Hacker News Reader

Comment by anonylizard | Hacker News Reader

The entire article can basically summarized in one sentence

"Using PPP instead of USD to measure GDP, significantly shrinks the gap between the EU and the US"

Now, using USD has its problems, but PPP's primary purpose is living standard comparisons, and doesn't work as a national strength comparator.

When in a war, you are buying ammunition and weaponry with USD, not PPP. When there's a energy shock, you are importing oil and gas with USD, not PPP. When you are in a AI race, you are buying GPUs with USD, not PPP.

There'll be some people who argue that 'only living standards' matter. If the two simultaneous hot modern wars in Ukraine, Gaza, and soon Taiwan can't convince that hard power matters, then don't complain when the draft officer knocks on your door.

View on HN

>When in a war, you are buying ammunition and weaponry with USD, not PPP.

Not if you're buying it locally.

>When there's a energy shock, you are importing oil and gas with USD, not PPP. When you are in a AI race, you are buying GPUs with USD, not PPP.

Pretty much. PPP is useful for the stuff you can source locally like groceries, rents, local cars and groceries, etc. but a lot of stuff needs to be imported so then the EU's financially weaker position shows, especially when bidding internationally for scarce items.

Not if you're buying it locally from an entirely domestic supply chain which is approximately nothing

You'd be surprised, Europe has a massive industrial base. European steel can be made with European iron and coal to make European weapons in European factories from European designs.

Sourced with european energy produced by european produced infrastructure and by workers eating european food grown with european resources?

It's "possible" for this to happen. And in the event of a large global war, we'll even go as far as to say it's plausible. But given that the world is heavily globalized and not at war, it's not actually what happens because it is cheaper to trade with others.

We're talking about this in the context of PPP versus nominal GDP when buying military equipment. Most countries _have_ to buy at nominal prices cos they either don't have a domestic arms industry, or they have one, which uses resources bought at nominal, global prices.

But the EU has both a domestic arms industry _and_ the inputs locally, so it's probably cheaper to go the domestic route, hence they can buy at PPP rates rather than nominal.

I'm not an expert in arms production but I find it extremely unlikely that the eu arms industry is not heavily globalized

> When in a war, you are buying ammunition and weaponry with USD, not PPP.

That depends on if you import the weapons or make them yourself, right?

In the Ukraine war, a common heard argument is that Russia can manufacture more weapons than its GDP suggests, because of PPP.

> In the Ukraine war, a common heard argument is that Russia can manufacture more weapons than its GDP suggests, because of PPP.

You are still dependent on foreign inputs that are dependent on the Dollar or Yuan payments, and even domestic commodities and goods are impacted by global prices.

PPP in isolation is useless, and I'm honestly surprised Bruegel even published this article.

> You are still dependent on foreign inputs that are dependent on the Dollar or Yuan payments

For Russia in particular, do we have some idea of how true this actually is? Russia lacks a lot of things, but natural resources is generally not one of them.

> For Russia in particular, do we have some idea of how true this actually is? Russia lacks a lot of things, but natural resources is generally not one of them.

This isn't a game of Civ 4 where access to resources automatically grants you production.

For example, the Oktyabrsky Mine is one of the largest nickel mines in the world, yet Russia has to export that nickel abroad to be processed in order to be used in batteries or integrated circuits.

And resources are not interchangeable - oil from Dharan has an entirely different set of specs to process compared to oil from northern Alberta.

Resources aren't that rare - most countries just choose not to exploit resources because they might not be an efficient deployment of capital (why should I spend billions subsidizing a commodity product whose margins are near 0 or even negative when I can use that money to build a hospital instead)

There's a reason people get PhDs in Chemical Engineering, Chemistry, Geology, Mining Engineering, Physics, Geophysics, Petroleum Engineering, etc - these are very complex and specialized problems, and no country has a complete monopoly on human capital in these spaces.

