E.A. Preobrazhensky

From N.E.P. to Socialism

Lecture 6

Russia’s economic system after the end of war communism
The restoration of agriculture in Russia in the first decade of NEP

IN THE period of so-called ”War Communism”, which lasted until the spring of 1921, the economic structure of Soviet Russia was simpler than it became subsequently. If we leave out of account the nomads (Kirghiz, Kalmucks, Buryats, etc.), there were two different types of economy existing in the country – socialist large-scale industry, orientated towards planned production and planned distribution of products, and the petty production of the peasants and craftsmen, with a system of distribution through the market. The Soviet state’s attempt to establish a system of compulsory distribution of agricultural produce without changing the petty-bourgeois production system itself ended in failure. Instead of the compulsory removal of surplus agricultural produce from the countryside and its planned distribution along with the products of urban industry, that is, instead of the adaptation of petty-bourgeois production to the system of large-scale socialist production, it was now necessary, on the contrary, to adapt large-scale state production to the market distribution of petty commodity economy. Socialist production now faced the task of subordinating petty peasant and craft production to itself on the basis of market distribution, that is, first and foremost, by the methods of large-scale capitalist economy. This inevitably entailed the appearance of a great variety of forms in the entire economic organism of the country. Large-scale state industry to a considerable extent began to work for the market. But the state economy as a whole did not cease, nevertheless, to be to a certain extent a planned economy. Only planning now had to take place in conformity to the market, and all planning drafts were inevitably very approximate. This was what led to the diversity in the economy. Alongside organs of capitalist regulation such as the state bank and the network of credit institutions subordinated to it, alongside the stock exchanges, syndicates and so on, there existed organs of planned state guidance of the economy such as the State Planning Commission, the Supreme Council of the National Economy, the People’s Commissariat of Food, the organs of planned distribution of wages (Tsekfond, the Supreme Rate Fixing Council). The diversity was all the more enhanced because, together with purely state enterprises, mixed state-capitalist companies and enterprises began to arise, and then co-operative societies, which not only played a very big part in the sphere of distribution but also controlled many manufacturing enterprises. One after another, concessionaire enterprises began to appear, with foreign capital invested in them. Private capital developed and consolidated itself in the sphere of trade and gained control mainly over small and medium retail trade. Finally, the predominant form of economy was petty peasant economy in the countryside and petty craft economy in the towns. At the very lowest level was the patriarchal economy of the nomads in the borderlands. Some people tried unsuccessfully to give the name ”state capitalism” to this variegated and mixed type of economy as a whole. The name was inappropriate because it completely failed to embrace the whole diversity of economic inter-relations, and was stolen from another economic form, real state capitalism, that is, a system in which the capitalist state is interlocked with private capitalist production organized in trusts and headed by the banks. The capitalism which then existed in Russia, and which grew up mainly on the soil provided by private trade, was very little ”state” in character, and the state had nothing in common with capitalism, as it was an organization of the proletariat for smashing capitalism. This mixed type of economy can be depicted in the form of a pyramid divided into sections, with the main section (four-fifths of the value of total annual production) consisting of two dozen million petty-bourgeois enterprises, with a stratum of patriarchal-tribal economy. Above this petty-bourgeois foundation arises a very much narrower zone of small and medium capitalist enterprises in trade and industry, not regulated by the state, and then a still narrower zone of capitalist enterprises under state regulation (mixed companies, etc). Still higher, a zone of co-operative production and co-operative exchange; and, finally, the topmost section of the pyramid, a block of socialist relations, which are not predominant but which are struggling to become pre-dominant. Taken as a whole, this entire system can be called in accordance with its two fundamental links, the upper, socialist link and the lower, petty-commodity production link a commodity-socialist system of economy.


At first all these different types of economy could not be delimited one from another; they did not occupy definite positions in relation to each other and they had not established close economic Lies with each other. Later, this was achieved, and fairly quickly. Large-scale industry and transport remained almost completely in the hands of the proletarian state, while medium industry was divided into two halves, one state and the other private, mainly on the basis of the leasing of enterprises from the state by private persons, artels [1] and co-operatives. Wholesale trade was to a large degree in the hands of state trading organs, mixed trading companies and co-operatives, and only partly in those of private merchant capital. In other words, large-scale trade was to a considerable extent socialized, or subordinated to the state either directly or indirectly. Small-scale trade, on the other hand, was mainly in the hands of private capital, and partly in those of the co-operatives. Nearly the whole of agriculture and small-scale industry was in the hands of independent commodity producers.

These types of economy began to become linked up mainly through trade. In the period of war communism there was a sharp split between large-scale state industry and peasant economy. A particular factory, say a footwear factory, would surrender its entire production to the state. This production went in an overwhelming extent to the army, or was distributed among the workers as working boots, and so on: only a small part found its way into the countryside. Even then it was not distributed according to the principle that he who had given most grain to the towns should receive most of the town-produced commodities, but often on the opposite principle: he who was poor and had been exempted from the compulsory deliveries of farm-produce had a greater chance of obtaining the manufactures than the kulak who had given his surplus to the towns. This slender link between urban industry and agriculture was realized through the state. No more direct link between peasant economy and large-scale industry existed, unless one takes into consideration the sale by the workers of a small part of the products which they received as wages, and also what was embezzled and illegally sold to the rural population.

Under the new economic policy, on the contrary, the same factory was connected by hundreds of threads with peasant economy and with individual enterprises both state and private. In the first place, this factory, forming a unit in a textile trust, the production programme of which was laid down by the State Planning Commission, with credit supplied by the State Bank, was incorporated in the system of socialist state economy. But at the same time it had lively connections also with the non-socialized part of the economy: it sold printed cotton cloth to the peasants through co-operatives, it bought grain or flax from them, it nourished private trade with these cottons, and through this and through the co-operatives it was linked with private enterprises of every kind; the factory obtained cotton from the indigenous peasants of Turkestan; and so on. And in just the same way an entrepreneur with a leased soap-boiling works, while constituting a unit in the non-socialized section of the economy, was nevertheless incorporated in the economic system as a whole. He sold his soap not only to peasants but also to state institutions, he bought raw material not only from peasants but also from the state wholesale depot, he transported his goods by the state railway, he borrowed money from the state bank or from a credit institution connected with the state bank. In this way, economic systems which were different and which were virtually antagonistic in their tendencies were interlocked economically.

You will certainly be interested to know how the socialist form of economy, in this medley of different economic forms, became the predominant one, at first subordinating the rest to itself and then absorbing them all in itself. This predominance was obtained by long and stubborn struggle, and even in the first stage the victory did not come by the spread of the socialist economic form as such.

There was a period when large-scale industrial production, having just left the stage of war communism, wallowed about rather helplessly in conditions of exchange of commodities for money. It was sometimes beaten by petty artisan production, just as sometimes a powerful bear can be reduced to exhaustion by a pack of little dogs. They robbed it and mocked it; some of the former capitalists, ensconced in positions of industrial management, did everything they could to inflict harm on large-scale state industry and to profit by the inability of the workers to manage all aspects of the economy, and especially their inability to conduct the trading side. The workers in large-scale industry sometimes earned less than the workers in craft production, not to mention the independent artisans. In those days one heard panicky and defeatist exclamations even among a certain section of the Communists – true, only a very small section, and composed exclusively of intellectuals: ‘we should give back more, if not everything, to the capitalists, in the form of leases, because we can’t cope, anyway’. But they did not at the time so much write about this as think it to themselves, as memoirs from this period reveal to us. However, this critical period was lived through. Large-scale production got on its feet, and bit by bit the small fry respectfully made way for it – the people who up to that time had lived by predatory waste of labour-power, stealing from large-scale industry, through their almost monopolistic position on the free market.

In the first years of the New Economic Policy the country’s economy was striving, in an unplanned way, to recover its pre-war positions. The proportions of pre-war economy provided the model in relation to which all economic life was built up. With, of course, the difference that now the entire summit of production, that is, large-scale industry and transport, the entire credit system and part of wholesale trade was in the hands of a new class and the mode of regulating the economy was historically higher than under capitalism.

I have already told you what positions were occupied in the country’s economy by the different economic forms. Now a progressive advance from these positions began. In the first years, the changes in the economy were rather of a quantitative kind: only later did quantity pass over into quality. The economic forms I have described, which had been established in the period of War Communism, were filled with content. The forms themselves began to change only in the second period of development of the economy, when they proved to be too narrow for further advance.

Already in the first economic year the dependence of industrial development on the progress of agriculture became clear. There were months when, despite the frightful goods famine and the exhaustion of all commodity reserve-stocks in the country, especially in the countryside, large-scale industry, as a result of the harvest failure, was unable to dispose of its products, a situation not to be explained merely by the inefficiency of the trading apparatus. A further development of industry was possible only on condition that its agricultural basis be enlarged. Experience showed that when the country’s entire agriculture produced two milliard poods of grain, industry could exist only with one foot in the grave. True, the most important branches of industry and transport obtained the bulk of their foodstuffs not so much by way of purchases from the peasants as from the resources provided by the tax in kind. But the amount collected by the tax in kind also depended mainly on the amount produced by agriculture as a whole.

The favourable harvest of 1922 opened a period of progress by the entire economy. Essentially, elements of this advance were observed already in 1921, but the famine disrupted the process and did not permit industry to begin turning over rapidly and without interruptions by the autumn of 1921.

In 1922 800 million more poods of grain were harvested than in the previous year. This meant that industry could expand considerably beyond the limits of 1921, in so far as this expansion would not be dependent on other conditions, such as the availability of raw materials, fuel and so on.

Peasant economy began to recover fairly speedily. After being reduced by nearly 30 per cent of pre-war, the sown area began to increase from year to year. In the northern regions of the country, land never before cultivated was brought under the plough. The success of the first elementary improvements in cultivation for which the People’s Commisariat of Agriculture had agitated increased the peasants’ confidence in agronomic science and stimulated great interest in further improvements. Furthermore, shoots of a new agricultural way of life began to break through by fits and starts on various holdings and in various districts; this being facilitated by the transition of the peasant communities to separate settlements and individual farmsteads. The economy also progressed in those communes and artels which had not disintegrated under the influence of NEP. After the success of the first large-scale campaigns for early first-ploughing of fallow, ploughing of autumn-ploughed land, drill sowing, and sowing of drought-resistant crops, a struggle began in the South and South-East for going over on a mass scale from the three-field to the multi-field system, making use of the increasingly wide diffusion of the growing of root crops, which facilitated cattle-raising, increased the milk yield of dairy cattle and increased the amount of animal manure; and here and there, on some holdings, cultivation in beds and sowing in strips took root. In a thousand ways, new information on improving cultivation made its way into the countryside. The agricultural campaigns of the People’s Commisariat of Agriculture, articles in the newspapers, in agricultural journals, pamphlets on farming subjects, successful experiments on the State Farms, lectures by agronomists, agricultural exhibitions organized by districts and also on an all-Russia scale, the initiative of Red Army men who had attended agronomic lectures during their service, the initiative of former prisoners of war who had seen and mastered the advanced farming methods in Germany and Austria – from all these sources the new knowledge which was needed percolated into the rural areas. This knowledge fell on fertile soil, which had been ploughed up by the great workers’ and peasants’ revolution. The world war, the revolution and the civil war had thrown millions of people this way and that, widening their horizons and radically changing the stagnant, conservative psychology of the Russian peasant. The villages woke up not only to political life but also to new agricultural methods. While during a century previously the way in which the overwhelming majority of the peasants worked the land had hardly changed, now a complete revolution occurred in a single decade. The peasantry were seized by desire to extend the sown area and increase crop capacity; the famine in the Volga region had a certain positive significance in the sense that it powerfully enhanced the interest among the mass of the peasants in all measures which would make drought less dangerous to their economy.

A most potent stimulus to enlarging the sown area and increasing crop capacity was the rapid development of the urban commodity market and of foreign trade. In the period of War Communism the peasant not only had no right to sell grain, because all surpluses had to be surrendered to the state, but in the majority of instances he had no special interest in selling it anyway, as the urban market could not offer him a selection of the goods he needed. Together with malnutrition due to harvest failure as a result of the disruption of the economy, the opposite phenomenon was also to be observed in the countryside: a striving by the peasants to consume everything they produced, because it was almost impossible, or unprofitable, to sell grain and buy the goods they needed. Now, however, every extra pood of grain sold for money made possible additional purchases on the market of all the things that the peasant needed. Furthermore, the turnover of foreign trade increased with every year that passed. The peasants were now in a position to buy foreign articles as well, especially agricultural machinery. Demand and prices increased together for agricultural raw materials and technical crops, especially for flax, hemp, wool, hides and so on. This demand proceeded not only from developing native industry but also from foreign industry. And this in its turn exerted a very great influence on the restoration of those crops which had begun to fall into decline, that is, in particular, technical crops. These crops had been ousted in the North and the North-West during the civil war by grain crops, because flax and hemp could not be sold even at cost price, and at the same time it was difficult to get grain. Instead of buying grain and selling technical crops, the peasants of the North and North-West went over to growing grain crops in place of technical crops. This could continue so long as industry was in a state of disintegration and the old stocks were sufficient for that part of industry which was working, and so long as there was no foreign trade, owing to the blockade. Now, however, began the restoration in their pre-war proportions of the processing of technical crops and the trade in them with foreign countries: the prices of these products increased and the peasant economy in the regions mentioned began to go back to growing technical crops. And just because during the famine years the cultivated area in these regions had generally increased in comparison with pre-war, this opened up the possibility for these districts, now that there was an adequate supply of grain, not only to attain their pre-war level of production of technical crops but to exceed it. This redistribution of crops in agriculture as compared with the period of War Communism led to the position that the Northern and North-Western regions produced economically more profitable technical crops while the Central Black-Earth Region, the South and the South-East specialized entirely in grain crops. In just the same way the cultivation of cotton was restored in Turkestan, after having been ousted by grain during the famine years. Altogether, Russia’s agriculture, thanks to uninterrupted expansion of the sown area and improvement in cultivation, began to increase its production by about 10 per cent annually. This successful restoration of agriculture made possible the development of industry on a firm basis, and at the same time the export of grain abroad on a large scale.

The biggest obstacle to the development of agriculture in the grain-growing districts was the shortage of cattle and the repeated harvest-failure in some parts. The famine in the Volga region and in Southern Ukraine led to especially big ravages among draught animals. All this called for extraordinary efforts on the part of the Soviet power in the direction of mass-scale purchase and distribution of these animals. Horses were bought not only in the districts where nomads carried on animal husbandry (which had also contracted owing to the dearth of fodder) but also in all the other parts of the Republic. The shortage of farm animals also had two results which were completely different from the economic standpoint. On the one hand it evoked an enormous interest among the peasants in motor traction and transport, which began to be used with great success in the fields of the South and South-East. Here arose the first large-scale agricultural concessionaire enterprises, mainly financed b\ German capita], and the ‘colonial’ immigration of unemployed European workers. On the other hand, the purchase by the Soviet Government of tractors for horseless peasant households was increased. A large number of tractor squads were formed, which ploughed the peasants’ land on the basis of definite contracts with the Government. The shortage of motor-drivers was overcome, on the one hand, by the influx of skilled foreign workers who emigrated to Russia partly under the influence of unemployment at home and partly for class and ideological reasons; and, on the other hand, by the development of technical vocational education in Russia itself. At first the S.R. and Narodnik circles among the agronomists and economists showed an ironical and sceptical attitude to the possibility of developing motor traction and transport in Russia, all the more because success in this direction sounded the knell of all their reactionary petty-bourgeois hopes concerning the viability of individual petty economy. But the years of intense expansion of motor traction and transport proved the complete possibility of its application in Russia, especially in the South-East, which area is not only favourable to the use of the motor car owing to physical conditions but also lies along the route by which petroleum is transported from Baku up the Volga.

The lack of farm animals produced another, contrasting tendency in the peasant household, which rejoiced the heart of all the petty-bourgeois utopians. Where there were neither enough draught animals nor tractors, the peasant household took a temporary turn towards the Chinese type of farming or a type of suburban market-gardening. In these areas they began to practise the cultivation of wheat in beds. The plough was often replaced, in the absence of horse-traction, by an iron spade and a mattock. On the wonderful black earth this sort of cultivation gave excellent results from the standpoint of crop-yield per desyatin [2], but on the other hand it led to a contraction in the sown area and the transformation into waste-land of the parts of land which were left uncultivated. But this system of economy could not persist for long. As soon as each household acquired a horse it gave up this system, retaining only some positive aspects of this intensive cultivation for a small part of the sown area.

Thus we see that the first period in the development of agriculture, which we have described, consisted above all in the restoration of peasant farming to its pre-war positions, and in a number of elementary improvements which had not been practised in the countryside before the war. The only exception was the areas where the use of motor-vehicles was developed and where the peasants succeeded in going over to the multi-field system of economy. On the whole, the technical base of petty peasant economy remained the same as before.

But all this progress demanded enormous efforts by the peasants themselves and by the Soviet Government. Most serious help was rendered by the Soviet Government to the peasant economy in the form of seed-loans, especially in the areas where the harvest failed, and in the form of long-term agricultural credit. This credit played a very big role both in reviving peasant economy, especially its weaker sections, and in establishing the closest economic ties between peasant economy and the large-scale industry and banking system of the Soviet Government. The credit was at first not large, but it increased with every passing year, especially when foreign capital was drawn into the work. Long-term credit was at first provided through a special long-term credit department of the State Bank. Later this department was transformed into a special agricultural joint-stock bank, in which the chief role, after the State Bank’s, was played by the People’s Commissariat of Agriculture. Its shareholders were also those trusts whose products were supplied on the basis of long-term credit to the peasants, especially the trust grouping agricultural machinery works and artificial fertilizer factories. The agricultural bank distributed sums of money and also goods in kind – for example, agricultural machinery and artificial fertilizers. When the state currency was still unstable, it was absolutely necessary for the bank, so as not to lose big sums by the fall in the value of the rouble, to have its loans repaid not in depreciated paper money but in actual agricultural products, equivalent in value to the loan advanced, plus a percentage. But this form of remuneration was reasonable not only because of the fall in the value of money – it also possessed an important economic justification of a general kind. The system of loans in kind and repayments in kind led to the elimination of private commercial middlemen between the peasants and large-scale state industry. Both parties benefited from this system, since the potential profit of the private middleman remained in the pockets of the state and the peasantry. This link between the peasants, on the one hand, and state industry and the state bank, on the other, was retained even after the paper currency had been stabilized. As a result, the state began to receive, in addition to the tax in kind, without any intermediaries, an ever-increasing amount of agricultural produce, and receipt of this produce was guaranteed to it even in years when harvests were not particularly good. This was a more or less stable fund on which developing industry could rely, together with the tax in kind. The agricultural produce received by the bank did not, of course, only go to pay for the products of those factories which worked for the peasantry; it was distributed among all the industrial enterprises which had dealings with the bank, whether directly or through the bank of trade and industry. The raw material received from the peasants in accordance with loans was partly distributed among state enterprises and partly went into the foreign trade fund. From this source the state bank obtained foreign exchange which enabled it to meet its obligations abroad. The position was that the state bank which advanced credit to peasant economy itself received credit from large-scale foreign capitalist firms, especially those which marketed in Russia goods which were required by the peasants. Foreign capital, which at first endeavoured to establish direct links with the countryside, was obliged in the end to resort to a form of economic relationship with Russia’s peasantry which was realized through the organs of the Soviet state; in the given instance through the bank of long-term credit. The resources of the state bank, together with those of industry, plus foreign credit and special loans, made up the fund for long-term credit to the Russian countryside. The tie between the peasant economy and industry through the banking system, or the smychka (bond), as Lenin called it, developed slowly at first and was at the beginning insignificant in comparison with the volume of ordinary trade between town and country through the co-operatives and the private trading system. Within a few years, however, this tie began to assume increasing importance and proved itself a more progressive form of distribution than all the other forms of exchange in the socialist commodity system of economy.

Trade on credit and credit in general (including credit for land-improvement) was found to constitute a most advantageous means of influencing peasant production as a whole. The influence of the socialist state on the peasant economy, which had failed in the form of the confiscation of surpluses in the war communism period, proved to be more viable in this new form, which was completely comprehensible and acceptable to the peasants. The receiver of loan repayments gradually became the controller of the kind of produce received, and the customer to whose needs and requirements the peasant economy had to adapt itself.

You will ask what were the intermediate links between the long-term credit bank and the peasant economy.

The role of lower links was played by credit societies and also by special organizations of the receivers of credit which were formed by the state bank and its local branches, organizations which arranged for the distribution of credit and checked on the making of repayments. At the start, petty-bourgeois and reactionary Narodnik elements tried to organize credit co-operatives on unified, centralized lines, and to counterpose them to the state organs.

Very soon, however, practical experience revealed that the leading organs of these organizations, and also those of the agricultural co-operatives, were quite useless ballast between the state, as producer, and the peasantry, as purchaser, of agricultural machinery, fertilizers and other industrial products. Furthermore it became apparent that these leading organs were engaged in political intrigue, and served to facilitate not unity but disunity between the country and the town. The existence of these leading organs clashed with the basic principle of cooperation itself, namely, to do without any superfluous middlemen between producers and consumers. In this particular instance, moreover, the credit co-operatives themselves had utterly insignificant resources of their own and could not sur-vive without the credit offered by the state-producer and by foreign capital, especially in the period when the currency was unstable. Credit societies, peasant associations of receivers of credit and other kinds of co-operative constituted the organizational intermediary mechanism which joined the peasant economy to large-scale socialist production. Thanks to this apparatus, and also to the ramified system of the banking inspectorate, the risk undertaken by the agricultural bank in its credit operations in the rural areas was reduced to a minimum.

In concluding my description of agriculture in this period, I must say a little more about the social grouping in the countryside which were then to be observed. With the transition to the New Economic Policy, class contradictions in the countryside naturally began to sharpen. That section of the kulaks which had not been finally destroyed by the policy of the Committees of the Poor in 1918 began to revive. In addition, a stratum of well-to-do elements emerged from among the middle peasants. The economically stronger section of the middle peasantry took this road – those who possessed sufficient animals and implements and who at the start benefited by all the advantages of the New Economic Policy. With the opportunities now opened for trade in agricultural produce, the kulaks and this section of the middle peasantry were the first to throw themselves into extending the sown area and they formed the first cadres of agricultural production for the market, which had almost disappeared after the October revolution. [Translator’s note: Here a line is missing from the text, which continues, after repetition of an earlier line] of high prices for grain, it was precisely these strata that most successfully utilized the favourable situation on the grain market. At the time when the entire peasantry was filled with desire to extend the sown area, only this section of the rural population had the maximum material possibilities of carrying out such an extension. At first a tendency to favour isolated farmsteads was observed in this group, an aspiration to have their land separately and along with this a strong endeavour to improve methods of cultivation. The weak or quite impoverished part of the peasantry, most of whom had no horses, were in a different situation. Wishing to retain their holdings at all costs, the weak section of the peasantry had to hire horses, obtain loans of seed, and so on, from the first group, and in this way they fell into serious economic dependence on the well-to-do elements in the countryside. That section of the poorest peasantry which was unable to work its strips of land leased these strips to the neighbouring peasants. These poor peasants were in part transformed into workers employed for wages by the kulaks, or else they went to the towns [sic] to find some kind of work for the state, such as timber-felling, floating timber, repairing railway tracks, and so on. With the support of the agricultural bank, a considerable section of the weaker peasants got on to their feet and turned into middle peasants. Another section, however, tumbled down into the ranks of the poor, and began to recover economically only in the next period, when the mass development of complete agricultural producers’ co-operatives began. Middle-peasant holdings constituted the main feature of the countryside. The economy of this fundamental stratum of the rural population had been extremely badly shaken during the civil war and the period of repeated harvest failures, but now, in years of good harvest, it began to recover. The middle peasants also benefited to some extent from high grain prices, though they sold very little, owing to the insignificant amount of their surpluses. This stratum showed great interest in Co-operation, but as regards improving methods of cultivation it proved on the whole more conservative and less lively than the first group, that of the well-to-do.

