Stalinist Price Cuts — a popular patriotic meme asserting that during the Stalin era prices were reduced every year.
The Nature of the Phenomenon
Price cuts by Stalin under conditions of total scarcity.
Causes
When Vladimir Vysotsky sang the praises of the supposedly righteous Stalinist era — "There was a time when prices were cut, / And canals flowed where they were supposed to, / And emptied out at the right place in the end" — he somehow overlooked the fact that during Stalin's rule the country also lived through quite different times. In the 1930s, when the canals were still being built, the funds to construct them were desperately short — as they were for all the factories and plants needed to industrialize the country. The repressions that had begun seemed, at first glance, to offer a solution. Yet the prisoners still had to be fed, however meagerly; their guards had to be paid; building materials had to be delivered and those cost money too; and, most importantly, virtually all machinery and equipment had to be purchased abroad.
Western investors, whose concession enterprises in the USSR — established during the NEP era — had been expropriated by every means fair and foul since the late 1920s, had no intention of putting money into the Soviet economy again. Foreign banks agreed to extend credit for Soviet purchases of machinery and technology only against gold as collateral. Major foreign firms would supply equipment on credit only at hefty interest rates and with their own governments' guarantees, and even then made clear they were taking the risk solely because of the Great Depression that had descended upon them.
The funds for industrialization therefore had to be found inside the country from every possible source, including the printing press. In 1946 the USSR Ministry of Finance noted that between 1929 and 1939 the money supply had grown more than sevenfold, from 2.9 billion to 22.2 billion rubles. Moreover, as the ministry itself acknowledged, the growth in the money supply did not always correspond to growth in economic turnover, which inevitably led to very substantial price rises. Regarding one such spike, which occurred in 1935, a Muscovite named G. Vanenko wrote to the Council of People's Commissars:
"A few days ago I had occasion to go to the (factory) pharmacy to buy tablets for a headache. I offer 18 kopecks, as I used to pay. They inform me that these same tablets now cost 90 kopecks. I decided to check at another pharmacy, where they confirmed fully that just a few days ago an order from the People's Commissariat of Health came out raising prices on medicines, with the markup on everyday essential items reaching as high as 500%. Prices on spa vouchers have likewise shot up mercilessly — instead of 200–250 rubles they are now being sold for 400–500 rubles. In 1934 there were also voucher price increases. Evidently the People's Commissariat of Health could think of no other way to cut costs and improve the management of its institutions than to inflate prices so mercilessly. People are now openly saying that organizations and institutions jack prices up several times over specifically so that they can then bring them down by small percentages."
Another means of filling the treasury and simultaneously suppressing demand was compulsory subscription to government bonds. By the 1930s considerable experience had accumulated in this area, so the excesses typical of the previous decade — when taxes, bonds, levies for the funds of various public organizations, and aid to foreign class brothers could consume up to half of a Soviet citizen's wages — were no longer in evidence. Nevertheless, as provincial schoolteachers wrote to Moscow, out of their modest monthly salary of 240 rubles, some 30 rubles went to taxes, bond payments, and other levies. And the remaining 210 rubles were not enough to live on "at current prices for goods."
One of the principal sources of funds for industrialization — and later for all state expenditures — remained the peasantry. Collective farms were obliged to deliver a set volume of agricultural produce to the state under compulsory procurement quotas at fixed low prices. Whatever was left to the peasants as payment for their labor was their own affair, a matter of no concern to the state. Collective farmers did try, in letters to Moscow, to argue that this approach was unjust and wrong. For instance, Nikolai Vetluzhsky from Kirov Region wrote not very grammatically but at great length:
"If you take rye bread — one kilo — 85 kopecks, when the state buys it for 6.5 kopecks per kilo (of grain — 'Vlast'). If you count the bread with the baked weight gain and all overhead costs, then the state gets a net profit of at least 80 rubles per centner. Comparing with 1926, back then the state bought grain for at least 60 kopecks a pood, meaning sugar that year was 38 kopecks a kilo, and a peasant could buy two kilos of sugar for one pood of rye. Nowadays to buy one kilo of sugar you have to sell five poods of rye, meaning prices on manufactured goods against peasant produce have gone up more than twelvefold. And take other goods — kerosene, for example: it was 7 kopecks a kilo, now it's 80 kopecks. Now the collective farmer says that the state takes all produce for nothing, and that they'd be better off not getting even that pittance of a payment, and they consider it a trifling sum."
To make up for their losses, collective farmers sold city-dwellers at markets whatever they had received for their labor days or grown on their own plots, charging as much as possible — which in turn set off yet another round of price increases.
