Isaac Deutscher 1948

The Economic Policy of the Soviet

Source: The Listener, 8 July 1948. Scanned and prepared for the Marxist Internet Archive by Paul Flewers.

‘Socialism has virtually been achieved in our days; but one half of it exists in Russia, the other – in Germany.’ This was the essence of a somewhat paradoxical remark dropped by Lenin in 1921. The ‘Russian half of socialism’ was the political system of the Soviets. The ‘German half’ was industry, technical skill and organisation. Lenin’s remark offers perhaps a general clue to the Soviet economic policy. Lenin hoped that a proletarian revolution in Germany would integrate the two ‘halves’ into the single structure of an international socialist society; and that then, but only then, socialism would prove to be economically superior to capitalism.

To Lenin, as to nearly all Marxists of his generation, socialism meant not only public ownership of the means of production. It also implied a highly developed industry, high standards of living and high standards of education. Planning was, of course, essential to safeguard society against the slumps and unemployment inherent in the capitalist trade cycle. But it was planning in an economy of plenty and not in one of scarcity that was at first identified with socialism. Russia alone – ‘backward, poor, semi-Asiatic’ (Lenin rarely mentioned his country without using these adjectives) – could not aspire to achieve socialism.

By the time Stalin had succeeded Lenin, it was clear that the German and the Russian ‘halves’ of socialism were likely to remain separated from one another for a long time. Communism had been utterly defeated in Germany. The Bolsheviks found themselves confronted with a task which looked to many like an attempt at squaring a circle. They were committed to the creating of a socialist society; and they ruled in a country which they themselves had claimed not to be ripe for socialism.

Then Stalin formulated his doctrine of socialism in one country, declaring, as it were, that the circle was not a circle, that it could be squared. The ‘German’ half of socialism was to be created in Russia by the exertions of the Russian people. That ambitious endeavour has been reflected in the three prewar Five-Year Plans and in the current, that is the Fourth Five-Year Plan. It was not only for purely economic or social reasons that Russia embarked upon this course. In 1931 Stalin thus pleaded against those who objected to his plans for rapid industrialisation:

No, Comrades... The pace must not be slackened! On the contrary, we must quicken it as much as is within our powers and possibilities. This is dictated to us by our obligations to the workers and peasants of the USSR. This is dictated to us by our obligations to the working class of the whole world. To slacken the pace would mean to lag behind; and those who lag behind are beaten. We do not want to be beaten. No, we don’t want to. One feature of the history of old Russia was that she was ceaselessly beaten for lagging behind, beaten for her backwardness. She was beaten by the Mongol Khans, she was beaten by Turkish Beys, she was beaten by Swedish feudal lords, she was beaten by Polish Lithuanian Pans, she was beaten by Anglo-French capitalists, she was beaten by Japanese barons, she was beaten by all – for her backwardness. For military backwardness, for cultural backwardness, for political backwardness, for industrial backwardness, for agricultural backwardness. She was beaten because to beat her was profitable and went unpunished. You remember the words of the pre-revolutionary poet: ‘Thou art poor and thou art plentiful, Thou art mighty and thou art helpless, Mother Russia...’ Such is the law of the exploiters – to beat the backward and the weak. It is the jungle law of capitalism. You are backward, you are weak – therefore you are wrong: hence you can be beaten and enslaved. You are mighty – therefore you are right; hence we must be wary of you.

That is why we must no longer lag behind... We are fifty or a hundred years behind the advanced countries. We must make good this lag in ten years. Either we do it, or they crush us.

Thus Stalin pleaded exactly ten years before Hitler attacked Russia.

Inherited Poverty: In the process of Russia’s intensive industrialisation, many of the traditional concepts of socialism have been thrown overboard, for what the rulers of Russia have come to regard as socialism is not planning in an economy of plenty for the satisfaction of human needs, but planning amid scarcity, planning on the basis of low standards of living and low standards of civilisation, though their objective has, of course, been to raise those standards. We must keep in mind this essential feature of the Russian economic system – planning amid absolute or relative scarcity – in order to understand some of the things that are going on there. It is silly to claim that the standards of living are higher in Russia than in the capitalist countries: they are still much lower, on the whole. It is, on the other hand, wrong to blame either public ownership or planning for a state of affairs which must be attributed primarily to the scarcity of all sorts of goods but also of industrial skill and organisational experience – in a word, to inherited poverty.

