by Donald A. Filtzer
With the revival of interest in Marxist ideas over the past ten or so years, Evgeny Preobrazhensky, one of the leading political and intellectual figures to emerge from the Bolshevik Revolution, has become known to a far wider circle than just the occasional specialist in Soviet history.1 In part this is due to the monumental work of Isaac Deutscher, whose biography of Trotsky did a great deal to keep alive the vitality of Marxist thought during a period when the continuity and traditions of the socialist movement had not yet emerged from the shock of postwar reaction.2 For the English reader, direct familiarity with Preobrazhensky's writings became possible only in 1965, with the publication of a translation of his most famous theoretical work, The New Economics.3 For the first time, English-speaking scholars who did not know Russian were able to assess firsthand Preobrazhensky's contribution to the early years of Soviet economic theory and the relevance of his discussions of Soviet industrialization to problems facing the contemporary neocolonial world. Unfortunately, since then we have had only one other translation of an important Preobrazhensky work, From NEP To Socialism. A glance at the bibliography of Preobrazhensky's major writings at the end of this book will show a significant body of valuable material that remains accessible only to those who read Russian. We hope, of course, that the present book will go some way toward filling this gap, but we by no means consider our effort sufficient.
As we have had cause to note in a previous essay,4 this lack of attention to the vast body of Preobrazhensky's writings is surprising, since the scope of his theoretical interests was enormous and encompassed such problems as the development of working-class culture in postrevolutionary society, the history of socialist thought, the theory of money and questions of finance and inflation under the capitalist and Soviet systems, the theory of capitalist crises, and, of course, the theory of economic development in the USSR.
The volume and theoretical sophistication of his writings appear all the more impressive when it is remembered that he was truly a self-made scholar, having had only a high-school education and having been a full-time (and leading) Bolshevik militant from his mid-teens onward. Nor can anyone doubt his political courage and skill, for it was precisely the years of intense political struggle inside the Bolshevik Party—a struggle in which Preobrazhensky played one of the two or three leading roles within the Trotskyist Opposition—that saw his most abundant and fruitful intellectual output. This is not to gloss over Preobrazhensky's sudden political collapse, when after years of fighting against Stalin's growing incursions on Party democracy and against the catastrophic policies of Party leadership, he was one of the first Oppositionists to break under the strains of exile and isolation and make his peace with the man Trotsky had so aptly called the "gravedigger of the revolution." Such acts are to be explained, perhaps, but never justified.
Preobrazhensky was born in 1886 in the town of Bolkhov in Orel Province. His father was a priest, and Preobrazhensky was to attribute much of his early radicalism to his reaction against what he termed "all the religious quackery" he could see going on around him. Although he attended the gymnasium, he did not continue his studies on leaving school. He had already become a political militant by the age of 15, and with a friend had founded his own political school journal. Soon, however, Preobrazhensky graduated to more sophisticated political activity. At 17 he joined the Russian Social Democrats, and by 1905 had already led a general strike of educational institutions in Orel. It is worth reflecting on this early history, because it indicates that Preobrazhensky was a completely self-taught scholar and theoretician. The types of clandestine literature he read during these early days in politics were to greatly influence his later theoretical preoccupations: the history of culture, general and revolutionary history, and basic works in political economy. It is equally notable that unlike many other great Bolshevik leaders of erudition, Preobrazhensky did not spend time abroad, nor even in the "cultured" metropolises of Petersburg and Moscow, but had his political activity confined to organizing work in the Russian provinces.
In the years following, and through the time of the Civil War, Preobrazhensky was assigned by the Bolsheviks to the Urals, where he was to do most of his political work—by and large in positions of responsibility. He spent these years constantly on the run from the tsarist police, and was apprehended, jailed, or exiled, on more than one occasion. When the February revolution broke out in 1917, Preobrazhensky was part of a Bolshevik minority that did not support Prince Lvov's provisional government, and was one of the early supporters of Lenin's April Theses.5From this early date Preobrazhensky was to find himself on the left of intra-Party disputes.
It was in the years after 1920 that Preobrazhensky came into his own as a major political thinker and Bolshevik leader. At the Sixth Congress of the Bolshevik Party (1917) he was elected an alternate to the Central Committee, and a full member at the Ninth Congress in 1920. At the same time Preobrazhensky was elected one of the Party's three secretaries, together with A. Krestinsky and L. Serebriakov, all three of them later members of the Left Opposition. It is ironic that Preobrazhensky and his two other comrades of the Left were early holders of the post that was later given over to Stalin, who was to use his position as General Secretary to stamp out Party democracy and build up his own base of power.
It is equally ironic that one of Preobrazhensky's early comrades in opposition was the young Nikolai Bukharin, later to be Preobrazhensky's opponent in the debate over industrialization, a faithful defender of "socialism in one country," and one of the more able executioners of intra-Party democracy. Both were members of the "Left Communist Group" which in 1918 opposed the treaty of Brest-Litovsk.6 Although at first reading the Left Communists' theses appear hopelessly out of step with the dire realities then confronting the Bolsheviks—who had to consolidate power in a decimated, war-torn country—a closer look at their platform shows an uncanny insight into the painful options that both Party and country were to face in ensuing years. The "annexationist peace" with Germany, argued the Left Communists, would dull the internationalism of the world proletariat, thus throwing the prospects of world revolution dangerously into the future. At the same time, the proletarian populations of Russia's two major centers, Petersburg and Moscow, were becoming declassed and lost in the petit bourgeois sea that dominated Russian society. This and the need to reestablish economic order within the country would lead, the Left Communists predicted, to dependence on foreign capital (this did not prove true, and Preobrazhensky would later note the importance of maintaining access to the world division labor as long as there was no question of foreign capital gaining domination over any arena of the domestic economy) and to a bureaucratic centralization of industry that would divorce the proletariat from control over economic and political life. Capitalist methods of labor organization would be introduced, with a concomitant reliance on bourgeois specialists. In the end, the Left Communists concluded, "the Russian workers' revolution cannot 'save itself by leaving the path of international revolution, constantly avoiding battle and retreating before the onslaught of international capital, by making concessions to 'native capital.'"
The theoretical legacy of Left Communism in Preobrazhensky's later political development is often overlooked. However, the problems that the Left Communists had pointed to were real, and found their place in Preobrazhensky's (and other Bolsheviks') thinking. On the one hand, the Civil War and War Communism compelled the Bolsheviks to implement certain parts of the Left Communist platform (e.g., the call for extension of nationalizations) simply as a matter of survival. On the other hand, the critical state of the Soviet economy made their worst fears come true, as well. Industry did have to be organized in a centralized and bureaucratic manner (one-man management, profit and loss accounting) and capitalist forms of labor incentives did have to be applied (especially piece wages). The physical annihilation during the Civil War of leading elements of the urban proletariat—the Bolsheviks' main political support in the early years of the Revolution—had brought about a drastic change in the social composition of the work force, thus raising the problem of building modern industry with a work force with a rural psychology. Finally, the problem of the regime's continued isolation placed the economy—and social peace within the country—under terrible strain. All of these difficulties, so aptly foreseen by the Left Communists (though not necessarily rectifiable in the manner they had proposed), read like a catalogue of Preobrazhensky's writings of the 1920s. The fact that Bukharin later abandoned the Left Communist standpoint is no reason to doubt that many of the ideas of that movement continued to influence its other adherents.
The War Communism experience taught Preobrazhensky a great deal. Politically he was one of its great supporters, but he was quick to absorb the real import of these events for Soviet Russia's later development. In terms of economic theory, the problems of finance and inflation would be central preoccupations of his writings for the rest of his career. It is testimony to his mastery of financial matters that, although he had been one of the most overenthusiastic advocates of the use of inflation as an "indirect tax" to help finance the socialist sector of the economy, he was appointed by the Central Committee and the Council of People's Commissars (Sovnarkom) to direct its work on adapting the monetary system and financial mechanisms to the market conditions of NEP.7 His interest in financial policy brought him into almost constant conflict with G. Sokol'nikov (Commissar for Finance until 1926) over what Preobrazhensky saw as the finance commissariat's financial conservatism in the issue of credits for industrial development.
Preobrazhensky was one of the first Bolshevik economists to grasp the impact that the economic devastation brought by the Civil War (and reflected in War Communism) would have on the Soviet Union's industrialization. This, too, was a constant theme of his writings, and the reader will come across it on a number of occasions in the present book (see in particular the first part of Preobrazhensky's article "Economic Equilibrium in the System of the USSR," and references to this theme in later sections of this Introduction).
The years 1923 to 1927 were Preobrazhensky's most active both politically and intellectually. He was one of the founding signatories of the "Platform of the 46" in 1923, which marked the first Left Opposition.8 Here Preobrazhensky, Serebriakov, G. Piatakov, and the other leaders of the Left, though political confidents of Trotsky (whom many of the signatories had supported in the trade union dispute of 1920—21), acted independently of Trotsky —and probably more resolutely—in opposing what they saw as the twin evils of internal bureaucratization and the leadership's blindness to the country's economic crisis. The Platform was a critical document in that it expressly linked the country's economic difficulties to the political bureaucratization of Party life.9 This theme was repeated in the debate at the Thirteenth Party Conference in January 1924, where the Opposition (whose main spokespersons were Piatakov and Preobrazhensky) unsuccessfully called for greater emphasis on industrialization and democratization within the Party,
Preobrazhensky thereafter retained a place alongside Trotsky as one of the two or three main Opposition leaders. These were also the years of his most productive theoretical work, including the publication of The New Economics and all but the first two of the articles collected in the present volume. We will discuss the main ideas of these writings in subsequent sections of this Introduction.
In 1929, after the Opposition had been finally crushed (late 1927) and its leaders exiled (1928), Preobrazhensky was one of the first Oppositionists (together with I. Smilga and K. Radek) to break with Trotsky and reconcile with Stalin. The political pretext was, of course, the Party leadership's sudden turn toward rapid industrialization, a turn that appeared to echo the main economic demands of the Left. But we must exercise caution here, for it is doubtful that any of the recanting Oppositionists was ever intellectually "convinced" of the correctness of Stalin's policy. Rather, the strains of exile and isolation from what the old Bolsheviks must have seen as the main battlefield of a great historical struggle no doubt took their toll on people's judgment. This is not to exonerate Preobrazhensky, Radek, or others; other Oppositionists did hold out and were only forced to capitulate much later.
