Chervonets

Definition

The chervonets was a gold-backed currency introduced in Soviet Russia in 1922 during the New Economic Policy (NEP). It served as an effort to stabilize the economy by creating a reliable medium of exchange that could help transition from war communism to a more market-oriented approach. The chervonets not only facilitated trade but also represented the Soviet government's attempt to regain confidence from both citizens and foreign investors.

5 Must Know Facts For Your Next Test

1. The chervonets was originally valued at ten rubles and contained about 0.9 grams of pure gold.
2. Its introduction was part of a broader strategy to recover the Soviet economy after the devastating effects of War Communism.
3. The chervonets was not just a domestic currency; it was also used in international trade to attract foreign investment.
4. The currency helped to stabilize prices and reduce hyperinflation that had plagued the Soviet economy prior to its introduction.
5. Although it was replaced by the ruble in the late 1930s, the chervonets remains a symbol of the NEP period and its attempts at economic reform.

Review Questions

• How did the introduction of the chervonets reflect the economic changes brought about by the New Economic Policy (NEP)?
  • The introduction of the chervonets marked a significant shift in Soviet economic policy under the NEP, moving away from the strict controls of War Communism. It represented an effort to restore a sense of normalcy and trust in the economy by providing a stable, gold-backed currency. This new currency facilitated trade and investment, promoting economic activity and aiding in recovery from the civil war's devastation.
• Discuss the relationship between the chervonets and international trade during the NEP era.
  • The chervonets played a crucial role in enhancing international trade during the NEP era by providing a reliable medium of exchange that foreign investors could trust. By linking the currency to gold, it aimed to instill confidence among foreign partners, which was vital for attracting much-needed foreign investments. The use of the chervonets in trade transactions helped improve Soviet relations with other countries and contributed to economic stabilization.
• Evaluate the long-term impacts of using the chervonets on Soviet monetary policy and its eventual transition back to full state control over the economy.
  • The use of the chervonets had significant long-term impacts on Soviet monetary policy as it highlighted the tensions between market-oriented reforms and state control. While it initially facilitated economic recovery and encouraged trade, its eventual replacement by a fully state-controlled ruble in the late 1930s reflected a return to centralized economic planning. This shift indicated that despite some initial success, ideological commitments to socialism ultimately prioritized state control over market mechanisms, shaping future economic policies in the USSR.

Related terms

New Economic Policy (NEP): A policy implemented by Lenin in 1921 that allowed for some private enterprise and market mechanisms to stimulate the economy after the disruptions of the Russian Civil War.

War Communism: An economic policy adopted during the Russian Civil War, characterized by state control over all aspects of the economy, which led to significant hardships for the population.

Gold Standard: A monetary system where a country's currency or paper money has a value directly linked to gold, providing greater stability and confidence in currency.