Myth #194: After the war, Stalin carried out the predatory monetary reform of 1947.
Myth #194: After the war, Stalin carried out the predatory monetary reform of 1947.
Myth #195: Stalin's post-war economic policy was aimed not at the benefit of the population, but at the arms race.
These are foolish and irrelevant myths that have no basis whatsoever. The fact is that the 1947 currency reform was a necessary measure due to the consequences of the war. During a war, the monetary system of a country at war, especially if military operations are taking place on its territory, declines, and the country's currency depreciates due to both the decline in commodity-money relations and the inevitable surge in speculation, the shortage of civilian goods, and self-inflating inflation. Furthermore, Nazi Germany used counterfeit Soviet currency against the Soviet Union on an unprecedented scale, thereby attempting to undermine the Soviet economy during the war.
Stalin was a very far-sighted statesman and therefore began considering the need for post-war monetary reform as early as 1943. Since his renowned finance minister, Arseny Zverev, was the one most knowledgeable about this issue, it was natural for him to speak. Below are excerpts from his memoirs, "Notes of a Minister" (Moscow, 1973, pp. 231–235).
War causes three types of damage. Some of its consequences can be overcome relatively quickly, by rebuilding, for example, a destroyed road or house. Others are much slower to resolve, requiring a long period of time to recover from. Still others are eternal, like, say, human casualties or a great work of art destroyed in flames, without copies or sketches. The potential destabilization of commodity-money relations is a consequence of the second type. It is impossible to immediately bring the money supply under control once it has escaped control.
What was our primary concern from a financial perspective? Firstly, the population's tax and loan payments, which had accumulated during the war, were excessively high. Secondly, the increased money supply led to a depreciation of the ruble.
Even during the war, we began quietly preparing for the post-war monetary reform. I remember one day in late 1943, around five in the morning, I.V. Stalin called me at the dacha. I had returned from Kazakhstan that evening. The head of government apologized for the late (or rather, early) call and added that it was an extremely important matter. I was completely surprised by the question that followed. Stalin inquired about the People's Commissariat of Finance's views on the post-war monetary reform.
I replied that I had already thought about it, but had not yet shared my thoughts with anyone.
— Can you share it with me?
- Of course, Comrade Stalin.
"I'm listening." A 40-minute telephone conversation followed.
I expressed two main ideas: that the inevitable partial burden of the reform, arising from the exchange of currency, should be shifted primarily to those who had accumulated their money reserves through speculative means; that when issuing new currency, we should take our time and hold back a certain amount, so that there would initially be a slight shortage and the state could build up emission reserves. Stalin listened to me and then expressed his thoughts on the social and economic foundations of the upcoming measure. It became clear to me that this wasn't the first time he had considered reform. At the end of our conversation, he invited me to visit the State Defense Committee the following day.
A brief comment. Note A. Zverev's emphasis: "It became clear to me that this wasn't the first time he was thinking about reform." The war was in full swing, and although the back of the fascist beast had already been broken, the end of the war was still far off, and Stalin was already thinking about the future. And what's most interesting, judging by Zverev's words, he began thinking about this long before the end of 1943. Joseph Vissarionovich Stalin was a remarkable man. The incredible burden of wartime concerns—he was carrying five heavy responsibilities at the time, not to mention his personal responsibility for the fate of the Soviet Union—yet, lo and behold, the war didn't obscure the problems of the postwar future one iota. Stalin was a creator; all his thoughts were on creating a peaceful and happy future for the USSR and its great peoples.
This time, the conversation was lengthy. Each proposal was carefully considered. For example, the prospects for a transition to peacetime were thoroughly analyzed. During wartime, a significant portion of goods goes not to the civilian population, but to the army; retail trade fails to meet existing demand, and the money either remains in hand or ends up in the pockets of those who own farm produce or, worse yet, to speculators taking advantage of the difficult times. Either way, the money bypasses the state treasury. Normal monetary circulation is disrupted. To ensure timely payment of workers' wages, to cover military expenditures, and so on, the state is forced to resort to issuing currency. A surplus of money results.
We then discussed how to determine which categories of the population would accumulate excess money. What was the size of the national debt? Who was the creditor for this debt? How long would it take to print new money? A year? More? The technicalities of this undertaking were quite complex. Stalin gave me several general instructions, which were to be understood as directives. Deviations from them in detail were permissible if the specifics of the financial system so required, but the principles had to be strictly adhered to.
