Historical Background of the Soviet Monetary Policy

Abstract

This chapter reviews the historical developments of the Soviet monetary policy and management during the period before the late-1950s. It took about 20 years after the Socialist revolution to establish the monetary management mechanism; the confusion of the Civil War and the unpreparedness for managing fiat money caused the delay. The experience of hyperinflation during the Civil War influenced the formation of the monetary management mechanism. The established monetary management mechanism relied on the presumed infallibility of material planning, that is, the administrative method to allocate resources. The foundation of the monetary management mechanism seemed fragile; however, there seemed to be no other alternative under the Soviet context that restricted the market. The latter part briefly reviews the Soviet practice of economic planning that seemed far from the infallibility.