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Lenin, Keynes and InflationAuthor(s): Frank Whitson FetterSource: Economica, New Series, Vol. 44, No. 173 (Feb., 1977), pp. 77-80Published by: Wiley on behalf of The London School of Economics and Political Science and The Suntoryand Toyota International Centres for Economics and Related DisciplinesStable URL: http://www.jstor.org/stable/2553552 .

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Economica, 44, 77-80

Lenin, Keynes and Inflation

By FRANK WHITSON FETTER Hanover, New Hampshire

For over fifty years the story has circulated among economists, journal- ists, businessmen, politicians and bankers, sometimes in print but even more in oral tradition, that Lenin said that severe inflation was the surest way to destroy capitalism. The supposed statement by.Lenin, and its.widespread and continued circulation, raises several questions for the historically minded economist; (a) the first appearance of the story in English; (b) evidence that Lenin made such a remark, or anything resembling it; (c) the possibility of such a remark having been made by some other Soviet leader and. then attributed to Lenin; (d) the history and use of Lenin's alleged remark after its first appearance in England.

The first attribution in English, and probably in any language, of such a statement to Lenin was in Keynes (1919). He wrote:

Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch its currency.... Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. [pp. 220-221]

Of what authority Keynes had for this statement I can find no trace., Sir Roy Harrod. has not been able to throw any light on the matter, beyond the plausible suggestion that Keynes, when with the British Peace Delegation at Versailles, probably heard many stories of what the Soviets were supposed to be saying, and that it was then a common practice to attribute all such remarks to either Lenin or Trotsky. Others have made a similar suggestion. The statement appeared in all subsequent printings of The Economic Consequences, and in the opening paragraph of the section on inflation and deflation in Essays in Persuasion (Keynes, 1932, p. 77). In 1919, and for several years thereafter, Keynes' great monetary concern was the disastrous effects of inflation.'In 1922 he published a series of articles in the Commer- cial Supplements of the Manchester Guardian Commercial, in which he preached the same general story as in The Economic Consequences of the disruptive effects of inflation upon capitalism, but with no refere'nce to Lenin. These articles formed the substance of his book of 1924 A Tract on Monetary Reform. In addition to the several English' and American printings of The Economic Consequences of the Peace, the book appeared in Belgian, Chinese, Danish, Dutch, Flemish, German, Italian, Japanese, Rumanian, Russi'an, Spanish and Swedish editions, so the readers of Keynes' version of Lenin's view on inflation probably ran into the hundreds of thousands.

As far as I can discover, no one at the time challenged the authenticity of Keynes' statement' about Lenin's view on inflation. To prove that Lenin never made such a statement at any time, or in any setting, would be quite impossible. However, no such remark appears anywhere in the English

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78 ECONOMICA [FEBRUARY

edition of Lenin's collected works, and correspondence with the major biographers of Lenin has failed to reveal the slighest evidence that he ever said anything remotely resembling the remark attributed to him by Keynes.

In fact, Lenin's few remarks on monetary matters give the opposite impression from the remark attributed to him by Keynes. In Septembe.r 1917, while the Kerensky Government was still in power, in an article on "The Threatening Catastrophe", he gives the most extended discussion of monetary and banking policy to be found in his published works. Of inflation he said:

Everybody recognizes that the issue of paper money is the worst kind of a compulsory loan, that it worsens the conditions principally of the workers, of the poorest section of the population, that it is the chief evil in the financial confusion.... The unlimited issue of paper money encourages speculation, allows the capitalists to make millions, and places tremendous obstacles in the path of the much-needed expansion of production; for the dearth of materials, machines, etc., grows and progresses by leaps and bounds. How can matters be improved when the riches acquired by the rich are being concealed? [Lenin, 1927-1945, p. 2Q7]

If Lenin never made the statement attributed to him, and if in fact the idea in it ran counter to his own thinking, what could have been the source of Keynes' statement of 1919? I believe the answer is given by Professor E. H. Carr in his memorandum of 1969, which I quote with his permission:

None of the Bolsheviks wanted, or planned, inflation. But, when that happened (since the printing press was their main source of revenue) they rationalized it ex post facto by describing it as (a) death to the capitalists and (b) a foretaste of the moneyless Communist Society. Talk of this kind was widely current in Moscow in 1919 and 1920 ..... Keynes in 1919 had no special knowledge of Lenin; everything that came out of Moscow was automatically attributed to Lenin or Trotsky, or both.

