The Problem of Transition: Development, Socialism and Lenin's NEP

Editor's note: This article is excerpted from a larger thesis by Atkins titled, 'Competing Agendas: Class Struggle, the Chinese State and the World Economy.'

Socialism can be defined as a phase of social-economic development during which ever-larger numbers of people in society are increasingly empowered to collectively control the direction of their lives through the process of incrementally crafting new democratic means of ownership and institutions for running the economy and other areas of social life. It is a society in which surplus labor is shifted away from individual, private profit toward allocation based on social needs and the public good, thus moving toward the resolution of the contradictions of capitalist social relations.

But socialism is not just democracy and collectivity for their own sake; it is not simply a project for spiritual freedom or equalitarian psychological satisfaction. It is also very much about ensuring ever-rising standards of living and material security to the members of society as a whole. In other words, egalitarianism is a laudable goal, but only if society actually has the material resources to give it substance. There must exist the capability to produce a sufficient economic surplus to satisfy the ever-growing needs of society. And that surplus has to be produced in a manner that is efficient in the employment of natural resources and productive forces (means of production and labor power) and which supplies use values in accordance with the social and economically realistic need for them – a point on which too often the existing socialist countries fell short. A 'socialist' system of common poverty, shared underdevelopment or wastefulness is not something to strive for.

While definitions of socialism are of course not blueprints to be drafted in advance with all the details predetermined, there are a few basic aspects that can be delineated. Socialism, as a socio-economic system succeeding capitalism, would be characterized by the social ownership and control of the decisive sectors of an economy, such as the most important industrial firms, the banks and financial institutions, the energy and natural resources industries, health care and social services, and probably much of the national distribution/transportation system. Democratization of the workplace would be central to gradually altering the exploitative relations which characterize the capitalist enterprise, making it possible to begin to develop in practice a new kind of economy in which those who create value have more meaningful collective control over their conditions of work and the disposition of that surplus value through social control of investment. As socialism becomes consolidated, services such as health care, education through university level, the ending of illiteracy, malnutrition, and unemployment would be priorities if they had not already been achieved. Social ownership would not necessarily be straight-jacketed into the two simple categories of 'state property' and 'collective property,' as was the distinction made in Soviet political economy. Ownership could conceivably take various forms depending on the goals of planned production and social needs: public or state ownership at various levels, publicly-invested and controlled enterprises, cooperative/collective and joint ownership forms, and likely some role for private ownership in certain businesses or industries for at least some length of time. The exact forms of ownership cannot accurately be predicted beforehand. Rather, they have to be crafted in the course of political development and in line with the needs of a balanced economy and sustainability. The political system would be one in which the interests of the working class of a society are the dominant, but not necessarily the only, political force. State institutions may vary temporally and geographically and be characterized by long periods of flux as the political and economic tasks change. The governing party or coalition would be subject to regular elections and the necessity of constantly winning anew its popular mandate. As Wu Yiching reminds us, “socialism without meaningful democracy is unfeasible.”

The definition of socialism given above, prefaced as it is as a period successive to capitalism, implies the pre-existence of highly-developed productive forces and the means of common prosperity – or at the very least access to them from other countries or economies. While it may be true that high levels of human development (social, economic, and cultural) have been achieved by the socialist countries with low levels of income in the past, the reality is that in order to prevent stagnation and promote further development, a modern industrial foundation has proven a necessity.

Looking at the first attempt at building socialism in the Soviet Union after the 1917 revolution and how it came up against a wall of economic underdevelopment can provide an insight into some of the challenges which many underdeveloped countries find themselves facing today. For example, many today dismiss China’s economic reform as a return to capitalism. Lenin and the Bolsheviks, however, also faced criticism during the early years of Soviet power for the course of their economic program. Lenin’s New Economic Policy (NEP) was often characterized, both outside and inside the Communist movement, as an abandonment of socialism and Marxist ideology. It seems to be the case that any recognition of the aforementioned fundamentals of historical materialism and practical policy which ensues from them (whether in Moscow in 1921 or Beijing in 1978) will inevitably give rise to the charge of heresy in certain sectors.

In the early years of the Russian Revolution, Lenin understood the underdeveloped position of Soviet Russia and was aware of the difficulty of constructing socialism under the kind of conditions which Marx and Engels had believed ill-suited to its success. Initially, he still believed that revolution would break out in one or more industrialized capitalist countries and that they would then assist Russia. “Soon,” he said, “after the victory of the proletarian revolution in at least one of the advanced countries, a sharp change will come about. Russia will cease to be the model and will once again become a backward country.” When such assistance ultimately failed to materialize, Lenin was forced to look for new ways to build up Russia’s productive forces in order to lay the ground for an eventual socialist transformation. He concluded that there could be no successful advance to socialist relations of production without highly-developed productive forces to sustain socialist methods of distribution and went about formulating a pragmatic response. Addressing the Tenth Congress of the Russian Communist Party in March of 1921, on the necessity of cooperation with foreign and domestic capitalist elements, Lenin stated, “We are now in a transitional stage, and our revolution is surrounded by capitalist countries. As long as we are in this phase, we are forced to seek highly complex forms of relationships.”