Preobrazhensky was again expelled from the Party in 1931, after the publication of his book The Decline of Capitalism (Zakat kapitalizma) and the submission of an article attacking the fiveyear plans.10 He was again readmitted in 1932, thereafter (to judge from the evidence) a crushed figure. In 1934 he made a pathetic recantation at the Seventeenth Party Congress (the so-called "Congress of Victors") in which he renounced his former views and attacked Trotsky. His recantation, as Alec Nove notes, was not, however, without its ironical twist.11 After being arrested and jailed in 1935, he served as a prosecution witness against Zinoviev at the infamous Moscow trials of 1936. Somehow, however, Preobrazhensky seems to have gathered the moral strength and courage to make one last act of defiance. Arrested once more in late 1936, and scheduled to be a defendant at the second series of trials, he did not appear. He had refused to confess, and so could not be allowed to appear publicly for the world to hear. He was shot, presumably in 1937, the date for his death listed in official Soviet sources.
The New Economics was to have been part of a larger work of the same title, of which five other chapters were published as articles (the portion that appeared as a book was to be the first, abstract-theoretical section of the work). Two of these five chapters, the twin articles "Socialist and Communist Conceptions of Socialism,"12 were intended to make up most of part 2 of vol. I, which was to be devoted to a history of socialist theory. The remainder of that volume, which was to have covered Lenin and the Bolsheviks, was never written. The three other chapters are the articles on "Economic Equilibrium Under Concrete Capitalism and in the Soviet System," which form the major part of the present collection. These were intended for part 1 of vol. II, which was to be "devoted to a concrete analysis of the Soviet economy, that is, Soviet industry, Soviet agriculture, the system of exchange and credit, and the economic policy of the Soviet state, together with an examination of the first rudiments of socialist culture."13The three published chapters were to have been the theoretical portion of vol. II, presenting an analysis of the regularities of expanded reproduction under modern capitalism and in the economy of the Soviet Union. The remainder of vol. II was to be taken up with "filling in the algebraic scheme of reproduction in the USSR" (already outlined by Preobrazhensky in the article "Economic Equilibrium in the System of the USSR") "with concrete data provided by Soviet statistics and, above all, by the Control Figures of Gosplan." It would equally "touch upon certain theoretical questions that, in the interests of shortening the purely methodological section of the study," Preobrazhensky preferred "to illustrate with figures from the present-day living Soviet economy."14
Preobrazhensky was never to carry out this ambitious theoretical plan. Political events—the intensification of the intra-Party struggle, the defeat of the Opposition, and the eventual suppression and liquidation of ex-Oppositionists—made this virtually impossible. Even the three articles on "Economic Equilibrium," ostensibly able to stand on their own, are marked by the time of their writing: Their hasty preparation meant that numerical examples are rife with errors (though this often appears the result of misprints), the arguments are often sketchy, and the political implications of the theoretical conclusions are drawn without the boldness of even one or two years before. By 1927, certainly, Preobrazhensky no longer felt free to state openly what seemed perfectly obvious to him and others on the Left.
If these articles seem incomplete, however, it is also due to the larger theoretical context in which they must be placed, Preobrazhensky did not so much abandon his plan for the completion of The New Economics as rework it and adapt it to the constraints of the deteriorating political situation. After rejoining the Party fold in 1929, he shifted his attention from direct concern with the Soviet economy (save for an occasional article on money) to the problem of capitalist crises. This was certainly not a topic that he had ignored in the 1920s, and the second of the three articles on "Economic Equilibrium" is devoted to an analysis of the process of declining reproduction in capitalist Europe after World War I.15 Yet it remains true that the theoretical problems that had increasingly preoccupied his thinking in these years—such as the temporal discontinuities in the process of expanded reproduction, the peculiar difficulties attached to the restoration and accumulation of fixed capital, especially in a poor, war-devastated country, and the role of money and the effects of monetary depreciation upon conditions of production and exchange—were fully worked out by him only in the early 1930s, and then only under the guise of their application to the economies of the capitalist world. We must stress that it is not speculation on our part when we say that the books and articles written after his recantation and capitulation were a direct continuation of his theoretical work of the 1920s. Preobrazhensky was sufficiently honest politically and intellectually to acknowledge this fact, and in so doing left his critics little need to guess his intention of extending his theoretical work on the nature of crises within the Soviet economy.16
It is difficult for those of us who have grown up in advanced industrial societies to grasp the extent of the problems that confronted the Bolsheviks when they came to power in 1917. The working class had successfully led a revolution in a backward, peasant country. Its industry, though modern and extremely largescale by the standards of pre–World War I Europe, was weak in comparison to the economy as a whole. What is more, this industry, now the possession of the proletarian state, had been devastated by the years of world war and civil war: aside from outright destruction, normal replacement of plant and equipment had not been made; the country's fixed capital was worn out, badly in need of replacement, and ill-suited to the tasks of building a modern, socialist economy. How, under these circumstances, was the state to proceed?
The years of the NEP were a constant succession of crises, all of which had their roots in the backwardness of the economy and the weakness of its heavy industry. It is worth pointing out that virtually all the participants in the so-called "debates" over industrialization shared certain premises and objectives. They were all, for instance, opposed to using coercion against the peasantry, even against its more prosperous layers, the so-called kulaks. Instead, it was accepted that the only way industrialization could take place would be for industry to develop strong market relations with the private economy, from which it needed vital supplies of foodstuffs and raw materials, and agricultural surpluses that could be marketed abroad for foreign currency (which was to be used for the purchase of foreign-made commodities). For these market relations to be successful, state industry had to satisfy the private economy's demand for consumer goods and agricultural means of production. No one disagreed on these points. Where they did disagree was on the implications of these problems for the country's short-term development.
The first crisis came in 1921–22. With the transition to a market economy agricultural prices went up considerably—a healthy phenomenon in that it augured well for an agricultural recovery. Industry, however, found itself hard put. Cut off from state credits and required to meet normal operating costs, all under the constraints of profit and loss accounting, the individual enterprise had no other recourse but to liquidate its stocks of finished products at any obtainable price. The more industrial prices fell, the more difficult it became to make even normal replacements of fixed and circulating capital. This was the so-called razbazarovanie, or "squandering" crisis of 1921.
The response of state enterprises was to combine into "trusts," which were successful in pushing industrial prices back up until 1923, when the famous "scissors" crisis reached full force. The terms of trade between agriculture and industry had become counterproductively detrimental to agriculture. The responses of the Party leadership and the Trotskyist Opposition (and Preobrazhensky in particular in his pamphlet Economic Crises Under NEP) were indicative. The official leadership acted by curtailing industrial credits and forcing industrial prices down. The Opposition agreed that agricultural prices were too low (so low, in fact, that the peasantry could not meet its tax obligations) and that enterprises were pushing industrial prices up way beyond rational considerations of proportionality between these two economic sectors. However, they also claimed that agricultural prices could only be raised if there was a corresponding increase in agricultural exports; otherwise, higher agricultural prices would simply produce a drain on industry. Parallel with this analysis went a call for an emphasis on heavy industry as the only long-term method for reducing industrial costs and boosting supplies for the peasant consumer.
Equally germane to the Opposition's argument (and a point made by Preobrazhensky in "The Outlook For the New Economic Policy," the first article in this collection) was the warning that any increase in the prosperity of the countryside, if left to develop spontaneously, would lead to a "differentiation" favoring the kulak strata at the expense of the medium-sized and poorer peasantry. It was therefore logical to insist that industrialization should in large part be financed by taxing (either directly or through the judicious setting of industrial prices) these prosperous elements, a move that would also keep rural inequality within limits.
The scissors crisis was really only a symptom of the more fundamental crisis that plagued the economy throughout these years and finally brought the country to the brink of social collapse: the so-called "goods famine." Here the two competing strategies for industrial development offered by the Opposition and the ruling group of Stalin, Bukharin (and until 1925, G. Zinoviev and L. Kamenev) simply had no point of contact, either in terms of policies or objectives. The ruling majority had committed itself to a short-term strategy of encouraging maximum, marketable agricultural surpluses. This in turn meant a commitment to favor that section of agricultural producers who in fact could supply that surplus, the kulaks. Official policy in the years 1924-25 went openly in that direction: kulaks were allowed to lease additional land and hire wage laborers, and their tax burden was eased.
The Opposition, with Preobrazhensky as a major spokesperson, countered by pointing out that, even accepting the logic of the majority case, the supply of industrial consumer goods could not expand while industry remained poor in fixed capital. The longer the country waited to carry out long-overdue replacements of plant and equipment, the worse the shortage of industrial products would be. In the end it was a question of making a commitment to heavy industry in the present for the sake of adequate supplies in the future.
Preobrazhensky's analysis of the goods famine (see the first of his "Economic Notes") pointed to the fact that peasant purchasing power was swelling, partly due to the agricultural recovery under NEP and partly because the peasantry was no longer subject to the kinds of heavy exactions that had been imposed under the tsarist regime. Unless industrial production could be boosted, there would be no economic reason for the peasantry to sell its output to the state. Further, the time when industry could improve its performance simply by bringing unused plant and equipment back into operation (the so-called recovery period) was rapidly drawing to a close. Henceforth, all major increases in industrial output would require the prior construction of new plant and equipment; the "restoration" period was about to begin. Events were to prove the power of the Opposition's case. The peasantry refused to market all of its surplus following the harvest of 1925: it did not need to, especially with no industrial goods forthcoming.
Although these events greatly shook the Party leadership (they compelled Zinoviev and Kamenev to break with Stalin and Bukharin and to move toward their bloc with Trotsky) there was a good harvest in 1926, which dulled the impact of the Opposition's argument. A year later, however, they were vindicated with a vengeance. There was another good harvest, but kulaks and even middle peasants hoarded their grain; they would not sell. The entire official policy was in danger. The train of events leading to collectivization and the industrialization drive of the late twenties was set in motion. The grain was collected, but only at the expense of increasing resort to "administrative" methods. But the problems of industry still had not been broached in any concerted fashion.
It was in this context that Preobrazhensky presented his famous theory of primitive (in the sense of primary, pervonachal'nyi) socialist accumulation. As long as industry was unable to expand on the basis of its own, internally generated surplus, it would have to draw this surplus from elsewhere—specifically, from the private economy. He was not unaware that this policy had its economic and social contradictions, a point to which we will later return. The thrust of his argument was that "equilibrium" between the state and private sectors required that the state anticipate its production needs over the foreseeable future and then consciously take steps in the present to accumulate the resources that would enable it to meet future demand.
A number of commentators have correctly pointed out that a significant fraction within the Stalin group was moving toward acceptance of much of the Opposition's economic argument for industrialization, However, the differences that separated Opposition from majority were far broader than a simple review of economic events and policies would reveal. It was not industrialization per se that Preobrazhensky and the Opposition were after, although this was the basis on which Preobrazhensky changed his position in 1929 (see my article in Critique, cited in note 2, above), but industrialization as part of the general historical tasks facing the proletariat in a backward country. Thus the theory of primitive socialist accumulation was premised on propositions of a more general political-methodological nature that were common to the Left Opposition as a whole.
