Political Report of the Central Committee to the Sixteenth Congress of the C.P.S.U.(B.)

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Political Report of the Central Committee to the Sixteenth Congress of the C.P.S.U.(B.)

 June 27, 1930

Stalin

Pravda, No. 177, June 29, 1930

The Growing Crisis of World Capitalism and the External Situation of the USSR

Comrades, since the Fifteenth Congress two and a half years have passed. Not a very long period one would think. Nevertheless, during this period most important changes have taken place in the life of peoples and states. If one were to characterise the past period in two words, it could be called a turning point period. It marked a turning point not only for us, for the USSR, but also for the capitalist countries all over the world. Between these two turning points, however, there is a fundamental difference. Whereas for the USSR this turning point meant a turn in the direction of a new and bigger economic upswing, for the capitalist countries it meant a turn towards economic decline. Here, in the USSR, there is a growing Upswing of socialist development both in industry and in agriculture. There, among the capitalists, there is growing economic crisis both in industry and in agriculture.

Such is the picture of the present situation in a few words.

Recall the state of affairs in the capitalist countries two and a half years ago. Growth of industrial production and trade in nearly all the capitalist countries. Growth of production of raw materials and food in nearly all the agrarian countries. A halo around the United States as the land of the most full-blooded capitalism. Triumphant hymns of "prosperity." Grovelling to the dollar. Panegyrics in honour of the new technology, in honour of capitalist rationalisation. Proclamation of an era of the "recovery" of capitalism and of the unshakable firmness of capitalist stabilisation. "Universal" noise and clamour about the "inevitable doom" of the Land of Soviets, about the "inevitable collapse" of the USSR That was the state of affairs yesterday.

And what is the picture today?

Today there is an economic crisis in nearly all the industrial countries of capitalism. Today there is an agricultural crisis in all the agrarian countries. Instead of "prosperity" there is mass poverty and a colossal growth of unemployment. Instead of an upswing in agriculture there is the ruin of the vast masses of the peasants. The illusions about the omnipotence of capitalism in general, and about the omnipotence of North American capitalism in particular, are collapsing. The triumphant hymns in honour of the dollar and of capitalist rationalisation are becoming fainter and fainter. Pessimistic wailing about the "mistakes" of capitalism is growing louder and louder. And the "universal" clamour about the "inevitable doom" of the USSR is giving way to "universal" venomous hissing about the necessity of punishing "that country" that dares to develop its economy when crisis is reigning all around.

Such is the picture today.

Things have turned out exactly as the Bolsheviks said they would two or three years ago.

The Bolsheviks said that in view of the restricted limits of the standard of living of the vast masses of the workers and peasants, the further development of technology in the capitalist countries, the growth of productive forces and of capitalist rationalisation, must inevitably lead to a severe economic crisis. The bourgeois press jeered at the "queer prophesies" of the Bolsheviks. The Right deviators dissociated themselves from this Bolshevik forecast and for the Marxist analysis substituted liberal chatter about "organised capitalism." But how did things actually turn out? They turned out exactly as the Bolsheviks said they would.

Such are the facts.

Let us now examine the data on the economic crisis in the capitalist countries.

1. World Economic Crisis

a) In studying the crisis, the following facts, above all, strike the eye: 1. The present economic crisis is a crisis of over-production. This means that more goods have been produced than the market can absorb. It means that more textiles, fuel, manufactured goods and food have been produced than can be purchased for cash by the bulk of the consumers, i.e., the masses of the people, whose incomes remain on a low level. Since, however, under capitalism, the purchasing power of the masses of the people remains at a minimum level, the capitalists keep their "superfluous" goods, textiles, grain, etc., in their warehouses or even destroy them in order to bolster up prices; they cut down production and discharge their workers, and the masses of the people are compelled to suffer hardship because too many goods have been produced.

2. The present crisis is the first post-war world economic crisis. It is a world crisis not only in the sense that it embraces all, or nearly all, the industrial countries in the world; even France, which is systematically injecting into her organism the billions of marks received as reparations payments from Germany, has been unable to avoid a certain depression, which, as all the data indicate, is bound to develop into a crisis. It is a world crisis also in the sense that the industrial crisis has coincided with an agricultural crisis that affects the production of all forms of raw materials and food in the chief agrarian countries of the world.

3. The present world crisis is developing unevenly, notwithstanding its universal character; it affects different countries at different times and in different degrees. The industrial crisis began first of all in Poland, Rumania and the Balkans. It developed there throughout the whole of last year. Obvious symptoms of an incipient agricultural crisis were already visible at the end of 1928 in Canada, the United States, the Argentine, Brazil and Australia. During the whole of this period United States industry showed an upward trend. By the middle of 1929 industrial production in the United States had reached an almost record level. A break began only in the latter half of 1929, and then a crisis in industrial production swiftly developed, which threw the United States back to the level of 1927. This was followed by an industrial crisis in Canada and Japan. Then came bankruptcies and crisis in China and in the colonial countries, where the crisis was aggravated by the drop in the price of silver, and where the crisis of overproduction was combined with the ruination of the peasant farms, which were reduced to utter exhaustion by feudal exploitation and unbearable taxation. As regards Western Europe, there the crisis began to gain force only at the beginning of this year, but not everywhere to the same degree, and even in that period France still showed an increase in industrial production.

