The Russian Revolution

15

“War Communism”

The term “War Communism” has acquired over the years in Communist and non-Communist literature a precise meaning. In the words of the Soviet Historical Encyclopedia:

War Communism: The name given to the economic policy of the Soviet Government during the years of the civil war and foreign intervention in the U.S.S.R., 1918–20. The policy of War Communism was dictated by the exceptional difficulties caused by the civil war [and] economic devastation.¹

The notion that War Communism was “dictated” by circumstances, however, does violence to the historical record, as shown by the etymology of the term. The earliest official use of “War Communism” dates to the spring of 1921—that is, to the time when the policies so labeled were being abandoned in favor of the more liberal New Economic Policy. It was then that the Communist authorities, in order to justify their sudden turnabout, sought to blame the disasters of the immediate past on circumstances beyond their control. Thus, Lenin in April 1921 wrote: “ ‘War Communism’ was imposed by war and ruin. It was not and could not be a policy that corresponded to the economic tasks of the proletariat. It was a temporary measure.”² But this was hindsight. While some of its measures were indeed taken to meet emergencies, War Communism as a whole was not a “temporary measure” but an ambitious and, as it turned out, premature attempt to introduce full-blown communism.³

That Bolshevik economic policies in the first years of the regime were neither improvisations nor reactions is confirmed by no less an authority than Trotsky. Allowing that War Communism entailed “systematic regimentation of consumption in a besieged fortress,” he goes on to say that

in its original conception it pursued broader aims. The Soviet Government hoped and strove to develop these methods of regimentation directly into a system of planned economy in distribution as well as production. In other words, from [War Communism] it hoped gradually, but without destroying the system, to arrive at genuine communism.⁴

This view is corroborated by another Communist authority. War Communism, he says,

was not only a product of war conditions and of other, spontaneously acting forces. It was also the product of a definite ideology, the realization of a sociopolitical design to construct the country’s economic life on entirely new principles.*

Nothing attests more convincingly to the long-range Communist goals of the policies which the Bolsheviks pursued during the Civil War than the systematic assault on the institution of private property. The laws and decrees to this end, passed at a time when the Bolshevik regime was fighting for its life and which contributed nothing to its survivability, were inspired by an ideological belief in the need to deprive the citizens of ownership of disposable assets because they were a source of political independence. The process of expropriation began with real estate. The so-called Land Decree of October 26, 1917, deprived non-peasant owners of landed property. This was followed by decrees concerning urban real estate, which was first (December 14, 1917) withdrawn from commerce and later (August 24, 1918) expropriated on behalf of the state.⁵ In January 1918 all state debts were repudiated. A decree of April 20, 1918, forbade the purchase, sale, and leasing of commercial and industrial enterprises. Another decree on that day required securities and bonds in private possession to be registered.⁶ A major step in the abolition of private property was taken on May 1, 1918, with a decree outlawing inheritance.⁷ None of these fell into the category of “emergency measures”: each was intended to deprive private persons and associations of title to productive wealth and other assets.

In its mature form, which it attained only in the winter of 1920–21, War Communism involved a number of sweeping measures designed to place the entire economy of Russia—its labor force as well as its productive capacity and distribution mechanism—under the exclusive management of the state, or, more precisely, the Communist Party. It was intended both to undercut the economic base of the opposition to the Communist regime and to enable that regime to reorganize the national economy in a thoroughly “rational” manner. These measures were:

1. The nationalization of (a) the means of production, with the important (albeit temporary) exception of agriculture, (b) transport, and (c) all but the smallest enterprises.

2. The liquidation of private commerce through the nationalization of the retail and wholesale trade, and its replacement by a government-controlled distribution system.

3. The elimination of money as a unit of exchange and accounting in favor of a system of state-regulated barter.

4. The imposition on the entire national economy of a single plan.

5. The introduction of compulsory labor for all able-bodied male adults, but on occasion also for women, children, and elders.

These unprecedented measures, pursued not because of but despite the Civil War, were designed to provide Soviet Russia with a coherent and rational economic system conducive to most efficient productivity as well as fairness in distribution.

War Communism had several sources of inspiration. State control (though not ownership) of production and distribution of commodities and labor had been introduced by Imperial Germany during World War I. These emergency policies, known as “War Socialism” (Kriegssozialismus), made a great impression on Lenin and his economic adviser, Iurii Larin. The replacement of the free market for commodities with a network of state-run distribution centers was patterned on the ideas of Louis Blanc and the ateliers introduced in France in 1848 under his influence. In spirit, however, War Communism resembled most the patrimonial regime (tiagloe gosudarstvo) of medieval Russia, under which the monarchy treated the entire country, with its inhabitants and resources, as its private domain.⁸ For the mass of Russians, who had never really been touched by Western culture, state control of the economy was more natural than abstract property rights and the whole complex of phenomena labeled “capitalism.”

If one were to take at face value the flood of Soviet economic decrees issued between 1918 and 1921, one would likely conclude that by the end of this period the country’s economy was completely state-managed. In fact, Soviet decrees of that time often reflected only intentions: the discrepancy between law and life was never greater. There is ample evidence that alongside the ever-expanding state sector there flourished a private sector which withstood all attempts at its elimination. Money continued to circulate even in an allegedly “moneyless” economy, and bread was sold on the open market despite the regime’s claim to a grain monopoly. The central economic plan was never put into practice. In other words, in 1921, when it had to be given up, War Communism was only very incompletely realized. Its failure was only in part due to the government’s inability to enforce its laws. No lesser a role was played by the realization that strict enforcement, even if it were possible, would bring about economic catastrophe: Communist sources conceded that without the illicit trade in food, which supplied the urban population with two-thirds of its bread, the cities would have starved. War Communism, under a new name and with fresh slogans, became a reality only ten years later, when Stalin resumed economic regimentation at the point where Lenin had left off.

The goal of War Communism was socialism or even communism. Its proponents had always believed that the socialist state would abolish private property and the free market, replacing them with a centralized, state-run and planned economic system. The main difficulty which the Bolsheviks faced in implementing this program derived from the fact that Marxism envisioned the abolition of private property and the market as the end result of a lengthy process of capitalist development which would concentrate production and distribution to such an extent that they could be nationalized by legislative fiat. But in Russia, at the time of the Revolution, capitalism was still in its infancy. Her overwhelmingly “petty bourgeois” economy, dominated by tens of millions of self-employed communal peasants and artisans, was further exacerbated by the Bolshevik policy of breaking up large estates for distribution to peasants and giving workers control of industrial enterprises.

Lenin gave ample proof of being an extraordinarily astute politician, but when it came to economic matters he revealed himself to be remarkably naïve. His knowledge of economics derived entirely from literary sources, such as the writings of the German socialist Rudolf Hilferding. In his influential Finance Capital (1910), Hilferding maintained that as capitalism entered its most advanced stage, that of “finance capitalism,” it concentrated all economic power in the hands of banks. Once it reached its logical conclusion, “this trend would produce a situation in which a bank or a group of banks would have at their disposal the entire monetary capital. Such a ‘central bank’ would thereby secure control over the entire social production.”⁹ Connected with the notion of “finance capitalism” was an exaggerated view of the role of syndicates and trusts. Lenin and his associates believed that in Russia syndicates and trusts virtually controlled industry and trade, leaving market forces a small and diminishing scope.

From these premises it followed that nationalizing banks and syndicates would be tantamount to nationalizing the country’s economy, which, in turn, meant laying the foundations of socialism. In 1917, Lenin argued that the concentration of economic power in the hands of banking institutions and cartels in Russia had attained a level at which finance and commerce could be nationalized by decree.¹⁰ On the eve of the October coup, he made the astonishing statement that the creation of a single state bank would provide, in and of itself, “nine-tenths of the socialist apparatus.”¹¹ Trotsky confirms Lenin’s optimism:

In Lenin’s “Theses on the Peace,” written in early 1918, it says that “the triumph of socialism in Russia [required] a certain interval of time, no less than a few months.” At present [1924] such words seem completely incomprehensible: was this not a slip of the pen, did he not mean to speak of a few years or decades? But no: this was not a slip of the pen.… I recall very clearly that in the first period, at Smolnyi, at meetings of the Council of People’s Commissars, Lenin invariably repeated that we shall have socialism in half a year and become the mightiest state.¹²

During the first six months in power Lenin thought of introducing into Russia a system which he called “state socialism.” It was to be modeled on German Kriegssozialismus, with this difference that it would embrace the entire economy, not only the sector directly relevant to the war effort, and work for the benefit not of “capitalists and Junkers” but of the “proletariat.” In September 1917, on the eve of the coup, he thus described what he had in mind:

Besides the predominantly “oppressive” apparatus of the standing army, police, officialdom, there exists in the contemporary state an apparatus, especially closely connected with banks and syndicates, which carries out a great deal of work of accounting and registering, if one may put it this way. This apparatus cannot and should not be smashed. It must be removed from its subjection to the capitalists, it must be cut off… from the capitalists with their threads of influence, one must subordinate it to the proletarian soviets, one must make it more comprehensive, more all-embracing, more national. And this can be done, leaning on the achievements already accomplished by large-scale capitalism.… The “nationalization” of the mass of employees of banks, syndicates, commercial societies, etc., is fully realizable both technically (thanks to preparatory work done for us by capitalism and finance capitalism) and politically under the condition of Soviet control and supervision.¹³

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.

I said that state capitalism would be our salvation; if we had it in Russia, the transition to full socialism would be easy, within our grasp, because state capitalism is something centralized, calculated, controlled and socialized, and that is exactly what we lack.…²³

The economic program that Lenin favored was thus much more moderate than the one that the Bolsheviks would actually adopt. Had he had his way, the “capitalist” sector would have been left essentially intact and placed under state supervision. The resulting cooperation, which posited the inflow of foreign (mainly German and American) capital, was meant to bring the Bolshevik economy all the benefits of advanced “capitalism” without its political side effects. The proposal had many features in common with the New Economic Policy introduced three years later.