These principles were as follows: the USSR's financial base must be no less solid than before the war; the inevitable growth of overall expenditures and the annual increase in the budget as a whole require the financial system to be able to adapt to changing conditions over a number of years; the difficulties of restoring the national economy will require additional sacrifices from the citizens of the USSR, but they must be confident that these sacrifices are their last.
Stalin specifically stipulated, three times, the requirement for absolute secrecy during the preparation of the reform. He rarely repeated what he had said. This demonstrates the importance he attached to complete secrecy. Indeed, the slightest leak of information would have unleashed a cataclysm that would have complicated already complex issues. Even worse would be if the enemy learned of the plan and attempted to exploit the situation for their own ends. At this stage of the reform's preparation, I was the only one in the People's Commissariat of Finance who knew about it. I personally carried out all the preliminary work, including the most complex calculations. I regularly reported to Stalin on the progress of the work. Whether anyone else knew about this aforementioned plan at that time, I do not know.
About a year later, I presented a rough plan for the event at a meeting of the Politburo of the Central Committee of the All-Union Communist Party (Bolsheviks). After the meeting, the decision was not formalized in writing, so that no unnecessary papers on this important matter would remain in the archives of the Party General Secretary for the time being. The second stage of reform preparations began. I was authorized to employ three specialists.
A year later, when Stalin went on vacation, he informed me from there that he wanted me to present him with my report on the upcoming reform. I sent him a 12- page typewritten report. This was already the third stage of preparation for the event. After reviewing the materials, the head of government suggested that I expand it, including some explanations, to 90-100 pages and present it to him again in two weeks. Putting all other matters aside, I took on this complex task.
A brief comment. This report, dated October 8, 1946, and marked "Top Secret," thankfully survived. It's a pleasure to read, as it was written by one of the most competent financial experts. This is especially true since the report contains a detailed analysis of the history of money in the USSR since pre-revolutionary times. Those interested can read it in the excellent book by contemporary author Yu. I. Mukhin, "It's a shame for the country!" (Moscow, 2004, section two). Mukhin's own commentary is no less interesting.
Even earlier, I had wondered whether the reform could be used simultaneously to streamline the price system. I therefore inserted a special section into the new text on streamlining the finances of heavy industry. Along with other measures for this purpose, it was proposed to include additional elements of denomination in the terms of the monetary reform: reducing citizens' incomes and, accordingly, to prevent them from suffering, reducing prices on consumer goods and tariffs for transportation and other services by five times.
I did this on my own initiative, for which I received a corresponding reprimand. When Stalin called me from the south, I was not at the Ministry of Finance; I had spent the entire day sitting in various official commissions, moving from one building to another. Finally, they found me at a meeting of the State Control Committee. I heard Stalin's indignant voice over the phone: why had I inserted into the text a question that had not previously been discussed and that had no direct bearing on the monetary reform? My position, as they say, was "worse than that of the governor." People were sitting nearby who had no right to know about this matter yet. And because the material was classified, I could not say anything substantive. Stalin asked questions, and I was forced to respond with generalities and monosyllabic replies. Outraged by my tongue-tiedness, Stalin sternly reproached me, casually remarking that publishing such a report was hardly advisable (this had been his previous intention). Some time later, Stalin summoned me again. A lengthy discussion of the same text took place, with no negative comments regarding the additional section being made. We discussed the details of the reform, right down to the organizational and preparatory measures: themes for propaganda posters and lectures, the need to immediately begin selecting designs for banknotes with artists from Goznak, and so on.
A quick comment. The reprimand Zverev received shouldn't be seen as a manifestation of Stalin's tyranny, which never existed. The fact is, Joseph Vissarionovich always loved to strictly adhere to agreements. For him, this was a sacred duty. If something was agreed upon, then it had to be implemented. Of course, for all its fundamental importance, Zverev's initiative nevertheless fell outside his purview. Reducing citizens' incomes and significant changes to pricing policy, especially in terms of lowering them, were, at that time, the purview of the Politburo and the Council of Ministers. And frankly, Zverev should have first received at least verbal permission to justify such issues in connection with the problems of monetary reform. He didn't do this. For which he received a reprimand. However, note also that, having grasped the essence of the new, previously undiscussed issues raised by Zverev, Stalin accepted them as self-evident, requiring an appropriate solution, and no longer criticized his finance minister. Moreover, the depth and detail with which all issues were addressed at the highest level is astonishing. This is the essence of Stalin and his most effective ministers, among whom Zverev occupied a prominent place.
