Towards Capitalism or Towards Socialism? (1925)

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I. The Language of Figures

THE State Planning Commission (Gosplan) has published a comprehensive table of “control” figures of the national economy of the USSR for 1925-26. All this sounds very dry, and, so to speak, bureaucratic. But in these dry, statistical columns, and in the almost equally dry explanations, there can be heard the fine musical notes of the harmonious growth of socialism. It is no longer here a question of guesses, of suppositions, of hopes or of theoretical deductions. On the contrary, we have here the weighty language of figures, convincing enough for even the New York Money Exchange. We wish to dwell for a short time on the most fundamental of these figures. They are well worth it.

In the first place, the very fact of the publication of these comprehensive tables represents for us a veritable economic triumph. The day of their publication (August 20) is a noteworthy day in the Soviet calendar. Agriculture and industry, the goods turnover, both internal and foreign, the circulation of money, the price of goods, credit operations, and the State Budget, are all reflected in these tables, both as regards their development and their mutual relations. We have here a clear, simple and convenient comparison of all the fundamental facts for 1913, for 1924-25, and of the estimated figures for 1925-26. In the explanatory text statistical data for other years of Soviet national economy are given wherever necessary. Thanks to this, we have a general picture of the development of our social structure and of the prospects for the following economic year. The very possibility of constructing such tables may well be considered a victory of the first order.

Socialism is a keeping of accounts. Under the conditions of the New Economic Policy only the forms of our account keeping are different from those which we endeavoured to employ during the period of Military Communism, and which will receive their final form with the development of socialism. But socialism is account keeping, and at present, in the new stage of the new economic policy, it is possibly of even greater importance than when socialism has been finally established. For then account keeping will be purely of an economic character, whereas now it is bound up with complex political problems. And so, in these comprehensive tables and estimates, we see for the first time the Socialist State taking into account all branches of economy, their relations to one another and to their development. This is undoubtedly a great victory. The very possibility of doing this is an undoubted testimony both to our material economic achievements, as also to our success in taking into account every detail, in generalisation, and in directing economic thought. These tables may indeed be looked upon as a kind of matriculation certificate. Only we must remember that a matriculation certificate is only granted to people, not when they conclude their education, but when, having finished their secondary education, they are ready to start on a higher educational course. It is precisely problems of a higher order which these comprehensive tables of the Gosplan place before us. We desire to subject them to an analysis.

The first question which arises when glancing at the tables is, how far are they exact? Here there is wide scope for reservation and even for scepticism. Everyone knows that our statistics and our methods of account keeping are often faulty. Not because they are any worse than other branches of our economic and cultural activities, but only because they reflect all, or, at any rate, many sides of our general backwardness. But this by no means justifies any wholesale distrust. At the present time the figures of the Gosplan are the nearest approximation to the actual facts. Why? For three reasons. In the first place, because they are based on the fullest possible material, which material, moreover, is worked up from day to day by the various sections of the Gosplan. Secondly, because this material has been worked up by the most competent and skilled economists, statisticians and technical experts. Thirdly, because this work has been carried out by institutions entirely free from departmental interests, and always able to confront the departments directly. It should also be added that there are no commercial or economic secrets for the Gosplan. It can verify (either itself or through the Workers’ and Peasants’ Inspection) any industrial process or any commercial calculation. All balance sheets are open to it, as also all departmental estimates, and that, not only in their final form, but also in the original drafts. Of course, there will still be disputes regarding separate figures. Certain facts are disputed from this or that point of view by the departments. The corrections of given departments, whether accepted or not, may exercise a considerable influence on certain practical enterprises, on the export and import estimates, on the assignments made in the Budget for certain purposes, and so on. But these corrections can have no influence on fundamental facts. There cannot be at the present time better thought-out and more thoroughly verified figures than those published in the Gosplan tables. And in any case even inexact figures, providing they are based on previous experience, are far preferable to working in the dark. In the first place, we introduce corrections based on our experience, and we learn therefrom, whereas in the second case we simply exist on chance.

The tables are brought up to October 1, 1926. This means that in about twenty months’ time, when we shall have at our disposal the reports from our economic departments for 1925-26, we shall be in a position to compare the facts of to-morrow with our suppositions of to-day as expressed in figures. Whatever discrepancy we may find, the very possibility of making such a comparison will in itself be a valuable economic lesson.

