STATE CAPITALISM

LENIN; On State Capitalism, During the Transition to Socialism

From REPORT ON THE TAX IN KIND DELIVERED AT A MEETING OF SECRETARIES AND RESPONSIBLE REPRESENTATIVES OF R.C.P.(B.) CELLS OF MOSCOW AND MOSCOW GUBERNIA APRIL 9, 1921

When the question of the tax in kind was being decided at the Party Congress the delegates were given a pamphlet by Comrade Popov, Director of our Central Statistical Board, on grain output in Russia. An enlarged edition will be published within a few days, and all of you should read it. It gives an idea of grain production, with the figures calculated from the returns of our census, which gave us the exact figures of the population and an estimate of the size of farms. It says that with a yield of 40 poods per dessiatine, peasant farming on Soviet Russia’s present area could provide 500 million poods of surplus grain that would cover the 350 million poods required by the urban population and leave us a fund for foreign trade and the improvement of peasant farming. The harvest was so bad that the yield was no more than an average of twenty-eight poods per dessiatine. This produced a deficit. If we accept the statisticians’ figure of requirements at eighteen poods per head, we must subtract three poods per head and oblige every peasant to go on short rations in order to keep the army and the industrial workers on half- rations. In that situation, we could do nothing but reduce the surplus appropriations to a minimum and convert them into a tax. We must concentrate on improving small peasant farming. We had no cotton goods, machines or other goods produced by large factories to give the peasant farmers, but it is a problem requiring urgent solution, and we have to solve it with the aid of small industry. We should have some results from the new measure this very first year.

Now, why is peasant farming the focus? Because it alone can give us the food and the fuel we need. If the working class, as the ruling class exercising its dictatorship, wants to run the economy properly, it must say: the crisis of peasant farming is the weakest spot. It must be remedied, and another start made on the revival of large-scale industry, 90 that in Ivanovo-Voznesensk district, for instance, all 70 factories—and not just 22—are running again. These large factories will then satisfy national demand, and the working class will deliver the goods to the peasants in exchange for farm produce, instead of taking it in the form of a tax. That is the transition we are making, and the price is short rations all round, if we are to save those who alone can keep what is left of industry and the railways going, and the army in the field to fight off the white guards.

Our grain appropriations-were maligned by the Mensheviks, who said that the Soviet power had given the population nothing but grain appropriations, want and destruction. They gloated over the fact that after the partial restoration of peace, after the end of the Civil War, the swift rehabilitation of our industry had proved to be impossible. But even the richest countries will take years to get their industry going full blast again. Even a rich country like France will take a long time to revive her industry, and she did not suffer as much from the war as we did, because only a small part of her territory was devastated. The astonishing thing is that in the first year of a partial peace we were able to start 22 factories out of 70 in Ivanovo-Voznesensk, and to produce 117 million arshins of cotton goods out of an anticipated 150 million. The grain appropriations had once been inevitable, but now we have had to change our food policy: we have had to switch from the surplus appropriation system to the tax. This will undoubtedly improve the peasant’s condition and give him an assurance and a sense of certainty that he will be free to exchange all his available grain surplus at least for local handicraft wares. This explains why the Soviet government must conduct an economic policy on these lines.

Now, in conclusion, let me explain how this policy can be reconciled with the communist standpoint and how it has come about that the communist Soviet power is promoting a free market. Is it good from the standpoint of communism? To answer this question, we must make a careful examination of the changes that have taken place in peasant farming. First, we witnessed the assault of the whole of the peasantry on the rule of the landowners, who were fought both by the poor peasants and the kulaks, although, of course, their motives were different: the kulaks wanted to take the land away from the landowners to develop their own farms. That was when it became clear that the kulaks and the poor peasants had divergent interests and aims. In the Ukraine, this divergence of interests is still much more in evidence than it is over here. The poor peasants could derive very little direct benefit from the transfer of land from the landowners to themselves, because they had neither the materials nor the implements. We find the poor peasants organising to prevent the kulaks from seizing the land taken away from the landowners. The Soviet government helped the Poor Peasants’ Committees that sprang up in Russia and in the Ukraine. As a result, the middle peasants have become the predominant element in the rural areas. We know this from statistics, and everyone who lives in the country knows it from his own observations. The extremes of kulak and poor have been rounded off, and the majority of the population have come closer to the status of the middle peasant. If we want to raise the productivity of our peasant farming, we must reckon chiefly with the middle peasant. The Communist Party has had to shape its policy accordingly.

Since the middle peasants now predominate in the rural areas, we must help them to improve their farming; moreover, we must make the same demands on them as we do on the workers. The principal question discussed at the last Party Congress was that of food propaganda: concentrate on the economic front, raise the productivity of labour and increase output. No progress is possible unless these tasks are fulfilled. If we say this to the worker, we must say as much to the peasant, but will demand in return that, after paying the tax, he should enlarge his farm, in the knowledge that no more will be exacted from him and that he will be free to use the whole of his surplus to develop his farm. Consequently, the change in policy in respect of the peasants is due to the change in their status. There are more middle peasants in the make-up of the rural areas, and we must reckon with this, if we are to boost the productive forces.

