Dismantling tsarist structures and implementing a new socialist economic system in Russia was much easier said than done. As with most revolutions, transforming the economy proved far more difficult than removing the government. As a consequence, Bolshevik economic policy was driven more by practical necessities than ideological principles.
An exhausted empire
Building a socialist economy in a nation devastated by years of war was a difficult undertaking. Such a transition might have been possible with the advantages of peace, stability, external assistance and domestic support – but the Bolsheviks enjoyed none of these.
When the Bolsheviks seized power in October 1917, they inherited a nation exhausted and deprived by three years of total war. The Russian economy had been devastated by shortages and deprivation, strikes and other disruptions to labour, failing infrastructure and the poor or unpredictable supply of resources.
The Russian economy had to recover before it could be rebuilt and restructured. By the beginning of 1918, Vladimir Lenin and other Bolshevik leaders were contemplating how this recovery might be achieved.
Lenin’s plan, articulated in 1918, was dubbed ‘state capitalism’. It was essentially a mixed economy – major companies and industries would remain in private hands but under state control. Bourgeois managers and experts would retain their roles in industries, factories and manufacturing. These sectors would be managed by Vesenkha, a government department created by the Sovnarkom in late 1917.
Lenin argued that capitalist development was necessary to restore production and build a solid economic foundation for the construction of a socialist economy. It was, in effect, a return to Karl Marx‘s argument that socialism can only take root in a capitalist economy.
In “a truly revolutionary-democratic state,” Lenin argued, “state monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism”. He stressed that socialism would be “the next step forward from state-capitalist monopoly.”
The German model
Lenin viewed Germany as the ideal state capitalist economy. It was fully industrialised and highly advanced but planned and controlled for the purposes of imperialism. Lenin saw it as the ideal economy on which to construct a socialist system.
If Germany’s “modern large-scale capitalist engineering and planned organisation” were subordinated to a Soviet-style state, Lenin argued, “you will have the sum total of the conditions necessary for socialism”.
This is one of the reasons that Lenin and his fellow internationalists hoped for socialist revolution in Germany. German industries and production under socialist control would be of enormous benefit to Russia as it
Criticisms of Lenin’s policy
Lenin’s idea of state capitalism won majority support in the ranks of the Bolsheviks, though it was sharply criticised by Nikolai Bukharin and others of the party’s left-wing faction. It was welcomed by some Mensheviks but others were more scornful of Lenin’s shifting policy priorities.
Some non-Bolsheviks ridiculed Lenin for having abandoned Marx before seizing power only to return to Marx after it. Writing in April 1918, a Socialist-Revolutionary named Stalinskii said of Lenin’s state capitalist policy:
“In repudiating their own program, the Bolsheviks repudiate the things that distinguished them from other parties. They cease to be Bolsheviks in the real sense of the word. They simply turn into a party that wants to stay in power at any cost. In this, only in this, lies the essence of their current program.”
Another problem with Lenin’s policy of state capitalism was that it threatened dozens of syndicalist movements which had taken shape during the Provisional Government period.
The core idea of syndicalism was worker control. In a syndicalist economy, workers’ collectives, would control factories, rather than bourgeois managers. Decisions about production methods, targets and working conditions would be made by mass meetings of workers in the relevant factory or industry.
This syndicalism, Lenin argued, was for a later time. If Soviet Russia was to meet its immediate challenges and survive, centralised economic controls and planning were needed. According to American historian Thomas Remington:
“On three occasions in the first months of Soviet power, the [factory] committee leaders sought to bring their [syndicalist] model into being. At each point, the party leadership overruled them. The Bolshevik alternative was to vest both managerial and control powers in the state.”
The onset of the Russian Civil War produced another shift in Bolshevik economic policy, with the introduction of what became known as “war communism”. As Lenin explained later, this policy shift was to meet the exigencies of war; it was not ideologically driven:
“War communism was thrust upon us by war and ruin. It was not, nor could it be, a policy that corresponded to the economic tasks of the proletariat. It was a temporary measure.”
War communism was introduced through a series of decrees in mid-1918. The two most significant were this May 13th decree that empowered the state to commence grain requisitioning and a June 28th decree that formally nationalised all Russian industries.
Grain requisitioning became the most visible aspect of war communism. The seizure of grain was carried out by Soviet officials, backed by units of the Red Army. Where grain hoarding or other opposition was anticipated, agents of the Cheka might be involved. Soviet bureaucrats determined quotas for requisitioning, while security forces actively punished anyone engaged in opposition or grain hoarding.
This policy allowed the Soviet state to gather its war needs but it had a disastrous effect on the overall economy. With any surplus grain almost certain to be confiscated, Russia’s peasants slowed production, while some even abandoned their farmland. The result was a rapid drop in productivity and severe shortages, particularly in major cities.
There was also disruption and declining productivity in the industrial sector. The Soviet bureaucracy grew rapidly in order to manage nationalised firms and factories. Private owners and syndicalist collectives were stripped of control. All aspects of production, from targets to wages and working conditions, were taken over by Soviet managers.
These changes, coupled with shortages of raw materials and shortages of food in the cities, saw thousands of industrial workers abandon their jobs. By 1920, Russia’s industrial production had fallen to less than one-quarter of its pre-World War I levels.
Between late 1917 and early 1921, Bolshevik economy policy was framed by conditions and circumstances rather than ideology. The regime relied on what historian E. H. Carr called “hand-to-mouth policies” rather than any cohesive, long-term economic vision. These policies allowed the regime to meet the needs of war and cling to power – but they caused widespread suffering for the Russian people.
A historian’s view:
“Workers, encouraged by socialist ideas and their own economic plight, pushed Bolshevik leaders faster than the latter wished to go. For Lenin, factory committees and other kinds of mass activism were useful for the political support they gave… but they could not be the basis for future economic and political authority. Moreover, Lenin and other Bolshevik leaders stressed the importance of drawing on the skills of the old managers and owners in the current economic crisis and transitional stage; supervision, not replacement of them was needed. [So] the regime followed a rather inconsistent economic policy for the rest of 1917, especially on workers’ supervision and nationalisation.”
1. The Bolsheviks dreamed of dismantling Russia’s old order and creating a socialist economy – but they inherited a nation underdeveloped and exhausted by years of total war.
2. Lenin’s solution was ‘state capitalism’, where major industries would remain in private hands but under state control. This would allow the economy to recover, consolidate and develop.
3. Lenin was criticised by other socialists, including within his own party, for failing to implement socialist policies. He justified it by arguing that production first needed to recover.
4. State capitalism also caused problems for the rising syndicalist movement, which saw factories, mines and other places of production controlled by workers’ collectives.
5. In mid-1918, the Bolsheviks introduced ‘war communism’ to supply the demands of the Civil War. Among its features were the nationalisation of all industries and forced grain requisitioning to supply the cities and the armed forces.