Lenin entrusted the direction of the council to Aleksei Rykov, whom one acquaintance described as a “warm-hearted Russian intellectual,” rather like the “kindly doctors from the old-time provinces.” Others he reminded of a “provincial zemstvo agronomist or statistician.”66 Certainly, he had neither the personality nor the expertise of a man to reorganize the Russian economy from top to bottom.67 Born into a peasant family, he had received a sketchy education and then dedicated himself to full-time revolutionary work for Lenin, to whom he was fanatically devoted. Shabbily dressed and usually unkempt, he spoke little and slowly, a habit which earned him a reputation for forcefulness: but, as it turned out, when required to make decisions, he was quite helpless. His lack of administrative talents rendered his task, difficult to begin with, quite impossible.
The true driving force behind the Supreme Economic Council—the “Saint-Just of Russian economics”—was Iurii Larin. Although little known even to specialists, this half-paralyzed invalid, always in pain, could take credit for a unique historic accomplishment: certainly no one has a better claim to having wrecked a great power’s national economy in the incredibly short span of thirty months. He exerted a powerful influence on Lenin, who in the first two and a half years of his dictatorship listened to Larin more attentively than to any other economic adviser. Larin was always ready with quick and radical solutions to difficult problems, which earned him the reputation of an economic “magician.” His office, in a suite at the Metropole Hotel, was the place of pilgrimage for Russians with the most fantastic economic schemes: none of them was rejected out of hand, many were seriously considered, some were adopted. It was only in early 1920 that Lenin grew disenchanted with his advice and had him expelled from the Presidium of the Supreme Economic Council, which until then he had dominated by the force of his ideas and personality.*
Born in 1882 in the Crimea as Michael Aleksandrovich Lure into a Jewish intelligentsia family, Larin spent his childhood in what he himself described as an “oppositional atmosphere.”68 He joined a radical organization at the age of eighteen, and from then on led the life of a typical Russian revolutionary, alternating between underground work, organizing illegal workers’ unions, and serving stretches in prison and exile. Politically, he sided with the Mensheviks. He had no higher education: such knowledge of economics as he acquired came mostly from the reading of newspapers, fat journals, and radical pamphlets. During the war he turned to journalism and filed from Stockholm reports on internal developments in Germany for the liberal newspaper Russkie vedomosti. His widely read articles, brought out after the Revolution in book form, displayed fascination with German “War Socialism.”69 In the spring of 1917 he worked in the Petrograd Soviet and in September went over to the Bolsheviks.70 In the first months of the Bolshevik dictatorship he drafted and on occasion issued a number of important decrees. It was largely owing to him that Soviet Russia established the Supreme Economic Council, initiated economic planning, defaulted on its foreign debts, nationalized its industries, and, for all practical purposes, abolished money.
92. Iurii Larin.
The Supreme Economic Council attracted non-Bolshevik intellectuals, mainly Mensheviks and independent experts, because it offered work that required no political commitment and allowed opponents of the regime to feel they were serving the people. In no time at all it expanded into a bloated bureaucratic hydra centered in Moscow in a sprawling building on Miasnitskaia Street that had once housed a second-class hotel, its many heads spread across the country. Ten months after its creation (September 1918) it employed 6,000 functionaries, whom it paid 200,000 rubles a day in salary.71 This staff and this payroll would not have been excessive if the Supreme Economic Council did what it was designed to do—namely, direct the country’s economy. But in reality it occupied itself mainly with issuing orders to which no one paid attention and forming bureaucratic organs that no one needed.
The Supreme Economic Council never even partially realized its mandate of “organizing the national economy and state finances” if only because of the vast private sector that remained outside its control. It did not even manage the task of distributing food and other consumer goods because it had to concede this responsibility to the Commissariat of Supply. In effect, the Supreme Economic Council became the principal agency that administered—or, more accurately, attempted to administer—Soviet Russia’s nationalized industries: in other words, a Commissariat of Industry under a different name.
The Bolsheviks began to nationalize industrial enterprises soon after October. In most cases, they took over plants on the grounds that the owners and managers engaged in “sabotage”; these they turned over to Factory Committees. On occasion—this happened to the textile mills of the former Provisional Government minister A. I. Konovalov—the expropriation was motivated by political vendetta. The owners of the nationalized enterprises received no compensation. This spontaneous, unplanned phase of nationalization culminated in the expropriation in December 1917 of the Putilov Works. Most expropriations were ordered by the local authorities on their own initiative rather than on government instructions—at first by the soviets and then by the regional branches of the Supreme Economic Council. A survey conducted in August 1918 showed that of the 567 enterprises that had been nationalized and the 214 that had been requisitioned, only one in five had been taken over on direct orders of Moscow.72
The systematic nationalization of Russian industry got underway with the decree of June 28, 1918.73 The impetus came from Larin. Having attended the commercial negotiations in Berlin, Larin concluded that German businessmen intended to seize control of Russia’s major industries. In the Brest-Litovsk Treaty, the Bolsheviks had agreed to exempt citizens and business firms of the Central Powers from Soviet economic laws, allowing them to hold properties and to pursue business activities on Russian territory. Owners of the nationalized properties were to be adequately compensated: a provision that made it possible for Russians to sell their enterprises to Germans, who could either take control or claim compensation. Larin convinced Lenin that only a sweeping nationalization measure could prevent the Germans from becoming masters of Russia’s industry.74 If Lenin hesitated to act it was out of concern over the German reaction: we know from Larin that many Bolsheviks feared the measure could provoke the Germans to break diplomatic relations and launch an anti-Bolshevik “crusade.” The fears proved groundless: while complaining that it was “disloyal,” “[the Germans] nevertheless acquiesced to the nationalization of all [Soviet] industry and did not declare war over it.”75 The reason was that German interests were guaranteed full compensation for their nationalized assets, whereas Allied interests received none.