Path Dependence in Russian Political Economy

Any blogger hesitates before writing a post about something on BoingBoing - after all, it's the fifth most popular blog in the English-speaking world, and its posts are replicated on dozens of other blogs you, my hypothetical reader, probably read. 

Nonetheless, this post on the resurgence of barter in Russia strikes me as exceptional. Cory Doctorow writes:

Russia's liquidity crisis is so bad that giant factories and regional governments are conducting commerce using barter -- trading underwear for cars, food for construction work, etc. The ruble's in short supply, first because the government's bought up a ton of money to keep it from collapsing, and second, because there is so little confidence in banks that many people keep their savings in safe-deposit boxes or mattresses, rather than savings accounts.

He goes on to quote reporting in the NYT:

 Advertisements are beginning to appear in newspapers and online, like one that offered “2,500,000 rubles’ worth of premium underwear for any automobile,” and another promising “lumber in Krasnoyarsk for food or medicine.” A crane manufacturer in Yekaterinburg is paying its debtors with excavators...

The Hyundai factory in Taganrog, the southern seaport where Chekhov was born, rolled out a barter promotion on its Web site, offering to trade vehicles for “raw materials,” “high-tech equipment” or “other liquid goods, including finished products of various branches of industry.” Gleb Korotkov, a spokesman for the factory, said he could not be specific about what goods were meant, saying it was a “commercial secret.”

Barter deals seem to be spreading fastest in construction industries. Dmitri Smorodin, who runs a large St. Petersburg building firm, said he thought for two months before announcing in late January that he was willing to accept barter items — including food products — as payment for construction work...All this evokes a bit of déjà vu. In the mid-1990s, barter transactions in Russia accounted for an astonishing 50 percent of sales for midsize enterprises and 75 percent for large ones.

The practice kept businesses afloat for years but also allowed them to defer some fundamental changes needed to make them more competitive, like layoffs and price reductions. It also hurt tax revenues.

The comeback is on a small scale so far. The most recent statistics available, from November, showed that barter deals made up about 3 to 4 percent of total sales, according to the Russian Economic Barometer, an independent bulletin. Nevertheless, economists are taking note.

While sometimes it seems that on social or economic issues that the NYT really does think that the plural of anecdote is "data," there's probably something to this. After all, the Soviet economy had a sclerotic system of internal cash accounting, where balance-sheet transactions had values tremendously inflated by comparison to hard-cash transactions, resulting in barter as a means of getting around the system. David Hoffman's The Oligarchs: Wealth And Power In The New Russia, the  best treatment of the collapse of the Soviet economy, is at its most compelling when talking about the incredible barter maneuvers entrepreneurs -and ordinary citizens - would go to in order to demonstrate the truth of the "use" theory of value.  

While I have no doubt that Craigslist, etc, will facilitate equivalent things happening in America, it seems likely that there's path-dependence at work here; Russian entrepreneurs have knowledge of who to go to to barter things in a crisis, more so than other options. It worked for decades under unbelievably more scarce conditions, after all, so shouldn't it work now? If that's the case, then we should expect to see the e-bartering platforms mentioned later in the article taking off in a way that they wouldn't in the United States (unless, of course, businesses try to keep barters off the record, since as I recall barter is now taxable in Russia, as it wasn't during much of the '90s). If these trends continue, it'll be an interesting demonstration of how financial institutions develop, or fail to do so, in post-authoritarian states.