I do not think there is any need to dwell particularly on the statistics that demonstrate the existence of the crisis. Nobody now disputes the existence of the crisis. I shall therefore confine myself to quoting one small but characteristic table recently published by the German Institute of Economic Research. This table depicts the development of the mining industry and the chief branches of large-scale manufacturing industry in the United States, Britain, Germany, France, Poland and the USSR since 1927; the 1928 level of production is taken as 100.

Here is the table:

Year USSR U.S.A. Britain Germany France Poland

1927 82.4 95.5 105.5 100.1 86.6 88.5

1928 100 100 100 100 100 100

1929 123.5 106.3 107.9 101.8 109.4 99.8

1930

(first quarter) 171.4 95.5 107.4 93.4 113.1 84.6

What does this table show?

It shows, first of all that the United States, Germany and Poland are experiencing a sharply expressed crisis in large-scale industrial production; in the first quarter of 1930, in the United States, after the boom in the first half of 1929, the level of production dropped 10.8 per cent compared with 1929 and sank to the level of 1927; in Germany, after three years of stagnation, the level of production dropped 8.4 per cent compared with last year and sank to 6.7 per cent below the level of 1927; in Poland, after last year's crisis, the level of production dropped 15.2 per cent compared with last year and sank to 3.9 per cent below the level of 1927.

Secondly, the table shows that Britain has been marking time for three years, round about the 1927 level, and is experiencing severe economic stagnation; in the first quarter of 1930 she even suffered a drop in production of 0.5 per cent compared with the previous year, thus entering the first phase of a crisis.

Thirdly, the table shows that of the big capitalist countries only in France is there a certain growth of large-scale industry; but whereas the increase in 1928 amounted to 13.4 per cent and that in 1929 to 9.4 per cent, the increase in the first quarter of 1930 is only 3.7 per cent above that in 1929, thus presenting from year to year a picture of a descending curve of growth.

Lastly, the table shows that of all the countries in the world, the USSR is the only one in which a powerful upswing of large-scale industry has taken place; the level of production in the first quarter of 1930 was more than twice as high as that in 1927, and the increase rose from 17.6 per cent in 1928 to 23.5 per cent in 1929 and to 32 per cent in the first quarter of 1930, thus presenting from year to year a picture of an ascending curve of growth.

It may be said that although such was the state of affairs up to the end of the first quarter of this year, it is not precluded that a turn for the better may have taken place in the second quarter of this year. The returns for the second quarter, however, emphatically refute such an assumption. They show, on the contrary, that the situation has become still worse in the second quarter. These returns show: a further drop in share prices on the New York Stock Exchange and a new wave of bankruptcies in the United States; a further decline in production, a reduction of wages of the workers, and growth of unemployment in the United States, Germany, Britain, Italy, Japan, South America, Poland, Czechoslovakia, etc.; the entry of a number of branches of industry in France into a state of stagnation, which, in the present international economic situation, is a symptom of incipient crisis. The number of unemployed in the United States is now over 6,000,000, in Germany about 5,000,000, in Britain over 2,000,000, in Italy, South America and Japan a million each, in Poland, Czechoslovakia and Austria half a million each. This is apart from the further intensification of the agricultural crisis, which is ruining millions of farmers and labour-mg peasants. The crisis of overproduction in agriculture has reached such a pitch that in Brazil, in order to keep up prices and the profits of the bourgeoisie, 2,000,000 bags of coffee have been thrown into the sea; in America maize has begun to he used for fuel instead of coal; in Germany, millions of poods of rye are being converted into pig food; and as regards cotton and wheat, every measure is being taken to reduce the crop area by 10-15 per cent.

Such is the general picture of the developing world economic crisis.

