The Origins of Soviet Cinema: A Study in Industry Development
In August 1919 Lenin affixed his signature to a sheet of paper and thereby assigned principal responsibility for the management of Soviet cinema to the government’s Commissariat of Enlightenment and to that agency’s head, Anatoli Lunacharsky. The new charge must have seemed anything but promising. The film industry was in chaos: resources remained in short supply; experienced personnel either fled the country or refused to cooperate with government authorities; and numerous theatres had closed or fallen into disrepair. The regime could manage only a handful of feature productions during this initial period of nationalisation, and it lacked the necessary distribution and exhibition apparatus to find any sizeable audience for the few films it did produce.1
Nevertheless, by the end of 1925 Soviet cinema had emerged as a vital public institution. Production levels had increased tenfold and continued to rise annually through the decade; and distribution and exhibition policies assured that even remote areas of Soviet Russia could expect at least some exposure to cinema. By any standard of industry development, this represented an impressive record, all the more so since it was effected despite such adverse conditions as civil war and political isolation.2
How might we account for this growth? What measures transformed a national problem into a national resource in little more than six years? The answers lie in a developmental history of the Soviet film industry from the late 1910s through the middle 1920s, one that takes into account the crucial policies of financial management, investment and resource allocation that nurtured the fledgeling cinema through this critical period.
Historians have paid surprisingly little attention to the Soviet film industry’s economic development. General histories of film usually make passing reference to the sorry state of the industry in the late 1910s, mention Lenin’s nationalisation decree, then concentrate on the Soviet cinema’s mature period of the middle and late 1920s, an elliptical narrative that tempts one to conclude simply that Lenin’s decree eradicated financial problems and led directly to the achievements of Eisenstein and his colleagues.3 Even specialised histories, valuable as they often are for their information on the industry, provide no systematic developmental record. In his widely read Kino, Jay Leyda acknowledged that his interest remained with the careers of individual film-makers rather than impersonal economic forces.4 Paul Babitsky, John Rimberg and Richard Taylor provide fuller chronicles of the industry’s evolution, but their work concentrates far less on industry growth patterns than on the official measures taken to bring the cinema under the Party’s ideological control.5
A genuine developmental history of the early Soviet film industry must represent a macro-economic study. It should take into account the large-scale trends of the entire Soviet economy during the period in question, including the efforts of Soviet leaders to encourage overall industrial growth. And by extension, such a history should draw on the discipline of developmental economics, some principles of which merit review.6
A developing nation, especially one which hopes to move rapidly from an agricultural to an industrial economy, as was the case with the Soviet Union, is likely at some point to undergo a period of so-called capital accumulation. This entails the rapid accumulation of the resources of production—factories, machines, tools, and the like—which can serve for future manufacturing. A national economy might effect such capital accumulation through forced savings by reducing the level of consumption for a time and investing instead in the machines and materials necessary for future production; consumer demand might be temporarily held in check on the promise of more and better consumer goods after capital goods industries had emerged. In some economies forced savings might be achieved by encouraging private savings through the manipulation of taxes and credit, and these funds would be used for investment in new capital. Reliance on forced savings might prove difficult, however, in a severely underdeveloped nation where a substantial part of the population lives at the subsistence level and thus generates no margin for investment; forced savings in such circumstances would represent a hardship political leaders might not wish to inflict on the population. To avoid the potential privations of forced savings, a developing nation might look to foreign investment and foreign credit to accumulate capital. These avenues can prove politically expedient, although they also involve concessions; revenues would be extracted from the affected industries by foreign investors and extensive foreign debts might compromise the developing nation in international affairs. Foreign trade, however, can provide concession-free capital as long as the developing nation establishes favourable terms of trade; typically, the developing nation must export what it can to offset the purchase of industrial machinery from abroad, and that usually means trading away raw materials and agricultural goods.
A condition to be avoided by any national economy, developing or otherwise, is an extended period of net capital consumption. This results from using up the resources of production faster than they can be replenished. Factory equipment must be replaced, for example, and raw materials secured. If such replacements are not provided regularly, industries will gradually grind to a halt. In such a crisis, industry planners must ration resources until such time as the economy can begin new capital accumulation.
Early Soviet planners confronted decisions on all these matters, and their choices were complicated by the particular position in which the USSR found itself. By virtue of climate, landscape, and cultural tradition, Russia represented a comparatively inefficient producer of industrial goods and a comparatively efficient producer of agricultural goods. In the late tsarist period, for example, Russia was a leading exporter of grain. The new Bolshevik regime, however, determined to defy the apparent dictates of nature and geography by transforming an age-old agricultural system into a world industrial leader. They undertook this formidable task despite external political threats from hostile capitalist nations and internal disorder culminating in the Russian Civil War.
The first phase of the Bolshevik economic system encompassed the period of War Communism (1918–21) in which the government effected a series of emergency measures to cope with the economic damage wrought by the Civil War and foreign blockade. With the eventual passing of these political crises, the regime initiated its New Economic Policy (NEP, 1921–9) to encourage economic recovery. This ‘transitional mixed economy’, as Lenin described it, involved returning much of the economy to a market system while leaving in place a large measure of government control in the hope that recovery could be facilitated by the forces of private initiative. The NEP period fell into two phases, an early interval of rapid capitalisation (1921–5) followed by successful production (1925–9). These trends and the previously discussed developmental principles define a clear periodisation: War Communism represented an interval of net capital consumption deriving from political and social dislocation while the first half of NEP was characterised by capital accumulation as industries geared up for the productivity that was eventually realised in the late 1920s. The first tactic of capital accumulation, forced savings, proved rather infeasible in the early Soviet economy given the limited private surpluses of the population; it would only be fully effected under Stalin’s rapid industrialisation plans of the 1930s, and then at great cost to the population. Instead, various combinations of credit, investment, foreign concessions, and overseas trade were used to accumulate capital under NEP.