Let me also remind you of the arguments I had with the “Left Communist” group in 1918, after the conclusion of the Brest- Litovsk peace. Those who were in the Party at the time will remember that some Communists feared that the conclusion of the Brest Peace would disrupt all communist policy. In the course of the argument with these comrades I said, among other things: State capitalism is nothing to fear in Russia; it would be a step forward. That sounded very strange: How could state capitalism be a step forward in a Soviet socialist republic? I replied: Take a close look at the actual economic relations in Russia. We find at least five different economic systems, or structures, which, from bottom to top, are: first, the patriarchal economy, when the peasant farms produce only for their own needs, or are in a nomadic or semi-nomadic state, and we happen to have any number of these; second, small commodity production, when goods are sold on the market; third, capitalist production, the emergence of capitalists, small private capital; fourth, state capitalism, and fifth, socialism. And if we do take a close look, we shall find all these relations in Russia’s economic system even today. In no circumstances must we forget what we have occasion to see very often, namely, the socialist attitude of workers at state factories, who collect fuel, raw materials and food, or try to arrange a proper distribution of manufactured goods among the peasants and to deliver them with their own transport facilities. That is socialism. But alongside is small enterprise, which very often exists independently of it. Why can it do so? Because large-scale industry is not back on its feet, and socialist factories are getting perhaps only one-tenth of what they should be getting. In consequence, small enterprise remains independent of the socialist factories. The incredible havoc, the shortage of fuel, raw materials and transport facilities allow small enterprise to exist separately from socialism. I ask you: What is state capitalism in these circumstances? It is the amalgamation of small-scale production. Capital amalgamates small enterprises and grows out of them. It is no use closing our eyes to this fact. Of course, a free market means a growth of capitalism; there’s no getting away from the fact. And anyone who tries to do so will be deluding himself. Capitalism will emerge wherever there is small enterprise and free exchange. But are we to be afraid of it, if we have control of the factories, transport and foreign trade? Let me repeat what I said then: I believe it to be incontrovertible that we need have no fear of this capitalism. Concessions are that kind of capitalism.

We have been trying hard to conclude concession agreements, but, unfortunately, have not yet concluded a single one. Nevertheless, we are nearer to them now than we were several months ago, when we last discussed concessions. What are concessions from the standpoint of economic relations? They are state capitalism. The Soviet government concludes an agreement with a capitalist. Under it, the latter is provided with certain things: raw materials, mines, oilfields, minerals, or, as was the case in one of the last proposals, even a special factory (the ball- bearing project of a Swedish enterprise). The socialist state gives the capitalist its means of production such as factories, mines and materials. The capitalist operates as a contractor leasing socialist means of production, making a profit on his capital and delivering a part of his output to the socialist state.

Why is it that we badly need such an arrangement? Because it gives us, all at once, a greater volume of goods which we need but cannot produce ourselves. That is how we get state capitalism. Should it scare us? No, it should not, because it is up to us to determine the extent of the concessions. Take oil concessions. They will give us millions of poods of paraffin oil right away, and that is more than we produce ourselves. This is to our advantage, because in exchange for the paraffin oil—and not paper money—the peasant will give us his grain surplus, and we shall immediately be able to improve the situation in the whole country. That is why the capitalism that is bound to grow out of a free market holds no terrors for us. It will be the result of growing trade, the exchange of manufactured goods, even if produced by small industry, for agricultural produce.

Today’s law tells you that workers in some industries are to be issued a certain part of the articles manufactured in their factories in the form of a bonus in kind which they can exchange for grain. For example, provided they satisfy the requirements of the state, textile workers will receive a part of the textile goods they manufacture and will be able to exchange them for grain. This must be done to improve the condition of the workers and of the peasants as soon as possible. We cannot do this on a nation- wide scale, but it must be done at all costs. That is why we do not shut our eyes to the fact that a free market entails some development of capitalism, and we say: This capitalism will be under the control and surveillance of the state. We need have no fear of it because the workers’ state has taken possession of the factories and railways. It will help to stimulate the economic exchange of peasant produce for the manufactures of neighboring craftsmen, who will satisfy some, if not all, of the peasants’ requirements in manufactured goods. The peasant economy will improve, and that is something we need to do desperately. Let small industry grow to some extent and let state capitalism develop—the Soviet power need have no fear of that. We must face the facts squarely and call a spade a spade, but we must also control and determine the limits of this development.

Concessions are nothing to be afraid of. There is nothing terrible about giving the concessionaires a few factories and retaining the bulk in our own hands. Of course, it would be absurd for the Soviet power to hand out the bulk of its property in the form of concessions. That would not be concessions, but a return to capitalism. There is nothing to fear in concessions so long as we retain possession of all the state enterprises and weigh up exactly and strictly the concessions we grant, and the terms and scale on which we grant them. Growing capitalism will be under control and supervision, while political power will remain in the hands of the working class and of the workers’ state. The capital which will exist in the form of concessions and the capital which will inevitably grow through the medium of the co-operatives and a free market, have no terrors for us. We must try to develop and improve the condition of the peasantry and make a great effort to have this benefit the working class. We shall be able to do all that can be done to improve peasant farming and develop local trade more quickly with concessions than without them, while planning our national economy for a much faster rehabilitation of large-scale socialist industry. We shall be able to do this more quickly with the help of a rested and recuperated peasant economy than with the absolutely poverty-stricken peasant farming we have had up to now.
That is what I have to say on the communist appreciation of this policy, on why it was necessary, and why, if properly applied, it will bring improvement immediately, or, at all events, more quickly than if it had not been applied.
Vol. 32, pp. 292-98