(These are the notes for the presentation at this event, which can also be listened to as a podcast)
This chapter at first appeared lacking some of the substance of earlier chapters, when I first read it recently after a long period since the previous time.
But that is a mistake, on re-reading. It contains some key insights into socialism, and how society must progress towards socialism after the working class takes power, and the necessary economic content of the dictatorship of the proletariat.
It also contains key insights into what is the economic basis of the kind of deformations that afflicted the Soviet state in the period of the early Stalinist regime, and points, in embryo, to how those deformations and problems led to the USSR’s collapse decades later.
So, it’s not a chapter to be skipped or treated lightly.
There are some very basic points about the economic content of proletarian dictatorship at the beginning of this chapter. The different economic content of money and credit under the dictatorship of the proletariat, even, or especially, in conditions of relative economic backwardness, is a key insight:
“The nationalization of the means of production and credit, the co-operative or state-izing of internal trade, the monopoly of foreign trade, the collectivization of agriculture, the law on inheritance – set strict limits upon the personal accumulation of money and hinder its conversion into private capital (usurious, commercial and industrial). These functions of money, however, bound up as they are with exploitation, are not liquidated at the beginning of a proletarian revolution, but in a modified form are transferred to the state, the universal merchant, creditor and industrialist. At the same time the more elementary functions of money, as measures of value, means of exchange and medium of payment, are not only preserved, but acquire a broader field of action than they had under capitalism.”
This is in effect a defence of the original purpose of Lenin’s NEP, and a polemic against the economic arbitrariness that was a key feature both of ‘war communism’ – the utopian period of the 1918-21 Civil War – and their revival under Stalinism in the 1930s.
The illusion that administrative measures can jump over material reality and development is the key point here. There was a greater cynicism under Stalinism about this, as opposed to earlier naivete.
Trotsky elaborates more on the role of money, provided it is safeguarded as a reliable measure of value, in spurring the development of the productive forces under the dictatorship of the proletariat:
“The role of money in the Soviet economy is not only unfinished but, as we have said, still has a long growth ahead. The transitional epoch between capitalism and socialism taken as a whole does not mean a cutting down of trade, but, on the contrary, its extraordinary extension. All branches of industry transform themselves and grow. New ones continually arise, and all are compelled to define their relations to one another both quantitatively and qualitatively. The liquidation of the consummatory peasant economy, and at the same time of the shut-in family life, means a transfer to the sphere of social interchange, and ipso facto money circulation, of all the labour energy which was formerly expended within the limits of the peasant’s yard, or within the walls of his private dwelling. All products and services begin for the first time in history to be exchanged for one another.”
It should be emphasised that this was not about money as the locus of profit making and the accumulation of surplus value.
The whole point of the proletarian dictatorship is to suppress that as much as possible.
But the role of the ‘elementary functions of money’ in overcoming pre-capitalist economic backwardness and developing the productive forces under a stratified economy, is crucial.
He noted that a stable currency, as an accurate measure of value by labour time, was the only way to promote real involvement of the masses and material incentives to increase production:
“a successful socialist construction is unthinkable without including in the planned system the direct personal interests of the producer and consumer, their egoism, – which in its turn may reveal itself fruitfully only if it has in its service the customary reliable and flexible instrument, money. The raising of the productivity of labour and bettering of the quality of its products is quite unattainable without an accurate measure freely penetrating into all the cells of industry – that is, without a stable unit of currency.”
His point about the Gold Standard may well be a product of its time, however. That was the dominant wisdom in terms of capitalist economics in that era, and it does turn out that the bourgeoisie has at times since done without that particular form of money and nevertheless made major productive gains at times.
That is debatable.
Trotsky was not advocating ‘market socialism’ or anything like it here. This was entirely consistent with the critique by the Left Opposition in the late 1920s of Stalin-Bukharin’s pandering to the well-to-do peasant (kulak).
And the LO’s demand for a measured programme of collectivisation of agriculture though material and moral incentives, as linked to a more general programme of measured, but consistent and planned industrialisation.
The Opposition was advocating the drawing up of comprehensive plans at the time the Stalin/Bukharin bloc were still cossetting kulaks and Bukharin, with Stalin’s approval, was calling on the peasantry to ‘enrich themselves’.