The film industry’s pattern of early development conforms to that of the larger economy. The industry’s shift from net capital consumption to capital accumulation conforms to the transition from War Communism to NEP, and the industry’s new capital derived from foreign trade, foreign and domestic investment, and, to a lesser extent, credit. The early history of the Soviet film industry entails a record of hard-headed management of scarce resources and judicious use of various sources of capital. Whatever Lenin’s nationalisation decree represented, it did not render the Soviet film industry productive. It only helped set in motion a complex developmental process, the’ details of which are the subject of this study.
War Communism and the Period of Net Capital Consumption
The combined effects of civil war, foreign intervention and international trade embargoes resulted in a near collapse of the Russian economy in the late 1910s. The British Royal Navy severed the major sea routes to Russia, precluding the importation of new industrial items and requiring Russia to survive on its economic inheritance from the pre-Revolutionary era. Although some industrialisation had taken place under the last tsars, many vital factories and railways suffered damage during the Civil War and production dropped to less than half the levels before the First World War. The only course available to the new government was to ration resources during the crisis and to postpone any sustained rebuilding effort until such time as the political situation stabilised. But even rationing efforts suffered from the government’s limited authority. Many regions remained under the control of the White Guards and even areas under Red Army occupation answered more to local Party and military units than to the Kremlin. During the period of political chaos, most working decisions were made at the local level by the various Soviets of Workers’, Soldiers’ and Peasants’ Deputies, the local governing bodies which derived from the Party’s old cellular organisation and which often operated without orders from Moscow.7
These conditions prevented Lenin from establishing any integrated, national economic plan. He resorted to pragmatic emergency measures grouped under the umbrella term ‘nationalisation’, although, as practised, this term represented something of a misnomer. The term applied to any public takeover of private assets, whether at the national or local level. Usually, in fact, the initiatives were taken by local officials, often the local Soviets of Deputies, and Moscow only ratified the expropriations after the fact. Nationalisation often resulted from accusations of sabotage, from the refusal of particular capitalists to co-operate with the local Soviet of Deputies, or from a desire to let public authorities manage limited resources as a means of preventing hoarding and waste. The policy remained one of reaction rather than systematic action and betrayed the regime’s lack of power.8
Such pragmatism obtained in early efforts to manage the film industry. Bolshevik leaders agreed that cinema could prove a useful propaganda and educational tool, a conviction that Lenin, for example, developed during his exile in the West. But the Party established no clear, long-range agenda on how to develop the film industry; nor was the integration of cinema into the national education system sufficiently outlined. The film industry that had been inherited from the tsarist period showed little promise of renewal as a national institution. Its production activity was centred almost entirely in Moscow, and distribution and exhibition facilities extended barely beyond the urban centres of European Russia. Lenin hoped that cinema would have its greatest utility in remote rural areas where literacy levels were lowest, but few villages contained exhibition facilities or any tradition of cinema. More ominous was the fact that no factories survived for the manufacture of cameras, projectors, printers, or film stock. Pre-Revolutionary film companies had simply relied on importation of materials through Western Europe, and heavy French and German investment in tsarist Russia encouraged such dependency. But the severing of trade routes, first by the World War and then by the anti-Soviet blockade, cut off the supply. As the Russian movie industry operated through the world war, it ate into a finite quantity of resources and left the post-Revolutionary industry with diminished reserves.9
Efforts by the Bolsheviks to use cinema in some official way began within months of the October Revolution, but they followed no grand design. In the ad hoc nature of War Communism, most steps were taken at the local level by different agencies acting unilaterally, and the measures were often limited in their effect to Moscow and Petrograd, the only sites of genuine Bolshevik authority. In January 1918 the Bolsheviks established a Division of Photography and Cinema which was attached to the Commissariat of Enlightenment. Although the measure seemed to clear the way for the making and showing of educational films on a national scale, in those early uncertain days of Revolution, the Commissariat’s influence barely extended beyond the Petrograd city limits, and its Photo-Cinema Division remained largely a paper institution. Its first significant action was the expropriation of the assets of the Skobelev Committee, an organisation surviving from the World War which had done some film work at the behest of the tsarist and provisional governments. This provided the Commissariat with the assets to begin producing a few short newsreels. Such low-budget films seemed the most appropriate use of scarce resources during this period of privation.10
Meanwhile the local Soviets of Deputies in both Moscow and Petrograd made independent moves into cinema activity in the spring of 1918. The Moscow Soviet of Deputies took its initiative in response to reports of sabotage by the heads of the private production companies centred in that city. It encouraged film workers to monitor the activities of their bosses with particular attention to the hoarding of materials, and it followed with orders for a full inventory of the assets of Moscow companies and for an end to the transfer of assets. The measures came in response to reports that private producers would remove their headquarters to areas outside Bolshevik control since Moscow cinema entrepreneurs openly acknowledged their opposition to the Bolshevik regime and spoke of defying official directives. The Petrograd Soviet of Deputies, by contrast, inherited a much smaller capitalist cinema establishment within its jurisdiction and, hence, much less resistance to its initiatives. It established its own Photo-Cinema Committee and used such public funds as it could spare to make short newsreels and to maintain a few exhibition facilities in and around the city.11
