Money (24 page)

In the sixteenth century, Thomas More had the inhabitants of his island of Utopia bring their goods to shared warehouses and then take in turn whatever they needed, “living in common, without the use of money.”
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The seventeenth-century Quaker and economic pamphleteer John Bellers, meanwhile, acknowledged that money had its uses and attractions—but also looked forward to a world
without it. “Money in the body politick is what a crutch is to the natural body, crippled,” he explained, “but when the body is sound, the crutch is but troublesome.”
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And in the nineteenth century Karl Marx and Friedrich Engels were swift to point out that what had been troublesome in the early days of the commercial economy was positively dangerous in the era of fully fledged industrial capitalism. To them, money meant economic freedom—but in the capitalist sense of bourgeois entrepreneurs being free to exploit proletarian workers rather than the socialist sense of everyone fulfilling their human potential. Money meant the impersonal and inhumane relations that hold together the economic machine in bourgeois society—leaving “no other nexus between man and man than naked self-interest, than callous ‘cash payment’ ”—in place of the natural and human relations that would characterise the socialist paradise.
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Money as it existed in capitalist economies was antithetical to the ultimate objectives of the communist project—and in the coming socialist paradise, money, therefore, would serve no purpose.

Like Plato, however, the one communist regime of the twentieth century that actually tried to implement the Spartan solution to money found it rather harder than expected. As a result, they adopted a second generic strategy instead: a strategy not of abolition, but of containment.

Ostap Bender, the roguish hero of Ilya Ilf and Evgeniy Petrov’s 1931 satirical novel
The Golden Calf
, is a desperate man. The first decade of the Soviet Union has left him distinctly nonplussed. He has discovered that he is constitutionally unsuited to the new order. “I have had some serious differences with the Soviet regime over the last year,” he confides to a fellow con-artist: “They want to build socialism. I don’t. I’m bored by building socialism.”
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Bender’s ambitions in life are much simpler, and more mundane. He just wants to get rich, and, if at all possible, move to Rio de Janeiro. To do so, he needs to find a millionaire and defraud him of his wealth. If only he lived in
the West this would be a cinch. “There, millionaires are popular figures,” Bender muses: “Their addresses are known. They live in large houses somewhere in Rio de Janeiro. You go straight to see them in their house and there, in the hall, after the initial greeting, you take their money.”
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The trouble is, he lives in the Soviet Union, where “[e]verything’s hidden, everything’s underground.”
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Still, where there is money, there must be millionaires: “[s]ince there are currency notes in circulation,” he reasons, “there must be people who have lots of them.”
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The challenge is simply to locate one.

With the help of a motley band of associates, this is what Bender proceeds to do. A suitable black market tycoon is quickly identified—a tight-fisted old railway clerk called Koreiko who has accumulated an impressive fortune through schemes ranging from speculation in government medical consignments during a typhus epidemic to siphoning off food supplies destined for famine-ravaged regions. Koreiko turns out, however, to be a shrewd operator himself, so that actually extorting the money involves a long series of preposterous adventures. In the end, having endured an unspeakably long railway journey into the heart of Soviet Central Asia, Bender succeeds in confronting the old miser at the grand opening of the new trans-USSR railway. There, he threatens to reveal Koreiko’s crimes to the Party unless he pays a cool million roubles. Koreiko finally concedes defeat and hands Bender a suitcase filled with banknotes. It is the moment for which the con man has waited all his life: he is ecstatic. Koreiko’s reaction, ominously, is more sanguine.

Bender soon finds out why. He offers to treat the demoralised Koreiko to dinner at the finest restaurant in Moscow, but when they try to catch the train back to the capital, they are refused seats because they are not part of the official delegation. Undeterred, the newly minted millionaire Bender heads for the local airfield, where he has spotted a plane about to leave. This, too, is not available, however: it is a “special flight” reserved for use according to the Plan. In the end, a group of passing Kazakh nomads are the only ones who will take their roubles, and the two plutocrats are reduced to travelling back by camel. They have no more luck with lodgings. In one town, they
are told that all hotel beds are already allocated to a congress of visiting soil scientists; in another, to the construction workers building a new power station. Eventually, Bender is forced to resort to “what he used to do while the possessor of empty pockets. He began assuming false identities, such as engineer, medical officer, or tenor … to get a room.”
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The million roubles he lusted after for so long have turned out to be virtually useless—since in the command economy, there is virtually nothing for them to buy. Everything he dreamt of—smart transport, luxurious accommodation, fine food—is allocated by the Party and the Plan.

