Stalin's Quest for Gold

The Torgsin Hard-Currency Shops and Soviet Industrialization

Elena Osokina

• Publisher: Cornell University Press
• Year: 2021
• ISBN:
  9781501758522
• Topic: History
• Subtopic: Russian History
• Index: History

Stalin's Quest for Gold tells the story of Torgsin, a chain of retail shops established in 1930 with the aim of raising the hard currency needed to finance the USSR's ambitious industrialization program. At a time of desperate scarcity, Torgsin had access to the country's best foodstuffs and goods. Initially, only foreigners were allowed to shop in Torgsin, but the acute demand for hard-currency revenues forced Stalin to open Torgsin to Soviet citizens who could exchange tsarist gold coins and objects made of precious metals and gemstones, as well as foreign monies, for foods and goods in its shops.

Through her analysis of the large-scale, state-run entrepreneurship represented by Torgsin, Elena Osokina highlights the complexity and contradictions of Stalinism. Driven by the state's hunger for gold and the people's starvation, Torgsin rejected Marxist postulates of the socialist political economy: the notorious class approach and the state hard-currency monopoly. In its pursuit for gold, Torgsin advertised in the capitalist West, encouraging foreigners to purchase goods for their relatives in the USSR; and its seaport shops and restaurants operated semilegally as brothels, inducing foreign sailors to spend hard currency for Soviet industrialization. Examining Torgsin from multiple perspectives—economic expediency, state and police surveillance, consumerism, even interior design and personnel— Stalin's Quest for Gold radically transforms the stereotypical view of the Soviet economy and enriches our understanding of everyday life in Stalin's Russia.

PART I

Small Bureau to Trade Empire

CHAPTER 1

The Birth of Torgsin

The Special Bureau for Trade with Foreigners on the Territory of the USSR, Torgsin for short, was created on July 18, 1930, by a decree of the People’s Commissariat of Trade (Narkomtorg). The name was clearly bigger than the enterprise itself. Torgsin was then just a tiny division in the extensive metropolitan trade system. By the end of 1930, Torgsin was already reaching beyond the city of Moscow. It had opened offices in some of the Soviet republics and regions, although they were as yet too weak to be clearly distinguished among other local trade offices. On January 4, 1931, the government granted Torgsin the status of All-Union Association under the auspices of the USSR People’s Commissariat of External Trade (Narkomvneshtorg). Still, another year would pass before the national rise of Torgsin became evident.

Before Torgsin, trade with foreigners within the Soviet Union was dispersed among many organizations. The emergence of Torgsin was part of a sweeping process of centralization and monopolization conducted by the Soviet state at the end of the 1920s and the beginning of the 1930s. By opening Torgsin’s stores for foreigners, the Soviet government aimed to concentrate the entire domestic hard-currency trade in the hands of a single organization.1 The service required from Torgsin was clear—to prevent foreign visitors from taking their currency back home.

At its start, Torgsin was mostly a seaport enterprise. Until November 1930, it supplied mainly foreign ships, their crews, and Soviet ships sailing abroad. The geography of Torgsin’s first regional offices repeated that of the major Soviet seaports: Arkhangel′sk, Batum, Novorossiisk, Taganrog, Vladivostok, Evpatoriia, and so on. The Soviet Commercial Fleet company—Sovtorgflot, which, before Torgsin, was in charge of supplying foreign ships in the Soviet seaports—operated sporadically, producing, to the government’s displeasure, only an insignificant foreign currency flow to the state budget. Well aware of the deplorable state of affairs in Soviet seaports, foreign captains tried to replenish supplies ahead of time, before entering Soviet waters. In taking over the seaport trade, Torgsin faced “virgin lands.”

Foreign tourists were also among Torgsin’s first clients. In November 1930, Torgsin opened its first department store in the former Mikhailov house in the very center of Moscow at the corner of Petrovka Street and Kuznetskii Most. The choice of location was fortunate and hardly accidental. Before the revolution and during the relatively prosperous years of the NEP of the 1920s, Petrovka was famous for its trendy shops. In better times, ladies dressed expensively in the latest fads promenaded there. At the beginning of the 1930s, the street did not look as splendid, but the memory of its former glory was still alive.

In those days, Torgsin in Moscow offered carpets, fur, antiques, and phi-lately, as well as wine and vodka and some export-quality foods. The consumer goods in high demand among Soviet people, such as simple calico textiles and unpretentious clothes and shoes, were excluded from Torgsin’s stock. Such goods were of no interest to foreigners and only attracted Soviet onlookers. Torgsin’s retail prices ranged from 10 to 50 percent above the Soviet export prices on similar goods.2

At the beginning of 1931, in the wake of Moscow, Torgsin’s stores opened in Leningrad: kiosks in the Evropeiskaia Hotel that traded in tobacco, crafts and souvenirs, and some food, and a small department store in the Oktiabr′skaia Hotel.3 An antiques section in the Oktiabr′skaia grew, by October 1931, into an antiques store. A new director was appointed by the local party committee. Like many other officials charged with overseeing art sales to foreigners, he knew nothing about antiques or art but was a loyal party member.