First, industrialization was not an end in itself, but a means to other ends. It was the mechanism for regrouping increasingly large sections of the population around collective production relations, which form the basis of any socialist economy and society. Though a general objective, this had a special meaning in the USSR, where there was already large-scale urban unemployment (itself a testimony to industry's weakness) and rural overpopulation. Absorption of this overpopulation required sufficient absolute industrial growth to more than offset the labor-saving effect of reequipping existing industry.
Second, as a new proletariat was created it would have to assume control over the political apparatus of the Party and the state,17which required that the proletariat be numerically and politically strong enough to assert its own interests. To create such a working class, however, the country had to be able to provide its working population the leisure time and resources to educate itself, adequate social provisions (for instance, communal canteens and laundries, child care facilities, etc., to enable women to leave the home and take an active part in political life), and in general, a rising standard of living. There also had to be a maximum of Party democracy, including an erosion of bureaucratic privilege and the incorporation of proletarian elements into the political leadership. Industrialization was a precondition (but not in and of itself a necessary condition) of each of these objectives; in short, it was a precondition for mass participation by the working class in political life. Yet, like industrial policy, this "primitive political accumulation" had to be consciously planned for; this is why the industrialization program was specifically linked to the program for Party democracy.
Third, these arguments were equally premised on the Opposition's hostility to the Stalinist dogma of socialism in one country. It would be a grave mistake to conclude that the question of "socialism in one country" was a doctrinal issue divorced from the substance of the debates of the Soviet twenties. Trotsky in his theory of permanent revolution had laid a theoretical basis for the internationalization of the Russian revolution long before the idea of socialism in one country had ever been voiced. In doing so Trotsky had been traveling fairly uncontroversial ground. Marxists, at least up to 1914, had taken it as an article of faith that socialism could only be established on a world scale. In the Soviet Union, where the country's isolation lay like a dead weight on all its problems and impasses, the issue attained tremendous urgency. From the Opposition's point of view, either the USSR would use its leading position within the international workers' movement to encourage revolution in other countries, or accepting its isolation as a fait accompli it would become increasingly conservative in its foreign policy, sacrificing its own and the world's socialist future. Preobrazhehsky's early formulations of his theory of Soviet crises had consistently accented the country's reliance on the world division of labor and argued that economic backwardness would drive the revolution into a dead end in the absence of proletarian revolution in the West.18
It is important to stress the place of the issues of Party democracy and internationalism in the Left's political program, because by 1927 a large fraction of the ruling group had come to accept the basic outlines of the Opposition's economic argument for industrialization, While the two sides had differences over the rates of accumulation and the extent to which it should be financed at the expense of the prosperous kulak strata of the countryside, far more crucial were-their divergences over the type of society to be built through industrialization. In the article "Economic Equilibrium in the System of the USSR" Preobrazhensky argued that industrialization would prove impossible if the country remained isolated: the social tensions engendered by a drive for rapid industrialization would be so severe as to threaten the continued existence of the Soviet state. The Party majority by contrast, grudgingly inching toward some sort of industrialization policy since 1925, very much saw industrialization as part and parcel of the doctrine of socialism in one country and an affirmation of the country's self-sufficiency.
To ignore these issues, as many historians and economic historians of the Soviet twenties are prone to do, is to make it appear that the only questions that separated the Left from the ruling group and the emergent Soviet elite were those of economic policy. Though these divergences over economic program were important, especially the Stalin group's failure to take up the problem of industrializing the country before the crisis had become unmanageable, we need to keep the other points of difference in mind when assessing the coherence of Preobrazhensky's theory and the attacks that it provoked.
When Preobrazhensky concretized his analysis of the law of primitive socialist accumulation and its application within the Soviet economy, it must have seemed almost automatic for him to turn to the schemes for simple and expanded reproduction developed by Marx in vol. II of Capital. This part of Capital has come to be the genuine stepchild of Marx's economic theory, which is odd since Marx's use of the schemes, far from being technical or an attempted objectification of concrete capitalist conditions, is rich in insights into both the regularities behind capitalist production and exchange and the inherent instability of the capitalist system. Though the schemes no longer receive the attention from students of Marxist economics that the first and third volumes of Capital do, they were at one time a major focus of controversy, to which we shall return shortly.
First, however, we would do well to provide a quick and simple description of the mechanics of the schemes. Though some of this ground is covered by Preobrazhensky in the first of the three articles on "Economic Equilibrium" ("The Problem of Economic Equilibrium Under Concrete Capitalism and in the Soviet System"), it will greatly facilitate the reader's grasp of Preobrazhensky's argument if she or he is already familiar with the basic outlines of the reproduction schemes and so can devote primary concentration to the details of the piece.
Marx noted that the total product of society could be broken down into two basic categories: means of production and means of consumption. If we collect together all the industrial enterprises that produce each of these types of commodities, we will get, as Marx said, two "great branches of production, that of means of production in the one case, and that of articles of consumption in the other."19 He designated the department producing means of production as department I and that producing means of consumption as department II. Marx then set out to define the regularities of capitalist production with regard to exchange between these two departments. Here he examined two cases: first, that of simple reproduction, where society consumes all of its surplus value and undertakes no accumulation. Such a situation does not exist in capitalist society, except as a transient moment in certain periods of crisis. Its major importance is that, as an abstract, hypothetical moment in the process of accumulation and economic expansion, it allowed Marx to lay down the basic patterns of economic life before proceeding to a more concrete level of study. The second case examined by Marx is what he called reproduction on an extended scale, or expanded reproduction. Here society takes part of its surplus value and devotes it to augmenting its productive forces. Some goes to increase the means of production, that is, machines, raw materials, and auxiliary products. The rest goes to increase the supply of labor power to work with these means of production. This, in turn, can take place in two ways: either by hiring more workers, or by increasing the subsistence of workers already employed so as to establish a work force of higher quality and skill, that is, a work force with a greater productivity of labor.
Marx studied simple reproduction in great detail. The process of accumulation, however, received only one chapter in vol. II of Capital, and even that abruptly breaks off. This aspect of his study was, therefore, incomplete.
Let us first take up simple reproduction. Marx used the following figures for his scheme:
II. 2,000c + 500v + 500s = 3,000 means of consumption
Department I produces means of production whose value equals 6,000. All of department I's product exists physically as means of production, and so the question arises, How will this product be used? Four thousand of it can go directly to replace the used-up means of production that have worn out in the course of production. The capitalists of department I exchange them among themselves, well enough, but in terms of their use they remain within that department. The other 2,000 means of production cannot be used as they are. Neither the workers nor the capitalists of department I can use them as means of production, for workers must use their wages to purchase means of subsistence and, under the assumptions of simple reproduction, the capitalists use their surplus value to do likewise, although the quality of their "subsistence" will be considerably higher than that of the workers. The result of all this is that department I must exchange these 2,000 in means of production for an equivalent value in means of consumption. Since there is no other department of production than department II, it is with the latter that department I must exchange this part of its commodity-product.
If we look at department II we see a similar case. This department produces means of consumption with a total value of 3,000. Of this it can directly use 1,000 in their existing physical form: 500 will go to support the workers of II (IIv), and 500 will go to sustaining its capitalists (IIs). However, department II will then have 2,000 of its product left over in a nonusable form. It cannot take means of consumption (food, textiles, toasters, and so on) and use them to replace the part of its means of production that were used up in the previous year's production—they cannot serve as a replacement for the used-up constant capital in II. Therefore, department II must also enter into exchange, and it must do so with department I.
The basic condition of simple reproduction is, then, that the part of the product of department I that it cannot use in its existing physical form (and hence must exchange with department II) must have a value equal to the part of department IPs product that the latter cannot directly use (and, therefore, must exchange with department I). In other words, the equivalent of I(v + s) must exchange against the equivalent of IIc. In Marx's scheme this exchange is possible: I(v + s) = IIc.
The process of accumulation, though more involved, is still not difficult to follow. Marx started with the following scheme:
I. 4,000c + 1,000v + 1,000s = 6,000
II. 1,500c + 750v+ 750s = 3,000
Here we must remember that the surplus value of each department is now divided into two portions. One is for capitalist consumption, and the other is for accumulation. Marx assumed for the sake of exposition that half of the surplus value in department I would be consumed and half would go for expanding production, making Is divide up into 500 for capitalist consumption and 500 for accumulation. This automatically changes the conditions of exchange with department II. Department I needs only 1,500 means of consumption, rather than the 2,000 we saw under simple reproduction. Thus, Marx adjusted the distribution of productive capital within department II such that IIc would still equal the consumption fund of department I. But in keeping the total volume of II's production the same, the organic composition of capital (the ratio of constant to variable capital, or c/v) in department II is reduced from a ratio of 4:1 (the same as in department I) to 2:1. The problems this brings with it will be discussed in a moment.
To show how accumulation takes place, Marx began with department I. It takes the 500 surplus value intended for accumulation and divides it up in proportion to the existing ratio of constant to variable capital. Four hundred goes to augment the supply of means of production; 100 goes to increase the amount of labor power. Thus after accumulation we have for department I:
I. 4,400c + 1,100v + 500 capitalist consumption
Department II, however, has a lie of only 1,500, But it, too, must accumulate, and Marx assumes that it does so in line with the needs of department I, that is, it expands its production only as much as is required for it to supply department I with the latter's increased demand for means of consumption.
If we do this, department II must take out of its total surplus value 100 to increase IIc to 1,600. But, in order for the technical structure of production in II to be maintained, this rise in lie demands a proportional rise in IIv. Therefore, the organic composition of capital being 2:1, II raises IIv by 50. As a result, II winds up taking a total of 150 from its surplus value, which in turn leaves 600 for consumption by II's capitalists. After accumulation in both departments the total scheme looks like this:
I. 4,400c + 1,100v + 500 capitalist consumption
II. 1,600c + 800v + 600 capitalist consumption
After the year's production, assuming a rate of exploitation of 100 percent (that is, a Iv of 1,100 produces a Is of 1,100, and a IIv of 800 produces a IIs of 800), we have:
I. 4,400c +1,100v +1,100s = 6,600
II. 1,600c + 800v + 800s = 3,200
These schemes as they stand are not without limitations. These are of two kinds. The first is methodological: Even at the most detailed level to which Marx carried them, the schemes must still be accepted as extremely abstract representations of capitalist reality. For Marx, as Preobrazhensky quite correctly noted, this level of abstraction was essential, for it allowed him to deal with the basic patterns of capitalist production and circulation before moving onto a more concrete examination of capitalist economy and society. But they are not, and indeed cannot be, "real" descriptions of the day-to-day workings of the capitalist economy. Rather, the schemes must be seen as part of Marx's overall theory, residing at a stage of analysis still very general and yet to be built upon in vol. III of Capital.20
The second type of limitation inherent in the schemes derives precisely from this abstractness, and it is these limitations that proved the subject of such controversy at the end of the last century and the early decades of the twentieth. As we do not wish to involve ourselves in a historical review of these debates (this has been done far better in other works than we could hope to do here2i), we will concentrate on the observations made by Rosa Luxemburg. Her framework was perhaps closest to the one from which Preobrazhensky was working, both in the sense that her criticisms of Marx's schemes were made from a politically revolutionary perspective (as opposed to the critique developed by the Austro-Marxists), and in the sense that she too was taken up with the problem of how the capitalist and precapitalist economies interrelate.
