IRONICALLY enough the capitalist countries have obligingly tobogganed into the depths of the depression just in time to give the Bolsheviks a breathing spell when they need it most -- to consolidate their gains in a period of slackened tempo, to arouse fresh enthusiasm among the industrial troops by giving more attention to human needs, and to hasten the training of personnel for the plant already constructed. Further, as if to give point to the contrast between their labor shortage and the "panic of unemployment" elsewhere, the Bolsheviks -- adopting the grand manner -- have attempted in recent months to raise the standard of living and to promote "world revolution," not by aggression, but by example.

This does not mean that Soviet Russia has entirely escaped the depression. It does mean, however, that the Bolsheviks have continued their advance, though more slowly than anticipated, despite the derangement of their export-import plans caused by falling world prices. Abroad, meanwhile, a number of academic groups and governments are studying the feasibility of adopting planning in emulation of Russia. But even a cursory examination discloses that the Bolsheviks have created in Russia three factors which do not exist to like extent elsewhere: a. a great national objective: to socialize and industrialize a backward country; b. a foreign trade monopoly: to shut off the planning system from the disastrous fluctuations of currency exchange; c. a coercive power, the centrally controlled police: to combat economic individualism and other forms of opposition to what the plan lays down as essential. Moreover, the development of Russia's economic life, year by year, is scientifically planned. Through all the cycles, whether marked by socialistic or capitalistic methods, constant revolutionary ends are kept in view -- the achievement of a socialized economy, unified in plan and control, operating in a class-less society, and the attainment of prosperity and a high cultural level for society as a whole.

Can we recognize in the recent extension of capitalistic methods in Soviet Russia the beginnings of a new cycle? The evidence does not indicate that it is the end of the transition period and the true beginning of socialism, as proclaimed in Moscow. Nor, on the other hand, is it a retreat to capitalism, as alleged by the foreign press. Rather is it a period of consolidation, following naturally the periods of destruction, rehabilitation, and feverish reconstruction through which the revolution has passed. To understand it we must understand those previous periods, in which the alternation in emphasis was somewhat as follows:

First cycle, Military Communism, 1917-21. Emphasis of state policy on socialistic methods; intense class war, centralization of control, prohibition of individualism, attempt at moneyless accounting; destruction of the capitalist order.

Second cycle, NEP, 1921-28. Emphasis of state policy on capitalistic methods; abatement of class war, decentralization of control, semi-toleration of individualism (competition between the socialized and private sectors), return of money and commercial accounting; rehabilitation of economic life.

Third cycle, Socialist Offensive, 1928-31. Emphasis of state policy on socialistic methods; reintensification of class war, recentralization of control, renewed attempt at moneyless accounting within the socialized sector; reconstruction along socialistic lines.

The first Five Year Plan called for concentration of effort on plant and producers' goods; the welfare of Soviet citizens was sacrificed. The Bolsheviks claim that the country has now been transferred from a predominantly agricultural to a predominantly industrial basis; that the stage is now set for socialism (by which they mean that economy is mostly socialized, planned, and controlled, and that society is practically reduced to one class with a new gradation based, not on possessions, but on service to the state); and that, therefore, the first part of the original program is substantially realized. Stalin announced last summer that "the main problem of the revolution has been solved." This accomplished, there came another turn of the wheel.

Present period, since 1931. Emphasis of state policy on certain capitalistic methods; relaxation of class war, decentralization of control in industry, semi-toleration of individualism outside the socialized sector, renewal of strict money basis in accounting; consolidation, and advance toward socialism by capitalistic means.

The second Five Year Plan, to go into effect January 1, 1933, has two characteristics of its own. It turns with new energy toward the development of Asia; and, without slowing up the building of plant, it gives much greater attention to the human element, to the welfare and training of citizens, the objective of the second part of the original program.

While the above generalizations omit much that is important, such as the effect of the international situation at any given time, we can, with this background in mind, try to form an opinion as to whether the revolution is in a new phase, if not actually a new cycle.


By 1931 it was realized that the rapid tempo set by the Five Year Plan overtaxed the capacities of certain basic industries, notably coal, iron and transport. More important still, it was found that machinery could be installed at much greater speed than raw peasants could be transformed into skilled operators. The cost of production has not come down, nor has the productivity of labor gone up, as rapidly as planned. Nor has the general quality of Soviet manufactures, though constantly improved, attained the standard expected.

