In late November 1917, Lenin jotted down the outline of an economic program:
Questions of Economic Policy
1. Nationalization of banks
2. Compulsory syndication
3. State monopoly of foreign trade
4. Revolutionary methods to combat looting
5. Publicizing financial and bank looting
6. Finance industry
7. Unemployment
8. Demobilization—of army? industry?
9. Supply14
This draft made no mention of state monopoly of domestic trade, or of nationalization of industry or transport, or of moneyless economy, which were to become the hallmarks of War Communism. Lenin at this time believed that the nationalization of financial institutions and the syndication of industrial and commercial enterprises would suffice to set the socialist economy on its way.
On October 25, 1917—that is, before he had even obtained from the Second Congress of Soviets the authority to form a government—Lenin approached Iurii Larin, a Menshevik recently turned Bolshevik. In socialist circles, Larin was considered an expert on the German wartime economy. “You have occupied yourself with questions of the organization of the German economy,” Lenin said to him, “syndicates, trusts, banks. Study this subject for us.”15
Soon afterward, Larin published in Izvestiia an impressionistic sketch of the Bolshevik economic program. It centered on the compulsory syndication of all raw material production, consumer industries, transport, and banks, each subordinated to a comprehensive national plan. Private shares in enterprises would be exchanged for syndicate shares, which would be traded on the open market. In the provinces, organs of self-rule (presumably soviets) would either syndicate or municipalize retail trade and residential quarters. The peasants too would be “syndicated” for the distribution of foodstuffs and agricultural equipment.16 Under this program, the government would control private enterprise, but not abolish it.
At Lenin’s request, Larin and his associates initiated discussions with Alexis Meshcherskii, one of Russia’s most powerful industrialists. A self-made man, Meshcherskii under the old regime had been a typical “progressive” businessman who despised the bureaucracy and wanted Russia to become a free, democratic country, capable of realizing her immense productive potential.17 Although not personally wealthy, he had considerable managerial responsibilities as director of the giant Sormova-Kolomna Metal Works, owned by Russian and foreign, mainly German, capital, employing 60,000 workers. At Larin’s invitation, Meshcherskii drew up a blueprint for a joint venture involving private enterprise and the Bolshevik Government. He envisioned the creation of a Soviet Metallurgical Trust with a capital of one billion rubles, half supplied by private investors, half by the state, and managed by a board, on which the former would have 60 percent of the seats. The trust, employing 300,000 workers, was to manage a network of industrial enterprises, as well as coal and iron mines, and devote itself, in the first instance, to providing rolling stock for Russia’s ailing railroad system.18 In March, the Communist authorities discussed a similar joint venture with the directors of the Stakheev Group, which controlled some 150 industrial, financial, and commercial enterprises in the Urals. Its management proposed a trust to exploit the mineral deposits of the Urals financed with funds supplied by the Soviet Government as well as Russian and American interests.19
These proposals, which would have pushed the Soviet economy toward a mixed model, were aborted by the opposition of Bolshevik “purists.” Under their pressure, government negotiators demanded an ever-greater proportion of the shares in the proposed Metallurgical Trust, until nothing was left for private capital. Meshcherskii and his associates were so eager for a deal with the Bolshevik regime that they agreed to concede the government even 100 percent of the trust’s shares as long as they were promised priority should the government ever decide to sell them. Even this modest proposal was rejected. According to a Communist account, on April 14, 1918, with what is cryptically described as a “near majority of votes,” the Supreme Council of the National Economy voted to terminate discussions.*
Although they had no result, the mere fact of these negotiations taking place helps explain the puzzling equanimity of Russia’s business community toward a regime which openly threatened it with economic ruin and even physical annihilation. Russia’s bankers and industrialists treated Bolshevik pronouncements as revolutionary rhetoric. In their view, the Bolsheviks would either turn to them for help in restoring a collapsing economy or fall. So it happened that in the spring of 1918 the Petrograd Stock Exchange, formally closed since the outbreak of the war, suddenly came to life, as securities, especially bank shares, rose in over-the-counter trading.20 The optimism of big business, reinforced by Bolshevik overtures and the knowledge that the government was negotiating with Germany a trade agreement that would open Russia to German capital, caused it to turn a deaf ear to the pleas of White generals for financial assistance. In the spring of 1918, the White movement appeared to businessmen a hopeless gamble compared with the prospects of collaboration with the Bolshevik Government.
As soon as the Brest-Litovsk Treaty had been ratified, the Bolshevik leaders turned their attention to the economy: now that power was theirs, they were no longer interested in squandering the country’s wealth by turning it over to the peasants and workers to divide among themselves. The time had come to organize production and distribution in a rational, efficient, “capitalist” manner, through the restoration of labor discipline, the reintroduction of accountability, and the adoption of the most modern technology and management methods. Trotsky signaled the change of attitude in a speech on May 28, 1918, with a strangely “Fascist” title, “Work, Discipline, and Order Will Save the Soviet Socialist Republic.”21 He called on the workers to exercise “self-restraint” and accept the fact that the management of Soviet industry would have to be turned over to specialists, drawn from the ranks of previous “exploiters.”
At the time, Lenin argued with great conviction but little success in favor of state capitalism, which would place the marvels of capitalist management and technology at the disposal of the new state. Only by adopting the best that capitalism had to offer could Russia build socialism:
Let us … take the most concrete example of state capitalism. Everybody knows this example. It is Germany. Here we have the “last word” in modern large-scale capitalist engineering and planned organization, subordinated to Junker-bourgeois imperialism. Cross out the words in italics, and in place of the militarist, Junker, bourgeois, imperialist state put also a state, but of a different social type, of a different class content—a Soviet state, that is, a proletarian state, and you will have the sum total of the conditions necessary for socialism.
Socialism is inconceivable without large-scale capitalist technology based on the latest discoveries of modern science. It is inconceivable without planned state organization, which makes tens of millions of people strictly observe a unified standard in production and distribution of products.22
What is state capitalism under Soviet power? To achieve state capitalism at the present time means putting into practice the accounting and control carried out by the capitalist classes. We have an example of state capitalism in Germany. We know that Germany has proven superior to us. But if you reflect even slightly on what it would mean if the foundations of such state capitalism were established in Russia, Soviet Russia, everyone who has not taken leave of his senses and has not stuffed his head with bits and pieces of book learning would have to say that state capitalism would be our salvation.