Torgsin’s trade in Leningrad during its “for foreigners only” period had a clear emphasis on art and antiques, with which the city was bursting with abundance after two hundred years as the capital of the Russian Empire. The revolution added substantially to the trove when the Bolsheviks made the Hermitage Museum a depository of nationalized art. Trains and carts brought loads of confiscated treasures to the Hermitage from all over the country, some of which were soon put up for sale.

At the beginning of Torgsin’s activity, only short-term foreign visitors in the USSR could buy from its stores.4 Government instructions forbade Torgsin from selling to foreigners who lived in the Soviet Union permanently or long-term, including diplomats and employees of foreign companies, as well as thousands of individuals who came to build socialism either for ideological reasons or to escape the depression raging in the West. These groups of foreigners were to be supplied by Insnab, a state trade organization that ran a network of restricted-access stores. Foreigners assigned to Insnab’s stores shared much of the Soviet people’s fate: in the first half of the 1930s, they lived on rations and could make purchases only in rubles, although their supplies were better in terms of variety, quantity, and quality of goods than those available to the majority of the population.5

Banning foreigners who lived in the USSR long-term from using hard currency in the state stores went against Soviet economic interests. This was a manifestation of the excesses of the state’s rigid currency monopoly, under which all kinds of foreign currency operations were prohibited within the USSR. Although foreigners, unlike Soviet citizens, were allowed to have hard currency in their possession, the People’s Commissariat of Finance (Narkomfin), a passionate advocate of the monopoly, tried to minimize the use of foreign currency as a means of purchase within the Soviet Union. This was true even for Torgsin. Thus only captains could make hard-currency payments for supplies and services provided to foreign ships. Crew members were not allowed to take cash on shore. The company that chartered the ship paid the Torgsin bills. According to the state’s regulations, foreign tourists, who came to look at the first communist state, although not yet numerous,6 had to make their purchases, including ones at Torgsin, not with “effective”—that is, hard—currency but with “Soviet rubles of foreign currency origin” (sovetskie rubli valiutnogo proiskhozhdeniia), or “currency rubles” (valiutnye rubli) for short.7

The “currency ruble” was visually indistinguishable from a regular Soviet ruble, but the difference between them was substantial. The “currency rubles” were rubles that foreigners received as a result of the lawful exchange of the foreign money that they brought into the Soviet Union. Every time foreign tourists paid with rubles in a hard-currency store like Torgsin, they had to present receipts issued by the State Bank of the USSR (Gosbank) proving the lawful currency exchange. In this way, Narkomfin tried to channel the flow of the hard currency brought to the USSR to the state’s vaults, diverting it from the black market where the exchange rate was more tempting for foreigners. In addition, foreign tourists were obliged to exchange their national currency for rubles without the right to reverse exchange. This inconvertibility made foreign tourists spend all their “rubles of foreign currency origin” before leaving the USSR. Moreover, the hard currency brought to the USSR could lose its legal status within three months if not deposited to a special account in Gosbank.8

The Soviet state also sought to control the hard-currency resources of those foreigners who came to the USSR for contract work. Each contract specified the portions of a salary that would be paid in rubles and in hard currency. The hard currency had to be deposited to an account abroad, so foreigners had to live in the USSR on the ruble portion of their salaries. At the beginning, in 1930–1931, the hard-currency payments as well as the overall salaries for foreign specialists were generous, as the Soviet government expected that Western technologies and experience combined with the “advantages of the planned economy” would produce an industrial miracle, but, alas, the dream did not come true. The disappointment, coupled with acute shortages of gold and hard currency in Soviet state reserves, led to drastic cuts in foreign specialists’ salaries and hard-currency portions.

At the very end of 1930, Narkomfin at last abolished one of its absurd, and routinely flouted, restrictions and officially allowed those foreigners who were long-term residents in the USSR to buy goods in Torgsin’s stores, although still only with “rubles of foreign currency origin”: that is, at the expense of a reduction in the hard-currency portions of their salaries deposited to their accounts abroad.9 Narkomfin continued to cling tenaciously to the state’s hard-currency monopoly. Foreigners could buy jewelry made of precious metals and gemstones only with written permission from Narkomfin. Once again, Narkomfin reminded employees in trade that foreigners on long-term stays in the Soviet Union could not purchase goods with hard currency.

The extremes of the state monopoly hindered the fulfillment of Torgsin’s hard-currency quotas demanded by the state plan, so, despite Narkomfin’s protests, Torgsin’s employees sold goods for hard currency to any foreigner, no matter the length of stay, and often “forgot” to check for the receipts confirming the origin of the rubles in foreigners’ wallets.10 The more acute the state’s need for hard currency grew in early 1930s, the more Narkomfin eased the grip of the currency monopoly. Unable to stop the practice of selling goods to foreigners for hard currency altogether, Narkomfin began to demand that Torgsin at least accept only currency that was legally brought to the USSR rather than acquired on the black market.11 Torgsin’s growing activity, however, required that this restriction be lifted as well. In May 1931, in order to “simplify the retail methods,” Narkomfin officially allowed Torgsin not to ask foreigners for receipts proving the lawful currency exchange.