Moments like this make me wish HN was shut down - it's gotten so braindead.

Thank you for your response. I think your final remark was unnecessary though, I think less people asking stupid questions just leads to more confidently incorrect non-questions, which is not an improvement.

Just a bit burned out by the low quality non-technical discourse on HN as someone who actually used to work in the Policy space.

I use HN to read articles or comments about ld_preload or shoot the shit about internal gossip in the tech industry - not rehash the same kinds of arguments you see on Reddit.

> I think less people asking stupid questions just leads to more confidently incorrect non-questions

Until domain experts get burned out and start flamewars for shits and giggles, or just quit HN entirely.

sapiogram made no assertions or arguments, just asked a simple, reasonable and good-faith question. Your response was disproportionately negative.

Yeah the comments by alephnerd really drag this place down.

"Please don't post comments saying that HN is turning into Reddit. It's a semi-noob illusion, as old as the hills." I hope you've seen that rule.

I absolutely have seen that rule and I will continue to yell this at the clouds in the sky - DISCOURSE ON HN HAS ABSOLUTELY DEGRADED.

Russia can easily produce all of the steel and all of the explosives needed for its shells all by itself, all thanks to its huge territory and the accompanying huge natural resources. It's one of the very few countries that can accomplish that, I think only the US can compete against them in that domain, i.e. becoming 100% autarchic in case of total war.

I mean, China, EU's common market, heck, even just pre-war Ukraine would not be far behind for that.

Just about every single trillion dollar economies can become autarkic if needed.

There are 19 1T+ economies and 3 more on the way in the next 2-3 years (Switzerland, Poland, Taiwan).

Money in the bank doesn’t produce grain out of nothing, you need land for it. The same goes for natural resources. Or maybe we’re thinking about autarchy differently.

Push come to stove, China doesn’t have the agricultural fields needed to feed its people for 3-4 years or more in case of a future sea blockade. Europe doesn’t have the natural resources, neither the grain (if we were to exclude the fields of Southern Ukraine).

> Russia can easily produce all of the steel and all of the explosives needed

Russia might be able to produce a lot of steel, but it is struggling to produce military grade, hard steel.

Half way down this article: https://www.dailykos.com/stories/2023/7/6/2179504/-Ukraine-U...

More importantly Russia is unable to produce the electronics needed for modern weapons. They can build WWI level stuff well, and even WWII level stuff in many cases, but 2020s level technology is much better in many ways and there Russia struggles.

This has been mostly a WW1 war, the West thinking that the next big war would bec a technologically-advanced one where they’d be able to have the edge thanks to its better tech is a big factor behind the current clusterfuck represented by the West’s involvement in Ukraine. The Ukrainians would have been way better off had the West been capable to send millions of artillery shells their way instead of more advanced HIMARSes and what have you.

Himars has done a lot (until they ran out) to keep this from a WWI type war. Drones are everywhere on the battlefield. this war doesn't look like WWI, it looks like a soviet war.

> until they ran out

That's the problem right there.

Russia with it's very large size has that ability, much like the US. EU countries are going to have to do quite a bit of internal trading between each other to make the quantities needed. Also there is some question of how much Russia is depending on China for stuff too.

Russia is not manufacturing more weapons than its GDP suggests. Its simply spending more money than the west donates to Ukraine (Because Russia is fighting for Putin's survival, while its not #1 priority in the west), and importing everything from China using that money.

Russia is actually precisely the example why GDP matters. Russia's position before the war was an overwhelming advantage, pinching Ukraine from three directions in a huge concave, in a flat plains basically without geographical barriers, against a divided, poor, and old (unlike say Afghanistan which has endless 18 year old men) country in Ukraine.

Yet it has fought the war into a extremely expensive stalemate, with draft imposed, large casualties, and basically total loss of international prestige.