b) Now, when the destructive effects of the world economic crisis are spreading, sending to the bottom whole strata of medium and small capitalists, ruining entire groups of the labour aristocracy and farmers, and dooming vast masses of workers to starvation, everybody is asking: what is the cause of the crisis, what is at the bottom of it, how can it be combated, how can it he abolished? The most diverse "theories" about crises are being invented. Whole schemes are being proposed for "mitigating," "preventing," and "eliminating" crises. The bourgeois oppositions are blaming the bourgeois governments because "they failed to take all measures" to prevent the crisis. The "Democrats" blame the "Republicans" and the "Republicans" blame the "Democrats," and all of them together blame the Hoover group with its "Federal Reserve System", (Original Footnote: The Federal Reserve System was instituted in the U.S.A. In 1913. Twelve Federal Reserve Banks in the major centres of the country co-ordinate and control all the activities of the American banks and are an instrument of monopoly capital. The System is headed by a Federal Reserve Board (re-named in 1933 the Board of Governors of the Federal Reserve System), the members of which are appointed by the U.S. President, and which is completely under the thumb of the financial magnates. The American bourgeois economists - apologists of American capitalism - and financial and government circles in the U.S.A. considered that the Federal Reserve System would safeguard the country's economy against crises. The attempts of President Hoover to cope with the crisis that broke out in 1929 with the help of the Federal Reserve System proved a complete failure) which failed to "curb" the crisis. There are even wiseacres who ascribe the world economic crisis to the "machinations of the Bolsheviks". I have in mind the well-known "industrialist" Rechberg who, properly speaking, little resembles an industrialist, hut reminds one more than anything of an "industrialist" among literary men and a "literary man" among industrialists. (Laughter.)

It goes without saying that none of these "theories" and schemes has anything in common with science. It must be admitted that the bourgeois economists have proved to be utter bankrupts in face of the crisis. More than that, they have been found to be devoid even of that little sense of reality which their predecessors could not always be said to lack. These gentlemen forget that crises cannot be regarded as something fortuitous under the capitalist system of economy. These gentlemen forget that economic crises are the inevitable result of capitalism. These gentlemen forget that crises were born with the birth of the rule of capitalism. There have been periodical crises during more than a hundred years, recurring every 12, 10, 8 or less years. During this period bourgeois governments of all ranks and colours, bourgeois leaders of all levels and abilities, all without exception tried their strength at the task of "preventing" and "abolishing" crises. But they all suffered defeat. They suffered defeat because economic crises cannot be prevented or abolished within the framework of capitalism. Is it surprising that the present-day bourgeois leaders are also suffering defeat? Is it surprising that far from mitigating the crisis, far from easing the situation of the vast masses of the working people, the measures taken by the bourgeois governments actually lead to new outbreaks of bankruptcy, to new waves of unemployment, to the swallowing up of the less powerful capitalist combines by the more powerful capitalist combines?

The basis, the cause, of economic crises of over-production lies in the capitalist system of economy itself. The basis of the crisis lies in the contradiction between the social character of production and the capitalist form of appropriation of the results of production. An expression of this fundamental contradiction of capitalism is the contradiction between the colossal growth of capitalism's potentialities of production, calculated to yield the maximum of capitalist profit, and the relative reduction of the effective demand of the vast masses of the working people whose standard of living the capitalists always try to keep at the minimum level. To be successful in competition and to squeeze out the utmost profit, the capitalists are compelled to develop their technical equipment, to introduce rationalisation, to intensify the exploitation of the workers and to increase the production potentialities of their enterprises to the utmost limits. So as not to lag behind one another, all the capitalists are compelled, in one way or another, to take this path of furiously developing production potentialities. The home market and the foreign market, however, the purchasing power of the vast masses of workers' and peasants who, in the last analysis, constitute the bulk of the purchasers, remain on a low level. Hence overproduction crises. Hence the well-known results, recurring more or less periodically, as a consequence of which goods remain unsold, production is reduced, unemployment grows and wages are cut, and all this still further intensifies the contradiction between the level of production and the level of effective demand. Overproduction crises are a manifestation of this contradiction in turbulent and destructive forms.

If capitalism could adapt production not to the obtaining of the utmost profit but to the systematic improvement of the material conditions of the masses of the people, and if it could turn profits not to the satisfaction of the whims of the parasitic classes, not to perfecting the methods of exploitation, not to the export of capital, but to the systematic improvement of the material conditions of the workers and peasants, then there would be no crises. But then capitalism would not be capitalism. To abolish crises it is necessary to abolish capitalism.

Such is the basis of economic crises of overproduction in general.

We cannot, however, confine ourselves to this in characterising the present crisis. The present crisis cannot be regarded as a mere recurrence of the old crises. It is occurring and developing under certain new conditions, which must be brought out if we are to obtain a complete picture of the crisis. It is complicated and deepened by a number of special circumstances which must be understood if we are to obtain a clear idea of the present economic crisis.

What are these special circumstances?

These special circumstances can be reduced to the following characteristic facts:

1. The crisis has most severely affected the principal country of capitalism, its citadel, the United States, in which is concentrated not less than half the total production and consumption of all those countries in the world. Obviously, this circumstance cannot but lead to a colossal expansion of the sphere of influence of the crisis, to the intensification of the crisis and to the accumulation of extra difficulties for world capitalism.

2. In the course of development of the economic crisis, the industrial crisis in the chief capitalist countries did not merely coincide but became interwoven with the agricultural crisis in the agrarian countries, thereby aggravating the difficulties and predetermining the inevitability of a general decline in economic activity. Needless to say, the industrial crisis will intensify the agricultural crisis, and the agricultural crisis will prolong the industrial crisis, which cannot but lead to the intensification of the economic crisis as a whole.

