The 1922–1924 monetary reform of the Soviet Union was a set of monetary policies which was implemented in the Soviet Union as a part of the Soviet government’s New Economic Policy. The principal objectives of the reform included stopping the effects of hyperinflation, establishing a unified medium of exchange and the creation of a more-independent central bank.
According to economic data recorded in the archives of the Soviet Union and the Russian Federation, results of the reform were mixed; some modern-day economists call the new policies a successful transition towards state capitalism, but others describe them as problematic and failing to uphold the targets laid out in its original blueprint. Economists such as John Maynard Keynes categorize the reform as an aggregation of short-term monetary expansion experiments which defined Soviet monetary and fiscal policies, where the state played an active role in dictating economic growth.
Purpose
According to historian Gustavus Tuckerman and economist Yasushi Nakamura, the reform's central theme was stabilisation. A united pursuit of the goal of stabilisation by the Soviet Politburo and the Central Planning Committee gave rise to a series of monetary experiments which, to a great extent, contradicted the collective ownership which was a core principle of The Communist Manifesto and the Soviet planned economy. Nakamura catalogues a list of government agencies which independently proposed a collection of monetary policies to the central government for incorporation into the reform.
Introduction of the reforms (July 1922)
With a budget deficit since the start of World War I, the Russian economy was in recession and near collapse by the end of the Russian Civil War (1918–1921). According to historian Paul Flewers, economic war communism and ideological questioning of the long-term need for a monetary system triggered a massive increase in the money supply; this prolonged a continued rise in the Soviet Union's domestic inflation rate. The Soviet economic data archive indicates that by 1921, the national monthly inflation rate averaged about 50 per cent and the quantity of currency in the Soviet economy increased by 164.2 times. According to the Soviet Union's 1921 purchasing-power index, 10,000 Soviet sovznaks had the purchasing power of 0.59 1914 chervonets.
Beginning
Soviet monetary reform began in July 1922 when Gosbank (the Soviet central bank) was given a degree of autonomy by Gosplan, the State Planning Committee. According to Russian historian Zahari Atlas, the bank was given the right to issue national banknotes and the power to restrict government access to capital. A more-independent central bank became an economic oversight mechanism to fight inflation and gave the Soviet economy the flexibility to counter domestic and global fluctuations. Economist Amy Hewes wrote that the policy outcomes were the Soviet economy's return to the gold standard, the introduction of a separate national currency, elimination of the government’s budget deficit and the restoration of a centrally-administered tax system. By the end of 1922, a dual-currency system was in place; gold-pegged Russian chervonets were restored as a unit of account, and Soviet printed money (sovznaks) was commissioned as the nationalised medium of exchange and domestic means of payment.
Implementation of the reform (1922–1923)