The Russian Revolution/Chapter 10
X.
MONEY, PRICES AND WAGES.
As a part of its general plan for Communism, the Soviet Government aims ultimately to abolish money entirely. But so far this has not been done. On the contrary, Russia is now being flooded with an unheard volume of paper money. So great is this that the manufacture of such money has become an important industry, employing 13,000 persons. Last year 3000 tons of rags were consumed for paper money making; and every month from 60 to 70 freight car loads of new paper rubles left Moscow for various parts of the Soviet Republic. It is a literal deluge of money.
In his splendid book, "Social Revolution and Finances," Preobrazhensky, Peoples' Commissar for Finance, cites the following figures to show the totals of money production, year by year, since the outbreak of the world war. From them the monster increase in the volume of money is strikingly apparent:
| 1915 | 2,611,200,000 | rubles |
| 1916 | 3,379,200,000 | rubles„ |
| 1917 | 18,091,200,000 | rubles„ |
| 1918 | 33,951,600,000 | rubles„ |
| 1919 | 163,750,800,000 | rubles„ |
| 1920 | 943,581,600,000 | rubles„ |
| 1921 (4 months) | 754,000,000,000 | rubles„ |
The Soviet Government is the first institution to operate financially upon the basis of trillions. And at the rate its money output is increasing soon its totals will take on true astronomical proportions.
The persistence and vigor of the monetary system in revolutionary Russia is explained very simply. It is because it is really a form of tax upon the large body of independent producers in non-nationalized industries—chiefly the peasants, who make up 85 per cent of the whole population. These petty bourgeois elements, besides really believing in the institution of money, have an actual need for a medium of exchange. Hence the Government issues them enormous quantities of paper rubles adorned with bright revolutionary mottoes, and gets in exchange large quantities of grain, cattle, and other commodities vitally needed by the army, the city dwellers, etc. The essence of the exchange is that the Government puts in a little printed matter and takes out great masses of substantial products.
Last year this process netted the Soviet Government 250,000,000 gold rubles' worth of commodities. And thus, in fact, the deficits in the national budget have been made up every year since the revolution. What the Government has been unable to realize from the output of its nationalized industries and from direct levies in kind upon the independent producers it has always made up by the "sale" of its paper money. Through the medium of the monetary system it has been able to extract indirectly from the money-loving petty bourgeois elements large amounts of supplies which, with all its armed power, it could hardly take from them directly by taxes.
Of course, the peasants and other independent producers object to the flood of paper money and at each fresh torrent of it they hastily raise prices accordingly. But they are always too late. The scientific Socialists at the head of the Soviet Government understand the laws of economics far better than they and are always able to take from the "money market" the tax so necesssary to the country's maintenance. Because of this fact, because it is a very potent means of making the non-revolutionary elements contribute taxes, Communist financial experts consider the issuance of paper money as a most important revolutionary weapon, especially in agricultural countries. Indeed, without it, the Soviet Government would probably have collapsed long ago.
Naturally the phenomenal increase in the volume of money in circulation has brought about an enormous depreciation in the value of the ruble. Before the war two rubles were worth an American dollar; now it takes 30,000 rubles to buy one. In other words, the ruble has fallen 15,000 times in value. In capitalist countries such an abysmal depreciation of the currency would completely destroy the financial system and paralyze everything. But in Russia, where most of the industries are nationalized and thus freed from the influence of financial control, no such effect is produced, The principal result is a constant depreciation which seems to have no limit. But the Government feels no great alarm about this. So long as its printing presses are in working order and the supply of rags holds out it will "get by" and make its necessary "profits" from the money market. As fast as the money falls in value it simply increases the number and denomination of the notes printed.
Discussing this phase of the financial situation, the Peoples' Commissar for Finance says, in the work above cited: "In 1917 a kopeck was still a reality, it was still possible to buy something for 50 kopecks. In 1918 the ruble plays the part of the kopeck. In 1919 not only is the word "kopeck" forgotten, but the word "ruble" as a real unit of calculation is replaced by 10 rubles. In 1920 the real unit of calculation is the hundred and the thousand: the ones and the tens disappeared. In 1921 the actual unit is the thousand and the five thousand. But when will all this come to an end? When will our paper currency fail? It is obvious that the failure cannot be brought about solely through the increase of naughts on our paper money notes. Here the difficulties are purely technical, not more. For lessening the number of naughts the three naughts in 1000 can be substituted by the letter "T" (thousand), and we can print paper money notes in 10T, 100T, 1000T, and soon. Further, we can replace the naughts in the "T" series by the letter "M" (million) and print 1M, 10M, 100M, etc. For the lifetime of our currency the existing mathematical denotations of ciphers will suffice, and should they not be sufficient others can be invented."