The problem was declared to be one of labor deficiency and mismanagement. On June 23, 1931, Stalin summarized for a conference of industrial managers the six new conditions of industrial development which called for new methods. Since then the government has issued innumerable decrees calculated to correct the defects of labor and management. The general result seems to be a change in temper from the militant restrictions of the Socialist Offensive to the milder methods of the NEP.

In passing, it should be noted that conditions now are basically different from those at the beginning of the NEP. In 1921 the government had but little industrial plant, and the peasants' demand for a quid pro quo, goods for grain, brought business to a standstill. The government now has a huge industrial organization at its command, but lacks skilled manpower. The industrial proletariat has failed to keep the required pace in training. Also, in 1921, when the pressure was lifted, the country revived by consumption of the fat laid by during tsarist times. In 1932 increased consumption means inroads on accumulated socialist stores.

In terms of social engineering, both the NEP and the present period of change represent concessions, voluntary or forced, to the human beings who operate the machine, as distinct from the machine itself. It must be remembered, however, that even in their rosiest pictures of the future the Bolsheviks have always maintained that communism is impossible until human nature has been transformed, until work ceases to be merely the means to support life, and becomes the first necessity of life. The "intermediate stage" of socialism is to be that time when the transformation takes place. Obviously it cannot yet be assumed that human beings find work as essential as eating and sleeping. Under the propulsion of organized enthusiasm for a distant objective they are capable of immense sacrifices. But the satisfaction of immediate wants cannot be too long neglected, the working strength exhausted by the first Five Year Plan must be restored, and the monotony of labor which continues to be primarily a means to support life must be relieved. Catering to the human weakness of mankind is probably the best way to describe the seeming relief which has now been given the workers of Soviet Russia.


For the purpose of this article we need describe the shift in methods only in general terms. Stalin's trump card in correcting the deficiencies of labor is to increase the material incentive to skilled workmen.

A system of organized incentive, called "socialist competition," developed with the first Five Year Plan. Labor groups are divided into rival units, matching their strength and skill. Distinction is awarded to the best group or individual, judged by quantity and quality of output. Red boards are set up for posting the names of the deserving, black boards for the reverse. Also, there are the shock brigades, or pacemakers, whose business is to put through special jobs in record time, and to demonstrate to the less enthusiastic the speed at which particular types of work can be done. The system has possibilities. But with so many shock brigades springing into existence this last year, the distinction of being a pacemaker began to wear thin. Nor did work seem to be the first necessity of life to all members of the shock brigades. Moreover, because of the labor shortage many workers were wont to behave as most humans do when in great demand. They tried to pick out factories which offered more favorable contracts. In some factories the labor turnover rose to 40 percent every six months.

Stalin diagnosed the ailment as caused by "left-wing" theoretical equalization of wages. As a matter of fact, actual equality of wages has never existed. But there was an equalizing tendency, whipped on by the trade union leaders, who were supported by the unskilled proletariat, by whom and for whom the revolution was said to have been fought. The difference between skilled and unskilled labor was beginning to disappear. The natural human result was that unskilled workmen lost what incentive they might have had to become skilled by taking the free training offered at night schools.

To remedy this situation, and to stimulate incentive for training, it was decreed that the wages of skilled labor, including the professions, be raised on an average of 30 percent, beginning October 1, 1931. In the metal and coal industries some of the increases are as high as 100 percent. The skilled workmen are likewise given special privileges in food supply and living quarters. The piece-rate system has been reorganized so as to mount in geometric progression. Since last April the collective farms have been operating on a piecework system, with norms fixed according to the degree of difficulty in different types of work, and to the amount of skill and experience required. And all economic organs are ordered to increase the percentage of profits which they set aside for prizes, for training employees, and for other forms of reward, such as educational excursions. The significance of this official differentiation is that service to the state supersedes class origin as the criterion of any one citizen's worth to the revolution.