3. Present-day capitalism, unlike the old capitalism, is monopoly capitalism, and this predetermines the inevitability of the capitalist combines fighting to keep up the high monopolist prices of goods, in spite of over-production. Naturally, this circumstance, which makes the crisis particularly painful and ruinous for the masses of the people who constitute the main consumers of goods, cannot but lead to prolonging the crisis, cannot but be an obstacle to resolving it.

4. The present economic crisis is developing on the basis of the general crisis of capitalism, which came into being already in the period of the imperialist war, and is sapping the foundations of capitalism and has facilitated the advent of the economic crisis.

What does that mean?

It means, first of all, that the imperialist war and its aftermath intensified the decay of capitalism and upset its equilibrium, that we are now living in an epoch of wars and revolutions, that capitalism has already ceased to be the sole and all-embracing system of world economy, that side by side with the capitalist system of economy there is the socialist system, which is growing, thriving, stands opposed to the capitalist system and by its very existence demonstrates the decaying state of capitalism, shakes its foundations.

It means, further, that the imperialist war and. the victory of the revolution in the USSR have shaken the foundations of imperialism in the colonial and dependent countries, that the prestige of imperialism has already been undermined in those countries, that it is no longer able to lord it in those countries In the old way.

It means, further, that during the war and after it, a young native capitalism appeared and grew up in the colonial and dependent countries, which is successfully competing in the markets with the old capitalist countries, intensifying and complicating the struggle for markets.

It means, lastly, that the war left the majority of capitalist countries a burdensome heritage in the shape of enterprises chronically working under capacity and of an army of unemployed numbering millions, which has been transformed from a reserve into a permanent army of unemployed; this created for capitalism a mass of difficulties even before the present economic crisis, and must complicate matters still more during the crisis.

Such are the circumstances which intensify and aggravate the world economic crisis.

It must be admitted that the present economic crisis is the gravest and most profound world economic crisis that has ever occurred.

2. THE INTENSIFICATION OF THE CONTRADICTIONS OF CAPITALISM

A most important result of the world economic crisis is that it is laying bare and intensifying the contradictions inherent in world capitalism.

a) It is laying bare and intensifying the contradictions between the major imperialist countries, the struggle for markets, the struggle for raw materials, the struggle for the export of capital. None of the capitalist states is now satisfied with the old distribution of spheres of influence and colonies. They see that the relation of forces has changed and that it is necessary in accordance with it to redivide markets, sources of raw materials, spheres of influence, and so forth. The chief contradiction here is that between the United States and Britain. Both in the sphere of the export of manufactured goods and in the sphere of the export of capital, the struggle is raging chiefly between the United States and Britain. It is enough to read any journal dealing with economics, any document concerning exports of goods and capital, to be convinced of this. The principal arena of the struggle is South America, China, the colonies and dominions of the old imperialist states. Superiority of forces in this struggle - and a definite superiority - is on the side of the United States.

After the chief contradiction come contradictions which, while not the chief ones, are, however, fairly important: between America and Japan, between Germany and France, between France and Italy, between Britain and France, and so forth.

There can be no doubt whatever that owing to the developing crisis, the struggle for markets, for raw materials and for the export of capital will grow more intense month by month and day by day.

Means of struggle: tariff policy, cheap goods, cheap credits, regrouping of forces and new military-political alliances, growth of armaments and preparation for new

I have spoken about the crisis embracing all branches of production. There is one branch, however, has not been affected by the crisis. That branch is the armament industry. It is growing continuously, not-withstanding the crisis. The bourgeois states are furiously arming and rearming. What for? Not for friendly chats, of course, but for war. And the imperialists need war, for it is the only means by which to redivide the world, to redivide markets, sources of raw materials and spheres for the investment of capital.

It is quite understandable that in this situation so-called pacifism is living its last days, that the League of Nations is rotting alive, that "disarmament schemes" come to nothing, while conferences for the reduction of naval armaments become transformed into conferences for renewing and enlarging navies.

This means that the danger of war will grow at an accelerated pace.

Let the Social-Democrats chatter about pacifism, peace, the peaceful development of capitalism, and so forth. The experience of Social-Democrats being in power in Germany and Britain shows that for them pacifism is only a screen needed to conceal the preparation for new wars.