In discussing the exactitude of our forecast, it is necessary before all to understand what manner of forecast we have in mind in the given case. When, for instance, the Howard Institute in America endeavours by means of statistics to determine the direction or rate of development of various branches of American national economy, they work to a certain extent in the same way as astronomers. That is to say, they endeavour to determine the dynamics of processes entirely independent of their will, with only this difference, that one cannot apply methods anywhere near so exact to statistics as to astronomy. Out statistics stand in a fundamentally different position. They exercise decisive influence in the institutions which direct our national economy. Estimates are here not merely the product of passive forecast, but they are the pivot of active economic observation. Every figure is not a mere photograph, it is a signpost. The table of estimates has been worked out by a State Department in which the very highest directing staff of our national economy participates. When the table says that our exports should rise from 462,000,000 roubles in the current year to 1,200,000,000 roubles in 1925-26, that is by 160 per cent, this is not merely a forecast, it is an instruction. On the basis of what we have already achieved, we are shown here what more we must do. When the table says that the capital investments in our industries – that is to say, expenditure on the renewal and extension of our basic capital – should amount to 900,000,000 roubles, this again is not merely a passive calculation, but a statistical well-founded practical task of the first importance, and this is precisely the character of the table from beginning to end. It is a dialectical combination of a theoretical forecast with practical observation, i.e., the combining in calculation of objective conditions and tendencies with the subjective formulation of the economic tasks confronting the workers’ and peasants’ State. Herein lies the fundamental distinction between the Gosplan tables and all possible statistical data, accounts and forecasts of any capitalist State. Herein also, as we shall see below, lies the gigantic superiority of our – that is, of socialist – methods over capitalist methods.

The tables of estimates of the Gosplan give, however, a valuation in figures of socialist economic methods, not in general, but in their application under given conditions, that is to say, at a definite stage of the so-called new economic policy. Spontaneous economic processes can be dealt with in the main by the objective statistical method. In their turn, the economic processes directed by the State at one stage or another make themselves evident in the market, and thereby are linked up with the spontaneous, so to speak, uncontrolled, economic processes, which owe their origin principally to the irregular phenomena of peasant economy. To a very large extent planning at the present time consists precisely in the conjunction of the controlled and directed economic processes with the spontaneous processes of the market. In other words, in our national economy, socialist tendencies at various stages of development are combined with and interlocked with capitalist tendencies, again at different stages of maturity and immaturity. Our estimate figures give the connection between the one set of processes and the other, and thereby reveal the equilibrium of development. Therein lies the fundamental socialist importance of our draft plan.

That the economic processes developing in our country are fundamentally antagonistic, presenting a struggle of two systems which mutually exclude one another, this we have always known and never concealed. On the contrary, precisely during the transition to the new economic policy, the historical question was formulated by Lenin in two pronouns – “who whom?” The Menshevist theoreticians, and particularly Otto Bauer, condescendingly welcomed the new economic policy as a sensible capitulation of the premature violent Bolshevist methods of socialist economy to well-tried and reliable capitalism. The misgivings of some, and the hopes of others, have now received a very thorough verification, and its results are expressed in the estimate figures of our social-economic draft plans. Its significance lies also in this, that it is now impossible any longer to talk in a general way of the socialist and capitalist elements of our national economy, of plans in general, and of spontaneity in general. Even though it may be only roughly, and in a preliminary way, we have now made our calculations; we have now defined quantitatively the relation between socialism and capitalism in our national economy, both for to-day and for tomorrow. We have thereby obtained valuable practical material for a reply to the historic question – “Who Whom?”

II. The Language of Figures (continued)

In all that has been said above, only the theoretical significance of the Gosplan tables has been dwelt upon. We have shown the enormous importance for us of the fact that we have at last been enabled to estimate all the fundamental processes of our national economy, their connections and developments, and thereby obtain a basis for a far more conscious and considered policy, and that not in the sphere of national economy alone. But of far more importance to us is, of course, the actual content of the Gosplan comprehensive tables, that is to say, the actual statistical data which express our social development.

