Nick Beams, national secretary of the Socialist Equality Party (Australia) and a member of the International Editorial Board of the WSWS, delivered two lectures at a summer school of the SEP in Ann Arbor Michigan in August 2007. The lectures deal with some of the crucial conflicts over economic policy in the Soviet Union during the 1920s. One of the motivations for the lectures was to answer the distortions advanced by the British academic Geoffrey Swain in his book Trotsky published in 2006. Further material can be found in Leon Trotsky & the Post-Soviet School of Historical Falsification by David North.
The following is the second and concluding part of the lecture concerning the Stalinist theory of “Socialism in One Country.” The first part was posted Monday, May 4. Nick Beams’ second lecture will be posted in two parts on May 6 and 7. For other lectures from the 2007 SEP summer school, click here.
One of the central problems confronting the revolutionary government was the breakdown and collapse of industry. It was necessary to begin the task of physically reassembling the industrial working class in order to revive production. Some workers had fled to the country, others were involved in the black market, others were simply engaged in the search for food. It was in this context that Trotsky developed the concept of the militarization of labour. The revolution had sent hundreds of thousands to die on the battlefield, through methods of compulsion. Why should not such methods be used on the no less important economic front? In fact, if the battle to revive the economy were not won, then all the sacrifices on the military front would have been in vain.
In the early 1920s, as the civil war started to come to a close, Trotsky had begun to deploy military units for tasks of civilian labour. What was the point of demobilizing troops under conditions where there was no industry for them to return to? Far better to deploy them on necessary economic tasks than see them simply dispersed into a chaotic economy.
“If we seriously speak of planned economy,” he told the Ninth Congress, “which is to acquire its unity of purpose from the centre, when labour forces are assigned in accordance with the economic plan at the given stage of development, the working masses cannot be wandering all over Russia. They must be thrown here and there, appointed, commanded, just like soldiers.... Without this, under conditions of ruin and hunger, we cannot speak seriously of any industry on new foundations.” 
Lenin advanced no less stringent measures. He supported the passage of a resolution, moved by Trotsky, which called for compulsory labour and for disciplinary measures “the severity of which must correspond to the tragic character of our economic situation.” 
He denounced the collegial system in factory management, under which the trade unions had representation in factory management, as “utopian,” “impractical” and “injurious.” A resolution introduced by him at the congress set out the responsibility of the trade unions to explain to the broadest sections of the working class the necessity to reconstruct the entire industrial administration through the “maximum curtailment of administrative collegia and the gradual introduction of individual management in units directly engaged in production.” 
In the middle of 1920, the government faced a crisis which, had it not been overcome, could well have led to the collapse of the workers’ state. Engineers had forecast a date, only a few months ahead, when not a single railway in Russia would be working. The system was rapidly grinding to a halt. Trotsky was called upon to intervene, despite his protestation that he knew nothing about running the railways.
Through what became a famous order, Number 1042, Trotsky placed the railways and the railway men under martial law and secured the rehabilitation of the railways ahead of schedule. This experience led to his proposal for a “shake-up” of the trade unions, sparking the so-called trade union controversy at the end of 1920.
In view of the later controversies about Trotsky’s call for the “militarization of labour,” it is necessary to point out that his proposals were grounded upon the program of War Communism. He later explained the logic of this program as follows:
“In the system of War Communism in which all the resources are, at least in principle, nationalized and distributed by government order I saw no independent role for trade unions. If industry rests on the state’s ensuring the supply of all the necessary products to the workers, the trade unions must be included in the system of the state’s administration of industry and distribution of its products. This was the real substance of making the trade unions part of the state organizations, a measure which flowed inexorably from the system of war communism, and it was in this sense that I defended it.” 