But this was not to be. Lenin and Trotsky ran into fanatical opposition from a number of groups, of which the Left Communists were the most vociferous. Led by Bukharin, and comprising an important segment of the party’s elite, the Left Communists had suffered a humiliating defeat over Brest-Litovsk, but they continued to operate as a faction within the Bolshevik Party and to argue their case in the pages of their organ, Kommunist. The group, which included Alexandra Kollontai, V. V. Kuibyshev, L. Kritsman, Valerian Obolenskii (N. Osinskii), E. A. Preobrazhenskii, G. Piatakov, and Karl Radek, saw itself as the “conscience of the Revolution.” It believed that, since October, Lenin and Trotsky were sliding toward opportunistic accommodation with “capitalism” and “imperialism.” Lenin treated the Left Communists as Utopians and fantasts, victims of a “childhood disease of socialism.” But the faction enjoyed powerful support among workers and intellectuals, especially in the Moscow party organization, who felt threatened by Lenin and Trotsky’s proposals to introduce “capitalist” methods. The proposed changes calling for the dismantling of Factory Committees and the abandonment of “workers’ control” in favor of a return to responsible individual management inevitably reduced the power and privilege of party officials. Lenin could ill afford to alienate these intellectuals and their supporters among the workers at a time when the Bolsheviks were under fire for Brest and had lost majorities in all the soviets. He could hardly insist on a course which commonsense recommended to him when he heard a metalworker say about the negotiations with Meshcherskii: “Comrade Lenin, you are a great opportunist, if you allow for a breathing spell also in this field.”*

The elements of the War Communist system that actually won out found reflection in an essay which Larin published in April 1918. Although he pretended merely to elaborate on the principles enunciated in his November 1917 article, Larin now presented a new and different economic program. All Russian banks were to be nationalized. So was industry, branch by branch: there was to be no collaboration between the state and private trusts. “Bourgeois” specialists could work for the economy only as technical personnel. Private trade was. to be abolished and replaced by cooperatives working under state supervision. The economy would be subjected to a single national plan. Soviet institutions would keep accounts without reference to money. In time, state control would be extended to agriculture, beginning with the unused land of ex-landlords. The only concession to private capital would be to foreign interests which would be permitted to participate in Soviet Russia’s economic development by providing technical personnel and granting loans for the importation of equipment.²⁴

With this program, the Left Communists in April 1918 overruled Lenin, plunging Russia headlong into the utopia of instant socialism.

Bukharin remained the leader of the Left Communists, but after suffering defeat over the Brest Treaty, he yielded to others the opposition to Lenin’s state capitalism. The principal theorist of Left Communism was Valerian Obolenskii, better known by his pen name, N. Osinskii.† Born in 1887 the son of a veterinarian with radical sympathies, he joined the Bolsheviks at the age of twenty. He spent one year in Germany studying political economy, which, in his mind, qualified him to write on economic subjects, notably Russian agriculture. Immediately after their coup, the Bolsheviks appointed him director of the State Bank, which post he held until March 1918, when he resigned in protest against the Brest Treaty.

His Construction of Socialism, written in the summer of 1918 and published that fall, provided the blueprint for War Communism.²⁵ The regime’s economic tasks, as Osinskii defined them, involved three operations: seizing control of the “strategic points” of the capitalist economy, purging it of unproductive elements, and imposing on the country a comprehensive economic plan.

Following Hilferding, Osinskii placed at the top of his priorities the seizure of banks, the “brain of capitalism.” They were to be transformed into clearing agencies of the socialist economy.

Next came the nationalization of private property in the means of industrial and agricultural production, both large-scale and small. This meant not only the legal transfer of property titles but a purge of the personnel, with the previous owners and managers being replaced by workers. These measures would strike at the very heart of capitalism and, at the same time, make it possible to rationalize production, through the appropriate allocation of resources.

The next step, the nationalization of commerce, was the most difficult. The government would take over all commercial syndicates and large trading companies. Exercising a monopoly on wholesale trade, it would set prices on commodities; in time, all commodities would be distributed by state organs, preferably free of charge. The elimination of the free market was an essential measure:

The market is the nidus of infection from which constantly ooze germs of capitalism. Mastery of the mechanism of social exchange will eliminate speculation, the accumulation of fresh capital, the emergence of new proprietors.… A correctly realized monopoly on all products of agriculture, under which it will be forbidden to sell on the side a single pound of grain, a single bag of potatoes, will make it utterly senseless to carry on independent village agriculture.²⁶

Liquidation of retail trade called for a fourth step: compulsory consumer communes enjoying a monopoly on articles of prime necessity. This institution would do away with speculation and “sabotage” and deprive capitalists of yet another source of profit.

Finally, it would be necessary to introduce compulsory labor. Its guiding principle would be simple: “No one has the right to refuse work assigned to him by the [labor] bureau.” Compulsory labor was not necessary, for the time being, in the rural areas, which had an excess of hands, but it was indispensable in the cities. Under this system, the “labor obligation … becomes a means of compelling people to work, replacing the old ‘economic’ stimulus, which, in plain language, meant the fear of dying from hunger.”

It was a basic premise of Osinskii’s plan that for political as well as economic reasons the economy could not be organized on a part-capitalist, part-socialist basis: a clear choice had to be made. Even so, in deference to Lenin, he called his program, not “socialism” or “War Communism,” but “state capitalism.”

The economic program of the Left Communists drew strong support from party members and workers, beneficiaries of workers’ control, who in no time formed a new interest group: they no more wanted to give up the factories they had taken over in 1917 than the peasants to surrender the seized land. The Left SRs also sympathized with these ideas. Lenin viewed them skeptically but he had to give in: it was the price of regaining the popularity lost at Brest. In June 1918, under conditions which will be detailed below, Lenin decreed the nationalization of Russian industries. This measure ended the possibility of “state capitalism” in the sense in which Lenin understood the term. It was a leap into the unknown.

The architects of War Communism, its theorists and executors—Osinskii, Bukharin, Larin, Rykov, and others—had only the most superficial acquaintance with the discipline of economics and no experience in business management. Their knowledge of economics derived largely from socialist literature. None of them had run an enterprise or earned a ruble from manufacture or trade. Except for Krasin, who did not take part in these experiments, the Bolshevik leaders were professional revolutionaries, who, save for brief stints at Russian or foreign universities (devoted mostly to political activity), had spent their entire adult lives in and out of jail or exile. They were guided by abstract formulae, gleaned from the writings of Marx, Engels, and their German disciples and from radical histories of European revolutions. What Sukhanov said of Larin applied to all of them: “a poor cavalryman who knew no obstacles to the leaps of his fantasy, a cruel experimenter, a specialist in all the branches of state administration, a dilettante in all his specialties.”²⁷ That such rank amateurs would undertake to turn upside down the fifth-largest economy in the world, subjecting it to innovations never attempted anywhere even on a small scale, says something of the judgment of the people who in October 1917 seized power in Russia. Observing these people in action, one recalls Taine’s picture of the French Jacobin:

His principle is an axiom of political geometry, which always carries its own proof along with it: for like the axioms of common geometry, it is formed out of the combination of a few simple ideas, and its evidence imposes itself at once.… Men as they really are do not concern him. He does not observe them; he does not require to observe them; with closed eyes he imposes a pattern of his own on the human substance manipulated by him; the idea never enters his head of forming any previous conception of this complex, multiform, swaying material—contemporary peasants, artisans, townspeople, curés and nobles, behind their plows, in their homes, in their shops, in their parsonages, in their mansions, with their inveterate beliefs, persistent inclinations, and powerful wills. Nothing of this enters into or lodges in his mind; all its avenues are stopped by the abstract principle which flourishes there and fills it completely. Should actual experience through the eye and ear plant some unwelcome truth forcibly in his mind, it cannot subsist there; however obstreperous and telling it may be, the abstract principle drives it out …²⁸

These qualities were nowhere more evident than in early Bolshevik fiscal experiments designed to introduce a moneyless economy.

Marx had written a great deal of sophisticated nonsense about the nature and function of money, in which he employed Feuerbach’s concepts of “projections” and “fetishes.” He defined money variously as the “alienated ability of mankind,” something that “confounds” all the “natural human qualities,” “crystallized labor,” and a “monster” which separates itself from man and comes to dominate him. These ideas greatly appealed to intellectuals who neither had money nor knew how to earn it but longed for the influence and gratifications that money brings. Had they been more familiar with economic history, they would have realized that some unit of measurement, whether or not called “money,” had existed in every society practicing the division of labor and the exchange of goods and services.

Under the spell of these ideas, the Bolsheviks both overrated and underestimated the role of money. They overrated it in respect to “capitalist” economies, which they viewed as totally controlled by financial institutions. They underestimated it in respect to “socialist” economies, which they believed could dispense with it: as Bukharin and Preobrazhenskii put it: “Communist society will know nothing about money.”²⁹

It followed from Hilferding’s thesis that by seizing Russia’s banks, it was possible, in one fell swoop, to seize control of the country’s industry and trade.* This belief accounted for Lenin’s optimism that Russia could quickly become socialist—that nationalization of banks would accomplish “nine-tenths of socialism.” Osinskii likewise declared it the single most important measure.† Although the expectation of a quick and easy conquest of Russia’s capitalist economy by such means proved entirely illusory, the Bolshevik Party stubbornly adhered to Hilferding’s doctrine. Its new program, adopted in 1919, claimed that by nationalizing Russia’s state and commercial banks, the Soviet Government had “transformed the bank from a center of domination of finance capital … into a weapon of workers’ power and the lever of economic revolution.”³⁰

As concerned money, the Bolshevik theoreticians wanted to abolish it altogether by depreciating it into “colored paper” and replacing it with a comprehensive system of distribution of commodities by means of ration cards. In Soviet publications in 1918–20 many articles argued that the disappearance of money was inevitable; the following is a fair sample:

Parallel with the strengthening of the socialized economy and the introduction of greater planning in distribution, the need for monetary tokens [i.e., money] should diminish. As it gradually disappears from circulation in the socialized economy, money turns into a property outside the direct influence of government on the private producer, which is why, despite their constantly growing quantity and the continued need for further [money] emissions, money begins to play in the overall movement of the national economy an ever-diminishing role. And this process of, as it were, objective depreciation of money will receive further impetus to the extent that the socialized economy is strengthened and developed and an ever-widening circle of small private producers is pulled within its orbit—until, finally, following the decisive triumph of state productivity over private productivity, there will emerge the possibility of a deliberate withdrawal of money from circulation through the transition to a moneyless distribution.³¹

In the jargon which Marxists favored, the author was saying that money could not be dispensed with as yet because the “small private producer” (read: peasant) still remained outside state control and had to be paid for his product. Money would become redundant only “with the decisive triumph of state productivity over private productivity”—in other words, after full collectivization of agriculture.