In the haphazard manner of early War Communism, then, three separate public institutions, acting without mutual consent, established whatever control they could in the private sector. Only retroactively, in late 1918 and early 1919, did they make any effort at co-ordination; that effort remained limited to the Moscow-Petrograd axis. The film-related activities of the Moscow Soviet of Deputies, which consisted mostly of monitoring private production, reverted to the Commissariat of Enlightenment when the national government moved the capital to Moscow in 1918, and the Commissariat assigned agents to oversee local film companies.12
The shortage of resources became the primary concern of the Commissariat when it expanded its responsibilities, and it set about locating new stocks for both the private firms and the public agencies involved in cinema. The Commissariat undertook inventories which revealed every form of supply problem. Most working cameras were European imports whose vintage preceded the First World War, and the dearth of spare parts meant that their working days were numbered. Commercial theatres were left to re-run ad nauseam old, scratched and worn prints of pre-Revolutionary features. Although the sea lanes to Russia remained closed, land routes proved harder to seal, and some material, including film stock, was smuggled in through Latvia. But such contraband hardly proved sufficient to supply either the private or public film organisations in Moscow and Petrograd.13
The Commissariat responded to this situation by initiating several ill-fated ventures calculated to acquire new resources:
(1) A contract with a Moscow laboratory to produce raw film eventually fell through; the laboratory lacked the technical sophistication to produce film of a usable quality.
(2) A Russian chemist devised a scheme to coat exposed film with new emulsion as a way of exploiting used footage, but the recycled film lacked adequate resolution to generate decent imagery.
(3) In a plan that betrayed considerable naivety about the nature of technological research and development, a Russian technician was sent to Berlin to make notes about state-of-the-art film technology with the expectation that he would then pattern new Soviet-made equipment on the Berlin models; the technician received an expenses-paid round trip to Berlin, but the Commissariat received no workable designs in return.
(4) This comedy of errors culminated in the notorious Cibrario affair, when a cagey foreign entrepreneur promised to tour the West to purchase new equipment and film stock for the USSR but then proceeded to bilk the Commissariat out of more than one million dollars’ worth of hard currency.14
Such desperate measures, though not unparalleled in other economic sectors during War Communism, demonstrated the necessity for greater centralisation of authority. Lenin’s August 1919 nationalisation decree was designed to serve that end. The action, in fact, was taken as something of a last resort to bring some order to the activities of local governments and to minimise the squandering of precious film resources. The measure presented no agenda for future development; instead, it merely delineated certain forms of authority that the Commissariat of Enlightenment could exercise should it choose to do so. It transferred the authority to set film policy to the Commissariat and gave that agency the power to nationalise existing private firms to supervise future productions, and to issue more detailed directives. Far from instantly transferring all private assets to government ownership, the decree simply had the net effect of assigning the Commissariat the power to manage and ration the industry’s supplies and to nationalise individual industry institutions on a case-by-case basis.15 Similar to countless such measures which passed under Lenin’s busy pen, it was a stop-gap device to help an industry through an inevitable period of capital consumption.
To facilitate the administrative responsibilities deriving from the decree, the Commissariat created a new bureaucratic layer, the All-Russian Photographic and Cinematographic Section (VFKO) which was to help co-ordinate local cinema activities, especially the haphazard process of nationalising individual film institutions. VFKO was to be the national agency linking the efforts of various localities, especially the Moscow and Petrograd Cinema Committees. In its first effort at general planning, VFKO collected an inventory of all prints that might be available for exhibition. The chronic shortage of films to supply commercial theatres encouraged VFKO to register for exhibition old tsarist films and pre-Revolutionary imports.16
Yet the weaknesses of the regime and the catch-as-catch-can nature of War Communism were manifested in the implementation of the Commissariat’s nationalisation authority. Lenin’s decree merely conferred on the Commissariat the power to nationalise on an individual basis, and, in practice, nationalisation of particular commercial institutions resulted from that institution’s failure. Most of the nationalised institutions in cinema were movie theatres which had closed because of lack of product. The net effect of the practice was that the government took over closed theatres while working establishments remained in private hands. By the late autumn of 1919, approximately one-third of cinema assets in Bolshevik-controlled regions were nationalised: yet much of that represented dead weight.17
The lack of Bolshevik authority in most regions of the country further compromised the nationalisation policy. Far from preventing the hoarding or transfer of materials—the decree’s announced goal—the threat of expropriation posed by the decree actually encouraged private entrepreneurs to seek friendlier political climes; this generally meant relocating to White-controlled areas in the south. Indeed, cinema would not seem to be an industrial form readily subject to nationalisation in times of emergency. Nationalisation worked best in heavy industries, such as steel and mining, where the assets could not be packed in a trunk and carried away. Film company owners simply carted off their inherently portable equipment and inventories to the Crimea, leaving Bolshevik officials to seize empty office buildings, barren shooting stages and darkened theatres.18
During the entire period of War Communism, private cinema out-produced government-affiliated producers in Moscow and Petrograd. The renegade firms in the south derived from strong pre-Revolutionary film companies and could draw on the expertise of experienced personnel. Lunacharsky and his colleagues in the Commissariat may have noted with envy the level of activity of private companies. From 1918 to 1921 private firms produced 296 fiction films, the lion’s share of which—209—were feature-length. Government-registered productions during the same period amounted to just 104 fiction films, only 13 of which were features.19
