in its early life the Soviet Union tried to create a society without money and it was a disaster despite the country wrecked by years of war and revolution the Bolshevik sought to immediately create their ideal socialist Utopia namely a moneyless society a moneyless society that strangely involved the printing of hundreds of billions of rubles hmm in this video we look at the Soviet Union's devastating first flirtation with Communism the Soviet Union was one of the most fascinating economic and social experiments in world history if you want to watch more a geometry style documentaries about the country then I want to suggest curiosity stream curiosity stream has thousands of documentaries covering all sorts of topics from nature to science to Industry to history with new stuff dropping every week I grew up on a diet of Old National Geographic and eyewitness documentaries their style reflects that of asianometry today and curiosity stream carries on with the tradition let me share a few curiosity stream documentaries that I enjoyed and feel would be great follow-ups for some of the videos on this channel the end of a superpower which covers the fall of the Soviet Union and what has happened since then this is obviously a Natural Choice did you enjoy the video about East Germany and their semiconductor efforts try the spying game which goes over stories of Espionage from the Cold War and world's best dinosaur fossil I love dinosaurs and I've heard about this fossil for a long time they made the video that I wish I could have made about it enough said I'm really excited to have the opportunity to talk about curiosity stream today they are fun well-told stories that also happen to be informative an affordable streaming option for anyone who wants to learn something new go to curiositystream asianometry or scan the QR code to get started use the promo code asianometry and you'll save 25 off thanks to curiositystream for sponsoring today's video we should begin with Marx classical economists saw money as a neutral link helping only to facilitate the buying and selling of goods Marx acknowledged this but disagreed in how those economists downplayed money's role in this Society first Marx believe that money contributed to the cyclical booms of over and under production in the capitalist economy in a capitalist economy someone has money m they use M to purchase a commodity C then they can resell the commodity again for money we call that M Prime so the complete equation goes something like this m to C to M Prime the capitalist foremost goal is to generate profit so they won't do this conversion unless they are sure that M Prime will be greater than m if not then they will wait leading to hoarding periodically those hoarding capitalists will all go produce Commodities at the same time creating overproduction booms and crises Mark saw this as a problem secondly Mark saw money as the means by which the bourgeoisie class parasitically sucked out the blood of the working class workers work and are paid a wage but those wages are not as valuable as the outputs of their work which generates wealth for the capitalists to accumulate money is the seemingly neutral medium by which overproduction crises occur and workers end up becoming alienated or distanced from their valuable outputs such a thing would not be needed in a socialist centrally planned Society so the notion of eliminating money from the entire economy was widespread and ingrained the Bolsheviks never questioned it as one of the major facets of the economy they wanted Russia to have World War One LED various governments across the European continent to go off the gold standard and print money Russia was no different the Imperial government left a gold standard in June 1914 four days after entering the war they ran a 39 deficit the first year of the war and 75 percent the two years after the war led to large government budget overruns foreign borrowing physical destruction collapses and economic output and high rates of inflation Good Times all around between 1913 and 1917 the number of industrial workers available in Russia declined by 16. 4 percent Total Industrial output had declined by even more than that 22. 7 percent this led to inflation at the start of 1917 the year the Bolsheviks took over the amount of paper rubles in circulation increased to 9 billion from the 1.
6 billion it was in July 1914. about a 5. 5 times increase far higher than the 100 to 200 percent increase seen in France and Germany the Russian government's deficit in 1917 was 82 percent of budget and 73 of that deficit was funded using the printing press so the Bolsheviks took over an economy already caught up in an inflationary crisis worse yet the new revolutionary government would not have access to much of the Empire's most productive land a few months after taking power of the Bolshevik government signed the Treaty of press the task in March 1918.
