The overwhelming bulk of foreign loans incurred during the war, totaling between 6 and 8 billion rubles, came from England, which helped finance Russia’s purchases of war matériel from herself as well as the United States and Japan.
Russia was not immediately afflicted by inflation because the suspension of exports at the beginning of the war meant that for a while the quantity of goods on the market matched and even exceeded demand. Inflation made itself felt only toward the end of 1915, rising dramatically the following year. It fed on itself as owners of commodities, especially foodstuffs, withheld them from the market in anticipation of still higher prices. The following table depicts the relationship between the emissions of paper money and the movement of prices in wartime Russia:*
Inflation not only did not hurt but positively benefited the rural population, for the peasants commanded the most valuable commodity of all, food. Descriptions of the countryside in 1915–16 concur that the village basked in unaccustomed prosperity. The military draft had claimed millions of men, easing pressures on the land and, at the same time, raising wages for farm laborers. The conscripted millions were now on the governmental payroll. True, the same draft caused seasonal labor shortages, which the employment of prisoners of war and refugees from the combat zone only partly alleviated. But the muzhik managed to cope with these difficulties, in part by curtailing the area under cultivation. He was swimming in money. It came from a variety of sources: higher prices fetched by farm produce, payments made by the government for requisitioned livestock and horses, and allowances sent to the families of soldiers. The closing of taverns also left large sums at the peasants’ disposal. The peasant saved some of this “mad money,” as it came to be known, by depositing it in government savings accounts or hoarding it at home. The rest he spent on such luxuries as “cocofee” (kakava), “shchocolate” (shchokolat), and phonographs. The more industrious used excess cash to buy land and livestock: statistics compiled in 1916 indicate that peasants owned 89.2 percent of the cultivated (arable) land in European Russia.10 Contemporary observers were struck by the prosperity of the Russian village in the second year of the war: the war was said to have put an end to its “Chinese-like” immobility.11 Perhaps the best authority of all, the Department of Police, while growing increasingly alarmed over the situation in the cities, reported in the fall of 1916 that the village was “contented and calm.”12 Such sporadic violence as occasionally erupted in the countryside was directed against neither the government nor landlords, but against the owners of the detested otruba and khutora, fellow peasants who had taken advantage of the Stolypin legislation to withdraw from the commune.13
Inflation and shortages bore exclusively on the urban population, which had expanded considerably from the influx of industrial workers and war refugees and the billeting of troops. The urban population is estimated to have grown from 22 to 28 million between 1914 and 1916.14 The 6 million newcomers from the rural areas swelled the ranks of peasants who had moved into the cities before the war. Like them, they were not urban inhabitants in any meaningful sense, but rather peasants who happened to live in the cities: peasants in uniform waiting to be shipped to the front, peasants employed in war industries to replace workers inducted into the armed forces, peasant peddlers. Their roots remained in the village, to which they were prepared to return at a moment’s notice, and to which, indeed, most of them would return after the Bolshevik coup.
Russia’s urban inhabitants first suffered the effects of inflation and food shortages in the fall of 1915. These shortages grew worse in 1916 and came to a head in the fall of that year. Everyone was affected: the industrial and white-collar workers and, in time, the lower ranks of the bureaucracy and even police employees. Although it is impossible to determine the matter with mathematical precision, contemporary sources agree that during 1916 the rise in prices exceeded wages by a wide margin. The workers themselves believed that while their earnings had doubled, prices had quadrupled. In October 1916, the Police Department estimated that in the preceding two years wages had risen on the average 100 percent while prices of essential goods had gone up 300 percent.15 Inflation meant that many town residents could not afford to buy even those commodities that were available. And they became less and less available as the war went on, largely because of the deterioration of transport. Russia’s principal food-growing areas as well as deposits of fossil fuels (coal and petroleum) were in the southern, southeastern, and eastern regions, at some distance from the urban and industrial areas of the north. Before the war it had been more economical to bring coal to St. Petersburg from England than from the Donets Basin. When the sea lanes to England through the Baltic were closed to Allied shipping on the outbreak of the war, the Russian capital immediately experienced fuel shortages. The supply of food was affected by two additional factors: the unwillingness of peasants to sell and the shortage of farmhands to cultivate the private estates, in peacetime a major supplier of grain to the market. By 1916, while the grain-growing regions drowned in food, the northern cities suffered shortages: here as early as February 1916 it was common to see “long queues of poor people waiting for hours in the cold for their turn at the bread-shops.”16
Alexander Khvostov, who would soon be appointed Minister of the Interior, warned already in October 1915 of looming shortages of fuel and food in the central and northwestern regions. Petrograd, in his judgment, was especially vulnerable: instead of the 405 railway cars needed daily to meet the capital city’s needs, that month it received on the average only 116.17 During 1916, the transport situation grew worse still from breakdowns of equipment caused by overuse and inadequate maintenance. Rolling stock ordered in the United States piled up at Archangel and Vladivostok for lack of facilities to move it inland.
People grumbled, but they did not, as yet, revolt: Russians patiently bore deprivations. The government’s threat to induct troublemakers into the armed forces also had a sobering effect.
The recovery of the army in 1916 surprised everyone, including Russia’s allies, who had more or less written it off. This was in good measure due to the ability of Polivanov and his associates to secure the cooperation of the Duma and the business community. The military command was now staffed with able officers who had profited from the lessons of the 1914 and 1915 campaigns. The flow of war supplies from the West which had gotten underway in mid-1915 made a great difference: in the winter of 1915–16, Russia’s allies sent her over 1 million rifles, a quantity equal to the annual output of the home industries.18 Adequate supplies of artillery shells were also assured. After Polivanov had taken over the Ministry of War, Russia began to place orders for artillery shells abroad: in 1915–16, she obtained from the West over 9 million 76mm shells as well as 1.7 million medium-caliber shells: this compared with 28.5 million and 5.1 million such shells produced at home. Of the 26,000 machine guns delivered to the armed forces in 1915–16, nearly 11,000 came from abroad, mainly the United States.19
In early 1916, the Allies prepared for the Somme offensive, scheduled to begin on June 25. It was agreed with the Russian General Staff that ten days prior to its opening—that is, on June 2/15—the Russians would attack Galicia: this operation, it was hoped, would finish off the Austrians. The command of the four armies assigned to the operation was entrusted to General Aleksei Brusilov: