Comrades! What is the meaning of the policy of abolishing the rationing system? First and foremost, it means that we want to strengthen the monetary economy. We want to strengthen the monetary economy under Soviet conditions and fully develop commodity circulation, replacing the present system or present policy of mechanical distribution of products — which takes account not of the needs of the district or of living people, but of an abstract person — with a system or policy of commodity circulation.

At present, the consumer is not taken into account. Such-and-such an amount of goods and bread is distributed — take it; if you don't take it, it's wasted anyway. This principle must be changed. We have already taken a position on the basis of commodity circulation, but we must plant both feet firmly on the basis of accounting for the needs of living people, of bringing things closer to the consumer.

At present, no one takes the consumer into account. You were given your ration — live as best you can, poorly or well. This principle, which had its justification as long as we did not have enough bread, must now be replaced.

We need to fully develop commodity circulation in all economic activity, throughout its entire sphere, through the monetary economy. Commodity circulation is not simply the exchange of goods. We need to strengthen the monetary economy.

The monetary economy is one of the few bourgeois economic apparatuses which we, as socialists, must use to the fullest. It has not yet been fully used, this apparatus. It is very flexible; we need it, and we shall turn it in our own way so that it pours water onto our mill and not onto the mill of capitalism. Developing commodity circulation, developing Soviet trade, strengthening the monetary economy — this is the basic meaning of the reform we are undertaking.

We have a rather well organized industry; we can produce goods and products. We also have a rather well organized agriculture; we can have agricultural products.

But all this is not enough. It is necessary to establish the meeting of these products — exchange between city and countryside. And establishing exchange between city and countryside under our conditions without commodity circulation, without buying and selling, is unthinkable.

There are in our Party individual "leftist" elements who think one can jump straight to product exchange at once. This is nonsense. Several times individual comrades have tried to do this, and each time they have banged their heads against a wall.

We are now at the stage when the bond between industry and agriculture, the exchange between city and countryside of goods, articles, and products can be carried out only through commodity circulation. We are at this stage, and we have not yet begun to exhaust it.

Only after we exhaust this stage to the fullest will it be possible to raise the question of product exchange. We have not even used a third of the possibilities that commodity circulation through the monetary economy provides to ensure that what is produced by industry and agriculture does not go to waste, but reaches the consumer.

Commodity circulation is the necessary connecting link between the products of industry and the products of agriculture. This is the stage we are at, at which we must develop commodity circulation if we truly want to move our economy forward — I mean the entire national economy.

The abolition of the rationing system in grain products and groats — evidently we shall do the same for potatoes, sugar, and manufactured goods — means that with respect to the bond, the commodity bond, between city and countryside, an end is being put to mechanical, blind, bureaucratic, ration-based distribution of products.

The tastes, needs, and wishes of individual districts and individual consumers must be taken into account by our trading organizations, both in terms of receiving a certain quantity of goods and, especially, in terms of the quality of these goods.

This means that trading organizations are dealing not with an abstract consumer, but with a concrete one, depending on the district, the oblast, the branch of industry, the branch of trade. Only after our trading organizations learn to take into account each and every specific feature of each district and each oblast, and establish the richest network of commodity distribution — only then will it be possible to attempt to raise the question of a transition from commodity circulation to product exchange without money.

Until we have done this, until we have not used even a third of this commodity circulation, to speak of the abolition of the monetary economy, of replacing commodity circulation with product exchange — means to speak nonsense, things that are absolutely anti-Leninist, anti-Marxist, having nothing in common with Marxism.

So, it is precisely for the expansion of commodity circulation, for the strengthening of the monetary economy under our Soviet conditions, in trade without capitalists and without speculators, precisely for this, first and foremost and principally, that the abolition of the rationing system is being carried out.

The rationing system undermines the foundations of commodity circulation, replaces trade with simple distribution, takes no account of market prices whatsoever. It turns upside down all possibilities of commodity circulation and thereby prevents us from establishing normal, living, organic ties between city and countryside, between industry and agriculture, between urban manufactures and agricultural products.

It may seem strange that socialists who have come to power, who have already organized socialist industry, socialist agriculture, and who possess such productive capabilities, should reach for an old instrument of the bourgeoisie — commodity circulation.

But there is nothing strange in this. We have used not one or two instruments of the bourgeoisie, of bourgeois economics. And this instrument, the most tenacious in the monetary economy, we shall use to the fullest, if we can get rid of all kinds of rationing systems. This is now the crux of the matter.

So, to repeat: in order to further develop commodity circulation, which provides the link between city and countryside — a commercial link — and in order to strengthen the monetary economy under our conditions, since commodity circulation without money is unthinkable, we are first and foremost abolishing the rationing system for bread, this basic commodity, because bread pulls everything else along with it. It is precisely with this link that we must begin.

This is the first and basic significance of this reform.

