Beria’s and Malenkov’s ordeals were relatively painless. Both remained within the top leadership. Presumably they were just being shown who was boss and reminded that they were dispensable. Stalin clearly had no intention of dismantling the system of supreme power that had taken shape. He just wanted to create new counterpoises, new centers of competition.
Stalin was just as calculating in dealing with the military leadership. By the war’s end, the status of the Soviet Union’s marshals and generals was understandably sky-high. For Stalin, who cherished his own reputation as a commander, their popularity was politically undesirable: the victory could be the work of only one genius. Stalin was also concerned about possible conspiracies. The generals, intoxicated by thoughts of their own brilliance, made matters worse. State security, which was always in competition with the military, reported to Stalin on conversations at celebratory dinners where generals lavished one another with praise and made disparaging comments about their
vozhd
. Stalin’s natural response was repression. Inevitably his first target was Zhukov, the most famous and influential of the wartime military leaders. Zhukov’s life now hung by a thread. Stalin ordered the arrest of a number of generals close to Zhukov and had a case opened against Zhukov himself. A month later, after Malenkov’s demotion and Merkulov’s firing, Zhukov and other military leaders received a dressing down. A 9 June 1946 order, issued by the minister for the armed forces of the USSR and signed by Stalin, described the wartime commander’s transgressions as follows: “Marshal Zhukov, having lost all modesty and carried away by a sense of personal ambition, felt that his services had not been sufficiently valued and took credit in conversations with subordinates for designing and carrying out all of the Great Patriotic War’s major operations, including those operations with which he had nothing to do.”
41
This condemnation was obviously motivated by Stalin’s jealousy and anger at a lack of proper deference from this national hero and other military leaders and his desire to cut them down to size. But he was not prepared to go so far as to physically annihilate Zhukov, who was too symbolic a figure and too closely associated with him. Public discrediting and demotion would suffice. The order relegated Zhukov to a secondary post commanding a military district. Given the fate of some of Stalin’s other close associates over the years, such a command might even be considered a reward. Zhukov had lost a great deal but not everything. Toward the end of his life, Stalin agreed to readmit Zhukov to the Central Committee, a sign that he was finally back in the
vozhd
’s good graces.
By late 1946 these reshufflings had evened out the balance of power among Stalin’s associates. The firings, demotions, and public humiliations more or less restored the structure of top government that had existed before the war. Stalin could now leave his associates in relative peace as he dealt with the country’s pressing economic problems.
CURRENCY REFORM AS A REFLECTION OF THE SYSTEM
Militarization, physical devastation, famine, an inefficient ration system, crippled agriculture, a degraded social infrastructure, and a reliance on compulsion in mobilizing the labor force—such were the features of the postwar Soviet economy. War’s toll was, of course, reflected in the sorry state of the budget. The government had financed the war’s huge costs primarily by printing money. The predictable result was spiraling inflation. Something had to be done about the excess currency circulating through the economy. To reduce the amount of money in circulation, the Soviet leadership ordered new rubles printed and old rubles devalued.
In his memoirs, the wartime finance commissar, Arseny Zverev, states that by late 1943 he had already discussed such measures with Stalin.
42
Evidence that the finance commissariat was planning for currency reform so early can also be found in the archives. Toward the end of 1943 it was decided that the reform would be introduced after the war by reducing the buying power of the ruble through increased prices, exchanging old rubles for new ones, and abolishing the ration system.
43
This is largely the program that went into effect a few years later.
Now that the war was over, the problem of stabilizing the country’s finances and doing away with rationing took on tremendous political importance. Doing away with ration cards even more quickly than in capitalist countries would demonstrate the advantages of socialism. The reform measures were planned for 1946, but the famine forced a delay. Throughout that year, Finance Commissar Zverev sent Stalin several memoranda on the upcoming reforms. Judging by Stalin’s notations on these documents, he took a great interest in the topic.
44
As preparations reached their final phase, Zverev had frequent face-to-face meetings with the
vozhd
. According to the log of visitors to Stalin’s office, during the period leading up to the reform’s introduction on 14 December 1947, Zverev was there thirteen times.
45
Finally, on 13 December 1947, the Politburo voted to approve the main documents instituting the currency reform and abolishing ration cards. It was stipulated that the measures would be announced over the radio at six o’clock in the evening on 14 December and in newspapers the following day. Overnight, between 14 and 15 December, the population was deprived of a significant portion of its savings. For every ten rubles people had in their possession, they would now receive one. There was a more complex system to deal with bank deposits. Accounts with under three thousand rubles were not affected, but those with three to ten thousand rubles would be compensated at a rate of two new rubles for every three old ones. Deposits over ten thousand rubles were compensated at a rate of one to two.
The Politburo was fully aware that the reform would not be popular. A large part of its resolution, which was intended for publication, was devoted to a detailed explanation of the move’s necessity, utility, and fairness. Keenly in tune with widespread prejudices, the text asserted that the reform would hit hardest at “speculative elements who have amassed large stores of money.” This assertion was false: the most well-off Soviet citizens were in the best position to convert their cash into other forms of wealth. Nevertheless, the idea that the currency reform was a means of confiscating ill-gotten gains proved extremely popular. As usual, the resolution did not neglect to mention the financial hardships faced by the toiling masses in capitalist countries. Its wording suggests that Stalin played an active role in drafting it. Among the revisions made in his handwriting is the added promise that this would be the Soviet people’s “final sacrifice.”
46
Major reforms are always fraught with difficulty. The new rubles began to be printed in 1946 for introduction at the end of 1947, but at first a high percentage proved defective. To maintain secrecy, the new money was not delivered to Gosbank branches, of which there were many, but to specially set up storage facilities evenly distributed around the country. The new rubles were transported in special, heavily guarded train cars. Finally, when it came time to exchange rubles, in addition to regular Gosbank branches, 46,000 exchange points were set up, for which 170,000 workers were hired.
