But the financial crisis has highlighted just what happens when markets fail. In the months before the crash, it was already apparent that Russia was developing its own brand of capitalism. Now the country is operating in a kind of economic never-never land that seems to grow stranger by the day. This is an economy that defies Western logic. You have to live here and talk to people to understand how they can keep going when they don't get paid.
Most companies are essentially bankrupt but keep cranking out goods.
You have to travel outside Moscow to get a feeling for how an economy can function when there is no effective banking system and never enough cash. Only in Russia could companies get away without paying their electricity or heating bills yet rarely face power cutoffs. To keep the electricity company from turning off the lights, the government makes up for its missing payments with a tax credit. It's a bizarre and oddly flexible economic model. Some economists call it the ''virtual economy,'' because real money, real goods, and real output play such a small role.