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The rusty machines: the capital fundamentalism in the Ukrainian war

 

Apparently, the army of the Federation of Russia has encountered a number of problems in its military campaign in Ukraine, where the material superiority has not meant a quick victory.

Based on several sources and on-ground movements, this article steps out some reports on the contest, and draws upon and adapts the diagram of Solow’s economic growth model, which usually is utilized in economics to explain the law of diminishing marginal returns of capital and technical change, in order to look into the two first months of Russia’s «Special Operation» in Ukraine.

The article is organized as follows. Firstly, a brief characterization of the two armies will be made and a set of reported facts from several press sources will be presented. Secondly, based on the reports, the analytical diagram will be introduced in order to interpret them.

It is natural that after only two months of the conflict the access to truthful information is hampered. This is one of the limitations of this article, which relies on information disseminated by the Western media about the Russian army’s performance (The New York Times, The Washington Post, CNN, The Economist, DW, among others).

The big disparity in physical assets and an unexpected outcome

Historically, the defense expenditure of Ukraine is just a share of Russia’s one. In the period 1992-2019 the Ukrainian military expenditure did not even reach the 15% of the Russian one:

Figure 1. Military expenditure of Ukraine as a percentage of Russian military expenditure

Figure and calculations made by the author with data from Penn World Table 10.0 for real GDP PPP and SIPRI for military expenditure as share of GDP.

 

According to the ranking made by the Global Firepower,  the armed forces of Russia are the most powerful after the United States, surpassing Ukraine in military hardware: the number of tanks, artillery, and above all, warships, submarines, and war aircraft (click here).

There were those who took for granted the quick Russian victory and a «change regime» in Ukraine. The Economist (2022) informs that a Russian quick military campaign in Ukraine was expected as that one unfolded by the United States in Iraq in 1991 (¿Does it mean a «highway of death» style? click here).

However, in accord with some military analysts, the performance of Russia’s troops has not been the one they thought despite its clearly material superiority:  it is estimated by the US (click here) and British (click here) intelligence that in only two months the 25% of the Russian forces allocated in Ukraine have been destroyed.

 

Two armies managed differently 

In The Economist (2022) we can find the following report on the Russian military campaign, which I summarized as follows:

The Russian officers, based on misleading information that underestimated the Ukrainian army’s will to hold, ordered the rolling toward the initiation of the «Special Operation», then, parachuters with light arms and solo columns of armored were trapped in embushes. At that moment, the Russians decided to enter the vast Ukrainian territory splitting its forces into isolated and ineffective troops: the armored, infantry, and artillery fought separately their own battles. In accordance with the estimations of the British intelligence, in two months 15.000 Russian soldiers were killed, which is more than ten years of war in Afghanistan.

Ukraine’s army, by contrast, counted on an effective intelligence work (click here) that allowed the identification of Russian supply vehicles to destroy them and hinder its logistics (click here), which turned into Russia’s «Achilles heel» (click here). 

The Russian army still uses old-fashioned military assets from the Soviet times (for instance T-72), and although it has the advantage of being massive and highlight mechanized, the Ukrainian army cut off the deployment of its numerous military assets in the urban areas, where the tanks and armored personnel carriers do not have much room for maneuver (click here).

On the other hand, Ukraine also has old-fashion equipment from the Soviet Union, nevertheless apparently its army has made greater use of drones (click here). Ukrainians count on a relatively light army and have chosen the Mosaic Warfare, relying on flexible and cheap military technology (more efficient) drawing upon drones and small platforms, as opposed to big conventional Russian platforms (click here).

In short, Ukraine is achieving its objective to endure and expel the enemy from its territory (as has been seen in the territories around Kyiv and Chernobyl) drawing upon less capital or military hardware. 

 

A simple diagram to interpret the Russia-Ukraine war

Assuming that the above is a truthful recreation of the facts, a scheme will be presented in order to look into the conflict. 

Based on the diagram usually used in economics to illustrate the decreasing marginal returns of capital and the technical change of Solow (which will not be explained here), the figure 2 steps out the relationship between the amount of military hardware (tanks, armored personnel carriers, artillery, aircraft, warships,…) and the extension of territory liberated from the enemy, that can be measured by the number of square kilometers abandoned by the adversary. 

