Once in power, the Bolsheviks dreamed of dismantling and destroying the old structures of tsarism and creating a new economic system, equitable and beneficial for the working masses. But as in most revolutions, transforming the economy was inordinately more difficult than just removing the government. To build a socialist economy in a nation devastated by years of war was an enormously difficult undertaking. It might have been achieved with the benefits of time, patience, resources, external assistance and domestic support. But the Bolsheviks enjoyed none of these luxuries. The country they now ruled was beset by war, deprivation, inadequate infrastructure, foreign opposition and internal divisions. For the next half-dozen years, Bolshevik economic management was much more pragmatic than ideological. Their economic policies were made ‘on the fly’ and reflected the parlous state of the nation and the weakness of their own position, rather than long-term planning or a commitment to ideological reform.
When the Bolsheviks seized power in October 1917, they inherited an economy exhausted and deprived by three years of total war. More than a million Russian soldiers were still engaged on the Eastern Front; the nation’s industrial sector was paralysed by strikes; its transport network was on the brink of total collapse; while major cities were desperately short of both food and fuel. The Russian economy had to recover before it could be rebuilt and restructured. By late 1917 Lenin was articulating a policy, called ‘state capitalism’, that would facilitate economic recovery and serve as a transitional phase before the implementation of socialist policies. The Russian economy would retain many elements of capitalism: money and petty trade would continue, as would markets and privately owned small businesses. Bourgeois experts like accountants, factory managers and technicians would also continue in their roles. The state, however, would acquire control of the major sectors of the economy, particularly heavy industry, mining, banking and finance. Planning and control of these sectors would be managed by Vesenkha, a government department created by Sovnarkom in late 1917.
Lenin’s call for state capitalism was criticised and opposed by radicals in the Bolshevik party, who demanded more meaningful socialist reforms. But Lenin justified his push for state capitalism by arguing that capitalist development was necessary, in order to build a solid economic foundation for the construction of a socialist 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.” In effect, it was a return to Marx’s argument that capitalism must be developed before socialism can take root. Lenin’s idea of state capitalism won majority support in the ranks of the Bolsheviks; it was also welcomed by some in the Menshevik faction. Others were more scornful of the Bolsheviks and their shifting policy priorities. Some Mensheviks ridiculed Lenin for having abandoned Marx in 1917 before returning to Marxist theory in 1918. One said of Bolshevik economic policy in 1918: “In repudiating their own program, 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 lies the essence of their current program.
“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.”
Rex Wade, historian
A problem with Lenin’s theory of state capitalism was that it threatened the dozens of syndicalist movements which had sprung up under the Provisional Government. The core idea of syndicalism was that workers should assume control of their factories, and thus the broader economy. Mass meetings of workers would make decisions about methods, production targets and working conditions in their factories. Lenin, however, argued that syndicalism was for a later time; if Soviet Russia was to meet its immediate challenges and survive, then centralised economic controls and planning were needed. Thomas Remington writes that “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.” Lenin’s insistence on state control alienated not only syndicalist workers but also the left-wing of his own party, such as Nikolai Bukharin, a vocal critic of state capitalism.
It is also worth noting that Lenin’s faith in state capitalism was also linked to his expectations about future events in the west. The Bolshevik leader was convinced that the ongoing war would trigger a socialist revolution in Germany, probably in 1918 or early 1919. Lenin viewed Germany as the model state-capitalist economy: fully industrialised, highly advanced yet largely planned and controlled for the purposes of imperialism. It was also the ideal economy upon 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”. Not only that, a socialist Germany would be of enormous benefit to neighbouring Russia. On its own Soviet Russia would take years, perhaps a generation to develop and industrialise – but this would be rapidly expedited with the assistance of a socialist German state.
1. The Bolsheviks inherited a Russian economy that was underdeveloped and exhausted by years of total war.
2. Lenin’s solution was ‘state capitalism’, which would allow the economy to recover, consolidate and develop.
3. It required the continuation of capitalist practices, though several sectors would be controlled by the state.
4. Lenin justified this with Marxist theory about capitalist development being necessary before socialism could succeed.
5. He also believed that a socialist revolution in Germany, a much more advanced and heavily industrialised capitalist economy, would provide the developing Soviet economy with resources and support.
This page was written by Jennifer Llewellyn, John Rae and Steve Thompson. To reference this page, use the following citation:
J. Llewellyn et al, “Bolshevik economic policy” at Alpha History, https://alphahistory.com/russianrevolution/bolshevik-economic-policy/, 2014, accessed [date of last access].