The first problem that Luxemburg noted arose from Marx's assumption—through all four volumes of Capital—that capitalist production was universal. His schemes claimed to represent the regularities of a "pure" capitalist economy, without any of the complications that would be introduced by a study of the way in which capitalism interacts with noncapitalist modes of production. Yet such a capitalism does not exist in the real world: Its relations with noncapitalist sectors is a historical fact, and the theory of reproduction, Luxemburg claimed, must take this into account.
In fact, Marx himself, in vol, II of Capital, anticipated the need to incorporate capitalism's relations with noncapitalist production into the theory of reproduction:
Within its process of circulation, in which industrial capital functions either as money or as commodities, the circuit of industrial capital, whether as money capital or as commodity capital, crosses the commodity circulation of the most diverse modes of production, so far as they produce commodities. . . . The character of the process of production from which they originate is immaterial. They function as commodities in the market, and as commodities they enter into the circuit of industrial capital as well as into the circulation of the surplus value incorporated in it. It is therefore the universal character of the origin of the commodities, the existence of the market as world market, which distinguishes the process of circulation of industrial capital. . . .
. . . As soon as act M-MP [the exchange of money for means of production—DF] is completed, the commodities (MP) cease to be such and become one of the modes of existence of industrial capital in its functional form of P, productive capital. Thereby however their origin is obliterated. They exist henceforth only as forms of existence of industrial capital, are embodied in it. However, it still remains true that to replace them they must be reproduced, and to this extent the capitalist mode of production is conditional on modes of production lying outside of its own stage of development. But it is the tendency of the capitalist mode of production to transform all production as much as possible into commodity production. The mainspring by which this is accomplished is precisely the involvement of all production into the capitalist circulation process.22
The problem, then, had already been posed. It remained, however, to concretize Marx's schemes so that the regularities—and points of crisis—of these interrelations could be studied.
Luxemburg pointed to a second difficulty when she showed that the schemes contained several simplifications that Marx dropped elsewhere in his analysis of capitalist production, and which, if removed, would disturb the regular patterns of accumulation and overall equilibrium. If we look at Marx's scheme for accumulation, we see that he adjusted accumulation in department II to that in department I. Department I accumulates 50 percent of its surplus value, but department II does not. It accumulates only as much as is needed to bring lie into line with the consumption fund of I (I[v + s/x], where s/x is the notation Marx used to designate the part of surplus value that went for capitalist accumulation). In the first year this amounts to 150 out of a surplus value of 750, or 20 percent. If we work out accumulation over a number of years, we see that as long as department II adjusts its accumulation to suit the demand of department I, it will accumulate exactly 30% of its surplus value against the 50% in department 1.23In reality, however, there is no reason to believe that the capitalists in department II behave any differently than those in department I. The schemes should allow for equal rates of accumulation in both departments.
Another simplification is that Marx does not allow the organic composition of capital to rise in either department. This is clearly an abstraction that would have to be dropped in a more detailed and concrete analysis of capitalist reproduction, since the rise in the organic composition—i.e., the secular tendency toward technical progress—is one of the central pillars of Marx's theory of capitalist development, including his law of the tendency for the rate of profit to fall.
Finally, by adjusting accumulation in department II to that in department I, Marx obscures the effect on accumulation of the unequal organic compositions of capital. If both departments were allowed to accumulate independently, department II would grow faster than department I. We can illustrate this simply by taking the scheme for the first year of accumulation. We already know how department I would look. If department II were to accumulate half its surplus value, the same percentage as department I, this would come to 375, rather than 150. If it divided this up according to its organic composition of capital, it would devote 250 of this to increasing lie and 125 to raising IIv. We would have
I. 4,400c + 1,100v + 500 capitalist consumption
II. 1,750c + 875v + 375 capitalist consumption
And after the year's production:
II. 1,750c + 875v + 875s = 3,500
Here I(v + s/x)= 1,100v plus half the new surplus value (1,100/2, or 550), making 1,650 in all. IIc = 1,750. There is an overproduction in II by 100; II has 100 in means of consumption it cannot sell. By the same token there is an underproduction in I, also of 100; I cannot supply II with 100 in means of production needed by the latter for the renewal and augmentation of its constant capital.
Luxemburg did not use this example, but she did recognize that overproduction would ensue in department II if it had a lower organic composition of capital than department I and if both departments accumulated the same percentage of their surplus value. Likewise, she noted that allowing for a rise in the organic composition of capital would also produce overproduction in II relative to I, since it would reduce the quantity of Iv (and hence also Is) while raising the size of IIc.
Finally, Luxemburg pointed out that under these conditions, where there was a tendency for department II to grow faster than department I, the balance could only be redressed by the transfer of capital out of department II into department I, This transfer, she argued, would encounter tremendous difficulties, since the physical form of the means of production used by department II would not allow their ready use in the production of means of production.24
Although Luxemburg highlighted these various problems with Marx's schemes, she did not actually use the reproduction schemes to work out a systematic exposition of her own theory of capital reproduction, incorporating the necessary modifications. In many respects this was unfortunate, for her theory of the interconnection of the capitalist and precapitalist modes of production readily lends itself to the type of two-sector scheme that Preobrazhensky was to use in his three articles on economic equilibrium.
Although we do not wish to involve ourselves in the controversy over the correctness of Luxemburg's theory of capitalist accumulation, it is worth giving a brief summary of it, especially since it should highlight just how similar her approach was to that of Preobrazhensky (a closeness that Preobrazhensky does not himself appear to have fully appreciated). Essentially, Luxemburg maintained that in a pure capitalist system consisting only of capitalists and workers, accumulation would be stifled because of inadequate effective demand. The accumulated part of surplus value is to be consumed productively, not individually. Therefore, neither the capitalists nor workers can provide the effective demand for this new investment through their own personal consumption. Similarly, the capitalists cannot simply "swap" their surplus products in natura, since under capitalist conditions what is produced must first be realized on the market for money. How, then, was exchange to be initiated? Luxemburg argued that under "pure" capitalism there were no holders of revenue who could provide this necessary demand, and so accumulation would have to presume that capitalists accumulate merely for the sake of accumulating—something unrealistic in an economy where the driving force of production is the realization of profit. Put another way, it may be possible on paper, within the bounds of the reproduction schemes, to pose the problem of accumulation under capitalism (with its atomized production units) without posing the motivation for accumulation and demonstrating the possibility that this accumulation will find purchasers on the market. But this does not accurately reflect the real world, where what is produced must first be sold on the market and the surplus value realized as money capital before accumulation can actually proceed.
The source of the effective demand needed to break the impasse, Luxemburg argued, came from outside the capitalist system, from noncapitalist strata either within capitalist countries or in the colonies. Luxemburg, therefore, claimed that the surplus value to be accumulated in at least one of the departments must first be realized in the noncapitalist sector in order for accumulation to proceed. At the level of description this was certainly correct—capitalism did realize part of its surplus value in the noncapitalist sector. But Luxemburg went on to deduce a quite rigid relationship between capitalism and its petit bourgeois periphery, not recognizing the extent to which her deduction was itself conditional upon the abstractness of the reproduction schemes, even after her modifications. (For example, they failed to incorporate the functions of the modern credit system in assisting capitalism to effect precisely that internal demand she considered impossible.)
Preobrazhensky, while acknowledging the brilliance of parts of her work, basically did not accept the way in which Luxemburg had posed the problem of accumulation.25 Certainly it is impossible to, surpass those sections of The Accumulation of Capital that detail and expose the methods by which capitalism penetrates and subordinates noncapitalist production in real life. But in addition to describing the actual relations between capitalism and its noncapitalist periphery, Luxemburg maintained—and thought she could theoretically prove—that it was impossible for capitalism to accumulate on the basis of its own resources and that its expansion was dependent on realizing an increasing share of its product in the noncapitalist sector. This approach establishes an absolute dependence by capitalism on the noncapitalist sector, such that once capitalism has completely subordinated and eliminated noncapitalist production, accumulation will be impossible and the automatic collapse of capitalism must follow.
It was with this part of Luxemburg's argument that Preobrazhensky most profoundly disagreed. Fie considered that the significance of the precapitalist sector was not in its absolute role in realizing part of the capitalist product, but rather in its existence as a buffer that afforded capitalism an indispensable elasticity both in finding markets and in acquiring the necessary in natura elements of production. Without this extra flexibility, Preobrazhensky argued, the disproportions that naturally arise in the course of capitalist reproduction would lead to crises of greater severity and frequency than is actually observed.26
The different approaches of Luxemburg and Preobrazhensky to the question of accumulation are probably best explained by the respective natures of the problems each was trying to solve. Luxemburg, of course, was concerned with imperialism and the ever more intense and competitive assault by capitalist countries on the noncapitalist world. Her task in these circumstances was to explain what drove capitalism to extend its grasp over other economic formations, and she believed she had found the theoretical foundations for doing so.
Preobrazhensky, on the other hand, was confronted by an altogether different problem: How could the Soviet Union industrialize in a backward country whose economy was dominated by peasant agricultural and craft production? When Preobrazhensky modified and elaborated Marx's schemes of reproduction he was not engaging in some baroque algebraic exercise in search of a hypothetical but historically extraneous solution to the problem of capitalist accumulation. Insofar as he was dealing with capitalist production, his modifications were intended to point to the manifold possibilities for crisis within the imperialist system, as well as to indicate the extent to which capitalism utilizes its relations with the precapitalist economy to try and smooth over some of its worst disproportionalities.27 Insofar as Preobrazhensky was working out analytical tools for analyzing the commodity-socialist system of the Soviet Union, his modifications of the schemes were an attempt to determine what consciously chosen policies the proletarian state would have to carry out if the state sector were to predominate in its struggle against private production and exchange and to guarantee the socialist development of the country. We know that Preobrazhensky had been thinking about how to apply the reproduction schemes to this problem for some time prior to publishing his articles on "Economic Equilibrium." Already in 1923, in Economic Crises Under NEP (Ekonomicheskie krizisy pri NEP'e), he had stated that in order to properly analyze the Soviet economy and to understand the sources of its crises and disproportions it would be necessary to add a third department to the two Marx had used in his study of simple and expanded capitalist reproduction:
In general, for us to carry out the necessary analysis of all the conditions of the exchange of goods in our commodity-socialist system of economy, we will need not two schemes, with which Marx operated, but three. It is necessary to introduce a third scheme, which will characterize the exchange of goods and the numerical regularities and proportions of this exchange between state industry and the peasant economy.28
Preobrazhensky must have soon realized that just an additional "third scheme" or third department would not do. The problem was another entire system of economy, as he had already pointed out. Thus, an analysis of expanded reproduction would necessitate the introduction of a new sector, which itself produced both means of production and means of consumption. This is what Preobrazhensky did.
