From the foregoing there also emerge the following features of small production that merit attention. The appearance of a new industry signifies, as we have already observed, a process of growing social division of labour. Hence, such a process must necessarily take place in every capitalist society, to the extent that a peasantry and semi-natural agriculture still remain to one degree or other, and to the extent that diverse ancient institutions and traditions (due to bad means of communication, etc.) prevent large-scale machine industry from directly replacing domestic industry. Every step in the development of commodity economy inevitably leads to the peasantry producing an ever-increasing number of industrialists from their ranks; this process turns up new soil, as it were, prepares new regions in the most backward parts of the country, or new spheres in the most backward branches of industry, for subsequent seizure by capitalism. The very same growth of capitalism manifests itself in other parts of the country, or in other branches of industry, in an entirely different way; not in an increase but in a decrease in the number of small workshops and of home workers absorbed by the factory. It is clear that a study of the development of capitalism in the industry of a given country requires that the strictest distinction be made between these processes; to mix them up is to lead to an utter confusion of concepts.
In post-Reform Russia the growth of small industries, expressing the first steps in the development of capitalism, has manifested, and manifests, itself in two ways: firstly, in the migration of small industrialists and handicraftsmen from the central, long-settled and economically most advanced gubernias, to the outer regions; secondly, in the formation of new small industries and the spread of previously existing industries among the local population.
The first of these processes is one of the manifestations of the colonisation of the border regions to which we have referred (Chapter IV, § II). The peasant industrialist in the Nizhni-Novgorod, Vladimir, Tver, Kaluga and other gubernias, sensing the increased competition accompanying the growth of the population, and the growth of capitalist manufacture and of the factory that constitute a menace to small production, leaves for the South, where “artisans” are still few, earnings high and the living cost low. In the new locality a small establishment was set up which laid the foundations for a new peasant industry that spread later in the village concerned and in its environs. The central districts of the country, possessing an industrial culture of long standing, thus helped the development of the same culture in new parts of the country, where settlement was beginning. Capitalist relations (which, as we shall see below, are also characteristic of the small peasant industries) were thus carried to the entire country.
Let us pass to the facts that express the second of the above-mentioned processes. We shall first say that although we note the growth of small peasant establishments and industries, we do not as yet deal with their economic organisation: from what follows it will be evident that these industries either lead to the formation of capitalist simple co-operation and merchant’s capital or constitute a component part of capitalist manufacture.
The fur industry in Arzamas Uyezd, Nizhni-Novgorod Gubernia, began in the town of Arzamas and then gradually spread to the surrounding villages, embracing an ever larger area. At first there were few furriers in the villages and they employed numerous workers; labour was cheap, since people hired themselves out in order to learn the trade. After learning it they left and opened small establishments of their own, thus preparing a wider field for the domination of capital, which now controls a large section of the industrialists. Let us note in general that this abundance of wage-workers in the first establishments of a rising industry and the subsequent transformation of these wage-workers into small masters is a very widespread phenomenon, bearing the character of a general rule. Obviously, It would be a profound error to deduce from this that “in spite of various historical considerations . . . it is not big establishments that absorb small ones, but small ones that grow out of big ones.” The large size of the first establishments expresses no concentration of the industry; it is explained by the solitary character of these establishments and by the eagerness of local peasants to learn a profitable trade in them. As to the process of the spread of peasant industries from their old centres to the surrounding villages, it is observed in many cases. For example, the post-Reform period saw the development (as regards the number of villages involved in industry, the number of industrialists, and the total output) of the following exceptionally important industries: the lock and cutlery industry of Pavlovo, tanning and boot-making in the village of Kimry, the knitting of woollen slippers in the town of Arzamas and in its environs, the metalware industry of the village of Burmakino, the cap-making industry of the village and of the district of Molvitino, the glass, hat and lace industries of Moscow Gubernia, the jewellery industry of Krasnoselskoye District, etc. The author of an article on handicraft industries in seven volosts of Tula Uyezd notes as a general phenomenon “an increase in the number of artisans since the peasant Reform,” “the appearance of artisans and handicraftsmen in places where there were none in pre-Reform times.” A similar view is expressed by Moscow statisticians. We can support this view with statistics regarding the date of origin of 523 handicraft establishments in 10 industries of Moscow Gubernia.