Secondly, the significance of the reform we are carrying out lies in putting the policy of lowering prices for all goods and all products on a real basis, on a genuine real basis. How do things stand with us at present? Every trading organization tries to tack on a surcharge everywhere.

If something is a difficult matter, everyone wants to solve it by raising prices. This chaos — or rather this whole bacchanalia in price policy — must be brought to an end. The meaning of the reform is that we begin to place the policy of lowering prices for all goods and all products on a real basis.

The reform itself lowers the price of bread. Here Comrade Razumov spoke and talked about ration prices. But is that really a price, Comrade Razumov? With us, the ration for black bread about a year and a half ago cost 12 kopecks a kilogram in Moscow.

And the market price was many times higher. Market prices take no account whatsoever of ration prices, because this is not really a price at all, but a gift from the state to the working class. It is a social, class ration for the working class.

The ration price is an appendage; in a strictly economic sense it is not a price for bread, and therefore the market pays it no heed. Subsequently we raised the ration price for a kilogram of black bread first to 25 kopecks, then to 50 kopecks.

At the commercial price it was sold at 2 rubles. And what did the market take into account — the peasants who brought bread to market — the ration price? Of course not. They oriented themselves on the market, on the commercial price — somewhat above commercial, somewhat below, but the price of bread moved around the commercial price.

If you want to know what the price of bread is, ask at the market and at the commercial shops. There you have the price. As for the ration price — it is not a price, and nobody pays it any attention. Nobody. And if the commercial price of bread with us is two rubles and one and a half rubles, and we are now lowering that price to 90 kopecks, to 1 ruble 10 kopecks, and so on — and only in the Far East, where there is no locally grown bread and it is shipped in, there because of transport conditions the price will be 1 ruble 30 kopecks — 1 ruble 50 kopecks — this means that we are beginning a genuine, real policy of lowering prices for bread.

We are beginning price reductions with bread because bread prices form themselves on the market and the market pays no attention to the ration price, which was not really a price at all but represented our class policy toward the working class. We bought bread cheap, sold it cheap — essentially we did not sell it but gave it away. That is how it must be understood.

So the meaning of the reform is that we begin a genuine, real policy of price reduction, starting with bread. In due course we shall have subsequent reductions in prices on bread and on all other goods. Just wait and see — from January we shall begin trading in bread without rations, and the market price of bread will fall. Compare how the peasant sells bread now with how he will sell it then.

There will certainly be a decline in the market price of bread; the peasant will lower it first. Thus we are organizing a genuine and real policy of price reduction, beginning with bread, and this policy must then proceed along the entire line.

The old bacchanalia of price jumps must no longer happen with us. The reform means laying a foundation under the policy of price reductions, beginning with bread and then for all other products.

This is very important for us also from the point of view of livestock farming, from the point of view of solving the meat problem. Peasants will only begin to engage in livestock farming when the price of bread falls, when they understand that it is better to put grain through livestock and sell meat than to sell bread.

Only after price reductions, only after prices on bread fall, only after that will grain production itself properly expand and will the transition begin from selling bread to selling meat — that is, from that point grain will be used to feed livestock, to feed livestock properly.

So the policy of reducing bread prices will, as a ricochet, also yield the beneficial result that we lay a real foundation for the expansion of livestock farming, because grain will also go toward the development of livestock farming.

Thirdly, the meaning of the reform is that the possibilities for bread speculation are cut off. When there are two or three prices for bread in life, speculation is absolutely inevitable. Price policy is a very interesting subject; with us, too little attention is paid to it.

When we were selling kerosene to the MTS at 10 kopecks a kilogram and to peasants through the cooperatives at 70 kopecks, MTS workers were of course speculating: they bought kerosene at 10 kopecks and sold it at 70. After we established a single price for kerosene, speculation in kerosene was undermined.

The same thing here. If the commercial price of bread is 1 ruble 50 kopecks and a worker pays 50 kopecks per kilogram, then of course he sells part of his bread. Even if he sells it for a ruble, he gains 50 kopecks. And workers do this.

I do not blame them, because the very system of two or three prices is such that even the most honest person must sell bread and turn a profit from it. That is how rotten the rationing system has become. Take Leningrad, where the workers are advanced — you know this from experience; there, commercial bread is sold ten times less than before, less bread is sold there than in Kharkov, although the population is twice as large.

What is going on? Workers are competing with the state: they sell ration bread much cheaper than the state does, and there is no longer such a need for commercial bread. And this is everywhere — in Moscow and in other major cities.

This system encourages petty speculation; petty speculation creates fertile ground for petty theft and all sorts of theft in general, creates ground for all speculation, both large and small: since I buy bread cheaply here and sell it dearly there, I profit from it.

The abolition of ration cards means establishing a single price for bread within a given zone. There will not be two or three prices for the same grade of bread within a given zone.

Within each zone, the price for bread of a given grade is set as one and the same, a uniform price. There speculation is made more difficult. This is yet another meaning of this reform — to make speculation more difficult and to avoid pushing honest workers into speculation.

