The People's Republic of Walmart

by Leigh Phillips

  Between the start of the Great War in 1914 and 1921, gross output of all industry plunged by two-thirds; coal production decreased by two-thirds, and steel and electricity generation (such as existed) by roughly four-fifths, while imports plummeted by 85 percent, and exports by just under 99 percent.

  Restoration of order was not just imperative, but popular. And indeed, we see repeatedly throughout history how capitalist states under conditions of total war have likewise engaged in widespread nationalization—or at least centralization of investment decisions, rationing, and much greater state control of the economy than normally obtained under capitalism in a time of peace. For the Bolsheviks, as with Roosevelt or Churchill some two decades later, winning the war came into conflict with the inefficiencies of the market. There was a fatal logic to the extension of state control.

  There were Left Opposition figures such as Nikolai Bukharin and Karl Radek who opposed Lenin’s inclinations toward discipline and managerial authority, and even those toward material incentives, piecework, and payment of higher wages to specialists than to other workers. So much of what was occurring seemed a refutation of the egalitarian, democratic aims of Marxism, and above all, of its desire to transcend domination in favor of a new realm of freedom. But at the same time, defeat in the civil war meant loss of the world’s first workers’ government. Such noble goals as Lenin himself had earlier articulated would have to wait. Russia was hopelessly underdeveloped, its economy crushed. The best that could be done was for the Bolsheviks to hold out as long as they could in the hope that the promised world revolution would spread to more-industrialized nations such as Germany or Britain, which Marx and other socialists had presumed would be the birthplace of world revolution, rather than a still largely feudal economic backwater like Russia.

  After the rouble collapsed, and public spending was sourced via the printing of money, the running expenses of much of the economy began to come straight out of the budget; as a result, actual cash payments began to mean less and less. Local economic councils resolved that state industrial enterprises deliver their products to other enterprises upon the instruction of the Vesenkha without need for payment, and that they should receive the materials and services they need in the same manner. The railways and the merchant fleet should likewise transport goods for free. Subsequently, workers in the state sector, and later other urban workers and even some rural residents, were no longer charged for their paltry food ration (“Free rations, when there was anything to ration,” Nove writes), while postal, transport and other municipal services were free and wages mostly paid in kind. Expenditures became more a practice of bookkeeping than exchange. As Nove describes the situation: “Money lost its effective function within the state sector of the economy.”

  By the end of 1918, a new body, this one called the Commission of Utilization, only tasked with the question of distribution, began to draft material balance sheets—the germ of what would become, over the decades, much grander Soviet systems of planning. The ideological wish for a moneyless society merged with the exigencies of a crisis economy. By 1919, the draft program of the Communist Party stated that trade should undeviatingly be replaced by “planned, governmentally-organized distribution of products,” while preparations should be made for “the abolition of money.” Some even theorized that it was the chaos of revolutions themselves that would produce the swift disappearance of capitalist relations, such as money and commodity exchange on the market.

  At first, amid the breakdown, the best that the Vesenkha could do amounted less to central planning than it did mitigation of the disaster. It ordered what had to be produced, distributed what could be distributed, and attempted to introduce coordination between economic sectors. Nonetheless, by September 1919, Bukharin estimated that some 80 to 90 percent of the largest industries had been nationalized. Expropriation of smaller enterprises, however, was ruled “absolutely out of the question,” as it would be impossible to organize such small-scale production and distribution. A decree earlier that year forbade nationalization of workshops with fewer than five employees, although, vast, ad hoc nationalizations of businesses of this size did indeed occur, but without any coherent plan, as authorities (where they existed) hurtled “from bottleneck to bottleneck.” Meanwhile, a vast underground economy exacerbated shortages and inflation, and drew resources away from war priorities. And so, in November 1920, despite the utter inability and distinct lack of desire of administrators, with their embryonic planning capacity, to handle tens of thousands of minuscule operations, a decree announced the nationalization of all small-scale industry.