There were also problems in the exhibition phase of the industry. According to one Soviet estimate, only 1,000 permanent commercial theatres operated in Russia in 1917, and many of those failed to survive the Civil War. Construction of new permanent installations was out of the question for the time being; the economy had no construction industry to speak of and little funding for expensive construction projects. Low-cost portable cinemas provided the answer. The agit-train, that ingenious Bolshevik institution for taking cinema and revolutionary culture into the countryside, owed much to economic necessity. The strategy of equipping trains with portable projectors and generators pre-dated the October Revolution, but it was also consistent with the War Communism practice of making maximum use of inherited resources. The Russian rail system had been considerably expanded by the last tsars and proved central to the Bolshevik exercise of power. Lenin put high priority on maintaining the rail system, partly out of military necessity (since the Red Army used trains to move troops to strategic locations). The same rail system also allowed the government to take propaganda into areas where popular support was deemed crucial. Trains equipped with old projectors carried Soviet-made documentaries and Bolshevik spokesmen into such regions and served the regime’s propaganda needs without requiring substantial new capital.20
The strategy adhered to throughout War Communism—if one could call such hasty, reactive measures a strategy—was to locate and gain control over whatever assets were available and to use them as efficiently as possible. The liquidity of the film industry and the limitations of Bolshevik power complicated such efforts. As with many other industries, sustained expansion would have to wait until the Red Army had finished its work.
NEP and Capital Accumulation
With the end of the Civil War and the subsequent consolidation of Bolshevik power, the pragmatic tactics of War Communism gave way to the systematic recovery efforts of the early NEP period. Sometimes mistakenly characterised as a retreat from socialism, NEP’s market economy was recognisied by Party officials as a necessary transitional phase of economic development, one that would lead to considerable capital accumulation.
NEP returned many previously nationalised enterprises to the private sector and encouraged competition. The government retained crucial industries such as transportation and mining and leased other concerns back to private entrepreneurs; in fact, many of those nationalised facilities had remained idle or operated below capacity and thus represented a drain on public funds. The government counted on private enterprise to revive such operations; by 1923 it had permitted 75 per cent of the nation’s trade to revert to private hands.21
One method the government developed to retain some influence in this expanded private sector was the industry ‘trust’ system. One or more government trusts, large semi-private companies, were organised in each industry in such a way that they tended to dominate without monopolising the industry’s market. They were designed to wield sufficient financial power to set standards of production, wages and prices that other firms would follow. The trusts represented a compromise between public and private commerce: the government oversaw their operation, but the trusts had to operate on a self-sustaining basis, generating sufficient income to cover their working expenses and, in theory at least, their expansion.22
The film industry adapted to NEP by following this model. The relative prosperity of private film firms during the Civil War indicated that the Soviet market harboured sufficient demand to sustain considerable commercial cinema activity. NEP permitted the old renegade firms to operate above board. Many of the ones that had not fled the country entirely relocated in Moscow, making it once again the nation’s centre of private film activity. By early 1922 at least five major firms were involved in production and/or distribution activity in the Moscow area. The single strongest film company at the beginning of NEP, however, was Sevzapkino of Petrograd, which had evolved from the old Cinema Committee of the Petrograd Soviet of Deputies and had changed from a public to a private concern with the advent of NEP. The absence of significant competition from private film entrepreneurs in the Petrograd region permitted Sevzapkino to dominate its market and fund quick expansion. It soon integrated production, distribution and exhibition functions and gained control of Russia’s north-west region, hence its new name Sevzapkino, or ‘North-Western Cinema’.23
The central government in Moscow, meanwhile, placed its administrative chips on a film trust called Goskino, which it created in 1922 to supplant the old, unwieldy bureaucratic apparatus VFKO. But bureaucratic duplication survived, in that Goskino was to answer to the Soviet government in the form of three separate official agencies: the Commissariat of Enlightenment, under Lunacharsky, continued to hold sway over most policy decisions; the Supreme Economic Council [Vesenkha], the state’s chief economic planning board, had control over the allocation of raw materials and producers’ goods, and could, where cinema was concerned, ration such resources as film stock; and the Commissariat of Foreign Trade took over the management of film-related imports when serious film trading began in 1922. Initial assets of the trust, appraised at just 3.5 million roubles, consisted largely of the production facilities in the Moscow area which VFKO had controlled and a few movie theatres, though most previously nationalised theatres had been leased back to private management.24
Goskino remained woefully undercapitalised considering that it was designated the government trust for cinema and expected to take the lead in industry development. The government proved willing to capitalise other enterprises in crucial sectors of the economy such as agriculture and construction with direct investments and credits, but cinema did not initially merit such support. For all the talk of cinema being the most important of the arts, the government quite simply had more pressing responsibilities than subsidising movies—like feeding, clothing and housing a population recently visited by the scourges of war and famine. Lunacharsky’s frequent requests in 1922 and 1923 for direct government support of Goskino went unheeded. Goskino, and by extension the rest of the film industry, went on notice that, for the time being at least, they would have to accumulate capital through their own initiatives rather than government subvention.25
Lunacharsky’s first such initiative involved seeking foreign credits and investments for the film industry. This tactic took its source from Lenin’s decision to grant foreign concessions in several industries beginning in 1921. Foreign capitalists received invitations to take over the operation of several moribund facilities in such areas as mining, oil and forestry. The Russians conceded a substantial amount of income from these facilities in return for the rehabilitation of the industrial units themselves. But while the foreign concession policy worked in these extraction industries, Russia received few foreign investments in manufacturing, apparently because foreign capitalists most wanted access to Russian raw materials and were leery of making investments in expensive production projects, especially since the Bolsheviks had cancelled foreign debts and confiscated foreign assets just a few years previously.26
