CREDIT AND MONETARY POLICIES OF THE USSR DURING WORLD WAR II

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000600370467-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: September 26, 2011
• Sequence Number: 467
• Publication Date: January 24, 1951
• Content Type: REPORT

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CENTRAL INTELLIGENCE AGENCY REPOR'
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADCASTS CD NO.
COUNTRY USSR
SUBJECT Economic - Money and credit
HOW
PUBLISHED Book
WHERE
PUBLSHED Moscow
DATE
PUBLISHED' 1947
LANGUAGE Russian
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OF In cOMnRn IN ART 1111111412 TO AM 00A0n011110 F10000 11 F10~
1111110 BY LAM. 1AH000C100 OF THIS FORM It 0000111n0.
DATE OF
INFORMATION 1941 - 1945
DATE DIST. 02`1 Jan 1951
NO. OF PAGES 9
SUPPLEMENT TO
REPORT NO.
THIS IS UNEVALUATED INFORMATION
Denezhnoye obrashcheniye i kredit SSSR, edited by Z. V. Atlas and
E. Ya. Bregel', Gosfinizdat, pp 231-2 5.
CREDIT AND MONETARY POLICIES OF THE USSR
DURING WORLD WAR II
Supporting a fighting army and reorganizing and expanding the economy for
war required the mobilization of vast sums of money. In 31 years of the Patri-
otic War 420 billion rubles was paid out for the expenses of the People's Com-
mi#ariat of Defense and the Navy alone. In addition, a large sum was spent on
evacuating enterprises and the population to the east, on converting industry,
and for other expenses connected with the war. In addition to the usual sources
of funds, the following were .mployed to finance the growing war expenditures:
1. Budget surpluses from prewar years and the free funds of government
offices and economic organizations such as balances in directors' funds, eco-
nomic organizations'. surpluses of their own working capital, the free funds
of long-term investment banks, etc. This gave the budget more than 20 billion
rubles.
2. Funds from the population, primarily voluntary payments showing the
patriotism of the-Soviet people. This includes receipts into the Defense Fund
and the Red Army Fund, money and goods lotteries, and subscriptions to war loans.
In addition, a special wa. tax and taxes on bachelors and childlz3s citizens were
introduced. As a result of all this, budget receipts from the population grew
from 20.8 billion'rubles in the prer year 1940 to 71.4 billion rubles in 1944.
3. Reduction of expenditures f6f financing the national economy and social
and cultural measures. In the second half of 1941 expenditures on the national
economy were 21.6 billion rubles less than called for by the 1941 budget, while
expenditures. for social and cultural measures decreased by 16.5 billion rubles.
It must be ten into consideration, however, that this reduction in expenditures
was connected not only with the increase in war expenses but also with the temp-
orary occupation of the Ukraine, Belorussia, etc.
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Increased labor productivity and reduced production costs were of great im-
portance as a source of war financing. Efforts to achieve quality goals were
particularly successful in war industry. During the first 3 years of the war,
savings from reducing the production cost, of comparable products amounted to
about 50 billion rubles.
As a result of the successful mobilization of all these resources, state
budget revenues exceeded prewar budget revenues as early as the second year of
the war. The 1944 state budget. was carried out with a 5-billion-ruble surplus..
The war was financed without recourse to increasing prices for necessities.
Under the rationing system workers aVd office employees were supplied with food
and industrial goods at low prices established long before the war. The only
prices raised were those for tobacco, alcoholic beverages, perfumes, and cosme-
tics. Thus., state and cooperative trade, playing the major role in Soviet trade,
supplied the population with goods at stable state prices It'is true that
the shortage of consumers' goods resulted in an increase in prices on the.collec-
tive farm. market, but even under war conditions collective farm trade'played a
role secondary to state and cooperative trade. ,
Beginning in 1943 prices on the collective farm market began to decline as
a,resuli of improvements in the rationing system, expansion of the public eating
place network, growth in the collective and individual vegetable gardens of the
urban populations, and later as a result of the opening of commerical stores in
large cities. From 1943 to the end of the war, prices on the collective farm
market were more than halved.
