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From International Press Correspondence, Vol. I No. 6, 8 November 1921, pp. 50–51.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Public Domain: Marxists Internet Archive (2019). You may freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit “Marxists Internet Archive” as your source.
As soon as the necessity for a complete financial reform became clear, “projects” sprang up from all sides. These projects fall into two categories – one utopian and inacceptable, and the other comprising such as are capable of being carried out, but equally inacceptable.
First of all we will consider the first category. Most of the projects originating in bourgeois financial circles, though presenting variety in certain respects, all boil down to the same thing, to a revaluation. A revaluation of metal money has been proposed without an annulment of existent paper money. A revaluation is effected as follows: The government determines, according to the present value, how much our billions in circulation are worth in gold, based on the average exchange value.
The government issues a corresponding sum of roubles at full value, let us say one hundred million new rubles. These rubles will be guaranteed in their full face value by a gold reserve, and they will at all times be exchanged into gold roubles. The population is summoned to exchange all old currencies before a fixed time-limit, for instance, 20,000 old roubles for one new one (the rate in old roubles will be determined according to the market-price of gold). All the former currencies not exchanged before a fixed time limit will be considered worthless. The result is that instead of billions in depreciated paper currency the population will possess a small sum (one hundred millions in our case) in rubles at full value, or in gold coins.
Why is this measure impossible of execution now? Because it becomes possible only with the supposition that our budget carries no deficit. This fortunate situation can only be brought about through economic prosperity. For the present the deficit still continues. Furthermore, such a measure presupposes a gold reserve in the government’s possession, sufficient for this operation. We possess no such gold reserve. And finally and most important, these measures do not guarantee a sound currency.
As a matter of fact, in case of a deficit in the budget, which will have to be covered by new issues of paper money, the gold will disappear from commerce and only the paper money will remain in circulation. This money will always continue to fall in exchange value to the rate level of the new issues of paper money. The gold will accumulate in the banks of those who possess the most ready paper money and, as a consequence, can change it into either new paper money or into gold (there will be no such block-heads as will not exchange the new paper ruble for gold). In this way the whole reform will come to this, that, instead of the existent currency, with a falling exchange value for the rouble, we will come into possession of another, with an exchange falling just as much. For this pleasure we will pay with an exhaustion of the republic’s gold reserve in favor of the usurers and the speculators.
As for the issuing of metal money without nullifying existing money, this is what will happen. This money will be in circulation at the same time as the paper notes, and the metal money will not obey our orders and will flow into the banks. The paper notes will always remain in commerce. To be sure, the paper money will not fall in value if we do not “support” it by means of new issues. But since the renunciation of new money issues in case of a deficit is a utopia, we will have the old situation as a result, namely, a falling exchange. But though this measure does not offer a sound currency, it is at least not so vicious as the first. In fact, the government will not give the metal money for nothing, but will pay workmen’s wages with it and will buy goods. This measure is sensible only if the government wishes thereby to dispose of a surplus of metal, and in that case it would be to its advantage to exchange this metal reserve in the domestic market for a set quantity of goods. But the aim of the author of this project was a sound currency, and not this.
As for the projects which are not utopian, but simply impossible of execution and partly harmful, they comprise such proposals as co-operatives’ bonds, salt taxes, receipts for goods’ securities, and so on. The authors of these projects aim in this way to create a sound currency established on a goods basis. But apart from the weakness of this basis, they forget again the most important thing – the deficit in the budget, and the necessity after a time, to resort to new issues of paper money. As long as these issues have to be made, every other currency except the new one, will only undermine the latter, and rob the state of sources of revenues which the authors of the projects also consider indispensable. Those who claim that it is possible to do without an emission of paper money are mistaken. (They do not suggest any reasonable plans by which those above-mentioned sources of revenues can be replaced by others though just such plans would interest us.). Furthermore, were it possible to do without new emissions of paper money, that would be well suited to bringing about a sound currency, and it would be a much better and quicker way to its accomplishment This way is plainly the suspension of issues of paper money. It is possible to state with absolute certainty, that at present, as a consequence of the revival of small industry, and increase in the turnover of goods, and, as a result of the increase in the money which is in circulation, we would obtain a rise in the exchange value of the rouble after a suspension of emissions. Thus rise would occur of itself without putting into operation any financial plan whatsoever. As for the creation of a sound but depreciated currency, through a sound but altered money token (let us say, one new rouble instead of 40,000 old ones), such an operation would be very simple to carry out It would be an ordinary episode in financial history. No sort of bonds are necessary for that.
It remains, finally, only to repeat what a stabilization of our finances can accomplish. Under all circumstances, large industry must be accelerated. If the production in 1926 were inferior to that of 1920, but if the cost production were lower, we should in this way be able to offer more goods to the needy land, and to replace the emission by means of other sources of revenues. We must continue to establish profitable enterprises which will work in the interest of free commerce, and which will yield us something. We must increase the taxes and in this connection return to the worker the part which comes from his wages. We must have economy and just distribution. In the end: the rouble will rise, independent of our action, through the general growth in the exchange of goods. Thanks to the combined influence of all these factors the exchange value of our rouble will doubtless attain a certain firmness. This can also be attained through a systematic emission on condition that this emission will be balanced by the above-mentioned factors. All these are not miracles, or illusions, no quack remedies but the right and natural path to the re-establishing of our currency.
These measures do not exclude other subordinate ones which can be carried out and will support those mentioned. These measures might contribute to the creation of the first economic budget for Soviet Russia.
Last updated on 14 February 2019