communists and banks--7/23/24

23 Jul 2024

communists and banks--7/23/24

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Today's selection-- from Money and Promises by Paolo Zannoni. Even the communists would use banks as a tool of power:

"Rudolf Hilferding [a proponent of the 'economic' reading of Karl Marx] provided Lenin with the theory that bankers and banks might be a dangerous enemy, but they are also a powerful tool, perhaps the most powerful tool in the early stages of a revolution. If one wants to build a communist commonwealth quickly, like Lenin, one needs not only to nationalise industry and the land, and to socialise, organise and govern the distribution of goods and commodities, but one also needs to use the banks. You have to seize finance capital. By the time Lenin boarded that fateful train in Zurich on April 9, 1917, bound for the Finland Station in St Petersburg to finally join the Revolution, he had long since absorbed both the lessons of the Communards and of Hilferding's Finance Capital. 'Can the Bolsheviks Retain State Power?' he asked in the title of his famous pamphlet, published in October 1917. Yes, was the loud answer. And how, exactly? By using the banks, of course.

"The 'skeleton' of a socialist society, in Lenin's phrase, the structural framework of the nation, consists of 'countrywide book-keeping' and 'countrywide accounting', by which he means not the mere passive registration of the financial outcomes of transactions; he means the actual execution of those transactions, the kind of bookkeeping that banks do when they exchange their debts for those of their clients in their ledger and then clear those debts by setting them one against the other. To be absolutely clear: Lenin did not want to get rid of banks and banking— no, not at all; he wanted a bigger, better, more comprehensive bank, 'A single State Bank, the biggest of the big, with branches in every rural district, in every factory', which 'will constitute as much as nine-tenths of the socialist apparatus'. Lenin's vision of the communist state was to have this one giant bank keeping a giant ledger in which it executed every single transaction, balancing the nation's ledger; in this way, this super, this supra-bank could manage and supervise the whole economy. With the assistance of this all-powerful bank, balancing its all-knowing, all-powerful ledger, Lenin would be able to make the communist economy work smoothly, effectively and, indeed, without money. It would be Marx's dream come true, the communist paradise, built using a tool, the banking system, ready-made from capitalism.

“Things did not work out exactly as Lenin planned.

“The Smolny is a large Palladian complex in the centre of St Petersburg. Built in 1805, it had once hosted a finishing school for the daughters of the Russian aristocracy, the Society for the Upbringing of Well-Born Girls. In 1917, Smolny, with its Grecian pillars and grand reception hall, became the Bolshevik headquarters, home to the Bolshevik Revolutionary Committee and the Military-Revolutionary Committee. 'It was,' Trotsky wrote in The History of the Russian Revolution (1930), 'as though the Winter Palace and Smolny had changed places.'

“In October, Smolny was a frenzy of activity; this was the very nerve centre of the revolution. Outside, armed Soviets fanned out into the city to occupy key government buildings; inside, Bolshevik leaders moved from one room to the other, organising the revolution. Lenin arrived at the Smolny on the evening of October 24, 1917, disguised as a workman, wearing a wig, a bandage and make-up. The moment to seize power had arrived. 'There can be no delay!' he told the Bolshevik Central Committee. On October 25, Lenin addressed his comrades in the Smolny's main hall: 'The old state apparatus will be destroyed at its roots and a new apparatus of administration will be created in the form of the soviet organisations.' There was work to be done. It was time to seize the banks -- because the banks are the state apparatus needed to bring about socialism. This was not France. And the Bolsheviks were not the Communards.

“The story goes that soon after arriving at the Smolny, Lenin was wandering down a corridor and came across a man sleeping on a couch, a label pinned to it: 'People's Commissariat of Finances'. Lenin recognised the slumbering form: Vyacheslav Rudolfovich Menzhinsky, a Polish Bolshevik from a noble family who had worked for a while at the Credit Lyonnais in Paris and whom the party had therefore put in charge of finance. Vyacheslav was not a man who was universally admired — a dilettante, poet, novelist and brilliant linguist, he was renowned for playing Chopin on a grand piano at the Smolny, much to the annoyance of his fellow Bolsheviks. Trotsky later wrote of him: 'The impression he made on me could best be described by saying that he made none at all.' But Vyacheslav at least dressed like a banker — three-piece suits, a derby hat, pince-nez — and Lenin was keen to put him to work. It was Vyacheslav whom Lenin instructed to take control of the State Bank — Russia's central bank, the biggest of the big, in charge of managing money and overseeing the country's banking system. Others may have been preparing to storm the Winter Palace; Vyacheslav was the man who was chosen to seize the keys to the state apparatus.

“The State Bank was just a few blocks from the Smolny. The plan was simple: Vyacheslav and his armed guard would arrive and ask the bank's director to hand over the keys to the establishment, plus a cool to million roubles in cash. Vyacheslav would then take the keys and the money and hand them over to Lenin, and his mission would be complete; he could then presumably return to his couch and to his Chopin. The only trouble was, when Vyacheslav arrived, the bank's director point-blank refused to hand over either the keys or the money. So Vyacheslav threatened him -- at which point, the director and his whole staff promptly went on strike. This presented a problem for the hapless Vyacheslav: no self-respecting Bolshevik would use violence against a fellow worker exercising their right to strike. It was a classic Russian stand-off, utterly absurd and yet somehow entirely mundane, like something out of a story by Gogol or Goncharov: a handful of armed Bolshevik soldiers and sailors occupying the headquarters of the State Bank, unable to take it over because the employees were on strike. Stalemate.

“So, poor Vyacheslav had to go back to Smolny, where he arranged for the Commissariat of Finance to issue a decree that replaced the director of the bank with a rather more obedient Bolshevik, who would do exactly what he was told. This newly appointed director duly complied, enabling Vyacheslav to provide Lenin with the keys to the Russian banking system, plus a truckload of cash. And so the takeover of the State Bank was finally complete. It was, in its way, an episode entirely typical of the 1917 revolution: part tragedy, part farce. And 100 per cent catastrophic for the future of the Russian people. 'The Bolshevik Revolution,' in A. J. P. Taylor's memorable phrase, 'was not a fully orchestrated piece with the music already composed. It was compounded, like most other events, of confusions and misunderstandings, of human endeavours and human failures, where the outcome surprised the victors as much as it stunned the defeated.'

“Lenin was perhaps less surprised than others. He had spent decades planning and theorising the revolution and he now had the state apparatus he needed to be able to change the way in which Russia produced and consumed goods and commodities: he had the bank. And he quickly set about executing his plan. Having nationalised the State Bank, the Bolshevik leadership renamed it the People's Bank; this People's Bank then took over every banking and quasi-banking establishment in the country; the Commissariat of Finance was then merged with the People's Bank; and thus the nation's banking system soon became the Central Budgeting and Accounting Administration of Soviet Russia, the keeper of the ledgers that registered and cleared all the debts and claims in the economy.

“So far, so good. The grand plan was working. There was just one problem: reality.”