"I live with my husband and daughter in the City of Gorky," wrote housewife L. Matveyskaya to the Council of People's Commissars in 1938. "It is a large, fine city, and many large and beautiful buildings have gone up in it recently. But food is hard to come by, and not only this year. I read the newspapers and I know that our homeland is rich and has everything one could want, but I cannot understand why we are then without the most basic necessities of life. For months on end there is no tea; for weeks there is no laundry soap at all; even matches run out; and now toilet soap is disappearing too. Butter cannot be bought for any amount of money — it isn't available at the market either; meat is often absent as well, and then at the market it costs 9–12 rubles a kilo, which not everyone can pay. There is no sausage, no cheese, no herring in the shops at all, and when they do appear you have to stand in line for hours and still may not get any — or it goes to whoever has the strongest fists. My husband is an accountant and earns 400 rubles; I earn a little extra with small sewing jobs, so we could live quite comfortably as a family of three with our daughter, but for all these reasons life is hard — and harder still, of course, for those who have a small wage and children on top of it."
Soviet citizens even began to suspect that the unrelenting rise in prices and the fall of the domestic currency — the ruble — were the work of enemies of the people who had not yet been rooted out.
"Enterprises are raising prices every day," wrote V. Klimentyev, a resident of Varshavsk, in a 1938 letter to the USSR government. "They raise them arbitrarily, and as a result prices are rising on basic goods as well. The currency falls every day. Wages must be raised. If we take into account the great number of saboteurs specifically in this branch of state life — since many former merchants, factory owners, and industrialists of every stripe have infiltrated it — then this phenomenon becomes entirely understandable."
The "saboteurs" continued to be arrested, but prices kept rising. With the outbreak of war, market prices climbed so high that people began to look back on the prewar period with genuine wistfulness.
"Still Too Expensive All the Same"
Hunger could be staved off with bread and a meager assortment of rationed goods — provided, naturally, that ration cards were issued on time and that bread, to say nothing of fats and grains, was available without interruption. According to the recollections of the most destitute Soviet citizens of the wartime period — those evacuated to remote areas where food was scarce even for the local population — in the hardest months of the war a loaf of rye bread that had cost 85 kopecks in 1940 could be obtained only at markets and only for 200 rubles.
Market prices did ease somewhat after Lend-Lease deliveries of food from the United States began on a large scale, a portion of which was sold without ration cards in commercial shops at commercial prices starting in 1944. For example, 1 kg of beef — which had cost 10 rubles in 1940 — could be purchased in early 1944 for 400 rubles. With an average wage of 435 rubles, and with the population still obliged to pay fixed prices for rationed goods, to pay utility bills, and to deduct a portion of their wages for war bonds, people could not afford not only meat but even, say, buckwheat — 1 kg of which had risen from 4 rubles 30 kopecks to 250 rubles. Clothing and other goods at commercial prices were equally out of reach.
Owing to lack of demand, some goods began to fall in price in that same year of 1944 — and it was precisely this that constituted the first Stalinist price cut. In commercial shops at the end of 1944, beef was already selling at 320 rubles per kg, and in 1945 the price fell to 150 rubles. Market prices were falling simultaneously. After bread was put on sale at commercial prices in 1945 — rye bread, for instance, at 24 rubles per kg — prices at the markets dropped as well, where it was now going for 30 rubles. The only problem was that this price reduction made little practical difference to most of the country's population. Collective farmers were still receiving nothing for their labor, and wages at the factories had fallen sharply with the end of the war.
The next reduction — no longer a quiet one but a widely publicized event — applied to commercial prices and took place in 1946. On February 26 commercial prices for bread were reduced, and it turned out that the staple food, which had vanished from the markets because of a poor harvest and the famine that was setting in, now had to be fought over.
"In connection with the price reductions," the organizational-instructional department of the CC VKP(b) reported to the party and government, "a large influx of shoppers has been observed in stores in all cities. Particularly long queues for bread and bakery products formed in the first days of trade at the reduced prices. As the secretary of the Chita Regional Committee of the VKP(b), Comrade Voronov, reported by telephone, such a large queue formed outside the commercial shop that opened on February 26 in the city of Chita that 'the customers nearly tore the whole shop apart.' Similar incidents occurred in the city of Kaluga, where for the first two days of trading large queues formed outside commercial shops from four or five o'clock in the morning. According to the report of responsible organizer Comrade Ivanov, who is in Kaluga, there were instances in which the crowd, trying to obtain goods more quickly, forced its way into the shops, as a result of which counters were smashed and windows broken in the commercial shops, and several people were injured and taken to hospital."
