Soviet Price System during the Great Patriotic War

 Pricing in the national economy of the USSR

The war was a severe test for the Soviet economy, which convincingly demonstrated its enormous advantages over the capitalist economy during the terrible war years. Withstood the test of wartime and the Soviet price system.

During the Great Patriotic War, the socialist state successfully used the price instrument. It used this tool in order to reduce the hardships of war experienced by the people by actively influencing the costs of the war industry, in order to protect the real wages of workers and employees from the influence of spontaneous price fluctuations in the unorganized market, in order to strengthen incentives for collective farms, and collective farmers to fulfill their economic obligations to the state. In the course of the war, the socialist state succeeded in ensuring the stability of wholesale prices for raw materials, fuel, industrial equipment, and retail prices for consumer goods in rationed trade, and at the same time significantly reduced wholesale prices for military products.

The significance of this fact will become clear if we take into account the exceptional difficulties that faced the economy of the USSR during this period in the way of implementing the Soviet price policy.

The Great Patriotic War caused significant changes in the commodity circulation of the country. The temporary loss of part of the territory with highly developed agriculture, heavy, light and food industries, the switching of very many enterprises to the production of military equipment - all this led to a significant reduction in the production of food and industrial goods; at the same time, the share of the market fund in the total balance of consumer goods fell sharply in favor of increased military consumption. Huge military spending, in turn, required the partial use of emissions in the first years of the war as an additional source of financial resources allocated by the state to finance the war.

By introducing rationing of consumer goods, the state has maintained a stable level of state retail prices for food and other essential goods. The preservation of pre-war prices for rationed goods was associated with certain losses for the state. These losses were caused, in particular, by the fact that pre-war prices did not correspond to the costs of production of consumer goods, which increased significantly as a result of: the temporary loss of areas that supplied many branches of industry with the cheapest agricultural raw materials; reducing the yield of agricultural raw materials and the productivity of livestock; deterioration in the indicators of the use of raw materials due to the retirement of many technically advanced enterprises; growth in wage costs per unit of output.

However, the state deliberately accepted these losses, considering them as inevitable losses of the war period, without which it is impossible to ensure the stability of the budget of the working people, and, consequently, the level of labor productivity necessary for the developing military economy.

Other relations in the field of prices have developed outside the organized market. Since the state prices for rationed goods remained unchanged, the entire excess money supply went to the collective farm market, which continued to function during the war. The share of the collective farm market before the war in the entire volume of retail trade was 19%. In the first years of the war, the amount of money opposed to goods sold in collective farm trade increased many times over. As a result, prices at the collective farm markets in the cities rose sharply during the first period of the war. Price increases continued until mid-1943.

Having ensured a regular supply of the population at stable rates and prices, the Soviet state was able, as agricultural production was restored and the output of industrial goods increased, to send a certain amount of food and other essentials to supply the population in excess of cards in the form of special, commercial trade. With the help of such irregular, commercial trade, the Soviet state satisfied the excess consumer demand that was not covered by the rationed supply, and also extracted additional financial resources to finance military needs and the national economy. Prices in commercial trade were determined taking into account: the availability of commodity resources that could be directed by the state into the channels of commercial trade, the need for a certain compensation for losses caused by the preservation of pre-war prices in normalized trade, as well as the interests of strengthening the economic impact on the collective farm market.

The development of commercial trade and the gradual reduction of the prices operating in it had a beneficial effect on the collective-farm market. At the same time, commercial trading was an extremely important preparatory stage for the development of open trading without cards.

Simultaneously with the stability of retail prices for consumer goods sold in rationed trade, the Soviet state ensured during the war a sharp decline in wholesale prices for military equipment, equipment of the armed forces, as well as the stability of wholesale prices for means of production and other types of civilian products.

The major successes achieved by Soviet industry in the design of models of military equipment, the introduction of advanced technology and the organization of mass military production created the conditions for reducing the cost of producing weapons and equipment for the armed forces.

The cost of certain types of tanks, aircraft, artillery, and small arms decreased by 2-3 times. In general, during the war, the cost of military products decreased by more than 50 billion rubles. This made it possible to correspondingly reduce wholesale prices for products supplied under military orders, and at this expense to achieve significant savings in military spending.

The situation with the cost of production of heavy industry was somewhat different. During the war years, there were significant changes in the economy of the most important branches of heavy industry: the temporary loss of the Donetsk coal basin, Krivoy Rog iron ore basin, southern metallurgy, Dnieper electric power system; relocation of many first-class machine-building enterprises to the east; fundamental changes in transport links; loss of qualified personnel. The interests of the accelerated development of the raw materials and fuel and energy branches of heavy industry demanded the introduction of especially stimulating wage systems in these branches of industry.

Under these conditions, the cost of production in a number of branches of heavy industry increased during the war period. The gap formed as a result of rising costs between the increased level of production costs of heavy industries and the relatively low wholesale prices for the products of these industries established before the war could be eliminated in two ways: either by raising wholesale prices to the level of increased costs, or by covering the resulting planned losses of heavy industries through subsidies from the state budget.

The Soviet government maintained pre-war wholesale prices for heavy industry products, introducing as a temporary measure for the period of the war a system of state subsidies to planned unprofitable branches of heavy industry.

