The centralization of banking - Financial and Monetary Policy of the Soviet Power during the Civil War

The development of the Soviet economy

Lenin considered banks as an instrument of nationwide accounting and control over the production and distribution of products, therefore the mastery of banks, the centralization of banking in the country was one of the first and most important tasks of the economic policy of the Soviet government. At the 7th Congress of the RCP(b), Lenin, developing the idea of universal control and accounting through the banking network, pointed out: “Here we set the specific task of organizing consumption, universalizing banks, turning them into a network of state institutions covering the whole country and giving us public accounting, accounting and control carried out by the population itself, which underlies the further steps of socialism ”[Lenin, Soch., vol. XXII, p. 355.]. 

The centralization of accounting in banks assumed the use of money as an instrument of this universal national economic accounting. 

Lenin saw the main task of financial policy in the implementation of an income and progressive property tax. The issue of paper money, as well as the indemnity, according to Lenin, were necessary as emergency and transitional measures. In the middle of 1918, Lenin considered it necessary to move to a centralized collection of progressive income tax with very frequent deadlines. Income tax was to be levied on citizens receiving income from the state treasury. The progressive property tax was to serve as a tool for the dictatorship of the working class in the struggle against the bourgeoisie in town and country.

 In order to exercise comprehensive control over the parasites who got rich in connection with the war, Lenin proposed such a measure as the introduction of "budget and tax books", in which all the income of the owner should be recorded and the payment of taxes, as well as the socially useful work performed by him.

But all these measures were transitional, temporary. The basis of finance under the dictatorship of the proletariat is public property and the main source is income from state enterprises. The working class, taking possession of the instruments of production of the bourgeoisie, uses them to fight the bourgeoisie, to destroy classes. In this regard, all previous forms of taxes are used “... in all cases when this is possible. But these cases, Lenin wrote in the draft program of the RCP(b) in 1919, cannot be numerous after the abolition of private ownership of land and most factories, plants, and other enterprises. In the era of the dictatorship of the proletariat and state ownership of the most important means of production, the finances of the state must be based on the direct circulation of a certain part of the revenues from various state monopolies for the needs of the state. Balancing revenues and expenditures is feasible only if the exchange of goods is properly organized, to which the organization of consumer communes leads and the restoration of transport, which is one of the main immediate goals of Soviet power ”[Lenin, Soch., vol. XXIV, p. 104.]. 

Among the sources of funds in the first period, almost all tax revenues of the previous lists remained: income tax, income tax, lump sum tax, various excise taxes, duties and income from property and enterprises. 

The spearhead of financial policy during the years of the civil war was directed against the exploiting classes of town and countryside. One of the first important acts of the period of the civil war in the field of finance was the decree of the All-Russian Central Executive Committee of November 2, 1918 "On a one-time extraordinary ten-billion revolutionary tax." This decree was issued at a time when the young Soviet Republic was exerting all its strength to fight internal and external counter-revolution, when the Red Army was just being created. Committees of the poor, village, volost and city councils were involved in the collection of a one-time emergency tax. 

The financial policy of the Soviet government underwent major changes in 1919 and 1920. The nationalization of banks, industry, private trade, and the transfer of the entire mass of commodities into the hands of the state narrowed the economic base of the urban bourgeoisie, and finally brought it to naught. At the same time, the depreciation of money deprived the monetary taxation of any meaning. 

The issue of paper money was a major financial source in the early years of the civil war. By the end of the civil war, the depreciation of money and the narrowing of the sphere of their circulation led to a sharp drop in the real value of the issue. By issuing paper money, the Soviet authorities hoped to use them as an additional leverage for mobilizing local circulation resources. There was not and could not be a complete closure of the market; private trade existed in an illegal form. During the entire period of the civil war, non-rationed products - and after the fulfillment of allocation obligations, many rationed - were freely sold by peasants at local bazaars: potatoes, dried mushrooms, fruits, honey, dairy products, etc. Industrial products were not allowed to be sold - sugar, salt, kerosene, tobacco, manufactory, i.e., severely scarce. But along with bread, they became objects of speculation, they were widely exchanged for bread in the bazaars. The ever-increasing mass of paper money in circulation was opposed by an ever-decreasing fund of real goods, which was reduced primarily due to industrial production. Natural, mainly speculative exchange grew. The role of paper money was reduced in general, and, consequently, the real amount of income from the issue should have fallen. 