CONTROL BY THE RUBLE AND STATE BANK FUNCTIONS UNDER WAR CONDITIONS
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Tasks of the State Bank in Reorganization of the National Economy for War
In connection with the reorganization of the national economy for war, the
State Bank system had the following chief tasks:
1. To supply regularly and on a priority basis credits to war industry and
also to civilian enterprises and cooperative artels for expenditures connected
with filling war orders.
2. To insure the accuracy of settlements between economic organizations
and also between economic organizations and the military establishment for goods
shipped to the front or evacuated from the front and threatened areas.
3. To set up field branches of the State Bank to assure that the army would
be paid regularly and to take care of the savings of service personnel and of non-
cash transfers to their families.
4. To extend credit to enterprises being evacuated to the east and setting
up operations in new locations.
5. To stimulate the production of consumers'.goods and the procurement of
food by the extension of credit, so as to make up for the shortage of food and
industrial.goods resulting from supplying the front with food, uniforms, etc.
6. To strengthen control b) the ruble over the work of economic organiza-
tions, to contend with problems arising under the difficult conditions of the ini-
tial period of the war, such as weakened adherence to credit and payments regula-
tions, increased production costs, and unequal. distribution of raw materials and
fuel sto.ks among economic organizations.
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SAL
7. To try to keep the ruble stable while simultaneously meeting an in-
creased demand for currency,, connected with the needs of enterprises working
on war contracts, the procurement of agricultural products for the front, and
also for expenses resulting from mobilization of the army and evacuation of
the population, enterprises, and government offices.
8. To bring more collective farm funds into the State Bank and to free
funds tied up in above-pldn stocks of enterprises and cooperative artels,
thereby reducing to the minimum the disparity between the disbursements and
receipts of the State Bank credit plan.
Work of the State Bank Durst _World War II 711 "' I'!
The State Bank's work during the war may be divided into two periods:
(1) the period of reorganizing the economy for war, and (2) the period of ex-
panding the war economy.
The first period is from the start of the war to spring 1942. In this
interval the State Bank's most important work was to provide an ninterrupted
supply of cash for expenses 'onnected with mobilizing the army, evacuating peo-
ple and industry to the east, developing a network of State Bank branches in
the field, and stimulating by means of credit the conversion of enterprises
and cooperative artels for work on war contracts and the mastery of new kinds
of production.. With regard to the resources of the State Bank, this period
was characterized by a sharp reduction in the balance of budgetary funds in
State Bank accounts and a large increase in the balances of collective farm
current accounts, caused primarily by the increase in prices of agricultural
products on the collective farm market. It is understandable that this period
was very difficult for the State Bank, because of (1) the growing demand for
currency,.,o (2) the extremely disorganized state of document transfers and
settlement payments. The latter situation was caused by the movement of goods
to the front and to the east, large-scale readdressing of freight in connection
with the evacuation of purchaser enterprises, and long freight delays en route,
which frequently resulted in losses of goods. All this resulted in consider-
able deterioration of contract; payment, and credit operatiors. The amount of
overdue indebtedness of economic organizations on State Bank loane had almost
doubled by 1 January 1942 as compared with 1 January 1941.
The second period in the work of the State Bank corresponds to the period
of the development of a smoothly functioning war economy. This, in turn, may
be divided arbitrarily into stages. The first stage, from spring 1942 to spring
191+3, is characterized: (a) by the establishment of a system of bank control
over settlement payments due to economic organizations for shipments to mili-
tary agencies and units, and by the development of a clearing system among eco-
nomic organizations; (b) by the extension of easy credit to evacuated enterprises,
by supplying credit to workers' food supply offices set up in affiliation with
enterprises, and by the use of credit to stimulate the production of consumers'
goods and the procurement of food; (c) by measures to bring additional currency
into the State Bank (organizing the receipt of deposits from private individuals,
assisting the financial organs iu the collection of funds from the population,
utilizing local resources to expand trade and speed up the turnover of goods),
and by improving the system of cash payments (inkasso) of the State Bank and of
the bank's cash operations generally.
