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History of Political Economy 34.1 (2002) 177-206

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Keynes and the “National Emission Caisse” of North Russia:

Jean-François Ponsot


Monetary reforms in the 1990s saw a resurgence of the old currency board mechanism first used in Britain's colonies. This unusual monetary arrangement makes the national currency fully convertible. It operates on two principles: the national currency is pegged to a key currency at a fixed par value; that par value is guaranteed by the exclusive commitment of the monetary authority to passively back any issue by reserve assets denominated in the reference currency.

As a result of the devaluation of the ruble on 17 August 1998 there have been increasing calls for this type of monetary scheme to be introduced in Russia (Barro 1998; Hanke 1998). Yet it so happens that a monetary experiment inspired by currency board principles was conducted at Archangel during the Russian Civil War. This “emission caisse” experiment begun by the Allies in 1918 in anti-Bolshevik North Russia has been featured little in economic publications. Only a brief paper by D. Spring Rice (1919) published at the time in the Economic Journal and a recent study by S. H. Hanke and K. Schuler (1991) give an overview of the arrangement.1 These documents indicate in particular that the mechanism was designed by John Maynard Keynes, then a senior official at [End Page 177] the British Treasury. However, the experiment is not mentioned in any of the thirty volumes of the Collected Writings (1971–89) or in Keynes's “unwritten” works brought to light by R. M. O'Donnell (1992).

Personal searches of British and French public records2 have produced official correspondence and internal memoranda providing important clarifications on the question. In particular, they contain various versions of a memorandum in which Keynes set out the scheme he had worked out.

Section 1 of this paper provides background to the Allied intervention alongside the “White” Russians and describes French and British plans to restore monetary order. Section 2 outlines the monetary arrangement thought up by Keynes; it shows that Keynes was inspired by monetary orthodoxy but willing to loosen the stringent issuing rules that traditionally governed currency boards. Section 3 reviews the brief existence of the national emission caisse, relating the difficulties in setting it up and describing how it worked. Finally, section 4 evaluates the experiment; it discusses how adhesion to the arrangement's strict rules helped create a stable and convertible currency; but it also emphasizes that these rules introduced a financial constraint by severely restricting any resort to borrowing. This explains North Russia's difficulties in financing its war effort.

The Background to Intervention and Projects for Monetary Reform

The Russian Civil War broke out shortly after the October Revolution. The “White” armies formed the hard core of resistance to the new Bolshevik regime. They were active on several fronts, including North Russia. Allied military intervention in support of the White Russians was based on motives that were not entirely free from ambiguity.3 When the [End Page 178] Murmansk Soviet, the main political body in North Russia, decided to break with the central government on 30 June 1918, the split was largely supported by the Allies. The Bolsheviks were driven from the region, and the various White troops then set up the supreme North Russian government at Archangel under the populist leader Nicolaï Chaikovski.4

Monetary Chaos: Inflation, Inconvertibility of the Ruble, and Parallel Currencies

The Allied landings in North Russia took place in a particularly difficult monetary context subsequent to the upheavals of 1914–18, namely the breakup of the czarist empire, the Great War, and the 1917 revolutions.

Like the Allies, in 1914 Russia had resorted to a full array of standard financial practices to pay for the war effort. Paper money was printed hand over fist as the ceilings for the issue of banknotes and for discounting Treasury bills by the state bank were constantly raised to meet the necessities of wartime. The ruble was declared nonconvertible...


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