MIA > Archive > Sokolnikov
From International Press Correspondence, Vol. 2 No. 56, 30 June 1922, p. 416.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
Public Domain: Marxists Internet Archive (2020). 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.
The fall of prices in Russia which until recently appeared to be an unrealizable dream of some theorists is now an actual fact. The increase in the prices of the most important articles of food ceased in May; more than this, prices fell. It is true, the prices of industrial products are increasing, but this is only a temporary phenomenon. This increase win only go on until the proper relations between the prices of city and rural products are established. The price of gold on the market, a very important “commercial index” of prices, showed in the course of May only a very trifling instability and fell a little. At the end of April, on the Moscow unofficial exchange, one paid 2,300 roubles (in 1922 currency), for a ten rouble gold piece, and at the end of May only 2,150. The paper rouble exchange in terms of gold, on the market, therefore shows at the end of April and in the month of May complete stability, a thing we have not seen for a long time.
What was the cause of this falling of prices? The reason was quite simple; it was not difficult to anticipate. It was, however, more difficult to prepare for it and to accelerate its appearance. The falling of prices is due to two factors: first, to the reduced famine danger, secondly, to the failure of speculation on the fall of the Soviet rouble.
The increase of the price of corn, (which determines the value of the rouble), was inevitable in April and May because of the increasing severity of the food crisis m the important centres, in the months of January to March, as a result of the belated arrival of considerable food supplies purchased abroad. Instead of being distributed in January and February, this food was distributed in the period beginning with April. Those months which are usually characterized by scarcity of food, will this year he the months of a relative abundance of food supplies, in other words, during this Summer the norm of the state food supply will be higher than in Winter, in all previous years the contrary was the case.
This circumstance alone must have had considerable influence upon the price of corn, its importance, however, was increased by the fact, that very large circles of consumers, (including a part of the workers and clerks), had, on account of previous experiences calculated on a lack of food in Summer, and had therefore accumulated great supplies of corn and provided for their needs in advance. This hoarding of corn caused an increase of corn prices in Winter and in the beginning of spring. This fact now has a contrary effect: the demand for corn has fallen off as a result of this accumulation.
The supply of corn on the other hand, has increased in view of the approaching harvest. The country has thrown its stocks of reserve corn upon the market. With the cessation of the transport of seed corn, this quantity of corn increased. After it had obtained its seed corn, the country could sell its stock of corn which had been reserved for seed; the famine districts have reduced their purchases of corn. The coinciding of the arrival of foreign food supplies with the termination of the of seed-corn distribution, and the opening of river and sea communications, was bound to produce a change in the condition of the market. This change has already taken place. Most of the speculators who had been driving the price of bread up, have been hard hit. They are very eager to sell their reserve supplies. The situation on the money market was another factor. Here we can distinguish three different periods: the first period being, the last three months of the year 1921, the period of unlimited issue of paper money and the consequent increase of prices; the second period embraced the first three months of the present year. It was the period of restricted paper-money issue, when prices were increasing more rapidly than the issue of money; and finally the third period, in which the increase of prices proceeds at a pace with the increase of the paper-money issue. During the second period the market absorbed the enormous quantity of money issued in the first period, under the conditions of reduced exchange of goods corresponding with the season of the year. The process of the depreciation of money took place with enormous rapidity. Financial collapse seemed inevitable. The advocates of unlimited issue of paper money are demanding that further hundreds of trillions be immediately thrown on the market. This expedient however, has been declined. The financial policy is directed towards the stabilization of prices and the rouble. The issue of money is restricted, the taxes and other government revenues are beginning to absorb the money from the market. The situation has changed. The “money shortage” is already making itself felt in the country. The country which previously boycotted the paper money, now endeavours to obtain more of it. It hastens to sell its products at the first opportunity in order to obtain money. Money has become a thing that is sought after. The exchange of the rouble expressed in terms of grain is increasing. The towns also have no “superfluous” money. The demand of the cities is limited. The price of corn cannot rise. The first signs of the cessation of the increase of corn prices were to be seen towards the end of March. In the course of a month the increase has completely ended. The real wage of the worker has ceased to fall; on the contrary, it is beginning to rise. The policy of restricting the issue of money and effecting the greatest possible reduction of the issue of new paper money has considerably accelerated the change in prices. This change enables the towns to develop their production and their markets. (The difficulties of selling under a rapidly falling valuta came to light recently; the stoppage of sales, however, means the stoppage of production.) To the working-class this change in prices means the stabilization of the real wage which can never be obtained by a fictitious rise in the wage-scale, but only through a real drop in prices.
Is this change and the stabilization of the rouble permanent? Nothing in this world is permanent, much less the value of paper money. Stated accurately, the question must be: under what conditions will the present situation which is favorable for the valuta of the Soviet Republic continue? With regard to the immediate future, this depends upon three factors, two of which will be determined by ourselves; the third factor is independent of our will. The third factor is the harvest. The other two factors are the development of commercial apparatus in the next few months, the organization of exchange of goods between town and country in the Autumn and the continuation of the policy of restricting the issue of fresh paper money.
The Proletarian Republic has overcome the famine catastrophe thanks to enormous work and the greatest sacrifices. The change of prices on the market is a symptom of a change in the whole economic situation. The worst times are behind us; better times are beginning.
Last updated on 10 July 2021