The conclusion of the civil war at the end of 1920 saw the Russian economy in a disastrous state after seven years of war, revolution, counterrevolution, civil war and imperialist military intervention. National income was less than one third the level of 1913. Industry produced less than a fifth of its pre-war output, coal mines one tenth, iron foundries one fortieth. The industrial workforce, which had numbered about 3 million before the war, was down to half that figure, and many of them were not productively employed. The railways, notwithstanding the success of Trotsky’s emergency measures, were in a shambles. Moscow had only one half of its pre-war population and Petrograd only one-third. The situation was so desperate that cannibalism had made its appearance in parts of the country.
These were the economic conditions that led to a series of peasant revolts at the end of the civil war culminating in the Kronstadt rebellion in February 1921 during the 10th congress of the Communist Party.
The proposal which Trotsky had first advanced a year before, that grain requisitioning be replaced by a tax in kind, was now put forward in the form of the NEP. At first the measures were limited ... Lenin even envisaged that exchange may take place on a kind of barter basis. But once the system of trading was established, it rapidly developed according to its own inexorable logic. In October 1921 Lenin declared that the retreat had not gone far enough and that a further retreat was necessary. The money system had to be brought back. “Nothing came of commodity exchange [in kind]; the private market proved too strong for us; and instead of exchange of commodities we got ordinary buying and selling, trade.” 
The shift to the NEP was conditioned both by conditions in Russia and a change in the international situation. It was clear by the beginning of 1921 that the immediate revolutionary crisis of the postwar years had passed—the betrayals of the social democracy had ensured that the bourgeoisie remained in the saddle. As Trotsky drew out at the Third Congress, against the “lefts” both in the German and Russian parties, while capitalism had not been able to establish a new equilibrium, such as had existed in the pre-war period, it had achieved a certain stabilization. Against the “left” theory of the continuous offensive it was necessary to prepare for a more protracted development in which the task of the party was not the immediate struggle for power, but the development of tactics to win the masses away from social democracy towards and into its ranks. Accordingly, the NEP in Russia was a manoeuvre, an adaptation to this new situation.
While the switch to the NEP was adopted without opposition, conflicting attitudes towards it were to arise almost from the outset. There were those for whom the NEP was a retreat—necessary but a retreat nonetheless. For these forces, of which Trotsky was one, the introduction of the NEP and the turn to the market did not do away with the issues of planning that had arisen in the period of War Communism.
As early as May 1921, just two months after the adoption of the NEP, Trotsky wrote to Lenin on the importance of a balanced economic reconstruction. “Unfortunately, our work continues to be carried out planlessly and without any understanding of the need for a plan. The State Planning Commission represents a more or less planned negation of the necessity to work out a practical and business-like economic plan for the immediate future.” 
There was no response from the Politburo where Lenin opposed Trotsky’s conception. He was not against long-term planning as such but regarded it as premature and therefore something of a “bureaucratic utopia” in a country of 20 million scattered farms, disintegrated industry and primitive forms of private trade.
At the same time, another current rapidly made its appearance. Insisting that the entire policy of War Communism was wrong, it was therefore somewhat misleading to characterize the NEP as a retreat. It was the policy which would have been adopted but for the civil war.
In the wake of the experiences of War Communism there was a backlash against measures of government intervention, let alone planning, and policies that could be seen as adversely affecting the peasantry. Everything had to be done to maintain the smychka—the bond or alliance between the working class and the peasantry without which the workers’ state would be placed in grave danger.
These tendencies, which insisted that the failure of War Communism had shown that it was necessary to develop the methods of the market, found spokesmen in Sokolnikov, the head the Finance Commission, and Rykov, the chairman of the economic council.
In discussing these issues it is necessary to emphasise at the outset that the complexities of the situation meant that there were no easy, cut and dried answers. The answer to the myriad problems that beset the revolutionary government was not to be found in the adoption of the appropriate slogan, but only through a deep-going analysis of the situation.
(This point should be kept in mind when we come to discuss the issue of “Socialism in One Country” and seek to discover why it was that Trotsky did not immediately link up with Zinoviev and Kamenev once they came into conflict with Stalin over this question in 1925.)