In order to receive a correct reply to the question – towards socialism or towards capitalism? – we must first of all formulate correctly the question itself. This question naturally divides itself into three sub-questions: (a) Are our productive forces developing? (b) What are the social forms of this development? (c) What is the rate of the development?

The first question is the simplest and the most fundamental. Without the development of the productive forces, neither capitalism nor socialism is conceivable. Military communism, which had its birth in stern historical necessity, spent itself quickly and impeded the further development of the productive forces. The most elementary, and at the same time the most compelling, significance of the new economic policy, consisted in the development of the productive forces as the basis for any social movement whatever. The new economic policy was welcomed by the bourgeoisie and the Menshevists as a necessary (but, of course, “insufficient”) step on the road towards the liberation of the productive forces. Menshevist theoreticians, both of the Kautsky and of the Otto Bauer persuasion, approved of the new economic policy precisely as the dawn of capitalist restoration in Russia. They added: either the new economic policy will destroy the Bolshevist dictatorship (a happy consummation) or the Bolshevist dictatorship will destroy the new economic policy (a very sad outcome). Smenavekhovism in its first form rose from the belief that the new economic policy would ensure the development of the productive forces in a capitalist form. And now, the comprehensive tables of the Gosplan give us the basic elements for a reply, not only to the question regarding the general development of the productive forces, but also to the question as to what social forms this development is assuming.

We know very well, of course, that the social forms of our economic development are of dual character, since they are based on both co-operation and antagonism of the capitalist and socialist methods and aims. The new economic policy has to work under these conditions of our development; therein lies its fundamental content. But such a general idea of the antagonism within our development is no longer sufficient for us. We seek and demand a measurement as accurate as possible of these economic antagonisms, that is to say, we demand not only the dynamic coefficients of the general development, but comparative co-efficients of the specific gravity of this or that tendency. On the reply to this question depends much; more correctly speaking, everything in our internal and our external policy.

Let us consider the question from its most acute angle. We may say that, without a reply to the question regarding the relative force of the capitalist and socialist tendencies, and of the direction in which the relation between their specific gravities is changing as the productive forces grow, it is impossible to form a clear and reliable idea of the prospects and possible dangers of our peasant policy. In reality, if it turned out that, as the productive forces developed, the capitalist tendencies grow at the expense of the socialist tendencies, then the final extension of the framework of commodity-capitalist relations in the villages might have a fatal influence, directing all further development on the road towards capitalism. On the other hand, if the specific gravity of the State, i.e., of socialist economy, increases in the general national economy of the country, then the greater or less “liberation” of the commodity-capitalist process in the villages becomes only a question of the relative equilibrium of forces, and may be solved from merely a business point of view. How? When? To what limits? In other words, if the productive forces in the hands of the socialist State, and which has in its hands all the commanding positions, not only grow rapidly, but grow more rapidly than the private capitalist productive forces of the towns and villages; if this has been confirmed by the experience of the most difficult period of restoration, then it is clear that a certain development of the commoditycapitalist tendencies, springing from within peasant economy, in no way threatens to take us unawares, or to overcome us by the transformation of quantity into quality; that is, by a sudden turn towards capitalism.

Finally, the third question before us is the rate of our development from the point of view of world economy. At a first glance it might appear that this question, although important, is nevertheless of entirely subordinate significance. Of course, it is desirable to reach socialism “as soon as possible,” but once the socialist tendencies are assured of victory under our new economic policy conditions, then the question of the rate of this movement would seem to be only of minor importance. This, however, is not so. Such a conclusion might have been correct (but not wholly so) if we had a closely-knit self-sufficing economy. But this is not the case. Precisely owing to our successes, we have entered the world market. That is to say, we have entered into the system of the world division of labour, and, moreover, we remain surrounded by capitalism. Under these conditions, the rate of our economic development defines the force of our resistance to the economic pressure of world capital, and to the military-political pressure of world imperialism. And, at present, these factors cannot be left out of account.

If we now apply our three leading questions to the comprehensive tables and explanatory notes of the Gosplan, then we shall see that the reply of the tables to the first two questions regarding the development of the productive forces and of the social forms of this development, is not only both clear and concise, but most favourable. As for the third question regarding the rate of development, our economic development so far has only reached the stage of considering this question in its international aspect. But here too, as we shall see, the favourable reply to the first two questions prepares the grounds for the solution of the third question. The latter will form the highest criterion for our economic development in the near future.

