In the previous section we described what was happening in Europe after the end of World War I. Today we will look at the economic and monetary policy of the Soviet Union. We devote this issue to a person, because actually, for the first time in history, someone was trying to implement ideas so utopian that they seemed unreal until now.
Soviet Union – communist utopia is becoming a fact
The word ‘utopia’ from this headline is used in an ironic context. It is hard to believe that Vladimir Lenin and his successors managed to create a paradise on earth. Rather, they built one of the most criminal countries ever to exist. One by one, however.
According to Marxists, capitalism was an unfair regime that did not allow workers to be fully appreciated. They noticed that the factory owner (or capitalist) left too much profit. Let’s put aside the assessment of this position. This is a topic for a separate text, and these views can be seen today among Polish leftists …
But what did the communists offer in return? And here comes the first big problem. In the writings of Marxist classics alone, we will not find any precise directions on how to build this paradise on earth. We learn from them that capitalism is bad. But what will people get in return? The means of production were to be socialized, which was supposed to eliminate social injustices and inequalities. All market mechanisms as well as money were to disappear. In other words, they wanted to create a system that had never existed in human history before. The very idea of eliminating money, which has existed in various forms since the emergence of the economy, must seem crazy to every reasonable person. It seemed great to the communists!
The economy was to be managed by means of so-called central planning. The domestic market was therefore to become one big factory …
It is ironic, however, that the communists and Vladimir Lenin were really capitalist states. This fact is still not sufficiently publicized and strangely avoided during school education. Not to mention the fact that in Poland during the PRL he was generally taboo. Behind the scenes of Lenin’s rise to power was described, for example, by Anthony C. Sutton in the book “Wall Street and the Bolshevik revolution“. We encourage you to read!
In any case, remember that Lenin took power as a result of the October Revolution, which was the result of the collapse of the Russian state during World War I. The leader of the “red” was transported to Russia in a special wagon and, as a result, taking over the reins of government (for the purposes of this text we describe this process briefly) ended the conflict with Germany, signing a peace treaty that is not favorable to his country. In short, the coming to power of communists in Russia was on hand for many opponents of this falling power – from the Germans (it was about the issue of fighting on the front: the end of the war with Russia gave Germany a chance to transfer troops to the Western Front) to the Wall Street financier who benefited on this financially.
After taking over power, the communists quickly got to work. In December 1917, the central bank was nationalized. Other banks were also liquidated. Already in January of the following year, citizens were forbidden to own gold, while the state had a monopoly on trade in it.
Tsarist Russia’s foreign commitments to France were estimated at USD 5 billion. As a result of the decision of the new authorities, this debt was completely canceled. This led to the collapse of economic relations between Bolshevik Russia and the West. Who would want to trade with such an uncertain partner?
The communists continued their policy. In April 1918, a foreign trade monopoly was introduced. All trade was banned and the state took over the supply of the market. It gained food by plundering people in the villages. Food supplies were sent there, and the peasants were forced to give them surplus food. To be more precise, they were paid money for it, but this – towards it inflation – they were worthless papers. In this way, an attempt was also made to eliminate money.
Ultimately, the whole process collapsed in the spring of 1921. In the villages, mass revolts of peasants and rebellions of the Baltic Fleet sailors began.
As a result, Lenin proclaimed the New Economic Policy (NEP). This was carried out until the mid-1920s. Supporters of communism like to refer to this period. NEP meant the return of a certain economic freedom. In a sense, a return was made, which China would make in the 1980s. Small private property allowed. Small enterprises were allowed to operate. The peasants began to pay taxes in kind, but they could also sell their surpluses on the market. The system turned out to be quite efficient for Russian conditions, as it again encouraged people to work.
Returning to this form of the economic system required money to be repaired and banking rebuilt. The currency was rebuilt through a series of denominations. In 1922, a ruble was issued, which was exchanged for existing rubles in a ratio of 1:10 00 rubles. A year later there was another exchange in the ratio of 1: 100 rubles from 1922 or 1: 1,000,000 “original” rubles.
From the end of 1922, the so-called “Dysentery”. They were banknotes with a denomination of 10 zlotys pre-revolutionary rubles. Their market share increased. In 1924, all money in exchange for 1 rubles zloty from 1924 was exchanged for reds = 50,000 rubles from 1923 = 5,000,000 rubles before 1922. To be honest, we do not believe that there were no frequent mistakes during the exchange , because it would be harder to complicate this system. Ultimately, 1 June was 10 rubles. Unlike ordinary rubles, it was also exchangeable for foreign demand for gold.
The currency issue was dealt with by Gosbank, the central bank. In the autumn of 1922, the Bank of Foreign Trade, Bank Przemysłowy and Spółdzielnia Bank were established, followed a few years later by Bank Budownictwa Mieszkaniowego.
No more free market
Unfortunately – as you know – this is not a story with a happy ending. The Soviet Union did not begin to evolve towards a country with a free market. In 1924 Włodzimierz Lenin died, who more than a dozen months earlier was removed from power – officially because of his health, but in fact in the background the struggle for power was already underway. Although he himself in his later censored cautionary warn others against Joseph Stalin, a Georgian whom he had somehow invited to Soviet salons, it was the “steel man” who took over the reins of Lenin.
In the second half in the 1920s, the USSR began to move towards “socialist industrialization.” It assumed as a priority the development of heavy industry and the aspiration for the country to become self-sufficient. In addition, agriculture was collectivized.
Industrialization was to take place at the expense of the countryside, in such a way that as a result of lowering food prices, they wanted to achieve low labor prices. The state also took on market and price regulations, thereby ultimately destroying the free market.