The vast majority of comrades who belong to the Comintern see Soviet Russia's New Economic Policy as merely a tactical maneuver on the economic front, a maneuver to which Soviet power has had to resort under pressure from the peasantry and in order to retain power in the hands of the proletariat.
This point of view is wrong, although it must be confessed that Russian Communists have done very little to provide a more correct interpretation of NEP.
NEP is, assuredly, a slow outflanking tactic on the part of the proletarian government of a country that has not been supported by proletarian revolution in other countries and that has been obliged to build socialism in isolation within a hostile capitalist encirclement.
But it is at the same time the economic policy of the proletariat of a peasant country that finds itself in this situation. In analyzing what NEP is today and what it promises for tomorrow, we must therefore take both of these aspects into account.
Had it been an industrial country rather than a petit bourgeois agrarian country that found itself in a position of socialist isolation, then the economic policy of that country, which also would have been obliged to dodge and maneuver, would have of course been different—if indeed such a country could have held out for long in a situation of capitalist encirclement without an adequate internal agricultural base. We can arrive at the same conclusion from the other direction. Suppose that a proletarian revolution were to occur right now in Germany and in the smaller countries of Central Europe (Czechoslovakia, Austria, Hungary). Could we then completely do away with our New Economic Policy and replace the present economic system as a whole with "true" socialist organization of labor in state industry and with socialist distribution of the production of town and countryside? It is enough to pose the question in that way to answer it in the negative. A revolution in Germany would radically alter the international political and economic situation for Soviet Russia and open up enormous possibilities for much more rapid socialization of the whole economy. It would eliminate all the tactical and maneuvering elements in NEP, but it would not do away with NEP altogether.
What would be left of NEP would be its organic part, that is, the economic policy of the proletariat in a peasant country.
It is precisely these elements of NEP that must be revealed in all clarity, for in them Soviet power is moving along the path that lies ahead of every economically backward country where the proletariat will find itself in power.
Let us see what the interrelations are between large-scale state industry and the nonsocialized sector of the economy—above all, the peasant economy—and the direction in which economic relations here will inevitably have to develop.
Under "War Communism," Soviet power made a mighty attempt to impose upon its petit bourgeois encirclement a compulsory system of planned distribution, at a time when that encirclement still used a petty individual mode of production. The name for the system of distribution that existed in our country under War Communism can be debated: semisocialist, precapitalist, planned–in natura, and so on. The name is not important. In essence, our requisition was a system of compulsory loans in kind shouldered by the peasantry, because the state could not fulfill its promise to pay for agricultural products with industrial products. The peasantry repudiated that system not only because as a class it did not receive from the town the equivalent of the products it had delivered in the requisition but also because a system of appropriation along the lines of a requisition and equalized distribution of the products of urban industry killed every incentive to expanded production in independent petty holdings. The period of War Communism convinced us that such a system of equalizing distribution does not even benefit the workers, that is, the class that would have to carry out socialization (see below). What then could one ask of the mass of independent petty producers? This whole system of compulsory distribution was abolished at the end of the Civil War, which, owing to the depreciation of the currency and the shortage of grain in the country, had made this necessary—if not in its entirety, then at least in its principal features. The peasantry forced the state to return to the old system of market distribution.
In this situation the tasks of the Soviet state were altered as well. These tasks can be stated as follows: (1) How to increase the output of large-scale industry on the basis of a system of distribution that, given the present level of culture and socialist consciousness of the working class, will ensure maximum productivity of labor; (2) how to increase the country's agricultural output, using the motive forces of petty production itself, and at the same time gain control over petty production in the way that capital has always done so, namely through trade and credit; and (3) how to move on to the next stage, when the technological base of petty peasant production must be transformed.