III. The Growth of Productive Forces

THE rapid restoration of our productive forces has now become a well-known fact, and it could not have been better illustrated than by the tables of the State Planning Commission (Gosplan). The output of agricultural produce in 1924-25, including as it did the bad harvest of 1924, amounted to 71 per cent of that of the good harvest year of 1913 (calculated in each case in values at pre-war prices). The value of the produce of 1925-26, which will include the good harvest of 1925, will undoubtedly exceed that of 1913, and will probably not be far off from that of 1911. Although during the last few years the grain crops have never reached three milliard poods, the harvest of the present year is estimated to yield about 4.1 milliard poods.

The value of the output of our industries during the past economic year has now reached 71 per cent of the prosperous year 1913. In the coming year it will certainly be 95 per cent of that of 1913. That is to say, the process of restoration will have been practically completed. If we remember that in 1920 our output only reached a fifth, or even a sixth, of the capacity of the factories, we see how rapid has been the rate of restoration. The output of State industry has more than trebled since 1921. Our exports, which this year had not yet reached half a milliard roubles, promise to reach considerably over a milliard. Our imports are developing similarly. The State Budget, which last year totalled two and a-half milliard roubles, will this year exceed three and a-half milliards. The quality of our goods is far above that of the question of the development of our productive forces, we get a clear reassuring reply. The “liberation” of the market has given a powerful impetus to our productive forces.

But it is precisely the fact that it is from the market – from a capitalist element – that the impetus has come, which has fed and is feeding the malevolence of the bourgeois theoreticians and politicians. The nationalisation of industry and the planned orderly methods of conducting the national economy had been hopelessly compromised by the very fact of the transition to the new economic policy, and still more by the undoubted economic success of the latter. This is the reason why only the reply to our second question regarding the social forms of our economy can give a socialist estimate of our development. The growth of the productive forces, for instance, in Canada, is nourished by United States capital. A similar growth is proceeding in India in the face of the pressure of colonial exploitation. Finally, in the form of restoration of productive forces, it has been going on in 1924 in Germany, in spite of the application of the Dawes Plan. In all these cases we have to deal with capitalist development. In Germany, the nationalisation and socialisation plans, which were so flourishing – at any rate, in the bulky volumes of the armchair socialists and Kautskyites in 1919 and 1920 – have now been abandoned as useless rubbish, and under the cruel guidance of America, the principle of private capitalist initiative, in spite of the fact that its teeth have either been lost or knocked out, is now in its second youth. And how are we off in this respect? In what social forms does the development of our productive forces proceed? Are we going towards capitalism or towards socialism?

The preliminary condition for socialist economy is the nationalisation of the means of production. Has this preliminary condition been maintained under the new economic policy? Has the introduction of market commodity forms of distribution in any way weakened nationalisation, or has it strengthened it?

The comprehensive tables of the Gosplan supply invaluable material for estimating the mutual relations and struggles between the socialist and capitalist tendencies of our national economy. We have here absolutely indisputable “control” figures which refer to basic capital, to output, to trading capital, and generally to the most important economic processes in the country.

The figures characterising the distribution of basic capital are the most subject to reservation, but this affects far more the absolute figures than their relative value and at the present moment we are chiefly interested in the latter. According to the calculations of the Gosplan, at the beginning of the economic year, 1924-25, the capital funds of the State amounted, at the most moderate estimate, to not less than 11.7 milliard chervonetz roubles; that of the cooperatives, to 0.5 milliard roubles; and that of private, mainly peasant, enterprise, to 7.5 milliard roubles. This signifies that, in the sphere of the means of production, over 62 per cent of the total has been socialised, and that the technically most up-to-date. Only 38 per cent of the means of production has not been socialised.

As regards agriculture, here it is not so much a question of the nationalisation of the land, as of the liquidation of the landed estate owners. The confirmation of this process is most instructive. The liquidation of the landed estate owners, and of land ownership other than peasant in general, has resulted in the almost total liquidation of large agricultural enterprises, including even those conducted on more modern lines. This was one of the reasons, although a secondary one, of the temporary falling off of our agricultural economy. But we now know that the present year’s harvest will raise our agricultural produce to practically the prewar level without the help of landed estate owners, and without farms conducted on “cultured” capitalist lines. And yet we are only at the very beginning of our liberation from the agricultural methods of the landed estate owners. Consequently the abolition of the nobility, and of all its breeding grounds, and even the barbarian transformation, of which our righteous mensheviks were afraid, has been completely justified by the economic results. This is the first and a not unimportant conclusion.