The standard reason the Bolsheviks gave at the time for their failure to decree money out of existence was that even after the passage of various nationalization decrees much of the economy, including nearly all of the food production, remained in private hands. According to Osinskii, the existence of a “dual economy”—part state-owned, part private—necessitated the retention of the monetary system for an “indeterminate period.”³²

In fact, however, the peasant was paid such ludicrously low prices for his product that this consideration was nowhere as serious as the official explanations claimed. In the summer of 1920, Larin conceded that the bulk of the money printed by the Treasury went, not to buy food, but to pay the salaries of workers and officials. He estimated that Soviet Russia had 10 million wage earners, who received on the average 40,000 rubles a month, for a total of 400 billion rubles. Compared with this figure, the money paid to the peasant for food was minuscule: Larin estimated that all the foodstuffs acquired at fixed prices (in 1918–20) had cost the government less than 20 billion.³³

The Bolsheviks could not nationalize banks immediately after taking power in Petrograd because of the near-unanimous refusal of banking personnel to acknowledge them as the legitimate government. This opposition, as we have seen, was eventually broken. By the end of the winter 1917–18, all banks were nationalized. The State Bank was renamed the People’s Bank (Narodnyi Bank) and placed in charge of other credit institutions. By 1920, all the banks were liquidated, except for the People’s Bank and its branches, which served as clearing agencies. Safes were ordered opened and gold found in them, as well as large amounts of cash and securities, was confiscated. These measures hardly fulfilled Bolshevik expectations: their result was not so much to give the government control of Russia’s business as to choke off credit. It was a bitter disappointment to the new regime.³⁴

Financially, the Bolshevik Government lived for a long time in a state of disarray. The tax system had all but broken down after October, and revenues were reduced to a trickle. The government improvised as best it could: among the currencies it resorted to were coupons from Kerensky’s “Liberty Loans.” There was nothing faintly resembling a regular budget: in May 1918, the Commissariat of Finance estimated (sic!) that in the preceding six months the government spent between 20 and 25 billion and took in 5 billion.* The government was unable to meet the needs of its provincial administrations, so it not only permitted but commanded guberniia and district soviets to extort money from the local “bourgeoisie.” Lenin thought this set a bad precedent by encouraging every local soviet to regard itself as an “independent republic,” and in May 1918 he demanded fiscal centralization.³⁵ But one could not centralize finances if the center lacked money: in the end Moscow told the provincial soviets to stop importuning it for subsidies and manage on their own.

To raise funds for extraordinary expenses, and at the same time undermine the economic power of the “class enemy,” the Bolsheviks occasionally resorted to discriminatory taxes in the form of “contributions.” Thus, in October 1918, a special one-time “contribution” of 10 billion rubles was imposed on the country’s propertied classes. This extraordinary tax followed the Chinese model, which the Mongols had introduced to medieval Russia, in that it set quotas for cities and provinces and left it to them to distribute the payments. Moscow and Petrograd were required to pay 3 and 2 billion rubles, respectively. Elsewhere the local soviets were asked to prepare lists of individuals liable for payment.† Similar “contributions” were imposed by local soviets on their own initiative, sometimes to raise money for current expenses, sometimes as punishment.

Lenin was rather conservative in fiscal matters, and if he had his way, Soviet Russia would have adopted from the outset traditional methods of taxation and budgeting. He worried about the budgetary chaos. In May 1918, with his usual tendency to exaggerate the importance of whatever business happened to be at hand, he warned:

All our radical reforms are condemned to failure if we do not succeed in financial policy. On this task depends the success of the immense endeavor we have conceived of reorganizing society on the socialist model.³⁶

But as he had little time to devote to this matter, he turned it over to associates with very different ideas. They wanted to abolish money and finance altogether, so as to create an economy based on state-controlled production and distribution. In the second half of 1918, Soviet economic publications carried many articles promoting the idea of such an economy, which had the support of such Bolshevik notables as Bukharin, Larin, Osinskii, Preobrazhenskii, and A. V. Chaianov.* Their idea was to make money worthless through the unrestrained emission of paper currency. The place of money was to be taken by “labor units,” similar to those issued in 1832 by Robert Owen’s “Labor Exchange Banks,” which were tokens representing quantities of expended labor entitling the holder to a comparable amount of goods and services. Owen’s experiment failed miserably (his bank closed after two weeks), as did Louis Blanc’s ateliers sociaux, introduced in France during the 1848 Revolution. Undaunted, Russian radical intellectuals would retrace this path.

The Communist Party declared the abolition of money an objective in the new party program adopted in March 1919. Here it was stated that while the abolition of money was not yet feasible, the party was determined to achieve it: “To the extent that the economy is organized according to a plan, the bank will be abolished and turned into the central bookkeeping office of Communist society.”³⁷ Accordingly, the Soviet Commissar of Finance declared his job redundant: “Finance should not exist in a socialistic community and I must, therefore, apologize for speaking on the subject.”†

The result was an accelerating devaluation of Russian currency which ultimately transformed it into “colored paper.” The inflation which occurred in Soviet Russia in 1918–22 nearly matched the much more familiar inflation that Weimar Germany would experience shortly afterward. It was deliberate and accomplished by flooding the country with as much paper money as the printing presses were able to turn out.

At the time the Bolsheviks took power in Petrograd, paper money circulating in Russia totaled 19.6 billion rubles.³⁸ The bulk of it consisted of Imperial rubles, popularly known as “Nikolaevki.” There were also paper rubles issued by the Provisional Government, called either “Kerenki” or “Dumki.” The latter were simple talons, printed on one side, without serial number, signature, or name of issuer, displaying only the ruble value and a warning of punishment for counterfeiting. In 1917 and early 1918, “Kerenkis” circulated at a slight discount to Imperial rubles. After taking over the State Bank and the Treasury, the Bolsheviks continued to issue “Kerenkis” without altering their appearance. During the next year and a half (until February 1919), the Bolshevik Government produced no currency of its own, which was a striking forfeiture of the traditional right of a sovereign power to issue its own money, and can only be explained by the fear that the population, especially the peasants, would refuse to accept it. Since the tax system broke down completely after October 1917 and other revenues fell far short of the government’s needs, the Bolsheviks had recourse to the printing presses. In the first half of 1918, the People’s Bank issued between 2 and 3 billion rubles a month, without any backing whatever.* In October 1918, the Sovnarkom raised the limit on the emission of uncovered bank notes from the 16.5 billion previously authorized by the Provisional Government, and long since exceeded, to 33.5 billion.³⁹ In January 1919, Soviet Russia had in circulation 61.3 billion rubles, two-thirds of them “Kerenkis” issued by the Bolsheviks. The following month, the government produced the first Soviet money, called “accounting tokens.”† This new currency circulated alongside “Nikolaevkis” and “Kerenkis,” but at a deep discount to them.

In early 1919, inflation, though increasingly severe, had still not reached the grotesque dimensions that lay ahead. Compared with 1917, the price index had increased 15 times: with 1913 as 100, it grew to 755 in October 1917, to 10,200 in October 1918, and to 92,300 in October 1919.⁴⁰

Then the dam burst. On May 15, 1919, the People’s Bank was authorized to emit as much money as in its view the national economy required.⁴¹ From then on, the printing of “colored paper” became the largest and perhaps the only growth industry in Soviet Russia. At the end of the year, the mint employed 13,616 workers.⁴² The only constraints on emissions were shortages of paper and ink: on occasion the government had to allocate gold to purchase printing supplies abroad.⁴³ Even so, the presses could not keep up with the demand. According to Osinskii, in the second half of 1919, “treasury operations”—in other words, the printing of money—consumed between 45 and 60 percent of budgetary expenditures, which served him as an argument for the most rapid elimination of money as a means of balancing the budget!⁴⁴ In the course of 1919, the amount of paper money in circulation nearly quadrupled (from 61.3 to 225 billion). In 1920 it nearly quintupled (to 1.2 trillion), and in the first six months of 1921 it doubled again (to 2.3 trillion).⁴⁵

By then, Soviet money had become, for all practical purposes, worthless: a 50,000-ruble bank note had the purchasing power of a prewar kopeck coin.⁴⁶ The only paper currency that still retained value was the Imperial ruble; these notes, however, were hoarded and all but disappeared from circulation.⁴⁷ But since people could not carry on without some unit to measure value, they resorted to money substitutes, the most common of which were bread and salt.⁴⁸ Inflation reached astronomical proportions, as the following tables indicate:

REAL VALUE OF RUSSIAN MONEY IN CIRCULATION ⁴⁹

(in billions of rublesi November 1, 1917 1,919 January 1, 1918 1,332 January 1, 1919 379 January 1, 1920 93 January 1, 1921 70 July 1, 1921 29

PRICES IN RUSSIA, 1913-1923⁵⁰ (as of October 1) 1913 1.0 1917 7.55 1918 102 1919 923 1920 9,620 1921 81,900 1922 7,340,000 1923 648,230,000

“From January 1, 1917, to January 1, 1923,” in the words of one economic historian, “the quantity of money [in Russia] increased 200,000 times and the price of goods increased 10 million times.”* ⁵¹

The Left Communists exulted. At the Tenth Party Congress, held in March 1921, before inflation had attained its apogee, Preobrazhenskii boasted that whereas the assignats issued by French revolutionaries had depreciated, at their lowest, 500 times, the Soviet ruble had already fallen to 1/20,000th of its value: “This means that we have overtaken the French Revolution 40 to 1.”⁵² On a more serious note, Preobrazhenskii observed that the massive inflation caused by the government’s policy of printing unlimited quantities of money helped to extract food and other products from the peasantry: it was a kind of indirect tax that for three years had played a crucial role in supporting the Bolshevik revolution.⁵³ At the Eleventh Party Congress, the speaker on financial policies, G. Ia. Sokolnikov, remarked with surprise that his was the first full-length report on the subject ever presented to a Party Congress. The policy until then, he stated, had been to regard money and fiscal policy as something to be done away with. The means to this end was deliberate inflation.⁵⁴

