The Russia < Texas Economic FallacyMar 12, 2022
An increasingly popular heard sentiment these days is "Russia's economy is the size of Texas!" This is a total misrepresentation that makes no sense whatsoever on a production basis.
For example - Russia exported almost 40M metric tons of wheat from 2020-2021 after supplying its population of ~145M. Texas exported roughly 2M metric tons (74M bushels) of wheat after supplying its population of ~30M people. (USDA)
Russian oil production in 2019: 11B barrels.
Texas oil production in 2019: 1.9B barrels.
When people say the Russian economy is smaller than Texas', they mean, of course, that Russian GDP as measured IN US DOLLARS is smaller. What they fail to account for is the fact that dollars are a) NOT the only way to count things, and that it b) severely misrepresents reality.
To put it another way, comparing the US and Russia is like comparing a bank to an average citizen. The bank, being the source of funds printed from nothing via credit creation, will obviously have more money than an average citizen, who depends on the bank to get funds. It is a comparison that defies reason. The US is the sole controller of US funds creation globally - how could it NOT have more dollars than Russia?
So what else can we use? Purchasing power parity is a BETTER measure to use, but still terrible.
The best measure to use is production of goods and services as measured in direct comparisons of units, but this is obviously hard to do across millions of different items. Economists use currency as the proxy for this, and then translated foreign currencies into dollars, which is how we arrived at GDP in dollars being the unit of measure that does not reflect reality - it's the best economists can do today. The point is - it's not good enough!
The nature of the current economic system - the petrodollar - means that the US standard of living is heavily favored at the expense of other countries. The implication then is that a shift away from the petrodollar - say, because of sanctions leading Russia to stop valuing dollars and start valuing commodities - will lead to the Russian economy being valued significantly higher with no other change - keep this in mind!
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