‘Building Socialism with Capitalist Hands’
Economic life in 1921–9 reflected the full measure of the national crisis the Bolsheviks inherited, the consequences of party political struggles, and the limitations that ideology imposed on proposed courses of action. The problems were fundamental and ubiquitous; conflict over the correct policy of industrialization left the party deeply divided. An incomplete and inconsistent commitment to NEP both nationally and locally undermined its effectiveness. Ongoing economic chaos and recurrent crises continued to plague the grass roots.
In terms of national development, the leadership felt an acute need for a strategy of industrialization. By 1921 the economy certainly had to be resuscitated for practical reasons, but other important considerations also played a part. Above all, orthodox Marxism had posited that socialism could come into being only in a fully industrialized economy. That was hardly the case in Russia: the Bolsheviks had made a ‘proletarian revolution’ in an overwhelmingly agrarian country. To square the circle, all party leaders accepted as axiomatic that Soviet Russia must industrialize to continue on the road to socialism. But that left the door open for fundamental disagreements over the tempo and short-term priorities. In the event, implementing NEP as a step in this long-term undertaking (what Lenin called ‘building socialism with capitalist hands’) in no way ensured unity even at the highest levels.
There were more pressing matters, however, before industrialization reached the top of the agenda. By 1921 the country faced almost total economic collapse: gross industrial output had fallen to less than one-fifth of the level before the First World War, production in some industries such as textiles was a mere one-tenth. Matters were hardly less catastrophic in agriculture: when the 1921 harvest produced significantly less than half the pre-war average, famine and epidemics ensued, claiming millions of lives. By 1922 hyper-inflation had driven prices, particularly those for agricultural products, to astronomical heights. In response, the government created a new currency backed by gold, the chervonets. This tight-money policy, however, caused difficulties in wage payments at many factories, triggering strikes and disorders.
The year 1923 witnessed the famous ‘scissors crisis’, a complete reversal of the price relationships of the previous year. In essence, agriculture had now begun to recover more quickly than industry. Although food was still not abundant, the shortage was no longer desperate. The supply of agricultural products thus outstripped the production of manufactured goods; as a result the index for industrial prices in 1923 rose to a level three times higher than agricultural prices. When plotted on a graph, these price indices—industrial prices rising, agricultural prices falling—resembled scissors, hence the name. In response, peasants resorted to grain-hoarding and a low level of marketing in the subsequent two years; that caused agricultural prices to recover in 1924–5, although obviously not in the way the state desired. As a result, the scissors crisis further exposed the fragility of NEP, suggested an incompatibility of private agricultural and industrial sectors, and—perhaps of greater long-term significance—reinforced the chronic fears of the kulak.
Nevertheless by 1924 the national economy began a recovery of sorts. Industrial reconstruction proved deceptively rapid: restarting factories closed during the civil war caused a sharp rise in manufacturing output. Supply networks also began to function once again: the workers who had fled during the civil war and famine made their way back to the plants. As a result, the output of large-scale industry reached nearly half its pre-war scale in 1924 and 75 per cent a year later. Industrial exports rose to nine times what they had been at the beginning of the decade, even if still but a third of pre-war figures. Recovery was still more marked in agriculture: by 1924 the cultivation of arable land approached 1913 levels, and marketable output in agriculture increased 64 per cent between 1922 and 1925.
But this was recovery, not expansion of the pre-war base. And industry, in particular, soon reached a point of diminishing returns. Seven years of warfare, followed by new hardships in the early 1920s, had destroyed a significant portion of the industrial base. There had been virtually no renewal of the capital stock since before the First World War; what the Russian civil war had not destroyed was badly worn or outmoded. Restarts could increase output, but without significant new investment it could never reach the pre-war standard. But that was precisely the Bolsheviks’ charge: to create the industrial foundation for socialism. And trade and foreign investment, although up considerably after 1921, fell far short of underwriting a venture of such magnitude.
This was the context of the party debate over industrialization. All leading protagonists agreed that the transformation was necessary and that the peasantry would absorb the chief cost. But they disagreed on three main issues: (1) tempo; (2) whether short-term development would centre first in heavy or light industry; and, (3) the degree of peasant entrepreneurship the state would tolerate during the process. Simply put, all sides agreed that capital investment would be generated in agriculture and ‘pumped over’, as the communists phrased it, to the industrial sector. The left—Trotsky and the economist Evgenii Preobrazhenskii, joined later by Zinoviev and Kamenev—favoured the rapid development of heavy industry and the substitution of centralized planning for the market. The right—Bukharin, Rykov, and Tomskii—championed a gradual tempo, the development of consumer goods manufacturing, and above all an alliance (smychka) with the peasantry. In their view, a tax on peasant profits could generate the needed investment capital. Scholars frequently present Stalin’s position as simply opportunistic. In one popular scenario, he first cynically sides with the right; then, after the left was politically defeated in 1927, he shifts maliciously to a position even more radical than that of Trotsky–Preobrazhenskii in order to attack the right.
In reality, the politics was more subtle and complex. It began in 1924, when Preobrazhenskii addressed the Bolsheviks’ need to create the material pre-conditions for socialism in Russia. Marx had written that in the early stages of Western industrialization, entrepreneurs practised ‘primitive capitalist accumulation’ by denying workers the full value of their labour and by reinvesting a significant portion of the surplus profit. Preobrazhenskii called for something analogous in the USSR. Since, however, the majority of toilers were not factory workers, but peasants, Preobrazhenskii proposed a ‘primitive socialist accumulation’ by turning the terms of trade against the peasantry. By setting state prices for agricultural produce artificially low but artificially high for industrial goods, the state could create the analogue of profit to be reinvested. This position, with its hostility towards peasant prosperity and to market economics, signalled a fundamental attack on NEP.
Bukharin countered in 1925. He argued that the Preobrazhenskii plan risked alienating the peasants, and he reiterated the logic of the smychka. Not exploiting but taxing a prosperous peasantry made more economic and political sense. For Bukharin, industrialization would best result from a healthy economy that was reinvigorating itself in stages from the bottom upward. In this spirit he borrowed a phrase attributed to François Guizot that would haunt him politically: hoping to drive home the importance of grass-roots prosperity for long-term economic growth, Bukharin encouraged the peasants to ‘enrich yourselves’. He warned that investment in heavy industry, as Preobrazhenskii proposed, was suicidaclass="underline" such ventures required several years to produce a return, and in the interim the Soviet economy would collapse. Investment in the production of consumer goods, he reasoned, was more rational in an impoverished country that needed a rapid return on its limited capital. Preobrazhenskii replied that Bukharin’s more gradual tempo posed the larger danger. What was left of the national economy would erode while implementing it.