Now, merely raising the wages of skilled workmen would not produce the desired incentive. There must be an equivalent opportunity to spend the enlarged income on things other than government bonds. Therefore, hundreds of old stores have been reopened, and hundreds of new ones established, in the campaign to meet the fourteen-year-old demand for consumers' goods. Even collective farms are invited to maintain retail stores of their own in the cities. It is expected that the physical volume of food on the market will be swelled by 25 percent in 1932, including one billion cans of preserved food, double the figure of 1931. And manufactured goods will be 20 percent more abundant. Carrying the grand manner still further, the government has ordered stores to lower their prices on an average of 30 percent. The enforcement of this decree is entrusted to Price Control Bureaus in all the large towns, backed up by the Workers-Peasants Inspection.

Of special interest in this scheme is the reliance placed on the kustarny, or handicraft workers. According to some estimates these small producers before the revolution supplied about 50 percent of the commodities used by the peasants and town laborers, roughly four-fifths of the entire population. With the liquidation of the private sector after 1928, they were taxed out of existence as producers, or made to work for the state. By the new decrees they are exempted from one-third of their taxes, and are even supplied with tools and raw materials as encouragement to produce as of old.

The government has likewise greatly extended the housing program. New construction of dwellings has been under way for some years. But because of the natural increase of population and the shift to new industrial centers the pressure for living quarters continues. A psychologically bad contrast is presented to the average worker between the new, well-lighted and well-ventilated factory where he spends his days and the dark, unsanitary rabbit-warren of pre-war construction which still serves him as a dwelling. The recent constructions reflect the social principle that group life, rather than family life, is to be desired. The sleeping quarters are invariably small, while the communal dining halls, clubrooms, assembly halls, etc., are very spacious. And city planning seems to have seized the Russian imagination. To coördinate this national effort a new All-Union Council of Municipal Economy was organized in November and given wide powers to hasten the construction of dwellings and to bring the standard of living conditions up to that of the new working conditions as rapidly as possible.

Thus the Bolsheviks are attempting systematically to raise the standard of living from the "sacrifice level" deemed necessary to carry out the first Five Year Plan. Soviet citizens enjoy more creature comforts, or are beginning to enjoy them. The effort of the last three years has been exhausting, the iron rations have been low. But even if no other factors had come into play the decline of sales abroad would in any case have meant an increase in the supply of food and goods at home. Now, whether the Bolsheviks in their wisdom have deliberately relieved the pressure, or whether they have been forced to do so, the result is the same for the mass of people. Granted the continuance of these conditions, it seems likely that the Bolsheviks will have under their control a greatly refreshed army of toilers, more capable of the élan necessary for carrying through the second Five Year Plan than would have been possible without the timely respite provided by the depression in capitalist countries.


Remarkable, also, is the tendency away from group responsibility and toward individual responsibility in economic enterprises.

Most factories and other institutions are directed by collegiums, of which the department chiefs are members. Moreover, the management is subject to frequent inspection by financial agents, by the Workers-Peasants Inspection, by the G. P. U., by trade unions, by workers' committees, all of them instructing it how to run the enterprise. The discovery has now been made that this sort of group responsibility has drawbacks. It checks abuse of power by individuals, but it also gives the individual a feeling of irresponsibility. Stalin declared that irresponsibility, or "depersonalization," had become the scourge of industry.

He found the principal source of trouble in this case to be the continuous week of five days, which was adopted wholesale in 1929 to abolish Sunday and to keep the machinery turning all the time. It was a high-pressure system. Experience showed that the continuous five-day week was not feasible for all types of enterprise. For one thing, there were not enough experts to insure that the right technical control was constantly on the job. If the motor of a small factory broke down when its one electrical expert was having his rest day, the manager would have to suspend operations until the following day. And workmen and managers alike developed an impersonal attitude toward the equipment they used in common. In general, no one person was solely responsible for any one thing. This led to an alarming increase in carelessness, violations of discipline, breakage, and other forms of waste. More than that, the arrangement was not conducive to coördinated effort to raise the productivity of labor and to lower production costs.

The upshot was a series of decrees ordering institutions, other than those engaged in distribution, to abandon the continuous week, and to establish a weekly schedule of six days. On the sixth day all the personnel rests and the machinery is idle. This makes a month of five weeks, but does not bring back Sunday.