Consider for a moment the question of grain supplies. In order for industry to expand it was essential that the supply of grain to the towns be increased. But an increase in the supply of grains would come from the development of larger, more efficient peasant farms. These farms would acquire more land, larger stocks, and hire more labour. And the policy of the NEP and its reliance on the market encouraged such a process. But in doing so it was inevitably giving rise to a class differentiation in the countryside. The operation of the market to bring about an increased supply of grain, so necessary for the development of industry in the cities, would also see the emergence of richer peasants, kulaks, and the danger of political opposition to the workers’ state.
All tendencies in the party agreed, at least in principle, on the need for industrialization. But the issue was how was it to be undertaken. The economic reasoning of the right wing was that it should arise from the growth of peasant demand, which would finance the expansion of industry. It followed that in order to stimulate peasant production, and above all sales to the market, there had to be a stable currency. If value of the currency were eroded through inflation, the peasant would tend to hoard his surplus or use it for other purposes, such as the making of alcohol, the provision of loans to other peasants or to feed livestock. But a stable currency meant that state subsidies and credits to unprofitable sections of industry had to cease as they were among the chief causes for inflation and the erosion of currency values. Tight credit, argued Sokolnikov, was necessary to ensure currency stabilization. Industry had to be made to pay its own way.
These positions came into conflict with the views of Trotsky who, among others, such as Preobrazhensky, insisted on the need to begin the planned development of industry with the provision of state credit.
The right-wing pro-market agenda continue to unfold throughout 1922 culminating in a proposal to do away with the monopoly of foreign trade. Currency stabilization required a favourable balance of trade and if price advantages pointed to the importation of consumer goods, then this should be undertaken. Sokolnikov, with the support of Bukharin and Stalin, secured the passage of a resolution on the Central Committee against the foreign trade monopoly.
The decision of the Central Committee, taken in the absence of both Lenin and Trotsky, did not go so far as to admit private business into foreign trade, but it did loosen central control over Soviet trade agencies and opened the door for the abandonment of the policy which Trotsky had called “socialist protectionism.”
Lenin objected to the plan upon hearing of it and called on Trotsky to defend their common view about the need to preserve and reinforce the monopoly of foreign trade. Trotsky agreed with Lenin, but pointed out that the move against the foreign trade monopoly was a consequence of the tendency to submit to the forces of the market. It was precisely in order to counter the pressure of the market that planning under the direction of Gosplan had to be undertaken. He and Lenin reached agreement that if they were not able to reverse the Central Committee decision they would publicly oppose it.
In the event, that was not necessary as Trotsky secured the reversal of the decision when it came up for review in the second half of December.
The move against the trade monopoly and its implications for the policies of the government appear to have had a major impact on Lenin’s outlook. On December 27, 1922 he wrote to the Politburo proposing a significant shift on the question of planning and Gosplan.
Set up in the last days of War Communism, Gosplan had largely been pushed aside during the initiation and expansion of the NEP. Its responsibilities did not extend to economic planning on a broad scale but were confined to giving advice on administrative matters to the various industries.
Lenin’s letter to the Politburo proposed a definite shift, and signaled his withdrawal of support for those in the party leadership who had opposed Trotsky on the need to expand Gosplan’s role.
“Comrade Trotsky, it seems, advanced this idea [about Gosplan’s prerogatives] long ago,” he wrote. “I opposed it ... but having attentively reconsidered it I find that there is an essential and sound idea here: Gosplan does stand somewhat apart from our legislative institutions ... although it possesses the best possible data for a correct judgment of [economic] matters. ... In this, I think one could and should go some of the way to meet Comrade Trotsky...” 
By the beginning of 1923 the first signs of a crisis in the NEP were clearly apparent. While the 1922 harvest had been a good one, problems were developing in the economy as a whole. The most obvious symptom of the imbalances was the growing divergence between agricultural and industrial prices. NEP had not assisted the growth of industry in the cities on which the advance of any economy depended. Rather, it had tended to stimulate primitive and backward local industries. Heavy industry had recorded no significant improvement.