Students of economic history had long warned that money was an indispensable element of every economic activity, not only in its “capitalist” form. In the words of Max Weber:

The assumption that some sort of accounting system will somehow be “found” if one resolutely tackles the problem of a moneyless economy, is of no help. This is the basic problem of every “full socialization.” One cannot speak of a rational “planned economy” as long as one does not have in this most decisive point a means of rationally establishing a “plan.”*

Closer to home, Peter Struve had demonstrated both before and after the Revolution that since economic activity meant striving for the greatest return at the least cost, it required an accounting unit or “money,” whatever its name or physical form. Money could not be abolished: whenever a government tried to prevent money from performing its natural function, the result was a split market (part regulated, part free).⁵⁵

The Bolsheviks now discovered the truth of these observations. The one difficulty the advocates of a moneyless economy had not foreseen and which ultimately doomed their undertaking was their failure to provide a method for the settling of accounts among the nationalized enterprises and other state institutions. A decree of August 30, 1918,⁵⁶ instructed Soviet agencies to deposit their monetary assets, except those required for current expenses, with the People’s Bank. They were to consign their products to appropriate agencies (glavki) of the Supreme Council of the National Economy (of which later) and receive, in return, equipment and raw materials. These transactions were to be carried out by means of book entries, without reference to money. But this procedure apparently did not work, for additional decrees came out the following year specifying in tortuous detail how to carry on moneyless bookkeeping of transactions between nationalized enterprises as well as between such enterprises and state agencies.⁵⁷ Osinskii claimed that government officials from the outset opposed and circumvented decrees regulating financial relations between Soviet institutions and enterprises; he would not concede that the system was unworkable.⁵⁸

He and his fellow-hotheads were not fazed. In February 1920, Larin and his associates drafted a resolution for the forthcoming Congress of Soviets formally abolishing money. Lenin agreed in principle but wanted to discuss the matter.⁵⁹ A year later (February 3, 1921) a decree was ready for release which, if implemented, would have for the first time in recorded history abolished taxes.⁶⁰ It never came out, however, because the following month, with the introduction of the New Economic Policy, the government, even while turning out money at an accelerating pace, took steps to return to fiscal responsibility.

As previously noted, after seizing power in Petrograd, Lenin had no intention of expropriating Russia’s industrial wealth. Although he tended greatly to oversimplify the complexities of managing an industrial economy, he was realist enough to understand that a party of professional revolutionaries could not possibly run it by itself. While political pressures had compelled him to give up his pet idea of “state capitalism,” he continued to believe that the national economy required the discipline of a central plan. In March 1918 he spoke of the government facing the following tasks:

the organization of accounting, control of large enterprises, the transformation of the whole of the state economic mechanism into a single huge machine, into an economic organism that will work in such a way as to enable hundreds of millions of people to be guided by a single plan.⁶¹

Trotsky agreed:

The socialist organization of the economy begins with the liquidation of the market, and that means the liquidation of its regulator—namely, the “free” play of the laws of supply and demand. The inevitable result—namely, the subordination of production to the needs of society—must be achieved by the unity of the economic plan, which, in principle, covers all the branches of productivity.⁶²

At Lenin’s request, Larin drafted a project for a central administrative and planning agency to direct the economy of Russia. After some revisions, it was issued as a decree on December 2, 1917, which established a Supreme Council of the National Economy (Vysshyi Sovet Narodnogo Khoziaistva, or VSNKh).⁶³ This institution, which in 1921 would be renamed the State Planning Commission (Gosplan), was to enjoy the same monopoly in regard to the country’s economy (at least in theory) that the Communist Party enjoyed in the realm of politics. We say “in theory” because in view of the existence of the private agricultural sector and the large and expanding black market in goods, the VSNKh never came even close to controlling Soviet Russia’s economy. Operating directly under the Sovnarkom, its formal task was to “organize the national economy and state finances.” It was to prepare and implement a master plan, to which end it was authorized to nationalize and syndicate all the branches of production, distribution, and finance. According to Trotsky, it had originally been intended to make the commissariats of Supply, Agriculture, Transport, Finance, and Foreign Trade into branches of the Supreme Economic Council.⁶⁴ The council was further to take charge of the economic sections of provincial soviets, and where these were lacking, to install its own branches. In conception, the Supreme Economic Council sought to adapt to the conditions of a socialist economy Hilferding’s notion of a “General Cartel.”⁶⁵ In actuality, it turned into something much more modest.

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.

The decree of June 28 ordered the nationalization, without recompense, of all industrial enterprises and railroads with capital of one million rubles or more owned by corporations or partnerships. Cooperatives were exempt. The equipment and other assets of the nationalized businesses were taken over by the state. Managers were ordered to remain at their posts under the threat of severe penalties.

From then on the process of nationalization proceeded apace. By the fall of 1920, the Supreme Economic Council was nominally in charge of 37,226 enterprises with a total work force of 2 million; 13.9 percent of the nationalized enterprises had one employee and almost half lacked any mechanical equipment. In fact, however, the council managed but a small portion of these establishments (4,547, according to one authority), the remainder being state-owned in name only.⁷⁶ In November 1920, the government issued a supplementary decree nationalizing most small-scale industries.⁷⁷ On paper, at the beginning of 1921, the government owned and managed nearly all of Russia’s manufacturing facilities, from one-man workshops to giant factories. In reality, it controlled only a fraction and managed even fewer.*

The Supreme Economic Council—that “trust of trusts,” as it has been called⁷⁸—developed a massive bureaucratic machinery, headed by a Presidium. It was subdivided into agencies organized vertically (functionally) and horizontally (territorially). The vertical organizations were “trusts” called either glavki or tsentry. These numbered forty-two in late 1920, each responsible for one branch of industrial production and directed by a board. They bore melodious acronyms, such as Glavlak, Glavsol, and Glavbum, for the paint, salt, and paper industries, respectively.⁷⁹ Larin, who played a major role in designing the council’s structure and operations, admitted later that he had borrowed his ideas from abroad: “I took the German Kriegsgesellschaften, translated them into Russian, infused them with worker spirit, and gave them currency under the name glavki.”⁸⁰ In addition to glavki, the Supreme Economic Council had a network of provincial branches, of which there were nearly 1,400 in 1920.⁸¹ The organizational chart of the council resembled a celestial map on which the Presidium represented the sun and the glavki, tsentry, and regional agencies the planets and their moons.⁸²

Abroad, this gigantic enterprise of “socialist construction” made a great impression. Soviet propaganda in the West spoke glowingly of the “rationalization” of Russian industry under the benevolent eye of an all-seeing government, but it stressed intent rather than performance. The graphs and charts depicting how Russian industry was regulated aroused the admiration of many Westerners trying to cope with the chaos of the postwar world. But inside Russia, from the pages of newspapers and journals, as well as reports of Party Congresses, a very different picture emerged. The claims of economic planning proved to be a travesty: as late as 1921 Trotsky confirmed that no central economic plan existed and that, at best, “centralization” was carried out 5–10 percent.⁸³ An article in Pravda in late 1920 bluntly admitted: “khoziaistvennogo plana net” (“there is no economic plan”).⁸⁴ The council’s glavki had but the vaguest notion of the condition of industries for which they were responsible:

Not a single glavka or tsentr disposes of adequate and exhaustive data which would enable it to proceed to a genuine regulation of the country’s industry and production. Dozens of organizations conduct parallel and identical work of collecting similar information, as a result of which they gather totally dissimilar data.… The accounting is conducted inaccurately, and sometimes up to 80 and 90 percent of the inventoried items escape the control of the relevant organization. The items which are unaccounted for become the object of wild and unrestrained speculation, passing from hand to hand dozens of times until finally reaching the consumer.⁸⁵

As for the regional branches of the council, these were said to be in a state of constant friction with their Moscow headquarters.⁸⁶

In sum, contemporary accounts depict the council as a monstrous bureaucratic jumble which meddled instead of administering and whose main function was to provide a living for thousands of intellectuals. At the beginning of 1920, the council’s regional branches and the economic departments of provincial soviets gave employment to nearly 25,000 people,⁸⁷ overwhelmingly members of the intelligentsia. A crass example of bureaucratic bloating was the Benzene Trust (Glavanil), which had on its payroll 50 officials to supervise a single plant employing 150 workers.* One of the Supreme Economic Council’s officials has left a colorful description of the types who attached themselves to it. It deserves citation since it depicts a situation not unknown to other agencies of the Communist Government:

The lower posts were occupied mainly by hordes of young ladies and gents, previously bookkeepers, shop assistants, clerks, or university, gymnasium, or “external” students. This whole army of youths was attracted to the service by the relatively high salary and the low amount of work required. They spent entire days loitering in the many corridors of the vast structure; they flirted, ran out to buy halvah and nuts for the office pool, distributed among themselves the theater tickets or meat conserves which one of their number had managed to get hold of, and, as a sort of accompaniment to these business dealings, cursed the Bolsheviks.…

The next, most numerous category [of employees] consisted of onetime officials of the tsarist ministries. In joining the Soviet service they were motivated either by material need or, no less often, by longing for the accustomed work, to which each had devoted more than a decade of his life. One had to see with what passion they threw themselves on the “outgoing” and “incoming” materials, on “memoranda,” “reports,” and the rest of secretarial archwisdom, to understand that they found it more difficult to live without this atmosphere of paperwork than to make do without bread and shoes. These people tried to serve conscientiously; they were the first to come and the last to leave, they stuck to their chairs as if chained. But perhaps precisely because of this conscientiousness nothing ever came of their work except unbelievable nonsense, because the disorder and impulsiveness of the higher authorities confounded all the “incoming” materials and “memoranda” that they spun out with such loving care.…

Finally, the non-Communist majority of middle-level officials and a segment of higher ones consisted of intelligenty? of various types. There were here, so to say, romantic natures for whom service in one of the enemy’s citadels smacked of high adventure. There were people of no principle, entirely indifferent to everything in the world except their own well-being. There were ordinary shady characters who sought to attach themselves to the Bolshevik chaos so as to be able, under the cover of its darkness and confusion, to loot for all it was worth. There were people of another type as well: specialists who hoped to salvage the work that they held dear, and those, like myself, who joined in order to “soften the regime.”⁸⁸

So much for Lenin’s pet idea, “the transformation of the whole of the state economic mechanism into a single huge machine” operating on a “single plan.”

