Soviet Union Information Bureau

FINANCE

CURRENCY: Shortly after the Soviet Revolution the State Bank was nationalized. Subsequently all other banks were nationalized and fused with the State Bank, the joint institution being known as the People's Bank. After the period of civil war, invasion and blockade set in, and wartime communism was inaugurated as a measure of necessity, even this bank ceased to have any function to perform. It was abolished in 1920, and there followed what is known as the "bankless phase" of the Revolution.

All supplies tended to become concentrated in the hands of the Government; industry secured its raw materials, not by purchase, but by direct assignments from the Government out of available stocks, and the population was similarly supplied with essential articles of consumption by a system of universal rationing. Methods of trade were largely superseded and the use of money limited to a very small sphere of commodity exchange. The devaluation of the currency which naturally resulted was intensified by a more or less deliberate attempt to discredit and abolish the use of money altogether by excessive use of the printing press. The process of depreciation did not cease, however, with the reversal of economic policy in April, 1921, when money was restored to its former function. On the contrary, the printing press was worked with even greater intensity, since the exhaustion of civil war and the advanced stage of economic disorganization left the government for the time being with little other source of revenue.

By 1922 the ruble as a unit of reckoning had declined to such an extent as to become practically useless. A new monetary unit was instituted called the "1922 ruble," equivalent to 10,000 rubles of previous issues. A year had barely elapsed before progressive inflation had rendered even the 1922 ruble too minute in value, and another monetary unit was instituted known as the "1923 ruble," made equivalent to 100 rubles of the 1922 issue, i.e., one million rubles of previous issues. The 1922 and prior issues were subsequently withdrawn from circulation.

Meanwhile, with the rapid revival of trade and industry, the need for a stable medium of exchange became urgent, and it was primarily to meet this problem that the State Bank of the R.S.F.S.R. (later the State Bank of the U.S.S.R.) was created in November, 1921. A year later it was empowered to issue its own note, known as the "chervonetz" (equal to ten gold rubles), backed by a reserve of gold and stable foreign currencies. The gold chervonetz contains 119.4826 grains of fine gold, and is equivalent to $5.146. The new note proved to be highly stable, thanks to the cautious issue policy pursued by the bank. As the bank rapidly accumulated stable assets the note issue was expanded and for two years the curious phenomenon was observed of a stable currency circulating side by side with a highly inflated and catastrophically depreciating currency.

Vigorous measures were meanwhile being taken to rehabilitate the State finances and render the use of the printing press unnecessary. This was more or less accomplished in the beginning of 1924. The 1923-24 budget was the first to he balanced since the outbreak of the war, and in March, 1924, were passed the decrees constituting the currency reform. These provided for the issue of a new treasury ruble, measured in terms of gold, supplemented by silver and copper coin of pre-war metal content. The State Bank exchanges its own note for ten rubles of the new currency, and this is the rate universally established. By law the total amount of treasury notes normally must not exceed one-half of the amount of chervontzi in circulation.⁽¹⁾ The old depreciated rubles were withdrawn from circulation at the rate of 50,000 rubles of the 1923 pattern (i.e., 50,000,000,000 rubles issued prior to 1922) for one new ruble.

The present currency system of the U.S.S.R. consists of State Bank notes (backed by a gold reserve and equivalent "hard" cover), treasury notes (limited to one-half the amount of State Bank notes in issue) and silver, copper and bronze coins. Currency in actual circulation, in millions of rubles:

The parity of the gold ruble is 51.4567 cents.

BANKING.- November 16, 1927, marked the sixth anniversary of the inception of the Soviet banking and credit system. The State Bank during its first year enjoyed a virtual monopoly but the rapid economic recovery of the country stimulated the creation of a banking system, which in view of the short interval involved, is of rather remarkable extent and complexity. This system consists of the central banks, such as the State Bank, the Long Term Credit Bank, the Bank for Foreign Trade, the All-Russian Co-operative Bank, the Central Municipal & Building Bank; banks serving specific territories, such as the Central Asiatic Commercial Bank, the Far Eastern Bank, the North Caucasian Commercial Bank, the Ukrainian Co-operative Bank; the numerous municipal banks of the cities; the Central Agricultural Bank with its numerous subordinate regional agricultural banks and agricultural credit societies; the savings banks and the private banks known as Mutual Credit Societies. In all, this system of banks with their branches and agencies (and treasury offices), comprises some 1,500 units, not counting the savings banks which number about 14,500. In this system the State Bank alone has over some g branches.