According to the account by the historian E.H. Carr, the situation in trade and distribution was “no less disquieting.” “In the first place, NEP had brought into the open the mass of private traders who had eked out an illegal existence in the penumbra of war communism, and encouraged the appearance of many more, so that the great bulk of retail trade was now conducted by private traders, greater and lesser nepmen, whose energy and resourcefulness, in conditions of free competition, drove the state trading institutions and cooperatives from a large part of the field. Figures compiled in early 1924 showed that 83.4 percent of retail trade was in private hands, leaving 10 percent to the cooperatives and only 6.6 percent to the state organs and institutions.” 
Even though his advocacy of consistent planning and the development of industry had won support from Lenin, Trotsky’s proposals met with intensified opposition from inside the Politburo, which, with his lone opposition, refused to publish Lenin’s article in increasing the powers of Gosplan. However the Politburo majority could not, at this stage, come out openly against Trotsky and so agreed that he should give the report on industry at the upcoming 12th congress of the Communist Party.
The Theses on Industry that he prepared for the congress emphasized the political importance of industrialization in the creation of an unshakeable foundation for the workers’ state. There had to be a correct relationship between the market and planning which ensured that the dangers of War Communism were averted while at the same instituting control over the market where necessary. State activity as a whole had to “place its primary concern on the planned development of state industry.” In his report, Trotsky called for a “more harmonious, more concentrated economic offensive.” 
The function of planning, he insisted, was ultimately to overcome the NEP, which had been established for a long time, but not forever.
“In the final analysis we will spread the planning principle to the entire market, thus swallowing it and eliminating it. In other words, our successes on the basis of the New Economic Policy automatically move towards its liquidation, to its replacement by a newer economic policy, which will be a socialist policy.” 
The resolution of the 12th congress was, on paper, a victory for Trotsky. But the program he advanced, including the increased involvement of Gosplan, remained, by and large, a dead letter.
The phenomenon of the scissors crisis—the divergent movement between the agricultural and industrial prices—attracted considerable attention. In March of 1923, Trotsky noted, industrial prices stood at 140 percent of their 1913 level while agricultural prices were below 80 percent ... and the divergence was widening.
But very different conclusions were being drawn about the policies that should be employed to overcome the crisis.
The advocates of industrialization, Preobrazhensky in particular, undertook a comprehensive analysis of the crisis. It was bound up with vast changes in the situation facing peasant agriculture brought about by the revolution. Prior to the revolution the peasantry had been forced to supply a considerable amount of grain in payments to the tsarist regime and the nobility for which there was no return. Now the peasants had a larger surplus to dispose of. To the extent that there was an insufficient output from industry to meet this additional demand, prices would tend to rise. The closing of the scissors therefore involved the development of industry and an increase in its efficiency in order to increase the supply of industrial goods that the peasant needed to purchase. Only in this way could the flow of goods to the city be maintained through market mechanisms and without resort to the methods of compulsion that had formed the basis of War Communism.
However, as the crisis became more severe, the right-wing defence of the market became more strident. The way to bring down prices, it argued, was to restrict the supply of credit to state industry, forcing it to lower prices and increase cash flow through the sale of stocks.
The situation rapidly worsened and came to a head in the late summer as the disparity between industrial and agricultural prices widened week by week. By October retail prices of industrial goods stood at 187 percent of their pre-war level and agricultural prices at 58 percent. The problem, however, was not lack of production. The harvest had been good and consumer goods were being produced. The mechanism to establish terms of trade that ensured the flow of goods from the country to the city and vice versa had broken down.
As E.H. Carr notes: “What NEP had created was not the much vaunted ‘link’ or ‘alliance’ between the proletariat and the peasantry, but an arena in which these two main elements of the Soviet economy struggled against one another in competitive market conditions, the battle swaying sharply first to one side, then to the other ...” 