A component of these “highly complex forms of relationships,” of course, was the institution of market methods of distribution in first the agricultural, and later other, sectors of the economy. In further remarks to the Congress, Lenin assured delegates that the gravest problem in the immediate period was not the policy of concessions to capitalism as some, particularly those on the left, warned. Rather, it was the very low level of productive forces that threatened the survival of the October Revolution: “We must not be afraid of the growth of the petty bourgeoisie and small capital. What we must fear is protracted starvation, want and food shortage, which create the danger that the proletariat will give way to petty-bourgeois vacillation and despair.” Many of Lenin’s writings from the early 1920s demonstrate that he gradually came to the conclusion that in a predominantly peasant country with low levels of productive forces, education, and culture there could be no leap to socialist or communist lines of production or distribution. He began to see that the rapid nationalizations and high hopes for broad planning in the economy that had characterized the early years had gone “too far, too fast.” Instead, the transition would have to take place in stages. These kinds of measures were intended to build up the material-technical foundations for socialism that Marx and Engels had envisioned being already developed by capitalism in advanced industrial societies, where they had foreseen the first socialist revolutions taking place. The proletarian revolution, as we have seen, was expected to occur in the most technologically and economically advanced capitalist countries because of the development of a large industrial working class and the acute contradictions of advanced capitalist relations of production which would serve as the catalyst for raising class consciousness. The victory of socialist revolutions in poor, underdeveloped, and usually agrarian countries of course presented a new challenge; once working class-based parties succeeded in capturing state power, they were confronted with the task of trying to develop socialism in economies that were in no way prepared to support it. Lenin and the Soviet Communists were the first to face the real-life situation of building a socialist system on an underdeveloped base.

