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. Last Updated: 07/27/2016

Cashless Economy Keeps Tutayev Plant Humming

TUTAYEV, Central Russia -- Every day, a miracle of loaves and fishes takes place in this Russian town.

In the gray of morning, thousands of workers emerge from cement apartment blocks carrying empty tin lunch pails. They trudge out of town, across a snowy field and into a ramshackle set of buildings called the Tutayev Engine Factory.

They work all day but produce next to nothing. The factory loses money, but is not bankrupt. No one gets paid, but they don't go hungry. When the workers head home, they carry sacks full of bread and lunch pails full of dumplings, fish cutlets and potatoes.

It's a form of economic magic unimaginable in the West.

"The factory feeds us," 49-year-old Viktor Kuznetsov says over lunch in one of the factory cafeterias. Near his elbow is a tin box with a cafeteria supper he will bring home to his son. "The factory is everything to us."

Tutayev is a company town, Russian style. In Soviet times it supplied the factory with workers, and in return, the plant supplied most of the town's needs: food, homes, heat, electricity, day care.

Seven years after the collapse of the Soviet Union, Russian industry has largely ground to a halt. This plant, which once built 12,000 diesel engines a year, produced 222 in 1998.

Yet the factory has not gone into bankruptcy. It has not had layoffs. Defying the laws of economics, the Tutayev factory has stayed open. And it has kept feeding the town's 50,000 residents.

"In economic terms, what happens here makes no sense," factory director Boris Peshkov admitted. "It's absurd, nonsense."

It may not make sense, but it happens every day in towns across Russia.

Tutayev is a microcosm of this nation's many economic ills. And the story of why the town is still working and eating helps explain why the Russian economy continues to confound Western diagnosis and prescription.

Bruce Bean, head of the American Chamber of Commerce in Russia, expresses admiration for Russian survival skills. "It's as if the laws of economics are in suspended animation," he said.

Tutayev's economy survives because it is effectively cashless.

Instead of cash salaries, workers earn coupons f ration tickets issued by the factory that can be used for bread or dinner in the cafeteria. One meal coupon costs about 25 cents and is deducted from what the factory owes Protasova in back wages. A bread coupon of similar value will buy one loaf of white and one loaf of rye at the factory bread counter.

The coupon system extends into the town as well. Children get coupons for school lunches.

The coupons are currency in a local barter economy centered on the factory. The plant gets bread from the local bakery in return for supplying it with truck parts and a delivery fleet. Similar arrangements with local farms provide the food for the cafeteria. When a clothing factory needs truck parts, dresses appear in the company coupon store.

Factory director Peshkov knows how a market economy is supposed to work. In the early 1990s, he studied finance and management at George Washington University in Washington.

"What I learned in the United States doesn't translate here," he said.

If it did, the plant would no doubt have folded a long time ago.