If money is not just a medium of economic exchange but also a political institution, then how does fiscal policy contribute to the politics of a nation? In an essay first published by Meduza in Russian, Ekaterina Pravilova, a Princeton University professor and author of “The Ruble: A Political History,” explains how the Russian imperial and Soviet governments’ refusal to outsource money supply to private banks unmoored the national currency, eroded the population’s political agency, and put the ruble at the service of the state’s autocratic and imperial ambitions.
Paper money as the monarch’s word
The history of the Russian ruble is a perfect example of the two-way relationship between national currency and political order. The first appearance of the silver ruble in the 18th century marked a Westward turn whose underlying ideology was defined and promoted by the reformist Tsar Peter I. The Petrovian reform equated the Russian ruble with the thaler (then in circulation around Europe), thereby linking the Russian monetary system with the European one.
The most significant change in Russia’s currency system was the introduction of paper assignations by Catherine II. Instead of silver and gold coins, inherently valuable because made of precious metals, the new paper money derived its value from sheer trust in the state’s promise that paper assignations could, if needed, be redeemed for “real money.”
But several years later the state reneged on that promise. Because Russia was constantly embroiled in wars, covering its expenses by printing more paper money, the value of its currency plummeted. In the late 1770s and early 1780s, a group of anonymous writers proposed to reform the Russian Assignations Bank, claiming that its capital was the imperial subjects’ common property, and that the government had no right to interfere in the balance between the national economy and currency supply — which, the writers, argued, had to correspond to the country’s volume of production. Thus Russia arrived at the idea of limiting the state’s control over money even before the French Revolution proclaimed the principle of the people’s sovereignty, rooting the legitimacy of state power in the people as its sole sanctioning source.
The constitutional ruble
In Russian history, heterodox political thought is commonly equated with opposition to state absolutism and with constitutional and parliamentary initiatives. In reality, the ideas of civil liberties and people’s sovereignty were capable of springing up outside of government and legislative contexts. The idea of a “constitutional” or “lawful” ruble, which emerged between the late-18th and early-19th centuries, was one such idea: it emerged in financial context but implied major limitations on the powers of the monarch and the state, if adopted.
What would have been the difference, then, between the constitutional and the monarchist ruble? Proponents of this reform wanted money issuance to be handled by an independent bank, rather than the state itself. They also wanted to restore the policy of freely exchanging assignations for silver. In 1809, the statesman Mikhail Speransky, the closest of advisors to Russia’s Emperor Alexander I, argued these ideas in his own fiscal reform proposal. A conservative court then denounced it as anti-national and, above all, incommensurate with autocracy.
With respect to the latter accusation, Speransky’s critics had been right. Just like any other liberal fiscal proposal of that era, Speransky’s sought to limit the state’s and the sovereign’s right to print money. In the ensuing political struggle, Speransky was pilloried and exiled, but his idea of a constitutional ruble lodged itself firmly in the minds of Russia’s liberal elites, who viewed independent banking and limiting the state’s control over money supply as a financial equivalent of constitutional rule.
From ‘liberté, égalité, fraternité’ to ‘autocracy, Orthodoxy, community’
Russia’s conservatives were themselves trying to develop a political philosophy of money, hoping to oppose it to the Westernizers’ economic ideas they considered to be alien for Russia. The conservatives’ main thesis was the imperative to trust the monarch: “If the sovereign gave us branded wood-chips and ordered them to circulate instead of rubles,” wrote the historian Nikolay Karamzin, “we would have used wood-chips.”
This ardent faith did little to remedy the fiscal situation. Towards the end of the Napoleonic Wars, the paper ruble had lost 75 percent of its original value. Awkward attempts to boost it without substantial reforms only made the problem worse. By the late 1830s, the government conducted a belated reform, devaluing the ruble to…
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