Financially, the Bolshevik Government lived for a long time in a state of disarray. The tax system had all but broken down after October, and revenues were reduced to a trickle. The government improvised as best it could: among the currencies it resorted to were coupons from Kerensky’s “Liberty Loans.” There was nothing faintly resembling a regular budget: in May 1918, the Commissariat of Finance estimated (sic!) that in the preceding six months the government spent between 20 and 25 billion and took in 5 billion.* The government was unable to meet the needs of its provincial administrations, so it not only permitted but commanded
To raise funds for extraordinary expenses, and at the same time undermine the economic power of the “class enemy,” the Bolsheviks occasionally resorted to discriminatory taxes in the form of “contributions.” Thus, in October 1918, a special one-time “contribution” of 10 billion rubles was imposed on the country’s propertied classes. This extraordinary tax followed the Chinese model, which the Mongols had introduced to medieval Russia, in that it set quotas for cities and provinces and left it to them to distribute the payments. Moscow and Petrograd were required to pay 3 and 2 billion rubles, respectively. Elsewhere the local soviets were asked to prepare lists of individuals liable for payment.† Similar “contributions” were imposed by local soviets on their own initiative, sometimes to raise money for current expenses, sometimes as punishment.
Lenin was rather conservative in fiscal matters, and if he had his way, Soviet Russia would have adopted from the outset traditional methods of taxation and budgeting. He worried about the budgetary chaos. In May 1918, with his usual tendency to exaggerate the importance of whatever business happened to be at hand, he warned:
All our radical reforms are condemned to failure if we do not succeed in financial policy. On this task depends the success of the immense endeavor we have conceived of reorganizing society on the socialist model.36
But as he had little time to devote to this matter, he turned it over to associates with very different ideas. They wanted to abolish money and finance altogether, so as to create an economy based on state-controlled production and distribution. In the second half of 1918, Soviet economic publications carried many articles promoting the idea of such an economy, which had the support of such Bolshevik notables as Bukharin, Larin, Osinskii, Preobrazhenskii, and A. V. Chaianov.* Their idea was to make money worthless through the unrestrained emission of paper currency. The place of money was to be taken by “labor units,” similar to those issued in 1832 by Robert Owen’s “Labor Exchange Banks,” which were tokens representing quantities of expended labor entitling the holder to a comparable amount of goods and services. Owen’s experiment failed miserably (his bank closed after two weeks), as did Louis Blanc’s
The Communist Party declared the abolition of money an objective in the new party program adopted in March 1919. Here it was stated that while the abolition of money was not yet feasible, the party was determined to achieve it: “To the extent that the economy is organized according to a plan, the bank will be abolished and turned into the central bookkeeping office of Communist society.”37 Accordingly, the Soviet Commissar of Finance declared his job redundant: “Finance should not exist in a socialistic community and I must, therefore, apologize for speaking on the subject.”†
The result was an accelerating devaluation of Russian currency which ultimately transformed it into “colored paper.” The inflation which occurred in Soviet Russia in 1918–22 nearly matched the much more familiar inflation that Weimar Germany would experience shortly afterward. It was deliberate and accomplished by flooding the country with as much paper money as the printing presses were able to turn out.