b) It is laying bare and will intensify the contradictions between the victor countries and the vanquished countries. Among the latter I have in mind chiefly Germany. Undoubtedly, in view of the crisis and the aggravation of the problem of markets, increased pressure will be brought to bear upon Germany, which is not only a debtor, but also a very big exporting. country. The peculiar relations that have developed between the victor countries and Germany could be depicted in the form of a pyramid at the apex of which America, France, Britain and the others are seated in lordly fashion, holding in their hands the Young Plan (Original Footnote: The Young Plan - named after its author, the American banker Young - was a plan for exacting reparations from Germany. It was adopted on June 7, 1929, by a committee of French, British, Italian, Japanese, Belgian, American and German experts, and was finally endorsed at the Hague Conference on January 20, 1930. The plan fixed total German reparations at 113,900 million marks (in foreign currency), to be paid over a period of 59 years. All reparations receipts and payments were to be handled by the Bank for International Settlements, in which the U.S.A. occupied a dominant position. The establishment of this bank was one of the cardinal points of the Young Plan and was a means by which American monopoly capital could control the trade and currencies of the European countries. The plan relieved German industry of contributions to reparations, the whole burden of which was laid upon the working people. The Young Plan made it possible to speed up the rebuilding of Germany's industrial war potential, which the U.S. imperialists were seeking to achieve with a view to launching aggression against the USSR) with the inscription: "Pay up!"; while underneath lies Germany, flattened out, exhausting herself and compelled to exert all her efforts to obey the order to pay thousands of millions in indemnities. You wish to know what this is? It is "the spirit of Locarno. (Original Footnote: This refers to the treaties and agreements concluded by the imperialist states at a conference in Locarno, Switzerland, held October 5-16, 1925. The Locarno agreements were designed to strengthen the post-war system established in Europe by the Treaty of Versailles, but their effect was to sharpen still more the contradictions between the chief imperialist countries and to stimulate preparation for new wars. [For the Locarno Conference, see J. V. Stalin, Works:, Vol. 7, pp. 277-83.]) To think that such a situation will have no effect upon world capitalism means not to understand anything in life. To think that the German bourgeoisie will be able to pay 20,000 million marks within the next ten years and that the German proletariat, which is living under the double yoke of "its own" and the "foreign" bourgeoisie, will allow the German bourgeoisie to squeeze these 20,000 million marks out of it without serious battles and convulsions, means to go out of one's mind. Let the German and French politicians pretend that they believe in this miracle. We Bolsheviks do not believe in miracles.

c) It is laying bare and intensifying the contradictions between the imperialist states and the colonial and dependent countries. The growing economic crisis cannot but increase the pressure of the imperialists upon the colonies and dependent countries, which are the chief markets for goods and sources of raw materials. Indeed, this pressure is increasing to the utmost degree. It is a fact that the European bourgeoisie is now in a state of war with "its" colonies in India, Indo-China, Indonesia and North Africa. It is a fact that "independent" China is already virtually partitioned into spheres of influence, while the cliques of counter-revolutionary Kuomintang generals, warring among themselves and ruining the Chinese people, are obeying the will of their masters in the imperialist camp.

The mendacious story that officials of the Russian embassies in China are to blame for the disturbance of "peace and order" in China must now be regarded as having been utterly exposed. There have been no Russian embassies for a long time in either South or Central China. On the other hand, there are British, Japanese, German, American and all sorts of other embassies there. There have been no Russian embassies for a long time in either South or Central China. On the other hand, there are German, British and Japanese military advisers with the warring Chinese generals. There have been no Russian embassies there for a long time. On the other hand, there are British, American, German, Czechoslovak and all sorts of other guns, rifles, aircraft, tanks and poison gases. Well? Instead of "peace and order" a most unrestrained and most devastating war of the generals, financed and instructed by the "civilised" states of Europe and America, is now raging in South and Central China. We get a rather piquant picture of the "civilising" activities of the capitalist states. What we do not understand is merely: what have the Russian Bolsheviks to do with it?

It would be ridiculous to think that these out-rages will be without consequences for the imperialists. The Chinese workers and peasants have already retaliated to them by forming Soviets and a Red Army. It is said that a Soviet government has already been set up there. I think that if this is true, there is nothing surprising about it. There can be no doubt that only Soviets can save China from utter collapse and pauperisation.

As regards India, Indo-China, Indonesia, Africa, etc., the growth of the revolutionary movement in those countries, which at times assumes the form of a national war for liberation, leaves no room for doubt. Messieurs the bourgeois count on flooding those countries with blood and on relying on police bayonets, calling people like Gandhi to their assistance. There can be no doubt that police bayonets make a poor prop. Tsarism, in its day, also tried to rely on police bayonets, but everybody knows what kind of a prop they turned out to be. As regards assistants of the Gandhi type, tsarism had a whole herd of them in the shape of liberal compromisers of every kind, but nothing came of this except discomfiture.

d) It is laying bare and intensifying the contradictions between the bourgeoisie and the proletariat in the capitalist countries. The crisis has already increased the pressure exerted by the capitalists on the working class. The crisis has already given rise to another wave of capitalist rationalisation, to a further deterioration of the conditions of the working class, to increased un-employment, to an enlargement of the permanent army of unemployed, to a reduction of wages. It is not surprising that these circumstances are revolutionising the situation, intensifying the class struggle and pushing the workers towards new class battles.