In the last twelve or thirteen years before the war Russia went through a momentous industrial revolution, she suffered a severe setback through the war, and she has since resumed intensive industrialisation. This whole development is in some ways comparable to the English industrial revolution or to the rapid industrialisation of the United States in the second half of the last century. When the war broke out Russia’s aggregate industrial power was on the point of catching up with Germany’s. The present Five-Year Plan should, broadly speaking, restore the Russian economy to her prewar condition. In some fields even more may be achieved. At the same time, planning for a much longer term is also being done. The objective of the long-term plans is to make Russia approach, within two decades or so, that level of industrialisation which the United States had reached before the recent war. Stalin, in 1946, said of the long-term plans:

The party intends to organise a new powerful development of the national economy that would enable us roughly to treble the volume of our industry compared with prewar. Our industry should produce up to 50,000,000 tons of pig iron a year, up to 60,000,000 tons of steel, up to 500,000,000 tons of coal, up to 60,000,000 tons of oil... This will take three new Five-Year Plans, if not more. But we can do the job and we shall do it.

Much more than before the war the emphasis in Russia is now laid on ‘catching up’ with the United States. But this is still a very remote objective, to say the least, especially if the American industry, too, were to make great advances within the next two decades.

Meanwhile, the Gosplan is still planning amid all sorts of scarcities. Moreover, the needs of defence constitute a powerful drain on Russian economic resources. In this year’s budget the expenditure on defence is roughly as great as the appropriation for capital investment in the national economy. In other words, if it were not for the present international tension the Russian government could double the tempo of industrialisation, or if it resolved to refrain from that it could raise considerably the standard of living of its people.

Industry Moves East: A salient feature of the Russian economic policy is the rapid opening up and development of the eastern lands, the Urals and the Asiatic provinces beyond. The industrialisation of the Soviet east began in the 1930s. During the recent war, the process was carried a long step further by the evacuation to the east of no fewer than 1300 plants and factories from western Russia and the Ukraine. Between 1942 and 1945 the total industrial output of eastern Russia was doubled. Thus, war not only destroyed enormous economic values. It also prodded Russia to new economic progress. Since the war, the government has continued to shift the centres of gravity of Russian industry eastwards. So much so that Asiatic Russia is now in fact on the point of gaining permanent economic preponderance over European Russia. Allow me to illustrate this with a few figures: in 1940 only 29 per cent of Russia’s iron ore was mined in her eastern provinces. In 1950, 44 per cent will come from the east. The corresponding figures for steel are 33 and 51 per cent, for engineering 34 and 51 per cent, for coal 36 and 48 per cent. Remember that about fifteen years ago almost the whole of Russia’s heavy industry was based on the iron ore mines of Krivoy Rog and the coal of the Donets Basin, the two areas in the south-west of Russia that were occupied by the Germans during the war. The figures that I have just quoted tell you the tale of Russia’s internal colonisation, for Russia is internally expanding eastwards – just as the United States expanded westwards over several generations. In the United States it was the pioneer farmer who opened up the ‘wild west’. In Russia the pioneering work in the wild east is done predominantly by industry.

These sweeping schemes of industrial development demand a constant supply of fresh labour. The working classes of the industrial countries of the West were once recruited mainly from the peasantry. The industrialisation of the United States was, in addition, stimulated by the spontaneous immigration of enterprising skilled and semi-skilled European workers. Russia’s main reserve of manpower has been in her own countryside. The tempo of industrialisation in the Western countries was up to a point dependent on the tempo of the migration of impoverished peasant masses to the towns. In Russia the process has been reversed. The pace of the industrialisation has determined the scope and rapidity of the internal migration. In the last decade before the war the urban population of Russia increased by about 26,000,000 people, most of whom had come from the villages. During the war many millions were evacuated from western to eastern Russia; and many of these evacuees have remained in the east. Every year millions of people are trained in various trades, according to a scheme laid down by the State Planning Commission in Moscow.

All this would not have been possible without the government having vast powers for the direction of labour. To go back to our analogy with the internal colonisation of the United States: the American farmer was attracted to the wild west by the abundance of good and free land and a pleasant climate. There is an abundance of land in Asiatic Russia, too. But because of the severe climate few western Russian or Ukrainian peasants would probably settle in Siberia of their own free will. Moreover, the government has been more interested in industrial than in agricultural migration. The supply of labour is therefore secured mainly through contracts between the industrial trusts and businesses and the collective farms, contracts by which the collective farms are obliged to send specified numbers of men and women to work in the factories. This is how in the early 1930s Stalin initiated his new labour policy:

We now have an entirely new situation and new conditions with regard to ensuring labour for our factories. We must no longer count on the spontaneous supply of labour... We must pass from waiting for the spontaneous supply to the organised recruiting of workers for industry. But there is only one way of achieving this, that of contracts concluded between the business organisations and the collective farms.