As regards the nationalisation of the land, in view of the widespread small-scale farms of the peasantry, the principle of the nationalisation of the land could not be properly realised. The popular tinsel which inevitably covered socialisation in the first period has equally inevitably fallen from it. At the same time the significance of nationalisation as a fundamental socialist measure in a State where the workers rule, has been made sufficiently clear for its important rô1e in the further development of agriculture to be understood. Thanks to the nationalisation of the land, we have assured to the State unlimited possibilities in the sphere of land arrangement and distribution. No barriers of private individual or group ownership will be able to hinder the adaptation of the forms of land utilisation to the needs of our productive processes. At the present time, the means of production of agriculture have only been socialised to the extent of 4 per cent. The rest of the 96 per cent is in the private hands of the peasants. It is, however, necessary to bear in mind that the agricultural means of production, both peasant and State, forms little more than one-third of the whole of the means of production of the Soviet Union. It is unnecessary to explain that the full significance of the nationalisation of the land will only, manifest itself as a result of advanced development of agricultural technique, and of the consequent collectivisation of agriculture, that is to say, in the course of a number of years. But it is just in this direction that we are going.

IV. The Share of State Industry

It was quite evident to us, as Marxists, even before the revolution, that the socialist reorganisation of our economy would start with industry and transport, and would spread from that to the villages. Consequently the statistical valuation of the work of our nationalised industry is of fundamental importance in the socialist estimation of the present transition forms of our economy.

In the sphere of industry the means of production have been socialised to the extent of 89 per cent, and if railway transport is included, to 97 per cent, whilst in large-scale industry alone, 99 per cent of the means of production have been nationalised. These figures prove that so far as the nationalisation of property is concerned, there has been no alteration to the detriment of the State. This alone is of very great importance. But we are principally interested in another question, namely, the proportion contributed by the socialised means of production in the annual output of our industry. That is to say, to what extent does the State utilise the resources in its hands?

The comprehensive tables of the Gosplan give the following answer. The State and co-operative industries in 1923-24 were responsible for 76.3 per cent of the gross output. This year they are contributing 79.3 per cent, whilst next year they are estimated to yield 79.7 per cent. Private industry, therefore, provided in 1923-24, 23.7 per cent of the output; in 1924-25, 20.7 per cent and next year it is estimated to yield 20.3 per cent. Apart from the cautious estimate figures for the coming year, the comparison of the dynamics of State and private production is of colossal importance. We see that during last year and the current year, that is to say, in years of intense economic progress, the share of State industry increased by 3 per cent, while that of the private industries decreased by that amount. This percentage is the measure for this short period of the growing preponderance of socialism over capitalism. This percentage may appear insignificant, but in reality its symptomatic significance is enormous, as we shall show below.

Wherein lay the danger in the transition to the new economic policy during the first few years? The danger lay in this, that, as a result of the complete exhaustion of the country, the State might prove powerless in a sufficiently short period to raise up on its shoulders the big industrial enterprises. In view of the fact that the big enterprises worked to only a small fraction of their capacity (in some cases only 10 to 20 per cent of their pre-war capacity) the middle, small and even handicraft enterprises might possibly have outweighed the larger enterprises by their mobility. The so-called “relinquishing” of enterprises during the first period, which was the socialist reward, to capitalism for setting into operation the factories and workshops which had been confiscated from it, threatened to transfer into the hands of the traders, middlemen, and speculators, a large proportion of State property. The handicraft enterprises and the small-master workshops were the first to revive in the atmosphere of the new economic policy. The union of private trading capital with small private, including home, industry might have led to a fairly rapid process of primary capitalist accumulation.

