The whole course of development of the capitalist mode of production and of the class struggle in bourgeois society inevitably leads to the revolutionary replacement of capitalism by socialism. Capitalism gives rise to large-scale machine industry which is the material prerequisite for the transition to socialism. In the shape of the proletariat, the development of capitalism prepares the social force which carries out this transition. As has been shown above, in the epoch of imperialism the conflict between the growing productive forces and bourgeois relations of production, which have become fetters on these productive forces, assumes unparalleled acuteness. The law that the relations of production must necessarily correspond to the character of the productive forces requires the abolition of the old bourgeois production-relations and the creation of new socialist productive relations. Hence, there arises the objective necessity of the proletarian socialist revolution.
There can be no peaceful “growing" of capitalism into socialism, as preached by the opportunists, because of the opposite natures of the very foundations of bourgeois and socialist society and of the antagonistic interests of labour and capital. The transition from capitalism to socialism is only possible by way of proletarian revolution and the dictatorship of the proletariat. The proletariat, by virtue of its economic position, is the only class capable of uniting the whole of the working people around itself, for the overthrow of capitalism and the victory of socialism.
Proletarian revolution is fundamentally different from all preceding revolutions. In the transition from slavery to feudalism and from feudalism to capitalism, one form of private property was replaced by another, and the power of one group of exploiters by that of another. Because all exploiting societies had foundations of a similar type-private ownership of the means of production—the new economic structure matured gradually in the womb of the old form of production. Thus, in the transition from feudalism to capitalism, new bourgeois relations of production gradually developed in the womb of the old system, more or less ready-made forms of the capitalist order grew up. The task of the bourgeois revolution consists of the seizure of power by the bourgeoisie in order to bring this power into accord with the existing capitalist economy and to sweep away the fetters of the old, feudal society which hamper the growth of capitalism. With the solution of this task, the bourgeois revolution is usually accomplished.
Proletarian revolution aims at replacing private ownership of the means of production by social ownership, and abolishing every kind of exploitation of man by man. It does not find any ready-made forms of socialist economy. A socialist form of society, based on social ownership of the means of production, cannot grow up in the womb of a bourgeois society based on private ownership. Having established the power of the proletariat, the proletarian revolution has the task of building a new socialist economy. The conquest of power by the working class is only the beginning of the proletarian revolution, and power is used as a lever for the reconstruction of the old economy and the organisation of the new.
Consequently, the replacement of capitalism by socialism requires in each country a special transitional period which occupies a whole historical epoch, in the course of which the building of socialist economy and radical reconstruction of all social relations takes place.
“Between capitalist and communist society lies the period of the revolutionary transformation of the one into the other. There corresponds to this also a political transition period, in which the State can be nothing but the revolutionary dictatorship of the proletariat." (Marx, “Critique of the Gotha Programme", Marx and Engels, Selected Works, 1951 vol. II, p. 30.)
The transitional period from capitalism to socialism begins with the establishment of proletarian power and is completed with the construction of socialism, the first phase of communist society. During the transitional period the old capitalist basis is abolished a new socialist basis is created and the development of productive forces necessary for the victory of socialism is assured. During this period the proletariat must temper itself as the force capable of administering the country, of building socialist society and reeducating the petty bourgeois masses in the spirit of socialism.
Basing himself on the principles of Marx and Engels, Lenin worked out the theory of the transitional period from capitalism to socialism and the dictatorship of the proletariat, which equipped the working class, and all working people with a scientific approach to the building of socialism.
The proletarian revolution was first victorious in Russia. The development of capitalism in Russia was sufficient for the victory of the proletarian revolution. At the same time Russia was the focal point for all the contradictions of imperialism. This greatly intensified the revolutionary activity of the proletariat and the gathering around it of the peasant masses. In October 1917, under the leadership of the Communist Party which was equipped with Lenin’s theory of the socialist revolution the Russian proletariat, in alliance with the poor peasantry, overthrew the power of the capitalists and landlords and established its own dictatorship. The great October Socialist Revolution, which for the first time in the history of mankind had opened the way to socialism, gave an, example of the essential features of the proletarian revolution in any country. In this connection, it must be borne in mind that the socialist revolution in each country seceding from the imperialist system necessarily has its own peculiarities, arising from the particular historical conditions of development of each country and the prevailing international situation.