The narrowing of the sphere of circulation of money with the increased work of the printing press and the abolition of many taxes led to a huge drop in the purchasing power of the ruble, as can be seen from the following table: 

Amount of money in circulation (as of January 1)

 

	1918	1919	1920	1921
Amount of money in circulation (in billion rubles)	27.3	60.8	225.0	1168.6
The real value of paper money according to the All-Russian index of labor statistics (in million rubles)	1315.6	370.5	93.0	69.6

 The depreciation of banknotes proceeded with great rapidity. By the end of 1920, the value of the paper ruble had fallen in comparison with 1913-1914. almost 13 thousand times ["On New Ways", no. II, ed. STO, p. 158.]. With such a rapid rate of depreciation, money was already performing its functions poorly. A characteristic everyday phenomenon was the naturalization of exchange and savings. Having received a salary, the worker and employee tried to immediately turn it into some kind of product. City dwellers exchanged clothes, furnishings, etc. directly for bread and other agricultural products. The kulaks, who, in spite of all prohibitive measures, managed to speculate in bread, accumulated the most diverse objects: pieces of manufactory, costumes, dresses, furniture, gramophones, even grand pianos and pianos - speculative accumulation assumed such a bizarre natural form. Separate salable products turned into a kind of money commodity. So, for example, in the Volga region on the illegal market, the role of a monetary commodity was played by salt, imported by bagmen from Astrakhan. The same role was played almost everywhere by rye and wheat flour. Such "money" was used by small sack speculators. Larger underground predatory speculators exchanged goods for gold (gold coins of pre-war minting). 

After the decree of the Council of People's Commissars of March 4, 1919, the only source of funds for all state enterprises was the state budget appropriations according to the list of national revenues and expenditures. All cash receipts of enterprises surrendered to the treasury. 

In connection with the transition to estimated financing of all industrial enterprises, all shares and shares of joint-stock companies and partnerships, the enterprises of which were nationalized and sequestered, were canceled, even if these enterprises had not yet passed to the state, but were listed in the gratuitous use of their former owners. Also canceled were private debts of enterprises made before nationalization, debts of state enterprises to the People's Bank and state credit institutions. 

The depreciation of money and the naturalization of economic relations in 1920 led to the fact that previously existing financial sources lost all economic significance. During 1920, a number of resolutions of the Council of People's Commissars abolished the collection of payment from state enterprises for electricity and water supply, abolished charges in favor of the state for products of the nationalized industry, abolished the collection of payment from Soviet institutions, enterprises, and farms for the use of mail, telephone, telegraph, radio and etc. 

With minimum fixed prices for rationed products sold to the population, the role of the state's cash income from the sale of products also lost economic significance. On December 4, 1920, the Council of People's Commissars issued a decree on the free distribution of food to workers and employees entitled to rations. The wages of workers and employees in cash in 1920 were less than 7% of their real wages, the remaining 93% of the total wages were rations, utilities, housing, etc. 

Despite the rapid depreciation of money, they played a significant role during the civil war. The issue of paper money in the current extremely difficult situation was a means of concentrating significant values ​​in the hands of the state. But the value of emissions decreased from year to year. If we conventionally take the income of the state from the two most significant sources at that time - emission and surplus appraisal - as 100, then it turns out that the share of surplus appraisal increased over the years from 1918/19 to 1920/21 from 20 to 70%. 

