STATE CAPITALISM

LENIN; On State Capitalism, During the Transition to Socialism

FOREWORD
Between these covers are V. I. Lenin's articles, speeches, and letters (complete or in part), and selected passages from his larger works dealing with the use of state capitalism in building socialist economy. Lenin demonstrates the suitability and objective economic need for using state capitalism in the period of transition from capitalism to socialism and defines its basic principles and methods.

Lenin referred to state capitalism even before the victory' of the socialist revolution in Russia. In September and October 1917, he pointed out that state-monopoly capitalism in the setting of revolution, in the conditions of a revolutionary democratic state, was beyond question a step closer to socialism (see present col- lection, pp 24-25, 44-45).
Later, in the new conditions created by the October Revolution, the approach to the question of state capitalism, to its nature and the methods of using it, was modified. Under Soviet power, Lenin said then, state capitalism was a capitalism condoned within certain limits, under strict control, of the socialist state, which held the commanding heights in the economy. State capitalism was called upon to help organise a new, socialist economy.

Lenin commended the agreement reached by the Trade Union of Tanners with the All-Russia Society of Leather Industry Fac- tory-Owners (see pp. 27-28). Under this agreement, two- thirds of the seats in the Chief Leather Committee and its local branches. which acted as supervisory bodies at enterprises of the leather industry, went to representatives of the workers, and one- third to employers and members of the bourgeois managerial staff. This enabled the Soviet state to control these administrative bodies. Analogous agreements, giving the workers administrative control over whole industries, were also concluded in the textile, sugar, tobacco, and a few other consumer and food industries. The specific features of this form
_of state capitalism were that the enterprises concerned filled orders under the government plan, received requisite subsidies from the state, and that all their output was put at the disposal of the state.

Lenin attached importance to this use of state capitalism, because it enabled the workers to learn from industrialists and bourgeois specialists the science of organising production, of running the country's economy, and because it helped to get production off the ground and keep precise records of output and consumption. Lenin was gratified to note that the best workers in Russia "in the central leading institutions like Chief Leather Committee and Central Textile Committee take their place by the side of the capitalists, learn from them, establish trusts, establish 'state capitalism', which under Soviet power represents the threshold of socialism, the condition of its firm victory" (pp. 52- 53).

We find the first and most conclusive exposition of Lenin's ideas on using state capitalism, on its character and features in the economy of the period of transition to socialism, in his report on April 29, 1918 to the All-Russia Central Executive Committee on the immediate tasks of the Soviet government, and in the article "'Left-Wing' Childishness and Petty-Bourgeois Mentality", which he wrote in May 1918. He pointed out that in the conditions prevailing in Soviet Russia, state capitalism would be a step forward and would ease the transition to socialism, because "state capitalism is something centralized, calculated, controlled and socialised, and that is exactly what we lack; we are threatened by the petty-bourgeois slovenliness, which more than anything else has been developed by the whole history of Russia and her economy, and which prevents us from taking the very step on which the success of socialism depends" (pp. 23-25).
Lenin described the five then existing socio-economic structures (patriarchal peasant farming, small-scale commodity production, private capitalism, state capitalism, and socialism), and convincingly demonstrated the advantages that state capitalism had over the first three structures, those that predominated in the economy of Soviet Russia at that time. He amplified: "It is not state capitalism that is at war with socialism, but the petty bourgeoisie plus private capitalism fighting together against both state capitalism and socialism” (pp. 38-39).
With the petty-bourgeois element dominating the economy, the principal "internal" enemies of the Soviet government's various economic measures were the profiteer, the commercial racketeer, and the disrupter of monopoly. They kept breaking "the shell of our state capitalism (grain monopoly, state-con- trolled entrepreneurs and traders, bourgeois co-operators)," with "profiteering instead of state monopoly forcing its way into every pore of our social and economic organism" (pp. 38, 39). Referring to petty-bourgeois capitalism, Lenin said: "It is one and the same road that leads from it to both large-scale state capitalism and to socialism, through one and the same intermediary station called 'national accounting and control of pro- duction and distribution"' (pp. 43-44). He strongly censured the "Left Communists”, who were dogmatically opposed to the idea of using state capitalism because in their view it would make for the revival of the capitalist system. For them the main enemy of socialism was state capitalism rather than the petty- bourgeois element. They did not see the distinctiveness and new nature of state capitalism as practiced in the Soviet Republic and were blind to the possibilities of combining Soviet power with state capitalism. Use of state capitalism was, by and large, one of the main questions in the plan of building socialism worked out by Lenin.