The position of the majority was that everything must be done to take pressure off the peasantry and that pressure must be applied to industry to reduce prices. Strikes of workers took place in August and September and the credits to industry were cut in order to try to force down prices.
On October 8, 1923 Trotsky initiated a battle against the majority of the Central Committee in a letter on the mounting economic and political crisis. Acutely aware that his actions would be interpreted as a challenge for the leadership of the party as Lenin lay incapacitated, he made clear that his views would only be made known to a “very narrow circle of comrades.”
The re-emergence of fractional groups within the party, he stated, was a result of two causes: the incorrect and unhealthy regime within the party and the dissatisfaction of the workers and peasants with the economic situation that had been brought about not only by objective economic difficulties but also by “flagrant radical errors of economic policy.”
The resolution of the 12th congress on Gosplan and the planning principle had been pushed into the background and decisions about economic issues were increasingly being taken by the Politburo “without preliminary preparation, out of their planned sequence.” Nationalized industry had not been developed according to a plan but had been sacrificed to the financial policy.
There was no mechanism within the present set of policies for a rational resolution of the crisis. “The very creation of a committee to lower prices,” he wrote, “is an eloquent and devastating indication of the way in which a policy which ignores the significance of planned and manipulative regulation is driven by the force of its own inevitable consequences into attempts to command prices in the style of war communism,” Trotsky wrote. 
The Politburo leadership ignored the warnings about the direction of policy and insisted that Trotsky was motivated by the drive for personal power.
According to the Politburo majority: “We consider it necessary to say frankly to the party that at the basis of all the dissatisfaction of Comrade Trotsky, all his attacks against the Central Committee which have continued already for several years, his determination to disturb the party, lies the circumstance that Trotsky wants the Central Committee to place him ... at the head of our industrial life...” 
In his reply, in which he detailed the past history of his disputes with the majority, Trotsky again insisted that “one of the most important causes of our economic crisis is the absence of correct uniform regulation from above.” 
The Declaration of the 46, which was issued immediately following Trotsky’s letter, made the same criticisms on economic policy.
“The casualness, thoughtlessness, lack of system in the decisions of the Central Committee, not making ends meet in the area of the economy, has led to this, that with undoubted large successes in the area of industry, agriculture, finance, and transport, successes achieved by the country’s economy essentially not thanks to, but in spite of the unsatisfactory leadership, or rather in the absence of any leadership—we face the prospect not only of the cessation of this success, but of a serious general economic crisis.” 
While the party leadership made certain concessions to the Left Opposition these were of a purely verbal character. The opposition was condemned at the 13th party conference in January 1924 and defeated at the 13th party congress held in May of that year. In October Trotsky published his Lessons of October, which saw a ferocious campaign against him, as part of which Stalin, for the first time, unveiled the theory of socialism in one country. As a result, Trotsky was forced to resign as commissar of war. In May of 1925, following his recovery from illness, he took up work in the Concessions Committee where he turned more deeply into the issues confronting the Soviet economy and its relations with the world market.
12. Trotsky, My Life, Penguin, 1988, p. 482.
13. Robert Daniels, The Conscience of the Revolution, Harvard University Press, 1965, p. 121.
14. Isaac Deutscher, Trotsky, Volume 1, Oxford University Press, 1970, p. 499.
15. Daniels, p. 124.
16. Trotsky, My Life, pp. 482-83.
17. Day, “Trotsky and Preobrazhensky,” p. 65.
18. Deutscher, Trotsky, vol. 2, p. 42.
19. Deutscher, Trotsky, vol. 2, p. 68.
20. E.H. Carr, The History of Soviet Russia, vol. 4, Penguin, 1969, p. 11.
21. Daniels, pp. 202-203.
22. Day, p. 82.
23. Carr, p. 87.
24. Carr, pp. 105-106.
25. Daniels, p. 217.
26. Carr, p. 106.
27. Daniels, p. 218.