Typical of the move to fix responsibility on individuals is the decree which makes deliberate injury to machinery a criminal offense. If a machine is neglected, some one person or crew can be made to answer for it. There is likewise a new individual responsibility vested in the directors and managers, whether members of the party or not. This emphasis on the importance of managerial skill is interesting. Marx, in his labor theory of value, seemed to deprecate the share of scientific management in production. And the Bolsheviks have probably relied too much on the native ingenuity of ordinary workmen to rise to the requirements of their tasks. At any rate, the manager has been clothed with new authority, and becomes a citizen of prime importance in the eyes of the Soviet state.


So much, briefly, for the new emphasis on material incentive to skilled workmen, and on individual responsibility. Let us turn now to a still more baffling problem which planning has brought to light, that is, the search for the proper balance between centralized dictation and local autonomy. In other words, with the managers of trusts not much more advanced toward the Communist ideal than are the workmen, how much initiative must be granted them to obtain the best results?

This has been a constant problem. Under Military Communism the ideal was a "single state factory." State enterprises then conducted their business on a non-commercial basis by documentary transfers through the treasury. With the reëntry of private business under the NEP, the unwieldy state enterprises were decentralized into autonomous trusts and were instructed to make profits. In 1927, however, they were ordered to adhere strictly to the plan assigned them from the center, whether profits accrued or not. After the Socialist Offensive began they were again recentralized, this time into huge, vertical combines, some of which united as many as two hundred enterprises. In 1931 the process of decentralization was once more put in motion.

This alternation between centralization and trust autonomy can be explained by the difficulties of socialist financing. The underlying problem is one of capital accumulation, since, in the absence of financial aid from abroad, the Bolsheviks have been compelled to rely on means within the country for developing industry. During the decade when the socialized sector was competing with the private sector there was a constant flow of capital from agriculture into industry, from light industry into heavy industry (from consumers' goods into producers' goods), all directed and planned. This pumping of capital from the private sector into the socialized sector mounted year by year until -- the peasants having been brought for the most part into collectives, and private producers likewise having been forced to abandon their activities -- the private sector has been reduced to insignificance.

But, with these sources exhausted or socialized, the suction pumps of taxation, state loans, and state-controlled prices on consumers' goods no longer produce the huge net accumulations which in recent years have poured through the single funnel of the financial plan, to be expended as the state chose. In view of this Stalin declared that heavy industry, the main beneficiary of the redistribution of capital in the past, can no longer rely on these subventions, and must share in the accumulation of surplus capital. Bad management must therefore be corrected, the huge combines must be split up into workable units, and group control must give way to the individual control of a head director. Further, all economic organs must be transferred to a cash basis (khozrazchet, or Economic Accounting). This new system of financing is one of the keys to the present period.

It will be remembered that the Credit Reform of January 1930 abolished commercial credit between state enterprises, and replaced it exclusively by bank credit, with the State Bank acting as a clearing house. The bill of exchange was to be no more. The State Bank cleared transactions simply by deducting the price of goods from the credit of the purchaser and adding it to that of the seller. The Credit Reform was expected to reduce the need for money, as business within the socialized sector would be conducted mostly by bookkeeping. It promised an original way of freeing at least one part of the world from the slavery to gold.

However, defects of this "left-wing banking" immediately became apparent. Assured that their credit would be replenished from the state budget, the trusts indulged in uncontrolled purchasing. This led to "automatic crediting." Also, as the State Bank paid for goods whether they proved satisfactory to the purchaser or not, the sellers became careless in regard to quality. Worse still, the individual producers could not profit by their accumulations, which went into the general funds. Consequently they were deprived of tangible rewards for initiative in reducing production costs, etc. The result was financial disorder, which came to a climax early in 1931.

The commercial basis of accounting, which had been used during the NEP, was restored. The new Economic Accounting system, decreed March 20, 1931, makes it necessary to fix a credit limit for each enterprise. The State Bank now issues funds only on the presentation of documents over the counter to show that contracts have been fulfilled -- goods produced, delivered, and accepted. Evidently there was some opposition on the part of the trusts, for by a decree of October 21 they were given until November 1 to change their credit system from a single to a double account -- one for their own funds and accumulations, and one for the funds loaned by the State Bank which must be paid back by the term date. Two weeks later the Supreme Court of the Soviet Union ruled that violation of the Economic Accounting instructions is a criminal offense. Capitalistic money relationships are thus resumed after a year's trial of socialistic bookkeeping.