The enormous depreciation of the ruble has naturally sent prices skyrocketing in the realm of competitive products.[1] The following, now prevailing in the "free" retail markets of Moscow, are typical:
| Butter, per pound | 29,000 | rubles |
| Sugar, per pound | 35,000 | rubles„ |
| Potatoes, per pound | 1,000 | rubles„ |
| Flour, per pound | 3,725 | rubles„ |
| Rice, per pound | 15,000 | rubles„ |
| Beet, per pound | 10,000 | rubles„ |
| Pork, per pound | 15,000 | rubles„ |
| Tea, per pound | 80,000 | rubles„ |
| Bread, per pound | 3,000 | rubles„ |
| Eggs, each | 1,200 | rubles„ |
| Herring, each | 1,800 | rubles„ |
| Hairpins, each | 1,000 | rubles„ |
| Common pins, each | 200 | rubles„ |
| Shoes, pair | 450,000 | |
| Clothes, suit | 1,000,000 | rubles„ |
| Thread, spool | 6,000 | rubles„ |
| Soap, toilet | 20,000 | rubles„ |
| Soap, laundry | 15,000 | rubles„ |
Translated into terms of American money (upon the basis of 30,000 rubles to one dollar) many of these prices are very high. This is because of the severe shortage of commodities that has been brought about by the crisis in production. Thus butter in Moscow costs 97 cents per pound; sugar, $1.16; tea, $2.67; rice, 50 cents, etc. On the other hand, some of the staples are comparatively cheap; flour retailing at 13 cents per pound; bread, 10 cents; beef, 40 cents, and pork, 50 cents. In 1914 bread cost less than three kopecks per pound. Its rate of increase in price is approximately 1,000,000 per cent. This is considerably less than for commodities generally.
A pronounced effect of these continuous and constantly soaring prices has been to practically wipe out the money wages of the workers. It has been found impossible to keep changing these in accordance with the rapidly changing prices. In order to understand the situation, however, it must be always borne in mind that the Russian industrial workers at the present time get rent, clothes, food, and other necessities free from the Government. The money wages they receive are merely for them to help out the Government rations by buying wherever they can in the open market. These money wages range from 4000 to 20,000 rubles per month. The Communist Party has a standing rule that none of its members may receive more than 13,500 rubles per month, which limits the Peoples' Commissars (the Cabinet of Russia) to that insignificant sum—now worth about 45 cents. Some non-party industrial experts, however, are paid as much as 750,000 rubles per month.
From the price list submitted above it is at once evident that wages of even 20,000 rubles per month have a negligible purchasing power, and as it has been out of the question to keep the schedules adjusted to the varying price rates, the Government has adopted a new policy of paying the workers their wages (in addition to their regular supplies) in the articles they produce, so far as the nature and condition of industry will permit. These products the workers then trade off through the co-operatives, either to the peasants for foodstuffs, or to other groups of workers for clothes, shoes, etc. Thus, so far as possible, they are protected from the wild price fluctuations in the "free" markets, and yet enabled to take advantage of whatever commodities these markets have to offer.
Although Russian revolutionists often smile at the antics of their money system and the way it yields them so much support, still they understand very well the disadvantages of inflating the currency. They know that a tremendous amount of Russian production (mostly agricultural) is still carried on upon a competitive, independent basis, and that for this to take place to the best advantage a stable monetary system is absolutely necessary. If they have weakened the medium of exchange it has been under the pressure of extreme revolutionary necessity.
Already the keen economists at the head of the Soviet Government have plans to re-habilitate the currency. But this can probably never be accomplished fully until the industrial crisis is solved; until the workers in the nationalized industries have great surpluses of goods on hand to trade off with the independent producers—the peasants principally. When that time comes, and come it will in the near future, the question of a medium of exchange, whether money, labor checks, or what not, will be a mere detail to be worked out at leisure.
- ↑ Besides the open market prices there are also "Soviet" prices. These apply to government manufactured or controlled products, and apply to the transactions between the various industries and to independent purchasers. They are established by the price committees of the Supreme Economic Council. The original plan was to have the articles in the Soviet retail depots priced (at much lower rates than prevailed on the open market) so that the workers might spend the money part of their wages there. But in practice these retail price lists are held in abeyance. Virtually all the retail products which the Government has at its disposal are distributed free to the workers.