STATE CAPITALISM

LENIN; On State Capitalism, During the Transition to Socialism

FIVE YEARS OF THE RUSSIAN REVOLUTION AND THE PROSPECTS OF THE WORLD REVOLUTION
Report to the Fourth Congress of the Communist International
November 13, 1922.

(Comrade Lenin is met with stormy, prolonged applause and a general ovation. All rise and join in singing “The Internationale".) Comrades, I am down in the list as the main speaker, but you will understand that after my lengthy illness I am not able to make a long report. I can only make a few introductory remarks on the key questions. My subject will be a very limited one. The subject, “Five Years of the Russian Revolution and the Prospects of the World Revolution", is in general too broad and too large for one speaker to exhaust in a single speech. That is why I shall take only a small part of this subject, namely, the question of the New Economic Policy. I have deliberately taken only this small part in order to make you familiar with what is now the most important question—at all events, it is the most important to me, because I am now working on it.

And so, I shall tell you how we launched the New Economic Policy, and what results we have achieved with the aid of this policy. If I confine myself to this question, I shall, perhaps, succeed in giving you a general survey and a general idea of it.

To begin with how we arrived at the New Economic Policy, I must quote from an article I wrote in 1918. At the beginning of 1918, in a brief polemic, I touched on the question of the attitude we should adopt towards state capitalism. I then wrote:
“State capitalism would be a step forward as compared with the present state of affairs (i.e., the state of affairs at that time) in our Soviet Republic. If in approximately six months’ time state capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year socialism will have gained a permanently firm hold and will have become invincible in our country.”

Of course, this was said at a time when we were more foolish than we are now, but not so foolish as to be unable to deal with such matters.

Thus, in 1918, I was of the opinion that with regard to the economic situation then obtaining in the Soviet Republic, state capitalism would be a step forward. This sounds very strange, and perhaps even absurd, for already at that time our Republic was a socialist republic and we were every day hastily—perhaps too hastily—adopting various new economic measures which could not be described as anything but socialist measures. Nevertheless, I then held the view that in relation to the economic situation then obtaining in the Soviet Republic state capitalism would be a step forward, and I explained my idea simply by enumerating the elements of the economic system of Russia. In my opinion these elements were the following: “(1) patriarchal, i.e., the most primitive form of agriculture; (2) small commodity production (this includes the majority of the peasants who trade in grain); (3) private capitalism; (4) state capitalism, and (5) socialism.” All these economic elements were present in Russia at that time. I set myself the task of explaining the relationship of these elements to each other, and whether one of the non-socialist elements, namely, state capitalism, should not be rated higher than socialism. I repeat: it seems very strange to everyone that a non-socialist element should be rated higher than, regarded as superior to, socialism in a republic which declares itself a socialist republic But the fact will become intelligible if you recall that we definitely did not regard the economic system of Russia as something homogeneous and highly developed; we were fully aware that in Russia we had patriarchal agriculture, i.e., the most primitive form of agriculture, alongside the socialist form. What role could state capitalism play in these circumstances?

I then asked myself which of these elements predominated? Clearly, in a petty-bourgeois environment the petty-bourgeois element predominates. I recognised then that the petty- bourgeois element predominated; it was impossible to take a different view. The question I then put to myself—this was in a specific controversy which had nothing to do with the present question—was: what is our attitude towards state capitalism? And I replied: although it is not a socialist form, state capitalism would be for us, and for Russia, a more favourable form than the existing one. What does that show? It shows that we did not overrate either the rudiments or the principles of socialist economy, although we had already accomplished the social revolution. On the contrary, at that time we already realised to a certain extent that it would be better if we first arrived at state capitalism and only after that at socialism.

