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.
Although the government promoted the reform as a tool in combating the illegitimate acquisition of wealth, in fact it had the opposite effect. Corrupt officials and those operating in the shadow economy managed to convert their cash into luxury goods, which they resold at a profit after the devaluation. In Moscow’s Tushino District, for example, two store directors (both members of the Communist Party) embarked on a large-scale money-making scheme. Using their own money, they bought up suits, fabrics, hundreds of pairs of shoes, and other items. These goods were stashed away until after the reform, when they were gradually sold at rynoks through a network of sellers, as well as through the directors’ stores. The following figures give an idea of how typical such operations were: during the last two weeks of December 1947, approximately 3,000 people working in the retail sector were arrested, of whom 1,100 were store directors and approximately 900 were party members. Such arrests continued at the same rate through January and February.57 And this was only the tip of the iceberg.
Another common practice spurred by the devaluation was the backdating of savings account deposits made after the terms of the reform were announced. Many large accounts were broken into smaller ones under the three-thousand-ruble limit. The true scale of such malfeasance is unknown, but records show that this subterfuge was practiced in all regions of the country by a significant proportion of officials. According to incomplete data for March 1948, in just twenty-six oblasts, krais, and republics, more than two thousand officials, including senior party and law enforcement officials, were prosecuted for violating the currency reform law.58 Party secretaries and the heads of state security and internal affairs branches were found guilty of such operations. Cases were also uncovered where top regional officials tried to subvert justice. Central Committee records show multiple cases where “certain regional party bodies have dragged out investigations of cases associated with violating the currency law, and in some cases they have even taken under their protection ‘major’ party and government officials, shifting the full burden of guilt on secondary individuals.”59 Another case file stated that “a significant proportion of senior party and government officials have essentially escaped punishment.”60