In the words of Trotsky, “the socialist organization of the economy begins with the liquidation of the market.” Indeed, to the Marxist, the market, the arena for the exchange of commodities, is the heart of the capitalist economy, just as money is its lifeblood. Without it, capitalism cannot function. The choking off of the free exchange of products and services, therefore, constituted a central objective of Bolshevik economic policy. Nationalization of the market and centralization of distribution were not, as is often erroneously argued, responses to shortages caused by the Revolution and the Civil War, but positive initiatives directed against the capitalist enemy, which caused shortages.
The Bolsheviks went to extreme lengths to eliminate the free exchange of commodities. They spelled out their intention in the 1919 party program:
In the realm of distribution, the task of Soviet authority at present consists in steadfastly pursuing the replacement of trade by a planned and nationally organized distribution of products. The objective is the organization of the entire population in a single network of consumer communes which will be capable, most speedily, in a planned manner, economically and with the least expenditure of labor, of distributing all the necessary products, strictly centralizing the entire mechanism of distribution.103
The Bolsheviks pursued this goal by a variety of means, including the confiscation of the means of production of goods other than food, forceful requisitions of foodstuffs and other commodities, a state monopoly on trade, and destruction of money as a medium of exchange. Goods were distributed to the population by means of ration cards, initially (1918–19) at nominal prices, later (1920) free of charge. Housing, utilities, transport, education, and entertainment were also withdrawn from the market and eventually made available at no cost.
While the production of industrial goods was turned over to the Supreme Economic Council, responsibility for the distribution of commodities was assigned to the Commissariat of Supply (Kommissariat po Prodovolstviiu), another bureaucratic empire with an array of its own glavki and a network of distribution agencies. Its head, Alexander Tsiurupa, had only limited business experience, having been employed before 1917 as manager of a landed estate. His commissariat was a very costly operation. Komprod, as it was popularly known, first and foremost received and distributed the foodstuffs which the government managed to collect through purchase, barter, or forceful requisitions. It was also supposed to receive for purposes of barter consumer goods from the nationalized industrial establishments and household industries. For distribution, it relied to some extent on its own network of state-run stores, but mainly on the consumer cooperatives which had developed before the Revolution and which the Bolsheviks, with some reluctance, retained after removing the SRs and Mensheviks from their directing staffs.104 In the spring of 1919 these cooperatives were nationalized. A decree of March 16, 1919,105 ordered the creation in all cities and rural centers of “consumer communes” (potrebitel’skie kommuny), which all the inhabitants of a given area, without exception, had to join. The communes were supposed to provide food and other basic necessities upon presentation of ration cards. Such cards came in several categories, the most generous ones being issued to workers in heavy industry: the “bourgeoisie” received at best one-quarter of a worker’s ration, and often nothing.106 * The system lent itself to terrible abuses: in Petrograd in 1918, for instance, one-third more ration cards were issued than there were inhabitants, and in 1920, the Commissariat of Supply distributed ration cards for 21.9 million urban residents whereas their actual count was only 12.3 million.107
In the words of Milton Friedman, the more significant an economic theory, “the more unrealistic the assumptions.” The Soviet experiment in the nationalization of trade amply corroborated this statement. The measures enacted under War Communism, instead of eliminating the market, split it in two: in 1918–20 Russia had a state sector, which distributed goods by ration cards at fixed prices or free of charge, and, alongside it, an illicit private sector, which followed the laws of supply and demand. To the surprise of Bolshevik theoreticians, the more the nationalized sector expanded, the larger loomed what one Bolshevik economist called its “irremovable shadow,” the free sector. Indeed, the private sector battened on the state sector, for the simple reason that a large part of the consumer goods which the workers bought at token prices or received gratis from state stores or “consumer communes” found their way to the black market.108
The government inaugurated free public services in October 1920 with a law exempting Soviet institutions from paying for telegraph, telephone, and postal services; the following year, these were offered free to all citizens. During this time government employees received all utilities gratis. In January 1921, residents of nationalized and municipalized houses were freed from the payment of rents.109 In the winter of 1920–21, Komprod is estimated to have assumed responsibility for supplying, at virtually no cost, the basic needs of 38 million people.110
Obviously, such largesse was possible only temporarily, as long as the Bolshevik regime could spend capital inherited from tsarism. It was able to dispense with the collection of rents because it neither built housing nor paid for its maintenance: nearly the entire residential housing of urban Russia, consisting of about half a million structures, had been built before 1917. When War Communism was at its height, the government constructed and repaired only 2,601 buildings in the country.111 The other factor which made the policy of free distribution possible was the food that was extracted from the peasants without compensation or with make-believe compensation in the form of worthless money. Clearly, neither situation could continue forever, as buildings decayed and the peasant refused to grow surplus food.
In the meantime, the private sector burgeoned. It traded every conceivable commodity, and above all, foodstuffs. The bulk of the food consumed by the non-agrarian population of Soviet Russia under War Communism came not from state outlets but from the free market. In September 1918 the regime was forced to permit peasants to bring into the cities and sell at market prices up to one and a half puds (25 kilograms) of cereals.112 These polutorapudniki, or “one-and-a-half-puders,” accounted for the lion’s share of the bread and produce consumed by the cities. A Soviet statistical survey conducted in the winter of 1919–20 indicated that urban inhabitants obtained only 36 percent of their bread from state stores; the remainder came, as the survey evasively put it, “from other sources.”113 It has been established that of all the foodstuffs consumed in Russian cities in the winter of 1919–20 (cereals, vegetables, and fruits), as measured by their caloric value, the free market furnished from 66 to 80 percent. In the rural districts, the proportion of victuals supplied by the “consumer communes” amounted to a mere 11 percent.114
A foreign visitor to Russia in the spring of 1920 found nearly all the stores closed or boarded up. Here and there small shops stayed open to dispense clothing, soap, and other consumer goods. Outlets of Narkomprod (Commissariat of Supply) were also few and far between. But the illicit street trade was booming:
Moscow lives. But it lives only in part from rationed goods and from earned money. In large measure, Moscow lives off the black market: actively and passively. It sells on the black market, it buys on the black market, it profiteers, profiteers, profiteers …
In Moscow money is made on everything. Everything is traded on the black market: from a pin to a cow. Furniture, diamonds, white cake, bread, meat, everything is sold on the black market. The Sukharevka in Moscow is a black-market bazaar, a black-market warehouse. From time to time, the police carry out raids, but these do not suppress the black market. It is a proliferating hydra, it reappears with a thousand heads.