Under these conditions it was possible that progress would be so slow that the reins of economic guidance might be wrested from the hands of the working-class State. By this we do not, of course, mean to say that every temporary, or even prolonged increase in the relative specific gravity of private industry as compared with industry as a whole, necessarily threatened catastrophic or even very serious results. Quality here, too, depends on quantity. Even had our statistics shown that the specific gravity of private capitalist production had increased by 1, 2 or 3 per cent during the last two or three years, this would by no means have rendered the position threatening. The State output would still have consisted of three-quarters of the total output, and the restoration of the lost rate of development would have been quite a possible task, seeing that large scale industry is working to greater and greater capacity. Had private capitalism increased the output of its industries by 5 per cent, to 10 per cent, we should have had to take the fact seriously into account. But even such a result during the first period of restoration would by no means have signified that nationalisation was economically unsound. The conclusion would simply have been that the most heavy section of the nationalised industries had not yet manifested the necessary rate of development. It is, therefore, the more important that as a result of the first, purely restoration period, and the most dangerous and difficult period of the new economic policy, nationalised industry had not only not lost ground, but, on the contrary, had succeeded in outstripping private capitalist industry by 3 per cent. This is the great symptomatic significance of this small figure.

Our conclusions will become still clearer if we take the figures relating not only to output, but to the trade turnover. During the first half year of 1923, private capital accounted for nearly 50 per cent of the middleman trade. In the second half-year, it accounted for 34 per cent; in 1924-25, nearly 26 per cent. In other words, the specific gravity of private capital in the middleman trade has been reduced by nearly 50 per cent during these two years. This has not been attained by the exertion of pressure on trade, for during this period the turnover of the State and co-operative trading organisations was more than doubled. Thus, not only private industry, but also private trade, is playing a diminishing social rôle and this in spite of a general increase in the productive forces and the trade turnover. The estimates for the coming year show, as we have already seen, a further diminution, true, a small one, in the relative importance of private industry and private trade. The victory of State industry over private industry need not be imagined as forming necessarily a continuously ascending line. There may be periods when the State, secure in the knowledge of its economic power, and endeavouring to increase the rate of development, consciously permits the relative specific gravity of private enterprise to increase: in agriculture, in the form of “solid” – that is, capitalist farms; in industry, and also in agriculture, in the form of concessions. Taking into account the heterogeneous character of the greater proportion of our private industries, it would be rather naïve to think that every increase in the relative proportion of private production above its present proportion of 20.7 per cent would signify some imminent menace to our socialist construction. In general, it would be incorrect to endeavour to fix here any hard and fast rule. It is not a question of formal limits, but rather of the general dynamics of the development. A study of these dynamics proves that, in the most difficult period, when the large enterprises manifested rather their negative than their positive advantages, the State came out successfully from the struggle against the first attack of private capital. During the period of very rapid development in the last two years, the relation between the economic forces arising from the revolutionary transformation, constantly, and according to plan, assumed a favourable position as regards the State. Now, when the fundamental position is stronger and more reliable than ever, as shown by the single fact that the large enterprises are now working to 100 per cent of their capacity, there can be no ground whatever for fearing anything unexpected happening, at any rate so far as the internal factors of our national economy are concerned.

V. The Worker-Peasant Alliance

As regards the question of the peasant and worker alliance (smychka) that is to say, the co-ordination of the economic work of the towns and villages, the comprehensive tables of the Gosplan give fundamental, and for that reason highly convincing, facts.

It can be seen from the tables that the peasants throw on the market less than a third of their gross produce, and these agricultural commodities constitute more than a third of all the trade turnover.

The relation between the value of the mass of agricultural and industrial commodities varies but slightly, the proportion being about 37 to 63. This signifies that, estimated not in poods, arshines, &c., but in roubles, agricultural goods on the market constitute a little over a third, and industrial or town goods a little under two-thirds. This is due to the fact that the villages satisfy their needs to a large extent without recourse to the market, whereas the towns throw on the market practically the whole of their produce. About two-thirds of the heterogeneous mass of the peasantry do not participate in the general trade turnover, and only one-third influence directly the national economy of the country. The whole of the produce of industry, on the other hand, by its very nature participates directly in the State turnover, since the “natural” turnover within industry itself (through the trusts and syndicates) which diminishes the amount of commodities by 11 per cent, not only does not lower, but on the contrary raises the influence of industry on the general economic process.