As a result of this, Social-Democratic illusions among the masses of workers are being shattered and dispelled. After the experience of Social-Democrats being in power, when they broke strikes, organised lockouts and shot down workers, the false promises of "industrial democracy, peace in industry," and "peaceful methods" of struggle sound like cruel mockery to the workers. Will many workers be found today capable of believing the false doctrines of the social-fascists? The well-known workers' demonstrations of August 1, 1929 (against the war danger) and of March 6, 1930 (against unemployment) (Original footnote: Anti-war demonstrations and strikes on August 1, 1929 (the fifteenth anniversary of the outbreak of the imperialist first world war) and protest demonstrations on March 8, 1930, against the rapid growth of unemployment (as a result of the world economic crisis of 1929) took place in many cities and industrial centres of France, Germany, Britain, the U.S.A., Poland and other European and American countries. The protest movement took place wholly under the leadership of the Communist Parties and the Communist International) show that the best members of the working class have already turned away from the social-fascists. The economic crisis will strike a fresh blow at Social-Democratic illusions among the workers. Not many workers will be found now, after the bankruptcies and ruination caused by the crisis, who believe that it is possible for "every worker" to become rich by holding shares in "democratised" joint-stock companies. Needless to say, the crisis will strike a crushing blow at all these and similar illusions.

The desertion of the masses of the workers from the Social-Democrats, however, signifies a turn on their part towards communism. That is what is actually taking place. The growth of the trade-union movement that is associated with the Communist Party, the electoral successes of the Communist Parties, the wave of strikes in which the Communists are taking a leading part, the development of economic strikes into political protests organised by the Communists, the mass demonstrations of workers who sympathise with communism, which are meeting a lively response in the working class - all this shows that the masses of the workers regard the Communist Party as the only party capable of fighting capitalism, the only party worthy of the workers' confidence, the only party under whose leadership it is possible to enter, and worth while entering, the struggle for emancipation from capitalism. This means that the masses are turning towards communism. It is the guarantee that our fraternal Communist Par-ties will become big mass parties of the working class. All that is necessary is that the Communists should be capable of appraising the situation and making proper use of it. By developing an uncompromising struggle against Social-Democracy, which is capital's agency in the working class, and by reducing to dust all and sundry deviations from Leninism, which bring grist to the mill of Social-Democracy, the Communist Parties have shown that they are on the right road. They must definitely fortify themselves on this road; for only if they do that can they count on winning over the majority of the working class and successfully prepare the proletariat for the coming class battles. Only if they do that can we count on a further increase in the influence and prestige of the Communist International.

Such is the state of the principal contradictions of world capitalism, which have become intensified to the utmost by the world economic crisis.

What do all these facts show?

That the stabilisation of capitalism is coming to an end.

That the upsurge of the mass revolutionary movement will increase with fresh vigour.

That in a number of countries the world economic crisis will grow into a political crisis.

This means, firstly, that the bourgeoisie will seek a way out of the situation through further fascisation in the sphere of domestic policy, and will utilise all the reactionary forces, including Social-Democracy, for this purpose.

It means, secondly, that in the sphere of foreign policy the bourgeoisie will seek a way out through a new imperialist war.

It means, lastly, that the proletariat, in fighting capitalist exploitation and the war danger, will seek a way out through revolution.

3. The Relations Between the USSR and the Capitalist States

a) I have spoken above about the contradictions of world capitalism. In addition to these, however, there is one other contradiction. I am referring to the contradiction between the capitalist world and the USSR True, this contradiction must not be regarded as being of the same order as the contradiction within capitalism. It is a contradiction between capitalism as a whole and the country that is building socialism. This, however, does not prevent it from corroding and shaking the very foundations of capitalism. More than that, it lays bare all the contradictions of capitalism to the roots and gathers them into a single knot, transforming them into an issue of the life and death of the capitalist order itself. That is why, every time the contradictions of capitalism become acute, the bourgeoisie turns its gaze towards the USSR, wondering whether it would not be possible to solve this or that contradiction of capitalism, or all the contradictions together, at the expense of the USSR, of that Land of Soviets, that citadel of revolution which, by its very existence, is revolutionising the working class and the colonies, which is hindering the organisation of a new war, hindering a new redivision of the world, hindering the capitalists from lording it in its extensive home market which they need so much, especially now, in view of the economic crisis.

Hence the tendency towards adventurist attacks on the USSR and towards intervention, a tendency which will certainly grow owing to the development of the economic crisis.