Lenin discovered and scientifically proved the possibility, in certain historical conditions, of a non-capitalist path of development in socially and economically backward countries. Having thrown off the yoke. of imperialism, these countries are able, with the help of advanced countries where the proletarian revolution has been victorious, to avoid the prolonged and agonising process of capitalist development and, by-passing, the capitalist stage, are able gradually to begin building socialism. Thus, an example of the non-capitalist path of development is the Mongolian People’s Republic, where feudal relations earlier prevailed. Thanks to the assistance of the Soviet Union, the Mongolian People’s Republic was able to develop along the path to socialism, without passing through capitalism.
Because the proletarian revolution has the task of creating the socialist system of economy, based on social ownership of the means of production, and of ending every kind of exploitation, it cannot avoid breaking up the old State machine, which suppressed the working people, and forming a new State capable of ensuring the establishment of the new economy. The proletarian revolution gives birth to a State of a new type—the dictatorship of the proletariat. The economic and political emancipation of the working people and the transition from the capitalist to the socialist mode of production is impossible without the dictatorship of the proletariat as its political superstructure. The dictatorship of the proletariat is the State leadership of society by the working class.
The dictatorship of the proletariat is a real democracy which reflects the deepest interests of the working people. With the dictatorship of the proletariat, the working people become, for the first time in history, the masters of their country. In all its previous forms the State has held down the exploited majority in the interest of an exploiting minority. The dictatorship of the proletariat holds down the exploiting minority in the interests of the working-class majority. Whereas the bourgeois revolution, in consolidating the new capitalist form of exploitation, cannot rally the working people and exploited masses around the bourgeoisie for any length of time, the proletarian revolution, in abolishing every kind of exploitation, can and must bind these masses to the proletariat in a permanent alliance. The alliance of the working class and the peasantry under the leadership of the working class is directed against the exploiting classes, and is the supreme principle of the dictatorship of the proletariat. The consolidation of the power of the proletariat and the construction of a socialist economy are impossible without this alliance.
The dictatorship of the proletariat is a continuation of the class struggle of the proletariat in new conditions and in new forms, against internal exploiters and against the aggressive forces of capitalist countries. “The dictatorship of the proletariat is a persistent struggle—bloody and bloodless, violent and peaceful, military and economic, educational and administrative-against the forces and traditions of the old society." (Lenin, “‘Left-Wing’ Communism, an Infantile Disorder", Selected Works, 1950, English edition, vol. II, Pt. 2, p. 367.)
The dictatorship of the proletariat has three basic features, corresponding to the problems involved in building socialism. It means the use of the power of the proletariat, in the first place to crush the exploiters, defend the country and consolidate its links with the proletarians of other countries; secondly, to detach once and for all the working people and exploited masses from the bourgeoisie, and to consolidate the alliance of the proletariat with these masses so that they can be drawn in to the work of building socialism; thirdly, to build the new socialist society.
As a political superstructure, the dictatorship of the proletariat is born of society’s fully-matured economic need of a transition from capitalism to socialism. But having come into being, it becomes itself a most powerful force, the instrument for the building of socialism. It ensures the elimination of the old capitalist basis, actively assists the socialist basis to arise and develop the victory of socialist forms of economy over capitalist forms.
Socialist forms of economy cannot emerge and develop spontaneously, of their own accord. They arise and develop as a result of the planned activity of the proletarian State and the creative activity of the working masses.
The proletarian State can successfully create the new basis only in so far as it relies on the objective economic law that the relations of production must necessarily correspond to the character of the productive forces, and to the new economic laws which emerge from the new economic conditions. Compared with capitalism, the dictatorship of the proletariat secures the creation of a higher form of social organisation of labour. This is the chief source of strength of the socialist structure and of its victory over capitalism.
The forms of the proletarian State can vary. “The transition from capitalism to communism certainly cannot but yield a tremendous abundance and variety of political forms, but the essence will inevitably be the same: the dictatorship of the proletariat." (Lenin, “The State and Revolution", Selected Works, 1950, English edition, vol. II, Pt. I, p. 234.)
This basic tenet of Marxism-Leninism has been wholly confirmed both by the historical experience of the U.S.S.R; where the form of the dictatorship of the proletariat discovered by Lenin-Soviet power-has established itself, and also by the subsequent historical experience of those countries where the dictatorship of the proletariat takes the form of people’s democracy.