Similarly, the Perm handicraft census revealed (according to data showing the time of origin of 8,884 small artisan and handicraft establishments) that the post-Reform period is characterised by a particularly rapid growth of small industries. It will be interesting to take a closer glance at this process of the rise of new industries. The production of woollen and semi-silk fabrics in Vladimir Gubernia began recently, in 1861. At first this was a peasant outside occupation, but later “subcontractors” made their appearance in the villages, who distributed yarn. One of the first “factory owners” at one time traded in groats, buying them up in the Tambov and Saratov “steppes.” With the building of railways, grain prices were levelled out, the grain trade became concentrated in the hands of millionaires, and so our merchant decided to invest his capital in an industrial weaving enterprise; he went to work in a factory, learnt the business and became a “subcontractor.” Thus, the formation of a new “industry” in this locality was due to the fact that the general economic development of the country was forcing capital out of trade and directing it towards industry. The investigator of the industry we have taken as an example points out that the case he has described is by no means an isolated one: the peasants who earned their living by outside employments “were pioneers in all sorts of industries, carried their technical knowledge to their native villages, got new labour forces to follow their example and migrate, and fired the imagination of the rich muzhiks with stories of the fabulous profits which the industry brought the workroom owner and the subcontractor. The rich muzhik, who used to store his money away in a chest, or traded in grain, paid heed to these stories and put his money into industrial undertakings” (ibid.). The boot and felt industries in Alexandrov Uyezd, Vladimir Gubernia, arose in some places in the following way: the owners of calico workrooms or of small yarn-distributing shops, seeing that handweaving was declining, opened workshops of another kind, sometimes hiring craftsmen so as to get to know the trade and to teach their children. To the extent that large-scale industry forces small capital out of the branch of production, this capital flows into others and stimulates their development in the same direction.
The general conditions of the post-Reform period which called forth the development of small industries in the rural districts are very vividly described by investigators of Moscow industries. “On the one hand, the conditions of peasant life have greatly deteriorated during this period,” we read in a description of the lace industry, “but on the other, the requirements of the population, of that part which lives under more favourable conditions, have considerably increased. And the author, using the data of the region he has taken, notes an increase in the number of those owning no horses and raising no crops, side by side with an increase in the number of peasants owning many horses and in the total number of cattle belonging to peasants. Thus, on the one hand, there was an increase in the number of persons in need of “outside earnings” and in search of industrial work, while on the other, a minority of prosperous families grew rich, accumulated “savings,” and were “able to hire a worker or two, or give out work to poor peasants to be done at home.” “Of course,” the author explains, “we are not dealing here with cases where individuals who are known as kulaks, or blood-suckers, develop from among such families; we are merely examining most ordinary phenomena among the peasant population.”
So then, local investigators point to a connection between the differentiation of the peasantry and the growth of small peasant industries. And that is quite natural. From the data given in Chapter II it follows that the differentiation of the agricultural peasantry had necessarily to be supplemented by a growth of small peasant industries. As natural economy declined, one form of raw-material processing after another turned into separate branches of industry; the formation of a peasant bourgeoisie and of a rural proletariat increased the demand for the products of the small peasant industries, while at the same time supplying free hands for these industries and free money.
