USE OF BARTER AND SURROGATE MONEY INCREASING IN RUSSIA.

Reports from several Russian regions refer to the introduction of surrogate money. Last month, a truck plant in Bashkortostan began to pay its workers in vouchers that can be used to buy goods in the plant’s shops or to pay rent for company housing. Workers say the vouchers are preferable to going without their wages. (Information from Monitor’s correspondent in Saratov) Last week, the authorities in Sverdlovsk oblast approved the issue of special checks that may be used in the region as a substitute for cash. (Trud, November 12)

Such stories have prompted speculation about regions printing their own money as a way of asserting independence from Moscow. In fact, surrogate money tends to be confined to vouchers or credit notes that can only be used to purchase specific items from specific sources or traded for rubles at a large discount from their face value.

Addressing a conference of American Slavicists in Boston on November 14, David Woodruff of MIT shed some light on this phenomenon. In the past three years, a combination of tight government monetary policies, the heavy burden of business taxes, and the government’s efforts to avoid wide scale bankruptcies has left firms and regional governments struggling to cope with payment difficulties. Manufacturers lack money to pay electric bills, power stations cannot pay for oil and gas, and manufacturers, power stations, and energy companies are all short of money to pay wages and taxes.

Producers have responded by resorting to barter and by printing surrogate money. Now the government’s campaign to crack down on tax laggards is putting pressure on firms to pay taxes with money they do not have. If the government persists, widespread bankruptcies are likely to result. This may be the only way to resolve the payments crisis since it will weed out production for which there is no end-use.

No Surprise: Border Forces Want More Money.