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tion. This meant that all lobbyists were in effect pursuing a common goal: derailing the government's policy of financial austerity.

Given the large number of actors and the well-known difficulties of collective action involving many agents, analysts would expect such collusion to be difficult to achieve (Olson, 1965). However, two factors eased the problem of collective action for Russian firms seeking government subsidies. First, these firms historically were organized into sectoral groups (formerly controlled by branch ministries), and it is usually these groups, rather than individual producers, that are represented by lobbies. Second, and most important, in the absence of conventional corporate control and functional input markets, the Russian economy has spontaneously switched to an alternative institutional arrangement, one that promotes collusion rather than competition. This institutional arrangement is based on mutual nonpayment.

NONPAYMENT AS A SPONTANEOUSLY DEVELOPED INSTITUTION

Apart from achieving price stability, one of the main rationales for introducing tight monetary policy was to eliminate the notoriously "soft" budget constraints faced by Russian firms, thereby compelling them to become cost conscious and profit oriented. "Hard" budget constraints would make producers sensitive to market signals and thus promote restructuring. This restructuring could take the form of shedding redundant labor, reducing nonlabor production costs, replacing obsolete equipment, switching to new product lines, or—should none of these options prove viable—going out of business through bankruptcy and liquidation.

As was detailed above, the inadequacy of input markets greatly impeded restructuring, but at least as important a role was played by the lack of a clearly defined and enforceable ownership structure for productive assets. With de jure property rights in limbo and de facto under the control of the firms' prereform management and labor representatives, there was little internal pressure on firms to engage in bona fide restructuring. Instead, faced with dwindling cash flows and unable to devise alternative strategies for securing income either through the market or (initially) through the government, firms resorted to the next available option: they ceased paying each other's bills.

When nonpayment became a universal modus operandi, insolvency was no longer an unequivocal indicator that a firm was nonviable. It could just as easily be an innocent victim of its nonpaying customers. The impossibility of assessing the economic health of enterprises on the basis of their books further undermined the prospects for restructuring in general. As a result, the economic signals required to guide the correction of inherited structural distortions were absent (Ickes and Ryterman, 1993), along with the input markets



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