The second stage is from spring 1943 to the end of the war. It is character-
ized chiefly by the large-scale extension of easy credit for the reconstruction
of liberated areas, by the improvement of currency circulation in the liberated
areas, and by the re-establishment of a network of credit institutions there. In
addition, a number of measures were taken which improved the country's currency
circulation generally. A network of commercial stores was set up, which helped
to lower market prices; a struggle was waged against arrears in wage payments for
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which the State Bank and economic organizations were responsible; banking ser-
vice through the postal agencies was introduced for collective farms, etc. Fi-
nally in this period the State Bank organized the payment of the Red Army in ter-
ritories where foreign currency was the medium of exchange.
Settlement Payments and Clearing Accounts
Settlement payments in 1941 - 1942 had grown very complicated. By the end
of 1941 civilian freight traffic was thoroughly disrupted, and settlements for
freight were in a very confused state. In connection with the frequent read-
dressing of freight caused by the evacuation of the purchaser economic organiza-
tions and because of the shortage of transportation facilities, large quantities
of goods were unloaded en route. There were piles of "ownerless" freight in rail-
road stations and at wharves in the central and eastern parts of the country. On
the balance sheets of purchaser economic organizattions, amounts owed them for
goods paid for but not received and amounts owed by them for goods received but
for which the bill of lading was not received grew very large. On the balance
sheets of supplier economic organizations amounts owed them for goods shipped
but not paid for by the purchaser also increased considerably.
The State Bank was imposed to help economic organization to clear this
debtor-creditor indebtedness caused by the breakdown of settlements between
suppliers and purchasers. The bank was required to help supplier organiza-
tions find the actual recipients of goods and those who had paid for the goods,
as well as to take part in the distribution of "ownerless" goods unloaded en
route and in the determination of their quality and price.
At first, the State Bank handled this unaccustomed work badly, and its
balance sheet for 1941 showed large sums received from purchasers for unknown
suppliers. In connection with this, there was also a tremendous increase in
transactions between branches of the State Bank.
In the secoad half of 1941 and the first half of 1942, there was a sharp
increase in the number of refusals of purchasers to pay for goods received, be-
cause economic organizations frequently received unordered goods shipped by sup-
pliers from the threatened areas, and because of the frequent refusals of agen-
cies of the military establishment and military units to meet demands for pay-
ment. The trouble was thet the bills of lading were sent by supplier organiza-
tions to offices of,, the military establishment direct, by special mail, without
going through the State-Bank. Frequently, the bill of lading was received by
the purchaser after the demand for payment, and agencies of the military'estab-
lishment refused to pay for this reason. There were cases when agencies of the
military establishment refused to pay because,they lacked funds at the moment
but justified the refusal on the ground of nonreceipt of bills of lading. In-
dustrial enterprises and particularly local industry and craft cooperative ar-
tels experienced serious financial difficulties because of frequent delays in
payment by agencies of the military establishment.
To regulate settlement payments between purchasers and suppliers, it was
necessary to (a) straighten out the confusion in settlements caused by the evac-
uation of goods, large-scale readdressing of freight, and the evacuation of the
suppliers or purchasers themselves, and (b) straighten out the settlements be-
tween inc..stry and craft cooperatives an; agencies of the military establishment.
In May 1942 the People's Commissariat of Finance and the State Bank, on
the order of the Council of People's Commissars, suggested to purchasers that
they pay for all freight received by-them without bills of lading, the value
of the freight being determined by a special commission including representa-
tives of the financial agencies and the State Bank. It was also suggested that
in ce'es where the supplier could not be located, the -coney for the goods should
'go t. the state budget. At the same time, steps were taken to stop frequent re-
fusals to pay by agencies of the military establishment and military units. It
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was suggested to suppliers that they send bills of lading and the documents
provided for by supply contracts through the State Bank. An exception was
made only for certain kinds of military freight for which the bills of lad-
ing went directly to the purchasers, by-passing the State Bank as before.
Different periods were set for paying the bills received, 3 to 5 days for
bills sent through the State Bank, and 5 to 10 days for bills received which
had not gone through the State Bank. In January 1943 this system was ex-
tended to shipments addressed to the People's Commissariats of Aircra.'t In-
dustry, Munitions, Defense Industry, Armaments, Tank Industry, and to some
others which had heretofore received bills of lading by special mail. In
addition, it was suggested to enterprises and establishments of these peo-
ple's commissariats that they inform the bank of their refusals to pay, giv-
ing reasons for such refusal. Simultaneously, the State Bank system was re-
quired to strengthen control over purchasers so as not to permit refusals to
pay without good grounds and to see that freight not paid for was taken care
of.