If, however, the agricultural produce consumed by the producers themselves does not influence the market, it does not signify that this part of the produce has no influence upon the national economy in general. It constitutes in the present state of our economy the natural necessary complement of that third of the total commodities thrown upon the market by the peasantry. This third in its turn constitutes the value for which the country demands the equivalent from the towns. We thus see the gigantic importance in the general economy of the country of the produce of the countryside as a whole, and of that third of the commodities which it supplies to the market in particular. The sale of the harvest and, in particular, the export operations in connection therewith have become important factors in the annual economic balance sheet. The mechanism of the alliance between country and town is becoming more and more complex. The question is no longer limited to the number of bushels of peasant grain which can be exchanged for a particular number of yards of calico. Our economy has now entered the world system. This has resulted in the forging of a new link in the union of town and country. Peasant grain is now being exchanged for foreign gold. Gold is exchanged for machines, implements and the various other articles required by town and village. Textile machinery obtained in exchange for the gold received from the export of grain re-equips the textile industry, and thereby reduces the price of cloth sent into the villages. The general process of circulation has become much more complex, but the basis of it remains as before the definite economic relation between town and village.

We must not, however, forget for a moment that this relation is a dynamic one, and that the leading rôle in this complex dynamic process is played by industry. This signifies that although the product of agriculture, and particularly its commodity portion, determines to a certain extent the limits of the development of industry, these limits are not hard and fast. This means that industry may develop even by a greater sum than that represented by the increase in the harvest. The mutual relations are even more complex. Industry, while depending mainly on the countryside, and developing as a result of the development of the latter, nevertheless more and more becomes itself a big market for its own products.

At the present time, when both agriculture and industry are nearing the end of the process of restoration, industry becomes more and more the driving force in development. The problem of the influence of the town on the socialist development of the countryside, not only by means of cheap articles of consumption, but by the perfection of the implements used in agriculture, which necessitates a collective form of working the land, now confronts industry in concrete and immediate forms.

The socialist transformation of agriculture will of course be brought about, not simply by means of co-operation as a mere form of organisation but through co-operation based upon the introduction of machinery into agriculture, its electrification, and generally its industrialisation. This signifies that both the technical and socialist progress of agriculture cannot be separated from the growing relative importance of industry in the general economy of the country. And this in its turn means that, in the further economic development, the dynamic coefficient of industry will, at first slowly, and then more and more rapidly, overtake the dynamic coefficient of agriculture, until there will no longer be any opposition between them.

VI. Conclusions

The output of industry in 1924-25 exceeded the output of the previous year by 48 per cent. In 1925-26, the output is estimated to exceed that of 1924-25 by 33 per cent, if the reduction in prices is not taken into account. But the various branches of industry are not developing at exactly the same rate. The large-scale enterprises increased their output by 64 per cent; the second group, which we may call the middle group, increased their output by 55 per cent; whilst for the small enterprises the increase was only 30 per cent. We have thus reached a position when the advantage of the large enterprises over the middle and small ones is already very apparent. This, however, in no way signifies that we have already reached the possible limit of development of a socialist economy. In so far as it is a question here of the greater productivity of the large enterprises in comparison with the middle and small ones, we are here only reaping advantages such as are inherent in the nature of big enterprises even under capitalism. We are only just entering upon the fundamental problems of socialist industry, such as the standardisation of products on a national scale, the specialisation of enterprises, the conversion of factories into powerful sections of a unified All-Union productive organisation, and the establishment of systematic material relations in the productive processes of all branches of industry. All this will provide us with the possibility of exceeding the old scale of our production within a few years. But this is a task of the future, and need not be discussed now.

So far the advantages of State direction of national economy were not utilised in the sphere of production itself, that is to say, in the organisation and co-ordination of the material processes, but in the sphere only of productive distribution, e.g., the supplying separate branches of industry with raw material, equipment, and so on. Or, to speak in the language of the market, it has been limited to supplying industry with working, and to a certain extent with basic, capital. Not bound by the limits of private property, the State was able, through its State Budget, through the State bank, through the Industrial Bank and similar organisations, to transfer at any given moment its resources wherever they might be most necessary, for the support, for the restoration, or for the development of the economic process. This advantage of socialist economy within the last few years proved a veritable salvation for the national economy. In spite of mistakes often made in the distribution of funds, we have nevertheless distributed them on the whole far more economically and expediently than could possibly have been done had the restoration of industry been proceeding under capitalist forms of production. Only thanks to this have we been able in such a short period to reach the present level without the help of foreign loans.

