Amendments to Rykov’s Resolution. On the Economic Situation in the USSR

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I. The Disproportion Between Industry and Agriculture and Problems of Economic Policy

The fundamental and at the same time most urgent aim of the NEP — after reviving the peasant’s material interest in developing his own farm — was to ensure the progress of the productive forces in general in the countryside and, on this basis, to accomplish the task of developing industry in close connection with agriculture. In accordance with the market forms taken by this link between industry and agriculture, the slogans “Learn how to trade” and “Save every extra penny for industry” became part of the New Economic Policy. At the same time the party proposed a plan for large-scale electrification.

The problem of the smychka, the bond between proletariat and peasantry, determined the fundamental economic content of this policy. The aim of the state’s economic policies as a whole is to ensure, on the basis of the growth of the productive forces, a dynamic equilibrium between industry and agriculture, with the socialist elements gaining increased predominance over the capitalist elements.

It is quite obvious that disruption of this equilibrium could occur under two main conditions: if the state, by its fiscal, budgetary, industrial, commercial, or other policies were to take from the economy and transfer to industry a disproportionately large share of the annual product and of our resources in general, as a result of which industry would run too far ahead, would become detached from the national economic base, especially the agricultural base, and would run into the roadblock of insufficient purchasing power, on the other hand, if the state, through all the levers it controls, took an insufficient share of the economy’s resources and their annual increases, the result would be that the supply of industrial products would lag behind the effective demand. A disruption of the smychka is evident in either case. If industry’s development is excessively forced, that imposes an insupportable burden on the peasant and thereby weakens agriculture. But the peasant would suffer just as great a loss if industry could not sufficiently meet the demand arising from the peasants’ sale of the harvest, resulting in a “scissors” between wholesale and retail prices.

The Fourteenth Party Congress decided on the industrialization of the country as its cardinal directive. The means, methods, and pace at which this directive is carried out are decisive not only for our future progress toward socialism but also for the political rule of the working class in the Soviet Union.

The main contradiction in our present economic situation, and likewise in the relations between city and countryside, is that state industry lags behind the development of agriculture. Industrial production does not satisfy effective demand: this hinders the realization and export of the marketable portion of agricultural production and keeps imports in very narrow limits, hinders the expansion of industry and could even lead to a worsening of the fundamental disproportion. All our data confirm that the 1926 harvest will find our industry without any reserves of manufactured goods. That could mean a repetition of the present difficulties on a larger scale. Under those conditions, a good harvest, i.e., a potentially increased quantity of marketable surpluses in agriculture, could become a factor that would not accelerate economic development toward socialism but would on the contrary disorganize the economy and further strain relations between city and countryside and, within the city itself, strain relations between consumers and the state.

Practically speaking, a good harvest — in the absence of industrial goods — could mean greater utilization of grain for clandestine distillation of alcohol and longer lines in front of shops in the cities. Politically, this would signify a struggle by the peasant against the monopoly of foreign trade, i.e., against socialist industry. Underestimating such a danger could have serious consequences, if not in the near future, at least in the later development of that correlation of economic factors which tends to preserve the disproportion between industry and agriculture or to eliminate it too slowly. The way out is to ensure the correct line in economic policy, really conforming to the policy of industrialization adopted by the Fourteenth Congress. …

…. The fundamental economic difficulties, consequently, result from the fact that the volume of industry is too small both in relation to agriculture (personal and productive needs of the peasants) and in relation to the growing needs of the working class. This disproportion should be overcome not by slowing down the growth either of agriculture or of the needs of the working class, but by developing industry at a rate that would make it possible to eliminate this disproportion in a relatively small span of years.

This task is all the more imperative in that industry — in its present state — can no longer solve other vital problems, starting with the production of the means of production for industry itself maintenance and development of the transportation system, and defense of the country.

In view of the above, the Central Committee instructs the Political Bureau:

— to draw up a concrete program of industrial development and new industrial construction for the coming economic period (five to eight years) in close relation to the perspectives of the growth of agriculture;

— to draw up a directive concerning the preparation of all programs and plans for 1926-27 that will ensure the possibility that substantial progress will be made in 1926-27 itself toward liquidating the internal disproportions of our economy.

The long-term plan should base itself on a working hypothesis — e.g., that the fundamental disproportion could be overcome over a period of five years (or by some other date) — in order to make a provisional determination of what the relative equilibrium will be in 1931 between the supply and demand of industrial products, under conditions of a policy of steadily lowering prices. Such a projection, naturally without pretending to be exact and definitive, would nevertheless be the compass for our whole economic policy.

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With these aims, the programs and plans for the year 1926-27 should flow from the following considerations:

1. Agricultural taxation, with the appropriate burden being imposed on the upper strata in the villages, should be one of the most important levers for correctly distributing the wealth accumulated by the economy. …

2. A rise in the retail prices should not be permitted. On the contrary, there should be a struggle to reduce them by every possible means. As for wholesale prices, a more flexible policy, adapted in a more specialized way to the various branches of industry, should be introduced, with the calculation that a larger share of the retail mark-up than before would end up in the hands of the state and the cooperatives.

3. The 1926-27 budget should be drawn up in such a way that a sufficiently large sum will be allocated to industry over and above the funds which are really only a redistribution, through the state budget, of industry’s own resources. The net balance cleared by industry should not in any case be less than 150 to 200 million, and all efforts should be bent toward increasing this net balance.

This must be achieved by strictly holding down all nonproductive expenses, or at least refusing to increase them in the near future, keeping in mind that we have not yet left the stage of primitive socialist accumulation.