Lenin devoted much time to the basics of the policy of con- cessions and to the question of granting concessions to foreign capitalists, notably German and US. Speaking to Raymond Robins, the chief of the American Red Cross Mission in Russia, he showed the benefits of commercial relations for both Russia and the United States, stressing that a friendly attitude to Soviet Russia was in the interests of the United States. In the spring of 1918, on Lenin's initiative, a plan was worked out for the pro- motion of trade and economic relations with the USA, in which the Soviet Government expressed readiness to grant concessions to the United States and other countries for the working of coal and other minerals, for using the water resources of Eastern Siberia, for river transport and railway construction, and so on. Lenin forwarded this plan to America through Robins, and it was published in the US press. Lenin also referred to the Soviet Government’s readiness to grant concessions in his letter to the American workers in September 1919 and in interviews given to US newspaper correspondents, notably in the interview to Lincoln Eyre, correspondent of The World.

Even after the Civil War broke out in Russia in the summer of 1918, attempts were made to conclude concession agreements. In 1918 and 1919, for example, negotiations were under way on the construction on concession principles of the Great North- ern Railway, which would have afforded access to large areas of timberland and to rich deposits of minerals. The decision Lenin drafted on February 4, 1919, adopted on the same day by the Council of People's Commissars , said that the latter "considers a concession to representatives of foreign capital generally, as a matter of principle, permissible in the interests of developing the country's productive forces," and "considers the present concession to be desirable and its implementation a practical necessity" (p. 55). Before taking a final stand, however, the Council of People's Commissars asked the initiators of the project to furnish proof of "their ... contacts ‘with solid capitalist firms capable of handling this job and shipping the mate- rials" (ibid.). The project came to nothing precisely because its initiators were found wanting in financial resources.
The Civil War and the foreign armed intervention in the latter half of 1918 and until 1920 precluded the use of con cessions and other forms of state capitalism. In the grim environment of war, the Communist Party was compelled to abandon the economic policy worked out by Lenin in the spring of 1918, in which use of various forms of state capitalism figured prominently. A different kind of economic policy was needed in the conditions created by the Civil War, the foreign intervention, the blockade, dislocation, and hunger. Eventually, that policy came to be known as "War Communism".

The country's limited resources were devoted almost entirely to securing victory over the foreign intervention forces and the domestic counter-revolution. The Soviet government had no choice· but to nationalize not only large-scale but also medium- scale industry, and to put small-scale industry under control. That was the only way to secure greater military production and to supply industry with requisite raw materials and fuel, besides to ensure rational distribution of manpower.

With industry concentrated chiefly on filling military needs, commodities that could be exchanged for grain grew scarcer and scarcer. In January 1919, the Soviet Government was compelled to introduce the extreme emergency measure of surplus food appropriation. This meant that all surplus grain and other foods would be appropriated from peasants at fixed prices. The measure was justified because the Communist Party and the Soviet government were defending the peasant and his land from foreign invaders and his age-old oppressors: the landowner and the kulak.

The "War Communism" policy helped the Soviet Republic to survive in its clash with the foreign intervention forces ·and the domestic counter-revolution. It was a temporary policy suit- ed to the concrete conditions of the Civil War period, and, as Lenin wrote, "was not, and could not be a policy that corresponded to the economic tasks of -the proletariat” (pp. 102-108). In late-"1920 and early 1921, on emerging victorious over the forces of international imperialism and white guard counter-revolution, the Soviet people began building socialism under the leadership of the Leninist party. The conversion from war to peace occurred in an exceedingly complicated situation. Some seats of counter- revolution had yet to be stamped out. The international imperialist forces had not abandoned the hope of destroying the Soviet Republic. The ravages of the imperialist world war and the Civil War had brought the country to the edge of total ruin. A large number of factories and mines, oil fields, and railways were inoperative. Industry suffered acute shortages of fuel and raw material. Agriculture was in a sad state. Food and other consumer commodities were scarce. The peasantry expressed their discontent with the surplus food appropriation system, which went counter to their interests in the new situation and was undermining peasant fanning.