But this does not exhaust the question. The economy and therefore the social expediency of socialism has also shown itself in this, that it has freed the process of the restoration of our national economy from the overhead charges of a parasitic class. We are approaching now the level of output of 1913, whereas the country is now considerably poorer than it was before the war. This signifies that we are attaining a corresponding productivity with less social overhead charges: such as the monarchy, the nobility, the bourgeoisie, the privileged section of the intelligentsia, and finally, the frenzied friction inherent in the capitalist mechanism itself. It is precisely thanks to our socialist methods that we have been able to mobilise the still very limited material resources directly for productive purposes, and in this way to facilitate the raising of the standard of living of the people of our country during the next stage of development.

We have, therefore, on the nationalised land, a heterogeneous peasant economy, the commodity production of which only slightly exceeds one-third of the value of the commodities circulating in the market. The nationalised capital of agriculture constitutes but 4 per cent of the total.

The basic capital of our industry is nationalised to the extent of 39 per cent, and it is this nationalised industry which yields 79 per cent of the total gross industrial output. The 11 per cent of non-nationalised industrial means of production yield, therefore, 21 per cent of the gross output of industry. The share of the State industry in the total output is increasing.

Railway transport is nationalised to the full 100 per cent, and is continually being extended, In 1921-22, the transport system carried out only 25 per cent of the volume of work of pre-war days. In 1922-23, it carried out 37 per cent; in 1923-24, 44 per cent; and in 1924-25, it will have been over 50 per cent; whilst in 1925-26, it is estimated that the proportion will be 75 per cent.

In the sphere of trade, nationalised (that is to say, State and cooperative) capital constitutes 70 per cent of the total capital engaged in trade, and this proportion is growing continuously.

Foreign trade is completely nationalised, and the State monopoly of foreign trade forms a cornerstone of our policy in this sphere. The value of the total turnover of our foreign trade in 1925-26 is estimated to reach 2,200 million roubles, and the private capital invested in this, even if we add contraband to it, which would be quite correct, will scarcely reach 5 per cent. The banks and the credit system in general have been nationalised almost to the full 100 per cent, and this powerful and growing credit machinery is becoming more and more flexible, and is performing its task of accumulating all the spare resources of the country for the purpose of nourishing the productive processes in a very capable manner.

The State Budget now amounts to 3.7 milliard roubles, forming 13 per cent of the gross national income (29 milliard roubles) or 24 per cent of the value of the mass of commodities (15,200 million roubles). The Budget is more and more becoming a powerful factor in the economic and cultural growth of the country.

Such are the figures of the Gosplan tables. The facts given there are of world historic importance. The continuous activities of the socialists, which began with the utopian socialists, and developed subsequently into a scientific theory, and which have lasted for over one hundred years, have for the first time been verified by a mighty economic experiment, now in its ninth year. All that has been written on socialism and capitalism, on liberty and compulsion, on dictatorship and democracy, all this has gone through the furnace of the October Revolution and the Soviet economic experience, and is now confronting us in a new and far more concrete form. The Gosplan figures sum up, may be in a rough and only a preliminary form, the first results of the first concrete experiment seeking to transform bourgeois society into a socialist society, and we see that this summing up is completely in favour of socialism. No country in the world was so ruined and exhausted by a whole series of wars as Soviet Russia. All the capitalist countries, without exception, however much they suffered from the war, were restored with the help of foreign capital. Only the Soviet country, which in the past was the most backward, and which was most ruined and exhausted by the war and by revolutionary upheavals, recovered from its complete destitution by its own efforts and in spite of the active antagonism of the whole capitalist world. Only thanks to the complete expropriation of the large landowner, the abolition of bourgeois property, only thanks to the nationalisation of the fundamental means of production, only thanks to the State socialist methods of mobilising and distributing all the most necessary resources, has the Soviet Union risen from its chaos, and becomes an ever more powerful factor in world economy. The comprehensive tables of the Gosplan lead back in an unbroken thread to the Communist Manifesto of Marx and Engels, and they lead forward to the future socialist society. Over all these dry columns of figures hovers the spirit of Lenin.