Russian appeals to foreign investors in film went out in 1922 and ran into the problems related to those of non-extraction industries. The Russians petitioned German and American film companies to invest in Goskino, counting on the foreigners to supply the needed equipment, film stock and technical expertise to get dormant studios working at full capacity. But the film industry, unlike forestry, for example, had little to concede to foreigners as an investment incentive. Lenin and Lunacharsky could only promise foreign movie-makers that they might use Russian landscapes for location productions, a meagre incentive at best for filmmakers who worked on artificial sets in well-appointed studios in Hollywood or Neubabelsberg; not surprisingly, studio moguls showed little interest in Russian ventures.27
Lunacharsky’s effort did succeed in attracting one significant foreign investment for film: the investment came not from foreign capitalists but from an international socialist organisation with close pre-existing ties to the Soviet Union. In 1921 The Workers’ International Relief (WIR) had been established on the Comintern’s orders to provide aid to victims of the Russian famine. From its offices in Berlin, the organisation solicited relief funds from various leftist organisations in Europe and America. WIR promptly turned to film as a means of advancing relief efforts, sponsoring the production of documentaries about the famine which were exhibited in the West to raise donations. WIR’s interest in cinema continued after the famine subsided, and the organisation turned its attention to Soviet economic recovery. In the course of supplying credits to several Soviet industries from 1922 to 1924, WIR supplied Goskino and other Russian film companies with celluloid and equipment valued at roughly 400,000 roubles; this advance was to be redeemed when WIR received foreign distribution rights for future Soviet feature productions.28
WIR’s most ambitious venture, however, involved the capitalisation of a major Russian production company, Mezhrabpom. In 1924 WIR invested 53,000 roubles to acquire half-interest in a small Moscow film studio which survived from the pre-Revolutionary period. WIR increased its level of investment annually until it had acquired 100 per cent of the company’s stock and had raised the firm’s total capital to 1.2 million roubles. WIR managed Mezhrabpom effectively, consistently making profits that were reinvested in the company’s expanded production schedule. Mezhrabpom concentrated on making big-budget entertainment films in such genres as comedy and science fiction, and it consistently outperformed other Russian companies at the box office. Typical of Mezhrabpom’s commercial programming were the works of director Yakov Protazanov, such as the comedy The Three Millions Trial [Protsess o trekh millionakh, 1926], which starred the popular comedian Igor Ilyinsky, and the expensive science-fiction film Aelita [1924], with its elaborate, futuristic sets and costumes. And Mezhrabpom’s horror melodrama The Bear’s Wedding [Medvezh’ya svad’ba, 1926], to cite another example, emerged as one of the USSR’s premier box-office successes of the 1920s. To advance the commercial performance of such films, Mezhrabpom became the first Soviet film organisation to establish a publicity department, which aggressively promoted Mezhrabpom productions. And the company made a move towards vertical integration as well, acquiring three of the USSR’s largest commercial theatres, Koloss and Temp in Moscow and Gigant in Leningrad; these profitable first-run houses brought the company an average daily return of 8,900 roubles.29
Such aggressive commercialism led to occasional charges of ‘NEPism’, or profiteering under NEP. But Lunacharsky realised that profitable commercial activity was precisely what the whole industry needed to increase production, and Mezhrabpom’s record became the envy of Goskino and other film companies. Mezhrabpom raised its annual production levels from four features and eight documentaries to sixteen features and twenty-three documentaries within five years. This impressive record owed much to the generous terms of the company’s WIR investors who demanded no significant concessions from the USSR since they functioned precisely to assist Soviet development.30
Other Russian film companies had to accumulate capital without the aid of such benefactors. Ultimately foreign trade, not foreign investment, proved to be the most expeditious route for the rest of the industry, and in 1922 Lenin and Lunacharsky devised an ingenious trading scheme which significantly advanced the industry’s growth. Lenin ordered the Commissariat of Foreign Trade to import large numbers of films into the USSR. The films were to provide Soviet commercial theatres with the product needed to begin generating revenues which could then be ploughed back into domestic production. All Soviet theatres were starving for product: the dearth of new feature-length productions meant that pre-Revolutionary Russian films and tattered prints of pre-blockade foreign films often were theatre managers’ only feature attractions. New foreign imports, if marketed properly, could satisfy pent-up demand and provide income to be passed on to domestic producers.31
In issuing his importation directive, Lenin helped establish the developmental agenda that would last throughout the period of capital accumulation. His decree specified that imported films would be exploited as much for revenue as for popular diversion, and he mandated that imports were to be exhibited in conjunction with the educational and propaganda shorts that Russian studios were making on their limited means. Later celebrated as the ‘Leninist film proportion’, this second article of the importation decree not only assuaged official concern about the possible ideological damage of showing capitalist films to Soviet audiences, it helped to assure an audience for the Soviet-produced shorts. Lenin and Lunacharsky correctly anticipated that foreign, especially American, films would attract sizeable audiences, and they recommended that political speakers be placed on the programmes. Soviet propaganda would rise on the coattails of Hollywood entertainments. ‘If you have a good newsreel, serious and educational pictures,’ Lenin asserted, ‘then it doesn’t matter if, to attract the public, you have some kind of useless picture of the more or less usual type.’32
Figure 6 Konstantin Eggert, co-director (with Gardin) and star of The Bear’s Wedding [1926], one of the most popular Soviet productions of the 1920s.