The queues and brawls, as the organizational-instructional department's report stated, were caused by a shortage of flour:
"A serious cause of the large concentration of buyers in queues is also the shortage of flour allocations. According to calculations by the trade department of the Voronezh Regional Committee of the VKP(b), the allocated flour fund of 418 tonnes per month is insufficient, and to meet the population's need for bread this fund must be increased to 1,000 tonnes. The secretary of the Krasnoyarsk Territorial Committee of the VKP(b), Comrade Kuznetsov, considers that to regularize trade it is necessary to increase the bread fund to 1,000 tonnes per month and to authorize the establishment of an additional 15 shops in the territory's cities. In Molotov Region the limit set for premium-grade flour amounts to only 70 tonnes per month, whereas the daily requirement comes to 4.5 tonnes."
The announced reduction of commercial prices on manufactured goods on July 1, 1946 likewise brought the country's citizens little joy. Those with limited means still could not afford the goods at the new prices — with the possible exception of thread. Those who did have money discovered that stocks of popular goods were extremely limited. The Chelyabinsk Regional Committee of the VKP(b), for instance, reported this to the CC:
"On the first and second days of trading at reduced prices, 200 to 300 people gathered outside the store well before it opened. On the first day the store's total turnover came to 1,979,000 rubles. Converted to the previously prevailing prices, this amounts to 3,300,000 rubles. Over the last three days up to July 2, the average daily turnover of the department store was 600,000 rubles. Working people are showing particularly high demand for ready-made clothing, woolen, silk, and cotton fabrics, knitwear, stockings and socks, haberdashery and household goods. Long queues are forming for items such as stockings, socks, and especially thread, whose price has dropped from 20 to 6 rubles a spool. Many are expressing the hope that this is not the last price reduction. Such remarks are heard in the woolen goods and ready-made clothing departments: 'It's still too expensive all the same. How are we supposed to buy at that price? We can't afford it.' Despite the fact that a group of employees involved in theft had already been exposed at the department store, isolated abuses are apparently still occurring, as some shoppers are saying: 'There are shoes of different kinds — cheap and expensive. But the cheap ones, boots at 400 rubles, don't get put out on the counter; they're sold under the counter to acquaintances.' The store's stocks of goods are clearly inadequate. Ready-made clothing, for instance, amounts to 9 million rubles' worth; leather footwear (men's and women's) to 7 million; woolen fabrics to 2 million; silk fabrics to 600,000; cotton fabrics to 1,800,000; crockery to 160,000 rubles. Given the level of demand seen on July 2, these stocks will not last long: ready-made clothing will last 20 days, footwear 12, wool 6, cotton 10, hosiery 9 days, and so on. It should be borne in mind that in the first two days the shoppers were predominantly residents of Chelyabinsk. In subsequent days demand for goods will not diminish, as residents from other districts and cities will be traveling to the department store."
"The State Robbed Me"
Decreeing price cuts under conditions of total scarcity was, to put it mildly, contrary to the laws of economics. Yet no one dared argue with Stalin, who had announced to the people a gradual but steady reduction in prices. And so, before the next stage in 1947 — since increasing the supply of goods was out of the question — it was decided to reduce demand for them instead. The price reform was therefore combined with a currency reform and the abolition of rationing. Party and Soviet functionaries at the district level and above were informed of the forthcoming changes in advance, at secret meetings held in late November 1947.
"In the near future," Moscow's senior officials were told, "the government will pass a resolution abolishing the rationing system for all food and manufactured goods. This resolution provides for the abolition of ration cards for all forms of supplementary food, and with the abolition of rationing uniform prices will be established for all food and manufactured goods, as well as for potatoes and vegetables. The price of meat will be 30 rubles per kg; fish products — 12 rubles per kg; butter — 62 rubles; granulated sugar — 13 rubles 50 kopecks; potatoes — 1 ruble. Prices for bread and flour will be reduced by 12% and for grain by 10% — relative to ration prices. Rye bread will cost 3 rubles per kg. Wheat bread — 4 rubles 40 kopecks. Millet — 6 rubles. Macaroni — 10 rubles. Prices on manufactured goods will be set at two to three times below current commercial prices, but will be higher than rationed-supply prices. For example: men's galoshes — rationed price 22 rubles, commercial price 250 rubles, new price 45 rubles. Cotton fabric — sateen — rationed price 4 rubles 80 kopecks, commercial price 50 rubles, new price 13 rubles 90 kopecks. Thread — rationed price 55 kopecks, commercial price 6 rubles, new price 1 ruble 90 kopecks. Men's Boston-cloth suit — rationed price 683 rubles, commercial price 2,660 rubles, new price 1,685 rubles."
