Abstract
With Lenin incapacitated from a series of strokes in 1922 and 1923, and then with his death in January 1924, a bitter power struggle occurred within the leadership of the Communist Party. On the level of ideas, the struggle took the form of the Soviet Industrialization Debate, where leading party economists and nonparty economists debated strategies for economic growth and development. Although much of the analysis of the debate focused on the political struggle for power, the consequence was more profound than just the political maneuvering of Stalin. The debates and controversies of the 1920s contain much that is of importance to economic and intellectual historians. As Alec Nove points out, “Development economics could be said to have been born here.”1
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Notes
Alec Nove, An Economic History of the U.S.S.R. (New York: Penguin Books, 1984[19691), 129.
See Robert M. Solow, “Growth Theory and After,” American Economic Review, Vol. 78, n. 3 (June 1988), 307–317.
Domar, Essays in the Theory of Economic Growth (New York: Oxford University Press, 1957), 10.
See H. W. Arndt, “Economic Development: A Semantic History,” Economic Development and Cultural Change, Vol. 29 (April 1981), 457–466. “In the immediate postwar years,” Arndt points out, “`economic development’ became virtually synonymous with growth in per capita income in the less developed countries” (465). Sukhamoy Chakravarty, “The State of Development Economics,” The Manchester School of Economics and Social Studies, Vol. 55, n. 2 (June 1987),125143, also documents this preoccupation of development theory with economic growth and offers suggestions for a “new agenda.” In the final analysis Chakravarty argues that economic development must be closely connected to the theory of economic evolution as advanced by Marx and Schumpeter, but without Marx’s linear determinism and Schumpeter’s open-ended analysis of innovation. What is needed in development economics is not more advanced theoretical models of “growth,” but more detailed historical studies of particular countries’ economic development. What is needed is “a much closer integration of history and theory” (139). This equating of economic development with neo-classical growth theory had severe consequences for the theoretical foundations of development economics. Domar, for example, in describing his original interest in G.A. Fel’dman’s article, “A Soviet Model of Growth” (published in 1928), states: “I have always felt that the Marxists, concerned as they were with the process of accumulation, should have developed some theory of growth.” See Domar, Essays in the Theory of Economic Growth, 10. But in developing Fel’dman’s model Domar was unimpressed with specifically the unique character of Marxism, that is, the structural proportionality between consumer and producer goods industries. As a result, growth theory developed in a direction opposite that of capital theory. But capital theory, properly understood, provides the basis for the microfoundations of macroeconomic analysis without which the theorist is left either with a world in which there are no market problems (the Walrasian world) or one where there are no market solutions (the Keynesian world). Neither theoretical world does much to advance our understanding of intertemporal coordination. See Roger Garrison, “Time and Money: The Universals of Macroeconomic Theorizing,”Journal of Macroeconomics, Vol. 6, n. 2 (Spring 1984), 197–213.
See, for example, the standard account in Alexander Erlich, The Soviet Industrialization Debate, 1924–1928 (Cambridge: Harvard University Press, 1960). A somewhat similar argument against the standard interpretation is offered by James Millar, “A Note on Primitive Accumulation in Marx and Preobrazhensky,” Soviet Studies,Vol. 30, n. 3 (July 1978), 385, where he states that “both Preobrazhensky’s and Marx’s concepts [of primitive accumulation] are much richer analytically than has been generally presumed…. Alexander Erlich’s famous article [later expanded into the book] infused more consistency and contemporary economics into Preobrazhensky’s theoretics than was there in the first place” (emphasis added). Also see Millar, “What’s Wrong with the `Standard Story,— Problems of Communism (July-August 1976), 51, where he states that ”The first problem with the standard story is that Alexander Erlich’s famous article on Preobrazhensky contains more of Erlich (and of John Maynard Keynes) than it does of Preobrazhensky.“
Consider the following statement of Keynes: “I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organising investment.” See Keynes, The General Theory of Employment, Interest and Money (New York: Harcourt Brace Jovanovich, 1964[1936]), 164. Also see Saul Estrin and Peter Holmes, “Uncertainty, Efficiency and Economic Planning in Keynesian Economics,” Journal of Post-Keynesian Economics, Vol. VII, n. 4 (Summer 1985), 463–473, for an example of Keynesian arguments for economic planning. This social engineering aspect of both systems of thought is responsible for the unity of Hayek’s criticism of both socialist constructions and Keynesian fine-tuning. See Hayek, “The Pretense of Knowledge,” New Studies in Philosophy,Politics, Economics and the History of Ideas (Chicago: University of Chicago Press, 1978), 23–34. This was Hayek’s Nobel Lecture in December 1974. Also see the critique of neo-Keynesian theories of economic growth in Ludwig M. Lachmann, Macro-economic Thinking and the Market Economy (Menlo Park, CA: Institute for Humane Studies, 1978[1973]).
This was the last great political and economic debate in the Soviet Union until perhaps today when debate is encouraged. The Industrialization Debate was the closest thing to an open political and economic forum that has ever been witnessed in the history of that government. Unfortunately, the debates of the twenties were ended not by the force of superior argument, but rather with the introduction of the bullet as a conversation stopper.
Gregory and Stuart, Sovier Economic Structure and Performance, 2nd ed. (New York: Harper and Row, 1981), 81–82.
See Deutscher and King, The Great Purges (New York: Basil Blackwell, 1984). This is also the theme of George Orwell’s Animal Farm (New York: Harcourt Brace Jovanovich, 1946), where the character Snowball is analogous to Trotsky and Napoleon represents Stalin. Arthur Koestler’s Darkness at Noon (New York: Macmillan, 1941) also captures the psychological and physical horror of Stalin’s bloody purges.
Dobb, “The discussion of the `twenties on planning and economic growth’,” in Papers on Capitalism,Development and Planning (London: Routledge and Kegan Paul, 1967), 127.
