Essay: Why the corrupt, authoritarian regimes of China and Russia are losing their long term competitive edge relative to the USA

Previously, I wrote the essay at: The United States will be the leading power in the world for the foreseeable future

Questions: Are the corrupt, authoritarian regimes of China and Russia are losing their long term competitive edge relative to the USA? If so, what are the major underlying reasons this is the case?

Corrupt authoritarian regimes are not competitive long term in a dynamic, competitive world with major technology-driven changes where people can vote with their feet

During his annual phone-in with the public in 2019, President Vladimir Putin described low productivity as “one of the most acute and important” problems facing Russia.

The best and the brightest are fleeing China and Russia. Wealthy and educated people are leaving China and Russia. Russia is experiencing a brain drain

Both China and Russia are corrupt, authoritarian regimes (See: What drives Xi Jinping and Vladimir Putin? and Vladimir Putin is a corrupt kleptocrat and an authoritarian).

There is currently a talent war in the world due to technology and labor productivity increasing being important in terms of the prosperity of a country.

Investopedia says about the importance of labor productivity to an economy, "Labor productivity is largely driven by investment in capital, technological progress, and human capital development. Labor productivity is directly linked to improved standards of living in the form of higher consumption. As an economy's labor productivity grows, it produces more goods and services for the same amount of relative work. This increase in output makes it possible to consume more of the goods and services for an increasingly reasonable price."

In 2023, the USA was over 200% more productive in terms of labor productivity than Russia when measured using purchasing power parity. In 2023, the USA was over 400% more productive in terms of labor productivity than China when measured using purchasing power parity.

Countries’ competition for talent is forecasted to become fiercer over the next ten years as both uncertainties and international tensions continue in trade, investment and politics. And right now, the United States is competitive in this talent war and China/Russia are not which is one of the reasons why people are fleeing China/Russia (See: Top 12 reasons why people are flocking to the USA and leaving the corrupt, authoritarian countries of China and Russia and The world’s best and brightest are flocking to these countries, CNBC, 2023).

In the long term corrupt authoritarian regimes are difficult to economically sustain

China's multiple economic crisis

Presently, communist China is facing multiple crisis with the three major crisis below being signs of growing deflationary pressures on their economy:

• Chinese real estate crisis (2020–present)

• Chinese stock markets crisis (Since 2021, China’s stock markets have lost about $7 trillion in value.)

• Youth unemployment in China

Since 2021, China’s stock markets have lost about $7 trillion in value.

Wars are expensive and the war in Ukraine is costly to Russia's long term economy

The Russian economy is too dependent on oil/gas.

Countries and economies that are more diversified in revenue sources are more resilient, stable and sustainable.

Before the war in Ukraine, Russia faced two major issues to their long term economy which I covered in the three essays below:

Namely, Russia is facing a demography crisis and it has an economy too dependent on oil given that the golden age of oil production will be over by 2030 according to oil industry experts.

• Russia is dying out. The war in Ukraine is making Russia's demographic crisis even worse

• Russia's economy is that of a shrinking, aging, and poorly qualified population

• Russian oil: Lower future production/profits due to future higher extraction costs and other inefficiencies

Key points:

1. According to the Russian demographer Salavat Abylkalikov the war in Ukraine makes Russia's demographic crisis worse.

Salavat Abylkalikov indicates:

“

In 2022, Russia's population growth rate was -0.38%. Assuming this rate persists, the population will halve in 184 years (according to Rosstat figures, Russia currently has 146.4 million inhabitants — The Bell). According to the UN's latest projection, Russia's population will be 112.2 million by 2100 under average circumstances. The Covid-19 pandemic caused life expectancy in Russia to fall by 3.3 years. It quickly began to recover in 2022, rising by 2.7 years. However, the war has disrupted this progress, and life expectancy is now impacted by war-related deaths and stress-induced substance abuse. Lower incomes and worsening access to medication, diagnostics, equipment and treatment are further reducing life expectancy. The war may also cause a decrease in inward migration, which has previously helped offset Russia's natural population decline. From 1992-2019, the natural loss was 13.8 million people, but inward migration compensated with 9.6 million. Russia could now find itself in a situation where natural and migratory losses reinforce one another... Shifts in the age structure of the population pose a substantial demographic risk for Russia's economy. The generations born in the 1990s and 2000s, when Russia's birth rate was at its lowest, are now entering the labor market. This will exacerbate the existing crisis due to a lack of young workers. Meanwhile, the post-war generations of the 1950s and 60s are aging and approaching retirement.

”

2. The Russian economy is too dependent on oil/gas.

Countries and economies that are more diversified in revenue sources are more resilient, stable and sustainable.

In 2023, OilPrice.com reported in an article entitled Analysts Predict 42% Decline In Russian Oil Production By 2035:

“

But Moscow cannot continue defying the odds indefinitely. BP Plc (NYSE: BP) has predicted that the country’s output is likely to take a big hit over the long-term, with production declining 25%-42% by 2035. BP says that Russia's oil output could decrease from 12 million barrels per day in 2019 to 7-9 million bpd in 2035 thanks to the curtailment of new promising projects, limited access to foreign technologies as well as a high rate of reduction in existing operating assets. In contrast, BP says that OPEC will become even more dominant as the years roll on, with the cartel’s share in global production increasing to 45%-65% by 2050 from just over 30% currently. Bad news for the bulls: BP remains bearish about the long-term prospects for oil, saying demand for oil is likely to plateau over the next 10 years and then decline to 70-80 million bpd by 2050. That said, Russia might still be able to avoid a sharp decline in production because many of the assets of oil companies that exited the country were abandoned or sold to local management teams who retained critical expertise.

”

Stratfor, an American strategic intelligence publishing company, reported in their 2020 article The Golden Age of Russian Oil Nears an End:

“

In the next 10-20 years, Russian oil will become more expensive as extraction from less accessible basins becomes necessary to maintain current export levels. Internal inefficiencies within Russia's oil sector, as well as the remote locations of remaining reserves and potential shifts in future oil demand, add up to a murky future for the country's energy-reliant economy. Moscow may adjust its budget to ensure plummeting oil prices don't cut into its government spending, but proper economic diversification away from energy remains a complex and unlikely process.

”

Vladimir Putin should listen to Sun Tzu

Sun Tzu (c. 400 B.C.) was the author of The Art of War, a classic Chinese treatise on military strategy. Sun Tzu's strategies and tactics utilize the "Eastern tradition of strategy that emphasizes outwitting an opponent through speed, stealth, flexibility, and a minimum of effort."

Sun Tzu wrote:

"There is no instance of a country having benefited from prolonged warfare." - Sun Tzu, The Art of War

"What is essential in war is victory, not prolonged operations." - Sun Tzu, The Art of War