All these measures helped to strengthen adherence to contract and pay-
ment regulations and to clear the great indebtedness on the balance sheets
of economic organizations resulting from unwarranted refusals to pay, the
receipt of shipments without bills of lading, and payment for goods not re-
ceived. In particular; good results were attained in straightening out set-
tlemeit payments between industry and the military establishment.
Thus, during the war the State Bank's work with respect to settlement
payments was characterized primarily by measures to straighten out-settle-
ment payments for evacuated goods and with evacuated suppliers or purchasers,
as well as straightening out settlements between industry, the military es-
tablishment, and war industry, and by efforts to contend with shipments for
which no bills of lading were received. The problem of unwarranted refusals
to pay and particularly the problem of deliveries without bills of lading con-
tinue to be among the questions vexing the State Bank at present.
Another characteristic of the State Bank's war work as a settlement, cen-
ter is the expansion of the clearing system. Before the war the clearing sys-
tem was being introduced very slowly. The war and the accompanying confusion
in settlement payments resulted in an increase in overdue payments of economic
organizations to their suppliers and made it necessary for the State Bank to
expand the clearing system, the best method of organizing settlement payments.
The clearing system was particularly successful in the heavy and defense
industries. The number of clearing centers increased, particularly in these
branches of industry and in the machinery industry. The proportion of clear-
ing'center settlements to total State Bank settlements for goods and services
more than doubled. During the war the number of interoblast clearing centers
for individual branches of industry also increased. These make settlements
between economic organizations located in different oblasts. In addition to
clearing centers, periodic and single cancellations of counterclaims among
economic organizations were introduced during the war.
The war called for greater centralization of the distribution of the
nation's materials resources, which created the conditions for expansion of
centralized clearing. Thus, in the heavy and defense industries, there de-
veloped central clearinb centers attached tc people's commissariats and main
administrations which made settlements among the enterprises suoordinate to
them. In addition, the State Bank began to make centralized intracommissariat
cancellation of counterclaims approximately twice a year. This settled, all
at one time, the claims of enterprises and organizations of 18 to 20 people's
commissariats against each other.
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CG EI ENTIAL
Extending Credit to the Economy During the War
The war economy called for a number of changes in the system of short-term
credit.
Beginning with the first days of the war, branches of the State Bank were
authorized to issue enterprises and ar.els unlimited loans for settlements with
persons being called into the army, and, later, for expenditures connected with
the relocation of enterprises.
To assure fexible and uninterrupted credit for expenditures connected with
war production, branches of the State Bank were given the right to change bank
credit limits established by State Bank regulations.
At the beginning of 1942 favorable credit terms were introduced for evac-
uated enterprises being set up again in new locations. Repayment of their in-
debtedness to the State Bank contracted before evacuation was postponed until
restoration. In addition, for 3 months after its restoration, an enterprise
had the right to receive credit if it did not have enough working capital of
ics own or if its own working capital was unevenly distributed. These favor-
able credit terms helped economic organizations to escape serious financial
difficulties resulting from evacuation.
In 1942, to improve the supply to workers of food and industrial goods,
workers' supply sections (otdel rabochego snabzheniya) were set up in affilia-
tion with large enterprises. State Bank branches were authorized to extend
these workers supply sections easy credit facilities. Credit was extended
not only for working capital, but also for other operations, such as purchas-
ing goods, procuring agricultural products, laying in seasonal stocks of vege-
tables, seasonal productional expenditures of their auxiliary enterprises, ex-
panding the production of consumers' goods, etc.
The reduction in the variety of gooi:s in the trade network and accelera-
tion of goods turnover in connection with the ration card system t .ad the goods
shortage resulted in considerable leveling of the turnover speed of various
groups of goods. In connection with this, a policy was adopted according to
which credit was extended for the planned average turnover period. This con-
siderably reduced the amount of unsecured indebtedness to the State Bank,
which was constantly increasing because of the unrealistically long credit
periods for certain goods which had turned over slowly before the war but
which were sold comparatively quickly during the war.
