The Crisis in Russia and the World Economic Crisis (2 June 1922) (original) (raw)

E. Varga

Economics

(June 1922)

From International Press Correspondence, Vol. 2 No. 44, 2 June 1922, pp. 329–330.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

For some years past, Russia has been in the throes of an unparalleled economic crisis. We will here attempt to disclose the connection between the Russian crisis and the general world crisis and to inquire into the reasons behind the unusual extent of the former.

Like the other warring countries of Central and Eastern Europe, Russia is suffering from an absolute underproduction resulting from the war. Russia’s economic basis has always been very weak. The expenditure for the upkeep of the modern state apparatus and especially of the expensive army already in pre-war times exceeded by far what a primitive economic system could reasonable be expected to support. Agriculture, the basis of national economy, was backward; its yield was – in spite of the fertile soil – the smallest in Europe due to the poverty and ignorance of the Russian peasant. The existence of extensive large landholdings did not change matters, because the greatest part of the land was rented to the peasantry in small leaseholds. Only the chronic hunger of the Russian peasant (which we meet with in Tolstoi’s and other authors’ writings) made possible that export of foodstuffs whose proceeds went to pay the interest on the foreign debts and the war material purchased abroad. The young large industry which for the most part had been built up with foreign capital, had not grown out of the needs of the country; it was propped up by Government contracts for war material, high protective tariffs and low wages corresponding to the meagre standard of living of the Russian peasant The productivity of labor was very low: 25% and even 10% of that of highly developed countries. The country was very poor in accumulated goods.

This primitive economy could not bear the pressure of the world war. Russia was the first of the great powers to collapse. How far the decay of economy had already advanced in the Kerensky period can be gathered from the small booklet of Lenin: The impending catastrophe and how can we avoid it?

The accession to power of the Bolsheviki did not put a stop to the downward movement of national economy; on the contrary, the latter gathered headway. And this for two reasons. The peace of Brest-Litovsk though it marked the close of the foreign war was not a harbinger of peace. A number of counterrevolutionary attacks supported by the European bourgeoisie carried the war year after year into the interior of Russia. It was followed by the great campaign against Poland. The year 1921 was the first to see the return of what after a fashion can be considered peacetime. But the fact of her isolation as the only proletarian power in the capitalist world is compelling Russia even today to use her best energies for the maintenance of a big army – at the expense of economic reconstruction. The blockade intensified Russia’s crisis, because it barred her way to the advantages derived from the economic achievements of the world. And because before the war Russia had chiefly imported means of production it was her production that was hit hardest by the blockade.

So far there is no fundamental difference between Russia’s economic crisis and that of the capitalist countries in the region of underproduction. There a causes, however, which, immanent as they are in the dictatorship of the proletariat, tend to intensify the crisis of underproduction in Russia. It would be futile to deny this. The first stages of every revolution are always accompanied by a dwindling of labor discipline resulting in a decrease of production. Dealing with this problem elsewhere [1], I wrote:

“Because in every class society, the discipline of the workers during working-hours is enforced by the means of class rule, every revolution means a profound loosening of labor discipline. A bourgeois revolution is no exception to the rule; it shakes the masses’ belief in authority and thus weakens labor discipline. The old methods of forcibly keeping the workers at their work, the methods of class discipline, lose their meaning once the workers themselves administer the shops and government and armed power is in their hands. The difficult task of evolving a new and free labor discipline corresponding to the changed social relations arises.”

But the evolution of this new and free labor discipline is not a matter of a day or two. The great mass of labor is slow to recognize the principal difference between working for the profit of capitalism and for the common good. Hence the wane of labor discipline and the consequent decay of productivity and production is unavoidable in the first stages of every revolution. And in order to safeguard the interests of labor itself the proletarian State is often compelled to resort to coercion against those sections of the workers which cannot be made to do an adequate amount of work with the usual methods of free labor discipline. The transition from the old to the new labor discipline in Russia was rendered especially difficult since the best elements of the Russian proletariat have been up to now required for the Red Army and the fight against the counter-revolution. Thus the shops lack the nuclei which would consciously undertake to carry through the new labor discipline and by their example fire the slow moving masses.

The second important factor responsible for the intensification of the crisis of underproduction (which is also due to the dictatorship) was the restriction of agricultural production by the peasants, the strong tendency to return to self-contained household economy, a tendency which was also present under capitalist conditions in the peasantry of Central and Eastern Europe during the war. The well-known necessities of “War Communism” tended to intensify these tendencies considerably in Russia.