Guidance of the whole process of planned construction of a socialist economy, in countries of the dictatorship of the proletariat, belongs to the Communist (workers’) parties. These parties, equipped with the theory of Marxism-Leninism and a knowledge of the laws of economic development of society, organise and guide the masses of the people to the solution of the problems of building socialism.
The development of capitalism prepared the essential pre-requisites for the socialisation of large-scale machine industry, mechanised transport, the banks, etc. The proletarian State, at the very outset of the transitional period, carries out the nationalisation of large-scale capitalist production.
Socialist nationalisation is the revolutionary alienation of the property of the exploiting classes by the proletariat and its conversion into State, socialist property—the property of the whole people. Socialist nationalisation leads to the elimination of the basic contradiction of capitalism—the contradiction between the social character of production and the private capitalist form of appropriation. As a result of socialist nationalisation the relations of production in industry are brought into accord with the nature of the productive forces, and this provides scope for their development.
Socialist nationalisation in the first place does away with the capitalist ownership of the chief means of production and thereby abolishes the economic domination of the bourgeoisie; in the second place it provides the proletarian dictatorship with an economic base, by transferring the commanding heights of the national economy, that is the key branches of the economy, to the working people. Social ownership of the means of production, as the basis of socialist production-relations, is
The nationalisation of large-scale industry, as the leading branch of the national economy, is of decisive importance for socialist construction. At the same time the banks, railways, merchant marine and communications, large-scale enterprises of internal trade and all foreign trade are nationalised. With the nationalisation of the banks the bourgeoisie lose one of their main instruments of economic domination, and the proletarian State acquires a centralised and extensive economic apparatus which, after its revolutionary refashioning, is utilised for the building of socialism. The nationalisation of foreign trade is essential to a country building socialism in order to secure its economic independence of the capitalist world.
Because of the urgent need to abolish the survivals of serfdom in the anachronistic system of large landowning, the proletarian State immediately confiscates the estates of the big landowners together with their cattle and implements. The bulk of the confiscated land is transferred to the working peasantry, while a small part is organised into large-scale State agricultural enterprises.
Nationalisation of the land, that is, the abolition of private ownership of land, and its conversion into the property of the proletarian State, is one of the most important measures of the socialist revolution. The question of the carrying out of the nationalisation of all the land is decided by the proletarian authority in accordance with the concrete conditions of each country. In Russia, where peasant traditions of private ownership of land were weaker than in the West, the Soviet Government in accordance with the demands of the peasant masses nationalised the whole of the land at the outset of the revolution. Hence absolute rent disappeared. The Soviet peasantry for the first time in history acquired the land for use without payment, from the hands of the proletarian revolution. In those countries where small peasant private ownership has existed for a long period, and where the peasantry accordingly has a stronger tradition of private ownership, the working class does not, on taking power, nationalise the whole of the land at the beginning of the revolution. In these countries only a part of the land, which bas been confiscated from the big landowners, is nationalised and formed into a State fund. The bulk of the confiscated land becomes the private property of the peasantry. The question of nationalising the whole of the land is settled in practice in the course of the socialist reconstruction of agriculture.
In the first months of the great October Socialist Revolution, after the bourgeois State apparatus had been broken, the means of production and other wealth were nationalised, and taken from the landowners and big capitalists without compensation.
The Decree on Land was issued on October 26 (November 8), 1917. The lands belonging to the landowners, bourgeoisie, imperial family, churches and monasteries, were confiscated, alienated without compensation. The right to private ownership of land was abolished for ever. The whole of the land together with its minerals, woods and waters became State property (the possession of the whole people). The purchase and sale of land was forbidden. The peasantry received free use of more than 400 million acres of new lands in addition to the land it disposed of before the revolution. It was freed from rent payments to the landowners and also from expenditures on land purchase, amounting in all to more than 700 million gold roubles (about £75 millions) annually. The nationalisation of the land was the basis for the abolition of the class of landowners. It meant the complete eradication of the remnants of serfdom. Thus, in passing, the socialist revolution finally completed the tasks of the bourgeois-democratic revolution. The nationalisation of the land did not yet in itself create socialist relations of production in the countryside since, although the land become national property, it continued to be privately used. It was, however, of great importance for the building of socialism. Nationalisation of the land strengthened the economic basis of the dictatorship of the proletariat and improved the economic condition of the working peasantry. It paved the way for the movement of the peasantry later on along the path of socialist development.