the treaty lost Russia a third of its population nearly a third of its agricultural land and over half of its industry the oil wells of Baku and the Caucasus representing some 97 percent of Russia's total oil output were inaccessible until late 1919. and then there was Ukraine Ukraine alone had provided the Russian Empire with 78 percent of its coal 74 of its iron ore and 80 of its grain even after World War one ended many territories were occupied by anti-bolshevik forces as the country plunged into the Russian Civil War the Bolsheviks would not reliably take control of Ukraine again until 1920. so when the Bolsheviks took over the Russian economy was in a pretty sorry State and even if you discounted the damage inflicted by the three years of war Russian Society was semi-industrialized and largely agricultural not ideal for transitioning to socialism yet the newly installed Bolsheviks decided to move forward anyway Lenin had laid out the steps of constructing this new Russian socialist economy in a pamphlet titled the immediate tasks of Soviet rule the party announced that would establish the dictatorship of the proletariat and centralize all the country's economic activities into a single National plan during this period of time the government carried out a series of activities since money was so important in the capitalist Society controlling that money gave you power and what controlled money the banks Marx long believed that banking was at the core of the capitalist system The Communist Manifesto lists the establishment of a single central bank has the first step towards centralizing the means of production within the state the Russian Empire was no different from the rest of Europe in having a very centralized Financial system about 12 Banks held 80 percent of the country's total Capital this made the country's Bank nationalization Swift and easy so one of the first things the Bolsheviks did was to declare a state Monopoly on all banking activities on November 20th 1917 the people's commissar of Finance seized the Russian State Bank Goss Bank the Bolsheviks ordered the other privately owned Banks to immediately begin funding the country's worker-controlled factories the financiers refused and on December 1917 the Bolsheviks sent troops to occupy all the country's largest banks their Capital was transferred over to goss Bank over the next few months the banks were disassembled their reserves and incomes redirected to the government Bank dividends were abolished withdrawals of deposits before 1918 were restricted and all foreign debts were canceled by the end of 1918 every Bank in the country was liquidated and merged into Goss Bank Goss bank would no longer lend out money but would simply keep accounts of the economy's transactions nationalizing the banks pinched off the flow of credit into the economy in the first quarter of 1918 405 Enterprises employing 205 000 workers closed down due to a lack of credit theoretically a centrally planned a socialist economy would no longer need money and free markets yet because it would take time to transition to this new system parts of the old system like Taxation and worker wages would have to remain this led to a weird seemingly contradictory situation the Bolsheviks moving towards a moneyless society while simultaneously printing a whole lot of it to fund their budgets in June 1918 the Council of the people's commissar announced the nationalization of Industry this was another crucial part of this new transition plan towards socialism as Lenin wrote this would be pulling out and cutting the wires through which the capitalists controlled the economy throughout the second half of 1918 of the first quarter of 1919 the Soviet government nationalized the country's Railways shipping Mining and so on Lenin wanted the Bolshevik nationalization drive to First gain firm control of the economy's most critical levers but the whole thing happened chaotically targeting Industries here and there less than 14 percent of the nationalizations were handled by the central government the large majority were performed by local organizations and trade unions this chaotic nationalization Drve meant the ejection of many skilled workers and business owners their new owners had no idea how to run these machines leaving them to seek the help of the bourgeoisie and all the while the Bolsheviks were fighting the Russian Civil War from the summer of 1918 to the end of 1919 the Russian Civil War ebbed and flowed the various white armies pushed the Red Army nearly to the brink but the White's inability to work together and win the support of the peasants put them at a disadvantage in response the Bolshevik government dedicated every possible effort towards supplying the Red Army industrial policies sought to utilize every available laborer and resource towards the war forced mobilization both fighting the war and the nationalization Drve strained the treasury this all needed to be done using traditional principles of capitalist Finance but the government had no way to fund it without the use of the money printing press no one wanted to lend the new Bolshevik government any money especially since 1918 when they repudiated All Foreign debts and nationalized their assets so the government has to raise taxes to pay their expenses but who and what was there to tax in 1918 income taxes provided just 7.
