When people claim that the Russian economy is “heading toward catastrophe,” they often mix three different layers: what is actually measured, what can be reasonably forecast, and what is purely rhetorical. Separating these layers helps show where the reality ends and exaggeration begins.

The true part is visible in structural shifts.
Russia’s economy has become militarised, which makes it inherently fragile. Recent GDP growth is fuelled by state spending, resource mobilisation, and massive injections into the defence sector. This is not sustainable development but a classic wartime overheating that hides technological stagnation, declining productivity, and acute labour shortages. Private investment is falling, high-tech import substitution is stalling, and raw-material dependence has not disappeared. This does not mean a collapse tomorrow, but the structure increasingly resembles the late Soviet economy.
The exaggeration lies in predictions of an “immediate crash.”
Large economies rarely collapse overnight. Sanctions cut supply lines, yet parallel imports, rerouting trade flows to Asia, and heavy state intervention keep the system functioning. The ruble, industry, and banking sector are under tight manual control, but they are not in free fall. This is not Venezuela; it is a slow deformation rather than an instant catastrophe.
Misleading forecasts come from misunderstanding what a mobilisation economy is.
Such a system can run for a long time by burning through resources. It stagnates technologically yet stays afloat through state spending, coercion, and forced redistribution. Analysts expecting “market-style” reactions — currency collapse, mass bankruptcies, stock market implosions — are mistaken because the market is largely switched off. Russia operates more like a command-resource apparatus than a market economy.
Put together honestly, the picture is this:
Russia is not plunging into an abyss tomorrow, but it is not moving toward stability either. It is locked into a wartime mode where growth is commanded rather than created through innovation. This is a path of exhaustion. The relevant question is not “collapse or not,” but “how long can a system endure while consuming itself.”
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"The key point is that state investment in arms production may contribute to higher rates of profit across the economy, but only under certain circumstances. It is by no means guaranteed. Marxist economist Michael Roberts, in his review of Elveren’s 2019 book on military expenditure, put it succinctly: “In the great scheme of things, milex [military expenditure] is not decisive for the health of the capitalist economy.”

In fact, Roberts argues, following on from Paul Mattick’s critiques of the permanent arms economy thesis during the 1960s, state investment in arms production imperils the capitalist accumulation process by “restricting the volume of use values that can be employed for reproductive purposes.” This becomes especially problematic when an economy is descending into recession conditions, when capitalists are already loath to invest in production and likely to speculate or hoard.

While large-scale state investment in arms production during the early decades of the Cold War played a role in spurring growth and prosperity, continued military investment in the latter decades of the twentieth century and beyond may have accelerated economic decline. Between 2006 and 2010, for example, US military spending was on the rise in both absolute and relative terms, just as the broader economy spiraled into recession conditions.

War and war production in the neoliberal period have became increasingly technologically intensive. As such, this failure to cohere to the midcentury pattern may illustrate precisely Mandel’s critique of the permanent arms economy thesis: the contradictory effects of military expenditure and the higher-than-average composition of capital in arms-producing industries."

https://jacobin.com/2025/06/war-economy-military-keynesianism-workers

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