The Bolsheviks had somewhat better success in overcoming the managerial anarchy that followed the spread of workers’ control. The syndicalist policies of the regime just before and just after October 1917 were a device to lure workers away from the Mensheviks: it helped the Bolsheviks gain majorities in the Factory Committees. After the signing of Brest, it was decided to revert to traditional methods of individual industrial management with the employment of “bourgeois specialists.” Trotsky spoke about this in March and Lenin in May 1918.⁸⁹ In fact, many of the previous owners and managers had never left their jobs, and by terms of the June 28, 1918, nationalization decree were forbidden to do so. The Supreme Economic Council was full of these people as well. In the fall of 1919, a visitor from Siberia noted that at the head of many of Moscow’s tsentry and glavki

sit former employers and responsible officials and managers of business, and the unprepared visitor … who is personally acquainted with the former commercial and industrial world would be surprised to see previous owners of big leather factories sitting in Glavkozh [the leather syndicate], big manufacturers in the central textile organization, etc.⁹⁰

But Lenin’s and Trotsky’s insistence on the need to utilize the skills of “bourgeois specialists” in the service of the “socialist” cause ran into resistance from Left Communists, trade union officials, and Factory Committees. Resenting the power and privilege which the members of the old “capitalist” elite enjoyed in Soviet industries by virtue of their expertise, they harassed and intimidated them.⁹¹

Until the end of the Civil War, the government had great difficulty enforcing the principle of personal management. In 1919, only 10.8 percent of industrial-establishments had individual managers. But in 1920–21, Moscow vigorously resumed the campaign, and at the close of 1921, 90.7 percent of Russian factories were run in this manner.⁹² The argument in favor of “collegiate” management, however, did not die down, its proponents arguing that individual management alienated workers from the regime and allowed “capitalists” to retain control of expropriated plants in the guise of serving the state.⁹³ Before long, this argument would be raised at the national level by the so-called Workers’ Opposition.

The narrowly economic objective of Soviet industrial policies under War Communism was, of course, to raise productivity. Statistical evidence, however, demonstrates that the effect of these policies was precisely the contrary. Under Communist management, industrial productivity did not merely decline: it plunged at a rate which suggested that, if the process continued, by the mid-1920S Soviet Russia would be left without any industry. There exist various indices of this phenomenon.

I. OVERALL LARGE-SCALE INDUSTRIAL PRODUCTION* 1913 100 1917 77 1919 26 1920 18

II. OUTPUT OF SELECTED INDUSTRIAL GOODS IN 1920⁹⁴ (1913 = 100) Coal 27.0 Iron 2.4 Cotton yarn 5.1 Petroleum 42.7

III. PRODUCTIVITY (in constant rubles) of the Russian worker⁹⁵ 1913 100 1917 85 1918 44 1919 22 1920 26

IV. NUMBER OF EMPLOYED INDUSTRIAL WORKERS† 1918 100 1919 82 1920 77 1921 49

In sum, under War Communism, the Russian “proletariat” fell by one-half, industrial output by three-quarters, and industrial productivity by 70 percent. Surveying the wreckage, Lenin in 1921 exclaimed: “What is the proletariat? It is the class engaged in large-scale industry. And where is large-scale industry? What kind of a proletariat is it? Where is your [sic!] industry? Why is it idle?”⁹⁶ The answer to these rhetorical questions was that Utopian programs, which Lenin had approved, had all but destroyed Russian industry and decimated Russia’s working class. But during this time of deindustrialization, the expenses of maintaining the bureaucracy in charge of the economy grew by leaps and bounds: by 1921 they absorbed 75.1 percent of the budget. As for the personnel of the Supreme Economic Council, which managed Russia’s industry, it grew during this period a hundredfold.*

The decline in agricultural production was less drastic, but because of the small margin of food surplus, its effect on the population was even more devastating.

The Bolshevik Government treated the peasant population as a class enemy and waged on it a regular war by means of Red Army units and detachments of armed thugs. The program of 1918—to choke off all private trade in agricultural produce—had to be modified in view of fierce peasant resistance. In 1919 and 1920, the government extracted food from the peasantry by a variety of means: forced deliveries, barter of food for manufactured goods, and purchases at somewhat more realistic prices. In 1919, it allowed limited quantities of food to be sold on the open market. Dairy products, meats, fruits, most vegetables, and all foodstuffs growing wild were initially exempt from state control but later regulated as well.

Through a combination of coercion and inducement, the government managed somehow to feed the cities and industrial centers, not to speak of the Red Army. But the prospects for the future looked bleak because the peasant, having no incentives to grow more than he needed for himself, kept on reducing the cultivated acreage. In the grain-growing provinces, between 1913 and 1920, the area under cultivation diminished by 12.5 percent.⁹⁷ The decline in sown acreage, however, does not fully reveal the fall in cereal production. First of all, since the peasants either consumed or set aside for seed three-quarters of the harvest, a decline of 12.5 percent in sown acreage meant that the arable land available to produce a grain surplus for the non-agrarian population dropped by one-half. Second, yields kept on declining at the same time that the sown area shrank, due largely to the shortage of draft horses, one-quarter of which had been requisitioned by the armed forces. The yields per acre in 1920 were only 70 percent what they had been before the war.⁹⁸ A 12.5 decline in acreage accompanied by a 30 percent decline in yields meant that the grain output was only 60 percent of the prewar figure. A Communist economist provides statistics which show that this, indeed, is what happened:

PRODUCTION OF CEREAL GRAINS IN CENTRAL RUSSIA⁹⁹ (in millions of tons) 1913 78.2 1917 69.1 1920 48.2

It required only a spell of bad weather for the harvest to fall to the level of starvation. Under Communist management, there was no surplus and hence no capacity to absorb the consequences of a poor harvest. That such a calamity was in the offing became a near-certainty in the fall of 1920, when Communist papers began to carry warnings of a new “enemy”—zasukha, or drought.¹⁰⁰

True famine, Asiatic famine such as neither Russia nor the rest of Europe had ever experienced and in which millions were to perish, still lay in the future. For the time being, there was hunger, a permanent state of undernourishment that drained energy, the ability to work, the very will to live. A leading Bolshevik economist, analyzing in 1920 the decline in industrial productivity, ascribed it principally to food shortages. According to his calculations, between 1908 and 1916 the average Russian worker had consumed 3,820 calories a day, whereas by 1919 his intake was reduced to 2,680 calories, not enough for heavy manual labor.¹⁰¹ This 30 percent drop in caloric intake, in his opinion, was the main cause of the 40 percent decline in worker productivity in the large cities. This, of course, was a great oversimplification, but it pointed to a very real problem. Another Communist expert estimated that using pre-revolutionary criteria, according to which an annual bread consumption of 180–200 kilograms meant hunger, the Soviet worker in the northern regions in 1919–20, with a consumption of 134 kilograms, was starving.¹⁰² If Russian cities at this point did not collapse from hunger, it was due to the fortuitous coincidence that just as this was about to happen, the Bolsheviks won the Civil War and reconquered Siberia as well as the North Caucasus and the Ukraine, which under non-Communist rule had managed to accumulate rich stores of grain.

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.

Moscow has free markets, a number of them, officially tolerated markets, supplementary ones, delicatessen markets. For example, there is a supplementary market near Theater Square, dealing in cucumbers, fish, biscuits, eggs, vegetables of all sorts. It is a tumult on a long sidewalk. There are booths on the curbs, traders squat, traders whisper offers into the ears of buyers.

A cucumber costs 200–250 rubles, an egg 125–150 rubles: other items fetch corresponding prices. This is not much when converted into Western European currency, especially dollars. During my stay in Moscow, currency speculators paid 1,000 Bolshevik rubles for one dollar. I was told that one American exchanged $3,000 for 9 million Bolshevik rubles. It is forbidden to speculate … But there is speculation in currency. Profits are made on everything, naturally also on money …

This profiteering, this black marketeering, this hoarding hinders work. Profiteering sits in the soul of workers. They profiteer while they work, they profiteer while they should be working.¹¹⁵

Many of the peddlers were soldiers who were disposing of their uniforms, which explains why at this time so many Muscovites appeared on the streets in military garb.¹¹⁶ Dignified ladies could be seen standing self-consciously on the sidewalks offering for sale personal belongings from happier days.

The “unconquerable stubbornness of small production in its insistence on the methods of commodity economy,” as one Soviet economist described the vitality of the free market,¹¹⁷ defeated all government efforts to monopolize distribution. The government found itself in the absurd situation in which the strict enforcement of its prohibitions on private trade would have caused the entire urban population to starve to death. A Soviet economic publication in early 1920 ruefully conceded that the private (“speculative”) market was flourishing at the expense and with the help of the state supply system. “One of the most striking contradictions of our current economic reality,” it wrote,

93. A common sight on the streets of Moscow and Petrograd in 1918–21.

is the contrast between the gaping emptiness of Soviet stores with their signs “Haberdashery Store of the Moscow Soviet,” “Bookstore,” … and so on, and the teeming activity of the market trade on Sukharevka, the Smolensk market, Okhotnyi Riad, and other centers of the speculative market.… [The merchandise for the latter] has its exclusive source in the warehouses of the Soviet Republic and reaches Sukharevka by criminal routes.¹¹⁸

So powerful did the private sector become that when in early 1921 the government finally faced reality and (temporarily) gave up the monopoly on trade under the New Economic Policy (NEP), it was only acknowledging the status quo. “In certain respects,” writes E. H. Carr, “NEP did little more than sanction methods of trade which had grown up spontaneously, in defiance of Government decrees and in face of Government repressions, under War Communism.”¹¹⁹

In October 1917, the Bolsheviks seized power in Petrograd in the name of the “proletariat.” The Soviet state was declared the embodiment of the will of the working class and the “vanguard” of the socialist order. This being the case, one might have expected Bolshevik labor policies greatly to improve, if not necessarily the economic, then certainly the social and political status of industrial labor compared with what it had been under the “bourgeois” Imperial and Provisional governments. But in this respect, too, the effects were the very opposite of proclaimed intentions: the status of Russia’s working class deteriorated significantly in every respect but the symbolic. In particular, it now lost its hard-won right to organize and to strike, the two indispensable weapons in labor’s self-defense.

