It followed from Hilferding’s thesis that by seizing Russia’s banks, it was possible, in one fell swoop, to seize control of the country’s industry and trade.* This belief accounted for Lenin’s optimism that Russia could quickly become socialist—that nationalization of banks would accomplish “nine-tenths of socialism.” Osinskii likewise declared it the single most important measure.† Although the expectation of a quick and easy conquest of Russia’s capitalist economy by such means proved entirely illusory, the Bolshevik Party stubbornly adhered to Hilferding’s doctrine. Its new program, adopted in 1919, claimed that by nationalizing Russia’s state and commercial banks, the Soviet Government had “transformed the bank from a center of domination of finance capital … into a weapon of workers’ power and the lever of economic revolution.”30
As concerned money, the Bolshevik theoreticians wanted to abolish it altogether by depreciating it into “colored paper” and replacing it with a comprehensive system of distribution of commodities by means of ration cards. In Soviet publications in 1918–20 many articles argued that the disappearance of money was inevitable; the following is a fair sample:
Parallel with the strengthening of the socialized economy and the introduction of greater planning in distribution, the need for monetary tokens [i.e., money] should diminish. As it gradually disappears from circulation in the socialized economy, money turns into a property outside the direct influence of government on the private producer, which is why, despite their constantly growing quantity and the continued need for further [money] emissions, money begins to play in the overall movement of the national economy an ever-diminishing role. And this process of, as it were, objective depreciation of money will receive further impetus to the extent that the socialized economy is strengthened and developed and an ever-widening circle of small private producers is pulled within its orbit—until, finally, following the decisive triumph of state productivity over private productivity, there will emerge the possibility of a deliberate withdrawal of money from circulation through the transition to a moneyless distribution.31
In the jargon which Marxists favored, the author was saying that money could not be dispensed with as yet because the “small private producer” (read: peasant) still remained outside state control and had to be paid for his product. Money would become redundant only “with the decisive triumph of state productivity over private productivity”—in other words, after full collectivization of agriculture.
The standard reason the Bolsheviks gave at the time for their failure to decree money out of existence was that even after the passage of various nationalization decrees much of the economy, including nearly all of the food production, remained in private hands. According to Osinskii, the existence of a “dual economy”—part state-owned, part private—necessitated the retention of the monetary system for an “indeterminate period.”32
In fact, however, the peasant was paid such ludicrously low prices for his product that this consideration was nowhere as serious as the official explanations claimed. In the summer of 1920, Larin conceded that the bulk of the money printed by the Treasury went, not to buy food, but to pay the salaries of workers and officials. He estimated that Soviet Russia had 10 million wage earners, who received on the average 40,000 rubles a month, for a total of 400 billion rubles. Compared with this figure, the money paid to the peasant for food was minuscule: Larin estimated that all the foodstuffs acquired at fixed prices (in 1918–20) had cost the government less than 20 billion.33
The Bolsheviks could not nationalize banks immediately after taking power in Petrograd because of the near-unanimous refusal of banking personnel to acknowledge them as the legitimate government. This opposition, as we have seen, was eventually broken. By the end of the winter 1917–18, all banks were nationalized. The State Bank was renamed the People’s Bank (Narodnyi Bank) and placed in charge of other credit institutions. By 1920, all the banks were liquidated, except for the People’s Bank and its branches, which served as clearing agencies. Safes were ordered opened and gold found in them, as well as large amounts of cash and securities, was confiscated. These measures hardly fulfilled Bolshevik expectations: their result was not so much to give the government control of Russia’s business as to choke off credit. It was a bitter disappointment to the new regime.34