Robert Bideleux, Communism and Development (New York: Meuthuen, 1985), 84.
Lenin, “Notes of a Publicist: On Ascending a High Mountain; The Harm of Despondency, The Utility of Trade; Attitude Towards the Mensheviks, etc.,” CW (33: 207).
See “Declaration of Twenty-Two Members of the Russian Communist Party to the International Conference of the Communist International,” in A Documentary History of Communism, ed. Robert V. Daniels, 2 vols. (New York: Vintage, 1962), I: 219.
Prokopovitch, The Economic Conditions of Soviet Russia (London: P.S. King and Sons, 1924), 230.
For an interesting discussion of the tension between Marx’s theory of praxis and command planning see David L. Prychitko, “The Political Economy of Workers’ Self-Management: A Market Process Critique” (unpublished PhD thesis, George Mason University, 1989), 28–80. Also see Radoslav Selucky, Marxism, Socialism, Freedom (New York: St. Martin’s Press, 1979) for a discussion of Marx’s contradictory economic and political projects. It should be kept in mind, however, that the tension between Marx’s political and economic project is a problem of the transition period. But its existence suggests that neither Marx nor Lenin addressed seriously enough the question of how to get from here to there—a serious problem for philosophers who were concerned not only with interpreting the world but also with changing it.
See Karl Marx and Frederick Engels, “The German Ideology,” Selected Works, 3 vols. (Moscow: Progress Publishers, 1969), I: 35–36. Also see Lenin, The State and Revolution, CW (25: 473), where he states that: “The economic basis for the complete withering away of the state is such a high stage of development of communism at which the antithesis between mental and physical labour disappears….”
Marx had no love for the machinery of the state. For example, consider his description of the state in “The Eighteenth Brumaire of Louis Bonaparte,” Selected Works, I: 477: “This executive power with its enormous bureaucratic and military organization, with its ingenious state machinery, embracing wide strata, with a host of officials numbering half a million, besides an army of another half million, this appalling parasitic body, which enmeshes the body of French society like a net and chokes all its pores, sprang up in the days of the absolute monarchy, with the decay of the feudal system, which it helped to hasten.” This leads Marx to view taxes as “the source of life for the bureaucracy, the army, the priests and the court, in short, for the whole apparatus of the executive power. Strong government and heavy taxes are identical” (482). The basis of this parasitic state was small-holding property. These problems would disappear under the dictatorship of the proletariat and communal ownership of property. Also see Marx’s discussion of the state in Critique of Hegel’s Philosophy ofRight (New York: Cambridge University Press, 1970), where he states: “The opposition between state and civil society is thus fixed; the state does not reside within but outside of civil society; it affects civil society merely through office holders to whom is entrusted the management of the state within this sphere. The opposition is not overcome by means of these office holders but has become a legal and fixed opposition. The state becomes something alien to the nature of civil society; it becomes this nature’s overworldly realm of deputies which makes claims against civil society. The police, the judiciary, and the administration are not deputies of civil society itself, which manages its own general interest in and through them. Rather, they are office holders of the state whose purpose is to manage the state in opposition to civil society” (49–50). But this opposition is due, according to Marx, to an unnatural separation of man from his communal existence. “In order to behave as an actual citizen of the state, to acquire political significance and efficacy, he must abandon his civil actuality, abstract from it, and retire from this entire organization into his individuality....existence as a citizen is an existence lying outside the realm of his communal existences.” Marx continues: “The separation of civil society and the political state appears necessarily to be a separation of the political citizen, the citizen of the state, from civil society, i.e., from his own actual, empirical reality” (78). Political alienation was as serious a problem to Marx as estranged labor. Both, however, would be overcome by proletarian revolution. It never occurred to Marx, nor Lenin, that political estrangement could worsen for the proletariat under the dictatorship in its name. It was a surprise—an unintended and undesirable consequence of the Marxian project.
Bukharin and Preobrazhensky, The ABC of Communism (Ann Arbor: University of Michigan Press, 1969[19191), 74.
Bukharin and Preobrazhensky, The ABC of Communism, 74; 282. This is the participatory planning advocated by the Bolsheviks. The trade unions would participate in the work of the commissariats, the economic councils, and the Supreme Economic Council until the whole economy, from top to bottom, was rationalized, constituting a unified economic plan.
Schapiro, The Communist Party of the Soviet Union (New York: Vintage, 1971[1960]), 334.
See “Appeal of the `Workers’ Truth’ Group,” A Documentary History, 220–222.
Thus, Bukharin’s criticism of the irrationality of the Soviet system of economic bureaucracy under war communism would continue throughout the NEP period. This problem of bureaucracy would become Bukharin’s major source of criticism of the left opposition and the later Stalinist regime in the 1920s and 1930s. It underlies his total rethinking of the economics of socialism as he tried to steer clear of what he referred to as the “Genghis Khan plan” toward socialist construction.
An excellent account of Lenin’s decline in health and the turmoil of political leadership is found in Moshe Lewin, Lenin’s Last Struggle (New York: Monthly Review Press, 1968). Also see Richard Day, Leon Trotsky and the Economics of Isolation (New York: Cambridge University Press, 1973), 69, where he argues that: “The party’s age of innocence ended in the spring of 1922. Shortly thereafter, Lenin’s terminal illness initiated a vicious and protracted contest among his potential successors for total political power. Economic policy emerged almost immediately as one of the main issues in dispute. Lenin had led his followers into the wilderness only to die before he could lead them out. The road to socialism had still to be defined. Confusion bred the desire first for certainty and ultimately for a faith supplemented by force.”
Cohen, Bukharin and the Bolshevik Revolution, 184.
Maurice Dobb, Soviet Economic Development Since 1917 (New York: International Publishers, 1948), 156–157. Even though prevailing market prices were high for agricultural goods this did not signal a betterment of the peasants; the higher prices were due to the shortage of agricultural goods. The famine of 1921 had left the peasants at a level of mere subsistence. Industrial workers, on the other hand, faced a reduction in their real income as a result of the higher food prices. The economic situation in the town and the country was bleak.