It can be argued, of course, and the argument has been made, that under conditions of revolution and civil war the Bolsheviks had no choice but to curb the rights of labor in order to keep the economy going: to save the “proletarian revolution” they had to suspend the rights of the “proletariat.” In this interpretation, Bolshevik labor policies, like the rest of War Communism, were regrettable but unavoidable expedients.

The trouble with this interpretation is that the anti-labor measures introduced when the Bolshevik regime was indeed struggling to survive turned out to be not just temporary devices but expressions of a whole social philosophy which the situation made it possible to justify as emergency measures but which outlasted the emergency. The Bolsheviks regarded compulsory labor, the abolition of the right to strike, and the transformation of trade unions into agencies of the state as essential not only for victory in the Civil War but for the “construction of communism”: which is why they retained their anti-labor policies after the Civil War had been won and their regime was no longer in danger.

The concept of compulsory labor was embedded in Marxism. Article 8 of the Communist Manifesto of 1848 called for the “equal liability of all to labor. Establishment of industrial armies, especially for agriculture.” Obviously, in a regimented economy, without a free commodity market, it made no sense to maintain a free market in labor services. Trotsky, who often spoke on the subject, reinforced the economic argument with a psychological one—namely, that man is basically indolent and driven to work only by the fear of starvation: once the state assumed responsibility for feeding its citizens, this motive disappeared and it became necessary to resort to compulsion.* In effect, Trotsky presented forced labor as an inseparable feature of socialism. “One may say that man is rather a lazy creature,” he said. “As a general rule, man strives to avoid work.… The only way to attract the labor power necessary for economic tasks is to introduce compulsory labor service.”¹²⁰ Lest some Soviet citizens delude themselves that compulsory labor was only a transitional measure, meant for the “duration” of the crisis, Trotsky put them on notice this was not so. In March 1920, at the Ninth Party Congress, convened after the Whites had been for all practical purposes defeated and the Civil War was virtually over, Trotsky minced no words:

We are making the first attempt in world history to organize labor in the interests of that laboring majority. But this, of course, does not mean liquidating the element of compulsion. The element of compulsion does not disappear from historic accounts. No, compulsion plays and will play an important role for a significant period of history.¹²¹

Trotsky spoke especially bluntly on this subject at the Third Congress of Trade Unions in April 1920. Responding to a Menshevik motion calling for the abolition of compulsory labor on the grounds that it was less productive than free labor, Trotsky defended serfdom:

When the Mensheviks in their resolution say that compulsory labor always results in low productivity, then they are captives of bourgeois ideology and reject the very foundations of the socialist economy.… In the era of serfdom it was not so that gendarmes stood over every serf. There were certain economic forms to which the peasant had grown accustomed, which, at the time, he regarded as just, and he only rebelled from time to time.… It is said that compulsory labor is unproductive. This means that the whole socialist economy is doomed to be scrapped, because there is no other way of attaining socialism except through the command allocation of the entire labor force by the economic center, the allocation of that force in accord with the needs of a nationwide economic plan.¹²²

In sum, forced labor was not only indispensable to socialism but actually beneficial: “Forced serf labor did not emerge because of the ill will of the feudal class: it was a progressive phenomenon.”¹²³

The notion that the worker must become a peon of the “socialist” state—that is, on the face of it, a slave of himself, since he was said to be “master” of that state—embedded in the Marxist theory of a centralized, organized economy and its misanthropic view of human nature, was further strengthened by the extremely low opinion which the Bolshevik leaders had of Russia’s workers. Before the Revolution, they had idealized them, but contact with the worker in the flesh quickly put an end to illusions. While Trotsky extolled the virtues of serfdom, Lenin dismissed the Russian “proletariat.” At the Eleventh Party Congress, in March 1922, he said:

Very often, when they say “workers” it is thought that this means the factory proletariat. But it means nothing of the kind. In our country, since the war, the people who went to work in factories and plants were not proletarian at all, but those who did so to hide from the war. And do we now have social and economic conditions which induce true proletarians to go to work in factories and plants? This is not the case. It is correct according to Marx, but Marx wrote not about Russia but about capitalism as a whole, beginning with the fifteenth century. For six hundred years this was correct, and for today’s Russia it is not correct. Those who go into the factories are through and through not proletarians but all kinds of casual elements.¹²⁴

The implications of this astonishing admission were not lost on some Bolsheviks: for Lenin was saying nothing less than that the October Revolution had not been made by or even for the “proletarians.” Shliapnikov alone had the courage to point this out: “Vladimir Ilich said yesterday that the proletariat in the sense in which Marx perceived it does not exist.… Allow me to congratulate you on being the vanguard of a nonexistent class.”¹²⁵

With such a view of human nature in general and Russian labor in particular as Lenin and Trotsky entertained, they could hardly have tolerated free labor and independent trade unions even if other considerations had not spoken against them.

The official reasons for the introduction of compulsory labor were the requirements of economic planning: economic planning, it was argued, not inconsistently, could not be realized unless labor were subject to the same controls as all the other economic resources. The Bolsheviks spoke of the need for compulsory labor obligation as early as April 1917, before coming to power.¹²⁶ Lenin apparently saw no contradiction in saying that whereas the introduction of compulsory labor in capitalist Germany in wartime “inevitably meant military penal servitude [katorga] for the workers,” under Soviet rule the same phenomenon represented “a giant step toward socialism.”¹²⁷

True to their word, the Bolsheviks declared the intention of introducing labor conscription on their first day in office. On October 25, 1917, almost in the same breath in which he announced the deposition of the Provisional Government, Trotsky told the Second Congress of Soviets: “The introduction of the universal labor obligation is one of the most immediate objectives of a genuine revolutionary government.”¹²⁸ Probably most of the delegates thought this statement applied only to the “bourgeoisie.” And, indeed, in the first months of his dictatorship, Lenin, driven by personal animosity, went out of his way to humiliate the “bourgeoisie,” compelling people unaccustomed to manual labor to perform menial chores. In the draft of the decree nationalizing banks (December 1917), he wrote:

Article 6: universal labor obligation. The first step—consumer-labor, budget-labor booklets for the rich, control over them. Their duty: to work as ordered, else—“enemies of the people.”

And in the margin he added: “Dispatch to the front, compulsory labor, confiscation, arrests (execution by shooting).”¹²⁹ Later it was a common sight in Moscow and Petrograd to see well-dressed people performing menial duties under guard. The benefit of this forced labor was probably close to nil, but it was intended to serve “educational” purposes—namely, to incite class hatred.

As Lenin had indicated, this was only the first step. Before long, the principle of compulsory labor was extended to other social strata: it meant not only that every adult had to be productively employed but that he or she had to work where ordered. This obligation, which returned Russia to the practices of the seventeenth century, was decreed in January 1918 in the “Declaration of the Rights of the Toiling and Exploited Masses,” which contained the following clause: “For the purpose of destroying the parasitic elements of the population and for the organization of the economy, there is introduced the universal labor obligation.”¹³⁰ Inserted into the 1918 Constitution, this principle became the law of the land and has served ever since as the legal basis for treating anyone shirking state employment as a “parasite.”

The principle of labor conscription was worked out in practical detail at the end of 1918. A decree of October 29, 1918, established a nationwide network of agencies to “distribute the labor force.”¹³¹ On December 10, 1918, Moscow issued a detailed “Labor Code” which provided for all male and female citizens between the ages of sixteen and fifty, with some exceptions, to render “labor service.” Those who already held regular jobs were to stay at them. The others were to register with Departments for the Allocation of the Labor Force (Otdely Raspredeleniia Rabochei Sily, or ORRS). These organs had the authority to assign them to any work anywhere they saw fit.

Not only did the decrees on compulsory labor apply to minors (children sixteen to eighteen) but special ordinances permitted children employed in war industries or other enterprises of special importance to the state to be made to work overtime.¹³²

By late 1918, it became common practice for the Bolshevik authorities to call up workers and specialists in various fields for state service exactly as they drafted recruits into the Red Army. The practice was for the government to announce that workers and technical specialists in a specified branch of the economy were “mobilized for military service” and subject to court-martial: those leaving jobs to which they had been assigned were treated as deserters. Persons with skills in critical fields, but not currently employed in jobs where they could use them, had to register and await a call-up. The first civilians to be “mobilized” were railroad workers (November 28, 1918). Other categories followed: persons with technical education and experience (December 19, 1918), medical personnel (December 20, 1918), employees of the river and ocean fleets (March 15, 1919), coal miners (April 7, 1919), postal, telephone, and telegraph employees (May 5, 1919), workers in the fuel industry (June 27, 1919, and November 8, 1919), wool industry workers (August 13, 1920), metalworkers (August 20, 1920), and electricians (October 8, 1920).¹³³ In this manner, industrial occupations became progressively “militarized” and the difference between soldiers and workers, military and civilian sectors, was blurred. Efforts to organize industrial labor on the military model could not have worked well in view of the plethora of decrees on this subject, setting up ever new punishments for “labor deserters,” ranging from the publication of their names to confinement in concentration camps.¹³⁴

Whatever its formal economic justification, the practice of forced labor meant a reversion to the Muscovite institution of tiaglo, by virtue of which all adult male and female peasants and other commoners could be called upon to perform chores on behalf of the state. Then, as now, its main forms were carting goods, cutting lumber, and construction work. The description of the duty imposed on peasants in 1920 to furnish fuel would have been quite comprehensible to Muscovite Russians:

The peasants were ordered … as a sort of labor service expected of them by the Government … to cut down so many cords of wood in designated forests. Every horse-owning peasant had to transport a certain quantity of wood. All this wood had to be delivered by the peasant to river jetties, cities, and other terminal points.¹³⁵

The principal difference between compulsory labor, or tiaglo, in Muscovite Russia and that in Communist Russia was that in the Middle Ages it had been a sporadic duty, imposed to meet specific needs, whereas now it became a permanent obligation.