All that, because its low GDP meant no high end equipment, no advanced logistical capabilities, no sophisticated information advantage. While, the US, by Elon Musk simply donating some starlinks (A definitive high GDP product), made all Russian attempts at disrupting Ukrainian command chains useless.

I’m not sure that crediting Musk with supporting Ukraine is quite accurate. He is quite the fan of Putin and at times has blocked Ukrainian operations against Russia.

This might be a perfect example a drawback of having tech billionaires.

https://www.bbc.com/news/world-europe-64579267 https://www.independent.co.uk/news/world/europe/elon-musk-pu...

I generally agree except for the war. Personnel costs, energy, manufacturing costs, costs of specific weaponry used vary vastly across countries. Russia or China can deliver much more firepower per USD than US.

Energy costs are much lower in the US than in China which must import most of its energy from the Persian Gulf (and most of the energy it gets from Russia leaves Russia from Russia's European ports).

The US has environmental policies that increase the cost of energy, but in a sufficiently serious war, those would get suspended.

Personnel costs though are vastly higher in the US especially if "costs" included the political costs of instituting a draft.

Most of PRC energy mix is cheap domestic coal, which they have in essentially endless amount. PRC also generates ~2x more power, that's not something US relaxing enviromental policies can overcome. PRC has many cost advantages stacked in energy/inputs/capex/labour/production/process and just sheer scale. That's where you get into personell costs, moving bodies to build new capex, assuming there's even enough qualified expertise.

That said, in a sufficiently serious war, IMO there'd be homeland attacks on critical infra, be it cyber or long range strikes, so it's really about who can survive/operate/recover from capex attrition fastest.

Interesting. Can they run their navy and air force during a war on fuel synthesized from coal?

PRC is not Japan, they're a continental sized land power with associated resources. They don't need to synthesize fuel from coal - they extract ~4 million barrels per day, IIRC US military consumes 90 million barrels per year / 240k barrels per day.

PRC domestic consumption is 14m barrels per day.~6m goes to transportation, 2m goes to heating, both in process of being electrified. 2m goes to other. Industry, uses ~4m barrels, of which PRC MIC uses relatively little as % of output. They can sustain military multiple their current size on wartime economy. There's also estimated 300m barrels and growing in strategic reserves,.

Coal is useful in that coal gassification useful to make fertilizer. Which PRC did - they were NET fertlizer exporter ~10 years ago before they clamped down on coal and curtailed sector.

Utimately it's not just a US+co navy+airforce vs PRC navy+airforce fight, it's a whatever US military logistics can bring in theatre vs entire Chinese industrial homefront pivotting into MIC fight with their various PPP advantages using domestic inputs, which is looking more and more to be more substantial relative to what US+co is projected/planned to muster.

Isn’t that the consequence of them having smaller budgets to begin with? Having a trillion-dollar budget means the US defense industry can afford more graft and cost overruns.

Russia and China cannot deliver more firepower per USD. Any such impression is because Russia/China only fights near-shore wars, rather than the expeditionary wars of the US.

Because the US fights global wars, it focuses on quality over quantity, as logistic costs start to dominate the production costs of military power.

If China tried to fight some Iraq war, it'll be just as expensive as the US effort. Even soldiers have to be paid far more in offensive expeditionary wars than defensive homeland wars, just to maintain morale.

One exception is mercenary groups like Wagner, they are actually extremely cost effective. That's because of much more flexible management structure, using private enterprise structures instead of rigid formal militaries, works 100 times better for chaotic low intensity warfare.

> Russia and China cannot deliver more firepower per USD. Any such impression is because Russia/China only fights near-shore wars, rather than the expeditionary wars of the US.

Maybe once - the shambolic internal politics playing out with the funding for Ukraine (a lot of which stays in the US anyway) doesn’t indicate American power. Quite the opposite.