By way of a transitional measure towards general nationalisation of capitalist concerns, and in order to obtain a degree of regulation of their activities, the Soviet Government introduced workers’ control, that is, supervision by the body of workers in these concerns of production, trade and finance. In December 1917 the banks were nationalised. The Soviet Government annulled all loans acquired by the Tsarist and Provisional Governments from both foreign and native capitalists. Foreign trade was declared a State monopoly, and imports and exports were taken from the hands of private individuals and transferred to State bodies. The monopoly of foreign trade, introduced by the Soviet Government, was a firm barrier protecting the country from the economic aggression of the imperialists who were striving to enslave it and turn it into a colony. The railways and means of communications, the mercantile marine and large river fleets became the property of the whole people. The Soviet Government nationalised industrial concerns by means of confiscation without compensation on an ever-increasing scale. The nationalisation of large concerns in all sectors of industry, was proclaimed in June 1918.
The nationalisation of large-scale industry, the banks, transport and foreign trade meant that the Soviet Government had undermined the economic power of the bourgeoisie and had taken over the key positions of the national economy.
Capitalist relations of production were replaced by socialist relations in the nationalised concerns. As social property, the means of production ceased to be capital. The exploitation of man by man was abolished. A new socialist labour discipline was introduced and socialist emulation was born among the workers. Socialist principles of management of production, combining one-man management with the creative activity of the working masses, were gradually established.
Overcoming the resistance of the bourgeoisie and the wrecking and sabotage of bourgeois specialists, and in determined struggle with disorganising petty-bourgeois influences, the Soviet Government began to organise public accounting and supervision of production and distribution.
With the nationalisation of large-scale industry, transport, the banks, etc., the socialist form (sector) of economy arises. But in the transitional period, alongside the socialist structure based on the social ownership of the means of production, there are still forms (that is, types of economy) inherited from the past and based on private ownership. This means that the economy of the transitional period has a mixed character.
As Lenin pointed out, there were, in the transitional period in the U.S.S.R., the following five forms of economy:
(1) Patriarchal peasant economy.
(2) Petty commodity production.
(3) The private economy of capitalism.
(4) State capitalism.
(5) Socialist economy.
Patriarchal peasant economy, based on personal labour, was a small-scale and largely natural economy. In other words, it produced almost exclusively for its own needs.
Petty commodity production was based on personal labour and connected to a greater or lesser degree with the market. This was primarily the middle-peasant economy, producing the bulk of marketed grain, as well as handicraft production without the use of hired labour. Petty commodity economy embraced the bulk of the population for a considerable part of the transitional period.
The private economy of capitalism was represented by the most numerous of the exploiting classes—the kulaks as well as by the owners of non-nationalised (mainly small and middling), industrial concerns and by traders. The capitalist concerns used hired labour, labour-power was a commodity, exploitation existed and surplus-value was appropriated by the capitalists.
State capitalism took the form mainly of concessions granted by the Soviet Government to foreign capitalists, and of certain State concerns rented to capitalists. Under the dictatorship of the proletariat, State capitalism was essentially different from that existing under the domination of the bourgeoisie. Under the dictatorship of the proletariat, it is a form of economy which is strictly limited by the proletarian authority and is utilised by it in the struggle with petty-bourgeois disorganising influences and in the building of socialism. State capitalism occupied only a very small place in the economy of the U.S.S.R.
Socialist economy comprised, in the first place, the factories, mills, transport, banks, State farms, trading and other concerns belonging to the Soviet State. In the second place, it included the co-operatives—consumer, supply, credit and producer, including their highest form, the collective farms. The basis of socialist economy was large-scale machine industry. At the very outset of the transitional period, socialist economy, as the most advanced of these economic forms, began to playa leading role in the economy of the country.
In the socialist sector of the economy, labour-power ceased to be a commodity, labour lost the character of hired labour and became labour for the worker himself, for society. Surplus-value disappeared. The transition to planning of the work of nationalised concerns, first in particular industries and subsequently throughout the whole of the State sector, was gradually achieved. As a result of the establishment of social ownership of the means of production, the output of State concerns began to accrue to the State, that is to the whole of the working people, instead of the capitalists.
The existence of all five of these forms of economy is not inevitable for every country building socialism. But, as Lenin taught, and as has now been confirmed by historical experience, there are the following main forms of social economy in every country during the transitional period from capitalism to socialism: socialism, petty commodity production, capitalism. To these forms there correspond the following classes: the working class, the petty bourgeoisie (particularly the peasantry), and the bourgeoisie. The main features of the economy of class relationships, and consequently also of the basic economic policy in the transitional period, are common to all countries. This does not exclude but on the contrary presupposes the existence of specific peculiarities in each country.
