STATE CAPITALISM

AIMS

Aims: 

1. To win support  and increase the popularity of Communism (political)
2. To begin the process of moving to a truly communist state by providing central direction of the economy (economic)

FEATURES:

State Capitalism had 2 main features:

1. State Capitalism was designed to ensure the regime’s short-term survival.  Workers and peasants were given what they wanted.                         The Land Decree (Nov 1917) legitimised the peasant land seizures of 1917                                                                                                            The Decree on Workers’ Control (Nov 1917) effectively created partial NATIONALISATION with the management of factories handed over to shop stewards and trade unionists.
2. Until the Bolshevik Party gained greater control it would be difficult for central government to impose its will on factories.  Nevertheless, the government pressed on with its plans for establishing the framework of state direction of the economy, even if the reality of effective central control was some way off.  The Supreme Council of National Economy (or Vesenkha) was set up in December 1917.  It was attached to the Council of People’s Commissars (Sovnarkom).  Its function was to organise the national economy and state finances

verdict? : success or failure?

success

• State Capitalism was successful in boosting support for the new regime.  
• It was used as Bolsheviks needed to survive.

​

failure

• State Capitalism soon proved unsustainable. 
• The workers’ committees that were set up to run the factories seldom ran them efficiently.  The result was a serious fall in industrial output.  There were shortages of food and fuel in the cities. 
• The Treaty of Brest-Litovsk deprived the Bolsheviks of industries, raw materials and arable land that would be needed to win the up-coming civil war.  ​
• It could be regarded as a sign of desperation

If the Bolsheviks were to win the civil war, a change in policy was needed

war communism

aims

• To win the civil war (political)
  
• To extend communist ideology and control to the countryside (political)

features

War Communism had 4 main features:
 

1. Food was requisitioned from the peasantry by the state.  ‘Food brigades’ were sent from the towns to extract grain from the peasantry, and where necessary, the Red Army and Cheka were used.
   
2. Industry was brought under state control.  After 1918, nationalised industries operated under the overall supervision of the Supreme Council of National Economy (or Vesenkha). Headed by Rykov, the Vesenkha was attached to government (Sovnarkom).  Individual industries were controlled by departments, or glavki, of the Vesenkha.
   
3. Discipline was reasserted in the factories.  The nationalisation of industry saw a return to ‘one-man management’ in place of control by workers’ councils.  In addition, the Bolsheviks introduced internal passports in an attempt to halt the flight of industrial workers to the countryside.
   
4. Rationing was introduced.  The biggest rations went to Red Army soldiers and workers in heavy industry.  Then came civil servants and workers in light industry, who received scarcely enough to live on.  At the bottom of the scale were ‘capitalists, landlords and parasites’ – in practice, the middle classes – who, said Zinoviev, were given ‘just enough bread so as not to forget the smell of it’.  

verdict? : success or failure?

success

• War Communism succeeded in its political aim of winning the Civil War. 
• It also allowed the Bolsheviks to extend their political control into the countryside.  

FAILURE

• However, War Communism was an economic disaster 
• The peasants greatly resented the forcible requisitioning of grain.  Peasants chose to destroy their crops and kill their livestock than have them taken from them. 
  
• Food production fell to two thirds of the 1913 figure. There was widespread famine, partly because of requisitioning and partly because of the collapse of the transport system so food could not get to where it was needed.  Over 20 million people died from famine and disease. 
  
• Industry not connected to the war effort virtually ground to a standstill.  Production in heavy industry fell to 20% of its 1913 level. 
  The Kronstadt and Tambov risings were evidence of opposition to War Communism.  This opposition threatened the survival of Bolshevism, and necessitated a change in policy.
  

NEW ECONOMIC POLICY (NEP)

AIMS

1. To regain support lost due to the harshness of War Communism (political)
   
2. To revitalise the economy after the damage caused by the civil war (economic)

FEATURES

NEP had 4 main features:
 

1. Grain requisitioning was replaced by a ‘tax in kind’.  This meant that peasants had to hand over a fixed proportion of their grain to the state.  Any surplus left over after this ‘tax in kind’ had been paid could then be sold for profit on the open market.  The amount of grain demanded by the state in 1921 totalled about half the amount requisitioned in 1920.  In 1924, the ‘tax in kind’ was replaced by payments in the form of money.
   
2. Private trading and private ownership of small businesses were legalised.  Many of the privately-owned businesses which emerged after the introduction of NEP were in the service sector, but there was also a significant amount of private manufacturing typically producing consumer goods such as clothes and footwear.
   
3. The ‘commanding heights’ of the economy, as Lenin called them, remained under state control.  These included not only heavy industries like coal and steel, but also the railway network and the banking system.  Foreign trade continued to be a state monopoly.
   
4. The industries which remained under state control after 1921-22 were expected to trade at a profit, and if they got into difficulties they were not bailed out by the government.  One of the consequences of this new regime was an increase in unemployment, which was caused by industries shedding surplus workers in order to increase efficiency.

verdict? : success or failure?

SUCCESS

• ​Under NEP, the Soviet economy made a marked recovery.  Grain and industrial productivity increased (but not to pre-war levels) and the value of money stabilised.  Living standards rose and discontent declined.  The peasants now felt secure that their grain would not be seized, so were more settled.  There were also fewer industrial strikes.

FAILURE

• But not a total success….
  It had served to put off rather than solve the problems of agricultural productivity.  While farms remained small, agricultural productivity would always be limited, and this in turn would limit industrial productivity.
  
• Old Bolsheviks saw NEP as a betrayal of communist ideology as it involved a ‘step back’ from true communism and the acceptance of some capitalist elements. 
  
• The emergence of NEPmen, tolerance of ‘bourgeois experts, and a black market economy were seen as evidence of this compromise.
  
• ​Industry failed to grow as fast as agriculture.  This led, in 1923, to the ‘Scissors Crisis’.  The scarcity of factory products drove up prices, while the increase in land under cultivation led to an increased amount of food being reduced, which drove down agricultural prices.  The result was that peasants were getting less for their produce and so could not afford to buy the increasingly expensive manufactured goods.  As a result, the peasants had no incentive to produce extra food.