The Left Communists exulted. At the Tenth Party Congress, held in March 1921, before inflation had attained its apogee, Preobrazhenskii boasted that whereas the assignats issued by French revolutionaries had depreciated, at their lowest, 500 times, the Soviet ruble had already fallen to 1/20,000th of its value: “This means that we have overtaken the French Revolution 40 to 1.”52 On a more serious note, Preobrazhenskii observed that the massive inflation caused by the government’s policy of printing unlimited quantities of money helped to extract food and other products from the peasantry: it was a kind of indirect tax that for three years had played a crucial role in supporting the Bolshevik revolution.53 At the Eleventh Party Congress, the speaker on financial policies, G. Ia. Sokolnikov, remarked with surprise that his was the first full-length report on the subject ever presented to a Party Congress. The policy until then, he stated, had been to regard money and fiscal policy as something to be done away with. The means to this end was deliberate inflation.54
Students of economic history had long warned that money was an indispensable element of every economic activity, not only in its “capitalist” form. In the words of Max Weber:
The assumption that some sort of accounting system will somehow be “found” if one resolutely tackles the problem of a moneyless economy, is of no help. This is the basic problem of every “full socialization.” One cannot speak of a
Closer to home, Peter Struve had demonstrated both before and after the Revolution that since economic activity meant striving for the greatest return at the least cost, it required an accounting unit or “money,” whatever its name or physical form. Money could not be abolished: whenever a government tried to prevent money from performing its natural function, the result was a split market (part regulated, part free).55
The Bolsheviks now discovered the truth of these observations. The one difficulty the advocates of a moneyless economy had not foreseen and which ultimately doomed their undertaking was their failure to provide a method for the settling of accounts among the nationalized enterprises and other state institutions. A decree of August 30, 1918,56 instructed Soviet agencies to deposit their monetary assets, except those required for current expenses, with the People’s Bank. They were to consign their products to appropriate agencies (
He and his fellow-hotheads were not fazed. In February 1920, Larin and his associates drafted a resolution for the forthcoming Congress of Soviets formally abolishing money. Lenin agreed in principle but wanted to discuss the matter.59 A year later (February 3, 1921) a decree was ready for release which, if implemented, would have for the first time in recorded history abolished taxes.60 It never came out, however, because the following month, with the introduction of the New Economic Policy, the government, even while turning out money at an accelerating pace, took steps to return to fiscal responsibility.
As previously noted, after seizing power in Petrograd, Lenin had no intention of expropriating Russia’s industrial wealth. Although he tended greatly to oversimplify the complexities of managing an industrial economy, he was realist enough to understand that a party of professional revolutionaries could not possibly run it by itself. While political pressures had compelled him to give up his pet idea of “state capitalism,” he continued to believe that the national economy required the discipline of a central plan. In March 1918 he spoke of the government facing the following tasks:
the organization of accounting, control of large enterprises, the transformation of the whole of the state economic mechanism into a single huge machine, into an economic organism that will work in such a way as to enable hundreds of millions of people to be guided by a single plan.61
Trotsky agreed:
