Leon Trotsky

Soviet Economy in Danger

The Situation on the Eve of the Second 5 Year Plan

(October 1932)

Written: 22 October 1932.
Source: The Militant, Vol. V No. 51, 31 December 1932, p. 4.
Transcription/HTML Markup: Einde O’Callaghan for the Trotsky Internet Archive.
Copyleft: Leon Trotsky Internet Archive (www.marxists.org) 2014. Permission is granted to copy and/or distribute this document under the terms of the Creative Commons Attribution-ShareAlike 2.0.

The Suppression of the NEP, Monetary Inflation,
and the Liquidation of Soviet Democracy

The need for introducing the NEP, the restoration of market relationships, was determined in its time first of all by the existence of 25 million independent peasant proprietors. This does not mean, however, that collectivization even in its first stage leads to the liquidation of the market. Collectivization becomes a living factor only to the extent to which it leaves in force the personal interest of the members of kolkhozes, by molding their mutual relations, as well as the relations between the kolkhozes and the outside world, on the foundation of commercial calculation. This means that the correct, and economically sound, collectivization, at the given stage should lead not to the elimination of the NEP, but to a gradual reorganization of its methods.

The bureaucracy, however, went the whole way; at first, it might have appeared to it that it was taking the road of least resistance. The genuine and indubitable successes of the centralized efforts of the proletariat were identified by it with the successes of its a priori planning. Or to put it differently: It identified the socialist revolution with itself. By administrative collectivization it masked the unsolved problem of establishing the link with the village. Backing up against disproportions through the NEP, it liquidated the NEP. In place of market methods it enlarged the methods of compulsion.

The stable currency unit, in the form of the chervonetz, constituted the most important weapon of the NEP. While in its state of dizziness, the bureaucracy decided that it was already standing firmly with both feet on the soil of economic harmony; and that the successes of today automatically guaranteed the progression of subsequent successes; and that the chervonetz was not a bridle that checked the sweep of the plan but on the contrary provided an independent source of capital funds. Instead of regulating the material elements of the economic process the bureaucracy began to patch up the holes by means of printing presses. In other words, it took to the road of “optimistic” inflation.

After the administrative suppression of the NEP, the celebrated “six conditions of Stalin” – economic accounting, piecework wages, etc. – became transformed into an empty collection of words. Economic accounting is unthinkable without market relations. The chervonetz is the yardstick of the link. Of what possible use for the worker can be a few extra roubles a month, if he is compelled to purchase in the open market the necessities of life he lacks at ten times their price?

The restoration of open markets came as an admission of the inopportune liquidation of the NEP, but an admission that is empiric, partial, thoughtless and contradictory. To label the open markets as a form of “Soviet” (socialist?) trade, in contrast to private trade and speculation is to practise self-imposture. Open market trading even on the part of the kolkhoz, taken as a whole, turns out to be speculation on the required necessities for the nearest city and by its consequences leads to social differentiation, i.e., to the enrichment of the minority of the more fortunately situated kolkhozes. But the chief place in the open market is occupied not by the kolkhozes but by individual members of the kolkhozes, along with the independent proprietors. The trading of the members of the kolkhozes, who sell their surplus at speculative prices leads to the differentiation within the kolkhozes. Thus the open market develops centrifugal forces within the “socialist” village.

By eliminating the market and by installing instead Asiatic bazaars the bureaucracy has created, to consummate all else, the conditions for the most barbaric gyrations of prices, and consequently has placed a mine both under the plan and under commercial calculation. As a result, the economic chaos has been redoubled.

Parallel to this, there has gone on the ossification of the trade unions, the Soviets, and the party, which dates back not from yesterday. Bucking up against the friction between the city and the village, against the demands from the side of various sections of the peasantry and from the side of the proletariat, the bureaucracy ever more decisively forbade any demands, protests and criticism whatsoever. The sole prerogative, which it ultimately left to the workers, was the right to exceed production tasks. Every attempt to influence from below the economic management is immediately assigned to a deviation either to the Right or to the Left, i.e., it is practically made a capital offense. The bureaucratic upper-crust, when all is said and done, has pronounced itself infallible in the sphere of socialist planning (disregarding the fact that its collaborators and inspirers turned out often to be inimical machinators and sabotagers). Thus was liquidated the basic mechanism of socialist construction – the pliant and elastic system of Soviet democracy. Face to face with economic reality and its difficulties the bureaucracy turned out to be armed only with the twisted and rumpled wire carcass of the plan and with its own administrative will, also considerably rumpled.