The most striking expression of this tendency at the present time is present-day bourgeois France, the birthplace of the philanthropic "Pan-Europe"(Original Footnote: '"Pan-Europe "-a projected bloc of European states against the Soviet Union suggested by the French Foreign Minister Briand in May 1930. Europe, united in a Federal Union," was to constitute a single anti-Soviet front, and the executive body of the "Federal Union," the "European Committee," was to be a general staff for preparing an attack on the USSR Briand's plan was also designed to establish French hegemony on the European continent, and therefore encountered the opposition of Britain, Italy and the U.S.A. Nothing came of the "Pan-Europe" scheme owing to the contradictions between the imperialist powers) scheme, the "cradle" of the Kellogg Pact, (Original footnote: This refers to the pact renouncing war signed in Paris on August 27, 1928, by the U.S.A., France, Germany, Great Britain, Poland, Italy, Japan, Czechoslovakia, Belgium and the British Dominions. The USSR was not invited to take part in the negotiations for the conclusion of the Kellogg Pact, in order that the USSR should not be included among the countries to which the proposed pact for renunciation of war as an instrument of national policy should apply. Under cover of demagogic talk about "universal peace," the sponsors of the pact (France, U.S.A., Britain) intended to use it as a means of isolating and combating the USSR The true purposes of the pact were exposed by the Government of the USSR in its statement of August 5, 1925. Under the pressure of public opinion, the American, British and French Governments were compelled to invite the USSR to adhere to the pact. The Soviet Government did so and was one of the first to ratify the Kellogg Pact, inviting neighbouring states to conclude an agreement giving immediate effect to its provisions. Such an agreement was signed by the USSR, Poland, Rumania, Estonia and Latvia in Moscow on February 9, 1929, Turkey and Lithuania adhering to it later) the most aggressive and militarist of all the aggressive and militarist countries in the world.

But intervention is a two-edged sword. The bourgeoisie knows this perfectly well. It will be all right, it thinks, if intervention goes off smoothly and ends in the defeat of the USSR But what if it ends in the defeat of the capitalists? There was intervention once and it ended in failure. If the first intervention, when the Bolsheviks were weak, ended in failure, what guarantee is there that the second will not end in failure too? Everybody sees that the Bolsheviks are far stronger now, both economically and politically, and as regards preparedness for the country's defence. And what about the workers in the capitalist countries, who will not permit intervention in the USSR, who will fight intervention and, if anything happens, may attack the capitalists in the rear? Would it not be better to proceed along the line of increasing trade connections with the USSR, to which the Bolsheviks do not object?

Hence the tendency towards continuing peaceful relations with the USSR.

Thus, we have two sets of factors, and two different tendencies operating in opposite directions:

1) The policy of disrupting economic connections between the USSR and the capitalist countries; provocative attacks upon the USSR; open and secret activities in preparation for intervention against the USSR These are the factors that menace the USSR's international position. It is the operation of these factors that explains such facts as the rupture of relations with the USSR by the British Conservative Cabinet; the seizure of the Chinese-Eastern Railway by the Chinese militarists; the financial blockade of the USSR; the clerical "crusade," headed by the Pope, against the USSR; the organisation by agents of foreign states of wrecking activities on the part of our specialists; the organisation of explosions and incendiarism, such as were carried out by certain employees of "Lena Gold-Fields (Original Footnotes: Lena Gold-Fields - a British company which in 1925-30 held a concession in the USSR for the exploitation of gold, copper, iron and other deposits in Siberia. By the terms of the concession agreement the Lena Gold-Fields company was obliged to construct new mining enterprises and to reconstruct the plants and mines it had received on lease. In view of the fact that the company did not carry out its obligations and caused the plants, mines and other installations it had received to fall into decay, the Soviet Government terminated the concession and committed to trial Lena Gold-Fields employees who had engaged in espionage and wrecking activities in the USSR); attempts on the lives of representatives of the USSR (Poland); finding fault with our exports (United States, Poland), and so forth.

2) Sympathy towards and support of the USSR on the part of the workers in capitalist countries; growth of the economic and political might of the USSR; increase in the USSRÝs defence capacity; the peace policy undeviatingly pursued by the Soviet government. These are the factors that strengthen the USSR's international position. It is the operation of these factors that explains such facts as the successful settlement of the dispute over the Chinese-Eastern Railway, the restoration of relations with Britain, the growth of economic connections with capitalist countries, and so forth.

It is the conflict between these factors that determines the USSRÝs external situation.

b) It is said that the stumbling block to the improvement of economic relations between the USSR and the bourgeois states is the question of the debts. I think that this is not an argument in favour of paying the debts, but a pretext advanced by the aggressive elements for interventionist propaganda. Our policy in this field is clear and well-grounded. On condition that we are granted credits, we are willing to pay a small part of the pro-war debts, regarding them as additional interest on the credits. Without this condition we cannot and must not pay. Is more demanded of us? On what grounds? Is it not well-known that those debts were contracted by the tsarist government, which was overthrown by the Revolution, and for whose obligations the Soviet Government can take no responsibility? There is talk about international law, about international obligations. But on the grounds of what international law did Messieurs the "Allies" sever Bessarabia from the USSR and hand it over to enslavement under the Rumanian boyars? On the grounds of what international obligations did the capitalists and governments of France, Britain, America and Japan attack the USSR, invade it, and for three whole years plunder it and ruin its inhabitants? If this is what is called international law and international obligations, then what will you call robbery? (Laughter. Applause.) Is it not obvious that by committing these predatory acts Messieurs the "Allies" have deprived themselves of the right to appeal to international law, to international obligations?

