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In 1891 the Russian economist V.Y. Postnikov published Peasant Farming in South Russia. Two years later, while living in Samara, the young Lenin studied and reviewed Postnikov’s work. The resulting study, New Economic Developments in Peasant Life, is Lenin’s earliest surviving work. Lenin’s interest in peasant farming was motivated by the desire to understand the capitalist relations penetrating the Russian countryside.

In his review, Lenin described the relationship of the market to capitalist relations of production. With regard to the prosperous peasants of South Russia, Lenin wrote that they 'possess considerably more than the average quantity of means of production,' and their labor is 'more productive, [they] are the principle growers of agricultural produce in the district, and predominate over the remaining groups.' Lenin considered their economic organization to be 'commercial in character' and 'largely based on the exploitation of hired labour.'

In his review of Postnikov, Lenin observes that 'the soil in which the above described phenomena grow is production for sale.' At the root of 'the struggle of economic interests arising among the peasantry is the existence of a system under which the market is the regulator of social production.'
This early review of Lenin sheds light on the discussion of the socialist market economy. Two recent articles in Political Affairs indicate that more clarity is needed on the concept. For example we read that 'The socialist market economy is designed for transition from an early capitalist or even pre-capitalist society and the focus is to create the prerequisites for socialism.' But an observer of the situation in China, the leading proponents of the socialist market economy, state to the contrary that 'China is already a socialist society.'

One of the sources of this lack of clarity may be that some people base their notion of the socialist market economy on 'classical' Marxism and may thus be very likely to view the socialist market economy as a euphemism for capitalism. But the Chinese Communist Party states that 'Socialism with Chinese characteristics is based on yet different from [my emphasis] socialism as defined by Marx.' Thus using only the 'classical' theories of Marxism-Leninism the socialist market economy as practiced in China will not appear to be socialist. This conclusion is, I think, borne out by the following analysis of Lenin’s work on the market question.

Soon after his study of Postnikov in 1893 Lenin moved to St. Petersburg and became involved with a group of Marxists who called themselves 'the ancients.' Here he wrote his second major work On the So-Called Market Question. Krupskaya, Lenin’s future wife, tells us this work made a profound impression as the views being expressed in the Marxist study groups at the time were taking on abstract and mechanical characteristics. According to Krupskaya 'The question of markets had a close bearing on the general question of the understanding of Marxism.'

Early in this essay Lenin reminds us that Marx, in Capital, has established 'that in capitalist society, the production of means of production increases faster than the production of means of consumption.' But what is this 'capitalist society' Marx writes about? In a brilliant sketch of its development, Lenin maintains that capitalism is the stage of commodity production in which, as discovered by Marx, human labor power becomes a commodity.

There are two stages in this development of capitalism. The first is the evolution of the natural economy developed by the producers themselves into an economy of commodity production. This first stage is the result of the division of labor. The second stage is the further development from commodity production into capitalism: an economy where commodities are specifically produced for a market where competition results in the ruin of weaker commodity producers, the creation of wage-workers from the ranks of the losers, and the growth of monopoly.

Lenin stressed the development of capitalism because the major social critics of his day were spokespersons for the interests of the peasantry – the so-called Narodniks. This term was a nickname for various groups attempting to prove that Russia would by-pass the capitalist stage of development and move into some form of peasant socialism based on primitive communal land ownership. In his analysis of the 'market' Lenin makes three conclusions and two observations still relevant to contemporary discussions. First, the division of labor and the market are necessarily linked together. Thus we see that the market is the center of the economic system arising from commodity production which has, up to now, been called 'capitalism.' Second, capitalism is based on the labor market and it produces, of necessity, an impoverished mass of actual and potential wage workers from the small producers who have been ruined by the growth of monopoly. This bloated labor market, where there are more workers than jobs, keeps labor costs low, leads to the enrichment of the capitalists, and an expansion of the market.

Third, due to ruthless competition between the capitalists they are forced to expand their system and gain control of new markets.

After drawing these conclusions, Lenin remarks that there are two supplemental points which must be noted: 1) the market needs the workers to buy the commodities it produces and at the same time it forces as best it can the worker’s wages down – that is, the market wants to pay as little as possible for the worker’s commodity – labor power. Marx called this one of the most fundamental contradictions of capitalism. 2) Even though the market impoverishes the workers, this is relative since as capitalism advances it must satisfy, more or less, the rising expectations of the population 'including the industrial proletariat.'

When Lenin wrote On the So-Called Market Question the Russian Revolution was 24 years in the future, but the progressive intellectuals could see that the Russian autocracy was doomed – it was politically and economically anachronistic in comparison to the general level of European development. What type of system would replace it was an open question. What Lenin clearly saw, even at the age of 23, was that before speculation on the future of Russia could be profitably indulged in, a thorough and accurate understanding of the real nature of Russian socio-economic conditions had to be mastered. Thus, without in-depth knowledge of the social conditions of the peasants, any transfer of Western models, especially the Marxist model, would be fruitless. Nor, on the other hand, would it be possible to refute the 'home-grown' models of the Narodniks.

Are these reflections on the Russian peasantry and the market, now over 100 years old, still relevant? Is impoverishment going on in China today? A recent New York Times article observes that up to 200 million peasants have to find supplemental employment in China’s cities – but many are cheated out of their wages without any means of obtaining their rights. These workers, responsible for about 40 percent of the income in the countryside have been cheated out of $12 billion in wages.

At the same time the productive forces have developed dramatically. But Lenin recognized that this is just what capitalism is all about. He stated that living standards (requirements) do improve by the development of the market – at least for some sections of the population.

Is the socialist market economy a reversion to capitalism or the first step in the development of a new kind of socialism making classical Marxist theory obsolete? I don’t have an answer to this question but I hope the above observations concerning Lenin’s views on the market question will lead to further discussion.



--Thomas Riggins is book review editor of Political Affairs.



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