The decision to accumulate capital through overseas trade owed much to favourable market conditions. The foreign blockade finally ended in 1921, and the British began negotiating trade agreements with the USSR, a break that finally liberated the Soviet Union from almost three years of isolation. Russia used the opportunity to acquire crucial producers’ goods for several industries, and it traded away raw materials and agricultural products in return. Ample supplies of grain, coal, timber and oil allowed the USSR to buy items ranging from Ford tractors to Paramount movies. The Soviet foreign trading system helped secure favourable terms. The government’s Commissariat of Foreign Trade maintained a monopoly on overseas buying and selling, even during the most freewheeling phases of NEP. No individual firm could enter into negotiations with any foreign concern but instead had to apply to the commissariat, asking that body to acquire the needed foreign goods. The commissariat then purchased the items and delivered them to the firm in question in return for a credit which the firm paid off over a period of time. Since all sectors of the economy channelled their foreign trade requests through this one agency, the government could closely monitor the trade balance and arrange for surpluses in one sector to offset deficits in another. In an unprotected’ economy, each individual firm would have to maintain its own trade balance or be prepared to pay for the imports in hard currency. In the Soviet system, however, weaker industries which had to import (e.g. film) could live off the surpluses of other, stronger industries. Fortunately, Soviet agriculture enjoyed good harvests beginning in 1922 and 1923 and running through much of the rest of the decade. These combined with high grain prices in several foreign markets to provide generally favourable terms of trade for the USSR. Industries such as film which could acquire their imports at a relatively low per unit cost (a movie costing less than a tractor, for example) were especially favoured by these circumstances. In net effect, good grain harvests bought the film industry its future.33
The Commissariat of Foreign Trade’s status as the sole bargaining agent in international trade gave the Russians another edge in dealing with foreign film sellers. West European and American film companies, which had balked at investing in the USSR directly, proved eager to trade with Russia, recognising it as the largest untapped market in Europe. But they could not deal directly with various Russian distributors and exhibitors in competitive transactions. They had to abide by the ‘take it or leave it’ offers of the commissariat which enjoyed the power of a monopsonist, the sole buyer in a market. The commissariat could thus obtain foreign films at relatively low prices, thereby enhancing the USSR’s trade advantage.34
When the importation plan went into effect, Goskino received a 2.3 million rouble credit from the Commissariat of Foreign Trade. The credit covered the anticipated worth of imports over a period of several years. Goskino would be given the opportunity to establish a distribution monopoly for all foreign films in the Russian market and these films were to erase the debt through income generated by Goskino’s distributor’s share. Any earnings above the credit could then be reinvested in new production activity. Film importation began in earnest in 1923 when at least 278 American, German and French films entered the USSR. It peaked in the mid-1920s when up to 85 per cent of films in the Soviet market came from abroad.35
The plan to exploit imports for capital formation ran into difficulty in its initial stages, however, due largely to problems in Goskino’s organisation. The trust never managed to take advantage of its mandated distribution monopoly for imports. Goskino’s distribution network existed largely on paper: while it managed to supply theatres in the Moscow region, it often failed to reach outlying areas. Theatre managers in the hinterlands had to acquire films from other sources, and competing distribution companies grew in strength relative to Goskino. Sevzapkino, for example, expanded its distribution activity well beyond its original Petrograd location, and it even established an exchange in Moscow to challenge Goskino’s control of Russia’s largest urban market. Smaller firms established regional distribution networks in outlying regions, acquiring prints (including imports) from Goskino and renting them to theatres at high prices because of the extra transaction. Rather than expanding its own distribution network, Goskino simply farmed out regional distribution to these middlemen.36
Goskino’s failure to fulfil its mandate betrayed a flaw in the entire trust system that was just then becoming apparent to Soviet officials. The government wanted to encourage a competitive, free-market economy while exerting control over each industry through the government trusts. Yet the trusts were frequently undercapitalised and could not achieve sufficient size to effect genuine domination of their industries. When smaller competitors proliferated under NEP freedom, the trusts experienced difficulties supplying their product to private retailers in remote areas, an abiding problem given the USSR’s geographical expanse and often uncertain transportation system. There promptly developed a layer of middlemen traders who bought goods from trust producers and supplied them to retailers not reached by trust deliveries, a practice that added to retail prices because of the traders’ higher margins.37
Theatre managers (the retailers of cinema) in various regions fell prey to this expensive trading system when Goskino resorted to distributing through such middlemen. Some theatre managers were forced to pay a distributor’s share of up to 70 per cent of gross receipts. This added to a set of circumstances which drove up ticket prices throughout 1923, causing a ‘theatre crisis’ which threatened to scuttle the industry’s entire developmental agenda. All theatres showing foreign films were subject to a national tax of 25 per cent of gross receipts, a burden then passed along to consumers in the form of higher ticket prices. The taxes were earmarked for the Commissariat of Enlightenment, the agency which oversaw the film industry. But not all tax revenues went back into film-related work; much of the revenue was diverted to the Commissariat’s non-income-generating responsibilities such as schools and libraries. Many local governments aggravated the problem by adding local taxes to ticket prices.38