I received permission to involve 15 more people in the case (14 from the Ministry of Finance, one from the State Bank of the USSR), but on the condition that none of them would know about the plan as a whole, but would only receive an idea of their specific assignment.
At this stage, it was finally agreed that the abolition of the rationing system would coincide with the exchange of old money for new and the transition to uniform state retail prices for goods. I was tasked with preparing the first draft of the corresponding resolution and a draft appeal to Soviet citizens. These were to outline the currency exchange procedure; the procedure for revaluing deposits in the State Bank and savings banks; the conversion of previous loans; respect for the interests of workers; the desire to strike dishonest elements with the ruble; and the principles for abolishing the rationing system.
A decree of the Central Committee of the All-Union Communist Party (Bolsheviks) and the Council of Ministers of the USSR was published a year later. Beginning December 16, 1947, new money was issued, and cash, with the exception of small change, could be exchanged for it within a week (in remote areas, within two weeks) at a ratio of 1 for 10. Deposits and current accounts in savings banks were revalued at a ratio of 1 for 1 (up to 3,000 rubles), 1 for 2 (from 3,000 to 10,000 rubles), 1 for 3 (over 10,000 rubles), and 4 for 5 (for cooperatives and collective farms). All ordinary old bonds, except for the 1947 loan, were exchanged for bonds of the new loan at a rate of 1 for 3 of the previous ones, and 3-percent prize bonds were exchanged at a rate of 1 for 5. Taxes, debts, and financial obligations remained unchanged. State prices for bread, flour, cereals, pasta, and beer were reduced; state prices for meat, fish, fats, sugar, confectionery, salt, potatoes, vegetables, vodka, wine, tobacco, and matches remained unchanged; new prices were established for milk, eggs, tea, fruit, fabrics, footwear, clothing, and knitwear (3.2 times lower than commercial prices).
Documents on the reform, developed in advance, were promptly dispatched to the local state security agencies in special packages marked "Open only upon receipt of special instructions." One of the documents contained in the package stated: "Immediately deliver to the first secretary of the regional party committee." For some local officials, curiosity overtook duty. The packages were opened ahead of schedule. Rumors of the impending reform began to circulate. For this breach of state discipline, those responsible were severely punished. Their misbehavior did not hinder the overall implementation of the event.
So what was predatory about that monetary reform?
Myth #196: Contemporary political, government, and public figures characterized Stalin negatively.
This is such an inappropriate and stupid myth that you don't even know what to make of it. Because everything was exactly the opposite. Evidence?! Please.
Henri Barbusse, French writer: "...The story of his life is a continuous struggle of triumph over a continuous series of monstrous difficulties. There was not a year, beginning in 1917, when he did not perform deeds that would have brought glory to anyone forever. He is an iron man. His name gives us his image: Stalin—steel. He is unbending and flexible as steel. His strength is incomparable common sense, the breadth of his knowledge, amazing inner composure, a passion for clarity, inexorable consistency, the speed, firmness, and strength of his decisions, and constant care in the selection of people.
If Stalin believes in the masses, then the masses believe in him. In the new Russia, there is a genuine cult of Stalin, but this cult is based on trust and has its roots in the grassroots. The man whose profile is depicted on red posters—next to Karl Marx and Lenin—is a man who cares for everything and everyone, who created what is and will create what will be. He saved. He saves.
A man with the head of a scientist, the face of a worker, in the clothes of a simple soldier.
Stalin is the center, the heart of everything that radiates from Moscow throughout the world.”
Cordell Hull, US Secretary of State during World War II: "Stalin is a remarkable individual. He possesses extraordinary ability and intelligence, as well as a keen grasp of practical issues. He is one of those leaders, along with Roosevelt and Churchill, who shoulder a responsibility such as no man will know for the next 500 years."
Averell Harriman, US Ambassador to the USSR: “…He (that is, Stalin. – AM) has profound knowledge, a fantastic ability to delve into details, a lively mind, and a remarkably subtle understanding of human character… I found him better informed than Roosevelt, more realistic than Churchill, and in a sense the most effective of the military leaders.”