I must lay special emphasis on this, because I assume that it is the only point of departure we can take, firstly, to explain what the present economic policy is; and, secondly, to draw very important practical conclusions for the Communist International. I do not want to suggest that we had then a ready- made plan of retreat. This was not the case. Those brief lines set forth in a polemic were not by any means a plan of retreat. For example, they made no mention whatever of that very important point, freedom to trade, which is of fundamental significance to state capitalism. Yet they did contain a general, even if indefinite, idea of retreat. I think that we should take note of that not only from the viewpoint of a country whose economic system was, and is to this day, very backward, but also from the viewpoint of the Communist International and the advanced West-European countries. For example, just now we are engaged in drawing up a programme. I personally think that it would be best to hold simply a general discussion on all the programmes, to make the first reading, so to speak, and to get them printed, but not to take a final decision now, this year. Why? First of all, of course, because I do not think we have considered all of them in sufficient detail, and also because we have given scarcely any thought to possible retreat, and to preparation for it. Yet that is a question which, in view of such fundamental changes in the world as the overthrow of capitalism and the building of socialism with all its enormous difficulties, absolutely requires our attention. We must not only know how to act when we pass directly to the offensive and are victorious. In revolutionary times this is not so difficult, nor so very important; at least, it is not the most decisive thing. There are always times in a revolution when the opponent loses his head; and if we attack him at such a time, we may win an easy victory. But that is nothing, because our enemy, if he has enough endurance, can rally his forces beforehand, and so forth. He can easily provoke us to attack him and then throw us back for many years. For this reason, I think, the idea that we must prepare for ourselves the possibility of retreat is very important, and not only from the theoretical point of view. From the practical point of view, too, all the parties which are preparing to take the direct offensive against capitalism in the near future must now give thought to the problem of preparing for a possible retreat. I think it will do us no harm to learn this lesson together with all the other lessons which the experience of our revolution offers. On the contrary, it may prove beneficial in many cases.

Now that I have emphasised the fact that as early as 1918 we regarded state capitalism as a possible line of retreat, I shall deal with the results of our New Economic Policy. I repeat: at that time it was still a very vague idea, but in 1921, after we had passed through the most important stage of the Civil War—and passed through it victoriously—we felt the impact of a grave—I think it was the gravest—internal political crisis in Soviet Russia. This internal crisis brought to light discontent not only among a considerable section of the peasantry but also among the workers. This was the first and, I hope, the last time in the history of Soviet Russia that feeling ran against us among large masses of peasants, not consciously but instinctively. What gave rise to this peculiar, and for us, of course, very unpleasant, situation? The reason for it was that in our economic offensive we had run too far ahead, that we had not provided ourselves with adequate resources, that the masses sensed what we ourselves were not then able to formulate consciously but what we admitted soon after, a few weeks later, namely, that the direct transition to purely socialist forms, to purely socialist distribution, was beyond our available strength, and that if we were unable to effect a retreat so as to confine ourselves to easier tasks, we would face disaster. The crisis began, I think, in February 1921. In the spring of that year we decided unanimously—I did not observe any considerable disagreement among us on this question—to adopt the New Economic Policy. Now, after eighteen months have elapsed, at the close of 1922, we are able to make certain comparisons. What has happened? How have we fared during this period of over eighteen months? What is the result? Has this retreat been of any benefit to us? Has it really saved us, or is the result still indefinite? This is the main question that I put to myself, and I think that this main question is also of first-rate importance to all the Communist Parties; for if the reply is in the negative, we are all doomed. I think that all of us can, with a clear conscience, reply to this question in the affirmative, namely, that the past eighteen months provide positive and absolute proof that we have passed the test.

I shall now try to prove this. To do that I must briefly enumerate all the constituent parts of our economy.

