Money, Banks and Finance in Economic Thought

Rethinking the role of money and banks in the 19th and 20th century Russia

Sheptun Alla, Financial University under the Russian Federation Government

The history of banking in Russia subdivides into four periods. I) Emerging of the first credit institutions in 1750-1860 in the form of state-owned banks designed to provide loans mostly for landowning nobility. II) Development of commercial banking and financial markets in 1860-1917 during the period of industrialization. III) Building of the Soviet planned economy and centralized financial system in 1917-1987. IV) Transition to a market-oriented economy and reconstruction of the financial system since 1990th. Each period reflects the different stage of country’s economic development and certain turn in understanding of the role of money and banks. During the first half of the 19th century the idea of financial modernization of Russian economy was expressed in different projects introduced by progressive government officials, who promoted the development of private credit institutions. However, at that time, these projects were denied and state credit monopoly was preserved. From the middle of the 19th century the discussion on financial modernization was revived by Russian liberal economists, who propagated in the press the advantages of private credit and formulated the need for a banking system designed to stimulate economic development of the country. They contributed not only in designing the economic policy, but also in theoretical understanding of the role of money and banking. N. Bunge was the first to develop the theory of credit in Russia, money and banking remained in the center of attention of many researches during the next decades. Russia’s industrial development in the second half of the 19th century resulted in the formation of its market-oriented financial system with private commercial banks and financial markets, and with the State Bank of the Russian Empire as a central banking institution. However, this trend was interrupted in 1917 with the Russian revolution, which imposed new political and economic tasks with the aim of forming a socialist society. At the beginning of this period, socialism was considered a society without money. Money was declared a feature of a capitalist economy. However, very soon the “new economic policy” returned money and other financial institutions to the life of society. Money was considered now as having a new meaning and hence can be used as a tool for building of the socialist planned economy. The Soviet economic thought was directed to substantiate of the peculiarity of money under socialism and the new role of credit institutions. The 1990th marked the beginning of “perestroika” – Russia’s transition to a market economy and the formation of a market-oriented financial system. New economic environment required a new understanding of the role of money and banks. This paper will focus on the changes in understanding the role of money and banks in economy in the 19th and 20th century Russia influenced by western ideas and changes in economic and political life of the society.


Keywords: understanding money, credit institutions, financial history of Russia, market economy, planned economy

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