Foreigners could not take out of the USSR more money than they brought in, or even as much. Customs officials had to make complicated calculations. First of all, the cost of living had to be subtracted. As of June 1931, the subsistence minimum was set at ten rubles a day.12 Also, according to a Narkomfin instruction of July 8, 1930, the cost of all goods purchased by foreigners in the USSR, especially those made of precious metals and gemstones, were to be counted as hard-currency expenditures. The Torgsin sales clerks had to explain the rule to clients and stamp their purchase receipts with “At the expense of the re-exportation of hard-currency valuables.” Narkomfin insisted that Torgsin’s clerks, before selling goods to foreigners, take into account the cost of living in the USSR and not allow foreigners to spend more money in the store than was shown on their Soviet bank’s currency exchange receipts.13 Only in May 1933, due to Torgsin’s high profitability, did Narkomfin revise the rule and allow foreigners to take goods purchased at the stores out of the country without restrictions.14 The required cost-of-living subtraction had apparently been canceled before that, in the fall of 1932, as part of the loosening of the state’s currency monopoly.

Torgsin’s trade led to an expansion of legal and, as one would expect, illegal hard-currency operations within the USSR. This is why all state organizations dealing with hard currency took part in discussing the expediency and limits of Torgsin’s activities—including, above all, the Politburo, as well as Narkomfin, Gosbank, Narkomvneshtorg, and of course the Joint State Political Directorate (OGPU), the political police. Narkomfin was not the only one to protest against the creation of Torgsin. The OGPU representatives in some regions also believed that Torgsin was unnecessary and even politically harmful—the formal justification for that being workers’ potential discontent with elite stores for foreigners.15

Archival documents do not state any other reasons for the OGPU’s aversion to Torgsin, but it seems that a conflict of institutional interests played a role. Dealers who speculated in illegal hard-currency operations swarmed around torgsins; that meant more work for the OGPU, which had to fight the black market. Afterwards, relations between Torgsin and the political police were complicated and often strained. The OGPU—and then its successor, the People’s Commissariat of Internal Affairs (NKVD)—saw in Torgsin a successful rival in the competition for hard currency and gold. At the same time, however, Torgsin unwittingly assisted the OGPU by bringing to light those who were hoarding valuables. After that, the political police needed only to visit those identified and confiscate their possessions to fulfill its hard-currency quotas under the state plan.

The People’s Commissariat of Foreign Affairs (NKID) also raised objections to the opening of Torgsin’s stores at the beginning, as well as to excessive advertising of its activities.16 The protest was justified by the fear of discontent among foreigners on long-term stays in the USSR, diplomats in particular. When the Soviet government eventually allowed diplomats to shop in Torgsin, the NKID withdrew its objections.

And what about Soviet customers? At first, the government not only did not allow them to shop in Torgsin but even forbade them from entering its stores. Narkomfin’s stern directives reminded Torgsin employees that it was absolutely prohibited to accept hard currency from Soviet citizens as a means of purchase. In order not to tempt Soviet customers and attract gapers, it was recommended that Torgsin neither advertise widely nor decorate its shopwindows. A door sign warned, “The store serves foreign tourists and foreigners in transit only.” The assortment of goods offered by Torgsin—antiques, carpets, furs, souvenirs—which were mostly useless to the vast majority of Soviet people, also helped keep unwelcome visitors away from its stores.

However, some Soviet customers, undoubtedly, became interested in Torgsin and managed to illegally penetrate its stores even during its “for foreigners only” period. Such efforts were facilitated by the rules the clerks had to follow: the direct question “Are you a foreigner?” was unacceptable, and a customer’s ID could be asked for only if the clerks were absolutely sure they were dealing with a Soviet citizen. Indeed, life was not easy for the clerks of Torgsin. They had to determine not only what kind of dollars foreigners were bearing—legally brought to the country or illegally acquired on the black market—and what kind of rubles they held—of hard-currency origin or the regular kind—but also, based on only appearance and speech, they had to determine who stood in front of them: a Soviet citizen or a foreigner. In the case of the former, the militia or OGPU could confiscate any purchased goods and hard currency in the person’s possession.

Soviet people had hard currency. Left over from the tsarist era, derived from the illegal trade of the Civil War period, or acquired via the legal hard-currency operations of the 1920s NEP, it lay hidden under mattresses, buried in the ground, or stashed in other secret places. And hard currency continued to be smuggled into the USSR from abroad. In neighboring countries such as the Baltic states, Poland, and China—as well as in France, where many Russians who ran from the revolution found a refuge—émigrés opened “firms” to deliver hard currency to Soviet addresses, as advertisements in local newspapers testified. Hard currency was also sent to Soviet people by their relatives and friends abroad, hidden in letters and parcels. The black market served as a major redistribution mechanism of hard currency withi...

Table of contents

• Introduction: An Accidental Finding
• Part I. Small Bureau to Trade Empire
• Part II. People’s Treasures
• Part III. Everyday Life in Torgsin
• Part IV. Torgsin’s Swan Song
• Instead of a Conclusion: The Paradoxes of Torgsin
• Tables
• List of Abbreviations
• Notes
• Bibliography
• Index