultimate target for the Trump administration is not the deep state. The target is the laws, regulations, protocols and rules, and the government civil servants who enforce them, which hinder dictatorial control. Compromise, limited power, checks and balances and accountability are slated to be abolished. Those who believe that the government is designed to serve the common good, rather than the dictates of the ruler, will be forced out. The deep state will be reconstituted to serve the leadership cult. Laws and the rights enshrined in the Constitution will be irrelevant.
“He who saves his Country does not violate any Law,” Trump boasted on Truth Social and X.
Executive Power
Trump taking questions Tuesday after signing executive orders at his Mar-a-Lago resort in Palm Beach, Florida. (White House, Daniel Torok)
The chaos of the first Trump administration has been replaced with a disciplined plan to throttle what is left of America’s anemic democracy. Project 2025, the Center for Renewing America and the America First Policy Institute compiled in advance detailed blueprints, position papers, legislative proposals, proposed executive orders and policies.
The legal cornerstone for this deconstruction of the state is the unitary executive theory, articulated by Supreme Court Justice Antonin Scalia in his dissenting opinion in the case of Morrison v. Olson. In Scalia’s opinion, Article II of the Constitution means that everything not designated as legislative or judicial power must be executive power. The executive branch, he writes, can execute all the laws of the United States outside of everything that is not explicitly given to Congress or the judiciary in the Constitution. It is a legal justification for dictatorship.
Although the Heritage Foundation’s Project 2025 does not use the term “unitary executive theory,” it advocates for policies that align with the theory’s principles. Project 2025 recommends firing tens of thousands of government employees and replacing them with loyalists. Key to this project is the weakening of labor protections and rights of governmental employees, making it easier for them to be fired at the behest of the executive branch. Russell Vought, the founder of Center for Renewing America and one of the key architects of Project 2025, has returned as director Office of Management and Budget, a position he also held in Trump’s first term.
One of Trump’s final acts in his first term was signing the order “Creating Schedule F in the Excepted Service.” This order removed employment protections from career government bureaucrats. Joe Biden rescinded it. It has been resurrected with a vengeance. It too has echoes from the past. The Nazis’ 1933 “Law for the Restoration of the Professional Civil Service” saw political opponents and non-Aryans, including Germans of Jewish descent, dismissed from the civil service. The Bolsheviks likewise purged the military and civil service of “counter-revolutionaries.”
Data Seizure & Enemy Lists
The firing of over 9,500 federal workers — with 75,000 others accepting a less-than-ironclad deferred buyout agreement amid plans to cut 70 percent of staff from various government agencies — freezing of billions of dollars in funding and ongoing seizure of confidential data by Elon Musk’s so-called Department of Government Efficiency (DOGE) is not about downsizing and efficiency.
The cuts to federal agencies will do little to curb the rapacious spending by the federal government if the military budget — congressional Republicans are calling for at least $100 billion in additional military spending during the next decade — remains sacrosanct.
And while Trump wants to end the war in Ukraine, part of his effort to build an alliance with the autocrat in Moscow he admires, he backs the genocide in Gaza. The purge is about gutting oversight and protections. It is about circumventing thousands of statutes that set the rules for government operations. It is about filling federal positions with “loyalists” from a database compiled by the Conservative Partnership Institute. It is about enriching private corporations — including several owned by Musk — that will be handed lucrative government contracts.
This deconstruction is also, I suspect, about increasing Musk’s cloud capital, his algorithmic and digital infrastructure. Musk plans to turn X into the “everything app.” He is launching “X Money,” an add-on to the social media app, which gives users a digital wallet “to store money and make peer-to-peer transfers.”
A few weeks after the announcement of X Money’s partnership with Visa, DOGE requested access to classified Internal Revenue Service data, including millions of tax returns. The data includes Social Security numbers and addresses, details on how much individuals earn, how much money they owe, properties they own and child custody agreements. In the wrong hands, this information can be commercialized and weaponized.