In the beginn_..g of 1944 the State Bank began to extend credit for cur-
rent trade to trade enterprises not operated on the cost accounting principle
(dining rooms, bakeries, food stores). The purpose of this credit was to fur-
ther the development of?the.network of public eating establishments and auxil-
iary production. Finally, the policy of unrestricted credit was extended to
cover all kinds of procurement by consumer cooperatives. However, because of
the shortage of goods in the state and cooperative trade system, these measures
did not result in any considerable increase in credit investment in trade.
During the war there was a considerable increase in opportunities for ob-
taining State Bank credits for expanding the production of consumers' goods
from local raw materials and scrap, for developing decentralized procurement
of agricultural goods, for fattening livestock, etc. For example, all trade
organizations were authorized to obtain credit from the State Bank for the
purchase of livestock and feed, for expanding gardens, organizing local salt
industries, etc. Enterprises of local industry and craft cooperative ar.tels
were authorized to obtain credit for a n-riod of up to one year for organi-
zing the production of standard parts for housing and furniture. State Bank
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GORFIIJE TIAL
I
branches were given the right to extend credit of up to 50,000 rubles for a peri:1
of 3 years to economic organizations for the deveL,pment of consumers' goods enter-
prises, without confirmation by the InduL;'~rial Bank and at its expense.
These are the main changes in the method of extending short-term credit to
economic organizations in connection with the reorganization of the economy for
war.
In spring 1943 the State Bank began extending large credits to industry in
liberated areas. The highly favorable terms of that credit were as follows:
1. Trade organizations and enterprises of the public eating place network
were given loans for a period of 3 months for the formation of the necessary min-
imum of their own working capital, and all goods coming into these organizations
were received on a 30-day credit basis.
2. Industrial enterprises and craft cooperative artels received credit from
the State Bank for a period of 3 months from the moment they started work again,
regardless of the condition of their own working capital.
3. Pending special orders to the contrary, all economic organizations were
granted postponement of payment of pre-occupation debts owed to the State Bank
and other creditors.
This special credit assistance by the State Bank speeded the economic recovery
of the liberated areas.
Mobilizing Resources for the Extensioh of Short-Term Credit
As has been previously stated, early in the war the budget surpluses from
prewar years had to be used to finance growing war expenditures. Also mobilized
for this purpose were balances in directors' funds, the free funds of long-term
investment banks, economic organizations' surpluses of their own working capital,
and other free resources of the economy. Since the funds were kept in accounts in
the State Bank, mobilization of these resources, totaling more than 20 billion rubles
meant a 20-billion-ruble reduction in the State Bank's own resources earmarked for
credit. This resulted in a substantial change in the composition of the receipts
side of the State Bank's credit plan, arising primarily from a large increase in
the balances of settlement accounts belonging to economic organizations. This was
caused by (1) the liberation of part of the funds of economic organizations pre-
viously tied up in surplus raw material and fuel stocks; (2) below-normal stocks
held ty some enterprises, because of nonfulfillment of delivery plans; (3) the in-
creased profits of some enterpriser. particularly war industry enterprises, as a
result of higher labor productivi", and reduced production t..ats; (4) curtailment
of capital repair in enterprises, as a consequence of which part of the depreciation
deductions earmarked for repair remained temporarily in special accounts in the State
Bank. (Balances in special capital repair accounts in the State Bank are considered
to be on the same footing with other balances'in sdttlement accounts.)
The current account balances of collective farms also grew, despite the fact
that the collective farms transferred part of the funds in their current accounts
to the Red Army Fund.
Thus, the structure of the receipts side of the State Bank's credit plan changed
during the war in the following way: budgetary funds were no longer the State Bank's
resources for the extension of credit; the relative importance of the balances of
budgetary organizations, specialized banks, State Insurance, and the savings banks
in the resources of the State Bank declined, while the relative importance of economic
organizations' settlement accounts and collective farms' current accounts increased
substantially.