The plan for carrying out the first of these tasks has already been outlined in full. The level of culture and socialist consciousness of the working class today is such that there can be no talk of equalizing distribution within the state sector. Under War Communism we experimented with the principle of equalization of distribution through rationing. The results were deplorable. In that period the working class as a whole demonstrated a magnificent heroism and self-sacrifice that history will not forget. Hungry, with his hungry children behind him, the worker stood at his machine; often, he would faint from exhaustion, but he did not stop working. Some detachments, some plants and factories, performed miracles on the economic front. But all that was done in the upsurge of general revolutionary enthusiasm, not because of the principle of equalization of distribution—and possibly in spite of that principle. In that period it was a heroic feat to work at all, and we were not able to demand of the worker even half of his prewar productivity. When the need arose to raise the productivity of labor at all costs, especially in certain highly important branches, we had to bid farewell first to the principle of equalization and then to monthly wages: piece rates were used more and more extensively. It was in keeping with their character that Soviet power and the trade unions had partially rejected the idea of equalization essentially even before the transition to the New Economic Policy. NEP hastened the transition to a new wage system, and at present that system is for the most part based on the same principle as wages under capitalism: the more an individual turns out, the more he gets paid. The principle of equalization through rationing that operated under War Communism may have been a "step forward" as compared to the wage system under capitalism, but the form wages take under NEP is a step backward as compared to the years of War Communism. It has been said that equalization of distribution through rationing, though imperfect, was nevertheless "a bit of socialism," but it is doubtful whether it was even that. The new form of wages has yielded positive results. It has served everywhere as the strongest incentive to raising the productivity of labor, which in many plants has reached the prewar level. And if we keep in mind that it has reached this level at a time when wages are extremely low (one-half to one-third, on the average, of what wages were before the war), then this success speaks for itself. Socialism in the area of distribution means greater equality on the basis of greater productivity. When productivity is falling or standing still, the equalization principle is poor consolation. In the present case the rise in the productivity of labor has to a considerable degree (though not entirely) been due to an abrogation of the principle of equalization in distribution. This fact in itself answers the question of whether Soviet Russia has gone very far toward socialist distribution within the state sector. It has not gone very far from capitalism. But it would be wrong to deny that there has been some progress. On the one hand, this progress consists in a more or less planned distribution of the wages fund of state workers and employees1 (for which there is a special central agency that sets wage rates); the system already contains the seed of more complete planned distribution in the future. On the other hand, the elements of collectivism that have already taken root also constitute a definite step forward. In a number of enterprises a worker is paid not only according to his individual output but also according to the output of the entire enterprise. How will things develop from here?
Nowhere in socialist literature has it been precisely established what form of distribution within a socialized economy is characteristic of socialism as such, and whether there is any difference between capitalism and socialism in this respect. To take a specific example, Karl Kautsky, in his brochure On the Day After the Social Revolution, allows room not only for the existence of wages of the capitalist type but also for the variation of wages between different branches depending on the supply of and demand for labor power of various levels of skill. However, a historically transitional stage of distribution is bound to lie between the system of wages under capitalism, with which we all are acquainted, and the system of purely communist distribution based on the principle of "from each according to his abilities, to each according to his needs," since socialism itself is a transitional stage from capitalism to communism. It is wrong to think that socialist distribution must differ from capitalist distribution only in that under socialism the entire product of the socialized sector of the economy is distributed in planned fashion, whereas the wage fund (whose volume is determined under capitalism by the correlation of forces between workers and capitalists and under socialism by calculating all the resources of the economy) will be distributed in about the same way as under capitalism. This means that even under socialism the worker will be rewarded according not only to his skills but also to the amount of his individual output (in cases where it can be calculated). If matters stood thus, it would mean that the incentives for production remain the same under socialism as under capitalism, and it would be impossible to see how mankind can ever make the leap from individual work incentives to a communist system of organization of labor. In