E.A. Preobrazhensky

From N.E.P. to Socialism


In Lecture hall No.1 of the Moscow Polytechnical Museum lectures have long been given for workers who, not content with what they learned at school, are continuing their education in their spare time. In 1970 lectures were given on the history of the great Russian revolution, and these attracted a large audience. The lectures, which were heard simultaneously by workers in other places, linked to Lecture-hall No.1 by radio, were given by Minayev, a professor of Russian history who was also a fitter in a railway workshop.

Minayev’s course of lectures began with the first Russian revolution (1905) and ended with the period of civil war in Europe. The historian not only taught his hearers how to use the methods of historical materialism in analysing the concrete facts of history but also conveyed to them a number of definite ideas about the period being studied – mainly economic ideas. His fifth lecture, given on May 13, began by describing the political and economic situation which existed in Europe after the first wave of proletarian revolution, in 1917-1920. We reproduce this lecture and those which followed it.

Lecture 5

European capitalism in a blind alley

COMRADES, in my last lecture I gave you a picture of the events which took place in 1918-1920. From the facts which I cited you were able to see that the first volcanic eruption of proletarian revolution proved not powerful enough to break through the social crust of capitalism throughout Europe. I tried also to explain to you why the revolution was unable to vanquish the bourgeois world in Europe at a single blow. But it would be wrong to underestimate the success actually achieved. The triumph of the proletarian revolution in Russia signified the passing of half Europe and one-sixth of the whole world under the rule of the workers. A war in which one of the combatants occupies a sixth of the enemy’s territory as a result of the first battle has not begun badly for this victorious combatant. But it would also be wrong to exaggerate the material results of this first stage of the revolution. If you compare the population of Soviet Russia of that time with the total population of the world, you will see that only one-fifteenth of man-kind were then under Soviet rule. Nor do the material results of the revolution appear any more important if we ascertain the relative weight of the economy of Soviet Russia in world economy. The net national income of Soviet Russia in the first years of the revolution did not exceed five milliard gold roubles, at pre-war prices, which constituted less than one-twelfth of the annual nation income of Europe and America, and therefore a still smaller share of total world production.

Nevertheless a breach had been made in the capitalist front, and a salient formed in the body of world capitalism in which the proletariat had secured the material possibility of gradually developing the pre-conditions necessary for socialist economy, The peculiarity of the political and economic situation in Europe in the 1920s consisted in the fact that capitalism could not stop up the hole made in it in the first stage of the revolution, and was obliged to adapt itself to the existence of the first Soviet state and the new property system, that is, social ownership--at least, in large-scale industry. While agreeing to tolerate the existence of the Soviet Republic, which it lacked the strength to crush, capitalism naturally looked on this situation as a temporary one, for it considered that Soviet power could not last long in Russia. History as you know, decided otherwise

How did all this happen, what forces led to the fresh out-break of workers’ revolution in Europe?

Let us begin by giving some attention to the economic situation in Europe after the first stage of the world revolution. Capitalism, saved from collapse but torn by internal contradictions, proceeded gradually to heal the wounds which it had received during the world war. It had to begin this task in a situation in which the volume of industrial production in Europe had shrunk by one-half. Capitalist Europe’s production could have escaped from this low level in a short time if all the elements needed for expanded production had been present. Among these elements were labour-power in sufficient quantity, instruments of production, adequate supplies of raw materials and adequate outlets for goods, the capacity of which would increase more or less in proportion to the increase of production.

As regards labour-power, this was available in the 1920s in great superfluity, in relation to the volume of production. Six million unemployed – that was the reserve army with which capitalism, politically restored, began its new cycle of development. So far as the instruments of production were concerned, they too were available to excess. Factories worked at half their productive capacity. No fresh accumulation of capital was needed, as normally, for resources for the fixed capital needed for expanded production to be obtained from this accumulation fund. This was all the more important in that situation because post-war Europe was not in a state to accumulate for expanded reproduction: on the contrary, it was even obliged to get rid of the capital accumulated in previous decades.