In the winter of 1919–20, Trotsky conceived an ambitious scheme of “militarizing labor” in which soldiers in uniform would perform productive economic work while civilian workers would be subjected to military discipline. This throwback to the infamous “military colonies” instituted a century earlier by Alexander I and Arakcheev met with skepticism and hostility. But Trotsky persisted and would not be dissuaded. Back from his triumph in the Civil War, full of his own importance and eager to gain fresh laurels, he insisted that Russia’s economic problems could be resolved only by the same rough-and-ready methods which the Red Army had used to defeat the external enemy. On December 16, 1919, he drafted a set of “Theses” for the Central Committee.¹³⁶ He argued that economic problems had to be stormed with blindly disciplined armies of workers. Russia’s labor force was to be regimented in military fashion: the shirking of duty (refusal to take on assigned work, absenteeism, drinking on the job, etc.) was to be treated as a crime and the culprits turned over to courts-martial. Trotsky further proposed that Red Army units no longer needed for combat duty, instead of being demobilized and sent home, be transformed into “Labor Armies” (Trudarmii). These “Theses” were not intended for publication, but Bukharin, the editor of Pravda, printed them anyway, either inadvertently (as he claimed) or to discredit Trotsky (as others believed). Published in Pravda on January 22, 1920, they unleashed a storm of protests, in which the epithet “Arakcheevsh-china” was commonly heard.

Lenin was won over because of the desperate need to halt the further deterioration of the country’s economy. On December 27, 1919, he agreed to the creation of a Commission on Labor Obligation, with Trotsky, who retained the post of Commissar of War, as president. Trotsky’s program entailed two sets of measures:

1. Military units no longer required at the front would not be demobilized but would be transformed into peacetime Labor Armies and assigned to such tasks as repairing railroad beds, transporting fuel, and fixing agricultural machinery. The Third Army Corps, which had fought in the Urals, was the first to undergo this transformation. Later other units were converted. In March 1921, one-quarter of the Red Army was employed in construction and transport.

2. Concurrently, all workers and peasants were made subject to military discipline. At the Ninth Party Congress in 1920, where this policy provoked intense controversy, Trotsky insisted that the government had to be free to use civilian labor wherever it was needed, without regard to the personal preferences of the workers, exactly as in the armed forces. “Mobilized” labor was to be assigned to enterprises requesting it through the Commissariat of Labor. In 1922, looking back at this experiment, an official of this commissariat stated: “We supplied labor according to plan and, consequently, without taking into account the individual peculiarities or wishes of the worker to engage in this or that kind of work.”¹³⁷

Neither the Labor Armies nor militarized labor fulfilled the expectations of their protagonists. Soldier workers produced only a fraction of the output of trained civilians; they also deserted in droves. The government faced insurmountable technical difficulties in attempting to administer, feed, and transport the militarized labor force. Hence, this prototype of Stalin’s and Hitler’s slave-labor organizations had to be abandoned: industrial mobilization was abolished on October 12, 1921, and the Labor Armies one month later.¹³⁸

The experiment discredited Trotsky and weakened him in the struggle for the succession to Lenin not only because it had failed but because it made him vulnerable to charges of “Bonapartism.” For indeed, if Russia’s economy had been militarized, officers subordinate to him would have acquired a dominant role in the civilian sector. “Trotskyism” as a term of abuse gained currency in 1920 in connection with this scheme.¹³⁹

In a regime based on compulsory labor there was, of course, no place for free trade unions. There were logical reasons why such unions could not be allowed, since in a “worker” state the workers by definition could not have interests separate from those of their employer. As Trotsky once put it, the Russian worker was “obligated to the Soviet state, under its orders in every direction, for it is his state”¹⁴⁰—in obeying it, therefore, he was obeying himself, even if he happened to think otherwise. There were also practical reasons why independent trade unions could not be tolerated, inasmuch as they were incompatible with central planning. Hence, the Bolsheviks lost no time in depriving of independence the two main organizations of Russian labor—Factory Committees and trade unions.

It will be recalled that after the outbreak of the February Revolution, with Bolshevik encouragement, Factory Committees spread and gained influence in Russia as organs of workers’ control. In conditions of spreading anarchy, they expanded at the expense of the trade unions, organized nationally by crafts, because the workers found more in common with others employed in the same plant than with fellow workers possessing the same skills but employed elsewhere. Inspired by syndicalist ideas, the Factory Committees gravitated leftward and in the fall of 1917 provided one of the main sources of Bolshevik strength.

But once in power, the Bolsheviks found little use for these committees. Pursuing their private interests and tending to treat industrial establishments as property, they interfered with production and obstructed economic planning. In the weeks that followed the October coup, while they were still insecurely in power, the Bolsheviks continued to curry favor with them. A decree of November 27, 1917, provided for the establishment of Workers’ Committees in all enterprises employing five or more workers. They were to supervise production, determine the minimum output, set production costs, and enjoy access to the accounting books.¹⁴¹ This was syndicalism, pure and simple. But Lenin no more intended workers to run Russia’s industries than peasants to own Russia’s agricultural land, soldiers to run their regiments, or national minorities to secede. All these were means to an end, the end being the conquest of power. Hence, he inserted into the decree on Factory Committees two provisions, little noted at the time, which gave the government the right to abrogate it. One stated that while the decisions of the workers or their representatives were binding on the owners of enterprises, they were subject to annulment by “trade unions and [their] congresses.” Another clause stipulated that in enterprises designated as being of “state importance”—that is, either working for defense or producing articles “necessary for the existence” of the masses—the Workers’ Committees were accountable to the state “for the maintenance of the strictest order and discipline.” As one historian observes, these vague provisions soon rendered the decree on workers’ control “not to be worth the paper it was written on.”¹⁴²

In time, the Factory Committees were emasculated by being subjected to bureaucratic oversight. The decree on workers’ control required each committee to render accounts to the Regional Council of Workers’ Control; these Regional Councils, in turn, were subordinated to the All-Russian Council of Workers’ Control. Officials running these supervisory organs received their appointments from the Communist Party and were duty-bound to carry out its instructions.¹⁴³ These institutions prevented Factory Committees from forming their own national organization independent of the state. The decree establishing the Supreme Economic Council (December 1917) gave it authority over all existing economic bodies, including the All-Russian Council of Workers’ Control.

The fate of the Russian labor movement, in its anarcho-syndicalist as well as trade union form, was largely settled at the First Congress of Trade Unions, held in Petrograd in January 1918.¹⁴⁴ Here, socialist intellectuals, Bolsheviks and Mensheviks alike, criticized the anarcho-syndicalist tendencies of industrial workers and rejected demands for workers’ control as detrimental to productivity and inimical to socialism. Despite heated arguments in favor of workers’ control, the congress, dominated by Bolsheviks, who on this issue had the backing of the Mensheviks and SRs, adopted a resolution shifting the means of exercising workers’ control over production from Factory Committees to the trade unions. Factory Committees now lost many of the powers granted them in November, including that of interfering with financial matters. “Control over production,” the resolution stated, “does not mean the transfer of the enterprise into the hands of workers.”

When the congress turned its attention to trade unions, the Mensheviks parted ways with the Bolsheviks. Since they enjoyed strong support among some of the largest national unions, the Mensheviks favored independent trade unionism. The Bolsheviks maintained that trade unions should serve as instruments of the state, its agents in “organizing production” and “rehabilitating the country’s shattered economic forces.” Among their tasks was “enforcing the universal obligation to work.” “The congress is convinced,” the Bolshevik resolution read, “that trade unions will inevitably become transformed into organs of the socialist state”:

The entire process of the full fusion of the trade unions with the organs of state authority (the so-called process of ogosudarstvlenie) must occur as the completely inevitable result of their joint, closest, and harmonized activity and the training by trade unions of the broad worker masses for the task of administering the state apparatus and all the organs in charge of the economy.¹⁴⁵

This was very much in line with a tradition of Russian history by virtue of which the state, sooner or later, coopted and subordinated to itself all institutions originally formed, sometimes on its own initiative, as independent, self-governing bodies.

Once it had been decreed that individual Factory Committees were subject to the All-Russian Council of Workers’ Control, that this council, in turn, had to account to the trade unions and their congresses, and that the proper function of trade unions was to serve as “organs of the socialist state,” the fate of Factory Committees was sealed. The history of workers’ control institutions following the First Congress of Trade Unions is one of relentless decline: they shrank, wilted, and died, one by one. The abortive movement in the spring of 1918 to create a nationwide network of workers’ plenipotentiaries was the last gasp of the movement. By 1919, they were only a memory.

As concerns trade unions, they increased their scope if not their authority as the Civil War neared its climax and the government came to rely on them to enforce labor discipline. The party increasingly assumed the right to appoint trade union officials, removing elected officials of whom it did not approve.¹⁴⁶ In 1919 and 1920, state and party resolutions still paid lip service to the principle that trade unions helped run the nation’s economy. But in reality by then their main task was to serve as transmitters of government directives. This is how Trotsky defined the role of trade unions in April 1920:

In the socialist state under construction, trade unions are needed not to struggle for better working conditions—this is the task of the social and political organization as a whole—but to organize the working class for the purpose of production: to educate, discipline, allocate, collect, attach individual categories and individual workers to their jobs for a set period: in a word, hand in hand with the government in an authoritative manner to bring workers into the framework of a single economic plan.¹⁴⁷

The trade unions proved a harder nut to crack than the ephemeral Factory Committees: after the Civil War, in 1920–21, an explosion would occur in Bolshevik ranks over the practice of replacing elected union officials with appointed party bureaucrats. This issue would cause a great deal of internal friction and give Lenin the pretext for outlawing the formation of factions in the Communist Party.

Once it had been established that the function of trade unions was not to defend the interests of their members, but to serve the state, it was logical for membership in them to be made mandatory. Compulsory enrollment was not decreed but introduced gradually in one trade after another, until, at the end of 1918, three-quarters of the working force was subject to compulsory unionization.¹⁴⁸ The larger their membership, the more impotent the trade unions became.