To prevent people from sweeping up the most acutely scarce goods even at the higher prices, per-customer purchase limits were introduced for food and goods. In the long list, bread stood out — no more than 2 kg could be purchased. Sausage was limited to 500 g, butter to 300 g, eggs to no more than five, shoes to one pair, thread to two spools per customer, and the same number of boxes of matches per person.
But that was far from all. In the reform that began on December 16, 1947, only money held in savings accounts was exchanged at a one-to-one rate, and only if the account balance did not exceed 3,000 rubles. Cash — the kind that ordinary workers kept stuffed in mattresses and linen cupboards — was exchanged at a rate of ten old rubles for one new one. It was precisely these people who suffered most from the reform and felt no benefit whatsoever from the "reduction" — which was in effect a price increase — since whatever goods they did buy they purchased not in commercial shops but with special vouchers awarded for labor achievements.
People had long since been trained not to express their anger openly, so even the boldest dared only to write their grievances anonymously on ballots during elections. Less than a week after the reform began, on December 22, 1947, elections to local soviets were held in Moscow. Observers noted a whole series of such remarks.
"There are inscriptions," the report of the Moscow City Committee of the All-Union Communist Party (Bolsheviks) stated, "expressing sharp dissatisfaction with the monetary reform. 'The state has robbed me. The monetary reform has taken the last kopek from the working person. Many tears have been shed, while speculators have been left with enough money for new speculation' (26th polling station, Leningrad District). 'My heart burns with resentment over the pennies taken away — pennies earned with calluses. Two or three hundred have been taken from a starving person' (34th polling station). 'Working people have suffered more from the monetary reform than speculators have,' reads an inscription on a ballot (3rd polling station, Leninsky District). 'The working class is displeased with the currency exchange. Only workers lost their money, while speculators kept theirs as before. Our hard-earned kopek was exchanged at 1 ruble for 10 kopeks' (polling station No. 62, Krasnopresnensky District). A voter from the 12th polling station (Leningrad District) writes: 'The abolition of the rationing system is a wonderful thing, but it has not been thought through to the end. Prices are such that you cannot buy anything. We always have only fine-sounding phrases, but nothing ever gets done.'"
Nobody expected anything special from the next price reduction, scheduled for March 1, 1949. Food prices fell only slightly, and some goods — clothing and woolen fabrics, for example — actually rose in price by 5–15%. To announce to the workers this new demonstration of the Party's and Comrade Stalin's personal concern for them, factories held grand rallies at which prepared speakers gave thanks for the joy bestowed upon them and took on new, higher commitments to fulfill the plan.
The report of the Propaganda and Agitation Directorate of the Central Committee to Georgy Malenkov stated:
"Steelworker Alexey Korchagin of the 1st open-hearth furnace shop at the Magnitogorsk Metallurgical Combine, speaking at a meeting, said: 'In response to Stalin's concern for improving the material well-being of working people, we metallurgists will answer with new labor achievements. On behalf of the steelworkers of my section, I commit to producing all heats at only the highest quality, to widely applying high-speed steelmaking, and to giving the country hundreds of tons of metal above the plan.'"
The same report, however, also contained information about workers' doubts regarding the sincerity of the Party's intentions and negative reactions to the decision to reduce prices:
"In Moscow, Leningrad, Riga, Rostov, and other cities, agitators were asked questions: Why have prices not been reduced on sugar, soap, kerosene, and leather footwear? Will rents be raised? Will there be enough goods for sale at the new prices? Why have prices on bread, flour, and vegetable oil not been reduced enough? Some women express dissatisfaction with the large reduction in the price of vodka and request that flour be sold more abundantly and more frequently. Party organizations report individual instances of hostile statements. Engineer Kapman of the Kirov Plant (Leningrad), in conversation with a group of workers, declared: 'There is no need to make such a fuss over such a small price reduction. This reduction is purely for propaganda purposes.' A similar statement was made by Gokkel, an employee of Lengiz."
Before long, however, Soviet citizens felt the unpleasant consequences of the new price reduction and were quick to report them to Moscow. In order to balance a budget losing part of its revenue, many institutions resorted to staff cuts.