This combination of uncertain distribution and quick inflation of ticket prices put the squeeze on commercial exhibitors, many of whom leased their theatres from the government under NEP leasing plans and so needed to realise sizeable profits to meet their annual lease payments. As a result scores of theatres closed during 1923 and early 1924. Moscow had only half as many theatres open in 1924 as 1917, and the drop was even greater in some outlying areas where middleman trading was in effect.39
This theatre crisis jeopardised the industry’s entire development since plans hinged on the exhibition of foreign films in commercial theatres. The government responded by initiating an investigation which centred on Goskino’s organisation and activity. A government commission originally recommended legislation to limit national and local taxes on movie tickets to 10 per cent. After further deliberation, the commission called for the dissolution of the Goskino trust and for its replacement by a stock company which would be sufficiently well capitalised to realise the distribution monopoly which had previously existed only as Goskino’s ambition. Goskino was duly disbanded in 1924 and replaced by the stock company Sovkino. Goskino’s 3.5 million roubles in assets were transferred to Sovkino and the new company was authorised to sell 1 million roubles’ worth of stock to raise additional capital. The eventual buyers in this stock issue were not private citizens but the government agencies which had official links with cinema: the Commissariat of Enlightenment purchased 55 per cent of the stock, the Commissariat of Foreign Trade 30 per cent. The investments represented formalisation of the administrative authority these agencies had already assumed vis-à-vis the film industry, and since there were no private stockholders to demand dividends on their shares, the agencies could reinvest their gains in Sovkino’s operation. Despite its earlier stated opposition to film industry subvention, the government had finally invested in cinema, and the windfall helped Sovkino assume its eventual position of industry dominance.40
The 1924 industry reorganisation also reduced the number of private firms with which Sovkino had to compete. Sovkino was ordered to buy out the smaller distribution firms which had operated simultaneously with Goskino and through such acquisition Sovkino established a genuine distribution monopoly which extended throughout Soviet Russia. Large, well-financed organisations such as Sevzapkino and Mezhrabpom continued to compete with Sovkino in the area of production, but Sovkino contracted to distribute their films. This consolidation of commercial cinema activity within Soviet Russia coincided with a major administrative reorganisation of the entire Soviet federal political system. Between 1922 and 1924 the empire was organised into first four and then six federal republics: Russia, Ukraine, Belorussia, Georgia, Armenia and Azerbaidzhan. By the time of the film industry’s consolidation in 1924, the non-Russian republics had established film companies which were tied to the government of each republic. Each such studio became that republic’s sanctioned national film company in 1924. Sovkino’s distribution monopoly extended only to the borders of Soviet Russia; each national studio won a similar monopoly within its republic. These mutually exclusive monopolies proved beneficial to both Sovkino and the national studios. The national studios could, and constantly did, buy films from Sovkino for distribution to local theatres without having to compete directly with the larger, more powerful Sovkino, and Sovkino was spared the necessity of extending its distribution network beyond Soviet Russia.41
The 1924 industry reorganisation benefited development in several ways. It consolidated resources and ended the manipulations of middleman traders. This reduced inflationary pressures and provided incentives for theatres to reopen. The reorganisation also gave Sovkino a strong, vertical structure and status as the true industry leader. And finally, it opened the way for the implementation of Lunacharsky’s long-range developmental strategy which was posited on the aggressive commercial exploitation of foreign films.
Major commercial theatres in large urban markets got first rights to imported films and to the industry’s exhibition technology, mostly old Pathé and Ernemann projectors. Sovkino charged these favoured theatres high rental fees—usually 50 per cent of gross receipts—and reinvested its margin in increased production. The typical programme at major commercial theatres included a Russian-made documentary short or political speaker, a comedy short, and a feature production (the last two of which were usually imports). Ticket prices at these commercial theatres varied considerably, ranging anywhere from 25 kopeks to 1.50 roubles. These commercial theatres competed with cinema installations in urban workers’ clubs which ran their theatres at cost and charged spectators only 12 to 15 kopeks. But union membership was often a requirement for patrons of workers’ clubs, a condition which excluded wealthier classes and assured that they would attend commercial theatres. In addition the workers’ clubs remained notorious for their poor facilities: patrons complained about the absence of heat, the poor musical accompaniment, and the uncomfortable seats. Hence the commercial theatres, with their comparatively attractive accommodation and constant supply of popular imports, attracted both bourgeois patrons who could afford higher ticket prices and workers who valued ‘bourgeois’ diversions. This made the commercial theatres the key revenue sources for the entire industry: although they constituted only 17 per cent of the total number of permanent exhibition outlets in the Russian market, they brought in 80 per cent of the industry’s revenues.42
The following figures reporting total box-office grosses from the middle 1920s indicate how important foreign films were in initially attracting revenue and how quickly the Soviets converted their gains into domestic production.43
Both the total proceeds and the proportions derived from domestic versus foreign films deserve attention. As can be seen, total proceeds increased significantly each season during the mid-1920s. A huge increment (roughly 270 per cent) followed the 1924–5 season, testifying to the beneficial effects of the 1924 industry reorganisation. The figures also reveal that Soviet producers consistently narrowed the gap between revenues generated by their films and those deriving from imports. Since the annual number of imported films remained high during the mid-1920s, the sharply reduced gap is attributable not to a decrease in importation but to an increase in domestic production activity and to the greater prominence of Soviet films in commercial exhibition. Indeed, in 1928 Sovkino reported that Soviet films had finally surpassed imports as income earners.44 Clearly, Russian producers wasted no time in converting their initial revenue source into domestic activity.