In The Bolshevik Revolution, 1917-1923, Carr. (1952, pp.. 260-2.61) had said. much the same thing. He, there pointed out that, when the Soviets had not. been ::able. to stop -inflation, "a virtue ;.was made of . necessity and .the view became popular that the destruction of the currency had been a deliberate act of policy". He then refers to. "a famous dictum of Preobrazhensky, who described the printing press as 'that machine-gun of the- Commissariat of Finance which poured fire into the rear of the bourgeois system and used the currency laws of that regime in order to destroy it'"

In view of the many translations of Keynes' The Economic Consequences of the Peace, it is hard to believe that the story about Lenin and inflation that Keynes had launched on its way in 1919 did not appear anywhere in non-English sources in the following quarter-century. However, outside of Keynes' own statement, there seems to be no reference in the formal literature of economics, even in English, to Lenin's views on inflation destroying capitalism, until Schumpeter (1942). His re-introduction into hard-cover literature of Lenin's supposed views on the relation of inflation to the downfall of capitalism is marked by some curious details (p. 227). There is no reference to Keynes, and no protective reservation that Lenin "is said" to have made the remark. Schumpeter makes the categorical

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1977] LENIN, KEYNES AND INFLATION 79

statement "as Lenin has pointed out", with the implication that he. is giving a direct quotation from Lenin. But what, according to Schumpeter, Lenin had "pointed out" went beyond what, according to Keynes, "Lenin is said to have declared". In the Keynes version, "the best way. to destroy the Capitalist System was to debauch its currency", whereas, according to Schumpeter, what Lenin had pointed out was that "in order to destroy bourgeois society you must debauch its currency". The difference in wording is not just a literary variation, but an important difference. in meaning.

The message of Keynes-and of virtually everyone else except Schumpeter who has quoted Lenin's purported statement- on inflation-was a warning to the bourgeois to beware of extreme inflation lest it bring the downfall of capitalism. The message of Schumpeter was directed to socialists, and ex- plained the tactics that a revolution, to be successful, would have to follow once it had started. After presenting the problems confronting a new socialist regime, Schumpeter said: "The first thing which must be done is to bring about inflation" (Schumpeter, 1942, p. 226).

-Since 1950 the message. of Lenin on inflation, as originally put forth by Keynes in 1919, has been used increasingly by economists, particularly in the United States and Germany. Hayek (19-52; 1960, p. 324), Wright (1951, pp. 220-221), Heilbroner (1953, p. 272), Hazlitt (1959, p. 396) and Lekach- man (1966, p. 4) simply quote Keynes, without questioning whether Lenin ever made the remark that Keynes attributed to him. Albert Hirschman, in his widely read Journeys Toward Progress, refers to "the Lenin dictum that there is no surer way to revolutionize a society than to 'debauch its currency' ", and then speaks of "this well-worn, though perhaps apoc- hryphal phrase so frequently and enthusiastically quoted by American bank presidents" (Hirschman, 1963, p. 222).

The question of the authenticity. of the Lenin quotation is sometimes addressed to the Legislative Reference Division of the Library of Congress by government officials, congressmen. and. the general public, and it is reported that there is a -standard reply to- the. effect that, if Lenin made -such a remark, they have no evidence to that effect. Yet as. recently-. as .15 October 1975 Secretary.. of the Treasury William E... Simon, in. a speech to the Associated Press Managing Editors' Association on the dangers of inflation, quoted Keynes' (1919) statement about Lenin and inflation (see Department of the Treasury News, 1975).

