E. Preobraschenski

Economics

The Problems of Russian Financial Policy

(11 November 1921)

From International Press Correspondence, Vol. I No. 7, 11 November 1921, pp. 59–60.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Public Domain: Marxists Internet Archive (2019). 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.

During the last three and a half years very little was spoken or written about our financial policy. But now it is the question everybody is discussing. And it does not remain mere talk. A great deal is being written at present about the financial policy, even more than appears in print. And that is not astonishing, as not only articles but numerous plans are written, and these plans more frequently drawn up by specialists than by Communists. This can also be understood. Marxian Communists have much more experience in economic questions, and are much less eager than the bourgeois national economists to spend their time on plan-scribbling. I will elsewhere enlarge upon the plans of the “Socialists”, and the reasons why the most of them appear to us naive and absurd. At first I want to explain in short what seems to us important for our financial policy.

General Problems

The most important problem of our financial policy at present is, on the one hand, the gradual introduction of a sound currency, which is just as important for individual exchange of goods as for calculating the economic results of socialized big industries and. on the other hand, the calculation of our entire material budget, based on the gold-standard of the world market.
The main obstacle to the solution of this problem is our random issuing of paper-money. But as long as we are unable to stop this emission of money because of the lack of other means wherewith to cover the deficit in the budget, the solution of this problem must be postponed for some time. It is necessary, therefore, to restrict the emission every year. This restriction presupposes an advance in the field of production. This advance, hand in hand with other measures, must make it possible to renounce the revenue coming from note emissions as a result of the creation of other sources of revenues.
There can be no question, however, of a restriction in emissions or of the adoption of a fixed plan with the purpose of arriving at a sound currency, as long as the government does not know how large the pending emission must be in order to cover the operations in the ensuing year or half-year, and as long as the clamor for gold money continues on the part of various officials. With a clamor of this kind it is altogether impossible to establish systematic management in any field whatsoever.

At present it is possible to assert that the chaos in the emission of currency is the greatest hindrance to the establishment of a new economic policy, particularly in the field of socialized industry.
Under existing circumstances it is more necessary than ever to arrive at a fixed budget system set within the limit which determines a permanent but systematically restricted emission. This system must consist of the following. On the basis of calculation of the material results of currency emission in 1921–22, it will be possible to determine, on the basis of the value in gold rubles a the pre-war rate, the extent of the deficit which can be covered by an issue by paper money. (About 200,000,000 gold rubles based on pre-war rates.) This sum will be partitioned among the commissariats, with the exception of a sum which will be put at the disposal of the department of the People’s Commissars for Supplementary Expenditures. The People’s Commissariat for Finance is ordered to provide every month, by means of the issue and distribution among public officials of a fixed amount of paper money, a sum determined on the basis, of prices current in free commerce. No public authority – not even the Council of People’s Commissaries – should receive throughout the year even one ruble outside of the amount of paper money determined on the basis of the gold value. When the amount of paper emission for 1922 is toeing established, the aim must be to lower the size of the emission (in gold value), for that year, in comparison with the average of the years 1920–21.
The realization of this measure makes it possible, not only to carry out the plan for stopping the issue of notes, but it leads to what is more necessary, the restriction in the necessary social expenditures of public authorities. It will perhaps lead various public officials to exercise greater economy, and will call into being a healthy exertion to cover expenditures through an increase in production and not as now by issues of paper.
The restriction of emission must be balanced not only by an increase in production in the nationalized enterprises and economy in the expenditures of the government apparatus, but also through tax-levies on capital with the explicit assurance that the part of the taxes which the tax-payers will attempt to throw on the shoulders of the workers and their salaries, will be returned to labor. When, the new taxes are put into force absolute provision must be made that though a part of the taxes fall on the workmen’s salaries this must be made good through a raising of the basic wages or in some other way.
The program of action of the People’s Commissariat for Finance for 1922 includes not only Denomination (issuing) of money notes, which will make it much easier to establish a fixed budget, but also the task of reducing the emission of money by at least 20%. Further, it must advance in the direction of introducing new taxes and increasing the old ones, as well as in the immediate reduction (in gold value) of the amount of paper money issued.
As the establishment of a system of regular emission of money in gold value for workmen’s wages for the whole year takes on a semblance of firmly established uniformity, the use of money to create an incentive to higher production and to establish a systematic economic accounting must at the same time guarantee to the economic organizations the right, in case of need, to demand wages exceeding the minimum wage, as well as to lead the labor unions to greater participation in the management of production.
Since the money in our budget represents only a part of the total budget of the Soviet government, and since without the ascertaining of the other part, that is, the income and expenditure-in-kind, no real picture can be had of our total income and expenditure, our next task must be to determine for the next year not only the extent of the issue of money (in gold value), but also the total income in kind. This income consists of the total wealth produced in the socialized enterprises, plus the taxes in kind.

The calculation of the income of our government for the year 1922 must be based on the following:

The taxes-in-kind minus what must be given out before the end of the year.
The total value of all the products of socialized industry, considering the real progress of production (calculated in gold rubles on the basis of prices in the world market).
Official receipts from taxes and monopolies, receipts from leased enterprises and from the sale to the population of goods imported from abroad.
The receipts through currency emission.

All these, calculations must be based on the gold value of the prices in the world market, and, if need be, calculated on the basis of the exchange value of the Soviet ruble.

In spite of all the difficulties and insufficiencies in the calculation of the first material budget of the first Socialist government of the entire world, these calculations nevertheless make it possible to introduce clarity and order into our budgetary system and into all our material economic accounting.

As the tax-in-kind plays a very big role in the material budget of the Republic and as it determines the whole plan of industrial production for a year, the real establishment of the program of production and the plan of expense budgets and, on the other hand, the calculation of the income from the tax-in-kind, can only be calculated after the results of the harvest will be determined. For this reason the formation of all plans for production and for the entire budget must always be postponed from the first of January to the first of September. The plans of production for the year 1922 must therefore be made during the period of time from the first of January to the first of September. For this same length of time, that is for eight months, the first general budget in kind and gold for the whole republic, must be provided.

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