Economic Apparatus

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Subject essay: Lewis Siegelbaum

Communism, as described by Karl Marx, resolves the inherent contradictions of capitalism. Private ownership disappears, as does social inequality and the exploitation of labor by capital. Lenin and his fellow Bolsheviks thought of communism only in the distant future, and during the long years of underground activity, their thoughts were focused on active resistance to tsarism. Only in the months leading up to the October Revolution did Lenin begin drafting ideas about the shape of a communist state. He distinguished the developed communism of the future, under which the state would wither away, from its earlier stages, in which a worker-run state would control the accumulation of capital. He predicted a long transitional period between capitalism and communism, demanding a strong role from the state.

Though lagging behind Europe and North America, the Russian economy was still significantly modern. Its vigorous industries needed a modern infrastructure and legal system. Though untrained as economists, the Bolsheviks took charge quickly. As early as December 1, 1917, they established a Supreme Council of the National Economy (VSNKh) to organize a general economic plan and financial administration for the new state. Initially headed by V. Osinskii and from April 1918 by A. Rykov, VSNKh took its place in Sovnarkom as a kind of super commissariat with an elaborate infrastructure to handle its enormous but none too clearly defined responsibilities. VSNKh essentially presided over the nationalization, or confiscation of assets, of banking and industry and sought to work out a system according to which the most urgent tasks of production and exchange could be effectuated. It advocated seizure of all joint stock companies, annulled all loans made by the state before October 1917, and put labor unions in control of industrial enterprises. Through its branch units, known as main administrations (glavki) and regional economic councils (sovnarkhozy), VSNKh struggled mightily to gain control of and coordinate the economic resources of the country. Forceful though all these measures were, they contained more than a bit of wishful thinking, and betrayed an ambivalence about rapid or revolutionary approaches to economic reform. Along with his socialist utopianism and his revolutionary ruthlessness, Lenin had a practical streak that saw little use in destroying a vast economy. As a transitional measure, he advocated features of a large-scale capitalist economy such as individual managerial control, wage and piecework incentives, even the employment of bourgeois technical experts and managers.

The egalitarian (equalizing) impulse can be seen in the very first decrees of the Soviet state, which abolished the system of social estates and ranks that underpinned tsarist society. The decrees were followed eventually by an ambitious program of nationalization, based on the truism that property would be held communally under socialism. The program was not at all as predictable as it seems in retrospect. The first act of nationalization took place in December 1917, when all banks were merged into the State Bank that had been created by the old regime. This act was directed against currency speculation and the flight of capital, in the spirit of the slogan common in those days, to “Loot the looters.” Yet it involved no direct confiscation of funds, and was an amateurish takeover accomplished by revolutionaries with no experience in banking. Lenin and his comrades did not make confiscatory nationalization a state policy until six months into the Revolution. In spring 1918, the Sovnarkhoz issued instructions for the administration of nationalized industries, and begin to undermine the control of capital by private citizens by first nationalizing foreign trade, and then abolishing the principle of inheritance. By late summer and early autumn, the final foundations of socialist nationalization were put in place with decrees abolishing private real estate, private trade of all types, and nationalizing small industrial enterprises.

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