This stratification of the rural population and the marked separation from the rest of the economically strong and well-to-do elements, and also the development of wage-labour in the countryside, could not, however, assume such a scale and such forms as might have led to the emergence, if not of large then at any rate of medium capitalist enterprises (we are not talking, of course, about the large-scale capitalist agricultural enterprises of the foreign concessionaires). The reasons were these. First, the political rule of the proletariat in the towns, which gave support to the poor strata of the rural population against the rich and mitigated the exploitation of the former by the latter. The state organs restricted by legislative means the exploitation of the poorest rural sections, annulled enslaving contracts and thereby obstructed the process of capitalist accumulation. Then the state imposed progressive income taxation not only in the towns but in the countryside as well, thereby making use of capitalist accumulation at one of the poles of rural life for what was called primitive socialist accumulation. Finally, the third reason was the slowness of this whole process; even in conditions favourable to agricultural capitalism it usually dragged out over many decades. In the case we are considering, history did not allow a long time for this process, because in the second part of the period we are studying there began the organic influence of large-scale urban production and of electrification upon petty peasant economy, as a result of which a process began of transformation of the entire technical basis of the peasant economy as a whole. Under these conditions, the process of capitalization was driven into a blind alley, as a result of mass organization of the agricultural producers into co-operatives. But we are getting a bit ahead of ourselves, and so let us turn back to the period under examination and see what happened with the state farms and collective farms.

State farms, organized on a business basis, after a few years of development under normal conditions, very soon established themselves soundly and began to play a very big role, especially in helping and improving peasant economy generally. Nearly all of them produced improved seed, and by exchanging their grain for that produced by the peasants they made possible to a very great extent an improvement in the crop-capacity of the peasant holdings. They acquired nurseries of improved breeds of animals, and by means of an extensive network of breeding centres they greatly helped to improve the peasants’ animal husbandry. At the same time, in a period of high grain prices both in the country and on the world market it was very advantageous for state capital to be invested in the development of large-scale grain farms. Proletarian farming also achieved great success, many state farms which the People’s Commissariat of Agriculture regarded as unprofitable beginning to produce a profit when they were transferred to management by factories.

True, the spontaneous striving by factories to acquire their own farms at all costs became less intense when the general grain shortage in the country was ended, and when the ratio between the prices of the products of large-scale industry and grain prices reached something approaching the pre-war position. The workers’ state farms thereafter possessed not so much an economic as a ‘hygienic’ significance, serving as points of contact between industry and agriculture and centres for summer holidays for urban workers and their children.

Of great importance were the new state farms set up in the borderlands, where the state brought under cultivation a large area of land hitherto waste, and where several very large animal-raising enterprises were established, which served as sources of improvement of the horses of the peasant economy and also produced raw material for foreign trade on a large scale. This construction of large-scale enterprises was especially intensified when the success of the first large-scale concessionaire enterprises of foreign capital in South and South-East Russia became apparent; these enterprises, after assigning, in accordance with their contracts, from 10 to 15 per cent of their produce to the state, still brought in a very substantial income to their owners.

Out of 15,000 communes and artels which were counted at the beginning of the period being studied, one section broke up, with some of the former commune members becoming very industrious and progressive farmers of the well-to-do type. Another section of these collectives survived until the stage when, in connection with the influence of large-scale industry and electrification, the mass turn to co-operation began throughout the peasant economy.

Thus, during the first half of the period under examination, Russia’s peasant economy not only attained the pre-war level of production but even exceeded it.

However, during this first decade, large-scale proletarian industry subordinated peasant economy to itself chiefly by means of exchange (trade, long-term credit), and only to a small extent on a production basis, through the State farms. More substantial changes began only in the second decade; how this happened we shall relate after we have seen what had happened in the sphere of state industry.


1. An artel is an independent team of workers, self-employed and self-organized, working jointly and sharing the proceeds. [Trans.]

2. A desyatin is equivalent to 2.7 acres. [Trans.]

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Last updated on 24.1.2009