Those are the three basic points of an economic order to which I wanted to draw attention, because evidently not all comrades have a clear understanding of why we are abolishing the rationing system.

How will this affect the condition of our trading organizations? Clearly, our trading organizations will have to clean themselves up. It is impossible to run things the way they have been run until now: your ration was set for you — take it or leave it, and if you don't take it you lose it.

The question of the quality of bread will also have to be posed anew — so that it is fresh, so that it is brought in the morning. There will be a great many protests and all sorts of things, and we shall "take to task" all trading organizations if they do not give up dealing with the abstract consumer, if they do not take account of the living person who will now be buying bread with money, at the real price.

So money will come into use, a fashion for money will arise, which we have not had for a long time, and the monetary economy will be strengthened. The exchange rate of the ruble will become more stable, without question, and to strengthen the ruble means to strengthen all our planning and cost accounting.

No cost accounting is possible without at least a somewhat stable ruble exchange rate. There is nothing absolute in the world; I am not speaking of an absolute stability of the ruble's exchange rate, but there must be some more or less stable ruble exchange rate if you want us to have economic cost accounting, if you want our planning to be real rather than bureaucratic.

This will give an enormous plus, and this is the fourth thing we gain from the reform. It is an enormous economic plus, the results of which it is impossible to calculate — a plus for all our economy, for all our planning, for the organization of industry and agriculture, for everything.

And the fifth plus is that our organizations will clean themselves up, begin to work more neatly, and begin at last to respect the consumer, to recognize in him a human being — this too is a major plus. Until trading organizations learn to respect in our consumer a human being — that worker and peasant about whom they talk a very great deal — we shall have no basis for product exchange.

Some workers from the State Bank argue that from such a reform we shall gain in money. In my opinion, that is wrong — that is nonsense. It is wrong that we shall receive two or even three billion. The People's Commissariat of Finance calculates, and people think that workers will buy just as much bread as they used to buy on rations.

That is wrong. Ration bread led to workers and employees signing up relatives, attaching their ration cards, and selling half their bread. Now there will be no two prices. There is no reason for them to sign up relatives. Now they must buy with money. They will spend their money more economically and will buy less.

If you take the industrial centers — Moscow, Leningrad, Kharkov, Kiev, Baku, and so on, where there are genuinely more or less skilled workers — people of taste, who know how to live, who earn properly — they will buy less bread, because now they must count on money, unlike before when they were buying for practically nothing.

Consequently, on this point we lose. The price of bread rises from the standpoint of the ration price. But, first, we compensate for this — though not fully — we compensate at a minimum three quarters of it; second, workers will begin to buy less bread, which means a minus for us.

But our bankers calculate that the worker will buy just as much. That is wrong. He will buy less.

Who will buy more? Those workers and employees who live in the provinces, who were receiving not 800 grams of bread but less, and who bought commercial bread on top. They are the ones who gain, because they were paying a ruble and a half and now they will pay one ruble or 90 kopecks. They will buy more, but at a price lower than the commercial bread price. These people lived on commercial bread. Now they may take twice as much bread, but at the low price, at a ruble or 90 kopecks. Again a minus for us.

I have not even mentioned that we must compensate the producers of industrial crops.

What do we gain here, how much do we lose? In general, nothing here can be calculated in advance, so guessing that this reform will give us a monetary plus means, in my opinion, writing on water with a pitchfork.

Molotov and I discussed this too. He was supplied with all sorts of materials showing that we gain, but when the materials were examined it turned out to be nonsense.

What changes will occur in the market, what will happen to buyers, how will they buy, how much will they buy — it is difficult to say now. One thing is clear: the provincial consumer, who was getting by on commercial bread, will buy more. There may be a monetary gain for the state from the reform, but most likely there will be no gain. You cannot guess at it.

Now, as to those oblasts that have fallen behind in bread baking. Here is the Urals, the Ivanovo Oblast, and some other places that have fallen behind. This is very bad, comrades. This matter must be made up. Comrade Kabakov gave a report here saying that he is not given this, or the other, or the third thing.

With us in general nothing is given, Comrade Kabakov, but things are taken — one must know how to take. And especially you, on the Urals. With your possibilities, to build medium-sized bread factories and bakeries — that is a trifle. They built the Uralmash plant, as we can see, but they cannot organize bread baking. This means — very little concern for the worker on the Urals.

In general I must say, whatever you look at on the Urals, everything speaks to the fact that there is no concern whatsoever for the everyday life of the worker; one is simply astonished at how people live there. So much filth! What a terrible, medieval way of life. Comrade Kabanov, one cannot live like that. If you had wanted, with the possibilities that the Ural industry provides, you would have far more bakeries and bread factories than in Moscow, which had fewer possibilities.

RGASPI. F. 558. Op. 11. D. 1118. L. 42–63.