Although Russia’s soil is in principle the collective property of the workers, it is a fact that everyone of the 30 million Russian peasants is the independent master of his own farm. [2] He decides, subject to the terrible shortage of technical implements, what and how much is to be produced. But the interests of the defense of the country and of the dictatorship compelled the Soviet Government to requisition all agricultural products of the peasants which were not essential to the maintenance of his form and the upkeep of his family. In principle the Government was to furnish in return all necessary commodities. During the first two years this was actually dona But with the progressive decay of industrial production it became impossible. The peasant was compelled to hand over his grain without receiving anything in exchange. He answered by returning to a self-contained household economy. That is to say he merely cultivated what was necessary for his own needs. [3] He cultivated all plants which the climate permitted: tobacco, hemp, vegetables, etc. He returned to the most primitive form of self-contained household economy. He made molasses out of sugar beets; he tanned the skins of slain animals; he spun and wove cloth out of his own hemp. The contradiction between private economic production and collective ownership was fatally balanced by a rapidly progressing decay of the whole national economy and in a nearly complete cessation of the exchange of commodities between town and country.

The war and the refusal of the Russian capitalists to produce under the dictatorship of labor (they still hoped at that time to be able to overthrow the workers’ government by their economic sabotage) compelled the Soviet Government to extend state ownership further than was justified by the weak organizing forces of the Russian proletariat. (Under the capitalist system the proletarians are not in a position to develop their ability in the field of economic organization. The capitalists do not give them occasion to do so. The necessary knowledge must first be acquired under the dictatorship. This also is one of the reasons of the crisis of production in the first days of dictatorship.) There was called info being a gigantic bureaucratic apparatus which acted as a brake on the exchange of commodities and did not even allow of utilizing those possibilities of production which the impoverished and devastated country still possessed.

The new economic policy inaugurated one year ago is to remedy the evils. This purpose is served

By replacing the compulsion to surrender the whole surplus of foodstuffs by the tax-in-kind. (The necessity of this has in a highly admirable manner been shown by Lenin in his booklet on the tax-in-kind.) This measure does away with the previously outlined contradiction between private economic production and collective ownership; it restores to 30,000,000 Russian peasants the stimulus for increased production.
By reducing collective ownership to the degree which can be taken care of. The restoration of free trade is the natural supplement of both measures. Without free trade the tax-in-kind would be of no use to the peasantry, and the factories excluded from state ownership and leased to private owners can also produce only if they are enabled to dispose of their products.
These two measures involve the principle of a change in the State’s position Under the former system of War Communism, state economy embraced in principle all inhabitants of the country. Every citizen was to work for the State and in return was entitled to maintenance by the State. The single economic entities were fused into the state economy. The new economic policy makes the State’s attitude as an economic system towards the various individual economic entities resemble that under capitalism (with the difference that the part of industry remaining under the immediate control of the State is much greater.) Now the State claims part of the products of its citizens in the form of taxes. But apart from this its intercourse with the single economic entities is carried on on the basis of equality. It sells, buys, transports, makes banking transactions, etc.
In order to carry this through successfully the state enterprises were reorganized and put on a commercial basis, that is, they must show a surplus which can be expressed in gold value. The measures to achieve this end were the following.

Restoration of the principle of defining wages according to labor performed. This resulted in extensive reductions in the number of workers and in the discharge of all superfluous labor. The State maintains only those laborers who are entitled to it by their work; the others must shift for themselves.

The price of goods and the output of the Government enterprises are compiled on the basis of the cost of production. On the market all government enterprises function as private economic formations. They buy and sell and strive to realize as great a profit as possible.

In order to make this possible the enterprises are being regrouped along economic lines. State trusts have been formed, freed from the shackles of the former bureaucratic administration and adapted to make the best of the boom on the free market. And because the new economic policy naturally abolishes the former restrictions on commerce, the State is enabled to found “mixed economic enterprises” (corporations whose shares are taken up by both the state and the capitalist). The road has been cleared for the advent of state capitalism.

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Notes

1. E. Varga, The Economic Problems of the Proletarian Dictatorship, Second Edition, Press of the Comintern, pp. 80–81.

2. We shall refrain here from dealing with the activities of the Seed Committees for regulating agriculture which commenced activities in 1921.

3. Compare Popoff, Grain Production in Soviet Russia, published in Russian.

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