reality there must be here a whole series of gradual transitions offering forms of reward and incentive that are just as imperfect, undeveloped, and logically incomplete as socialism itself—that unfinished communism—is incomplete and illogical. Socialism must begin where capitalism has ended: with individual payment of a worker's labor plus an occasional share of the profits of the enterprise (that is, in the present case, bonuses for extra output). But it creates the conditions for the gradual replacement of individual payment of labor with collective payment: "The more I turn out, the more I earn," says the worker under a piece-rate system. "The more my factory or trust turns out, the more I earn," says the worker under a system of collective pay. And from here the next step is the slogan "The more society as a whole turns out, the more everyone receives." At first, collective pay will exist side by side with individual pay: a worker's earnings will depend on both his individual output and the collective output of the whole enterprise. Gradually, the part of each worker's wages that he receives from the collective bonus fund will grow, and at the same time the percentage of the general wages fund to be set aside for collective bonuses will also grow. The moment when the majority of workers under a socialist regime have made the step forward from individual to collective incentives for work will be no less important to the struggle for communism than, perhaps, socialization of the instruments of production. This transition will occur mainly because individual incentives prove inadequate for socialist production; they are backward and obsolete, especially since technological development (electrification, transport, etc.) decreases, rather than increases the possibility and the expediency of individually calculating the labor performed by each worker. On this basis young people will be more rapidly reeducated in the spirit of the demands that the new method will place on the workers' mass psychology, their collective instincts, and their socialist consciousness and habits. Soviet power has already advanced slightly in this direction under NEP. This was the experiment of "collective supply," which was used in a number of our largest enterprises and gave satisfactory results from the standpoint of production. This form is admittedly no longer obligatory, but it can be used with the voluntary agreement of the trade unions and the economic organs. In one or another form, collective wages will (after a spell of capitalist reaction under NEP) develop and become the dominant form of wages under the dictatorship of the proletariat. Of course, in a peasant country, where a petit bourgeois psychology is strong even among the proletariat, we could not advance significantly beyond the methods of the capitalist wage system. But from the very outset industrially advanced countries under the dictatorship of the proletariat will be able to advance further along the path toward socialist distribution.
One of the most important tasks for the proletariat after taking power is swiftly to send out its vanguard to seize control over science and the command posts in industry and in the entire state apparatus and if not to outstrip, then at least in the first decade to compare favorably in the field of culture with the vanquished foe. In this respect there is a fundamental difference between a bourgeois and a proletarian revolution. During its struggle for power the bourgeoisie was not an oppressed class but rather a class that competed with the nobility from a position of power. As an exploiting class, as a minority possessing all the good things in life, wealth and leisure, the bourgeoisie could and did attain a higher cultural level than its opponents, the landed aristocracy and the clergy. Not so with the proletariat. The proletariat is able to seize state power before it has assimilated the culture of the age and begun to create a culture of its own. In this respect it does not overtake the vanquished bourgeoisie until after the conquest of power. And in a country like Russia, where the proletariat in general is on a lower level even than the proletariat of other countries, this problem is even more important, if not portentous, for the very existence of workers' power.
This problem confronts Soviet power under NEP just as it did during the period of War Communism. Moreover, under NEP the threat to the proletariat posed by the cultural superiority of the vanquished bourgeoisie and bourgeois intelligentsia is even more serious. For this reason, Soviet power is currently making even greater efforts than before to proletarianize higher education and to aid the proletariat in its striving to appropriate science for its own use. As yet our accomplishments in this respect are still modest, but they surpass anything that the proletariat was able to attain in a whole century of bourgeois rule. We have a network of workers' colleges with 50,000 proletarian students. In the last two years the introductory levels in higher education have been considerably proletarianized. Within three or four years a majority of students in all the institutions of higher education (with the possible exception of the arts academies) will be from the proletariat or socialist-minded peasant youth. This is not to mention the Communist schools, our party schools, from the local district level to the highest institutes (for example, Sverdlov University) as well as the military schools, which have long had students drawn exclusively from the working class and peasantry.