Compared with their position under capitalism, the position of the classes, in the transitional period is fundamentally changed.
The working class, from being an oppressed class under capitalism, becomes the ruling class, holding the reins of power and owning, in common with all the working people, the means of production which have been socialised by the State. The material conditions of the working class steadily improve, its cultural level rises.
The peasantry, the poor and middle peasant masses, obtain from the State land, emancipation from the yoke of the landowners, protection from the kulaks, and all round economic and cultural assistance. As a result of the October Revolution and the assistance of the Soviet Government, the middle and poor peasantry were already producing about 65 million tons of grain in 1926-7, compared with 40 million tons before the Revolution.
Small-scale peasant commodity production inevitably gives birth to capitalist elements: class differentiation of the peasantry into poor peasants and kulaks takes place. But in the transitional period the character of this process is not the same as under capitalism. Under capitalism the poor peasants and kulaks increase in numbers, while the middle peasantry decrease: in their mass they become impoverished and swell the ranks of the poor peasantry and the proletariat. During the transitional period, owing to the new conditions of development of peasant economy, the proportion of middle peasants increases in comparison with the pre-revolutionary period while the number of poor peasants and kulaks decreases. In the U.S.S.R., during the transitional period before the main mass of peasants began to take the path of socialism, the total number and proportion of middle peasants increased as compared with the pre-revolutionary period, at the expense of a decrease in the total number and proportion of the poor peasants, a part of whom rose to the level of the middle peasants. At the same time the total number and proportion of kulaks considerably decreased, compared with the pre-revolutionary period, the growth of the kulaks that took place in some years of the transitional period being considerably less than under capitalism. The middle peasant became the central figure in agriculture.
Following the October Revolution, already in 1918, the middle peasant predominated. This was because the peasants had received without payment the land and part of the cattle and stock of the landowners. In 1918 the kulaks were partially expropriated, being deprived of 125 million acres of land which were given to the poor and middle peasants. In 1928-9 peasant households were divided as follows: 35 per cent poor peasants, 60 per cent middle peasants and 4-5 per cent kulaks."
The Soviet Government was guided in its attitude towards the peasantry during the transitional period by Lenin’s formula: a firm alliance with the middle peasant, reliance on the poor peasant and implacable struggle against the kulak. Lenin taught that the working class, in leading the peasantry, must always distinguish the two sides in every peasant—the toiler and the private owner.
The middle peasant has an essentially two-fold character: as a toiler he gravitates towards the proletariat, but as a small owner towards the bourgeoisie. Both the bourgeoisie and the proletariat strive to win the mass of the middle peasantry to their side. In doing so, the working class addresses itself to the fundamental interest of the peasant as a toiler, while the bourgeoisie tries to utilise his private interests. During the transitional period, particularly while the existence of the is based on private ownership and petty commodity production, there are certain non-antagonistic contradictions between the working class and the peasantry centring, for example, around prices and tax scales. But these contradictions are not fundamental. The interests of the working class and the working masses of the peasantry coincide on fundamental questions. Both classes are deeply interested in putting an end to exploitation and in the victory of socialism. This is the essence of the firm alliance of the two friendly classes—the working class and the peasantry.
The principle of the alliance of the working class and the peasantry, under the leading role of the working class, is the foundation of socialist construction. “The most important political task of the party," it was stated in a resolution at the 12th Congress of the R.C.P.(B), “determining the whole outcome of the revolution, is to defend and develop, with the greatest care and attention, the alliance of the working class and the peasantry". (The C.P.S.U. in Resolutions and Decisions of its Congresses, Conferences and Central Committee Meetings, 7th Russian edition, vol. I, pp. 682-3.)
A firm alliance between the working class and the peasantry is essential for correct economic relations between town and country, between industry and agriculture, for the growth of agriculture and its socialist transformation. The elimination of capitalist forms of economy and the victory of socialism can only be assured on the basis of the alliance of the working class and the peasantry.
The main classes in the transitional period are the working class and the peasantry.