Many argued that this was not the proper policy. A report of the Economic Planning Commission, for example, argued that the problem would not be solved by a reduction of output, but by the introduction of a more liberal grant policy on the part of the state budget to industry. Cut off in 1921 from state credit and required to meet the harsh reality of profit and loss accounting, many firms were already selling their products well below operating costs just to liquidate their stock pile of products. (This was the so-called razbazarovania or squandering crisis of 1921.) Cutting output figures and curtailing state credit even further, it was argued, would just increase the misery of the industrial sector and demonstrate a “tuning of the face” of the government toward the peasantry and away from the worker. But the policy of output reduction and the combining of state enterprises into “trusts” proved to be a temporary expedient. It lead to an easing of the fuel situation through the summer of 1922, which benefited light industry, and to a recovery of the terms of trade between town and country. See Dobb, Soviet Economic Development, 158.
See Trotsky, The Revolution Betrayed (New York: Pathfinder Press, 1972[1937D, 25. Trotsky’s argument also contained a class character. In particular, Trotsky was concerned over the growing kulak (well-off peasants) influence in the village.
Industrial selling prices fell an estimated 23.3 percent in 1923–1924. The Soviet state established a Commissariat for Trade to market manufactured goods in rural areas below the prices charged by the Nepmen. “By April 1924,” Alec Nove points out, “the agricultural price index had risen to 92 (1913=100) and the industrial index had fallen to 131.” See Nove, An Economic History of the U.S.S.R, 96.
Novozhilov, Vestnik Finansov, No. 2, 1926, as quoted in Nove, An Economic History of the U.S.S.R., 139.
See Gregory and Stuart, Soviet Economic Structure and Performance, 56, fn. 47. The tovarnost or marketing problem took the Bolsheviks by surprise. Whereas before the war the kulaks and large agricultural estates produced more than 50 percent of the total grain and supplied more than 70 percent of the marketable grain, now grain was mainly produced by small peasant farms. Moshe Lewin argues that the peasants consumed rather than marketed their surplus and thus explains why marketed surplus in 1927 was half that of the pre-war level: 13 percent as against 26 percent of the harvest. The procurement for the year 1926–1927 was only 428 million poods of grain, and in 1927 the state only collected 630 million poods of grain, as compared to 1,300 million poods in 1913. And the Soviet state possessed no reserves in case of war or famine. And this is the crux of the problem: grain production was smaller than it was before the war, and the peasants marketed less, but the requirements were greater. See Moshe Lewin, “The Immediate Background of Soviet Collectivization,” The Making of the Soviet System (New York: Pantheon, 1985), 91 ff. Also see Lewin, Russian Peasants and Soviet Power (New York: Norton, 1975[1968]), 214 ff.
Bolsheviks enacted article 107 of the penal code (a law against speculation that was introduced in 1926 and provided for prison sentences and confiscation of property for persons found guilty of causing a rise in the price of good by repurchase or hoarding) directly against the kulak. By February 1928 Stalin, feeling the need for a scapegoat, argued that the kulaks in Siberia had reserves of about 50,000–60,000 poods per farm and were waiting for the price to go up. Even though these figures were considered to be highly unreliable, it was accepted that any kulak who refused to sell his surplus grain at state prices was a speculator and his surplus was to be confiscated. Stalin’s tactic was to explain the procurement crisis as a general kulak strike. “This enabled him,” as Moshe Lewin points out, “to use coercive measures not only against the kulaks, but also against the majority of the peasants and against those elements within the Party who had doubts about the operation. In fact, the danger of being labeled as an ally of the kulaks was such that no communist could afford to incur it.” See Lewin, Russian Peasants, 219.
contend that how the different theorists interpreted the debacle of war communism was extremely influential on their positions in the twenties. The fact that neither Trotsky nor Preobrazhensky never quite understood the problem with either the militarization model nor the strict-unity-of-plan model explains why they adopted the industrialization strategy they did. Any other strategy would concede that socialism was not feasible. On the other hand, Bukharin’s recognition of some of the fundamental problems of socialist planning (at least at the current stage of development) led him to his position of pro-market growth to support the development of state capitalist industry (guided by the proletarian dictatorship) until the Soviets developed the proper industrial foundation for socialist construction.
Within the debate over general industrialization strategy another debate took place. This was the debate over the proper role of economic planning within economic policy. Thinkers such as Kondratiev, Bazarov, and Groman argued that consumer demand should signal what the economic planners should do and in what direction the economy should be changed. In other words, they advocated a sort of indicative planning model that would concentrate on alleviating short-run market problems. To do otherwise and expand the industrial sector without paying attention to the effects on the other sectors in the economy would produce economic disproportionality and thus economic crises. The basic model of economic coordination, therefore, should be the market methods of allocation that existed under NEP. These theorists became known as the “geneticists” and were associated with the right wing of the party. Advocates of more long-term planning models, such as Strumlin, Pyatakov, Kuibyshev, and Fel’dman, were known as “teleologists.” In dealing with problems of development, these economists argued that the planner should not be concerned with current market conditions, but rather, should pursue policies that would maximize long-run economic growth. The planner should not subject the growth of the economy to the spontaneous and anarchistic forces of the market, but instead rationally control the economy’s growth and supersede the market. To do otherwise was to submit to the “genetical inheritance” of tsarism. These issues will not be directly addressed within my discussion, since I am limiting my discussion to industrialization strategy. See Gregory and Stuart, Soviet Structure and Performance, 93 ff., for a discussion of the debate between the geneticists and teleologists. Also see Alec Nove, An Economic History of the U.S.S.R., 132 ff. In addition, many translations of the original articles are contained in Nicolas Spulber, ed., Foundations of Soviet Strategy for Economic Growth (Bloomington: Indiana University Press, 1964).