US expenditionary model maybe relatively economical method for US to deliver global fires given US goals/constraints, but US choosing to be visiting team doesn't negate homecourt advantage for those who choose play at home. Reality is RU/PRC can deliver firepower cheaper in most reasonable scenarios we envision they'll get involved in. And currently both countries have autarkic enough MIC that PPP makes sense even accounting for smuggling in western machinery etc. They're not isn't Japan whose GDP in USD is 60% of ~2010 peak and need to scrounge for couch USDs to buy F35s. Or ~2B to buy 400 tomahawks over years when PRC MIC signalled they can make twice that in one day, at presumably magnitude lower costs, because they don't need 6sigma reliability to balance expeditionary logistics costs. That's before tactics changing procurement economics like RU ECM negating 100k per shell Excalibure rounds from 70% effectiveness to 6%, making it closer to 1k dumb shell. Or sanctioned to death Iran's budget ballistic salvo still managed to penetrate Israel+co's exquisitely expensive missile defense that was estimated to cost one day of IL GDP in interceptors (for just their share of interceptions). PPP is more appropriate comparison for powers whose MIC isn't dependent on US relative to their strategic goals i.e. PRC likely isn't going to spend trillions building/sustaining 11 nuke carriers and securing global basing to project power in the Americas, they're going to build a few 100s of billions worth of conventional ground launched ICBMs, stored in tunnels, to hit US strategic targets (like carriers in ports) in event of peer war.

> When in a war, you are buying ammunition and weaponry with USD, not PPP

That depends on your geo-political allies, for example I'm sure Russia had no problems in purchasing artillery shells from North Korea without using USD. The fact that Europe has become dependent on using the USD for its vital interests (like purchasing artillery shells, for example) is a major strategic weakness, but that's the bed that they have laid out for themselves.

PPP is not only about living standards, it accounts also for the fluctuation of currency exchange rates, as you should've understood if you read the article.

The reason the EU seems to have fallen by 1/3 compared to the US is that the dollar got stronger, not that EU suddenly became 1/3 less productive.

Your point of view is just completely wrong and it's funny how you think it's the article that has it wrong.

I agree with you in principle. Every time someone brings this kind of thing up, I'm also reminded of how odd it is that the country flanked by oceans and mountains to the east and west and two staunch allies to the north and south, is the one that's apparently better equipped for war from an economic perspective.

What do you think of the notion that hard power is measured in manufacturing capacity rather than in financial terms?

Manufacturing is not a magical lamp that craps out guns.

It is merely a part of a value chain. Namely, minerals and petrochemicals have to be produced upstream. Financial GDP captures the ability to produce or purchase the upstream resources, manufacturing alone does not.

Now manufacturing capacity is illiquid, and it takes time to convert financial power to manufacturing capacity, see the Ukraine ammunition crisis. While manufacturing capacity is more war-ready.

However, China hasn't invaded Ukraine yet, because US choking off the sea lanes will be catastrophic for China's economy and offensive war capacity. Without trade, the factories have no resource inputs, and no markets to export to.

So in the end, financial power does slightly underestimate the hard-power benefits of manufacturing, but GDP (USD) should still be used as the primary determinant of hard power, not amount of factories built.

> Financial GDP captures the ability to produce or purchase the upstream resources, manufacturing alone does not

Sure, manufacturing depends on its inputs. My take is that the material economy (manufacturing and all its inputs) is the actual source of hard power, finance is a proxy, and maybe not the most helpful one in a case where war materials are controlled by an opponent.

> What do you think of the notion that hard power is measured in manufacturing capacity rather than in financial terms?

That's too reductive.

1. That ignores established stores. One of the enormous advantages that Russia has over Ukraine is its enormous store of tanks, artillery pieces, and armored vehicles. Not all of them are state of the art, but they're a lot more effective than a rifle.

2. That ignores the pace of innovation during long wars. Just look at the pace of innovation during WWII. Or even later wars. New designs for rifles, tanks, planes, etc. come out quickly when people start dying en masse. Existing manufacturing lines may not be very relevant if they can't be modified to support new equipment types.