The bourgeoisie after losing political power and the principal means of production are no longer one of the main classes of society. The big capitalists and a considerable section of the urban middle bourgeoisie are deprived of the means of production at the outset of the transitional period. But there still remains a section of the urban bourgeoisie, as well as the rural bourgeoisie, the kulaks. The bourgeoisie still retains considerable strength for a number of years during the transitional period. This is explained by the inevitable, spontaneous growth of capitalist elements out of petty commodity economy, and by the impossibility of immediately replacing capitalism by socialism in all branches of the economy. The bourgeoisie, even after losing its domination, retains in some degree its monetary and material resources, and its ties with a considerable section of the old specialists. It relies on the support of international capital.
The basic contradiction of the economy of this period is between socialism-which has been born but is still weak in the early stages, and to which the future belongs—and dethroned capitalism, which is still at the outset strong, with roots as yet in petty commodity production, but represents the past. The struggle between socialism and capitalism, around the question “who will beat whom", develops in all spheres of economic life during the transitional period. There are antagonistic and irreconcilable contradictions between the working class and the bulk of the peasantry on the one hand, and the bourgeoisie on the other. In the transitional period the policy of the proletarian State is first to restrict and squeeze out the capitalist elements, and subsequently to eliminate them completely. The sharpening of the class struggle of the proletariat and the working masses against the bourgeoisie, whose opposition increases as socialist construction expands, is a law of development in the transitional period.
To the extent that the socialist sector takes over the key positions of the national economy, the capitalist forms of economy and their laws of development lose their dominating position in the national economy at the very beginning of the transitional period. The development of the national economy ceases to be governed by the operation of the basic economic law of modern capitalism. The operation of the law of surplus-value only extend to the capitalist sector of economy and becomes increasingly restricted.
New economic laws, inherent in socialist production relations arise, develop and gradually extend the sphere of their operation, on the basis of the new economic conditions.
The basic economic law of socialism emerges and begins to operate with the formation and development of the socialist economy. This finds expression, in the first place, in a radical change in the aim of production. In the socialist sector, production is carried on, not in order to extract capitalist but for the satisfaction of the material and cultural needs of the working people and for the construction of socialism. Secondly, as socialist relations of production are strengthened and extended, the conditions are created for achieving this aim by an uninterrupted and rapid growth of industry and extensive introduction of modern technical methods. The development of industry ceases to be cyclic in character, economic crises of overproduction cease to occur.
As long as the petty commodity and capitalist sectors exist in the economy alongside the socialist sector and the problem of “who will beat whom" is still not settled, the sphere of operation of the basic economic law of socialism is restricted. It operates within the bounds of the socialist sector. But as the socialist sector plays a leading role, and its share in the economy of the country constantly increases, the basic economic law of socialism begins to exercise an ever-increasing influence on the development of the entire national economy.
The Soviet State in its economic policy relied ort this law, developing socialist production, introducing modern techniques in all branches of the economy and striving for a systematic improvement of the living standards of the working people, within the limits imposed by the difficult conditions of the transitional period.
Social ownership of the enterprises in the socialist sector makes its planned development both possible and necessary. Based on socialist relations of production, the economic law of planned (proportional) development of the national economy emerges and gradually begins to operate during the transitional period. This law calls for the planned management of the economy and the establishment by planning of such proportions between branches of the economy as are necessary for the victory of socialism and for the satisfaction of the growing needs of society. The law of planned development of the national economy begins to fulfil the role of the regulator of production in the socialist sector and exerts an ever greater determining influence on proportions throughout the national economy. At the outset the scope for the operation of this new economic law in the U.S.S.R. was narrow, since the socialist sector embraced only the smaller part of the national economy. The Soviet Government was only beginning to master the techniques of planning. As the socialist sector developed, the law of competition and anarchy of production lost its validity and there was constantly increasing scope for the operation of the law of the planned development of the national economy.
The operation of the law of value in relation to labour-power ceases in the socialist sector. Instead there emerges and begins to operate, on the basis of the new relations of production, the law of distribution according to work, in accordance with which each worker must be paid according to the amount of labour he has expended.
Since commodity production and circulation still exists, so also does the law of value. But thanks to the socialisation of the principal means of production and the appearance of the economic laws of socialism, the sphere of commodity production and of the law of value is limited, and they begin to playa fundamentally different part from their part under capitalism.
The law of value operates within fixed limits as a regulator of production in the petty commodity and capitalist sectors of the economy. But it is not the regulator of production in the socialist sector. The law of the average rate of profit ceases to operate in the socialist sector. Capital investments in this sector are made on the basis of the law of the planned development of the national economy.
