MIA > Archive > Sokolnikov
From International Press Correspondence (weekly), Vol. 3 No. 12, 29 March 1923, pp. 188–189.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Public Domain: Marxists Internet Archive (2021). 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.
We frequently meet with the opinion that our traffic in paper money, like all traffic in paper money, must inevitably lead to a catastrophe; that the crisis which our paper money is undergoing is a deadly one, and that it is not possible to avoid the transition to gold currency, not merely in the sense of calculating on a gold basis but to the use of gold currency. But if we accord these opinions careful consideration, we find that the arguments on which they are founded are supported more by prejudice than by logic.
The instance most frequently adduced is that of the great French revolution, which attempted to put its economics in order with the aid of paper currency. When this paper money was deprived of value, it was replaced by metal coins, and after a crisis bating some years France passed to metal currency again.
This historical analogy deserves a careful analysis, for such an analysis serves to disclose the extreme superficiality of this analogy, and demonstrates that it contains not a shadow of proof of the inevitability of the collapse of our paper currency. During the epoch of revolutionary crisis, France did not make the transition to metal coms because the paper money system had collapsed; the reverse was the case, the system of paper money collapsed because it was replaced by metal currency. And why? In the first place because coin currency was possible. There were such quantities of coins in the country (about 2½ milliards of francs, in the hands of private persons, that these sufficed to cover the requirements of French currency. This was the first and most important condition, and was a result of the then existing backwardness of banking activity, which had not yet reached the point of withdrawing metal from circulation in overwhelming quantities, and concentrating it in reserve funds belonging to the central banks.
Besides this, there were two other decisive factors. First, until 1793 France still had a favorable trade balance, and during the first year of the revolution this favorable commercial balance was able to prevent metal currency from leaving France. The revolution gave a powerful impetus to the development of foreign trade. Later on the revolutionary wars hindered the development of foreign trade, especially of sea trade. But – and this is the second factor – the Napoleonic wars brought about a tremendous increase of France’s gold reserves, for the gold of Italy, Holland, and other countries has confiscated. It may be asserted, without exaggeration, that almost all the gold reserves accumulated by the commercial states of the continent curing the middle ages fell into the hands of the French bourgeoisie, which proceeded (for a time) to extend its political hegemony in France to an immediate political and economic hegemony in Europe.
Even during the period of paper currency, France’s finances were never on a purely paper basis. The government combined the system of issuing bank-notes with a system of paying in metal to bankers and business people who gathered round the government; the manufacturers supplying war requisites were almost invariably paid in metal coins.
During the whole period, up to the overthrow of Robespierre, the revolutionary government was supplied with considerable means by the issue of paper money, and when the fall in the rate of exchange came, it was inconsiderable as compared with the present fluctuations in the value of paper money in Russia, Germany, etc. At the time of Robespierre’s downfall the paper money still retained 30% of its original value; it was not until later that the depreciation took more rapid strides, with regard to which it must be observed, that the most acute depreciation occurred at a time when the government itself was anxious for the complete depreciation of the paper currency. Thus the maximum limit of depreciation of this paper has nothing whatever in common with that limit reached by the Soviet currency. During the epoch of bourgeois revolution, the economic conditions obtaining in France were naturally very different to those of Russia after the October revolution In France there was never that restriction of commercial traffic which took place in Russia. In France the political force of the bourgeoisie was never so undermined as in Russia. When the French paper money began to depreciate in value, the revolutionary government encountered the economic resistance of the commercial bourgeoisie and of the industrial magnates, who wished to rid themselves of the sinking paper currency, and thus converted their economic resistance into a political resistance. The bourgeoisie had no objection so long as the “costs of the revolution” were borne by the nobility. But when the issue of paper money became a peculiar means of “taxing” financial and trade capital, the bourgeoisie made a clean sweep of the paper money, and of the government based upon it.
With us there is no resemblance to this. Our industry is a state industry and our trade a state trade, and though these are equally anxious to be rid of the depreciated currency, and to have another basis of support than Soviet currency, still this striving implies no political development, for the state industry and the state trade are much more in need of a firm Soviet power than a firm currency.
Thus the analogy drawn between the French and Russian financial crises is more than weak: in Russia there is not sufficient gold for economic traffic; it is impossible to enrich the inner traffic with gold from foreign traffic or from confiscations. Most of the gold had already been withdrawn from circulation in Russia before the revolution, and was in tlie state bank, not in the hands of private persons.
It must be added that even the collapse of the paper currency in France cannot be regarded in its essential character as a collapse of the paper money traffic. After the paper money had depreciated and disappeared. France still carried on the paper money system for some years, under another name. Paper money notes were issued by the state exchequer in anticipation of revenues. This paper money also depreciated, but the state finances were held together by it for some years, until the taxation system was regulated, and the French state bank decided on the issue of bank-notes.
Soviet Russia’s greatest advantage lies in the circumstance, that the regulation of the taxation system, and the organization of the state bank and its bank-note issue, are already being carried out at the present time, so that our Soviet “paper money” is not only secure from collapse, but is on the contrary showing symptoms of improvement.
Last updated on 10 July 2021