But other questions arise. If trusts are to be denied further credit because they have not fulfilled their quotas under the plan, then what becomes of the plan? If this situation should become general, if the tempo set proves too fast, then how will the planning system fare as a whole? How to grant the trusts enough initiative to serve as an incentive, without jeopardizing the plan, continues as a problem for the future.


Last to be noted, but in many ways most significant, is a relaxation of the terroristic methods which marked the drive for collectivization. The Bolshevik leaders feel more secure. Visible opposition has been liquidated and the atmosphere seems now to be less tense than it has been at any time since 1924. There are many indications of the change in temper. "Privateers" can again be seen, handicraft workers, and small traders in the illegal market. And Stalin, in declaring that the proletariat must create its own intelligentsia, urged that non-party workers be given the same opportunities for promotion as party members, so as to prevent the growth of a closed caste system. He likewise demanded that the party wipe out discriminations against those of the old technical intelligentsia who coöperate loyally. The purpose is to use all the available brains of the country in the campaign for training industrial personnel. So those who were "dangerous" yesteryear (many of them were deprived of citizenship because of their class origin) are now granted the same rights in housing, food, schools for their children, and social insurance, which are accorded to the proletariat.


What we see going on in Russia today is an attempt to readjust the relationship between man and the machine. The mechanical equipment, prerequisite to the proposed industrial civilization, has been created at an unprecedented rate. But the human equipment, equally essential, has been relatively slow in arriving at the stage of efficiency and skill which the machinery on hand demands. The methods used by the Bolsheviks to stimulate the human advance, as described above, may be considered capitalistic. The appeal is to workmen and managers as individuals. But this does not entail a return to capitalism. Private ownership in the means of production remains abolished. It entails, rather, that the pendulum has again swung away from over-rapid centralization to a compromise with the industrial troops (to whom work is still a means of support, and not a first necessity of life); away from class war as a driving force to a semi-toleration of the human beings who are compelled to live under the aegis of planned economy.

The present period may be but a demonstration of tactics in the military science which, according to Lenin, inspires the directives necessary to reach the Marxian goals of collectivism. From this point of view, early 1931 marked the "culminating point of the attack," the time to consolidate the positions taken, to refresh the shock troops of assault, and to restore the morale.

Is this the start of the fourth cycle, set to begin when Soviet Russia has become economically and politically secure? Or is it merely another zigzag, a prelude to stricter control than ever before? That depends somewhat on the sharpness of the international competition after capitalist countries have recovered from their present economic troubles.

According to statements from Moscow, the industrial production mounted 20 percent in 1931 (a substantial advance, but not the 40 percent increase planned), the crop was better than average, but the foreign trade showed an unfavorable balance of 125 million dollars. While exact figures are not made public, the foreign commitments of the Soviet Government are estimated by the Amtorg at 400 million dollars. In some quarters it is believed that the Soviet Government will follow the lead of other governments, and default. To meet the payments the State Bank claims to have 329 million dollars of gold in the vaults, which is augmented by a marked increase of gold production in Siberia. Whether or not any of these gold holdings are already earmarked for international payments is not indicated. But even though the prospects for increased income through sales abroad are not promising, and granted that anything is possible in Russia, default by the Soviet Government does not seem likely at present.

So, while we must wait for time and events to show whether or not the revolution definitely entered a fourth cycle in 1931, two conclusions are possible at present. The first is that regimentation has enabled Soviet Russia to weather the depression with fewer apparent economic dislocations than those which have shaken the capitalist world. The second is that the Bolsheviks are taking advantage of the breathing spell to shift their emphasis from the machine to the human beings who operate the machine. Moreover, since they repudiated pre-war and war debts alike, and do not participate in reparations, they are not faced with the financial dilemma which confronts other great nations. Nor are they troubled by frozen assets. Similarly, the present international military situation is not unfavorable to them. All in all, they feel free to take definite steps to improve the welfare of their people and to advance "world revolution" not, as they have threatened in the past, by open aggression, but by example.

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  • BRUCE HOPPER, Assistant Professor of Government, Harvard University; author of "Pan-Sovietism"
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