Anti-Musk protest at the Berkeley, California, Tesla showroom on Saturday. (Revel8er, Wikimedia Commons, CC0)
Musk is pursuing an “AI-first” agenda to increase the role of artificial intelligence (AI) across government agencies. He is building “a centralized data repository” for the federal government, according to Wired. Oracle founder, business associate of Elon Musk and longtime Trump donor Larry Ellison, who recently announced a $500 billion AI infrastructure plan alongside Trump, urged nations to move all of their data into “a single, unified data platform” so it can be “consumed and used” by AI models. Ellison has previously stated that an AI-based surveillance system will guarantee that
“Citizens will be on their best behavior because we are constantly recording and reporting everything that’s going on.”
Trump has, like all despots, long enemy lists. He has pulled security details from former officials from his previous administration, including retired Gen. Mark Milley, who was the highest-ranking officer in the military during Trump’s first term, and Mike Pompeo, who was Trump’s director of the Central Intelligence Agency and secretary of state. He has revoked or threatened to revoke, the security clearances of President Joe Biden and former members of his administration including Antony Blinken, the former secretary of state, and Jake Sullivan, the former national security adviser. He is targeting media outlets he deems hostile, blocking their reporters from covering news events at the Oval Office and evicting them from their working spaces in the Pentagon.
These enemy lists will expand as larger and larger segments of the population realize they have been betrayed, widespread discontent becomes palpable and the Trump White House feels threatened.
Remnants
Once the new system is in place, laws and regulations will become whatever the Trump White House says they are. Independent agencies such as the Federal Election Commission, the Consumer Financial Protection Bureau and the Federal Reserve System will lose their autonomy.
Mass deportations, the teaching of “Christian” and “patriotic” values in schools — Trump has vowed to “remove the radicals, zealots, and Marxists who have infiltrated the federal Department of Education” — along with the gutting of social programs, including Medicaid, low-income housing, job training, and assistance for children, will create a society of serfs and masters. Predatory corporations, such as the healthcare and pharmaceutical industries, will be licensed to exploit and pillage a disempowered public. Totalitarianism demands complete conformity. The result, to quote Rosa Luxemburg, is the “brutalization of public life.”
The hollowed-out remnants of the old system — the media, the Democratic Party, academia, the shells of labor unions — will not save us. They mouth empty platitudes, cower in fear, seek useless incremental reforms and accommodation, and demonize Trump supporters regardless of their reasons for voting for him. They are fading into irrelevance. This ennui is a common denominator in the rise of authoritarian and totalitarian regimes. It engenders apathy and defeatism.
The “Trump’s Birthday and Flag Day Holiday Establishment Act,” introduced by Congresswoman Claudia Tenny, is a harbinger of what lies ahead. The act would designate June 14 as a federal holiday to commemorate “Donald J. Trump’s Birthday and Flag Day.” The next step is choreographed state parades with oversized portraits of the great leader.
Joseph Roth was one of the few writers in Germany to understand the attraction and inevitable rise of fascism. In his essay “The Auto-da-Fé of the Mind,” which addressed the first mass burning of books by the Nazis, he counseled fellow Jewish writers to accept that they had been vanquished:
“Let us, who were fighting on the front line, under the banner of the European mind, let us fulfill the noblest duty of the defeated warrior: Let us concede our defeat.”
Roth, blacklisted by the Nazis, forced into exile and reduced to poverty, did not delude himself with false hopes.
“What use are my words,” Roth asked, “against the guns, the loudspeakers, the murderers, the deranged ministers, the stupid interviewers and journalists who interpret the voice of this world of Babel, muddied anyhow, via the drums of Nuremberg?”
He knew what was coming.
“It will become clear to you now that we are heading for a great catastrophe,” Roth, after going into exile in France in 1933, wrote to Stefan Zweig about the seizure of power by the Nazis. “The barbarians have taken over. Do not deceive yourself. Hell reigns.”
But Roth also argued even if defeat was certain, resistance was a moral imperative, a way to defend one’s dignity and the sanctity of the truth.
“One must write, even when one realizes the printed word can no longer improve anything,” he insisted.
I am as pessimistic as Roth. Censorship and state repression will expand. Those with a conscience will become an enemy of the state. Resistance, when it happens, will be expressed in spontaneous eruptions which coalesce outside the established centers of power. These acts of defiance will be met with brutal state repression. But if we do not resist, we succumb morally and physically to the darkness. We become complicit in a radical evil. This, we must never allow.