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GOWFIDENPAL
Cash 0 erations of the State Bank During the War
The war required large expenditures involving cash payments and simultane-
e,. '.y caused a reduction in the volume of retail sales in state and cooperative
trade. Under these conditions, and in the interests of currency stability, the
currency-regulating apparatus was called upon to take steps (1) to increase re-
the into from athesState Banke turnover of money, and
ceits of
peed up (2)pto reduce currency
State Bank branches exercised control over local industry, craft coopera-
tives, and other enterprises producing consumers' goods from local raa; bmateri--
als and scrap. The production of such goods as furniture, toys,
her shoes, baskets, shoes, and clothes from utility waste, etc., developed con-
siderably during the war in some oblasts (Ivanovo, Gor'kiy, Kirov, etc.). In
addition, State Bank control over the work of industrial bases and wholesale
trade bases was increased to accelerate the movement of goods into the retail
network. In 1944 special stores for the sale of food and industrial goods at
ashdinto the State Bank and tordepressepricesionhcol-
commercial to increase rices
lective farm markets.
de-
At the end of 1942 the State Bank was authorized to accept p ivainnde-
posits of not less than 3,000 rubles. In addition, from the very
of the war, field branches of the State Bank accepted for deposit money be-
longing to service personnel.
To siphon off currency from collective farms, limits were established
to sums which could be retained in kolkhozes. The receipt of money from col-
lective farms far from banks was organized e in through the post lasystem, andcthe
use of the State Bank as a payment
tions was expanded.
A great deal of work was done on diverting currency into the channels
the State Bank. The role of the State Bank as an agent for currency payments ar Tax from in rural areas was expanded to include the collet iond ofthe aonfromnthe
peasantry and the collection of voluntary paymee
to the Red Army Fund. Trade organizations were consolidated to speed the col-
lection of receipts.
adherencerto cash 'regulations ewasostrengthened. Much
was also lso organizations' done to improve the cash operations of the State Bank, making it pos-
siblpopul%tione to time an gairplanee sums tom
liberated areas, etc.
Steps were taken not only to increase the flow of currency into the State
Bank, but also to economize on the expenditure of currency. Noncash transfers
of funds to servicemen's families were organized through banks in the field.
This made it possible to reduce cash payments to service personnel in military
units.
The State Bank's disbursement of currency to enterprises and establish-
ments for administrative and travel expenses was considerably curtailed, and
close supervision of their expenditure of currency was set up. This resulted
in a substantial reduction in administrative expenditures as compared with
prewar. thened.
Control over the payment of wages in enterprises was also streng
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State Bank Control by the Ruble Over Economic Organizations
In the difficult initial period of the war, the operations of credit, pay-
ments, and contracts greatly deteriorated. At first, the State Bank's efforts
to straighten out the difficulties fared badly, and as a result indebtedness
of economic organizations to the State Bank and to supplier organizations con-
tinued to grow. Ab the beginning of 1942 the State Bank system began to take
more effective measures. In the case of enterprises violating the principle
of cost accounting, delinquent in their obligations to the State Bank, and
failing to achieve the qualitative and quantitative goals set for them, credit
penalties were applied, up to denial of all credit. A special effort was made
to do away with the situation in which the capital of economic organizations
was tied up in excess stocks or in goods for which they bad absolutely no use.
Of great assistance in solving this problem was the authority given in
July 1941 (a) to people's commissars to distribute and redistribute all ma-
terials resources, including fixed assets, among enterprises, and (b) to en-
terprises to sell surplus materials through marketing organs without permis-
sion from the people's commissariat. Simultaneously, there was a redistri-
bution of the enterprises' own working capital among enterprises subordinate
to the same commissariat. At the beginning. of the war the people's commissar
was given the right to use funds from the'settlement accounts of enterprises
subordinate to him to pay the overdue debts (to suppliers) contracted by other
enterprises of his commissariat. The payments situation was also improved by
the previously discussed measures taken in spring 1942 to straighten out the
settlement payments of enterprises with military agencies. This made it pos-
sible for enterprises to free considerable funds tied up in debts owed them
by agencies of the military establishments, and in turn to settle with their
own suppliers. Finally, intercommissariat and intracommissariat cancella-
tions of counterclaims, begun by the State Bank at the beginning of 1943,
helped to reduce overdue payments to suppliers.
As a result of all these measures, as early as the beginning of 1943,
nonpayments to the bank and to suppliers by economic organizations declined
considerably in comparison with the first year of the war.
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C O 3FIDE TIAf
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