Yuri Paasikivi, President of Finland: "Stalin is one of the greatest figures in modern history. He firmly inscribed his name not only in the history of the Soviet Union, but also in world history. Under his leadership, the old history was transformed, renewed, rejuvenated, and transformed into the Soviet Union of today. He elevated the USSR to the level of a powerful world power—made it more powerful than Russia ever was or could be."
Stalin was one of the greatest state builders in history. Stalin displayed sympathy and friendship toward Finland. Therefore, his passing brings sincere grief to our people. I had the opportunity to meet with Generalissimo Stalin on many occasions and hold talks with him. I retain the most pleasant memories of these meetings."
Harry Hopkins, American statesman and diplomat, close aide and confidant of US President Roosevelt: "... Stalin never repeated himself. He spoke the way his troops fired—accurately and directly. He greeted me with a few quick Russian words. He shook my hand briefly, firmly, and graciously. He smiled warmly. There was not a single superfluous word, gesture, or grimace. It was as if you were talking to a remarkably balanced machine, an intelligent machine.
Joseph Stalin knew what he wanted, he knew what Russia wanted, and he assumed you knew it too. During this second visit, we talked for almost four hours. His questions were quick, clear, concise, and direct. Tired as I was, I responded in the same tone. His answers were quick, unambiguous, and delivered as if he had thought them out years before.
Christopher, Patriarch of Alexandria: "Marshal Stalin... is one of the greatest men of our era, has confidence in the Church and is favorably disposed toward her... Marshal Stalin, the Supreme Commander-in-Chief, under whose leadership military operations are being conducted on an unprecedented scale, has an abundance of divine grace and blessing for this, and the Russian people, under the brilliant leadership of their great leader, with unrivaled self-sacrifice, are inflicting crushing blows on their age-old enemies."
Pablo Neruda, Chilean poet and public figure: "...And here's my position: the dark sides of the personality cult period, which I was unaware of for many years, could not erase from my memory the image of Stalin that I had formed from the very beginning—an image of a man strict with himself, like an anchorite, a titanic defender of the Russian Revolution. Moreover, the war exalted this short man with a large mustache. With his name in mind, the Red Army soldiers stormed Hitler's fortress and left no stone standing."
Alexy I, Patriarch of Moscow and All Rus':
"The Great Leader of our people, Joseph Vissarionovich Stalin, is no more. A great force, a social force, has been abolished. It was a force in which our people felt their own strength, a force by which they were guided in their creative labors and undertakings, a force by which they found solace for many years. There is no realm into which the great Leader's profound gaze did not penetrate... As a man of genius, in every undertaking he revealed what was invisible and inaccessible to the ordinary mind."
A.F. Kerensky, Prime Minister of Russia in 1917 and a prominent figure in the anti-Soviet White émigré movement: "Stalin raised Russia from the ashes. Made it a great power. Defeated Hitler. Saved Russia and humanity. Showed what Russia means to the world."
Lion Feuchtwanger, a prominent figure in Germany's Jewish intelligentsia and writer, wrote: "Stalin... worked; he was on the right path. He united the peasants into artels, cultivated the soil for socialism in the Soviet Union, and built socialism. If Lenin was the Caesar of the Soviet Union, then Stalin became its Augustus... The reality he created refuted Trotsky's irrefutable theories."
And there are so many such statements—it's impossible to list them all. No book could cover them all. After all, even such sworn enemies of Stalin as A. Hitler and W. Churchill, and what is called "unanimously" praised Stalin as an outstanding statesman of global stature, emphasizing his creative genius.
It's also surprising that even those who met Stalin during his lifetime but subsequently radically changed their opinions of socialism never changed their opinions of Stalin himself. The story of the writer Emil Ludwig is particularly telling in this regard. As early as 1930, he decided to write a biography of Stalin, collected materials, and was even granted an audience with Joseph Vissarionovich. He completed his work on Stalin only in 1945, having revised it several times beforehand, ultimately revealing himself to be a staunch opponent of socialism. However, this in no way altered his assessment of Stalin as a world-class figure of caliber!
This is how Joseph Vissarionovich Stalin was assessed by his contemporaries. And we, living today, would certainly do well to learn from them how to be objective in assessing such an outstanding man and statesman!
Myth #197: Stalin planned M.A. Suslov as his successor.