It was Preobrazhensky then, and not Luxemburg, who actually worked out the pattern of accumulation in a mixed industrial-precapitalist economy, The object of such an investigation was to analyze the economy of the USSR, but before doing that it would first be necessary to study in some detail the regularities of accumulation under what Preobrazhensky called "concrete capitalism," that is, capitalism as it exists in its constant and evolving interrelation with noncapitalist modes of production. The result was the first of the three articles on "Economic Equilibrium," published in Vestnik Kommunisticheskoi Akademii (VKA) 17 (1926).
In the first part of the article Preobrazhensky presents a scheme for simple reproduction under concrete capitalism. Although no accumulation takes place in either the peasant or capitalist sectors, he shows that there is a definite pattern of interdependence between these two modes of production. This interdependence is hierarchical: The peasant sector is subordinate to the capitalist sector—disproportions in the latter call forth a new division of labor in the former, which in turn allows the imbalances in the capitalist sector to be overcome. Preobrazhensky's initial scheme reads as follows (the letter K designates the capitalist sector, the letter P the precapitalist one):
KI. 4,000c + 1,000v + 1,000s = 6,000
KII. 1,500c + 375v+ 375s = 2,250
PI. 750c + 1,500 consumption fund = 2,250
PII. 2,000c + 4,000 consumption fund = 6,000
KIIc is 500 less than KI(v + s) and so cannot provide the full complement of means of consumption to department I of the capitalist sector. However, c of department II of the precapitalist sector is 500 greater than the consumption fund of PI. Neither sector's exchange is internally in balance. Equilibrium does, however, exist for the system as a whole. Department II of the peasant sector can obtain 500 in means of production from KI that it could not get from PI. Similarly, it can sell to KI 500 in means of consumption that it could not dispose of in PI. Thus, Preobrazhensky established that there is a reciprocal relationship between the two sectors. Shortfalls in production in one of the capitalist departments can be made up if the equivalent department of the peasant sector has a surplus in its own intradepartmental exchange.
Preobrazhensky's choice of figures in this illustration is unfortunate, since total production is equal in the two sectors, whereas production in KI equals that in PII and production in KII equals that in PI. Thus, it may at first appear as if his result is an artifact of the symmetry he has established in his figures. The subsequent analysis in the article makes it clear, however, that this is not the case.
Another point that Preobrazhensky is at pains to emphasize—and to which we will return in the next section of this Introduction—is that the relationships he defines here apply solely to the value magnitudes of each department's production. In reality, in a concrete study of a specific economy, such as Preobrazhensky offered in the final article of this volume ("Economic Equilibrium in the System of the USSR"), account must be taken of the in natura composition of the different branches of social production. It may be, for instance, that although PII can make up the shortage of means of consumption within KI in value terms, they may not be the kinds of means of consumption that the workers and capitalists in KI need to purchase. In that case equilibrium cannot be restored, and a crisis must ensue—at least on the assumptions we have made here, which exclude the prospect of foreign trade.
The second section of the article returns to the schemes for pure capitalism. Here Preobrazhensky drops the simplifying assumptions made by Marx. He keeps the organic composition of capital lower in department II than in department I, as this corresponds to the division of social labor under modern capitalism. But he then allows for equal rates of accumulation in the two departments, and when he does this he derives a tendency for department II to grow more rapidly than department I because of the greater addition to its variable capital—and ultimately to its surplus value—with each period of accumulation. Likewise, Preobrazhensky traces the effects of a rise in the organic composition of capital. This, too, leads to a relative overproduction in department If, for the reasons we have stated above.
As Preobrazhensky is here assuming a pure capitalist economy, with no peasant sector on which to fall back, the only solution left open is the transfer of capital from department II to department I. This transfer must ensure that the overall size of I is sufficiently great that, even with its higher organic composition of capital, the sum of its v + s/x will equal the now-lower lie. Preobrazhensky shows that this transfer cannot eradicate the tendency toward overproduction in department II in ensuing production periods, and hence such transfers must take place systematically, with each and every year. Finally, in this section Preobrazhensky tries to demonstrate how capitalism overcomes the physical obstacles to such capital transfers, which had been one of Luxemburg's objections to the rigidity of Marx's schemes. This was a problem that Preobrazhensky did not fully take up, however, until his book The Decline of Capitalism.
The last part of this article provides a synthesis of the analyses of the two preceding sections. Given the tendency for a capitalist economy to suffer from periodic underproduction of means of production, how do its relations with noncapitalist strata help it to overcome this disproportion? Clearly there must be a corresponding tendency for precapitalist production to alter its division of labor in such a way that it produces more means of production and fewer means of consumption that its own internal demand would call for. If the peasant sector absorbs the shifts in the social division of labor in this way, capitalism can be spared the potential disruptions and possible crises that transfers of capital within the capitalist sector would entail.
It is no secret that Preobrazhensky is here talking about the situation actually confronting the Soviet Union. The argument in this first of the "Economic Equilibrium" articles implicitly previews that in the final article, which deals specifically with the USSR. The Soviet Union suffered a pressing shortage of means of production. This shortage could only be overcome if the peasant sector could produce a surplus of means of production, which could either fill gaps in state production directly or be exported for foreign currency, which could then be used to buy needed machinery and raw materials on the world capitalist market.29 Already Preobrazhensky shows the pattern of mutual dependence that characterized the Soviet Union under NEP. Department I of the peasant sector had to produce a surplus of means of production. In so doing it would also increase its dependence on department II of the state sector for means of consumption. Conversely, the state's department II could use this surplus of peasant means of production to make up the shortages of means of production that the state sector was not capable of supplying.
This argument applied to the Soviet Union only in its most general outlines. There were further complications that the Soviet economy's poverty of fixed capital and other means of production would impose on this process of growth. But the analysis in this first article provided the analytical tools that Preobrazhensky was to use later on to develop his theory of crisis in the Soviet economy. The implications of the argument were clear enough in their own right. The dictates of proportionality in an industrial or industrializing country demanded accelerated growth in the department producing industrial means of production. Where this could not be done except at the risk of generalized crisis, an equivalent value of these means of production had to come from the peasant periphery. The contradiction facing the Soviet economy was that this presupposed the prior production of industrial means of production, without which agriculture could not expand at the rate and volume required. And these means of production Soviet industry could not supply.
For Preobrazhensky to extend his analysis he had to solve two additional problems that were closely related. First, he had to incorporate into his analysis and, to the extent possible, into the reproduction schemes the differentiation in the in natura composition of production in all four departments of the two major sectors. The nature of this problem and the inadequacy of confining a study of reproduction simply to the analysis of the exchange of values have already been touched on. Secondly, Preobrazhensky had to allow for the fact that the various elements of productive capital are reproduced differently in time. Both of these problems were really different dimensions or aspects of one single problem, namely the fundamentally different processes through which fixed and circulating capital are reproduced. In addition, it is one thing to study the basic mechanisms behind these differences within a developed capitalist system, where we can expect to find a general pattern of regularity in the whole process, and another thing completely to examine them within the context of the Soviet system, where the entire economic organism had been disrupted by the Revolution, World War I, and the Civil War, not to mention the drastic alterations in production and exchange relations that had occurred with the transformation of the social system. With the second and third of the articles on "Economic Equilibrium" (which deal with capitalist Europe and the Soviet Union, respectively), Preobrazhensky began to make the necessary modifications in his theory of reproduction, although he did not manage to really complete this part of his study until 1931, with The Decline of Capitalism.
Marx had noted in vol. II of Capital that the specific properties of fixed capital presented special problems for the study of simple and expanded reproduction. Unlike circulating capital, which is used up and demands replacement in the course of a single production period (assumed to be one year), the functioning of fixed capital is of longer duration. While it is purchased in toto in a certain year, its value passes into the products it helps produce only little by little, over several production periods. This opened up for Marx a whole new area of potential disturbances and crises for capitalism. Not only could imbalances result from the inability of the two departments to produce commodities in the right value proportions, but they could also arise from temporal discontinuities in the replacement of fixed capital. If the fixed capital already purchased and functioning was not replaced at exactly the right moment in time, this too would disrupt the division of labor within department I and the pattern of exchange between the two departments, and would in consequence precipitate a crisis.30
Unfortunately, except for a few scattered passages in vols. II and III of Capital and in Theories of Surplus Value, Marx discussed the difficulties engendered by the reproduction of fixed capital only within the context of simple reproduction. Even here, however, Marx's analysis foreshadowed the work Preobrazhensky was to do later on. For from this work, as from Marx's analysis of the breakdown of the product of department II into articles of luxury and necessities, we can derive the need to "disaggregate" the reproduction schemes not just into different departments but into different sectors, each of which produces qualitatively different types of commodities. If anything, it is more essential to do this with the production of means of production than with department II. Means of production serve as both circulating and fixed capital, and the different use forms acquired by particular means of production must be taken into account in analyzing either simple or expanded reproduction.
It is not surprising that Preobrazhensky would give this relationship special attention, since in the Soviet Union the differentiation between fixed and circulating constant capital largely corresponded to the separation of the economy into state and petty-commodity production sectors. While state industry's department I would produce means of production that would serve as both kinds of constant capital, this was not true of the peasant sector. Its production of means of production, at least insofar as they were produced for sale to the state sector, would be virtually entirely devoted to commodities that would function solely as circulating capital, mainly raw materials. Thus, any analysis of the interrelations between the two sectors had to take this material distinction into account.
