861.9111/1–848
The Ambassador in the Soviet Union (Smith) to the Secretary of State
No. 43
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[Page 650]V. Sociological Matters
A. Derationing and Monetary “Reform”. The one really big event of December, which far overshadowed all others, is primarily an economic development and therefore not subject to detailed analysis here. However, the sociological significance of its effect on the daily life of most of the USSR’s 190 million people is so great that this report would not be complete without at least a general outline of the subject.
The event in question is, of course, the USSR’s abolition of rationing and the monetary “reform” which were announced on December 14 and went into effect on December 16. This development apparently received considerable publicity in the United States and the rest of the world in a manner which seldom happens to Soviet internal affairs, enveloped as they are by the iron curtain of the Soviet Government’s secrecy psychosis.
This important development had cast its shadow before, and even as early as the last few days of November forecasts of its coming had sent the rumor-sensitive Soviet population into a mad flurry to get rid of their currency holdings by buying every article in sight. Item IV–D of last month’s report2 described this buyers’ panic in its early stages. The wave of purchasing continued as long as anything was available in the stores, and even afterwards unusually large crowds of people filled the shopping districts of Moscow in a last-minute search for overlooked goods. Many of the smarter elements of the Soviet people—a cynical view would suggest that they were just the “speculators” at whom the reform was aimed—undoubtedly succeeded in getting rid of most of their rubles for goods. Unfortunately, many of the American members of the Embassy staff were not so wise and foresighted!
[Summaries of the main provisions of these two decrees are here omitted.]
For the purposes of this report the significance of these measures is their effect on the life of the Soviet people and on “public opinion” in the USSR. As regards derationing, this measure was universally welcomed. The Soviet people had long hoped for and looked forward to the elimination of the hated card system, for they knew that it would mean more for them to eat, and merely filling their stomachs remains the chief preoccupation of the majority of the people of this advanced socialist land. Consequently, the abolition of rationing, always provided that goods are furnished in sufficient quantity to meet the demand, will mean a considerable relative increase in the standard of living of the Soviet people. Thus far the only fly in the ointment of their pleasure is the fact that only limited quantities of food products [Page 651] are available for sale and that consequently each purchaser is restricted to a given quantity of the product he desires. This situation produced an increase in the number of stand-in-line-for-others speculators and the establishment of long queues in front of many of the food stores and some of the consumer goods shops in Moscow. Presumably, the situation is the same or worse in the provinces, for Moscow is usually given especially favored treatment in such matters. If the supply of goods increases and the population is able to purchase supplies without queueing (a situation which has never fully prevailed in this country even before the war) they will be very happy indeed. But even if the Soviet distribution system can maintain the present amount of supplies, the people will be better off than before and consequently less discontented with their lot.
However, the currency “reform” is a different matter, and cannot fail to have roused an enormous amount of irritation and resentment among the Soviet people. The decree as passed hit the mass of the people much harder than suggested in last month’s report, which stated that the measure “would probably harm directly only that small proportion of the population which has large ruble hoardings.” The one to ten conversion ratio and the forced exchange of bonds were much harsher provisions than most foreign observers had prognosticated. The one to ten ratio hit even the man with only a few hundreds of rubles in savings as well as the speculator with thousands or hundreds of thousands. Indeed, the decree might be said to be harder on those with small savings—they, together with those with no savings at all represent the mass of the population of the USSR—because the rich and the speculators had probably already put a great deal of money into goods, while people only slightly ahead of indigence must keep their small savings liquid. Moreover, it is fairly certain that the largest part of those with large currency holdings were not really “speculators” in the illegal sense, but rather peasants who had complied with the Government’s demands for large crop sowings during the war and had taken advantage of their legal right to sell their personal surplus at open market prices. Furthermore, while the preferred treatment given savings bank deposits benefited only the very limited number of depositors in this country, the one to three bond exchange ratio penalized some 60-odd millions of bondholders, for purchase of government bonds is practically obligatory for all wage-earning workers in this country. In short, the currency “reform” decree, by itself, had a very harmful effect on large numbers of the Soviet people and consequently created a great deal of irritation and resentment, mitigated only partly by the Government’s propaganda emphasizing that the measure would penalize primarily the unpopular “speculators”.
[Page 652]The above analysis of the individual effect of the derationing and currency control measures on Soviet living conditions and “public opinion” is about as safe as estimates can ever be in a country where all facts are deliberately concealed and all diplomats thoroughly screened from the local population. However, the Soviet Government, by its; acts and propaganda, so successfully combined the unpopular measure with the popular that their effect on the people cannot be separated but must be assessed together. Such an assessment is far more difficult to make with any assurance of accuracy, but it seems safe to say that the effect of the measures has, in general, been positive. The resentment created by the monetary “reform” was apparently more than counteracted by the pleasure at derationing, and the former will, in any case, probably be soon forgotten by most of the Soviet people, who are far more long-suffering and resigned to ill treatment than Americans would believe possible. Moreover, the improvement in living standards caused by derationing (providing always that supplies are sufficient) will go far toward improving public morale, for it is a sad fact that the population of this country is, in general, far more concerned with improving its material welfare than in earning for itself the basic civil liberties. It seems reasonably safe, then, to conclude that these measures have thus far brought greater internal stability to the Soviet regime.
The one factor, particularly interesting from an American point of view, which might cast some doubt on the above conclusion, is the strong reaction of the Soviet Government to the Voice of America broadcast of the news of the buyers’ panic in the USSR. Soviet propaganda media have made an all-out attack on the Voice for its treatment of this subject, and have devoted thousands of words to proving that the Soviet monetary system and price structures are infinitely more stable and advantageous for the people than their capitalist counterparts. The amount and intensity of this propaganda vituperation gave a strong impression that the Soviet Government had been touched in a sensitive spot. It seems very clear that the Voice of America is having an appreciable effect on Soviet “public opinion” (an inference collaborated [corroborated] from many other sources), and the sharp Soviet reaction may also indicate a deeper popular resentment against the confiscatory currency “reform” than the Embassy has been able to assess from its limited contacts.
A final interesting but unfortunate sidelight on the above developments was the reaction of the diplomatic corps in Moscow. Unlike postwar currency control measures in less xenophobic countries, the Soviet monetary “reform” made no exception for foreign missions and their personnel, so foreign governments and the diplomatic corps lost money [Page 653] along with the native population. Moreover, the special “diplomatic rate” for foreign currencies was cut substantially in all cases. For example, the drop from 12 to 8 rubles to the dollar will mean a 50 percent increase in the expenses of this Embassy and its personnel. Altogether, the financial blow is so great that some foreign correspondents and possibly some of the smaller diplomatic missions will close. Despite the obvious injustice of such treatment, the diplomatic corps could not even agree to protest as a body because the Yugoslav and other satellite ambassadors so dominated, with Molotov-like conference tactics, a meeting called to consider a protest that no vote could be taken, not even to adjourn! The attitude on this matter of the Soviet regime is scarcely surprising, and undoubtedly represents both an evidence of its fundamental egocentric xenophobia and a calculated intention to make life in the USSR as restricted and uncomfortable as possible for unpopular foreigners (the satellite missions received certain special advantages under the financial measures). It looks like a hard year for “bourgeois” diplomats in Moscow!
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