In a sense, you have to go 1-2 steps back to "the machine that builds the machine". How quickly can tooling be brought on line. How innovative and productive of a workforce do you have? Those things are related to manufacturing capacity, but are not the same thing.

3. Access to raw materials. One of the major reasons Russia is able to maintain its war against Ukraine is because it is a net exporter of petroleum products. If they were a net importer instead, global sanctions would be able to make them effectively stop within a few months. Petroleum, steel, food, etc. are all necessary commodities. If any of them can be embargoed, that is a massive weakness that is hard to compensate for with manufacturing.

There are probably other factors, but those are the main ones I could think of off the top of my head.

My read of each of your points is that they are about manufacturing capacity (1. in the past, 2. in the present, 3. its inputs.) rather than about finance. All of these things are valuable or necessary independent of their financing. In a war situation, finance may not be a substitute for acquiring them.

I like your "machine that builds the machine", I think that's actually the point I was driving at in the original post. Finance can accomplish much, but, at least during war, it is not a substitute for the physical economy.

> ...don't complain when the draft officer knocks on your door.

As long as my country has an independent nuclear deterrent and a functionally democratic government then I feel that my son is safe from the draft officer. The places you're listing lack one or both of those things.

When large wars start breaking out and spreading over the planet the entire 'functionally democratic government' thing can come in to question very quick.

> If the two simultaneous hot modern wars in Ukraine, Gaza, and soon Taiwan can't convince that hard power matters

I’m not sure that Ukraine has been a good example of US power. Things may have turned a corner but it’s been a hell of a show of US internal division and turmoil.

that is very true but looking at PPP and demographics at least identifies the correct problem which is as you point out the problem of autonomy and capacity in key industries and strategic goods where the EU is dependent on foreign sources.

Given that I have, in the last week alone, read about a dozen articles about whether German workers have lost their will to work, taxes and regulations and whether Europe is impoverished this article is pretty important. The same has been true for discourse about Japan. Where the common narrative was that the country somehow has not grown in 30 years, but in terms of real output and adjusted for working age the gap even to the US is much smaller.

>"PPP's primary purpose is living standard comparisons"

Which is the only thing that matters to people.

>"When in a war, you are buying ammunition and weaponry with USD, not PPP. When there's a energy shock, you are importing oil and gas with USD, not PPP. When you are in a AI race, you are buying GPUs with USD, not PPP."

Thank you for confirming the purpose of USD - make every other country into a servant.

Practically speaking nobody has attacked the EU country. Rather quite the opposite. EU also happens to have their own weaponry. And in a worst case they can just produce whole bunch of nukes and declare simple policy: do not attack us or else you will be nuked.

> they can just produce whole bunch of nukes

That might be a bit difficult with no uranium reserves.

https://world-nuclear.org/information-library/nuclear-fuel-c...

> do not attack us or else you will be nuked

This sentiment has been expressed a few times in this thread now. Is it really true?

From my understanding nuclear war at any scale will be devastating for the entire planet, not just the aggressor. So the threat of nuclear retaliation hinges on the aggressor believing the defender to be either be suicidal a or mad.

The default assumption of people being rational means it should be quite safe to attack despite talks of nuclear retaliation.

> From my understanding nuclear war at any scale will be devastating for the entire planet, not just the aggressor. So the threat of nuclear retaliation hinges on the aggressor believing the defender to be either be suicidal a or mad.

It kind of depends on which countries you're talking about.

The US and Russia have enough nukes that if they're involved, that's definitely true.

But what about Pakistan? Or Israel? There are several nuclear powers who would have a hard time devastating a single country, not to mention the entire world.

> what about Pakistan

First source I found now: https://www.tandfonline.com/doi/full/10.1080/00963402.2019.1...

> the climatic effects of the smoke produced by an India-Pakistan nuclear war would not be confined to the subcontinent, or even to Asia. Those effects would be enormous and global in scope.