First of all, I shall deal with our financial system and our famous Russian ruble. I think we can say that Russian rubles are famous, if only for the reason that their number now in circulation exceeds a quadrillion. (Laughter.) That is something! It is an astronomical figure. I am sure that not everyone here knows what this figure signifies. (General laughter.) But we do not think that the figure is so very important even from the point of view of economic science, for the noughts can always be crossed out. (Laughter.) We have achieved a thing or two in this art, which is likewise of no importance from the economic point of view, and I am sure that in the further course of events we shall achieve much more. But what is really important is the problem of stabilising the ruble. We are now grappling with this problem, our best forces are working on it, and we attach decisive importance to it. If we succeed in stabilising the ruble for a long period, and then for all time, it will prove that we have won. In that case all these astronomical figures, these trillions and quadrillions, will not have mattered in the least. We shall then be able to place our economy on a firm basis and develop it further on a firm basis. On this question I think I can cite some fairly important and decisive data. In 1921 the rate of exchange of the paper ruble remained stable for a period of less than three months. This year, 1922, which has not yet drawn to a close, the rate remained stable for a period of over five months. I think that this proof is sufficient. Of course, if you demand scientific proof that we shall definitely solve this problem, then it is not sufficient; but in general, I do not think it is possible to prove this entirely and conclusively. The data I have cited show that between last year, when we started on the New Economic Policy, and the present day, we have already learned to make progress. Since we have learned to do this, I am sure we shall learn to achieve further successes along this road, provided we avoid doing anything very foolish. The most important thing, however, is trade, namely, the circulation of commodities, which is essential for us. And since we have successfully coped with this problem for two years, in spite of having been in a state of war (for, as you know, Vladivostok was recaptured only a few weeks ago), and in spite of the fact that only now we are able to proceed with our economic activities in a really systematic way—since we have succeeded in keeping the rate of the paper ruble stable for five months instead of only three months, I think I can say that we have grounds to be pleased. After all, we stand alone. We have not received any loans and are not receiving any now. We have been given no assistance by any of the powerful capitalist countries, which organise their capitalist economy so “brilliantly” that they do not know to this day which way they are going. By the Treaty of Versailles, they have created a financial system that they themselves cannot make head or tail of. If these great capitalist countries are managing things in this way, I think that we, backward and uneducated as we are, may be pleased with the fact that we have grasped the most important thing—the conditions for the stabilisation of the ruble. This is proved not by theoretical analysis but by practical experience, which in my opinion is more important than all the theoretical discussions in the world. Practice shows that we have achieved decisive results in that field, namely, we are beginning to push our economy towards the stabilisation of the ruble, which is of supreme importance for trade, for the free circulation of commodities, for the peasants, and for the vast masses of small producers.

Now I come to our social objectives. The most important factor, of course, is the peasantry. In 1921 discontent undoubtedly prevailed among a vast section of the peasantry. Then there was the famine. This was the severest trial for the peasants. Naturally, all our enemies abroad shouted: “There, that’s the result of socialist economy!” Quite naturally, of course, they said nothing about the famine actually being the terrible result of the Civil War. All the landowners and capitalists who had begun their offensive against us in 1918 tried to make out that the famine was the result of socialist economy. The famine was indeed a great and grave disaster which threatened to nullify the results of all our organisational and revolutionary efforts.

And so, I ask now, after this unprecedented and unexpected disaster, what is the position today, after we have introduced the New Economic Policy, after we have granted the peasants freedom to trade? The answer is clear and obvious to everyone; in one year the peasants have not only got over the famine, but have paid so much tax in kind that we have already received hundreds of millions of poods of grain, and that almost without employing any measures of coercion. Peasant uprisings, which previously, before 1921, were, so to speak, a common occurrence in Russia, have almost completely ceased. The peasants are satisfied with their present position. We can confidently assert that. We think that this evidence is more important than any amount of statistical proof. Nobody questions the fact that the peasants are a decisive factor in our country. And the position of the peasantry is now such that we have no reason to fear any movement against us from that quarter. We say that quite consciously, without exaggeration. This we have already achieved. The peasantry may be dissatisfied with one aspect or another of the work of our authorities. They may complain about this. That is possible, of course, and inevitable, because our machinery of state and our state-operated economy are still too inefficient to avert it; but any serious dissatisfaction with us on the part of the peasantry as a whole is quite out of the question. This has been achieved in the course of one year. I think that is already quite a lot.