Nove, An Economic History of the U.S.S.R., 128.
Trotsky, “Theses on Industry,” March 6, 1923, in A Documentary History, 235.
During the 1920s Trotsky’s emphasis was on the backwardness of the Russian industrial sector and the failure of world revolution. Trotsky would later argue for a sort of market socialism in the transition period and maybe even beyond. In Revolution Betrayed, 23, he argued that even if the German revolution had been successful it would have still “been necessary to renounce the direct state distribution of products in favor of the methods of commerce.” Yet, within the same text he argued that “Socialism is a structure of planned production to the end of the best satisfaction of human needs; otherwise it does not deserve the name of socialism” (61). Trotsky may well have been a Nepist, as Stephen Cohen suggests, but he accepts market principles only tentatively—as sort of the rules for socialist competition. The superiority of industrial planning will eliminate the anarchy of market discipline. See Stephen Cohen, Rethinking the Soviet Experience (New York: Oxford University Press, 1985), 38–70. Also see Alec Nove, “New Light on Trotskii’s Economic Views,” Slavic Review, Vol. 40, n. 1 (Spring 1981), 84–97, who, while supporting Cohen’s thesis, points out that Trotsky was especially concerned with the “market devil” and argued for an expanded socialist sector. Nove argues that Trotsky “learned fast from the poor performance of centralized planning under war communism” and that “the market mechanism is needed.” He learned that while “one day a socialism would arise in which there could be the kind of planning envisaged by Marx—that is, an end to commodity production—but there would be a long transition period” (88). NEP, again, was viewed as a retreat from the proper model of comprehensive planning. Trotsky did clearly change his mind from his early war communism period to a position that was conciliatory toward markets—but is the change with the introduction of NEP or only after the left opposition is defeated? His thesis on industry seems to suggest that he did not learn the lesson of war communism—bureaucracy, not economic irrationality, eventually convinced him.
This is the essence of his complaint of bureaucracy. The Declaration of the FortySix of October 1923, for example, argues: “The economic and financial crisis which began at the end of July of this year, together with all the political (including intra-party) consequences which have stemmed from it, has unmercifully uncovered the unsatisfactoriness of the party leadership, in the area of the economy and especially in the area of intra-party relations.” The bureaucracy had choked off the “party’s social mind,” and unless something was done to introduce democratic measures within the workers’ dictatorship in Russia, the Russian Communist Party would suffer a serious set-back. But the democracy Trotsky envisaged was a democratic centralism within the party, because as he argued in his open letter to the party of December 8, 1923, “the party must subordinate to itself its own apparatus without for a moment ceasing to be a centralized organization.” See “The Declaration of the Forty-Six” (secret document to the Central Committee of the Russian Communist Party, October 15, 1923), A Documentary History, 239–242, and “The New Course” (open letter to a party meeting, December 8, 1923), A Documentary History, 243246. The response from the party came in January 1924 and was contained in the resolution of the Thirteenth Party Conference (“On the Results of the Controversy and on the Petty-Bourgeois Deviation in the Party”). The party responded by denouncing Trotsky for “intellectual anarchism” on questions of party discipline, and Trotsky was eliminated as a serious threat to the party leadership (even before Lenin’s death).
As quoted in Laszlo Szamuely, First Models of the Socialist Economic System (Budapest: Akademia Kiado, 1974), 94.
Trotsky, “Theses on Industry,” 236.
Trotsky argued that “in contrast to capitalist countries, the area of the planning principle is not limited here to the framework of individual trusts or syndicates, but extends to all industry as a whole. Not only that: the state must embrace the interrelationship of industry on the one hand and of agriculture, finance, transport, domestic and foreign trade, on the other.” See Trotsky, “Theses on Industry,” 236.
Trotsky, “Theses on Industry,” 237. It seems here that Trotsky recognized an incentive problem within state industrial organization, but he did not recognize the inherent administrative difficulty in mobilizing enough economic knowledge to coordinate advanced industrial production.
As quoted in Richard Day, Leon Trotsky, 82.
As quoted by Richard Day, Leon Trotsky, 99.
Trotsky, The First Five Years, II: 253, as quoted in Day, Leon Trotsky, 58.
Trotsky quoting himself in Revolution Betrayed, 30.
Revolution Betrayed, 30. Richard Day, however, provides evidence that Trotsky, faced with the failure of the world revolution, supported importation of capital resources to build industry. See Leon Trotsky, 69 ff. Day also argues that this is the major difference between Trotsky and Preobrazhensky. See “Trotsky and Preobrazhensky: The Troubled Unity of the Left Opposition,” Studies in Comparative Communism, Vol. X, n. 1 and 2 (Spring/Summer 1977), 69–86. Robert Bideleux, Communism and Development, 102–110, also argues that Trotsky advocated a “least-cost” strategy for economic development. The theory of “Trotskyism” was a fabrication, Bideleux argues; Trotsky was just not the “super-industrializer” he was made out to be. But Trotsky was ambiguous himself, and in many ways contributed to his own defeat.
Day’s argument about Trotsky’s intellectual commitment to the world division of labor is subject to some questions from a Marxist point of view. Marx was especially concerned with the problems of the division of labor. The social division of labor, in particular, confronted man as an anarchistic and alien will and was an expression of man’s estranged and alienated state under commodity production. On the other hand, the division of labor within a capitalist firm was more rational, but despotic within bourgeois society. The goal of Marxist-Leninism, at least in some sense, was to transform the economic life of society from the anarchistic and alien organization of the social division of labor to the more rational division of labor with a consciously regulated, though not despotic, social organization within the proletarian society. This is what underlies, at least intellectually, Zinoviev’s criticism of Trotsky and the British loan negotiations at the beginning of 1924. Submitting to the international division of labor would, from a Marxist-Leninist point of view, represent surrendering the “socialist fatherland” to the anarchy and despotism of international capitalism.