In these conditions, Lenin drew up the principles of a pew economic policy (NEP), one of the chief elements of which was to abolish surplus food appropriation and to introduce in stead a far less onerous tax in kind. On paying. the tax, peasants were free to dispose of their food surpluses in the local market. This was an incentive for them to expand production of food and industrial crops. The economic bonds between town and countryside and the alliance of the working class and peasants grew stronger.

The New Economic Policy projected the economic principles worked out by Lenin in the spring of 1918 to fit the new conditions. It was designed to promote rapid economic rehabilitation and to pave the way for the socialist reconstruction of the economy. It solidified the worker-peasant alliance on an economic foundation, thereby drawing the peasants into socialist construction, and extended the ties between socialist industry and the peasant producer of cash crops. NEP allowed for a moderate development of capitalist elements, with the Soviet state retaining the commanding heights in the economy. The decision to substitute NEP for the policy of "War Communism'' was adopted in March 1921 at the Tenth Congress of the Communist Party.

A key NEP principle was to use state capitalism for building socialism in the conditions of that time. The idea was set forth and argued by Lenin in his report on the tax in kind at a meet- in of secretaries and representatives of Party cells of Moscow and Moscow gubernia on April 9, 1921, and in the pamphlet The Tax in Kind, written at that time (pp. 133-47). Lenin observed that what he had said about state capitalism in the spring of 1918 was also wholly valid in the spring of 1921 be- cause the basic elements of the country's economy had not changed and the small-proprietor petty-bourgeois element had even grown owing to the rise of a large part of the poor (semi- proletarians and proletarians) to the level of average, medium- scale producers.
In the circumstances, Lenin held, the Soviet state would do well to direct private capitalism into the channel of state capitalism, which was a step forward as compared with the small- proprietor element. For Lenin, state capitalism was not merely a structure of the period of transition to socialism, but an economic device for using capitalism controlled by the proletarian state to further the building of socialism. He saw the most important task of all Party and government functionaries in ap- plying the principles of the policy of state capitalism "to the other forms of capitalism-unrestricted trade, local exchange, etc."

The works in this collection offer an exhaustive description of the types and forms of state capitalism used in Soviet Russia. The most distinct and clear-cut form of state capitalism, Lenin held, was that of concessions, that is, of agreements be- tween the Soviet Government and foreign industrialists who undertook to organise or improve some industry (felling and floating of timber, ore and coal mining, oil extraction, and the like), relinquishing a fixed share of the product to the state and taking a share as profit for themselves. In the context of the then obtaining social-economic structures and their correlation, such concessions were in substance an alliance of the Soviet state with "state capitalism against the small-proprietor (patriarchal and petty-bourgeois) element".

Lenin stressed that the policy of concessions, if carried out cautiously and within limits, would despite some sacrifices, specifically that of giving up some valuable resources to capitalists, speed 1:1.p the growth of the productive forces and help attract foreign technical facilities for the rehabilitation and development of industry, raising output of food and manufactured goods, and improving the material condition of the working people. Soviet workers employed at concession enterprises would learn from the capitalists' scientific-technical and managerial experience. Besides, concessions would promote business relations with the capitalist countries. Furthering the concessions policy was, indeed, an important aspect of the Soviet Government’s activity in the field of foreign relations.

Lenin devoted most of his attention precisely to concessions. On October 26, 1920, the Council of People's Commissars dis cussed Lenin's report on the question of concessions in Siberia. On November 23, 1920, the CPC adopted a pertinent decree, "The General Economic and Legal Terms of Concessions". "The Basic Principles of Concession Agreements" drafted by Lenin and adopted on March 29, 1921, contributed importantly to the theoretical elaboration of the concessions policy and furthered its concrete implementation.