Now I come to our light industry. In industry we have to make a distinction between heavy and light industry because the situation in them is different. As regards light industry, I can safely say that there is a general revival. I shall not go into details. I did not set out to quote a lot of statistics. But this general impression is based on facts, and I can assure you that it is not based on anything untrue or inaccurate. We can speak of a general revival in light industry, and, as a result, of a definite improvement in the conditions of the workers in Petrograd and Moscow. In other districts this is observed to a lesser degree, because heavy industry predominates in them. So, this does not apply generally. Nevertheless, I repeat, light industry is undoubtedly on the upgrade, and the conditions of the workers in Petrograd and Moscow have unquestionably improved. In the spring of 1921, there was discontent among the workers in both these cities. That is definitely not the case now. We, who watch the conditions and mood of the workers from day to day, make no mistake on that score.

The third question is that of heavy industry. I must say that the situation here is still grave. Some turn for the better occurred in 1921-22, so that we may hope that the situation will improve in the near future. We have already gathered some of the resources necessary for this. In a capitalist country a loan of hundreds of millions would be required to improve the situation in heavy industry. No improvement would be possible without it. The economic history of the capitalist countries shows that heavy industry in backward countries can only be developed with the aid of long-term loans of hundreds of millions of dollars or gold rubles. We did not get such loans, and so far, have received nothing. All that is now being written about concessions and so forth is not worth much more than the paper it is written on. We have written a great deal about this lately and in particular about the Urquhart concession. Yet I think our concessions policy is a very good one. However, we have not concluded a single profitable concession agreement so far. I ask you to bear that in mind. Thus, the situation in heavy industry is really a very grave problem for our backward country, because we cannot count on loans from the wealthy countries. In spite of that, we see a tangible improvement, and we also see that our trading has brought us some capital. True, it is only a very modest sum as yet—a little over twenty million gold rubles. At any rate, a beginning has been made; our trade is providing us with funds which we can employ for improving the situation in heavy industry. At the present moment, however, our heavy industry is still in great difficulties. But I think that the decisive circumstance is that we are already in a position to save a little. And we shall go on saving. We must economize now though it is often at the expense of the population. We are trying to reduce the state budget, to reduce staffs in our government offices. Later on, I shall have a few words to say about our state apparatus. At all events, we must reduce it. We must economize as much as possible. We are economizing in all things, even in schools. We must do this, because we know that unless we save heavy industry, unless we restore it, we shall not be able to build up an industry at all; and without an industry we shall go under as an independent, country. We realise this very well.

The salvation of Russia lies not only in a good harvest on the peasant farms—that is not enough; and not only in the good condition of light industry, which provides the peasantry with consumer goods—this, too, is not enough; we also need heavy industry. And to put it in a good condition will require several years of work.

Heavy industry needs state subsidies. If we are not able to provide them, we shall be doomed as a civilised state, let alone as a socialist state. In this respect, we have taken a determined step. We have begun to accumulate the funds that we need to put heavy industry on its feet. True, the sum we have obtained so far barely exceeds twenty million gold rubles; but at any rate this sum is available, and it is earmarked exclusively for the purpose of reviving our heavy industry.

I think that, on the whole, I have, as I have promised, briefly outlined the principal elements of our economy, and feel that we may draw the conclusion from all this that the New Economic Policy has already yielded dividends. We already have proof that, as a state, we are able to trade, to maintain our strong positions in agriculture and industry, and to make progress. Practical activity has proved it. I think this is sufficient for us for the time being. We shall have to learn much, and we have realised that we still have much to learn. We have been in power for five years, and during these five years we have been in a state of war. Hence, we have been successful.