The Crisis of Soviet Economy

Had the general economic level, set by the first Five Year Plan, been realized only 50 percent, this in itself could have given no cause as yet for alarm. The danger lies not in the slowing down of growth, but in the growing unconformity between the various branches of economy. Even if all the integral elements of the plan had been fully coordinated a priori, the lowering of the coefficient of growth by 50 percent would have by itself engendered great difficulties because of the consequences; it is one thing to produce one million pairs of shoes instead of two millions; but it is quite another thing to finish building one half of a shoe factory. But reality is much more complex and contradictory than our hypothetical example. Disproportions are inherited from the past. Stipulations which are made by plan include in themselves inevitable mistakes and miscalculations. The unfulfillment of the plan does not occur proportionately, due to the particular causes in each individual instance. The average growth of 50 percent in economy may mean that in sphere A the plan is filled 90 percent, whereas in sphere B, only 10 percent; if A depends on B, then in the subsequent cycle of production, the branch A may be reduced below 10 percent.

Consequently the misfortune does not lie in the fact that the impossibility of adventuristic tempos has been revealed. The whole trouble is in that the prize leaps in industrialization have brought the divers elements of the plan into a dire contradiction with each other. The trouble is that economy functions without material reserves and without calculation. The trouble is that the social and political instruments for the determination of the effectiveness of the plan have been broken or mangled. The trouble is that the accrued disproportions threaten ever bigger and bigger surprises. The trouble is that the uncontrolled bureaucracy has tied up its prestige with the subsequent accumulation of errors. The trouble is that a crisis is impending with a retinue of consequences such as the enforced shutting down of enterprises, and unemployment.

The difference between the socialist and capitalist tempos of industrial development – even if one takes for comparison, the former progressive capitalism – astonishes one by its sweep. But it would be a mistake to consider as final the soviet tempos of the last few years. The average coefficient of capitalist growth results not only from periods of expansion but also of crisis. Matters are otherwise with Soviet economy. In the course of the last 8-9 years it has experienced the period of uninterrupted growth. It has not as yet succeeded in working out its average indices.

Of course, we shall be told in refutation that we are transferring over to the socialist economy the laws of capitalism; that a planned economy does not require regulation by means of crises, or, even, by means of premeditated lowering of tempos. The arsenal of proofs at the disposal of the Stalinist bureaucracy and its theoreticians is so restricted that it is always possible to forecast beforehand what particular generalization they will resort to. In the given instance, the matter concerns pure tautology. The fact is that we have entered into socialism and therefore we must always act “socialistically”, i.e., we must regulate economy so as to obtain ever increasing planned expansion. But the gist of the matter is in the fact that we have not entered into socialism. We have far from attained mastery of methods of planned regulation. We are fulfilling only the first rough hypothesis, fulfilling it poorly, and with our headlights not on as yet. Crises are not only possible as far as we are concerned, but they are inevitable. And the impending crisis has already been prepared for by the bureaucracy.

The laws that govern the transitional society are quite different from those that govern capitalism. But no less do they differ from the future laws of socialism, i.e., of harmonious economy, growing on the basis of tried, proven and guaranteed dynamic equilibrium. The productive advantage of socialism, centralization, concentration, the unified spirit of management – are incalculable. But under incorrect application, particularly under bureaucratic misuse, they may turn into their opposites. And in part they have already become transformed, for the crisis now impends. Any attempt to force economy by further lashing and spurring ahead in an attempt to redouble the misfortunes ensuing.

It is impossible to foretell the limits that the crisis will attain. The superiorities of planned economy remain during crises as well, and one may say, they evince themselves with especial clarity precisely in a crisis. Capitalist governments are compelled to wait passively until the crisis spends itself on the backs of the people, or to resort to financial hocus-pocus in the manner of Papen. The workers’ State meets the crisis as well with all its resources. All the dominant levers – the budget credit, industry, trade – are concentrated in a single hand. The crisis may be mitigated and afterwards overcome not by bellowing commands but by measures of economic regulation. After the adventuristic offensive, it is necessary to perform a planned retreat, thought out as fully as possible. This is the task of the coming year, the 16th year of the proletarian dictatorship. Il faut reculer pour mieux sauter: Let us retreat in order the better to advance.

(To be continued)

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Last updated on: 6 February 2015