The stability of wholesale prices for industrial raw materials and fuel, as well as transport tariffs, was an essential factor in the struggle to reduce the costs of military production. In order for the huge reserves in industry associated with the deployment of mass military production to be fully revealed and mobilized for the needs of the state, accurate, reliable accounting of the own costs of military enterprises was required. Such accounting of costs and the effective impact of the state on their level could not be ensured with unstable, rising prices for industrial raw materials, fuel, and electricity.

The preservation of pre-war prices for industrial raw materials and fuel, as well as transport tariffs, despite their unprofitability caused by wartime circumstances, was also dictated by the interests of stability of state retail prices for consumer goods. The needs of the population for goods of mass demand could be satisfied in the conditions of war by involving not only centralized funds, but also local resources in the trade turnover. At the same time, compliance with the Soviet price system, i.e., the stability of state retail prices for all rationed goods, including locally produced products, and a consistent reduction in commercial prices could not be ensured under the conditions of growing wholesale prices for means of production and tariffs for freight transportation.

Finally, bringing the wholesale prices of the means of production into line with their prime cost established during the war would mean that the post-war restructuring of the national economy had to be carried out on the basis of high prices and value relations between the sectors of the Soviet economy that did not meet the conditions of peaceful construction. This circumstance could create additional difficulties in the transition of industry after the end of the war to the rails of peaceful economic development.

All this made it expedient to maintain pre-war wholesale prices for heavy industry products. At the same time, the losses of heavy industry were more than offset by the savings from the reduction in production costs of the military industry, which was redistributed with the help of the levers of the state budget.

Of all the belligerent states, only the Soviet state systematically reduced prices for military products during the war.

Things were different in the bourgeois countries. The capitalist monopolies of the USA, Britain and other bourgeois countries used the war as a means of monstrous gain. Thus, with the help of the notorious policy of the state "regulation of wages and prices", American monopoly capitalism achieved a "freeze" of wages and turned all the benefits associated with the growth of labor productivity in conditions of mass war production into the source of its colossal enrichment.

At the same time, under the pretext of allegedly having to make sacrifices on the part of the state in the interests of stabilizing prices, the American monopolies made extensive use of the tax pressure to further redistribute the incomes of the working people in their favor. Thus, the so-called regulation of prices in the USA, England and other capitalist countries during the Second World War represented the form of "regulation of economic life" that V. I. Lenin had in mind when he said in the days of the First World War:

“Both America and Germany “regulate economic life” in such a way as to create military hard labor for the workers (and peasants in part), and paradise for bankers and capitalists . Their regulation consists in the fact that the workers are "pulled up" up to starvation, and the capitalists are provided (secretly, reactionary-bureaucratically) with profits higher than those that were before the war .

First of all, the "regulation" of prices in the capitalist countries did not rule out a direct and, moreover, quite significant increase in official list prices during the war.

As early as 1943, according to official data, wholesale prices in the USA increased by 35% and in England by 67% against 1939. 3 In this case, the actual increase in prices was much higher than according to official statistics. Firstly, in each of the warring bourgeois countries, along with the market, which was subjected to certain state influence, there was a so-called black market with significantly higher prices. Secondly, official state statistics provide only data on the movement of list wholesale prices, ignoring other sources of increasing the incomes of the capitalist monopolies and thereby concealing from the working people the real prices and profits of the capitalists. Meanwhile, the Second World War introduced a lot of new things in relation to the sources of monopoly profits of the capitalist associations. Along with a direct increase in prices, the bourgeois states during the Second World War made extensive use of tax methods of redistributing the incomes of the working people in favor of the capitalist monopolies. Thus, under the guise of the need to stabilize prices for goods, state subsidies were issued in excess of the established prices. In England, at the expense of taxpayers, a state subsidy was paid to firms in charge of the wholesale supply of food, amounting to about 600 million pounds during the war years. In the United States, government subsidies were paid from the state budget, that is, also at the expense of taxpayers, for many types of strategic raw materials (copper, lead, liquid fuel, etc.). Thus, by giving the appearance of price stability and rejecting demands for higher wages, the bourgeois states ensured, by raising taxes on wages, an increase in the incomes of the capitalist monopolies.

Another form of deliberate concealment of the real rise in prices and profits of the capitalist monopolies during the war was the attribution to the taxpayers of a significant part of the costs associated with the production of products for state orders.

For government orders in the United States, an unheard-of high rate of depreciation of fixed capital was adopted - 20% per year. At the same time, the capitalist monopolies were allowed to include deductions to various insurance and reserve funds in their calculations, which allowed them to hide a significant part of their profits from taxation. The prices of military products guaranteed a huge level of profit in all cases. This is a consequence of the management of the capitalist monopolies, which used the fulfillment of military orders to obtain the highest possible profits.

That is why the Second World War was so exceptionally advantageous for the capitalist monopolies. During the war, the net profits of all American corporations (net of taxes paid) exceeded almost 3 times the level of pre-war profits, as can be seen from the following table:

	Five pre-war years (1935-1939)	Five years of World War II (1940-1944)
Net profits of all American corporations	$15.3 billion	$42.3 billion