  While Lenin was ultimately successful in reinstalling the principle of one-person management in workplaces, this took varying forms. In some locations it meant a worker in charge, with a specialist—in essence a manager from before the revolution—advising. In other locations this meant a specialist was put in charge, with a worker-commissar advising who could sometimes query but not overrule him. Some, in a political tendency within the Bolsheviks known as the Workers’ Opposition, wanted trade union control over the economy, while Leon Trotsky, the commander of the Red Army and ultimately architect of the Bolshevik victory in the civil war, sought the full militarization of labor. The urgency of the cataclysm justified the temporary establishment of an “army of labor” operating under military discipline, he believed. But it would be overly simplistic to view such arguments as taking place between a right, centralizing, more authoritarian tendency, on the one hand, and a left, more libertarian tendency on the other. The argumentation was furious, and key figures vacillated over various aspects of the question as conditions changed. Lenin, for his part—while supporting stricter discipline and more centralized management in the general interest, and even the militarization of labor on a case-by-case basis—thought Trotsky went too far. He felt that the trade unions needed to maintain their important function as sectional representation of workers. Precisely because the current dire situation demanded such bureaucratic, centralizing distortion of socialist goals, he believed there was a need for trade unions to maintain an independent ability to embody their members’ interests at this or that factory. Trade union control of the economy would in effect transform the trade unions into managerial arms of the Vesenkha, representing the interest of the management with respect to workers, which would conflict with their historical role of representing the interest of the workers with respect to management. Nevertheless, the effort to establish greater discipline led to ever greater control of the party over the trade unions (in some cases willingly so, as the personnel involved were frequently members of both), and, later on, as soviet democracy was ultimately strangled, the contradiction here would ultimately be decided in favor of the state.

  The Gosplan and the Gulag

  As above, there is little need for us to add to the extensive historical literature describing the purges that killed off most of the old Bolsheviks who had made the revolution, the great famine in the early ’30s that was responsible for the deaths of as many as 12 million (mostly Ukrainians), the sabotage of the Spanish Revolution, the gulag, the suppression of worker uprisings in Hungary and Czechoslovakia, or the invasion of Afghanistan. We are, however, interested in considering the economics of the deterioration, and in particular whether planning causes (or even contributes to) the rise of authoritarianism—as the market socialist Nove and indeed most social democrats, liberals and conservatives have argued—or instead whether these analysts have it backward: whether it is in fact authoritarianism that fatally undermines planning.

  Immediately in October, the peasantry had begun seizing much of the land and dividing it up among themselves. While the land redistribution was in keeping with the stated aims of the revolution and encouraged by the emerging government, the process very quickly resulted in an unexpected inability to feed the urban masses, a crisis that set up a deep antagonism between town and country that would only be resolved via a brutality that must be counted as one of the great c
rimes of history.

  The reorganization of farms and the large estates, of course, had a disruptive impact on agricultural production, notably as the peasants squabbled among themselves over how the land would be distributed. There were richer and poorer peasants. Some wanted the estates broken up, while others favored collectivization of production. But the hunger that stalked the cities was not a result of these struggles, but instead of a contradiction between the immediate interests of the urban workers and the peasants, however much was made of the unity of those who wielded the hammer in the factory and those who hewed with the sickle in the fields. Much of the peasantry were not agricultural workers employed by a boss, but instead more akin to feudal serfs, despite serfdom having been formally abolished in 1861, with either nobles or the state itself directly expropriating a percentage of what was produced and then selling that on the market. The great source of wealth in Russia, as in all other countries before the rise of capitalism, was this seasonal act of direct theft from the peasantry. The incentive of the peasant to produce any surplus was thus driven by their need to survive, to make sure there was enough left over to eat after the landowner had taken his cut.