Trotsky was forced into exile at the beginning of 1928. In exile he published, along with the aid of his son Leon Sedov, the journal Byulleten’ Oppozitsii. Trotsky argued that the Soviet socialism had been perverted by centrism. “Centrism,” he argued, was “a midpoint between reformism and communism. It does not and cannot have its own line….It zigzags from one extreme to the other….It is wholly bureaucratised and wholly subordinate to the commands of the top of the Stalinist faction.” Trotsky’s arguments against the Soviet industrialization drive were not that it was wrong—in fact, he argued that the government had been forced to adopt many of his targets. His criticism from the scissors crisis on was that the Soviet leaders were going too slow in building up industry. Throughout the 1920s he criticized Bukharin for his theory of socialism at a snail’s pace. The kulaks must be taxed to support industrialization, Trotsky argued. And the grain crisis of 1927–1928 was a result of the kulaks’ power—earlier concessions to the kulaks (a position of the right) had strengthened their power. He thus agreed in principle with some of the Stalinist program against the kulak; disagreement was with the Stalinist bureaucracy. But Trotsky did not oppose some of the most obnoxious manifestations of that bureaucracy unless they were turned against him. During the so-called trial of the Mensheviks in 1931, for example, Trotsky’s journal endorsed all the accusations. The “incontrovertible evidence” was that it was not possible to advocate “pure democracy” without advancing towards capitalism and “one cannot move towards capitalism without becoming agents of the international bourgeoisie.” See Alec Nove, “A Note on Trotsky and the `Left’ Opposition,”Political Economy and Soviet Socialism (Boston: George Allen and Unwin, 1979), 44 ff., for an analysis of the articles in the Byulleten.
See Erlich, “Preobrazhensky and the Economics of Soviet Industrialization,” Quarterly Journal of Economics (February 1950) and The Soviet Industrialization Debate, 1924–1928. Preobrazhensky’s principle writings have been translated into English. See Preobrazhensky’s books, The New Economics (Oxford: Clarendon Press, 1965 [19261), From the New Economic Policy to Socialism (London: New Park Publications, 1973[1922]) and the selection of his principle essays of the twenties in The Crisis of Soviet Industrialization, ed. Donald Filtzer (New York: M.E. Sharpe, Inc., 1979).
Erlich, “Preobrazhensky,” 58. This is also the thesis implied in Robert Bideleux, Communism and Development, 111–127, where he discusses the “socialist forced industrialization strategies” of Preobrazhensky and Stalin.
See James Millar, “A Note on Primitive Accumulation,” and Donald Filtzer, “Preobrazhensky and the Problem of Soviet Transition,” Critique, n. 9 (Spring-Summer 1978), 63–84.
Economists in general, it is now asserted, agree that mathematical growth theory “is a separate subject overlapping rather little with Development Economics.” See W.A. Lewis, “The State of Development Economics,”American Economic Review, Vol. 74, n. 1 (March 1984), 9.
Erlich in The Soviet Industrialization Debate,158, does mention the importance of an integrated capital structure for economic coordination, but he does not go any further in demonstrating this point. Ironically, this view of capital coordination and economic crises is a point of commonality, at least to a substantial degree, between Marxian and Austrian economists. Marx’s theory of economic crises, as well as that of Mises or Hayek, depends on the occurrence of disproportionality in the capital structure. The underlying difference in the respective theories lies in what generates the disproportionality. Both theories advocate a nonneutrality view of money, and both emphasize the disequilibrium characteristics of a monetary exchange and production economy. What causes disproportionality for the Marxist, however, is the very unplanned nature of capitalist production. For the Austrian, on the other hand, the disproportionality results from monetary intervention in the economy. See Peter Rosner, “A Note on the Theories of the Business Cycle by Hilferding and by Hayek,” History of Political Economy, Vol. 20, n. 2 (Summer 1988), 309–319. Also see Paul Craig Roberts and Matthew A. Stephenson, Marx’s Theory of Exchange, Alienation and Crisis (New York: Praeger Publishers, 1983[19731), 48–63, 95–104, and Don Lavoie, “Some Strengths in Marx’s Disequilibrium Theory of Money,” Cambridge Journal of Economics, Vol. 7 (1983), 55–68.
See The New Economics, 77 ff. The term, as Preobrazhensky points out, was not his own but employed instead by several other Bolshevik theorists, in particular, V. M. Smirnov (83, fn. 1).
Preobrazhensky, The New Economics, 80.
Preobrazhensky, The New Economics, 82–83. Thus, the importance of primitive socialist accumulation. “By socialist accumulation,” Preobrazhensky argued, “we mean the addition to the functioning means of production of a surplus product which has been created within the constituted socialist economy and which does not find its way into supplementary distribution among the agents of socialist production and the socialist state, but serves for expanded reproduction.” On the other hand, primitive socialist accumulation “means accumulation in the hands of the state of material resources mainly lying or partly from sources lying outside the complex of state economy.” The concept was of such importance in Preobrazhensky’s scheme of socialist construction that he argued that “we can understand nothing of the essence of Soviet economy if we do not discover the central role which is played in this economy by the law of primitive socialist accumulation” (84).
It is this idea that led Bukharin to charge Preobrazhensky with “internal imperialism.”
The New Economics, 88.
At the beginning of NEP Preobrazhensky offered an interesting analysis of the world situation and socialist construction. By supporting industrial development within Russia the Soviet state (the proletariat dictatorship) would prepare the way for world revolution. “As a result of the rapid recovery of large-scale industry and the creation of favorable material conditions for the proletariat, and with the prospects of an industrial crisis or crises abroad, unemployment, and persecution by bourgeois governments, masses of foreign workers will stream into Russia; this proletarian colonization of Russia will provide support to our developing industry to compensate for Russia’s own lack of skilled labor. Not only will the proletariat as a class grow continuously in number, but its qualitative composition will also improve.” See Preobrazhensky, “The Outlook for the New Economic Policy,” The Crisis of Soviet Industrialization (1921), 10.