 Here is an interesting example of how these two different processes occur in one and the same gubernia, at one and the same time and in one and the same industry. The spinning-wheel industry (in Vyatka Gubernia) is ancillary to the domestic production of fabrics. The development of this industry marks the rise of commodity production, which embraces the making of one of the instruments for the production of fabrics. Well, we see that in the remote parts of the gubernia, in the north, the spinning wheel is almost unknown (Material for a Description of the Industries of Vyatka Gubernia, II, 27) and there “the industry might newly emerge,” i.e., might make the first breach in the patriarchal natural economy of the peasants. Meanwhile, in other parts of the gubernia this industry is already declining, and the investigators believe that the probable cause of the decline is “the increasingly widespread use among the peasantry of factory-made cotton fabrics” (p 26). Here, consequently, the growth of commodity production and of capitalism is manifested in the elimination of petty industry by the factory.—Lenin
 See, for example, S. A. Korolenko, loc. cit., on the movement of industrial workers to the outer regions, where part of them settle. Transactions of the Handicraft Commission, Vol. I (on the preponderance in Stavropol Gubernia of industrialists from the central gubernias), Vol. III, pp. 33-34 (the migration of boot-makers from Viyezdnaya, Nizhni-Novgorod Gubernia, to the Lower-Volga towns); Vol. IX (tanners from the village of Bogorodskoye in the same gubernia established tanneries all over Russia). Industries of Vladimir Gubernia, IV, 136 (Vladimir potters carried their trade into Astrakhan Gubernia). Cf. Reports and Investigations, Vol. I, pp. 125, 210; Vol. II, pp. 160-165, 168, 222 for general remarks on the preponderance “all over the South” of industrialists from the Great-Russian gubernias.—Lenin
 Transactions of the Handicraft Commission, III.—Lenin
 For example, the same thing has been noted in the dyeing industry of Moscow Gubernia (Industries of Moscow Gubernia, VI, I, 73-99), in the hat (ibid., VI, Pt. I), in the fur (ibid., VII, Pt. I, Sec. 2), in the Pavlovo lock and cutlery industries (Grigoryev, loc. cit., 37-38), and others.—Lenin
 Mr. V. V. hastened to draw this conclusion from a fact of this kind in his Destiny of Capitalism, 78-79.—Lenin
 A. Smirnov: Pavlovo and Vorsma, Moscow, 1864.—N. Labzin: An Investigation of the Cutlery Industry, etc., St. Petersburg, 1870.—Grigoryev, loc. cit.—N. Annensky, Report, etc., in No. 1 of Nizhegorodsky Vestnik Parokhodstva i Promyshlennosti [The Nizhni-Novgorod Steam-Shipping and Industrial Journal ] for 1891.—Material of Zemstvo statistics for Gorbatov Uyezd, Nizhni-Novgorod, 1892.—A. N. Potresov, Report in the St. Petersburg Branch of the Loan and Savings Society Committee in 1895.—Statistical Chronicle of the Russian Empire, II, Vol. 3, St. Petersburg, 1872.—Transactions of the Handicraft Commission, VIII.—Reports and Investigations, I, III.—Transactions of the Handicraft Commission, VI, XIII.—Industries of Moscow Gubernia, VI, Pt. I, p. 111, ibid., 177; VII, Pt II, p. 8.—Historico-Statistical Survey of Russian Industry, II, Col. VI, Industry 1.—Vestnik Finansov, 1898, No. 42. Cf. also Industries of Vladimir Gubernia, III 18-19 and others.—Lenin
 Transactions of the Handicraft Commission, IX, 2303-2304.—Lenin
 Industries of Moscow Gubernia, VII, Pt. I, Sec. 2, 196.—Lenin
 The data on the brush, pin, hook, hat, starch, boot, spectacle frame, harness, fringe and furniture industries have been selected from the handicraft house-to-house census material quoted in Industries of Moscow Gubernia and in Mr. Isayev’s book of the same title.—Lenin
 Industries of Vladimir Gubernia, III, 242-243.—Lenin
 In his researches into the historical destiny of the Russian factory, M. I. T.-Baranovsky showed that merchant’s capital was a necessary historical condition for the formation of large-scale industry. See his The Factory, etc., St. Petersburg, 1898.—Lenin
 Industries of Vladimir Gubernia, II, 25, 270.—Lenin
 Industries of Moscow Gubernia, Vol. II, Pt. II, p. 8 and foll.—Lenin
 The fundamental theoretical error made by Mr. N.-on in his arguments about the “capitalisation of industries” is that he ignores the initial steps of commodity production and capitalism in its consecutive stages. Mr. N.-on leaps right over from “people’s production” to “capitalism,” and then is surprised, with amusing naïvety, to find that he has got a capitalism that is without basis that is artificial, etc.—Lenin
 In the middle of the 19th century, the knitting of slippers with designs in coloured wools was widespread in Arzamas and its outskirts. In the 1860s ten thousand and more pairs of knitted footwear were made annually in the town, the Nikolsky Convent and the village of Viyezdnaya Sloboda. The wares were sold at the Nizhni-Novgorod fair, and from there were dispatched to Siberia, the Caucasus and other parts of Russia. [p. 341]