As regards a rise in the productivity of labor, an increase in the number of commodities, and a corresponding increase in wages, things are considerably worse at the moment than under capitalism. Industrial production stands at no more than about one-fifth of the prewar level. The productivity of the individual worker is on the whole lower than before the war: the prewar level is still an ideal we have yet to reach. But at the same time we can state that both the absolute volume of output and output per worker have risen in the last year and a half. But the devastation of industry caused by the war and the revolution is so great that, in the opinion of most economists, Soviet industry will not reach prewar levels for four to five more years, and only after that will it be possible to move beyond the levels reached by capitalism. The only major branch of industry where we have gone further than capitalism is electrification. The question of wages is intimately bound up with this point. During the Civil War, wages fell so low that normal production was altogether impossible. But now wages are rising steadily, albeit slowly. This rise does not promise to be particularly rapid in the next few years either, because industry, after accumulating circulating capital (which is still in extremely short supply), will begin restoring fixed capital and resume urban construction, tasks that will require "primitive socialist accumulation," not only at the expense of the petit bourgeois classes through taxation but also at the expense of wages.
The task of restoring industry and wages to the prewar levels and then advancing further is a task common to every proletarian state. Nor can it even be said now whether a victorious European proletariat will restore industry starting from a relatively higher level with respect to the prewar level than we are having to do, because no one can predict the extent of devastation that the inevitable civil war will inflict on the European economy.
But on the other hand the task of economic subordination of the peasant economy to large-scale state industry is posed in unique fashion in Russia, as an agrarian country; it is posed in a way in which it will not be posed for Germany, Austria, or Czechoslovakia.
It is only the Balkan countries and Poland that will find themselves in a position somewhat similar to Russia's under a proletarian regime. To understand NEP—not its tactical aspect but its organic aspect, its genuinely lasting elements—we have to understand the economic relations between state industry and the peasant economy as they exist now and as they will take shape in the immediate future.
The essential prerequisite for subordinating the peasant economy to large-scale state industry and state banking centers by capitalist methods is, above all, sufficient economic power on the part of large-scale industry itself.
How do matters now stand in this respect?
According to S. N. Prokopovich's calculations,*the entire national income of European Russia for 1913 was 11,805 million gold rubles (rounded off to the nearest million) and came from the following sources (in millions):
| Agriculture | 5,630 |
| Forestry and fishing | 729 |
| Industry | 2,566 |
| Transportation | 1,055 |
| Construction | 842 |
| Trade | 980 |
If we add to the income from industry, transportation, and construction the income from trade in industrial products, which from a methodological standpoint is more correctly regarded as a certain part of the income of industry allotted to trade, and add to the income from agriculture the income from trade in agricultural products, we would have to concede that the Russia that entered the war was not the totally agrarian country that we imagined her to be.
If we then take the ratio of large-scale industry to agriculture, we have to exclude from the income of all types of industry the income from craft production (611 million) and cottage industry (289 million) and part of the income of petty producers in the fishing and lumber industries. But even after that deduction, the ratio between large-scale capitalist production and agricultural production would be about 4:7, and with petty production added to agriculture, about 4:8.
In general, industrial, banking, and especially merchant capital played a dominant role in the prewar economy; they occupied the main command posts within the economy as a whole and subjugated agriculture to themselves. And if the proletariat were to take possession of all the positions of capital in the Russian economy in its prewar proportions, it would exercise complete sway economically over the whole territory of petty, nonsocialized production. But, unfortunately, during the years of war and revolution the relationship of forces between the large-scale and petty economies, in particular between large-scale industry and the peasant economy, shifted sharply in favor of the latter. Large-scale and petty production suffered to quite different degrees during the war and revolution. In 1921 the net national income of the whole country was very roughly estimated at 5 billion gold rubles in prewar prices. Our economists calculate that the net income of industry was 500 million (about 1 billion in gross income) and that of transportation about one-fourth the prewar figure, that is, about 350 million. And these figures are probably somewhat exaggerated. Peasant income is currently more than 3.5 billion, whereas the income of craft and artisan workers has fallen to half its prewar level. In any case, the ratio of net output of large-scale industry and transportation to peasant income is approximately 1:5, which is a dreadful step back from the prewar proportions. True, industrial production has risen this year (and production costs have dropped), but thanks to the good harvest the peasant economy's output has risen even more, and the ratio between industrial income and agricultural income has become even more unfavorable for the former.