Ilf and Petrov’s frustrated hero was a victim of the second generic strategy for fixing money’s failings: the strategy of containment. In the period of so-called “War Communism” immediately following the socialist revolution in Russia, the young Soviet Union had attempted the more radical Spartan solution of abolishing money completely.
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“In a socialist society,” the Commissar for Finance had explained in a bashful apology made to the inaugural All-Russian Congress of the Council of the National Economy in 1918, “finance is not supposed to exist, and therefore I beg to be excused for its existence and for my own appearance here.”
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The new regime had lost no time in working to spare the Commissar any further blushes. Within two months of the revolution, all banks had been nationalised; within three, all public debts annulled. In June 1919, the All-Russian Central Executive Committee ordered the Commissariat of Finance “to endeavour to establish moneyless settlements with a view to the total abolition of money.”
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By the end of 1920, the Commissariat reported that it was well on its way. In financing the ongoing civil war between the Reds and the Whites, the Commissariat boasted, it had been solicitous in making “free use of the money system.”
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Its officials therefore looked forward confidently to the ancillary benefit this was sure to produce of “a progressive depreciation and finally a complete disappearance of money.”
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More pragmatic elements were sceptical, however. No less an authority than Vladimir Ilyich Lenin warned against the Spartan strategy. Even Marx and Engels, he pointed out, had advised that the
achievement of true socialism would take time—and that during the transition, money, the greatest weapon of the bourgeois class, would remain necessary as the means of co-ordinating activity and trading with those benighted countries not yet blessed by revolution. “When we are victorious on a world scale,” he had reassured the Party, “I think we shall use gold for the purpose of building public lavatories in the streets of some of the largest cities of the world.”
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But in the meantime, he warned, money would have to be retained. “When you live among wolves,” he reminded his audience, “you must howl like a wolf.”
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Belatedly, the new regime had grasped the wisdom of this advice. The most noticeable result of the Commissariat of Finance’s well-intentioned efforts to debauch the currency was a spectacular collapse in agricultural and industrial output. By early 1921, a dramatic reversal was under way. A completely revised monetary policy was unveiled at the 9th All-Russian Congress of Soviets in December of that year. Its first priority, it soberly announced, was the “transition to a stable monetary unit, which is absolutely essential for the trade turnover among the smaller units of the economy.”
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Banks were back. Money was not to be abolished after all.

The world’s first communist society was skewered on the horns of a fundamental dilemma. A socialist economy organised by capitalist money and finance was an oxymoron. But the experience of War Communism had proved that the abolition of money was, at least for the time being, a pipe dream. It would be necessary to devise some kind of compromise. Money would have to continue to exist—but with strict limitations imposed on its powers. This was to be the essence of the Soviet strategy: achieving the containment of money by reducing its ability to deliver freedom and increasing its commitment to ensure stability. It was a strategy that sought, in other words, a partial reversion from monetary to traditional society. Of course, the values and hierarchy to be protected from money’s assault, and given priority over it, were not those of the feudal Russian society that had come to an ignominious end in October 1917. They were the political priorities of the revolution. Money was to be dammed and canalised so that rather than flooding indiscriminately into every
corner of society as it did in capitalist countries, it would henceforth flow only along those channels beneficial to the progress of socialism. Money would become, as Lenin’s successor Stalin put it, “an instrument of the bourgeois economy which Soviet power has taken into its own hands and adapted to the interests of socialism.”
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The result was the financial hall of mirrors in which Ostap Bender found himself trapped.

In practice, this Soviet strategy of containment was achieved in two ways, both of which gathered momentum from the end of the 1920s. The first was the relegation of money and finance to second place in all economic decision-making. Priorities were set by the Plan, and neither it, nor the system of centralised management introduced to implement it, were defined in monetary terms. It was physical quantities and technological coefficients that occupied first place. The role of money was to keep account, not to control. The annual company budget was known, significantly, as its
techpromfinplan
—its technical, trade, and financial plan—with finance deliberately bringing up the rear. The leading place in the company was to be occupied by an engineer or technician. The finance function in enterprises was little more than an exercise in bookkeeping, and the powerful figure of the Western CFO was unknown. The emasculation of the financial sector itself was even more extreme. The job of banks was not to screen projects for financing and monitor loans once granted. It was simply to create money to order as soon as a payment instruction had been issued from an engineer’s desk. The process was automatic. The ultimate aim was to ensure that by starving it of personnel and denying it responsibility, money could interfere with the Plan’s organisation of the economy as little as possible.
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The inevitable result of this relegation of money to a passive role was an explosion in its issuance. The engineers were in charge, and there was no incentive to listen to the irrelevant bankers’ whining about financial viability. The bankers might issue periodic pleas for enterprises not to demand so much new money by continually increasing production which they, by law, had to fund; but since it was production and not money that mattered, who cared? One exasperated banker characterised the prevailing attitude of company
chiefs as follows: “let’s build our factories, let’s make our goods: victors are not judged, after all.”
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The resulting flood of money increased the need for the second part of the Soviet strategy: the imposition of ever stricter limits on what it could be used for, and when. With the introduction of the first Five Year Plan in 1928 and the related Credit Reform of 1930, money, even in its passive form, was gradually removed from more and more parts of the economy. As Ostap Bender discovered, money became less and less the organising technology: pulling the strings in its place was the Plan, and an ever more elaborate system of vouchers and privileges assigned to particular classes of worker or members of specific unions. Even money’s most basic component—the concept
of universal economic value—ceased to exist. A whole plethora of goods and services had no monetary price, since they could not be bought and sold for money; and as for those that could, their prices were administered and access was rationed, so money’s role as a universal comparator was no more than a empty charade.

“The Power of the Dollar” to circumvent all legal constraints and transport the wealthy capitalist up to take control of the political machinery, as illustrated in this Soviet poster: it was this subversive power that Soviet monetary policy was designed to curb.

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illustration credit 10.1
)