3 percent of total budget spending forcing the Bolsheviks to break promises made less than a year earlier about abolishing indirect taxes in fact they raised those indirect taxes even further and through an extraordinary income tax in October nothing can be done to fill the gaps in the government budget but to print more money at the end of 1918 inflation measured at 598 percent and there was over 60 billion rubles in circulation yet the value of those rubles when measured using 1913 values had actually Fallen by a tenth from 1917 from 2. 4 billion to just 222 million the party's prevailing effort was to keep the country supplied with food there were food problems early on in January 1918 Lenin wrote in a telegram for God's sake take the most energetic and revolutionary measures to send grain grain and grain otherwise Petersburg will die special trains and detachments harvest and collect escort the trains and form daily for the love of God the Zara's government had introduced a grain Monopoly during World War One it prohibited grain trading in any way shape or form Farmers had to deliver their grain surpluses to the state at a fixed price with no hiding or concealment whatsoever the provincial government had continued the Monopoly when they ran the country and the Bolsheviks reaffirmed it too but the crashing Ruble meant that wages no longer matter to The Peasants who refused to sell their goods at the official state prices the government seeing the problem as being one of food distribution rather than production the food had to be there right responded by quote-unquote requisitioning the food only further disincentivizing The Peasants from producing surpluses in May 1918 the Bolsheviks announced a food dictatorship which reaffirmed the grain Monopoly and permitted the people's commissar of food to use Armed Force to take food from The Peasants who were supposedly hiding it High inflation soon became hyperinflation in May 1919 The People's Bank announced that it would print as much money as possible the bank would receive orders for cash and furiously print however much it can inflation doubled from a mere 598 to 1 376 in 1919. the ruble's value was crashing so fast that the government published their budgets retroactively planning ahead of time was basically impossible in the second half of 1919 money printing costs took up 45 to 60 percent of the mint's total budget and even still the Ministries were not fulfilled on what they asked for even the war Ministry got less than 40 percent of their request amazingly the Bolsheviks argued that this hyperinflation was a sign that their socialist transformation was working their goal in printing unlimited paper money was to devalue it to nothing doing so would annihilate the power of the wealthy money orders transitioning to a system of State distribution and finally giving us a moneyless world the ABC of Communism wrote the gradual disappearance of money will likewise be promoted by the extensive issue of paper money by the state but one can also argue that the unlimited printing of money indicated just how much the Bolsheviks still relied upon the old capitalist system ruined as it was to keep their industrial and war machines going starting around April 1920 the Red Army had essentially won the Civil War defense spending began to wind down but the Bolshevik successes on the battlefield gave them the confidence that they would be able to win the quote-unquote economic War as well all the policies implemented during the war demonetizing the economy nationalizing the economy and requisitioning food from The Peasants that would only intensify them the state sought to take over the entire Supply and distribution system passing legislation to make every public service from transportation to Telegraph use free in December 1920 Lenin signed a flurry of new decrees to make medicines food consumer goods Fuel and postage free the government intensified its attempts to demonetize the economy private traded money would be banished for good the government would control all the inputs and distribute all the outputs taxes and wages were to be paid in kind meaning using physical Goods rather than cash by 1921 93 percent of all wages were paid in this way Banks partially to the rubles collapsing value money would be replaced by a new accounting unit but what would that be some suggested using physical properties others salt or cooperative funds one interesting unit was to use the combined thermal and labor energy that went into the item they eventually suggested the tread a unit of Labor defined as a day of simple labor at a normal intensity all of these suggestions only confused people in determining the value of the goods they were trying to trade with making them unreasonable accounting units in the end there was only the hyper-inflating ruble in 1921 the government issued 16.
3 trillion new rubles despite this the inflation ran so fast that the government still ran a deficit of 21. 9 trillion rubles that year one year later in 1922 that issuance swelled to 1. 97 quadrillion new rubles by 1921 the Soviet government realized that war Communism had gone too far the Russian economy fell into ruins the state was nowhere near ready to take centralized control of every item from soap to food nor were they correct in believing that once the state took over distribution of an item economic Market laws no longer applied illegal markets flourished providing most of people's food meanwhile production of items like steel sugar and Bricks practically ceased overall industrial production had fallen to a third of the pre-war era in 1913.
without money there was a total lack of incentive for people to work work desertion rates in the railways hit 40 percent and a worker in 1920 produced an average of just 45 percent of what they used to Before the War started hyperinflation ruined the lives of the Russian people daily caloric intake in 1919 had fallen by 30 percent from the eight-year average in the 1910s 3 820 calories to 2680. famine broke out in 1921 lasting into 1922 resulting in the deaths of 5 million people food requisitioning had left them with nothing to fall back upon despite the end of the Russian Civil War peace did not return the peasants started to revolt one Insurrection in particular the kronstadt rebellion in 1921 shook Lenin's views on the current direction Lenin realize that market activity had to return in some way in March they implemented a New Economic Policy or the NEP to reverse the decline grow output and stabilize the currency a few years later in 1923 a year in which 176.