47
No amount of secrecy, of course, could hide such a major operation from public view. Rumors began to spread and became more persistent after salaries and pensions for the second half of November were paid ahead of schedule. Overall, however, the public did not know what the reform would look like. Spurred by contradictory rumors, people scrambled to save their nest eggs. At first the panic affected purchases of durable goods and valuables. On 29 November 1947, Internal Affairs Minister Sergei Kruglov reported to Stalin that customers were flooding stores to buy manufactured goods and crowding into banks to withdraw their savings. Store shelves were emptied, and even items for which there had previously been no demand disappeared. Stores sold out of furniture suites going for tens of thousands of rubles—huge sums, given that the average annual salary for laborers or office workers was approximately 7,000 rubles. One suite costing 101,000 rubles that had languished on the showroom floor for years now had four competing buyers. Customers bought furs, fabrics, watches, jewelry, pianos, and rugs.
48
On 30 November Kruglov reported that hundreds of people had lined up outside Moscow’s department stores before opening. People from neighboring oblasts flooded into the city. Huge lines of up to five hundred people formed outside savings banks. After two days of this buying frenzy, the authorities decided to take action. Kruglov informed Stalin that most stores had been closed under the pretext of renovation or taking inventory. The stores that remained open removed valuable items such as gold jewelry from sale. And some were forced to shut their doors because they had nothing left to sell.
49
Kruglov’s report of 2 December was not much different. Now that consumer goods were in short supply, people had started to buy up whatever they could find, including musical instruments and phonographs. One store that had been selling six pianos a year sold all eleven it had in stock over two days—30 November and 1 December. The shortage of manufactured goods led to a run on non-perishable food items such as smoked sausage, canned goods, candies, tea, and sugar. This hoarding prompted an order to remove these items from sale. Restaurants did a brisk business, and “drunken individuals would take wads of cash out of their pockets and cry: ‘Look at all this paper.’” Other regions reported similar spending sprees.
50
If Stalin read such reports—and there is every reason to believe he did—he was given an eye-opening lesson on the lives and economic logic of ordinary Soviet citizens.
It is interesting that the authorities refrained from heavy-handed measures to halt the frenzy. Beginning in early December there was a noticeable increase in small savings bank deposits, an obvious effort to spread savings over multiple small accounts that would counteract the reform’s intention of removing rubles from circulation.
51
Even then, no steps were taken. Stalin could see how unpopular the reform was and did not want to further inflame sentiment against it.
By 15 December it was all over, and the straightforward operation of exchanging old rubles for new and revaluing deposits began. During the eight-day period from 16 to 23 December 1947, Stalin received visitors in his office five times. Each time, Zverev was among them. His visits on 16 and 17 December—the reform’s first days—both lasted two hours. Each time, a significant fraction of the Politburo was also present.
52
On 3 January 1948 Zverev sent Stalin a report on the reform’s results. It was filled with statistics that must have been encouraging to the government but disheartening to the rest of the population. Before the reform, on 1 December 1947, there were 59 billion rubles in circulation. As a result of the spending spree and ruble exchange, there were now only 4 billion. Deposits in savings accounts had been reduced from 18.6 billion old rubles to 15 billion new ones.
53
The percentage by which prices decreased following the abolition of ration cards was modest in comparison with the number of rubles that had been taken out of people’s pockets. The price of bread went down by 20 percent and meat by only 12 percent. Some prices even increased. Woolen fabrics, for example, went up by 27 percent, while clothing in general rose by 11 percent. Overall, the index of state retail prices after the reform went down to 83 percent of what it had been beforehand.
54
Having exchanged ten old rubles for one new one, a consumer’s purchasing power was now reduced by a factor of eight. The lion’s share of the population’s savings had been confiscated.
To some extent the “shop window effect” that followed—the presence of more goods in stores, even if few could afford them—should have softened the blow. But in Stalin’s USSR, the shop windows were still not very impressive. Poor output in both the agricultural and consumer goods sectors and the general sluggishness of the state-run economy meant that even relatively weak post-reform demand could not be satisfied. As usual, special measures were taken only in major urban centers, Moscow and Leningrad first and foremost. Generous supplies of food and manufactured goods had been warehoused there in advance. But even in these cities, there were limits placed on purchases: bread—two kilograms per customer; meat and meat products—one kilogram; sausage—half a kilogram; milk—one liter; footwear—one pair; socks—two pairs; soap—one bar; matches—two boxes, etc.
55
In the capitals and in some other major cities, the end of rationing led to supply problems. A few weeks later, Moscow began to receive complaints about empty store shelves, limits on purchases despite the supposed end of rationing, and special shops set up for officials only. One letter from Belgorod read: “Today is the sixth day in a row that my wife stood in line for bread from 2 in the morning to 10, but, alas, all six days she came home without bread.” Facing long lines, high prices, and empty stores, people looked back on the days of ration cards with nostalgia.
56
Not all population segments suffered equally. People in major cities, especially those receiving high salaries or otherwise affluent, were not greatly affected by the reform. Before the devaluation it had been relatively simple for them to convert their old rubles into goods. After the reform they took advantage of the relative availability of goods and the drop in prices in urban
rynoks
(food markets where peasants could charge a market price for the goods produced on their private plots). But the price drop hit the peasants hard. Deprived of their savings, uncompensated for their labor on kolkhozes, and forced to carry a heavy tax burden, they were desperate for cash. The reduction in state prices, however modest, pushed down food prices in the
rynoks,
further depressing their income. Once again, the country’s rural majority was the main victim of Stalin’s policies.