The Left Opposition were denounced as ‘super industrialisers’ in that period before the Kulaks declared war on the Soviet regime and split the Stalin Bukharin bloc, forcing Stalin to defend Soviet power by means of panicked measures of civil war and forced collectivisation.
Which was not good, but clearly the lesser evil to Bukharin in these circumstances.
Trotsky’s critique of Stalin for playing fast and loose with the currency and its ability to be used as a reliable measure of value, is key. This was economic adventurism.
He documents the destruction of Lenin’s gold chervonetz by Stalin’s printing of money to finance the forced collectivisation, and its ruinous consequences on the masses:
“So long as the course toward the well-to-do farmer continued, the chervonetz was an object of governmental concern. During the first period of the five-year plan, on the contrary, all the sluices of inflation were opened. From 0.7 billion rubles at the beginning of 1925, the total issue of currency had arisen by the beginning of 1928 to the comparatively modest sum of 1.7 billions … The subsequent curve of inflation from year to year is depicted in the following feverish series: 2.0 – 2.8 – 4.3 – 5.5 – 8.4! The final figure 8.4 billion rubles was reached at the beginning of 1933.”
He noted the concentrated efforts of the regime to pretend that this meant nothing, that this was a sign of the ‘genius’ of Stalin’s planners, etc, and the attempt to criminalise talk of inflation being a problem.
He complained that:
“…the bureaucracy was … sending ‘to the devil’ the NEP, which means the money evaluation of all goods, including labour power. Restoring “bourgeois norms” with one hand, they were destroying with the other the sole implement of any use under them.”
But the effect of this on the working class was disastrous: “It is needless to say that inflation meant a dreadful tax upon the toiling masses.”
Likewise in agriculture, the economic arbitrariness led to disasters in the countryside:
“The immediate consequence was not only an extermination of more than half of the livestock, but, more important, a complete indifference of the members of the collective farms to the socialized property and the results of their own labour. The government was compelled to make a disorderly retreat. They again supplied the peasants with chickens, pigs, sheep, and cows as personal property. They gave them private lots adjoining the farmsteads. The film of collectivization began to be run off backwards.
“…the daily needs of the average peasant are still met to a greater degree by his work ‘on his own’, than by his participation in the collective. A peasant’s income from individual enterprises, especially when he takes up technical culture, fruit, or stock farming, amounts frequently to three times as much as the earnings of the same peasant in the collective economy. “
And the regime subsequently was forced to retreat, not only in agriculture:
“After that came the years of reconsideration and retreat: 6.9 – 7.7 – 7.9 billion (1935). The rouble of 1924, equal in the official exchange to 13 francs, had been reduced in November 1935 to 3 francs – that is, to less than a fourth of its value, or almost as much as the French franc was reduced as a result of the war. Both parties, the old and the new, are very conditional in character; the purchasing power of the rouble in world prices now hardly equal 1.5 francs. Nevertheless, the scale of devaluation shows with what dizzy speed the Soviet valuta was sliding downhill until 1934.”
The criticisms of the illusion promoted by the Stalinists in ‘administrative’ prices are very sharp:
“…the obedient professors managed to create an entire theory according to which the Soviet price, in contrast to the market price, has an exclusively planning or directive character. That is, it is not an economic, but an administrative category, and thus serves the better for the redistribution of the people’s income in the interests of socialism. The professors forgot to explain how you can estimate real costs if all prices express the will of a bureaucracy and not the amount of socially necessary labour expended”
They were forced to do a U-turn on this. Attempts to substitute ration cards for money were abandoned. He quotes the head of the state planning commission saying that:
“The present system of mutual relations between the banks and industry must be revised, and the banks must seriously realize control by the rouble.”
And again, just as with NEP, the results were positive:
“The growth of commodity circulation under the restored market has become very rapid. Paper-money inflation was actually stopped in 1934. The elements of a certain stabilization of the rouble exist. Nevertheless, the announcement of the People’s Commissar of Finance must be explained to a considerable extent by an inflation of optimism. If the Soviet rouble possesses a mighty support in the general rise of industry, still its Achilles heel is the intolerably high cost of production. The rouble will become the most stable valuta only from that moment when the Soviet productivity of labour exceeds that of the rest of the world, and when, consequently, the rouble itself will be mediating on its final hour. [….]