It is said, further, that the establishment of "normal" relations is hindered by the propaganda conducted by the Russian Bolsheviks. With the object of preventing the pernicious effects of propaganda, Messieurs the bourgeois every now and again fence themselves off with "cordons" and "barbed-wire fences" and graciously bestow the honour of guarding these "fences" upon Poland, Rumania, Finland and others. It is said that Germany is burning with envy because she is not being permitted to guard the "cordons" and "barbed-wire fences." Does it need to be proved that the chatter about propaganda is no argument against establishing "normal relations," but a pretext for interventionist propaganda? How can people who do not want to appear ridiculous "fence themselves off" from the ideas of Bolshevism if in their own country there exists favourable soil for these ideas? Tsarism in its time also "fenced itself off" from Bolshevism, but, as is well known, the "fence" proved to be useless. It proved to be useless because Bolshevism everywhere does not penetrate from outside, but grows within the country. There are no countries, one would think, more "fenced-off" from the Russian Bolsheviks than China, India and Indo-China. But what do we find? Bolshevism is growing in these countries, and will continue to grow, in spite of all "cordons," because, evidently, there are conditions there that are favourable for Bolshevism. What has the propaganda of the Russian Bolsheviks to do with it? If Messieurs the capitalists could somehow "fence themselves off" from the economic crisis, from mass poverty, from unemployment, from low wages and from the exploitation of labour, it would be another matter; then there would be no Bolshevik movement in their countries. But the whole point is that every rascal tries to justify his weakness or impotence by pleading Russian Bolshevik propaganda.

It is said, further, that another stumbling block is our Soviet system, collectivisation, the fight against the kulaks, anti-religious propaganda, the fight against wreckers and counter-revolutionaries among "men of science," the banishment of the Besedovskys, Solomons, Dmitrievskys, and other lackeys of capital. But this is becoming quite amusing. It appears that they don't like the Soviet system. But we don't like the capitalist system. (Laughter. Applause.) We don't like the fact that in their countries tens of millions of unemployed are compelled to suffer poverty and starvation, while a small group of capitalists own wealth amounting to billions. Since, however, we have agreed not to intervene in the internal affairs of other countries, is it not obvious that it is not worth while reverting to this question? Collectivisation, the fight against the kulaks, the fight against wreckers, anti-religious propaganda, and so forth, are the inalienable right of the workers and peasants of the USSR, sealed by our Constitution. We must and shall implement the Constitution of the USSR with complete consistency. Naturally, therefore, whoever refuses to reckon with our Constitution can pass on, can go wherever he pleases. As for the Besedovskys, Solomons, Dmitrievskys and so forth, we shall continue to throw out such people like defective goods that are useless and harmful for the Revolution. Let them be made heroes of by those who have a special predilection for offal. (Laughter.) The millstones of our Revolution grind exceedingly well. They take all that is useful and give it to the Soviets and cast aside the offal. It is said that in France, among the Parisian bourgeois, there is a big demand for these defective goods. Well, let them import them to their heart's content. True, this will overburden somewhat the import side of France's balance of trade, against which Messieurs the bourgeois always protest, but that is their business. Let us not intervene in the internal affairs of France. (Laughter. Applause.)

That is how the matter stands with the "obstacles" that hinder the establishment of "normal" relations between the USSR and other countries.

It turns out that these "obstacles" are fictitious "obstacles" raised as a pretext for anti-Soviet propaganda.

Our policy is a policy of peace and of increasing trade connections with all countries. A result of this policy is an improvement in our relations with a number of countries and the conclusion of a number of agreements for trade', technical assistance, and so forth. Another result is the USSRÝs adherence to the Kellogg Pact, the signing of the well-known protocol along the lines of the Kellogg Pact with Poland, Rumania, Lithuania, and other countries, the signing of the protocol on the prolongation of the treaty of friendship and neutrality with Turkey. And lastly, a result of this policy is the fact that we have succeeded in maintaining peace, in not allowing our enemies to draw us into conflicts, in spite of a number of provocative acts and adventurist attacks on the part of the warmongers. We shall continue to pursue this policy of peace with all our might and with all the means at our disposal. We do not want a single foot of foreign territory; but of our territory we shall not surrender a single inch to anyone. (Applause.)

Such is our foreign policy.

The task is to continue this policy with all the perseverance characteristic of Bolsheviks.

THE INCREASING ADVANCE OF SOCIALIST CONSTRUCTION AND THE INTERNAL SITUATION IN THE USSR

Political Report of the Central Committee to the Sixteenth Congress of the C.P.S.U.(B.)

The Party