The problem of fixed capital proved important also because of its temporal aspect. It is not just that fixed capital wears out over a period of years, giving rise to temporal discontinuities in the reproduction process. The production of fixed capital also has a time dimension that must be allowed for if economic growth is to proceed smoothly. Investments in fixed capital, as all new investments, require the prior existence or construction of plant and equipment. That is, they demand the prior production of fixed capital. These investments have a relatively long gestation period, that is, once an investment project is initiated it is usually several years before it yields any result and itself begins to produce commodities. Such investments in the production of fixed capital, therefore, entail a one-way withdrawal of means of production and labor power from society's production apparatus without giving any value in return for some years. In this way, investment in fixed capital would actually lower the supply of commodities coming from department I of the industrial sector that was available for exchange, either within that department itself or with the other three departments of the economy. Society gets around this problem by having on hand substantial reserves in the form of idle plant and equipment, raw materials, and auxiliary products, as well as reserves of labor power and means of subsistence needed to sustain new workers. When new investment projects are undertaken, these reserves are brought into play to tide society over until the new plant and equipment are completed and are themselves employed in production. It is clear from this that society must arrive at a fairly fine balance between the investment projects it initiates and those that are just coming to fruition if it is to maintain proportional growth of all departments. This growth must also maintain a balance between current production on the one hand and reserves of all kinds (means of production, means of subsistence, and labor power) on the other, so as to allow both for periods of expansion and for "normal" disruptions in the material proportions between the productive forces or for imbalances in the latter's times of production.31
It is not hard to see that the Soviet Union could fulfill none of the economic preconditions for the relatively crisis-free accumulation of fixed capital. This was true regardless of the angle from which we approach the problem. On the one hand, the balance between retirements of expired fixed capital and that portion of fixed capital stock still capable of functioning in production was completely disrupted by World War I and the Civil War. Many factories were using machinery that should have been scrapped years before: Once the process of recovery was under way and the maximum expansion that could be realized simply by bringing idle capacity back into use had been reached, the amount of fixed capital renewals would vastly exceed that of a normal capitalist economy during a comparable period of time. (This was the "transition from recovery to reconstruction"; in the second "Economic Equilibrium" article, dealing with declining reproduction, Preobrazhensky shows that post—World War I Europe faced a very similar though far less chronic problem.) The difficulty was simultaneously exacerbated from the other end. The Soviet economy's initial poverty, inherited from backward capitalist Russia, and the destruction of its fixed capital base during the war and postrevolutionary years meant that it did not have at its disposal the plant and equipment required to produce the fixed capital it would demand to restore Soviet industry. Consequently, its output of fixed capital was to prove seriously deficient.
Secondly, the investment required to produce the fixed capital that would subsequently provide means of production for both departments of the state sector and for agriculture would withdraw resources from the economy—means of production and labor power—without yielding any output for a certain number of years. Therefore, in the short run the existing famine of means of production in the state sector would deepen, since means of production had to be diverted to heavy industry to provide an adequate supply of means of production in the future. But this meant that the current annual product of department I of the state sector would be severely retarded. The Soviet Union's future needs came into sharp conflict with its present capacities, a contradiction rooted in the fundamental temporal disequilibrium inherent in the backward structure of the economy.
Preobrazhensky noted that, as in the case of disproportions in the in natura composition of the product of the various departments, this disequilibrium could be partially ameliorated by recourse to the foreign market, where ready-made means of production could be purchased and where the prior investment in the plant and equipment essential for their production could be avoided. But this could not solve the problem. Politically the capitalist West was not prepared to deal with the Soviet Union on an adequate scale. Economically, it merely begged the question: to purchase on the world market, the Soviet Union had to sell; and peasant production, which was tied to its preindustrial technique, could not keep pace with the demands of industrial accumulation, which would proceed much more quickly. Preobrazhensky could demonstrate that access to the world division of labor was indispensable both for ironing out disproportions in the physical make up of peasant and industrial output and for overcoming certain aspects of the temporal disequilibrium plaguing the economy; but for both economic and political reasons he could also demonstrate that so long as the world division of labor was capitalist, the Soviet economy could not escape from its impasse. What was needed was assistance, and that would come only from other countries where the dictatorship of the proletariat had triumphed.
Herein lies the true tour de force of the 1927 article "Economic Equilibrium in the System of the USSR," for in it Preobrazhensky showed more clearly than in any other of his writings the deeply contradictory nature of Soviet society. It was true that if the dictates of the law of primitive socialist accumulation were ignored, disruption would result. But it followed equally from his analysis that implementation of the policies demanded by this theory would bring with it further conflicts and distortions in the economy and in the "equilibrium of social forces" within the country. The underlying reasons were the backwardness of the Soviet economy and society and the fact that the needs of industrialization could not be met with the paucity of economic and human resources at the Soviet Union's disposal. As such the contradictions were not strictly economic but also political and social, being bound up not merely with the poverty of the country but with the political character of the Soviet regime. It was not Soviet backwardness alone, nor the simple fact of its isolation from the world division of labor, that structured the USSR's development, but rather that these were factors in a conflict of class forces both inside the country and on a world scale. Here was "proof," if such was needed, of the impossibility of socialism in one country.
In 1929, as we have mentioned, Preobrazhensky broke with Trotsky and the Opposition and made his peace with Stalin over the latter's "left turn" towards industrialization. The "peace," such as it existed, was short-lived. In 1931 Preobrazhensky was again expelled from the Party. Although we have not as yet done the detailed archival research that would perhaps fully explain the exact reasons for Preobrazhensky's second expulsion, two events seem to provide all the explanation we are likely to require.
The first is Preobrazhensky's own literary activity during 1931. In that year he published his book on capitalist crises, The Decline of Capitalism. Also in 1931, he submitted an article to the journal Problemy ekonomiki, entitled "On the Methodology of Drawing Up the General Plan and the Second Five-Year Plan" ("O metodologii sostavleniia genplana i vtoroi piatiletki"). This was an attack on the way in which the industrialization drive then under way was being conducted, and appears to be Preobrazhensky's only attempt after 1927 to write directly about the Soviet economy. The article given to Problemy ekonomiki was never published, but to judge from the attacks that it provoked and the quotations that the latter provided, Preobrazhensky seems to have based his critique of Stalin's industrialization drive on the ideas developed in the 1920s articles on "Economic Equilibrium" and in The Decline of Capitalism. Given that in the latter Preobrazhensky had made it quite explicit that he was continuing the theoretical work begun during his days in the Opposition, it is not surprising that his opponents delved deep into his theoretical and political past to draw the connection between his present "errors" and his political and intellectual association with Trotsky.
During 1932 Preobrazhensky was subjected to a barrage of attacks in various articles and symposia, all of which zealously attempted to link his book on capitalism to his critique of the fiveyear plans, and to tie the two directly to Preobrazhensky's alleged attempt to bring "Trotskyist contraband" into the Party.32For once Stalin's intellectual thugs of the Institute of Red Professors seem to have told the truth. For it is interesting that, though Preobrazhensky had broken with Trotsky just two years before, by 1931 the two were again advancing an identical argument: that the five-year plans were leading to disastrous dislocations and overaccumulation in heavy industry, beyond all bounds of maintaining proportionality with other sectors of the economy. As Deutscher notes this should have been an obvious argument, but "as happens so often, the truisms of one generation were the dreaded heresy of its predecessor; and communists, but not only they, received Trotsky's criticisms with indignation or derision. "33The concurrence of views reached by Trotsky and Preobrazhensky on this question is in our view the "missing link" that explains the ferocity and speed with which Preobrazhensky was hounded during this period.
Taking the "Economic Equilibrium" articles as his starting point, Preobrazhensky used them to develop a theory of the capitalist business cycle based on what he termed "the temporal uneveness in the renewal and augmentation of fixed capital." Central to his theory was what he saw as the discrepancy between the demand for new fixed capital (which, given the long gestation period of investments and the massive prior investment in plant and equipment needed to effect them, tended to be covered by bringing reserve capacity into operation) and the moment in time when new investments would be completed and their output thrown onto the market in search of realization.
Suppose, says Preobrazhensky, that there is an extraordinary demand for new fixed capital equal to 100% of society's existing yearly output of these types of means of production. To fill such a demand from scratch would require society to take on the literally impossible economic task of doubling its existing stock of fixed capital, i.e., to undertake the prior construction of plant and equipment equal in value (in Preobrazhensky's example) to some 7.5 times the value of the final output of fixed capital that is required. What is more, since the technical proportions of production in department I must be kept intact, this would also demand a doubling of supplies of raw materials, labor power, and means of subsistence. Clearly no society could ever meet with new orders of such magnitude unless it already had on hand adequate reserves of all types of means of production and means of subsistence. Specifically, it would have to have adequate excess capacity such that no new construction of plant and equipment was immediately needed. If this could be brought into play, the entire accumulation fund could be devoted to constant and variable circulating capital, and the demand covered in a relatively few years.34
It is noteworthy that Preobrazhensky bases his example on such an extreme increase in the output of fixed capital, especially since in his actual theory of the investment cycle new demand for these means of production is shown to arise from the upward conjuncture of a recovery-boom-slump cycle.35Clearly he is trying to construct his "model" to more closely reflect Soviet conditions. By inference he is at this point in his argument already pointing to the USSR's inability to undertake such a massive reequipment given its paucity of reserves and excess capacity.
To see where Preobrazhensky takes this argument we need to look at his picture of the pattern of the business cycle. Under competitive, classical capitalism such new orders for fixed capital will, in fact, be covered by bringing idle capacity into operation. Given the competitive conjuncture new capital will flow into those branches of production manufacturing fixed capital; but the new investments made with this capital will not complete their gestation for some time after their initiation. By that time the demand for fixed capital will already for the most part have been filled by existing production units. When the new investments are complete there will be overproduction and crisis. Preobrazhensky used this theory to demonstrate the important structural changes in the morphology of the investment cycle that come with the evolution of monopoly capitalism, but this is not our immediate concern here.36In his unpublished article of 1931, "On the Methodology of Drawing Up the General Plan and the Second Five-Year Plan," he drew what conclusions he needed from this theory to make his attack on the five-year plans and Stalin's industrialization drive.