Shortly after the victory of the October Revolution, Soviet Russia became embroiled in a civil war and came under attack by interventionist armies from fourteen nations, among them the United States, Britain, Canada, France and Japan. Under these conditions, with food and industrial shortages plaguing the country, a harsh system of surplus extraction from the peasants was introduced and wages were leveled – the policy of 'war communism.' Almost all industrial enterprises were seized and production was carried on under a strict command basis. Money and markets were, for all practical purpose, eliminated in every area of the economy. Some among the Bolsheviks believed that war communism was not just a time of intense struggle and difficulty, but that it actually represented the beginnings of true socialism and communism – the fulfillment of the revolution’s purpose. Others, like Trotsky, saw such measures as an unavoidable result of the particular situation the Bolshevik government found itself in and not the preferred method of building socialism. With domestic counterrevolutionary forces attempting to make a comeback at precisely the moment of an outside military attack, the Soviet government was not in a position to go about following any preplanned theoretical models. Writing in 1920, he said: Once having taken power, it is impossible to accept one set of consequences at will and refuse to accept others. If the capitalist bourgeoisie consciously and malignantly transforms the disorganization of production into a political struggle, with the object of restoring power to itself, the proletariat is obliged to resort to socialization, independently of whether this is beneficial or otherwise at the given moment. After the civil war was won by the Red Army and the foreign interventionists were pushed out of the country, the Soviet economy was in ruins. The productive capacity of the nation had dwindled; agriculture was below even pre-1914 levels. The working class which the party had purported to represent was decimated, leaving only the party itself and the old state bureaucracy to pick up the pieces. Peasant farming was now an even more dominant part of the economy, but it was in need of industrial products which the state was unable to provide. There was an urgent need to raise capital and jumpstart the development of the productive forces if the country was to survive. After these few years of immense difficulty, Lenin proposed what has recently been described as a “socialist market economy in embryonic form.” In 1921, he introduced the NEP to replace the extreme measures of war communism, “with which,” in his words, the country had been “saddled by the imperative conditions of wartime.” The NEP allowed limited denationalization, foreign-domestic joint ventures, some foreign-owned enterprises, cooperatives running on market principles, and the use of economic administrators who had been trained in capitalist management methods. Many of these administrators came from the former bureaucracy and managerial strata who had been removed from their positions shortly after the revolution but were now the only ones with the knowledge and expertise to run the national economy. The remaining state-owned enterprises, which for the most part would now only occupy the commanding heights of the economy, had to be self-reliant and operate on profit/loss principles. The commanding heights referred to the lifeline sectors of the economy, such as energy, transport, finance/banking, and steel – those sectors that effectively control or support most other areas of the economy. Under the NEP, the state still formulated an overall plan for the economy, but it was achieved primarily through market, not administrative, means. Production of individual goods and services would be based on supply and demand, not on the decree of a central planning authority. Economic competition defined relations between public and private sectors. Of primary importance in this competition was which sector would win out. Addressing the Second Congress of Political Education Departments in the fall of 1921, Lenin stated the matter bluntly: We must face this issue squarely – who will come out on top? Either the capitalists will succeed… Or the proletarian state power, with the support of the peasantry, will prove capable of keeping a proper reign on these gentlemen, the capitalists… The question must be put soberly. Lenin admitted that such an arrangement was not the kind of socialism the Bolsheviks had earlier had in mind. “Retreat is a difficult matter, especially for revolutionaries who are accustomed to advance.” He realized, however, that market relations and a commodity economy were necessary until the capacity and infrastructure of a fully socialized economy could be constructed and secured. This was a task which he foresaw encompassing years, even decades of transition. Nove has pointed out that Lenin believed “the new policy was to be carried through 'seriously and for a long time.'' Lenin spent much time trying to explain what the NEP was and why it was an absolute necessity: What is free exchange? It is unrestricted trade, and that means turning back towards capitalism… How then can the Communist Party recognize freedom to trade and accept it? Does not the proposition contain irreconcilable contradictions? The answer is that the practical solution of the problem naturally presents exceedingly great difficulties. How this is to be done, practice will show. And, Since the state cannot provide the peasant with goods from socialist factories in exchange for all his surplus, freedom to trade with this surplus necessarily means freedom for the development of capitalism. Within the limits indicated, however, this is not at all dangerous for socialism as long as transport and large-scale industry remain in the hands of the proletariat. The development of such a form of capitalism controlled and regulated by the state, which Lenin time and again referred to as 'state capitalism,' if directed carefully by a socialist state, would be not only advantageous, but even necessary, especially in an underdeveloped country. The NEP, though, was effectively ended by the latter half of the 1920s, for reasons both political and economic. In the years following Lenin’s death, Joseph Stalin had positioned himself as a moderate and a centrist among the party leadership, always promoting himself as a faithful disciple of Lenin. Early on, he allied himself with Bukharin in advocating pro-peasant policies and the extension of the NEP. As long as the NEP approach seemed to be working in its efforts to revive agriculture and industry, Stalin criticized proposals by Trotsky and others for increased investments in heavy industry as well as those by E. Preobrazhensky for a 'primitive socialist accumulation' of squeezing the private peasants for the sake of industry. Portraying himself as the pragmatist, he progressively undercut support for Trotsky and his other opponents. Whenever the NEP started to experience imbalances and industrial development reached a plateau, however, Stalin rapidly swung to the left, adopted those same policies he criticized when Trotsky and the others had proposed them, and dumped his erstwhile ally Bukharin. Zinoviev, the head of the Communist International, had been a critic of the NEP as well as of Stalin and Bukharin’s plan to build 'socialism in one country.' When Stalin decided to drop the NEP but not 'socialism in one country,' Zinoviev had to go as well. Within a matter of a few short years, Stalin was able to successfully move from one policy position to another in accordance with the needs of the moment while simultaneously eliminating (first politically and later physically) all other party leaders from any positions of authority.

In his power struggles with these other party leaders, Stalin began to argue that the concessionary measures of Lenin’s NEP were intended only to be of the most temporary nature, not guiding developmental policy. He accused those who wanted to continue the NEP or extend it to more areas of the economy, like Bukharin, of wanting to restore capitalism and of spreading a “most harmful, anti-Leninist interpretation of NEP.” This was one of the earliest occasions in which those who followed Lenin’s ideas were branded 'anti-Leninist,' a hallmark charge of the Stalin era. There was now to be only one recognized successor to the cause of 'Leninism.' Trotsky and other critics were denounced as a 'petty bourgeois opposition' and faced either exile or execution. Trotsky himself would eventually suffer both.

Instead of continuing to build up the productive forces under the auspices of the NEP, Stalin pushed the Party to opt for forced collectivization of agriculture and complete state or cooperative ownership of all other means of production in line with rapid industrialization under the first five-year plan – the same 'leftist' line he had spent much of the twenties arguing against with Bukharin by his side. The Fifteenth Soviet Party Congress was convened in December 1927, and at Stalin’s urging decided that “with respect to the elements of private capitalist economy which have increased absolutely…a policy of even more squeezing out can and must be pursued.” This marked the beginning of a particular stream of ultra-leftist thought which branded the market as eternally incompatible with socialism and christened the comprehensive plan and total public ownership as the necessary and sufficient conditions for building a socialist system.