“With a firm rejection of inflation in the future, the currency, although deprived of the advantage of the gold standard, could indubitably help to cure the many deep wounds inflicted upon the economy by the bureaucratic subjectivism of the preceding years.”
Again, by the ‘market’ Trotsky is not talking about a market for capital, or anything like it, but rather a system of exchange of the products of state industry and collectivised agriculture based on a (relatively) stable currency
One where exchange, mediated by a stable currency, is of goods and products mediated by their values as expressed in socially necessary labour time, as the basis for the building up of the productive power of the economy in a rational and commeasurable way.
Not with arbitrary prices based on illusion giving birth to unpredictable economic surprises
The final section in this chapter is about the Stakhanov movement, and the tendency of the Stalinist regime to vacillate, sometimes quite rapidly, between utopian administrative measures to try to speed up growth, and brutal capitalist derived methods.
Shock brigades, and then Stakhanovism.
The Stakhanov movement, with its trumpeted and no doubt considerable achievements of productivity by particular individuals, was based on piecework.
Which is the most extreme form of the capitalist labour process, and rightly rejected by many workers as a crude carrot-and-stick method of coercing the working class to potentially damage its own future labour capacity through overwork.
These are among the worst methods of labour discipline, which the workers movement in capitalist countries often fought against for this reason. There was nothing ‘socialist’ about it, and Trotsky was harshly critical of it being portrayed that way.
Yet he was not dismissive of the idea that there could be some element of socialist aspirations and consciousness, and also a subordinate element of the effect of planning as a method, in driving some of its achievements.
This itself was an element of the contradictory nature of the USSR under Stalinism – different elements, some involving backwardness, could combine with the advanced tendencies of planning and its socialist potential, to produce something with unique elements.
However, whatever potential may have existed in this, the bureaucracy’s instability and arbitrariness of the bureaucracy was a barrier:
“Certain achievements of individual workers are undoubtedly extremely interesting as evidence of the possibilities open only to socialism. However, from these possibilities to their realization on the scale of the whole economy, is a long road. With the close dependence of one productive process upon another, a continual high output cannot be the result of mere personal efforts. The elevation of the average productivity cannot be achieved without a reorganization of production both in the separate factory and in the relations between enterprises. Moreover, to raise millions to a small degree of technical skill is immeasurably harder than to spur on a few thousand champions.”
That was the principled consideration. The implementation, however, was tainted with arbitrariness and irrationality:
“The first steps of the movement were signalized with mass repressions against the technical engineering personnel and the workers accused of resistance, sabotage and, in some cases, even of the murder of Stakhanovists. The severity of repressions testifies to the strength of the resistance. The bosses explained this so-called “sabotage” as a political opposition. In reality, it was most often rooted in technical, economic, and cultural difficulties, a considerable portion of which found their source in the bureaucracy itself.”
And the consequences often even squandered the potential benefits of the bourgeois methods employed:
“As a result of the “Stakhanovist” days and ten-day periods, complete chaos was introduced into many enterprises. This explains the fact, at first glance astonishing, that a growth in the number of Stakhanovists is frequently accompanied, not with an increase, but a decrease of the general productivity of the enterprise.”
As he made clear, the underlying reason for the problem was not the backwardness of the working class, per se, but the arbitrary nature of the bureaucracy and its backwardness and vacillations:
“The leaders themselves, as we have heard, complain at times that the Soviet workers lack skill. However, that is only half of the truth, and the smaller half. The Russian worker is enterprising, ingenious, and gifted. Any hundred Soviet workers transferred into the conditions, let us say, of American industry, after a few months, and even weeks, would probably not fall behind the American workers of a corresponding category. The difficulty lies in the general organization of labour. The Soviet administrative personnel is, as a general rule, far less equal to the new productive tasks than the worker.”
And that is the strategic question – the role of the bureaucracy and what is to be done about it. Future chapters will continue to address this.