Introduction

The Russian economy is ‘non-monetary’ in the sense that the bulk of inter-enterprise and even governmental transactions are not conducted in monetary form but through barter chains and the use of various kinds of non-monetary instruments. However, retail trade and the provision of consumer services are almost entirely monetary: it is not possible for households to issue bills of exchange to buy their groceries or to settle their utilities bills, nor is it generally possible to acquire goods in shops or retail markets for anything other than cash. While enterprises and government bodies have adapted quite comfortably to life without money, households with falling money incomes have a steadily declining capacity to meet even their most basic needs directly through the market.

Households are the primary victims of demonetisation, but they are not necessarily passive victims. Household responses to demonetisation have important implications for the reproduction of the non-monetary market economy. If households respond in the normal way to falling money incomes – by drawing on their savings, falling into debt and reducing their money spending – then demonetisation will translate, perhaps with a lag as savings are run down, into an old-fashioned Keynesian deflationary spiral. On the other hand, if employers arrange to pay wages and benefits in kind or with non-monetary tokens (or quasimonies) which can be used to purchase means of subsistence, households will be integrated into the non-monetary economy and will be able to sustain their demand for goods and services despite their falling money incomes.