During 1927-28 certain reorganizations have been effected in the banking world in the interest of rationalization and efficiency. The gross number of bank branches has been considerably decreased. Several hundred local agencies of the Commissariat for Finance, which had acted as branches of the State Bank, were discontinued, and their functions were taken over by regular branches of the State Bank, the number of which was somewhat increased in the process. (On October I, 1927, the number of branches of the State Bank in operation was 417, on January 1, 1928, the number was 575.)

Incidentally the Bank for Electrification was merged with the Industrial Bank into a single Long Term Credit Bank, a process called forth in the interest of separating long term from short term credit operations and made logical by the expansion of the long term credit operations and the diminution of the short term operations of the two banks. Short term credit operations of the two banks were transferred to the State Bank, which in turn transferred to the new institution long term operations within its sphere.

Banking institutions of the Soviet Union, main offices only:

Number of banking institutions and branches (exclusive of savings banks, Treasury offices, and agricultural co-operative credit societies):

STATE BANK OF THE U.S.S.R.- The State Bank was founded November, 1921, with a capital of two billion paper rubles, supplemented later by similar subventions. When the bank's resources were recomputed in May, 1923, in terms of its own stable notes, capital was fixed at o million gold rubles. This was increased in October, 1924, to 100,000,000 gold rubles, and in June, 1927, to 250,000,000 gold rubles. Balance sheets of the State Bank (in millions of rubles):

The State bank note issue of various dates, with the reserve covering issue, in rubles, follows:

The minimum legal reserve for the State bank notes is 25 per cent in gold and precious metals and stable foreign currency.

Balance sheets of the Department of Issue of the State Bank, in chervontzi:

SAVINGS BANKS: The first Soviet savings banks were opened in February, 1923. During their short existence their operations have steadily expanded. They have made headway despite certain conditions not conducive to savings, such as the extensive system of social insurance which tends to remove some of the strongest motivations for storing up against the future. A form of universal bank book has been introduced which allows the bearer to deposit or withdraw money at any savings bank in the country.

The savings banks as a rule do not exist as independent organizations. Attempts have been made to establish savings bank branches in various organizations of a public or financial character, including post offices, Treasury Department branches, railway stations, State insurance company branches, banks, large stores, army units, schools, etc.

Statistics of savings banks:

FEDERAL BUDGET: The political, social and economic structure of the Soviet State determines the aims pursued in the budget. The federal budget includes the budgets of the six Constituent Republics. The economic structure of the Soviet Union where the whole of the large industry and transport, as well as a large part of the commercial machinery and the credit system are in the hands of the State, makes it inevitable that a large proportion of the revenue is derived from State undertakings and that considerable expenditure is made for economic enterprises. Revenue from taxation during the past few years has comprised from 45 to 41 per cent of the total of the income side of the budget. State properties show a steadily increasing yield, though this is balanced by increasing appropriations for capital expansion in State industries. Internal loans have risen notably as a factor on the income side of the ledger. During the fiscal year 1927-28 they yielded 705,600,000 rubles.

The growth of State revenues since 1922-23, the first year in which the Soviet State attempted to construct a firm budget, is shown by the following figures:

Receipts in classified form of recent budgets follow (in thousands of rubles):

The 1923-24 budget was the first post-revolutionary budget to be balanced. Since that year each budget has produced a surplus of revenue over expenditure.