Lenin attached importance to negotiations on concessions and called for ''the most relentless struggle" against those who op posed them (pp. 190-91). He corresponded with foreign firms interested in receiving concessions or in investing in joint-stock companies, and with private entrepreneurs in Russia concerning lease of enterprises to them. In particular, Lenin devoted much energy to negotiations with US businessman Washington Vanderlip concerning a fishery concession and concessions for oil and coal prospecting and extraction in Kamchatka and the Maritime Territory, with Armand Hammer and B. Miceli of ·the American Allied Drug and Chemical Corporation concerning the asbestos mines in Alataes district in the Urals, and concerning a concession agreement with SKF, the Swedish ball bearings concern.

Lenin was involved in negotiating concessions for part of the oil- fields, the iron-ore deposits in the Kursk magnetic anomaly area, and some of the coal mines in the Donets basin. He also followed the negotiations on timbering concessions in the north of European Russia and in Siberia which the Soviet state was as yet unable to develop on its own, on development of idle land,on concessions for river shipping and airlines, postal and tele- graphic concessions, and so on.

In the negotiations, Lenin combined fidelity to principle with diplomatic flexibility, making the most of the economic interest shown by the entrepreneurs and safeguarding the economic and political interests of the Soviet state. All pros and cons were carefully weighed before any agreements were concluded. On no account did the Soviet Government concede any ground where political principles or the commanding heights in the country's economy were at stake.

Lenin stressed that concessions were important not only for raising production, but also in view of their political effect. Con- cession agreements with people from the capitalist world benefit ed the policy of the peaceful coexistence of states with different social systems. As Lenin stressed, "those who want to go to war will not agree to take concessions. The existence of concessions is an economic and political argument against war. States that might go to war with us will not be able to do so if they take concessions” (p. 64).
By and large, however, concessions did not become wide- spread. In all those years, their share in the country's total industrial output never exceeded 0.6 per cent. Contracts of lease, which, in effect, were a variety of concession agreements (see pp. 153-54) were far more widespread. The state concluded such contacts with entrepreneurs with production experience, with prov1s1ons governing the organisation and volume of production and the assortment of items to be produced, maintenance and renovation of leased premises and equipment, and so on. Essentially, the contract defined the activity of the leased enterprise, thus putting the capitalist lessee within the sphere of state regulation since he was committed to executing state assignments and orders.

In the first few years of NEP, leasing was fairly extensively practiced in the coal, chemical, metal-working, timber- processing, cotton, leather, food, and some other industries. In early 1923, the number of leased industrial enterprises nearly matched that of state enterprises, the ratio being 9.6:10. But the work force employed in leased industry was only about 9 per cent of the total industrial work force, because the leased enterprises, rented for terms of two to five years, were mostly small and partly medium-sized enterprises making consumer goods ( nearly 6,500 such enterprises had been leased as on March 1, 1924). In 1924 and 1925, the share of leased industry in value of total output was a mere 3 per cent.

The most widespread form of state capitalism was the institution of private middlemen and agents working on a commission basis. Middlemen (supply agents, contractors, travelling salesmen, commission _merchants, and so on) handled nearly all the supplying and marketing for state enterprises. Firms and entrepreneurs often acted as contractors, performing various jobs for building, timbering, transport, and other state enterprises.

The number of such middlemen ran into several tens of thou sands.