Since the war the demand for new labour has been at least as pressing as it was when Stalin spoke these words. More than 6,000,000 new workers are to be drafted into the mines and factories between 1946 and 1950. Where are they to come from in a country that has just lost many millions of men on the battlefields? In other countries agricultural slumps usually created the so-called surplus peasant population to be absorbed by industry. In Russia an administrative order defines what proportion of the farming population should be regarded as redundant on the land and directed into industry. The job must be an awkward one, especially since life is much easier now in the countryside than in the towns, and peasants probably prefer to stay on the land. I shall not try to answer here the tricky question which is preferable from the peasants’ viewpoint: to be driven into the factories by the scourge of poverty, as they once were in the older industrial countries, or by the governmental stick, as they are in Russia. The fact is that without the peasants being driven into the town by the one or the other no country in the world would have ever become industrialised. Let me add that the Russian government often acts with much greater cruelty than stark economic necessity justifies, with a cruelty that evokes the horrors of earlier industrial revolutions.

Abundant use is, however, also made of material incentives. As early as 1925 Stalin warned a congress of the Communist Party: ‘We must not play with the phrase about equality. This is playing with fire.’ Since then the egalitarian idealism of the early days of the Soviets has been repeatedly condemned as a heresy. Payment by results is the order of the day. Almost every year new elaborate measures are introduced, designed to widen discrepancies between rates of salaries and wages, to extend differential rates of payment into ever new branches of industry and to replace time rates by piece rates, bonuses and premiums. Towards the end of the war no less than 28 per cent of all payments made to technicians and skilled workers and eight per cent of all wages paid to ordinary workers consisted of premiums and bonuses. Since the war these percentages have risen still more. The Russian system of wages favours not only the skilled workers against the unskilled ones, but also the heavy manual workers against the men with the easy jobs. Finally, all rates of wages and salaries are about 50 per cent higher in eastern than in western Russia.

I should like to finish this survey with a brief remark on the economic aspect of what is commonly called the Iron Curtain. From the economic viewpoint – I am not speaking about the political side of the problem – the Iron Curtain represents an extreme variety of protectionism. No nation, with the peculiar exception of Great Britain, has built up a vast industry without at first sheltering it from the competition of older and stronger foreign industries by solid custom walls and all sorts of protectionist measures. It was in this way that Germany and the United States grew to their industrial maturity, even though both countries had been greatly assisted by the investment of foreign capital in their industry. The United States also benefited from the assistance of two such supreme protectionists as the Atlantic and the Pacific Oceans. Russia has not had any comparable advantages. If one looks at her present development through the prism of economic history, one cannot, I think, be greatly surprised by her drastic and relentless protectionism. Incidentally, what the Russian government has been shielding – often in a most bizarre manner – from foreign competition is not merely a young and still unconsolidated industry, but also a young and not yet fully consolidated social system. That is why her extraordinary protectionism has extended to ideas as well as commodities. The import of both has been strictly controlled or banned.

Every protectionism sacrifices the immediate interests of consumers for the sake of the country’s economic future. It denies the consumers cheap foreign goods, in order to enable the nation to produce as much as possible at home. This has been true also of Russia. The rigidity of her protectionism is by itself proof that on the purely economic ground Russia is not yet capable of competing with the most advanced capitalist countries. Only when her economic efficiency – her productivity of labour, to use Lenin’s expression – becomes equal, if not superior, to the efficiency of the most advanced capitalist countries, may she be willing to do away with the so-called Iron Curtain. She may, of course, soften some of the rigours of her protectionism even before that. ‘In the last analysis’, so Lenin argued, ‘productivity of labour is the most important, the principal thing for the victory of the new social system. Capitalism created a productivity of labour unknown under feudalism. Capitalism can be finally defeated and will be finally defeated by the higher productivity of labour that socialism will create. This is a very difficult matter and must take considerable time.’ Though nearly thirty years have elapsed since Lenin spoke these words and though Russia has since moved rapidly ahead, it is still true that for her to obtain that higher efficiency of which Lenin dreamed, is ‘a very difficult matter and must take considerable time’.