The two other conditions remained. Here the position was very unfavourable for capitalism. During the war, American industry had taken a gigantic step forward. At the same time native industry had developed strongly in the colonies and semi-colonies which before the war had been sources of raw material and markets for the products of European industry. As a result, the size of the market for European industry bad been markedly reduced, and also the amount of raw material available for Europe was lessened, because a substantial part of it was now worked up in America and the colonies. As a consequence of this new distribution of markets and sources of raw material within the world economic system, Europe’s industry found itself hemmed in and compelled to sink to a much lower basic production level than before the war. In pre-war European industry there had, of course, been a definite proportionality between the fundamental conditions of production, and if now the amount of raw material and markets available had contracted sharply and disproportionately as compared with the other elements of production, the old structure of industry could not be restored without restoring the old proportions. As the strength of a chain is determined by its weakest link, so Europe’s industry could not overstep in its development the dimensions dictated by the available sources of raw material and markets, but, on the contrary, was obliged to come into line with them. Russia’s departure from the world economic system rendered the situation still more acute, because it meant the loss of a huge market and a very rich source of raw material. Europe’s industry could have enlarged its sources of raw material and its markets by three methods:

  1. by drawing Russia into the world economic system, at the same time increasing the productivity of its agriculture;
  2. by increasing the purchasing-power of the population of Europe itself;
  3. by a new war, waged against America, which had ousted Europe from a number of areas important to her as markets or as sources of raw material.

Added to these difficulties were difficulties in respect of food supplies. Even before the war Europe’s industry had rested upon a slowly-developing agriculture, which led to an increase in the cost of foodstuffs. The production of grain became relatively dearer and dearer, while manufactured products became cheaper, as a result of the progress in industrial technique. And in its turn the slowness of technical progress in agriculture, by keeping up the price of grain, slowed down the process of cheapening manufactured products. Thus, even before the war, Europe’s industry was confronted with crisis approaching from this direction. The failure of the first Russia revolution (1905), which, had it succeeded, could have ensured a rapid development of Russian agriculture, closed this door in Europe’s face. The war mixed up all the cards, screening the grain crisis behind a number of other kinds of crisis. But the unsolved problem faced Europe afresh after the war. It was all the more serious because European agriculture had considerably reduced its production during the war, and the continent’s dependence on foreign grain had become still greater.

Europe could not find its way out of the situation through war with America because it was immeasurably weaker than America in all respects, not to mention the fact that it was impossible to form a united capitalist front against America. It was also impossible to increase the purchasing power of the population of Europe, and, especially, of the working class. Capital was driven to take the opposite course, to reduce wages in order to use the increased mass of surplus value to increase its purchases of raw material, which had risen in price. The need to extend its markets and its supplies of raw material by peaceful means led Europe to make use of what possibilities existed within Europe itself and in the colonies and to establish economic ties with Russia. The withdrawal of the Russian grain market from the European economic system thrust Europe into severe economic dependence on America, especially as regards food supplies and foreign exchange. Conversely, a restoration of the Russian grain trade would mean the establishment of a second large-scale competitive centre in the world grain trade, and so to cheaper grain. The inclusion of Russia in the European economic system would open to Europe the possibility of developing industry without transferring a considerable amount of capital and productive forces generally from industry into agriculture, which would have meant a lowering of the level of the entire economic system and of civilization in general. If a hundred million Russian peasants who in 1920 produced two milliard poods [1] of grain were in 1930 producing five milliard poods, this enlarged the food supply basis of European industry to a colossal extent. But the restoration of Russian agriculture, which, in the first years at any rate, got on to its feet more rapidly than Russian industry, enormously increased Russia’s demand for Europe’s manufactured goods.