The right to strike was considered fundamental to labor’s interests and was reconfirmed as such at the trade unions’ Third All-Russian Conference in June 1917.¹⁴⁹ The Communist Government neither then nor later issued a decree outlawing strikes: it was obvious, nevertheless, that the Bolsheviks would not tolerate work stoppages against state enterprises. They were inhibited from outlawing strikes by legislative fiat as long as the overwhelming majority of industrial enterprises were in private hands, but they were not prepared to confirm this right. At the Congress of Trade Unions in January 1918, the trade unionist G. Tsyperovich moved that the “professional worker movement continues, as before, to regard the strike as a means of defending its interests” with the understanding that under “the new conditions of workers’ control of production, [strikes] can be more soundly implemented.” The congress, dominated by Bolsheviks, ignored this resolution.¹⁵⁰ In practice, strikes were permitted against privately owned enterprises, as long as these existed, but not in state enterprises. The progressive nationalization of industry had the effect of making strikes unlawful. The implications of the de facto abolition of the right to strike in Soviet Russia are thus defined by one scholar:

The first assumption [of the Soviet Government] was that collective bargaining and the strength of the unions did not rest on the right to call a work stoppage, but on its political relationship with the state and Party. In all cases, the burden of responsibility for avoiding and terminating strikes was now transferred to the trade unions, the very institutions for which the right to strike was vital. The trade unions were left in the impossible position of having to deny the one power that would give them strength and enable them to protect their membership.¹⁵¹

This spelled the death of trade unionism in Soviet Russia.

The policies subsequently christened War Communism were meant to raise economic performance to a peak never known: it was the most ambitious attempt ever made until then to rationalize completely production and distribution through the elimination of market forces. Did it produce the desired results? Clearly not. Even the most fanatical advocates of these policies had to admit that after three years of experimentation the Soviet economy lay in shambles. As rapidly as the regime nationalized everything in sight, the illicit free market expanded, threatening to absorb what remained of Russia’s wealth. And there was not that much left to absorb. Russia’s Gross National Income in 1920 fluctuated between 33 and 40 percent of what it had been in 1913. The living standard of workers by then had declined to one-third of its prewar level.¹⁵²

The facts were indisputable, but their interpretations differed. The Left Communists and other advocates of immediate socialization, standing in the midst of the wreckage they had wrought, facing the prospect of imminent famine, refused to concede failure. In a treatise published in 1920 Bukharin spoke glowingly of the collapse of the Soviet economy. In his view, it was the legacy of “capitalism” that was being destroyed: “such a grand debacle had never happened before,” he boasted. It was all “historically inevitable and historically necessary.” His book, filled with Marxist clichés, contained no facts, statistical or other, on the actual condition of Soviet Russia’s economy: facts that would have demonstrated that the culprit was not “capitalism” but Bolshevism.*

Other Communists found the cause of the economy’s calamitous condition in the survival of the private sector. They had always insisted that socialism could not succeed under conditions of partial nationalization and now felt vindicated: the trouble lay not in the government’s pressing socialism too hard, but in not pressing it hard enough. A typical defense of War Communism in this spirit appeared in Pravda in early 1921, just as it was being abandoned. The author, V. Frumkin, ascribed the shortcomings of Soviet Russia’s economy to the fact that its “entire apparatus lies in the hands of bourgeois and petty bourgeois elements, our class enemies.” This could be overcome only by the formation of “sufficiently large cadres of Red commanders of the economic front,” a task which he perceived as lying in the “more or less distant future.”¹⁵³

More sober heads realized that, far from being responsible for the failure of socialist experiments of 1918–20, “capitalism” had made such experiments possible in the first place. Essentially, under War Communism the Bolsheviks had been living off the human and material resources accumulated by bourgeois Russia. But there was a limit to those. An analysis published in the summer of 1920 in the leading Soviet economic newspaper concluded: “We have completely exhausted the supplies of the more important resources and raw materials bequeathed to us by capitalist Russia. Henceforth, all economic gains will have to be made from our own current production.”¹⁵⁴

This agenda would be adopted in the spring of 1921 under the New Economic Policy: a transitional period of indeterminate duration, modeled on Lenin’s original concept of “state capitalism,” during which the government would retain a monopoly on political power but allow private enterprise a limited role in restoring the country’s productive forces. During this period, it would ready cadres of “Red commanders of the economic front.” Once productivity had been sufficiently improved and the personnel stood available, a fresh offensive would be launched to exterminate the “bourgeois” and “petty bourgeois” class enemy for good and then to proceed in earnest with the construction of socialism.

*L. N. Iurovskii, Denezhnaia politika sovetskoi vlasti (1917–1927) (Moscow, 1928), 51. Another contemporary expert who concurs is the Left Communist L. Kritsman (Geroicheskii period Velikoi Russkoi Revoliutsii, 2nd ed., Moscow-Leningrad, 1926): he calls “so-called War Communism the first grandiose attempt at a proletarian-natural economy, the attempt [to take] the first steps of transition to socialism” (p. 77).

*Meshcherskii in NS, No. 33 (May 26, 1918), 7; M. Vindelbot in NKh, No. 6 (1919), 24–32. According to NV, No. 101/125 (June 26, 1918), 3, Meshcherskii was arrested in June. He later emigrated to the West.

*Vechernaia zvezda, April 19, 1918, in Peter Scheibert, Lenin an der Macht (Weinheim, 1984), 219. The reference, of course, is to the unpopular “breathing spell” which the Bolsheviks claimed to have secured with the Brest-Litovsk Treaty.

†On him: Granat, XLI, Pt. 2, 89–98. He was given a mock trial (along with Bukharin) in 1938 and presumably shot soon afterward for an alleged plot to assassinate Lenin: Robert Conquest, The Great Terror (New York, 1968), 398–400.

*According to Hilferding, in 1910 six of the largest Berlin banks controlled most of German industry: S. Malle, The Economic Organization of War Communism, 1918–21 (Cambridge, 1985), 154.

†Russian banks, like those of Germany, participated directly in industrial and commercial ventures, and owned sizable portfolios of securities and debentures issued by these enterprises, which lent these notions the semblance of credibility.

*E. H. Carr, The Bolshevik Revolution, 1917–1923, II (New York, 1952), 145. Carr says that “it is difficult to regard any of these figures as anything but guesses.” Indeed, the state budget approved by the Sovnarkom in July 1918 retroactively for the preceding six months fixed expenditures at 17.6 billion and revenues at 2.85 billion: NV, No. 117/141 (July 14, 1918), 1. Another contemporary estimate placed expenditures for the first six months of 1918 at 20.5 billion and revenues at 3.3 billion: Lenin, Sochineniia, XXIII, 537–38.

†Piatyi Sozyv VTsIK: Stenograficheskii Otchët (Moscow, 1919), 289–92. It appears, however, that only a fraction of the desired sums was actually collected.

*A survey of the theoretical foundations of the projected moneyless economy can be found in Iurovskii’s Denezhnaia politika, 88–125. A dominant influence on Bolshevik thinking on this subject was the German sociologist Otto Neurath.

†S. S. Katzenellenbaum, Russian Currency and Banking, 1914–24 (London, 1925), 98n. In view of this evidence it is not possible to agree with Carr (Revolution, II, 246–47, 261) that Bolshevik fiscal policies which led to the total depreciation of Russian currency were the result not of plan or policy but of responses to desperate needs.

*It is surprising how little note financial markets took of this irresponsible fiscal policy and, indeed, how readily they accommodated themselves to Bolshevism. According to contemporary newspapers (NV, No. 102/126, June 27, 1918, 3), in June 1918 one could buy U.S. currency in Russia at the rate of 12.80 rubles for one dollar, which was the same rate as in early November 1917.

† Reproductions of Russian currency for the revolutionary period can be found in N. D. Mets’s Nash rubV (Moscow, 1960). According to Katzenellenbaum, the earliest Soviet currency came out in mid-1918 in Penza (Russian Currency, 81).

*In fact, prices increased 100 million times.

*M. Weber, Wirtschaft und Gesellschaft, I (Tübingen, 1947), Pt. 1, Chap. 2, 12. These strictures were directed at Otto Neurath, who believed he had worked out a system of keeping accounts without reference to money.

*Lenin, Khronika, VIII, 243, 267. While most of the economic planners of this period fell afoul of Stalin and were shot, Larin, a victim of childhood polio, had the good fortune in 1932 to die a natural death.

*The organization of defense industries is not clear. In August 1918, the Supreme Economic Council set up a Commission for the Production of Articles of Military Ordnance under the direction of Krasin. This commission received and passed on to industrial enterprises orders from the military which were mandatory. In time, responsibility for supplying the armed forces came under the Council of Defense (Sovet Oborony).

*Litvinov in Pravda, No. 262 (November 21, 1920), 1. Professor Scheibert (Lenin, 210) mistakenly deciphers the acronym Glavanil to mean “Vanilla Trust.”

*Kritsman, Geroicheskii period, p. 162. Figures in Narodnoe Khoziaistvo SSSR v 1958 godu (Moscow, 1959), 52–53, show a 69 percent decline in overall industrial production in 1921 compared with 1913, and a 79 percent decline in heavy industrial production.

†A. Aluf, cited in S. Volin, DeiateVnosf menshevikov v profsoiuzakh pri sovetskoi vlasti, Inter-University Project on the History of the Menshevik Movement, Paper No. 13 (New York, 1962), 87. By 1918, of course, which is here taken as the base year, the number of employed workers had declined considerably compared with 1913–14.

*Buryshkin in EV, No. 2 (1923), 141. The figures for the Supreme Economic Council are 318 employees in March 1918 and 30,000 in 1921.

*Possession of a card entitling one to the lowest ration (paëk) served the Cheka as a means of identifying members of the “bourgeoisie.” The holders of such cards were natural victims of terror and extortion.

*The notion that man works only to avoid starvation Trotsky took from Marx, who had found it in the writings of the Reverend J. Townsend on the Poor Laws: Das Kapital, I, Chap. 25, Sect. 4.

*N. Bukharin, Ekonomika perekhodnogo perioda, Pt. 1 (Moscow, 1920), 5–6, 48. The second part, which was to have provided empirical data (p. 6), never appeared.