These figures once again show that the bulk of industrial output was accounted for and distributed among consumers in kind. Transport services, utilities, etc., with a few exceptions, were provided free of charge. 

This naturalization process can also be illustrated by the following comparison of gross output figures with data on the movement of the state budget. 

The movement of gross industrial output and the state budget (all data in pre-war rubles):

 

	1913	1918	1919	1920
Gross output of the licensed industry (in million rubles)  In % to the level of 1913	6391  100	1860  29.1	962  15.1	835  13.1
The state budget:  Revenues (in million rubles) In % to the level of 1913  Expenses (in million rubles) In % to the level of 1913	3431.3 100   3382.9 100	199.7 5.8   594.6 17.6	63.1 1.8   277.6 8.2	19.4 0.5   147.8 4.4

While gross industrial output in 1918 amounted to 29.1% of pre-war output, state budget revenues fell to 5.8% by 1913. In 1919, there was a further decline in both absolute and relative revenues for the state budget. In 1920, state budget revenues amounted to only 1 / 2 % by 1913, with a reduction in industrial output to 13.1%. The state budget, if we take only estimated monetary appropriations, did not at all reflect the real picture of the movement of real values. 

Lenin's instructions on the importance of money as an instrument of accounting and control, given by him as early as April 1918, could not be put into practice under the conditions of war communism. The depreciation of money and the naturalization of the national economy postponed this task for the entire period of the civil war. It was only after the end of the civil war that the Soviet government was able to set a real task of stabilizing the Soviet ruble. 

The civil war could not but affect the state of accounting and control. Often the abuses were in the nature of deliberate wrecking on the part of elements hostile to Soviet power. Therefore, the actual control over the execution of economic plans was a tool in the fight against sabotage, abuse, and speculation. 

Paying great attention to the correct organization of financial control, Lenin was concerned in every possible way about the regime of economy, about the rational use of money. At the same time, the Trotskyists preached the most harmful "theory" and even put forward draft laws on the destruction of money, which met with a sharp rebuff from Lenin. At the first All-Russian Congress on Out-of-School Education in May 1919, Lenin said: “... as long as money remains and will remain for quite a long time during the transitional period from the old capitalist society to the new socialist” [Lenin, Soch., vol. XXIV, p. 293]. 

The practice of socialist construction confirmed Lenin's instructions. Subsequently, Comrade Stalin, developing Lenin's theory, pointed out that the money would remain until the end of the first phase of communism. 

The process of naturalization of the national economy was greatly influenced by the economic blockade of the Soviet Republic by the Entente; The blockade led to an almost complete cessation of economic relations between the Soviet Republic and the outside world. Exports during the years of the civil war amounted to an extremely insignificant value in terms of their economic value; imports in 1919 amounted to 0.1%, and in 1920 - 2.1% of the pre-war. 

After the failure of the intervention and the lifting of the blockade, the elementary conditions for trade relations with foreign countries were restored. Separate groups of the foreign bourgeoisie put pressure on their governments and sought the opportunity to trade with Soviet Russia. The conclusion of peace with Estonia was a "window to Europe", a victory for the Soviet government, which gained the opportunity to trade with all peoples. 

Thus ended in failure the armed struggle of the interventionists and the White Guards against the Soviet regime. 

War communism, as it is also stated in the program of the Comintern, was not the normal policy of the dictatorship of the working class, designed for peaceful construction. At the same time, war communism was also not a mistake or an oblivion by the Bolsheviks of the economic teachings of Marx, as portrayed by the enemies of Soviet power. This policy, Lenin emphasized, cannot be blamed on us, it must be credited to us. It would be political blindness not to understand that War Communism was a temporary measure; this policy was necessary and accepted by the ally of the working class, the peasantry, as long as there was a threat of the return of the landlords. It became unsuitable in conditions of peaceful construction, because the surplus appraisal deprived the small peasant of an incentive to develop his economy. Under the new conditions, it was not enough to have a military-political alliance between the working class and the peasantry,