Although the Soviet Union was driven to attempt to overcome industrial backwardness by its isolation and by the fact that its productivity was drastically below that prevailing in the world capitalist market, the policy pursued by Stalin involved a disproportionately massive investment of resources in heavy industry. Department I would find at the end of this process that it had outstripped the ability of the other sectors of the economy to keep pace with it. Heavy industry would end up with neither adequate supplies of raw materials nor sufficient output of means of subsistence. This was inherent in the fact that the one sector of the economy that had to be modernized as a prerequisite for general industrial development was large-scale industry. The problem was that this had been done without regard to the needs of proportionality: "In drawing up the second five-year plan," warned Preobrazhensky, "the amount of pig iron or coal must be the end result, and not the beginning."37 The crux of the argument resided in the temporal unevenness of the accumulation of fixed capital. Preobrazhensky noted that while huge investments had been made in the latter, the rate of consumption of the total output of the economy had remained stable despite an actual growth in the size of the work force (i.e., real per capita consumption had fallen). This investment, however, had not yet come to completion and hence had not begun to yield any output. Following his analysis of the capitalist cycle, it seemed clear to Preobrazhensky that once the gestation period of this investment was over there would be a sudden swelling of department I, with no compensating or proportional growth in either department II of the state sector or in agriculture (which had to provide certain raw materials, and more importantly, means of consumption), Preobrazhensky logically called for a shift of resources back into department II and an increase in individual consumption. This may at first seem an odd conclusion to be reached by a person once labeled a "superindustrializer"; but not when we recall that this appellation was but an epithet attached by the Stalinists at a time when intra-Party struggle demanded that the Left Opposition be portrayed as the pillagers of the working class and the countryside. Within the context of Preobrazhensky's overall theory of the Soviet transition, and especially in terms of the argument put in "Economic Equilibrium in the System of the USSR," the warning against a hypertrophy of heavy industry was perfectly consistent.
We do not know the specific conclusion that Preobrazhensky reached in this article. M. Mekler indignantly imputed to him the view that such difficulties could have been avoided only by, in Mekler's words, "the victory of the proletarian revolution in other countries and state aid from their victorious proletariats."38Mekler then goes on to specifically link Preobrazhensky's article to Trotsky's statement of the mid-twenties, "The contradictions in the position of a workers' government in a backward country, with an overwhelmingly peasant population, can only be resolved on an international scale, on the arena of the world-wide proletarian revolution."
It is our own view that the subsequent history of the Soviet Union has amply borne out the validity of Preobrazhensky's warning. On one level this is empirically verified in the immediate experience of industrialization in the 1930s, where the bottlenecks of supplies and labor power and the squeezing of working-class and peasant living standards have been detailed by so many firsthand and secondary accounts that it would be superfluous to reproduce them here. On a deeper and more enduring level, however, it is worth noting that even in Stalin's time there were—and there have continued to be—countless plans that called for a more rapid growth in consumer over producer goods, and yet the end result has been an utter failure to carry out the plan: when all is said and done it has been "Group A" that has yet again swollen out of proportion to "Group B."39 The root cause, in our view, lies in the bureaucratic nature of Soviet planning, to which the fetish of "Group A" and the vulgar equation of heavy industry with "Marxism" must ultimately be laid. Nevertheless, in light of what we have said in this Introduction and of the articles presented in this collection, we must point out that from an economic point of view a genuine transfer of emphasis in favor of the development of consumer goods in the Soviet Union would require the massive prior construction of a consumer goods industry. In an economy where the social and economic mechanisms are such that the plan is always "taut,"40such investment is simply out of the question, and will remain so until these mechanisms themselves undergo a fundamental upheaval.
1 The reader should be aware that we are able to provide here only the most general historical background to the events of the Soviet twenties, and have made no attempt to take up the ideas of Preobrazhensky's individual opponents in the debates over industrialization. We refer the reader instead to such standard works as E. H. Carr's multi-volume A History of Soviet Russia, published by Macmillan; Isaac Deutscher's three-volume biography of Trotsky, The Prophet Armed, Trotsky: 1879-1921 (London: Oxford University Press, 1954), The Prophet Unarmed, Trotsky: 1921-1929 (London: OUP, 1959), and The Prophet Outcast, Trotsky: 1929-1940 (London: OUP, 1963); Alec Nove's An Economic History of the U.S.S.R. (London: Allen Lane, 1972); and Alexander Erlich's The Soviet Industrialization Debate (Cambridge, Mass.: Harvard University Press, 1960). Nicolas Spulber's anthology, Foundations of Soviet Strategy for Economic Growth (Bloomington: Indiana University Press, 1964) is a valuable collection of documents by the leading economists of the 1920s. It also contains a translation of most of Preobrazhensky's article "Economic Equilibrium in the System of the USSR" (included in the present book), important passages of which, however, have unfortunately either been omitted or inadequately translated.
2 For specific references to Preobrazhensky's role in the Left Opposition of 1923 and the United Opposition of 1926-27, see Deutscher, The Prophet Unarmed, pp. 113-34 and chapters iv and v; Carr, The Interregnum (London: Pelican, 1969), chapters 13 and 14, plus the "Note," pp. 374-80, giving the text of the "Platform of the 46," as well as the various reservations expressed by its signatories; David S. Law, "The Left Opposition in 1923," in Critique, No. 2, pp. 37-52; Carr, Socialism In One Country (Pelican, 1970), vol. I, Part II, and vol. II, ch. 19; and scattered references in E. H, Carr and R. W. Davies, Foundations of a Planned Economy, 2 volumes (London: Macmillan, 196971). See also Alexander Erlich's early article, "Preobrazhenski and the Economics of Soviet Industrialization,"Quarterly Journal of Economics, February 1950, and Richard Day's "Preobrazhensky and the Theory of the Transition Period," Soviet Studies, April 1975. Both my own article, "Preobrazhensky and the Problem of the Soviet Transition," in Critique, No. 9 and this Introduction should be taken as an implicit rebuttal to Day's treatment of Preobrazhensky, especially in regard to the issue of Preobrazhensky's attitude towards socialism in one country. Finally, much of the biographical information on Preobrazhensky has been drawn from Preobrazhensky's autobiographical sketch and the accompanying note by Jean-Jacques Marie, in Georges Haupt and Jean-Jacques Marie, Makers of the Russian Revolution (Ithaca, N.Y.: Cornell University Press, 1974), pp. 191-201.
3 We will not give detailed bibliographical references to Preobrazhensky's works cited in the Introduction, but instead refer the reader to the bibliography of Preobrazhensky's major writings at the end of the book. To assist the reader, textual references will be to the English titles, with the original Russian given in parentheses.
4 See Donald A. Filtzer, "Preobrazhensky and the Problem of the Soviet Transition," Critique 9, where we discuss the political conceptions behind Preobrazhensky's economic theories.
5 Lenin, Selected Works, in three volumes, vol. 2 (Moscow, 1970), pp. 43-47. See also Trotsky, History of the Russian Revolution, vol. I (London: Sphere, 1967), pp. 284-89.
6 The "Theses" of the Left Communists, "On the Current Situation," have been published as a pamphlet in English translation by the journal Critique (Glasgow, 1977). Preobrazhensky and Bukharin were coauthors of the well-known ABC of Communism, an exposition of the Party's 1919 program.
7 Preobrazhensky's writings on inflation are a notable contribution to the Marxist theory of money, the literature on which is not overly abundant. See in particular The Reasons for the Fall in the Exchange Rate of Our Ruble [Prichiny padeniia kursa nashego rublia] and A Theory of Depreciating Currency [Teoriia padaiushchei valiuty ]. His other works on finance are cited in the Bibliography.
8 Carr, The Interregnum, pp. 374-80.
9 This was a constant theme in Preobrazhensky's writings in these years. See in particular On Morality and Class Norms {O morali i klassovykh normakh ], pp. 105-07.
10 These will be discussed below, in the final section of the Introduction.
11 Nove, Introduction to The New Economics, pp. xiv-xvi.
12 "Sotsialisticheskie i kommunisticheskie predstavleniia sotsializma," VKA, 12-13 (1925).
13 The New Economics (English translation by Brian Pearce), p. 2.
14 "Economic Equilibrium in the System of the USSR." See pp. 230-31 of this volume.
15 For Preobrazhensky's other discussions of capitalist crises see From NEP To Socialism (English translation by Brian Pearce), pp. 1-9 and 97-104; The New Economics, English edition, pp. 150-60; The Theory of Depreciating Currency [Teoriia padaiushchei valiuty ]; and The Decline of Capitalism [Zakat kapitalizma].
16 Preobrazhensky's own references to the continuity between The Decline of Capitalism and his articles on "Economic Equilibrium" appear in Zakat kapitalizma, pp. 54ff., 61-62, 70-71, and 82-83. We discuss this point further in the final section of the Introduction.
17 It should be remembered that the most politically aware sections of the working class had been annihilated during the civil war, so that the proletariat, a minority of the population in any case, had lost its most capable elements.
18 This is discussed in Deutscher, The Prophet Unarmed, pp. 277-78 and in Trotsky's The Third International After Lenin (New York, 1957), specifically dedicated to this issue. Preobrazhensky, in his early theory of Soviet crises, noted that even if industry were to undertake expansion at the partial expense of peasant surpluses this would have the contradictory effect of holding down the growth of agricultural supplies to industry and to the export fund. At a deeper level, so long as the economy contained two different modes of production which produced with nonequivalent techniques, at a certain point industry's growth would outstrip the ability of agriculture to finance such industrialization or to maintain supplies of technical crops. "It began to become clear that the rate of development of agriculture was beginning to lag behind the rate of development of industry and the demands of foreign trade . . . . Such changes were needed in the entire technique of the peasant economy as would signify a rapid and decisive increase in the agricultural basis for Russia's industry . . . . This huge task was beyond the power of the Soviet Republic alone. Here the development of Russia's productive forces necessarily depended on proletarian revolution in the West and a re-grouping of productive forces on the European scale." (From NEP To Socialism, English edition, pp. 84 and 87). Jean-Jacques Marie (op cit, pp. 198-99) cites the following incident of a confrontation between Preobrazhensky and Stalin over this question at the Sixth Party Congress in 1917:
Stalin read a report on the political situation which contained a resolution declaring the task of the Russian people to be "the seizure of power and, in alliance with the revolutionary proletariat of the advanced countries, its direction towards peace and the socialist reconstruction of society." Preobrazhensky objected to this formulation and proposed the following version: ". . . its direction towards peace, and, in the event of a proletarian revolution in the West, towards socialism." Stalin refused this version, saying that one "cannot rule out the possibility of its being precisely Russia that will open the path to socialism."
19 Capital, vol. II, English edition (Moscow: Progress Publishers, 1967), p. 399.
20 See the recent and extremely welcome publication in English of Roman Rosdolsky's The Making of Marx's Capital (London: Pluto Press, 1977), which contains an excellent discussion of the methodological relation between Marx's schemes and Marx's method of abstraction (pp. 63-72 and chap. 30).
21 In addition to Rosdolsky, chap. 30, see Rosa Luxemburg, The Accumulation of Capital (New York: Monthly Review Press, 1968), sec. 2. Luxemburg's book, along with her Accumulation of Capital—An Anti-Critique (London: Allen Lane, 1972), were, of course, themselves major contributions to the debate.
22 Capital, vol. II, English edition, p. 113 (emphasis mine). Neither Luxemburg nor Preobrazhensky cites this passage, although it has direct relevance for the discussion in "The Problem of Economic Equilibrium Under Concrete Capitalism and in the Soviet System."