  Bread rations in Petrograd were so meager that workers—many of whom had, not a generation before, been peasants themselves—began to migrate back to their villages in order to be able to feed themselves; some factories even had to close their gates due to the dearth of workers. The new government was in a bind. The best option would be to produce a raft of light industrial items and consumer goods that peasants might want, thus incentivizing the peasantry—many among them reduced to subsistence farming on small redistributed plots—to produce sufficient surplus to be able to purchase such items. The disruption and chaos from revolution and civil war already made this quite a task, but the problem was compounded by the ongoing need for heavy industrial production to produce the weapons and vehicles needed to fight the war. Even as the civil war, to everyone’s exhausted surprise, began to wind down in the Bolsheviks’ favor by 1920, the revolutionaries felt an abiding fear that foreign armies, much wealthier and more technologically advanced, could reinvade at any moment. The Bolsheviks confronted a paradox: a shift to light industrial production would likely result in the crushing of the revolution from without; but if they did not shift to light industrial production, the revolution would likely be crushed from within.

  In short, the early soviets suffered due to an agricultural sector that had yet to be integrated into capitalism. Had a countrywide emergence of capitalism turned these peasants into agricultural workers instead, as had been occurring for the last couple of centuries in western Europe, these workers would have had an immediate common interest with the industrial workers of the cities and towns in the collectivization of production. Instead, the revolution had liberated peasants by turning them into smallholders.

  Food shortages drove hoarding, speculation and thus inflation, and these in turn compounded the shortages. During 1918–19, some 60 percent of urban consumption passed through the black market.

  As was happening with other areas of production, distribution, and broken markets, central authorities increasingly turned to more aggressive mechanisms of allocation. The Supply Commissariat (Narkomprod), in May 1918, was given powers to obtain food by force. Its officials, together with detachments of armed workers and the secret police (Cheka), seized the stocks of those accused of hoarding, while poorer peasants were whipped up into a campaign of confiscating grain from alleged “kulaks” (or so-called “rich peasants”). These haphazard food requisitions were over time regularized into “prodrazvyorstka,” a system of enforced purchase for a fixed—but unattractive—price that echoed earlier grain confiscation programs of the tsar during World War I. The prices were so low that in some cases, the requisitioning might as well have been called confiscation, as very little could be purchased with such paltry sums. Quite understandably, peasants fought back, not least because what food was left after the agents of prodrazvyorstka had gone was not enough to feed themselves. Riots were not uncommon. The program only exacerbated the shortages and speculation as peasants hid their grain, sold it on the black market, or simply didn’t sow seeds—for what was the point in working if the entire fruits of your labor were to be stolen? Even as procurements more than tripled, overall, production collapsed.

  The civil war, prodrazvyorstka and a severe drought in the east and southeast resulted in a grain harvest in 1921 of barely more than two-fifths of the prewar average, creating a famine, accompanied by a typhus epidemic, in which millions died, despite emergency relief and the waiver of the food tax in affected regions.

  Even at this point, out of fear of a return of the landlords, peasants remained sufficiently loyal to the Bolsheviks to ensure their victory in the civil war by 1922. Meanwhile, for all their fury at the “selfish” peasants’ inability to produce in the interest of the greater good, Lenin, Trotsky, Bukharin and some other leading Bolsheviks began to argue that the emergency requisitions were no long-term solution to the contradiction between the interests of the urban workers and the peasantry. A boost in agricultural productivity would be impossible without some sort of incentive for the peasantry. Once a fragile peace had been achieved, the leadership considered the scale of the disaster of “war communism” and were convinced of the need for a retreat from what others had believed to be a salutary, galloping advance toward socialism. The government was not just faced with peasant rebellions: workers in Petrograd were also beginning to strike over the meager bread rations; the prodrazvyorstka was being replaced with a food tax set significantly lower than the requisitioning targets; further, a sailors’ revolt at Kronstadt, home to the Baltic fleet, had at the end of the civil war cemented this view of a need to draw back. And so, by 1923, the sown area had returned to 90 percent of prewar levels, and while the harvest was still less than in 1913, food shortages were no longer desperate.

  A more cautious approach that reintroduced elements of the market, with the aim of development of primarily private agriculture and a substantial private light-industrial sector, would now be the aim under the New Economic Policy (NEP)—a concession leading Bolsheviks believed would likely be needed to be kept in place for a long time. Lenin hoped for a maximum of twenty-five years; others thought that would be the minimum.