This is understandable, because the peasantry were on our side. Probably no one could have supported us more than they did. They were aware that the whiteguards had the landowners behind them, and they hate the landowners more than anything in the world. That is why the peasantry supported us with all their enthusiasm and loyalty. It was not difficult to get the peasantry to defend us against the whiteguards. The peasants, who had always hated war, did all they possibly could in the war against the whiteguards, in the Civil War against the landowners. But this was not all, because in substance it was only a matter of whether power would remain in the hands of the landowners or of the peasants. This was not enough for us. The peasants know that we have seized power for the workers and that our aim is to use this power to establish the socialist system. Therefore, the most important thing for us was to lay the economic foundation for socialist economy. We could not do it directly. We had to do it in a roundabout way. The state capitalism that we have introduced in our country is of a special kind. It does not agree with the usual conception of state capitalism. We hold all the key positions. We hold the land; it belongs to the state. This is very important, although our opponents try to make out that it is of no importance at all. That is untrue. The fact that the land belongs to the state is extremely important, and economically it is also of great practical purport. This we have achieved, and I must say that all our future activities should develop only within that framework. We have already succeeded in making the peasantry content and in reviving both industry and trade. I have already said that our state capitalism differs from state capitalism in the literal sense of the term in that our proletarian state not only owns the land, but also all the vital branches of industry. To begin with, we have leased only a certain number of the small and medium plants, but all the rest remain in our hands. As regards trade, I want to re-emphasize that we are trying to find mixed companies, that we are already forming them, i.e., companies in which part of the capital belongs to private capitalists—and foreign capitalists at that—and the other part belongs to the state. Firstly, in this way we are learning how to trade, and that is what we need. Secondly, we are always in a position to dissolve these companies if we deem it necessary, and do not, therefore, run any risks, so to speak. We are learning from the private capitalist and looking round to see how we can progress, and what mistakes we make. It seems to me that I need say no more.

I should still like to deal with several minor points. Undoubtedly, we have done, and will still do, a host of foolish things. No one can judge and see this better than I. (Laughter.) Why do we do these foolish things? The reason is clear: firstly, because we are a backward country; secondly, because education in our country is at a low level and thirdly, because we are getting no outside assistance. Not a single civilised country is helping us. On the contrary, they are all working against us. Fourthly, our machinery of state is to blame. We took over the old machinery of state, and that was our misfortune. Very often this machinery operates against us. In 1917, after we seized power, the government officials sabotaged us. This frightened us very much and we pleaded: “Please come back.” They all came back, but that was our misfortune. We now have a vast army of government employees but lack sufficiently educated forces to exercise real control over them. In practice it often happens that here at the top, where we exercise political power, the machine functions somehow; but down below government employees have arbitrary control and they often exercise it in such a way as to counteract our measures. At the top, we have, I don’t know how many, but at all events, I think, no more than a few thousand, at the outside several tens of thousands of our own people. Down below, however, there are hundreds of thousands of old officials whom we got from the tsar and from bourgeois society and who, partly deliberately and partly unwittingly, work against us. It is clear that nothing can be done in that respect overnight. It will take many years of hard work to improve the machinery, to remodel it, and to enlist new forces. We are doing this fairly quickly, perhaps too quickly. Soviet schools and Workers’ Faculties have been formed; a few hundred thousand young people are studying; they are studying too fast perhaps, but at all events, a start has been made, and I think this work will bear fruit. If we do not work too hurriedly, we shall, in a few years’ time, have a large body of young people capable of thoroughly overhauling our state apparatus.

I have said that we have done a host of foolish things, but I must also say a word or two in this respect about our enemies. If our enemies blame us and say that Lenin himself admits that the Bolsheviks have done a host of foolish things, I want to reply to this: yes, but you know, the foolish things we have done are nonetheless very different from yours. We have only just begun to learn but are learning so methodically that we are certain to achieve good results. But since our enemies, i.e., the capitalists and the heroes of the Second International, lay stress on the foolish things we have done, I take the liberty, for the sake of comparison, to cite the words of a celebrated Russian author, which I shall amend to read as follows: if the Bolsheviks do foolish things the Bolshevik says, “Twice two are five", but when their enemies, i.e., the capitalists and the heroes of the Second International, do foolish things, they get, “Twice two make a tallow candle”. That is easily proved. Take, for example, the agreement concluded by the U.S.A., Great Britain, France and Japan with Kolchak. I ask you, are there any more enlightened and more powerful countries in the world? But what has happened? They promised to help Kolchak without calculation, without reflection, and without circumspection. It ended in a fiasco, which, it seems to me, is difficult for the human intellect to grasp.