4. It is necessary to re-examine the question of vodka, basing ourselves on the experience we have acquired, which shows that the sale of vodka by the state plays a very insignificant role in the flow of resources from the village to heavy industry (which was the aim) and that at the same time if takes a big bite out of the workers’ wages.

5. The possibility for substantial growth in long-term credits for new industrial construction will have to be assured, beginning in 1926-27. …

6. The system of amortization deductions should be organized in such a way that industry automatically has the means for maintaining its productive capacity at the existing level, using all additional resources for further expansion.

7. The export and import plan for 1926-27 should be drawn up in such a way as to assure the growth of productive capacity in industry and substantial technical reequipment of industry, including the construction of new factories.

8. Our whole economic policy should be fashioned in such a way as to assure the possibility that in the year 1926-27 a program of capital construction will be carried out at a level of no less than one billion rubles, as compared with 820 million in 1925-. 26 (i.e., an increase of at least 20 percent).

9. The resources of the Industrial Bank should be reinforced in order to strengthen the central industrial reserve fund, which provides for the steady expansion of working capital in industry.

10. It is necessary to draw up and begin today to make practical preparations for a system of measures capable of ensuring realization of the next harvest — first of all, by the supplementary import of primary materials (cotton, wool, rubber, leather, metals) so as to increase our stocks of goods destined for the peasants in the autumn; second of all, by preparation for intervention in the world market, which may become inevitable — an intervention based on the principle of foreign credit proportional to our internal trade volume and strictly corresponding to the interests and possibilities of state industry.

11. It is necessary to ensure that the electrification plan for the country will be carried out at as energetic a pace as possible.

II. Problems of the Rate of Development

The expropriation of the nonproductive classes (the aristocracy, the bourgeoisie, the clergy, and the privileged bureaucracy), the nationalization of the land, the abolition of rent, and the concentration of the assets of industry, transportation, and the whole credit system in the hands of the state have assured, as the experience of past years has proven incontestably, an indubitable preponderance of the socialist elements over the capitalist elements in our economy. But precisely the tremendous successes of our economy, which have more and more linked it to the chain of the world market, have by the same token placed our future successes and, first of all, our rate of industrialization, under the relative control of the world capitalist economy. It would be radically false to believe that socialism, within capitalist encirclement, could progress at an arbitrary pace. The advance toward socialism can only be assured if the distance separating our industry from advanced capitalist industry — in volume of production, cost-price, and quality — diminishes in a palpable and evident way, rather than increases. Only on this condition can our armed forces be given the technical base capable of protecting the socialist development of the country.

III. The Leading Role of Industry, and Agriculture

The resolution of the Fourteenth Congress clearly and categorically indicated the leading role of state industry in the economy as a whole. The duty of the party is to clearly grasp the full significance of this directive and to draw all the appropriate practical conclusions from it. … Furthermore, since agriculture has neared the prewar level on the old basis of primitive technology, any serious advance in the rural economy in the future will be possible only through gradual industrialization, that is, a major growth in the manufacture of agricultural machinery, synthetic fertilizers, electrification, etc. The most effective form of state aid to peasant agriculture would be a substantial flow of the necessary agricultural tools produced by state industry at advantageous credit terms. This in turn presupposes a major growth in the manufacture of agricultural machinery, closely coordinated with the particularities of the main agricultural regions.

IV. The Plan: Its New Tasks and Methods

The importance of the planning principle has been demonstrated not only in our tremendous successes in economic construction but also in our failures and miscalculations. It would be a crude error to see these as an argument against the planning principle. On the contrary, the very possibility of discovering them in time and correcting them in one way or another is provided by the centralized system of economic administration. This system is inconceivable without the coordination of all the factors essential to it, both administrative and market-related.

The growth of our economy not only requires a general strengthening of the planning principle but also creates qualitatively new problems in this area. Until now planning consisted mainly in the attempt to foresee the movement of the essential economic elements for the year to come and to coordinate them by various maneuvers; that is, planning was limited to the functions described in the resolution of the Twelfth Congress. This kind of planning based on maneuverability within an ongoing operational framework might have been adequate during the so-called reconstruction period, when industry was developing on the technical bases inherited from the past. Now that this period is ending, the need to renew and expand the fixed capital of industry and transportation places entirely new problems before the party and the state, parallel to the old ones, in the area of planned management.

Until recently, industry — with considerable reserves of underutilized equipment at its disposal — Could rapidly raise its output above the projections of the plan, in accordance with the needs of the market. But from now on its possibilities in this direction will be determined by the capital outlays industry will be able to make annually. The volume and application of these capital expenditures will have to be planned as thoughtfully and rigorously as possible by the state. The construction of new factories, power plants, and railways, the reclamation of huge areas, the training of suitably skilled workers in all categories, and the task of coordinating all this new construction with the existing economic conditions and with the plans for industry and for the economy as a whole — all that cannot be accomplished in a single business year. We are talking about the planning of very large units and projects which are expected to take a number of years and whose economic consequences will be felt for an additional period of years after that The annual plan must be viewed as an individual part of an overall five-year plan. On the other hand, the five-year plan should be corrected annually to take account of the changes made in the current operating plan.

V. Wages

Economic difficulties do not allow us at present to chart a course toward a substantial rise in wages. The party should recognize, however, that the present wage level is inadequate and should set itself the following tasks in this area:

a. not to allow a decrease in real wages in the near future;

b. to create the material conditions for a future increase in wages, i.e., a sufficient increase in the volume of industrial production in 1926-27 for money wages to be appropriately supplemented in kind (40 to 45 percent of the worker’s budget is now paid for in industrial products); a stubborn and systematic technical reequipment of industry, the only thing that can ensure a systematic and uninterrupted rise in the workers’ standard of living. …