23 In The Accumulation of Capital, p. 122, Luxemburg mistakenly maintained that arranging accumulation in this way meant that department II accumulated varying proportions of its surplus value in each year. Her conclusion, however, was based on a number of simple errors in addition and subtraction. The fact that the equations for accumulation are linear should have told her that if department I accumulates 50 percent of its surplus value each year, the percentage of lis accumulated, though lower than department I's, would also have to be constant from year to year.
24 For Luxemburg's discussion of the contradictions within Marx's schemes, see The Accumulation of Capital, pp. 120-26, and chap. XXV, especially pp. 336-47. On the possibility of transferring capital between departments, Preobrazhensky takes this point up in some detail in the first article on "Economic Equilibrium."
25 Zakat kapitalizma, p. 14. Mention should also be made of Bukharin's reply to Luxemburg, Imperialism and the Accumulation of Capital (London, 1972; the same volume contains Luxemburg's Anti-Critique). Independently of Bukharin's rather specious polemical methods in this work it is often overlooked that it was written with a dual political purpose in mind: one, to bolster the attack on the so-called "Luxemburgism" of the Polish Communist Party of the time (1924), and two, to counter any negative implications that Luxemburg's theory might have for the "theory" of socialism in one country or for the idea that the USSR could industrialize without accumulating at the expense of the peasant economy.
26 Zakat kapitalizma, pp. 14, 15, 77.
27 The objection will inevitably be raised that Preobrazhensky's modifications of the reproduction schemes are subject to the same critique as Rosdolsky has made against the Austro-Marxists: that the latter's neat mathematical solutions to the problem of accumulation are only possible if one denies the essential premise of the problem, namely, that we are dealing with capitalist production, for which the instability of the scheme?—once concretized in the manner Luxemburg (and Preobrazhensky) had suggested—reflects the real instability of the system in its day-to-day existence. Suffice it to say that Preobrazhensky, though not accepting the breakdown hypothesis as formulated by Luxemburg, was still attempting in his concretization of the reproduction schemes to develop a theory of crisis based, in this case, on the temporal unevenness in the reproduction and accumulation of fixed capital. The modifications he made in the articles on "Economic Equilibrium" were thus necessary steps along the way to developing the theory of crises contained in The Decline of Capitalism.
28 Ekonomicheskie krizisy pri NEP'e, p. 16.
29 it is interesting that this was also the pattern of industrialization under tsarist capitalism, where exports of peasant grains were used to finance foreign loans and foreign investment in capitalist industry. To the extent that domestic resources were inadequate for indigenous capital accumulation, the problem was "solved" at the expense of peasant living standards.
30 Capital, vol. II, English edition, chap. XX, sec. X, pp. 453-73.
31 "Once the capitalist form of reproduction is abolished, it is only a matter of the volume of the expiring portion—expiring and therefore to be reproduced in kind—of fixed capital. . . varying in various successive years. If it is very large in a certain year (in excess of the average mortality, as is the case with human beings), then it is certainly so much smaller in the next year. The quantity of raw materials, semi-finished products, and auxiliary materials required for the annual production of the articles of consumption—provided other things remain equal—does not decrease in consequence. Hence the aggregate production of means of production would have to increase in the one case and decrease in the other. This can be remedied only by a continuous relative over-production. There must be on the one hand a certain quantity of fixed capital produced in excess of that which is directly required; on the other hand, and particularly, there must be a supply of raw materials, etc., in excess of the direct annual requirements (this applies especially to means of subsistence). This sort of over-production is tantamount to control by society over the material means of its own reproduction. But within capitalist society it is an element of anarchy" (Capital, vol. II, English edition, p. 473).
32 These are Grigory Konstantinovich Roginsky, ed., Zakat kapitalizma v trotskistskom zerkale (o knige E. Preohrazhenskogo, "Zakat kapitalizma") [The Decline of Capitalism in the Trotsky is t Mirror (on E. Preobrazhensky's Book "The Decline of Capitalism "), Moscow, 1932]; K. Butaev, "K voprosu o material'noi baze sotsializma" ["On the Question of the Material Basis of Socialism"], Prob'lemy ekonomiki, No. 1 (1932);and V. Balkov, "Kapitalisticheskoe vosproizvodstvo v trotskistskom osveshchenii" ["A Trotskyist Interpretation of Capitalist Reproduction"], Problemy ekonomiki, No. 6 (1932). The Balkov article (subtitled "A Critique of the 'Theory' of E. Preobrazhensky") states that it was to be followed by another article, but unfortunately, the series of Problemy ekonomiki available to us at the time of writing was incomplete, and so we do not know the contents of this later piece. Balkov also cites part of his "Critique" appearing separately in VKA, No. 7-8 (1932). The Roginsky collection—the same Roginsky who was co-prosecutor at the infamous "Menshevik Trials" of 193 1-32, among whose victims was the eminent Soviet economist I. I. Rubin—was the outcome of a symposium organized by the Institute of Red Professors to attack Preobrazhensky's book. Among its contributions is an article by M. Mekler, "Obshchii krizis kapitalisma i bor'ba dvukh sistem v svete teorii Preobrazhenskogo" ["The General Crisis of Capitalism and the Struggle of Two Systems in the Light of Preobrazhensky's Theory" attacking the unpublished article by Preobrazhensky, "On the Methodology. . . ." The latter article was also the object of Butaev's attack, and it is from these two sources that we know of its contents. The first person to note the existence of this article by Preobrazhensky and its importance was Erlich, Soviet Industrialization Debate, pp. 178-80.
33 Deutscher, The Prophet Outcast, pp. 93ff., where references to Trotsky's criticism of the first five-year plan are given. Trotsky was to express this position throughout the years 1929-1933, and in fact, the references in the various volumes of his writings are too numerous to list. In addition to the references cited by Deutscher, see in particular "The New Course in the Soviet Economy," in The Writings of Leon Trotsky, 1930 (New York: Pathfinder Press, 1975), pp. 105-19, and "The Five-Year Plan and World Unemployment," ibid, pp. 123-29. This analysis was by no means confined to Trotsky and Preobrazhensky: we should not lose sight of the extent of the turmoil caused by collectivization and industrialization and the opposition this provoked within the Communist Party itself (and not simply among former members of the Right Opposition). See Tibor Szamuely, "The Elimination of Opposition Between the 16th and 17th Congresses of the CPSU," Soviet Studies, January 1966, pp. 318-38. I am grateful to Michael Cox, Queen's University, Belfast, for calling these references to my attention.
34Zakat kapitalizma, pp. 66-71.
35 At the Sixteenth Party Congress (1930) Kuibyshev announced that the country's stock of fixed capital was to be doubled in three years.
36 This part of Preobrazhensky's argument bears a certain similarity to that of J. Steindl in Maturity and Stagnation in American Capitalism (New York: Monthly Review Press, 1974). The transition was characterized, according to Preobrazhensky, by the greater use of reserves in the monopoly period and concomitantly by investment in and construction of new fixed capital coming at a later phase in the cycle. This in turn worked to create a secular tendency toward stagnation, with deeper, more prolonged crises and briefer, less pronounced periods of boom. Although he based his theory on these disequilibria in the the riatura output of the different branches of the economy and their temporal dimensions, it must also be said that Preobrazhensky consistently stressed the impossibility of a strictly monist theory of crisis, noting that one purpose of his book was to bridge the alleged gap between the theories of crisis derivative from vol. II of Capital and Marx's repeated statements, especially in vol. Ill, to the effect that the primary source of crises lay in the contradiction between capitalism's drive to extend the development of the productive forces and its need to restrict the basis of social consumption.
37 Pig iron and coal were two of the worst bottlenecks in the early years of industrialization, with construction sites and factories lying idle for lack of these two basic means of production. What Preobrazhensky means here is that the eventual output of pig iron and coal had themselves to be determined on the basis of existing capacities, rather than have the quite unrealistic targets for pig iron and coal production serve as the starting point for calculating production in those sectors dependent on them.
38 Mekler, in Roginsky, ed., p. 56. In his book Erlich argues that Preobrazhensky's conclusion predicting over-accumulation was unrealistic, since the economy did not have the means to augment heavy industry to the extent that Preobrazhensky had posited in the rather extreme hypothetical illustration on which he had predicated his conclusion. We would suggest, however, that Preobrazhensky was deliberately using hyperbole here, and that he was addressing the economic situation as it actually existed. The question for Preobrazhensky, after all, was one of proportionalities of expanded reproduction and not absolute volumes. It is a fact that the legacy of Stalin's industrialization has been a more or less rigid and unrectifiable hypertrophy of heavy industry in the Soviet economy.
It is interesting that in the article "Economic Equilibrium in the System of the USSR" Preobrazhensky makes the statement that overaccumulation in the state sector was in his view impossible, since the internal market presented an almost limitless demand for the products of state industry. We should remember, however, that he was here attacking those of his opponents who were cautioning against a "too rapid" growth of industry. The statement is equally premised on the assumption that peasant incomes would be systematically rising (though a portion of this rise would be siphoned off into the fund of socialist accumulation), an assumption rendered completely inoperative by the destruction of agriculture during collectivization.
A modern discussion of the issues raised here that uses data from the period appears in Michael Ellman, "Did the Agricultural Surplus Provide the Resources Needed for the Increase in Investment in the USSR During the First 5-Year Plan?," Economic Journal (December 1975). Ellman's conclusion is that industrialization was indeed carried out by raising the degree of exploitation of the industrial workers, and not through drawing off supposed surpluses from agriculture.
39 "Group A" and "Group B" in Soviet parlance correspond essentially to Marx's department I and department II. Statistics on the discrepancy between planned growth in departments I and II and the increases actually achieved can be found in Alec Nove's An Economic History of the U.S.S.R. Hypertrophy here should not be taken simply as a matter of the relative standing of producer and consumer goods, since Soviet economists still complain of the productive capacity of heavy industry having outstripped the creation of a suitable infrastructure upon which any pattern of "balanced" growth must depend.
40 This is by now so well documented in both Marxist and non-Marxist literature on the Soviet Union that it hardly needs elaboration here. For a very good and readable description of the dysfunctionality of current Soviet planning, see Robert Kaiser's Russia, The People and the Power (New York: Atheneum, 1976), chap. 9. From a theoretical standpoint, the most provocative analysis of Soviet planning to appear in recent years is in our view to be found in two articles by Hillel H. Ticktin: "Towards a Political Economy of the USSR," Critique, No. 1 (1973), and "The Contradictions of Soviet Society and Professor Bettelheim," Critique, No. 6 (1976).