Or take another example, a closer and more important one: The Treaty of Versailles. I ask you, what have the “great” powers which have “covered themselves with glory” done? How will they find a way out of this chaos and confusion? I don’t think it will be an exaggeration to repeat that the foolish things we have done are nothing compared with those done in concert by the capitalist countries, the capitalist world and the Second International. That is why I think that the outlook for the world revolution—a subject which I must touch on briefly—is favourable. And given a certain definite condition, I think it will be even better. I should like to say a few words about this.

At the Third Congress, in 1921, we adopted a resolution on the organisational structure of the Communist Parties and on the methods and content of their activities. The resolution is an excellent one, but it is almost entirely Russian, that is to say, everything in it is based on Russian conditions. This is its good point, but it is also its failing. It is its failing because I am sure that no foreigner can read it. I have read it again before saying this. In the first place, it is too long, containing fifty or more points. Foreigners are not usually able to read such things. Secondly, even if they read it, they will not understand it because it is too Russian. Not because it is written in Russian—it has been excellently translated into all languages—but because it is thoroughly imbued with the Russian spirit. And thirdly, if by way of exception some foreigner does understand it, he cannot carry it out. This is its third defect. I have talked with a few of the foreign delegates and hope to discuss matters in detail with a large number of delegates from different countries during the Congress, although I shall not take part in its proceedings, for unfortunately it is impossible for me to do that. I have the impression that we made a big mistake with this resolution, namely, that we blocked our own road to further success. As I have said already, the resolution is excellently drafted; I am prepared to subscribe to every one of its fifty or more points. But we have not learnt how to present our Russian experience to foreigners. All that was said in the resolution has remained a dead letter. If we do not realise this, we shall be unable to move ahead. I think that after five years of the Russian revolution the most important thing for all of us, Russian and foreign comrades alike, is to sit down and study. We have only now obtained the opportunity to do so. I do not know how long this opportunity will last. I do not know for how long the capitalist powers will give us the opportunity to study in peace. But we must take advantage of every moment of respite from fighting, from war, to study, and to study from scratch.

The whole Party and all strata of the population of Russia prove this by their thirst for knowledge. This striving to learn shows that our most important task today is to study and to study hard. Our foreign comrades, too, must study. I do not mean that they have to learn to read and write and to understand what they read, as we still have to do. There is a dispute as to whether this concerns proletarian or bourgeois culture. I shall leave that question open. But one thing is certain: we have to begin by learning to read and write and to understand what we read. Foreigners do not need that. They need something more advanced: first of all, among other things they must learn to understand what we have written about the organisational structure of the Communist Parties, and what the foreign comrades have signed without reading and understanding. This must be their first task. That resolution must be carried out. It cannot be carried out overnight; that is absolutely impossible. The resolution is too Russian, it reflects Russian experience. That is why it is quite unintelligible to foreigners, and they cannot be content with hanging it in a corner like an icon and praying to it. Nothing will be achieved that way. They must assimilate part of the Russian experience. Just how that will be done, I do not know. The fascists in Italy may, for example, render us a great service by showing the Italians that they are not yet sufficiently enlightened and that their country is not yet ensured against the Black Hundreds. Perhaps this will be very useful. We Russians must also find ways and means of explaining the principles of this resolution to the foreigners. Unless we do that, it will be absolutely impossible for them to carry it out. I am sure that in this connection we must tell not only the Russians, but the foreign comrades as well, that the most important thing in the period we are now entering is to study. We are studying in the general sense. They, however, must study in the special sense, in order that they may really understand the organisation,
structure, method and content of revolutionary work. If they do that, I am sure the prospects of the world revolution will be not only good, but excellent. (Stormy, prolonged applause. Shouts of “Long live our Comrade Lenin!” evoke a fresh stormy ovation.)
Vol. 33, pp. 418-28