From this we see, comrades, that the strength of Soviet Russia in the 1920s consisted above all in the weakness of Europe. The Achilles heel of European industry was Russia. And Russia was ruled by the revolutionary proletariat. If Russia were not drawn into the world economic system a rapid development of Europe would not be possible. The attempt of bourgeois Europe to turn Russia into a European colony by supporting civil war and intervention proved unsuccessful. It was necessary to choose other, peaceful, means. The first attempt in this direction was the Genoa Conference (1922), at which capitalist Europe wanted to arrange matters so that, in return for its inclusion in the world economic system – that is, for something which was a vital necessity for Europe itself – Russia should pay all the Tsarist debts, and compensation for the losses suffered by Europe’s capitalists through the nationalization of industry. The Soviet government did not agree to this, and subsequent events showed that it was quite right. More than that, events showed that Soviet Russia had underestimated its own strength. The capitalists of Europe were in much greater need of Soviet Russia than their diplomats made out – more, even, than bourgeois diplomats then realized. Under these conditions the stronger party was the one who could wait the longer. Russia could wait longer than capitalist Europe, and proved to be stronger.

But the development of Russia’s own productive forces also required close economic ties with Europe. Unlike the industrial countries of Europe, especially Britain and Germany, Russia was a country which possessed all the resources – economic, geographical and social – needed to develop as a self-sufficient economic organism. First, Russia possessed all the natural resources for creating a powerful industrial and agricultural economic organism. Coal, petroleum, peat, timber, iron and other ores, cotton – every kind of raw material except rubber: boundless possibilities of agricultural development and of increasing supplies of raw material of animal origin. Thus, the resources were there for rapid progress on American lines. But at the same time there was also a huge difference from America – which did not hinder but on the contrary helped the formation of a unified economic entity: namely, the socialist régime. At a certain stage of its industrial advance, the economy of capitalist America needed to expand its market base beyond the country’s frontiers. American industry and American agriculture became woven into the world economic system. America’s industry was always outgrowing its domestic demand, and inevitably broke out into the foreign market. Insofar as the driving force of the economy was profit, the distribution of the product proceeded only in the form of sales, and when sales proved impossible, expansion of production became point-less from the capitalist point of view. For a country like Russia, however, where natural potentialities for a self-sufficient economy were united with social potentialities (before the victory of socialism in other countries), the situation was different from what it was in America. External markets were not needed for the expansion of industry because every increase in production made more available for socialist distribution. To capitalist production the slogan ‘the more the merrier’ does not apply, for not everything that is produced can be sold. This slogan is appropriate to socialism, however, indeed it is its basic slogan, because every increase in production makes more available for every worker. True, socialist economy needs proportionality between its various sections, even more than capitalist economy does. However, this proportionality is achieved not through the market but on the basis of calculating the volume of potential demand. At any rate, for the industry of Russia at that time, working for internal demand, there could be no question of overproduction.

True this industry was not socialist in the full sense of the word, as our present industry is, and not all of its products entered into socialist distribution. Industry then still worked to a considerable extent for the internal peasant market, because petty independent peasant economy was the predominant form in agriculture. In order to buy grain and raw material, industry had to sell part of its production to the producers of grain and raw material. Overproduction was a danger only to the extent that in certain branches an excessive quantity might be produced of goods which were wanted neither by the peasants nor by the workers, while goods which they both needed were underproduced. But this is another question, to which I shall come back later, when I shall be speaking to you about the economic development of Russia in the period of transition from capitalism to socialism. Here I want to emphasize only one point. While needing an increase in the capacity of the peasant market internally, our industry had no need of external markets for its development because in socialist distribution within the circle of state enterprises, state workers and office-workers, it had an outlet-valve which took the place of the outlet-valve of a new external market for expanding capitalist industry.

But while possessing all the natural resources for a temporary isolated economic existence (before the proletarian revolution in other countries), Soviet Russia nevertheless also needed, in order to ensure the most rapid development of its productive forces, economic connexions with capitalist Europe. While the capitalist countries were urged towards Russia by the need to seek markets and supplies of raw material for their developed industry, Russia was urged towards Europe by the inadequacy of her industrial development, which, in turn, was held back by the disorganized state of agriculture. Without a sufficiently sound agriculture Russian pre-revolutionary capitalist industry could not have survived. Without a strong agriculture socialist industry could not develop rapidly. But for agriculture to get quickly on to its feet, it needed external help, it needed, and on a large scale, not only short-term commercial credit but, also, and mainly, long-term credit, credit for land-improvement and for the restoration of the economy. Russian socialist industry was not able to furnish this aid to agriculture on a large scale; it could not provide credit on any substantial scale because it was itself in need of help through credit. It lacked sufficient circulating capital, and had to a large extent worn out its equipment during the war and the revolution.