In figure 2, the positive slope of the line shows that the greater the military hardware, the greater the number of square kilometers liberated from the enemy. Moreover, the assumption is that the Ukrainian army is more efficient than the Russian army (more square kilometers liberated per unit of military hardware), so the line of the Ukrainian army is over the Russian army’s.

The army of Ukraine counts on less weaponry than Russia’s army Ku<KR, but such a quantity of military capital brings about a higher number of enemy withdrawals (dotted blue line) than the delivered by Russia (red dotted line), Yu >YR, on the A point of figure 2.

The above recreates the fact that  Russian forces, despite that counts on more military hardware, have withdrawn from the outskirts of Kiyv and Chernobyl (west of Ukraine), what I will call plan A (see figure 2), and have reorganized for the Donbas operations (east of Ukraine): what Russians have called the «second phase» of their «Special Operation» and that represents the plan B in figure 2. 

 

Figure 2. Relationship between military hardware and number of square kilometers liberated from the enemy.

Figure made by the author using illustrations from The Washington Post and Freepik.

 

In plan B («second phase») Russians will look for another way to perform their tasks (a technical change) that brings about more efficiency in the management of its war machine.

With the same amount of military hardware, though using it in a more efficient way, Russia’s efficiency line could move upward and reach the efficiency path of the Ukrainian army. That upward movement would mean a greater amount of territory taken by the Russian army (Y’R) using the same number of military assets from plan A (KR). 

Plan B recreates what some analysts have observed in the new Russian tactic: slow infantry and armored advance coming after classic artillery shells on Ukrainian positions. 

For sure, the Ukrainian army also could reach point B if it keeps its efficiency and gets more military hardware; for instance, if NATO supplies Ukraine with enough war equipment. In that case, in Figure 2 we would see a rightward movement on Ukraine’s line, what means more amount of territory liberated from the Russian enemy.

A conclusion we can reach thanks to the diagram above is that a greater stock of war machinery and equipment does not guarantee the achievement of planned objectives if efficiency issues come about. This is a clear example of what is called «capital fundamentalism» in economics: overrating capital accumulation and overlooking the importance of physical-capital management.

This reasoning would have led the strongly nationalized planned economies, including Soviet Russia, to realize massive investments in physical capital without obtaining fundamental increases in productivity (De Long & Summers,1991, 1992). 

Eliot Cohen (click here) made an interesting argument related to the above:

… But just as much credit for the shattering of Russian illusions lies in a phenomenon long known to military sociologists: that armies, by and large, reflect the qualities of the societies from which they emerge… The state has bred an army at the mercy of corrupt bureaucrats, contractors, and soldiers.

In this sense, Cohen’s argument aims at the relationship between the country’s institutions (rules of the game) and the resources management, whether these are economic resources for production or military resources for invasion/defense. 

The above also includes Ukraine as a former Soviet republic, however, as it is specified by the military experts, the urban areas favor defenders and offer spots where to hide and prepare ambushes (click here), which may compensate for Ukraine’s institutional problems.

This article has been a brief sketch of what may be is going on in the contest, many other factors not taken into account in this post may explain the Russian army’s performance in Ukraine, for instance, the Ukrainian troop’s conviction to defend their own land from an enemy that is unfolding war on foreign territory. 

 

References

De Long, B., Summers, L.H., 1991. Equipment investment and economic growth. Quarterly Journal of Economics 106 (2), 445–502.

De Long, B., Summers, L.H., 1992. Equipment investment and economic growth. How Strong is the Nexus? 157–211.

The Economist. How Rutten is Russia’s Army. (April 30th-May 6th, 2022).

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Medardo Alfonso Palomino Arias

Por Medardo Alfonso Palomino Arias

Economista y Magister en Gestión Pública graduado en la Universidad Santiago de Cali, Colombia. He sido Profesor desde el año 2014 en distintas universidades de Cali. En la actualidad me encuentro adelantando estudios y viajando en Australia. El proposito de mi blog es difundir conocimiento sobre economía y brindar un espacio para el debate.

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