"Since the beginning of 1948," wrote B. Kovalenko, "reductions in the administrative and managerial apparatus — accounting departments in particular — have been observed everywhere (and still are). Let me dwell on this. In our city of Maikop, some accountants and especially bookkeepers have already been let go, with the result that as the number of workers grows, the accounting department is being cut, and accountants who previously worked their allotted hours are now working ten to twelve hours or more. Yes! Yes! One wonders: where is the protection of labor? Are the laws being observed? Perhaps one can do without an accounting department altogether? I consider these cuts improper. In Maikop there is a branch of the Krasnodar Training Center that graduates accountants and bookkeepers — yet as layoffs have been going on for a year, it continues to graduate them without any plan; there is no work for the accountants and bookkeepers it graduates, since the branch does not place them anywhere, and as a result they remain unemployed. Unemployment has been observed in Maikop for over a year now. The accountants and bookkeepers graduated by the Maikop training branch cannot find work, and when they inquire about a job at some enterprise, they are typically told: 'We're cutting our own accounting staff here.'"
A citizen who prudently declined to give his name wrote about the shortcomings of the authorities' pricing policy for manufactured goods:
"The reduction of prices on industrial goods has been carried out incorrectly: many items (watches, musical instruments, radios, bicycles) are either not available for sale in regional and district centers, or there is no selection. Reducing prices on goods that are not available for sale is a disservice to the population: shortages, pull-and-connections, queues, and all the rest of the chaos return. Moreover, premature price reductions force industry to adapt to cost targets by sacrificing quality: reports have already appeared, for instance, of radios being produced without screws, held together with some kind of adhesive fasteners. It is well known that our domestically made bayans and accordions are greatly inferior in quality to those brought from Western Europe: they are twice as heavy, inferior in melodiousness and volume of sound for the same airflow, their mechanisms are inherently sluggish and break frequently. This is due mainly to the use of low-quality metals. It would seem that what is needed is to sort out the technology and sharply improve quality and range of products, raising prices where necessary. Yet, as is evident, things are moving along the path of least resistance: first price reductions for propaganda purposes, then cost-cutting through the production of goods 'without screws,' and then unwarranted reproaches directed at Soviet citizens and self-flagellation over admiration for foreign goods. More practicality, comrades, in matters of prices and trade!"
But the central question on the minds of virtually all Soviet citizens was posed in a letter by the same Kovalenko from Maikop:
"This reduction should extend to everything: foodstuffs, certain manufactured goods, postal services, radio, public baths, and railway ticket prices. In the autumn of this year, depending on the harvest, prices on bread and flour should be reduced further. All of this is necessary because prices have not yet reached even half the pre-war level (although wages have been raised by one and a half times); meanwhile, agriculture and industry have already reached pre-war output levels." No matter how much the propagandists spoke of price reductions, prices still exceeded pre-war levels by several times. Wages, meanwhile, were rising at a considerably slower pace. And the situation did not change much with the subsequent Stalinist price cuts — there were four more of them, and the last took place after the death of the leader of all peoples, on April 1, 1953. For instance, the price of sewing machines, after the 1953 reduction, remained three times higher than before the war. Prices for tableware, matches, footwear, fabrics, furniture, toys, and many other goods, according to the data of the USSR Central Statistical Office (CSO USSR), continued to be double the pre-war level. Particularly amusing was the situation with children's wooden blocks, which — despite all the Party's concern for children — remained four and a half times more expensive than before the war. The picture with food was only marginally better. In 1953, the price of bread remained more than one and a half times higher than before the war. And the most popular fish in the USSR — sprat and anchovy — cost one and a half to two times more.
And yet the new price tags appeared most disheartening in the eyes of those who still remembered pre-revolutionary times and the much-vaunted 1913 — reputed to be the finest year in the history of the Russian Empire. Compared with it, according to CSO data, printed cotton fabrics had risen in price 46 times, men's mid-season overcoats 29 times, and even the faceted glass — without which no Russian, and later Soviet, household could get by — had gone up in price 22 times.
In subsequent years, changes in the scale of prices — naturally, at the request of working people — were carried out on multiple occasions. As veterans of the USSR Council of Ministers told me, however, the process followed a standard pattern. The Ministry of Trade would submit a list of slow-moving, stagnant goods as well as those in high demand. Then the price of slow-moving "old ladies' stockings" would be reduced while prices on crystal glassware and automobiles were raised. Needless to say, such operations had nothing to do with any real reduction in prices.
So perhaps our canals did flow and empty where they were supposed to. But prices, once they had risen, never came back down to their former level under any circumstances.
(Vlast Magazine, No. 10 (813), March 16, 2009)