These, then, are the conditions under which the Russian proletariat must undertake the task of economically subordinating the peasant economy to state industry. This task is extremely difficult given present proportions in the economy, but it can unquestionably be managed once industry is restored. There are two ways to subordinate the peasantry to large-scale production: first, through trade and credit, that is, through exchange; and second, by transforming the basis of the peasant economy through electrification of agriculture and mechanized farming, that is, through production. For us the second alternative still lies in the future; the first already has been started, although our success in this direction has been extremely modest.
Our task as far as trade with the countryside is concerned consists in the gradual elimination of private middlemen; in the elimination of private merchant capital from the relations between large-scale industry and the peasantry; in reliance on the cooperatives; and in the creation of a state monopoly not only over trade in products of large-scale industry with the countryside but also in the sense of controlling the bulk of agricultural products that are poured onto the big market. Here and there we are already enjoying success. For example, in the guberniia of Orel 60 percent of all trade is now carried on through organs of state trade, whereas workers' cooperatives dominate the market in certain factory centers. Thanks to the foreign trade monopoly, the state will be able to maintain control over the country's entire trade with foreign capital in grain and agricultural raw materials.
As regards credit, its main form must be long-term ameliorative credit; credit-sales of agricultural machinery, improved seed grains, and artificial fertilizers; and cash loans from the State Bank (Gosbank) for the purchase of horses and the restoration of agriculture in general. Long-term agricultural credit has an enormous future in Russia. This is the easiest way for the proletariat to subordinate agriculture to the dictatorship of large-scale industry. Here the State Bank has the chance to grant credit to the peasantry not only in the form of money but also—and principally—in kind, in the form of agricultural machinery and other commodities needed in the countryside. By receiving payments and interest on loans in natura, that is, in the form of grain and raw materials for export, the State Bank can gradually guarantee the state a considerable share of all surpluses of agricultural production, which together with its resources from the tax in kind will constitute a stable foodstuffs and raw materials fund not only for Soviet industry but also for foreign trade. Later the state will easily be able to switch from its role as chief buyer and sole creditor of the peasantry to the role of order-placer and inspector of peasant production. By adopting the appropriate price policy and issuing statements as creditor (that it will accept certain products, and not others, as payment for loans), the State Bank can influence the extension of one type of crop, encourage the development of another, and eliminate a third, thereby subordinating in a capitalist manner the individual peasant economy to the requirements of its general economic plan. This method can also provide a rather precise accounting of all rural production, since the creditor has to know all the economic resources of the debtor. And socialism is above all, accounting.
If we keep in mind that the state also possesses another powerful means for redistributing the national income, namely, by levying taxes that should fall in increasing measure on the more well-to-do strata of the countryside and on private merchant and industrial capital, then the combination of all these methods provides Soviet power with the means to divert the flow from the channels of primitive (or, more accurately, secondary) NEP accumulation to the mill of primitive socialist accumulation, thus transforming the victories of revived capitalist economic relations into a form that is lower than and subordinate to the forms of large-scale socialist economy.
*S. N. Prokopovich, Opyt ischisleniya narodnogo dokhoda 50 gubernii Evropeiskoi Rossii [A Rough Calculation of the National Income of the 50 Guberniias of European Russia, 1918].
1 The Russian phrase rabochie i sluzhashchie is used to differentiate manual, usually waged workers (rabochie) from salaried employees (sluzhashchie), such as office and other so-called "white collar" workers.