It is not surprising that the story should have had wide circulation in post-1945 Germany. Hellwig (1967) opened his article with the statement: "It is almost a ritual, on the occasion of the required tributes to a stable monetary standard, to quote Lenin as a bogeyman [Schreck und Scheuche]" (p. 28). He pointed out that it appeared in the early 1950s in the works of two well-known German economists, Professor Adolf Weber of the University of Munich (Weber, 1951, p. 12) and Professor Walter Euchen of the University of Freiberg (Euchen, 1952, p. 255). Neither of these -men brings Keynes into the story. According to Hellwig, Dr Dollinger, the Postmaster- General and former Secretary of the Treasury, in a speech in June 1965 quoted Lenin on the demoralizing effects of inflation on political stability, as did Karl Schiller, the German Economic Minister, in a speech of 6 February 1967.

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80 ECONOMICA

As far as I can discover, although the story of Lenin's views on inflation began in Keynes' statement of 1919, it was virtually lost and forgotten in the land of its origin until in May 1974, its authenticity and relevance was discussed in letters to The Times from Lord Boothby (4 May), R. Palme Dutt (11 May) and Professor T. W. Hutchinson (15 May).

Doubtless the story of Lenin's supposed views on extreme inflation and the downfall of capitalism will live on in both legend and the printed page. A remark so quotable will not die simply for lack of historical credentials. But it is in order to put on notice any economists, bank presidents and politicians who think they are quoting Lenin on inflation as a threat to the capitalist order that they are really quoting Keynes.

ACKNOWLEDGEMENTS

A list of all the economists and historians with whom, over the past fifteen years, I have discussed, in conversation or in correspondence, the authenticity and origin of the alleged statement by Lenin would run to inordinate length. I must, however, express my particular thanks to Sir Roy Harrod, the biographer of Keynes; to Sir Austin Robinson, who asked several Cambridge colleagues about the story; to Professor E. H. Carr for a short memorandum about the attitude toward inflation of Soviet leaders in the early years of the Communist revolution, which he prepared as a result of Robinson's inquiry; to Herbert Furth, formerly of the staff of the Board of Governors of the Federal Reserve System; to Paul Gekker, of the same organization, who made available to me his unpublished memorandum, "Lenin on Inflation as an Anti-Capitalist Tactic"; and to the late Professor Ludwig von Mises, who called my attention to the article by Hans Hellwig on "Lenin als Inflationspopanz", cited below.

REFERENCES

CARR, E. H. (1952). The Bolshevik Revolution, 1917-1923. New York: Macmillan.

DEPARTMENT OF THE TREASURY NEWS (15 October 1975).

EUCHEN, WALTER (1952). Grundsiitze der Wirtschaftspolitik. Tiubingen.

HAYEK, F. A. (1952). Review of Roy Harrod's Life of John Maynard Keynes, in The Journal of Modern History, 24, 197; reprinted in Hayek, F. A. (1967). Studies in Philosophy, Politics and Economics. Chicago; University Press. (1960). The Constitution of Liberty. Chicago: University Press.

HAZLiTT, HENRY (1959). The Failure of the "New Economics". Princeton: Van Nostrand.

HEILBRONER, ROBERT L. (1953). The Worldly Philosophers. New York: Simon and Schuster.

HELLWIG, HANS (1967). Lenin als Inflationspopanz. Das Profil (Munich), April.

HIRSCHMANN, ALBERT (1963). Journeys Toward Progress. New York: Twentieth Century Fund.

KEYNES, JOHN MAYNARD (1919). The Economic Consequences of the Peace. London: Macmillan.

- (1932). Essays in Persuasion. New York: Harcourt, Brace.

LEKACHMAN, ROBERT L. (1966), The Age of Keynes. New York: Random House.

LENIN, V. I. (1927-1945). Collected Works. New York: International Publishers, Vol. XXI, Book 1.

SCHUMPETER, J. A. (1942). Capitalism, Socialism, and Democracy. New York: Harper.

WEBER, ADOLF (1951). Das Arbeitseinkommen und unsere wirtschaftliche Not. Munich: Pflaum.

WRIGHT, DAVID MCCORD (1951). Capitalism. New York: McGraw Hill.

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