There are very well studied escalation scenarios where high altitude strikes, acting basically as EMPs, with good meteorological information taken into account to manage fallout, can mean nukes can come into play and be effective as defense. Anyways the way things are going we have a non-zero chance of testing the hypothesis.

People like you, is why Europe passed on global leadership to the USA.

Ukraine can be burning on your front door, and you still think EU is safe. Guess what, EU is safe only because of NATO. Russia has attacked basically every neighboring country in Europe that is not in NATO.

Nukes don't work against salami slicing. Russia takes Estonia tomorrow, are you going to throw a nuke against Russia? No, you'll won't risk annihilation for Estonia, so you'll ignore it. So the next day Russia takes Latvia. And so on so forth. The only way of fighting salami slicing is applying proportional response, which requires a conventional army.

Also, Ukraine living standards isn't very high right now, regardless what their PPP is, and getting conquered by Russia, means you get used as battle-slaved for the next conquest. This snowball tactic was innovated by the Mongols, using the conquered people as cannon fodder for the next war.

Yes Minister had 'funny' skit back in the day about Salami Tactics demonstrating this.

https://www.youtube.com/watch?v=yg-UqIIvang

> Russia has attacked basically every neighboring country in Europe that is not in NATO.

What are you talking about? Russia hasn't invaded anyone in Europe except Ukraine since WW2

Hungary and Czechoslovakia have been invaded once more by Russia decades after the WW2 invasion (1956 & 1968), even if you do not count the Caucasian countries as European.

Before that, there were threats to invade Tito's Yugoslavia, but those have been not accomplished.

Hungary, Czechoslovakia, Moldova, Ukraine, arguably Belarus in 2020.

Plus an attempted coup in Montenegro.

What others said + East Germany in 1953 + the threats to Poland in 1980.

The photos from the former, in particular, are practically iconic.

How is it possible to miss this history?

> Russia has attacked basically every neighboring country in Europe that is not in NATO.

That's not true, Russia has participated or initiated the following wars in the greater European area (i.e. excluding Syria for example, but including the Caucasus) after the USSR collapsed:

* Georgia (a couple of times)

* South Ossetia

* Abhkazia

* Transnitria (part of Moldova)

* Chechnya (also a couple of times)

* Dagestan

* Ukraine

Mostly,these were local conflicts inherited from the USSR or border region disputes, not country invasions like in Ukraine.

Russia did not invade, or threaten to invade, any of its main European neighbours:

* Finland (which only became NATO last year)

* Norway and the Baltic states (members of NATO)

* Azerbajan

* Turkey (border by sea)

A lot of bad things are happening already, no need to make things up.

Belarus is defacto under occupation ever since 2020.

In any case, OP said "basically every neighbor" and you're doing a victory lap because only about half of their neighbors have been invaded.

Belarus is the closest ally of Russia and has a defense pact with them. Saying Belarus is under Russian occupation is like saying NATO countries are under USA occupation because it keeps bases and bombs there.

Rarely do "defense pacts" include the staging of offensive invasions from the territory of your allies.

Or stealing every piece of military equipment that isn't nailed down for use in an offensive war in which the allied nation isn't a party to.

A large part of NATO's deterrence is the same kind of "we promise to nuke Russia if they invade Estonia".

And obviously, without NATO, a EU defense force would quickly spring up (including possibly the UK), and more money would be put into all kinds of weapons.

>"People like you, is why Europe passed on global leadership to the USA."

Forget to take your meds?

Salami tactics puts you in a losing position if your only option is nukes. Your enemy will play the Hungry game of buying off politicians and importing as many loyalists as they can in your country. Then they'll "democratically" vote in authoritarianism. Then they'll start on the next slice.

National strength only matters if you're the government, for the population of the countries living standards are probably what you want to be higher

Reply on news.ycombinator.com