Only the richer industry of Europe could supply credit to Russian agriculture, in reviving which this industry was itself interested to a high degree. Thus, the economic situation in Europe in the 1920s took this form, that a mutual economic tie-up was needed for the development of the productive forces both in capitalist Europe and in socialist Russia, and the initial driving force of development in this period of Europe’s economic history necessarily had to be provided by a rapid, almost violent, development of Russian agriculture. As I have already said, European industry did not possess within Europe itself the preconditions for its rapid restoration without new markets and supplies of raw material beyond the bounds of this continent. As a result, the Russian countryside was in this period the axis of the economic advance of Europe. This was the line of least resistance for progress. How true this was can be seen from a simple economic calculation. Every step forward economically means an increase in new values created in the country, hundreds of millions or milliards annually, with all the consequences that follow from this: increase in the possibilities of productive accumulation, and so of building new factories and railways, extending production in existing factories, increasing the possibilities of personal consumption both for the capitalist class and for the workers, and so on. Imagine for a moment the whole economy of Europe in the 1920s as a unified entity, though it was this only to a limited extent. Imagine that it is a question of increasing in the shortest possible time the amount of values produced annually by Europe’s industry by, say, two milliard gold roubles. How would this be objectively possible under the conditions described above and while retaining the mechanics of the capitalist mode of production?

Let us assume that European capitalism obtains the means to buy the additional amount of raw material needed, and then locates and buys this raw material, something itself almost impossibly difficult to do in a short time. But it still needs to sell the manufactured products, that is, to find in a short time an additional selling outlet, though what is involved here is the realization of only part of the new product, since capitalism itself, as we know, creates internally the market for the rest. As neither the one nor the other can drop from the sky, but can appear only through gradual, step-by-step development of economic processes both inside and outside Europe, it is perfectly obvious that a rapid leap forward by European industry on the basis merely of its own production potentialities and the existing markets would be impossible. If Europe’s industry, in its drive to expand, were to produce two milliard excess values and could not realize them all, this would mean such a crisis, such a waste of scarce resources, and would cal) forth such a reaction against expansion in the whole industrial organism, that after such an experience this industry would be unable to sustain even the limited amount of production which existed before this development took place. The restoration of European capitalist industry would have been an exceedingly easy matter if each factory had not only begun to produce as much as before the war but had been able, first, to sell all it produced, and second, to sell it at prices which ensured the continuation of production. Because the fabric of world economy was torn as a result of the world war, a number of new preliminary economic processes proved necessary for the expansion of European industry.

Russian agriculture, however, needed little to achieve an increase in its annual production.

While Russian agriculture produced in the first years of the revolution about two milliard poods of grain, in 1922 an average harvest was sufficient to bring its production figure up to nearly three milliard poods. And to produce more than three milliard, to bring production up to four milliard (the pre-war production figure), it was necessary merely, first, to plough 25 per cent more land, which was available for working at any moment; second, to introduce a number of very simple improvements into peasant economy, none of them requiring any specially large expenditure (such as early first-ploughing of fallow, ploughing up of autumn ploughland, drill-sowing, and so on); third, replenishment of agricultural equipment; and, fourth, increase in the number of draught animals and transfer of these animals to the areas which had suffered most from their loss.

None of these measures required any changes in the actual structure of the peasant economy, still less in the structure of European economy. But, being put into effect, they substantially changed the entire economic situation in Europe. The European economy got moving again – though, as we shall see below, not for long – thanks to Russia, while Russia, if it had continued to be isolated in Europe, could have made progress even with-out capitalist Europe, though, of course, at a slower pace. In this is partly to be found the explanation of the fact, at first sight paradoxical, that economically backward Russia played such a decisive role in the history of Europe. On this point I must conclude my description of the general economic situation in Europe. In the next lecture I will survey the history of the economic development of Russia, the period which is called that of the New Economic Policy.


1. A Pood is a Russian measure of weight, about 36 lb. [Trans.]

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Last updated on 24.1.2009