  The NEP’s legalization of private trade turned out to be a rapid success, particularly with respect to consumer items in the countryside. Small workshops that had been nationalized were now leased to entrepreneurs and cooperatives, while the state held on to heavy industry, finance and foreign trade. Talk of the abolition of money vanished as state enterprises would now have to operate on the basis of commercial accounting. Resources necessary for production, notably fuel, would have to be paid for with funds obtained from sales instead of with easy credit from the center. Likewise, wages would once again be paid in cash, and charges for municipal services were reimposed. Factories would operate as autonomous, competitive units aiming for profits and avoidance of losses. Oil and timber concessions were even offered to foreign capitalists, in the hope of their introduction of much-needed modern machinery.

  Due to the considerable market allocation of goods that was reintroduced under the NEP, it is hard to say how much planning was occurring. Strategic sectors of heavy industry were closely directed by the appropriate division of Vesenkha as to what to produce, and when, while consumer goods industries were left to craft their own production plans, taking their cues from the market. Here’s Nove again: “The word ‘planning’ had a very different meaning in 1923–26 to that which it later acquired. There was no fully worked-out production and allocation program, no ‘command economy.’” What emerged instead of operational planning were forecasts, recommendations and guides that permitted higher-ups to discuss priorities for strategic investment decisions. In many respects, what was obtained at this point was not radically different from some of the more statist Western economies of the postwar period, as many of
the commanding heights of the economy, particularly coal and steel, were in public hands—although perhaps it had a more spasmodic character, as the disorganized new state was still establishing itself.

  Simultaneous to all this, the civil war had gutted civil liberties and atrophied soviet democracy. Millions of workers, including the most politically active, were killed in combat. Those who survived had done so by returning to villages to scrape together enough to eat, engaging in black market activities, or through absorption into the new state apparatus. Day-to-day functioning of the government depended upon tsarist bureaucrats, and talk of the extinction of the proletariat was only a slight exaggeration. The soviets had truly ceased to be organs of government by the workers, but instead existed for the workers—or even by and for the bureaucrats. There was no longer any real direct exercise of power by the soviets. The constriction of civil liberties, amid total war with enemies on all sides, never let up—even as a fragile victory emerged. With most political parties siding against the revolution after October, by the end of the civil war the Bolsheviks were the only effective party left. It was through factions within the party, not between parties, that political disagreement was expressed. But in 1921, unnerved at an echo of the ideas of the Left Opposition within the Communist Party among the Kronstadt rebels—and at how many Communist Party members had joined the revolt—the leadership made perhaps its greatest mistake, laying the groundwork for the Stalinization process later in the decade: it legislated a ban on factions within the Bolsheviks. Intended as a temporary measure until things calmed down, even those backing the measure nevertheless feared what might happen as a result.

  Throughout the 1920s, despite the formal ban on factions, argumentation about what was to be done was omnipresent, although debate coarsened. After the death of Lenin in 1924, Joseph Stalin, leader of the Bolshevik “Center” faction that waffled between the two poles of continuing the NEP and re-collectivizing agriculture in the name of a rapid expansion of heavy industry, emerged to a position of power. Discussion meetings would face squads of Stalinist hecklers disrupting them with taunts, jeers and catcalls, even fisticuffs. The hooliganism accompanied a creeping dominance of the secret police, the Joint State Political Directorate (OGPU). From mid 1926 onward, most opposition figures, left and right, were steadily expelled from positions of influence. Oppositionists (or anyone suspected of opposition) were dragged from their beds at night and imprisoned or exiled without charge. In 1928, Trotsky and his supporters were exiled to remote parts of the union; then, in 1929, with the Left defeated, Stalin turned his attention to the last remaining critics of authoritarian creep, among them Bukharin. Bukharin confessed to “ideological errors” and was partially and briefly rehabilitated, but a few years later, he too would join most of his old Bolshevik comrades who had made the revolution, killed in one way or another in the Great Purge.