Other sources of socialist accumulation would be various taxes on capitalist profits in industry or on kulaks and other traders. Preobrazhensky also, rightfully, viewed inflation as a tax. The difference between the period of primitive capitalist accumulation and primitive socialist accumulation was that socialist accumulation was based not only on the surplus product of petty production but also on the surplus value of capitalist production. The proletarian state arises from out of the monopoly capitalist system, and as such, has within its means the ability to regulate the whole economy rationally—something that capitalism does not possess. One of the principle means for regulating the whole economy was the concentration of banking in the epoch of finance capital and the later nationalization of banks following the proletarian revolution.
Preobrazhensky, New Economics, 91.
The New Economics, 97; emphasis added.
New Economics, 123–124.
This, of course, was the aspect of Preobrazhensky’s thought that Stalin used to justify the collectivization.
Filtzer, “Preobrazhensky and the Problem of Soviet Transition,” 65.
Filtzer, “Preobrazhensky and the Problem of Soviet Transition,” 66.
This, in fact, was the subject of Preobrazhensky’s futuristic account, From the New Economic Policy to Socialism. In From the New Economic Policy to Socialism, 116, Preobrazhensky describes Soviet Europe, that is, the future socialist world, as a combination of German industrial technique and Russian agriculture.
Filtzer, “Preobrazhensky and the Problem of Soviet Transition,” 75.
The elimination of the division of knowledge in society rests on the fundamental assumption that “knowledge is potentially accessible to every member of the working class….Without this assumption both the proletarian revolution and socialism are unthinkable, and the struggle of the left against Stalin is reduced to a debate over economic policy.” See Filtzer, “Preobrazhensky,” 77.
Nove, An Economic History of the U.S.S.R., 126. Evidence that this was, indeed, the case was provided by the debate between Preobrazhensky and Bukharin. As Preobrazhensky states: “Comrade Bukharin agreed that the state economy cannot but utilize the surplus resources of petty production. We have taken these resources up to now, we continue to take them, and inevitably we shall go on taking them. How astonished we are when reference to this completely indubitable fact is seen by Comrade Bukharin as an arrow shot at the `petty-bourgeois policy of our party.’ It is astonishing that Comrade Bukharin has not noticed this contradiction within his own article. Generally speaking, all that I have done is to describe what has happened up to now in our country.” See The New Economics, 249.
See Shanin, “The Economic Nature of Our Commodity Shortage,” (November 1925), and “Questions of the Economic Course,” (January 1926), in Spulber, ed., Foundations of Soviet Strategy for Economic Growth, 205–220.
Shanin, “Economic Nature of Our Commodity Shortage,” 206.
Shanin, “The Economic Nature of Our Commodity Shortage,” 207. The quote is from chapter 16 of the second volume of Capital. This problem of managing capital investment is the crux of Mises’s challenge to the Marxian system. In the absence of a market for the means of production, and thus money prices for capital resources, Mises asked, how is society (the planners) going to decide which economic projects are feasible and which are not.
Shanin, “Questions of the Economic Course,” 212.
Shanin, “Questions of the Economic Course,” 213.
Shanin’s case for international trade was right out of the Ricardian textbook case for comparative advantage. There is a tension here between Marx’s condemnation of the social division of labor and Shanin’s argument for free trade. There was also a class character, as pointed out in my discussion of Trotsky, associated with the agriculture first argument—one did not want to be seen as a friend of the kulak. It is for these reasons that Shanin’s advice fell mainly on deaf ears.
Shanin, “The Economic Nature of Our Commodity Shortage,” 210.
“Questions of the Economic Course,” 219.
Erlich, Soviet Industrialization, 9. It is interesting to keep in mind that during Bukharin’s exile from Russia in 1914, he studied economics in Vienna and attended Böhm-Bawerk’s famous seminar on economic theory. He later embarked on a serious study of the theories of Leon Walras and Vilfredo Pareto. His economic studies produced the book The Economic Theory of the Leisure Class (New York: Augustus M. Kelley, 1970[1919]), which is a criticism of the Austrian school of economics and other non-Marxian neo-classical schools of economics. Bukharin was well aware of both Böhm-Bawerk’s and later Mises’s criticism of Marxian economics.
Bukharin’s ideas toward NEP are contained in such writings as Building Up Socialism (London: Communist Party of Great Britain, 1926) and Selected Writings on the State and the Transition to Socialism, Richard Day, ed. (New York: M.E. Sharpe, 1982).
See Nove, “Some Observations on Bukharin and His Ideas,” Political Economy and Soviet Socialism.
See Bukharin, “Concerning the New Economic Policy and Our Tasks,” Selected Writings, 188.
Bukharin, “Concerning the New Economic Policy,” 189; emphasis added. Bukharin’s emphasis on establishing the appropriate incentives can be found throughout his writings during the twenties. Consider the following statement made at the beginning of NEP in 1921 concerning the fall in industrial output during war communism: “the picture in industry came to resemble that in agriculture; the absence of a direct material interest in production, for both individuals and groups, led to a fall in production.” See, “The New Course in Economic Policy,” Selected Writings, 106.
This is what underlies his famous slogan about the peasants enriching themselves. Ambiguity in rules would produce nothing but contradictory expectations, which would deter economic progress. “Consider the fact that the well-to-do upper stratum of the peasantry, along with the middle peasant, who is also striving to join the well-to-do, are both afraid at present to accumulate. A situation has been created in which the peasant is afraid to buy an iron roof and apprehensive that he will be declared a kulak; if he buys a machine, he makes certain that the communists are not watching. Advanced technology has become a conspiracy….The result is that the middle peasant is afraid to improve his farm and lay himself open to forceful administrative pressure; and the poor peasant complains that we are preventing him from selling his labor power to the wealthy peasants, etc.” In response, Bukharin argued, “In general and on the whole, we must say to the entire peasantry, to all its different strata: enrich yourselves, accumulate, develop your farms. Only an idiot can say that the poor will always be with us. We must now implement a policy whose result will be the disappearance of the poor.” See Bukharin, “Concerning the New Economic Policy,” 196–197. Selected Writings, 308.