Fairly widespread at the time, too, were mixed enterprises jointly operated by the state · (represented by the Supreme Eco nomic Council, the People's Commissariat for Foreign Trade, and others) and foreign or Russian entrepreneurs. Referring to these mixed enterprises, Lenin noted in the Central Committee report to the Eleventh Congress of the Communist Party that "we Communists are resorting to commercial, capitalist methods" as a form that helps "to establish a link with the peasant economy, that we can meet its requirements, that we can help the peas- ant make progress even at his present level, in spite of his backwardness, for it is impossible to change him in a brief span of time" (pp. 194, 196-97). In these mixed enterprises, the state made sure that it had at least 51 per cent of the shares and took part m production, marketing, procurement, and management. Through these joint-stock societies, the activity of capitalists was concentrated more effectively on fulfilment of state assignments and was more effectively aligned with the planning principle. The Soviet state, as a rule, had predominant influence because the mixed societies operated on the basis of the state plan and were governed by the interests of the country's economy. .
Producer co-operatives proliferated during the NEP per od. Co- operative capitalism, as Lenin said, facilitated accounting, control, and supervision, and made for contractual relations be- tween the state and the capitalist elements. Through co- operatives, private capital was drawn into economic cooperation with the Soviet state and was, in effect, made to fulfil state assignments. But only co-operatives of small commodity producers (associations of artisans, crediting and material supply associations, marketing groups, consumer and other types of co-operatives) came under the head of state capitalism. Workers' consumer co-operatives, for example, and various types of rural producer co-operatives (communes, agricultural artels, and so on) were essentially socialist enterprises. It should be remembered, however that in Russia, which was a country of mostly small peasants, there predominated co-operatives of. small commodity producers, especially in the early years of Soviet power. or the working class, co-operatives were a means of influencing the peasantry, securing victory of socialist principles over the. petty- bourgeois element, consolidating the Soviet system, and involving the mass of the working people in the building of socialism. Lenin held that co-operatives or, more precisely, some types of co-operatives, were much more than just a form of state capital- ism. He predicted that in due course they would turn from bourgeois co-operatives into socialist. ·

Lenin’s ideas of what ·co-operatives meant in the general plan of socialist construction were presented in final form in an article, "On Co-operation", published in early 1923. Here Lenin set forth a programme for using producer co-operatives to convert individual small-scale peasar1l: cash cropping into large-scale socialist farming.

Alongside the listed forms of state capitalism, there were also the following: employment of bourgeois specialists in the managerial mechanism and at state-controlled industrial and commercial enterprises and trusts, use of private tradesmen as middle- men or commission agents in procurement and marketing, use of foreign capital for technical assistance and aid in designing and building large new enterprises, and for technical consultation in organising large-scale production, and so on.

Lenin vigorously promoted the idea of using state capitalism in building socialism. He did all he could to bring home the need for this to all members of the Party and to the mass of the working people. And he censured those who identified state capitalism in the setting of a proletarian state with state capitalism in a bourgeois society. Criticizing them for following the interpretation of state capitalism as given in "old books", Lenin pointed out in the political report of the Central Committee to the Eleventh Congress of the Party in March 1922 that “they deal with the state capitalism that exists under capitalism. Not a single book has been written about state capitalism under socialism. It did not occur even to Marx to write a word on this subject; and he died without leaving a single· precise statement or definite instruction on it. That is why we must overcome the difficulties entirely by ourselves" (pp. 199-200).

The measure of state capitalism and the terms on which it would not endanger and would benefit the proletarian state depended on the relation of strength, since the policy of state capitalism was, in effect, a projection of the class struggle in a new form, a war in the economic field with, however, the difference that it did not destroy but rather helped to build up the country's productive forces. The policy of state capitalism amounted, indeed, to a competition between two economic systems, the socialist and the capitalist.

Use of state capitalism during the transition from capitalism to socialism, necessitated by the prevailing situation and the concrete conditions of building socialism, was a new question that the founders of scientific communism had never raised nor could have raised. Lenin was the first to consider it, and his studies of the subject have enriched Marxist theory, contributing conspicuously to the science of building socialist society.

The policy of using state capitalism was also instrumental in overcoming the economic and political isolation of the Soviet Republic and in creating conditions for peaceful socialist construction despite the country's encirclement by capitalist states. The experience of using state capitalism in the USSR, the first in history, is of great international relevance. It blazed the trail, as it were, for the use of state capitalism as one of the forms of transition from capitalist to socialist economy at various stages of revolutionary reconstruction in other countries of the socialist camp. Though in some of them there had been no need, in view of the emergence of the world socialist system, to use state capitalism in the form of concessions, contracts of lease, and other forms applied in the Soviet state, it did occur in all socialist countries without exception as an element of the transitional policy.