Revenues and expenditures, past three years, in millions:

Expenditures of recent budgets exclusive of State reserve, by categories, in percentages:

Budget of 1927-28

General detail of revenues of the budget 1927-28, with advance estimates compared with actual revenues for the year (preliminary figures) in millions of rubles, follows:

Preliminary budget figures for 1928-29, approved by the Central Executive Committee, show a total of 7,694,800,000 rubles ($3,962,822,000). The expenditures include 939,000,000 rubles for capital extensions in industry, 184,000,000 for electrification, 317,000,000 for agriculture, 40,000;000 for irrigation and 127,600,000 for new railway lines. The budget for army and navy was 840,700,000. Special funds, such as those for unemployment and homeless children, were 1,600,000. A special State reserve fund of 50,000,000 rubles was included in the budget.

Revenues included direct taxes of 1,700,000,000 rubles, including single agricultural tax 400,000,000. Indirect taxes of 1,965,000,000 included 1,720,000,000 from excise duties and 245,000,000 from customs. Stamp and other duties were fixed at 138,000,000. Non-tax revenue included transport 2,001,000,000, communications 190,000,000, State property and enterprises 775,000,000. Revenue from State loans is placed at 800,000,000 rubles.

LOCAL BUDGETS.- The budgets of the local government bodies (provincial, rural district, city and village executive committees) have increased during the past few years with the growth of local improvements and education. Before the war these budgets played a comparatively insignificant role. The figures, in thousands of rubles:

TAXATION.- Direct taxes are imposed in the form of a single agricultural tax, a trading tax, an income tax, a surplus profits tax, probate duties. They yielded upwards of 900,000,000 rubles in 1926-27.

Indirect taxes consist of excise taxes and customs duties. Excise taxes are imposed on sugar, tobacco, textile products, fermented and distilled spirits, oil products, salt, tea, coffee, matches, yeast. They yielded upwards of 1,200,000,000 rubles in 1926-27. Customs duties yielded 190,000,000 rubles.

DEBTS-The Soviet Government, since it came into existence in November, 1917, has contracted no foreign debts.

The internal State debt of the Soviet Union as of October 1, 1928, was 1,422,100,000 rubles ($732,381,500). Figures of the internal debt, at various dates, in millions of rubles:

Details of Government bonds sold and refunded, in rubles:

National Income

The national income has increased nearly 50 per cent in the past two years. The figures are given in the following table (in millions of rubles):

The national income, previous years (in millions of rubles):

National Wealth

The national wealth of the Soviet Union has increased 34 per cent during the past three years, with an increasing gain each year. The national wealth (in terms of prices of 1925-26), is divided as follows, as of 1924-25 and 1927-28:

Under the category of agriculture, national wealth as of 1927-28 is divided as follows:

The distribution of national wealth, State, cooperative and private, in billions of rubles, is as follows:

In the category of private wealth listed above, as of 1927-28, 28.3 billion rubles represents wealth in agriculture.

Tariff

The Soviet Union has a protective system of import duties, supplemented by duties on a limited number of articles of export. There are separate schedules for the European and the Asiatic frontiers. Early in 1927 the schedule for the European frontiers underwent a slight upward revision, the average duties on imports being about 30 per cent. In the fall of 1926, raw cotton, which had hitherto been admitted free through the port of Murmansk, was put under a small duty. Early in 1927 this duty was fixed at 21 rubles per 100 kg.

Goods for trans-shipment to and from Manchuria are admitted free without customs inspection at Vladivostok.

Next: FOREIGN TRADE

⁽¹⁾ A special decree of the Central Executive Committee and the Commissariat for Finance, issued August I, 1928, provided for a temporary increase of the percentage of treasury bills to 75 per cent of the total of State Bank notes, during terms when the turnover of consumption goods showed a sharp rise, such as the crop-moving season. The increase was to be confined to bills of rubles or less, as the supply of bills of small denominations had proved insufficient for the demands of the crop-moving season.

⁽²⁾ Without "Sums in Transit" which are entered to the account of "Offices, Branches & Agencies."

⁽³⁾ Including "Investments".

Table of Contents: The Soviet Union: Facts, Descriptions, Statistics