Economia

The Russian transition to a workable free market economy in the 1990s brought with it one very striking feature: The widespread reemergence of barter as an accepted, and perhaps even, preferable, means of exchange. Surprisingly, this use of barter was seen less in transactions between individuals, and more in major transactions between firms in almost all industries.

All the usual characteristics of a barter system were seen. For one, almost all deals were bilateral. But given that not all goods bartered could be used directly, additional barter deals were created to garner goods that could be used directly. Complicated barter chains were created, resulting in substantial problems for the Russian economy.

Distortions in prices and the true value of output occured, though this could also be said to have been an advantage as production and employment were maintained in economically unfavourable conditions. Transactionary flows were easily hidden from tax authorities given the general informality of barter. Weaknesses in the Russian financial sector were exacerbated, with both short-term and long-term loans severely constrained.

However, the barter system did bring a couple of benefits to the transiting Russian economy. Besides the positive effects on production and employment outlined earlier, favourable effects were seen on Russian firms themselves. The bankruptcies of many Russian firms were avoided as trading continued through barter even as mountains of debt lay unresolved.

But one of the most interesting parts of the issue is that barter was (and is) not exclusive to domestic trade. Consider the recently rekindled proposed exchange of 250,000 tons of Thai raw chicken for 12 Russian SU-30 MK jets. If successful, we would very well have to admit that so many years after cash as a means of exchange was popularised, barter can still coexist side by side.