Bukharin, “Notes of an Economist (At the Beginning of a New Economic Year),”
Bukharin argued: “If the Trotskyists do not understand that the development of industry depends on the development of agriculture, then the ideologists of petit bourgeois conservatism do not understand that the development of agriculture depends on industry, that agriculture, without the tractor, chemical fertilizers, and electrification, is condemned to mark time. They do not understand that it is precisely industry that represents the lever of radical change in agriculture, that without the leading role of industry it will be impossible to eliminate rural narrowness, backwardness, barbarism, and poverty.” See Bukharin, “Notes of an Economist,” 310–311, emphasis in original.
Bukharin, “Notes of an Economist,” 316–317.
This was Bukharin’s idea of socialism at a “snail’s pace” or creeping socialism. See Robert Bideleux, Communism and Development, 86–94, for a discussion of Bukharin’s theory of creeping socialism. Bukharin basically, after war communism, adopted a Fabian strategy toward socialist construction. The Fabians, as opposed to Marxists, had always argued that socialism would be achieved by small victories, rather than a radical transformation, because of the inherent efficiencies of socialism, that is, socialism would win on economic grounds by outcompeting the capitalists. The shift from the war communism strategÿ of revolutionary implementation of the Marxian program to the interventionism of NEP explains why Bukharin could argue that “we see that rationalization is a process, that the `planning principle’ grows. In a certain sense every state intervention in the spontaneous course of economic life represents a penetration of this rational principle of a `plan.”’ See “Toward of Critique of the Economic Platform of the Opposition (The Lessons of October 1923),” Selected Writings, 125.
See Bukharin, Building Up Socialism, 52–53, for a criticism of the opposition to the theory of socialism in one country (Trotsky and Zinoviev) and Bukharin’s defense of the concept.
It is important to keep in mind, in contrast to Stephen Cohen or Moshe Lewin, that Bukharin’s model of market-based socialist construction was a model of the transition, not of socialism. Through the use of the market, Bukharin argued, socialism could be constructed. The ideal of full rationalization of economic life did not collapse with war communism; it was just postponed until the appropriate economic base was established.
Bideleux, Communism and Development, 115.
Stalin could not have adopted the Trotsky platform because, as I have arguedabove, there was no platform to speak of. What Stalin adopted from Trotsky was an arbitrary and ambiguous strategy toward economic development.
Erlich, “Stalin’s Views on Soviet Economic Development,” Continuity and Change in Russian and Soviet Thought, ed. Ernest Simmons (Cambridge: Harvard University Press, 1955), 85–86. Stalin’s economic views during the industrialization debate can be found in J.V. Stalin, On the Opposition (Peking: Foreign Language Press, 1974) and The Foundations of Leninism (Peking: Foreign Language Press, 1975).
See Stalin, “The Fourteenth Congress of the C.P.S.U.(B.): Reply to the discussion on the Political Report of the Central Committee,” (December 23, 1925), On the Opposition, 242. Also see Stalin’s defense of Bukharin against the left opposition over his “mistake” of telling the peasants to “enrich” themselves, 255 ff.
See Stalin’s discussion in “The Results of the Work of the Fourteenth Conference of the R.C.P.(B.),” (May 9, 1925), and “Concerning Questions of Leninism,” (January 25, 1926), On the Opposition, 206 ff., 317 ff. For a discussion of some of the criticisms raised against Stalin’s formulation of socialism in one country, see William Korey, “Zinoviev ‘s Critique of Stalin’s Theory of Socialism in One Country, December, 1925 - December, 1926,”American Slavic and East European Review, Vol. 9 (1950), 255–267.
“The Results of the Work of the Fourteenth Conference of the R.C.P.(B.),” On the Opposition, 215.
See Bideleux, Communism and Development, 117, where he discusses Stalin’s speech at the 1925 Party Congress. Also see Stalin, “Results of the Work of the Fourteenth Congress,” On the Opposition, 225, where he discusses the importance of the development of the metal industry. “At the present time,” Stalin pointed out, “we have an industrial proletariat of about 4,000,000. A small number, of course, but it is something to go with in building socialism and in building up the defense of our country to the terror of the enemies of the proletariat. But we cannot and must not stop here. We need 15–20 million industrial proletarians, we need electrification of the principal regions of our country, the organisation of agriculture on cooperative lines, and a highly developed metal industry. And then we need fear no danger. And then we shall triumph on an international scale” (229).
That Stalin adopted Preobrazhensky’s view toward socialist accumulation is questionable. The problem with Preobrazhensky’s scheme was that if carried out, it would have destroyed the very town-country relations on which the accumulation was to take place. In this regard, the solution was to collectivize, that is, colonize the peasantry. But Preobrazhensky did not see this “solution” in his work. Erlich, Soviet Industrialization Debate, 177, quotes Preobrazhensky as stating: “Collectivization—this is the crux of the matter! Did I have this prognosis of the collectivization? I did not.” Erlich continues by pointing out that Preobrazhensky “was careful not to add that neither did Stalin at the time when the industrialization debate was in full swing. And he was wise not to point out that the decision to collectivize hinged not on superior intellectual perspicacity but on the incomparably higher degree of resolve to crush the opponent with utter disregard of the staggering human costs of the operation.”
Nove, An Economic History of the U.S.S.R., 151.
Stalin, “Industrialization of the Country and the Right Deviation,” Spulber, ed. Foundations for Soviet Strategy for Economic Growth, 266–267. Bukharin, “ex- posed” as a right deviationist was expelled from the politburo in November 1929.