The Russians also used this income to expand their exhibition facilities. The USSR had inherited only about 1,000 commercial theatres from the pre-Revolutionary industry, a figure that was significantly reduced by the effects of the Civil War and the financial problems that culminated in the theatre crisis of 1923. By 1925, however, intensive investment had raised the number to 2,000 and the figure would approach 10,000 by the end of the decade.45
Meanwhile the extension of cinema into the countryside continued apace. The linking of cinema with the national rail system, which began as a marriage of necessity during the Civil War, was extended by the mid-1920s into a full-scale campaign to reach and inform previously isolated segments of the population. The Russians traded for foreign projectors which were then fitted with portable generators and transformed into itinerant cinema facilities. By 1925, 1,600 such units were touring the countryside by train. Within two years the figure had risen to 2,000; film industry officials boasted of approaching their goal of being able to reach literally every Soviet village with some form of cinema entertainment and enlightenment.46
The profitable activity of urban commercial theatres helped subsidise the daily operation of the itinerant units as well as the discount exhibition facilities in workers’ clubs. While Sovkino was taking 50 per cent of gross receipts from commercial theatres, it charged only 5.50 roubles per programme in rentals to rural cinemas and 16 roubles per programme to the workers’ clubs, figures that would have barely covered costs. Such generous rates permitted these institutions to offer their two programmes per week to patrons for nominal ticket prices: 5 to 8 kopeks in the villages and 12 to 15 kopeks in workers’ clubs.47
Finally, a sustained level of growth in production levels attests to the wise reinvestment of industry surpluses. From a mere 13 features released in 1923, the beginning of the growth period, the number of feature releases jumped to 62 in just two years and continued to increase each subsequent year until it peaked in 1928 with 109. In the meantime Sovkino nearly tripled its total assets; from 4.5 million roubles in 1924, assets grew to 13.4 million roubles by the end of 1927. Sovkino was budgeting over 4 million roubles annually to new productions, a figure that approached its entire 1924 starting capital.48
The ultimate goal of industry planners was for Soviet cinema to reach full self-sufficiency, a goal which involved an end to the reliance on imported product and equipment and which began to become realised by the end of the decade. Under a mandate set down by the Fifteenth Party Congress in 1927, the Supreme Economic Council directed that film industry earnings be invested in the construction of facilities for the production of film stock and equipment. By the early 1930s two massive film laboratories and three equipment factories supplied most of the materials needed for domestic production and helped reduce reliance on the overseas purchase of production materials. In fact, terms of trade turned against the USSR in the late 1920s; wheat harvests dropped and the price of grain and raw material declined in foreign markets, thus compromising the key export items which had sustained Soviet foreign trade strategies through the decade. The Commissariat of Foreign Trade responded by curtailing imports in several non-essential industries, including the cinema. Foreign films finally began to disappear from Russian screens; Russian film-makers began to regularly purchase their resources from plants in Moscow, Leningrad or Samara rather than Berlin and Paris.49
The growth strategies which characterised the industry throughout the 1920s finally levelled off in the 1930s; and after the installation of tighter censorship measures under Stalin, the film industry reduced production levels.50 It had achieved the status of a stable industry with sufficient capacity to satisfy the needs of its market once its resources were used efficiently. And that, after all, represents the goal of any developing industry.
The Soviet film industry’s early developmental record owed its success to the stingy management of resources during the period of civil war scarcity and to the shrewd exploitation of market forces under NEP. No official decree, neither Lenin’s 1919 nationalisation edict nor his 1922 importation order with its codicillary ‘Leninist film proportion’, fully accounts for the industry’s eventual success. In fact, Lenin’s two most celebrated interventions into film history should best be understood as ingredients of larger developmental formulas, the former representing a response to the exigencies of net capital consumption and the latter a part of capital accumulation efforts. The complex and imbricated histories of early Soviet borrowing, importation and investment explain the quick growth of the Soviet film industry. Perhaps the ultimate irony stems from the fact that the revolutionary cinema of Eisenstein, Vertov and Pudovkin owed its existence to the kind of shrewd trading and investment that would have been the envy of many a capitalist movie mogul.51
Figure 7 Interior of Mezhrabpom-Rus’s cinema, the Koloss, in 1927 with advance advertising for Eggert’s The Lame Gentleman [Khromoi barin, rel. 1928]. The Koloss occupied what was formerly and subsequently the Great Hall of the Conservatoire in Herzen Street, Moscow.