Reflections on the Russian Revolution 5

In 1921 Lenin wrote the following on ‘Concessions and the Development of Capitalism’:

“The Soviet government is inviting foreign capitalists to obtain concessions in Russia.”

“What is a concession? It is a contract between the government and a capitalist who undertakes to organise or improve production (for example, felling and floating timber, extracting coal, oil, ore, etc.) and to pay the government a share of the product obtained, keeping the rest as his profit.”

“Is it right for the Soviet government to invite foreign capitalists after expelling the Russian landowners and capitalists? Yes, it is, because, seeing that the workers’ revolution in other countries is delayed, we have to make some sacrifices in order to achieve a rapid and even immediate improvement in the condition of the workers and peasants. The sacrifice is that over a number of years we shall be giving away to the capitalists tens of millions of poods of valuable products. The improvement in the condition of the workers and peasants is that we shall immediately obtain additional quantities of petroleum, paraffin oil, salt, coal, farming implements, and so forth. We have no right to forego the opportunity of immediately improving the condition of the workers and peasants, for our impoverishment makes it essential, and our sacrifices will not be fatal.”

“But is it not dangerous to invite the capitalists? Does it not imply a development of capitalism? Yes, it does imply a development of capitalism, but this is not dangerous, because power will still be in the hands of the workers and peasants, and the landowners and capitalists will not be getting back their property. A concession is something in the nature of a contract of lease. The capitalist becomes, for a specified period, the lessee of a certain part of state property under a contract, but he does not become the owner. The state remains the owner.”

In this view, the proletarian nature of the state guaranteed the socialist character of an economic construction carried out upon the foundations of state capitalism.  The undeveloped and crisis conditions in Russia meant that the state capitalist foundations had themselves to be built under the workers’ own state in alliance with forms of state capitalism that involved individual capitalists, and including foreign capital.  In these circumstances “the worker will never be afraid of such
 a [capitalist] leader, because he knows that Soviet power is his power, that it will stand firm in his defense, and because he knows that he wants to learn the practicalities of organization.”  This was considered a requirement all the more pressing because of the low cultural level of the Russian working class we noted in our earlier posts.

One such collaboration shows what this might involve but also the differences within the Bolsheviks and the new state over the policy and its practical implementation.  In January 1918 the head of the Mining-Metallurgy Department of the Supreme Council of the National Economy (Vesenkha), reported discussions with Alexis P. Meshchersky, a self-made industrialist, 
on the formation of a metallurgical trust.

This would involve creation of a milliard-and-a-half ruble trust combining some 20 industrial enterprises to control approximately 60% of railway wagon and 85% of locomotive production, or 50-60% of Russia’s machine construction and metallurgical industries. Initially, Meshchersky offered the government one-third of the trust’s shares (corresponding to the number of enterprises to be included which were already nationalised) and the same representation on the central administrative board of the trust. Each factory would be run by a board consisting of the existing ‘specialists’ and a commissar representing Vesenkha.

The idea for the trust met with a positive response on the part of leaders in Vesenkha but opposition from some local metallurgical trade unions, who called for complete nationalisation of the factories involved.  Meshchersky then began to back off from his original proposal, in particular with regard to the relative proportions of private/state control.

Meshchersky was forced to reveal that almost 20% of the stocks in the proposed trust were in the hands of German banks and opposition to possible foreign control resulted in readjustment of the shares in the proposed trust from 60% private and 40% government to 50-50, 20-80, and finally to a 100% government share and complete control. However, included in this final proposal was a ‘loophole’ from which Meshchersky never retreated: that 20% of the shares be held in reserve to be returned to the original owners with accumulated dividends should the government ever offer the trust’s shares for sale. When Meshchersky refused further concessions, Vesenkha voted to break off the talks but to proceed with the formation of a unified metallurgical trust.

Vesenkha continued to circulate the Meshchersky proposal to unions and representatives of workers but while they supported creation of trusts or national syndicates they rejected Meshchersky’s proposal because he had refused from the beginning to cooperate with the trade unions and because of the potential influence of foreign capital in the trust.  Eventually Vesenkha nationalised the Sormovo-Kolomna industrial complex in June and other factories in November

Similar negotiations took place in the spring of 1918 between owners and managers of the sugar, textile, and leather industries and trade union representatives, which resulted in formation of a joint or state controlled trust.  The typical pattern for creating joint trust organisations in these cases involved the addition of trade union representatives to pre-revolutionary regulatory boards (usually privately initiated, state sanctioned organisations) which were authorized by Vesenkha to take control of the whole industrial branch.

Lenin cited these organisations as exemplary of state capitalism’s role in the transition period: “The situation is best among those workers who are carrying out this state capitalism: among the tanners and the textile and sugar industries, because they have a sober, proletarian knowledge of their industry and they want to preserve it and make it more powerful-because in that lies the greatest socialism.”

The pursuit of this state capitalist road reflected not only the relative backwardness of Russian capitalism exacerbated by war and economic collapse, but an analysis that socialism could only be built on the grounds of capitalism and not from simply ‘smashing’ the capitalist state and creating socialism ex nihilo.

In neither of these could Lenin be criticised for being wrong.  What was wrong was (1) that the weak development of Russian capitalism could not be overcome within Russia itself and socialism could neither be created through state capitalism (with a workers’ state place on top of it) nor could this stage be leapt over by going ‘straight’ to socialism and (2) the socialisation created under capitalism upon which socialism could be built was not limited to the centralisation and concentration of production by state capitalist trusts.

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