In contrast to the use of state capitalism in the USSR in the form of agreements between capitalists and the working- class state limited in time and based on means of production expropriated from capitalists, the state-capitalist forms used in some of the other socialist countries allowed the non-monopoly bourgeoisie to retain their title of ownership to the means of production. In these countries, state capitalism was practiced in the simple form of state control and participation in economic transactions, and, did not rise above the level of mixed state- capitalist enterprises. The latter were changed into state- operated socialist enterprises through redemption and the development in them of a socialist type organisation of production. Historical experience thereby corroborated the previously never used forms of socializing production which had, however, been theoretically acknowledged by Marxists.
Lenin's theory of state capitalism is especially relevant for the current era of the break-up of imperialism when, inevitably, more countries are dropping out of the capitalist system. Some forms of state capitalism are also being used by developing countries both as specific economic structures ( concessions to foreign capital, lease, mixed societies and enterprises, various types of co-operation, and so on) and as a system of means and methods of state control and regulation of private national and foreign capital. Indeed, in many ways the state-capitalist type of economic relations is determinative for the specific economic structures of developing states.

Countries that have flung off the colonial yoke are devoid of a ramified large-scale industry in the early period of independence. So, state capitalism begins to develop there as a means of building large-scale production, as a basis for independent eco- nomic development and for stimulating the productive forces. Though anti-imperialist and anti-colonialist by nature, its social and economic character depends on the class character of the state and the social-economic policy of the forces that hold power. That is why the essence of state capitalism in the socialist- and capitalist-oriented developing countries is not the same.

In the socialist-oriented countries, state capitalism is called upon to combat neocolonialism, to enhance the rate of growth of the productive forces, and, indeed, to serve through a series of mediate links as a form and method of preparing the way for socialist reconstruction. There, state capitalism gradually acquires some of the features seen in the setting of socialist construction. State capitalism's role in the capitalist-oriented developing countries is also by and large progressive, for it is aimed at eliminating the aftermaths of colonial rule, as well as ‘. archaic economic patterns (patriarchal, feudal, and so on). The order and scope of such changes, however, depend on the nature of the prevailing political system and the basic social class forces whose interests that system represents. The purpose of state capitalism in these countries is to secure the development of national capital. If power in the country falls into the hands of reactionaries, state capitalism is used for the enrichment and personal gain of the ruling elite, and serves as a tool of strengthening its economic and political hold on government, and intensifying the exploitation of the labouring masses, with the inevitable effect of subordinating the country to foreign monopoly capital.
The economic base for the development of state capitalism in the developing countries is the state sector. In the socialist· oriented countries this sector encompasses a wide spectrum of relationships ranging from state capitalism to various transition al forms that may safely be described as socialist-oriented or proto-socialist. Leaning on the state sector, the new authorities enlist the co-operation of capitalists on terms suiting the over-all needs of the country's economic policy, and employ the legislative system to direct private capital along the channel of state capitalism in order to lay the ground for a socialist economy and to organise the economic base of socialism.

Mixed companies, enterprises and firms operated jointly by the state and foreign or national capital are becoming an increasingly typical occurrence in all developing countries. Their aims are in a way analogous to those that had been pursued in the USSR through contracts of lease and mixed companies: more rapid development of natural resources, extension of export opportunities, assimilation of the scientific and technical experience of economically more advanced countries, and the like.
Co-operatives of a state-capitalist type are also important. In a socialist-oriented developing country co-operatives guided and supervised by the state enable the latter to control rural capitalist elements, and to regulate their growth in its own interests and with an eye to the interests of small producers. It encourages anti-capitalist tendencies in the co-operatives and stimulates growth of prerequisites for their subsequent conversion into co- operatives of a socialist type.
In the present international situation, with the forces of peace and socialism exercising an increasing influence on the course of world events, the countries of Asia and Africa, which are opting for the socialist orientation in increasing numbers, can travel the chosen road in ever more peaceful and favourable surroundings. Given a progressive political system that carries out radical economic changes, with state capitalism playing a considerable and growing role, the socialist orientation can lead to the construction of the foundations of socialism, and then to socialism.

The countries of the socialist community, and notably the Soviet Union, are natural allies of the socialist-oriented countries and render them all-round support and aid. For countries that have opted for the socialist road, Lenin's theory of state capitalism thoroughly tested in the USSR and the other socialist states, retains all its relevance in the present conditions.