Many observers argue in the final analysis that the decision to collectivize was justified on military grounds. But as Robert Bideleux, Communism and Development, 127, argues, “[T]he Stalinist strategy increased military vulnerability of the U.S.S.R. by squandering manpower on an unprecedented scale and by antagonizing, disrupting and demoralizing large sections of Soviet society.”
Isaac Deutscher, Stalin: A Political Biography, 2nd ed. (New York: Oxford University Press, 1967[1949]), 228, points out: Few important developments in history are so inconspicuous and seem so inconsequential to their contemporaries as did the amazing accumulation of power in the hands of Stalin, which took place while Lenin was still alive. Two years after the end of the civil war Russian society already lived under Stalin’s virtual rule, without being aware of the ruler’s name. More strangely still, he was voted and moved into all his positions of power by his rivals. There was to be an abundance of somber drama in his later fight against these rivals. But the fight began only after he had firmly gripped all the levers of power and after his opponents, awakening to his role, had tried to move him from his dominant position. But then they found him immovable. Stalin’s rise to power and the fact that none of his rivals seemed to notice what they had done until it was too late reveals one of the two fundamental flaws of Marxist-Leninism, a complete disregard of organizational checks against totalitarian problems associated with the concentration of power in the hands of a few or one person.
Cohen, Bukharin and the Bolshevik Revolution, 314–315.
See the debate between Nove and Millar on the “necessity” of Stalin, “A Debate on Collectivization: Was Stalin Really Necessary?,” Problems of Communism (July-August 1976), 49–62. While Millar makes some cogent points about grain procurement before and agricultural production after collectivization, I do not believe he understands the political and logical continuity between Lenin and Stalin. The rise of Stalin was “necessary” neither economically (to industrialize the Soviet economy) nor historically (determined), but he was the logical outcome of the Marxian rationalization project—though Stalinism is the unintended and undesirable outcome of that project. Nove, on the other hand, does not seem to understand either the economic issues (that collectivization did not increase productive capacity of the Soviet Union) or the political problems of economic planning and totalitarianism.
Erlich, Soviet Industrialization Debate, 174–175.
Erlich, Soviet Industrialization Debate,180. The militaristic attitude also serves to mobilize individuals under the unified power of the state. See James Buchanan, “Markets, States, and the Extent of Morals,” What Should Economists Do? (Indianapolis: Liberty Press, 1979), 219–229, for a discussion of how the perception of a common enemy can be used by a political regime in the attempt to extend our morals. This, of course, was also the theme of Orwell’s constant “wars” in 1984.
Lavoie, National Economic Planning: What Is Left? (Cambridge: Ballinger Publishing, 1985), 230. As Lavoie goes on to say: “The theory of planning was, from its inception, modeled after feudal and militaristic organizations. Elements of the Left tried to transform it into a radical program, to fit into a progressive revolutionary vision. But it doesn’t fit. Attempts to implement this theory invariably reveal its true nature. The practice of planning is nothing but the militarization of the economy.”
As Alain Besançon writes in discussing the differences in Soviet studies between those who approach the subject from an economic perspective and those who approach it from history, literature, or travel, “There seems to be an unbridgeable gap between this system, conceived through measurement and figures, and the other system, without measurements or figures, which they have come to know through intuition and their own actual experience.” See Besancon, “Anatomy of a Spectre,” Survey, Vol. 25, n. 4 (Autumn 1980), 143.
Erlich, Soviet Industrialization Debate, 183.
See Michael Ellman, “Did the Agricultural Surplus Provide the Resources for the Increase in Investment in the U.S.S.R. During the First Five Year Plan?” Economic Journal, Vol. 85 (December 1975), 844–864. Ellman argues that the collectivization did, indeed, work in providing the basis for tremendous industrialization. “Agriculture,” he concludes, “made an essential contribution to the development of the Soviet economy during the First Five Year Plan.” It (1) provided the industrial sphere with a greatly increased supply of bread, cabbage, and potatoes; (2) supplied industry with a large addition to its labor force; (3) provided exports; (4) contributed to import substitution; and (5) provided a residual economic sector to absorb economic shocks such as bad harvests. Therefore, Ellman concludes calmly that “in this period collectivization appears as a process which enabled the state to increase its inflow of grain, potatoes and vegetables and its stock of urban labour, at the expense of livestock and the rural and urban human population” (858859). But see the argument contained in Bideleux, Communism and Development, 123 ff., where he discusses the betrayal of the peasants. Also see Micha Gisser and Paul Jonas, “Soviet Growth in Absence of Centralized Planning: A Hypothetical Alternative,” Journal of Political Economy, Vol. 82 (1974), 333–347, who argue that industrialization without `super-industrializers’ would have achieved at least the same growth rates if not more than what actually did happen.
For a criticism of standard development theory see P.T. Bauer, Dissent on Development (Cambridge: Harvard University Press, 1976). As Bauer states: “Comprehensive planning has thus not served to raise general living standards anywhere. There is no analytical reason or empirical evidence for expecting it to do so. And in fact both analytical reasoning and empirical evidence point to the opposite conclusion. But the failure of comprehensive planning to raise general living standards has not affected its appeal for politicians, administrators, and intellectuals, that is for actual or potential wielders of power” (92).
An excellent discussion of a capital-using economy is provided by Roger Garrison, “A Subjectivist Theory of a Capital-Using Economy,” in Gerald P. O’Driscoll and Mario J. Rizzo, The Economics of Time and Ignorance (New York: Basil Blackwell, 1985), 160–187.
Kirzner, Perception, Opportunity and Profit (Chicago: University of Chicago Press, 1979), 118.
Kirzner, Discovery and the Capitalist Process (Chicago: University of Chicago, 1985), 71–72.
Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), 29.
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Boettke, P.J. (1990). The Political Economy of Development Strategy: The Soviet Industrialization Debate, 1924–28. In: The Political Economy of Soviet Socialism: The Formative Years, 1918–1928. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-3433-2_5
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