The proletarian authority increasingly takes hold of commodity production, the law of value, trade and monetary circulation, and uses them to develop sodalist forms of economy, to strengthen the economic connections between industry and peasant economy, and in the struggle with the capitalist elements. Basing himself on Lenin’s proposition concerning the new role of trade and money in the transitional period, Stalin pointed out:
“The point is not at all that trade and the monetary system are methods of’capitalist economy’. The point is that the socialist elements of our economy, in fighting the capitalist elements, master these methods and weapons of the bourgeoisie for the purpose of overcoming the capitalist elements that they successfully use them against capitalism, use them successfully for the purpose of building the socialist foundation of our economy. Hence, the point is that, thanks to the dialectics of our development, the functions and purpose of these instruments of the bourgeoisie change in principle, fundamentally, change in favour of socialism, to the detriment of capitalism." (Stalin, “Reply to the Discussion on the Political Report of the Central Committee to the XIVth Congress of the CPSU(B)," Works, vol. VII, p. 379.)
Socialism cannot be built without a correct assessment of the objective economic conditions of the transitional period, and of the economic laws which arise on the basis of these conditions. The policy of the Communist party of the Soviet Union and of the Soviet State was based on Lenin’s plan for building socialism, relied on economic laws, and took into account the real balance of class forces.
Lenin’s teachings on the victory of socialism in one country were of the greatest importance for building socialism in the U.S.S.R. They equipped the party and the working class with a clear perspective and confidence in the triumph of the idea of scientific socialism.
Two aspects of this question have to be distinguished, the internal and the international. The internal aspect of the question concerns the mutual relations of classes within the country. The Communist Party and the Soviet State based themselves on the idea that the working class can overcome the contradictions existing between itself and the peasantry, strengthen the alliance and draw the peasant masses into the building bf socialism. The working class in alliance with the peasantry is fully capable, after breaking capitalism politically, of also overcoming its bourgeoisie economically and, having eliminated the exploiting classes, building socialist society. The international aspect of the question concerns the relations of the country of proletarian dictatorship with the capitalist countries. In conditions of the coexistence of two opposite systems—socialism and capitalism—there is still a danger of armed aggression against the land of socialism by the hostile imperialist Powers. This contradiction cannot be resolved by the forces of one country of proletarian dictatorship alone. Therefore the victory of socialism can only be final when the danger of intervention and restoration of capitalism by aggressive imperialist Powers will have disappeared.
An essential condition for the success of socialist construction in the U.S.S.R. was the routing of the Trotskyist and Bukharinist restorers of capitalism, who propounded theories calculated to disarm the working class, to the effect that the construction of socialism in one country was impossible, and that Russia was “not ripe" for socialism because of her technical and economical backwardness.
The Communist Party and Soviet State based themselves on Lenin’s propositions that the U.S.S.R. had everything necessary and adequate for the complete construction of socialism, and that the technical and economic backwardness of Russia could be completely overcome under the dictatorship of the proletariat. History has fully confirmed the truth of Lenin’s propositions.
Fundamental in Lenin’s plan for building socialism in the U.S.S.R. was the idea of the creation of a powerful socialist industry, as the material basis of socialism and as the prerequisite for the gradual transition from small peasant farming to large-scale collective production, by way of co-operation. The State plan for the electrification of Russia, the Goelro Plan, adopted in 1920, was of primary importance in Lenin’s programme for building socialism. This was the first perspective plan for the development of the national economy in the history of mankind, and provided for the creation of the productive and technical basis of socialism within ten to fifteen years.
“The victory of socialism over capitalism and the consolidation of socialism may be regarded as ensured only when the proletarian State, having completely suppressed all resistance on the part of the exploiters and secured complete stability for itself and complete obedience, reorganises the whole of industry on the basis of large-scale collective production and on a modern technical basis (founded on the electrification of the whole of national economy). This alone will enable the towns to render such, radical assistance, technical and social, to the backward and scattered rural population as will create the material basis for enormously raising the productivity of agriculture, and of agricultural labour in general, thereby stimulating the small tillers of the soil by the force of example and in their own interests to adopt large-scale, collective mechanised agriculture." (Lenin, ‘’’Preliminary Draft of Theses on the Agrarian Question", 1920", Selected Works, 1950, English edition, vol. II, Pt. 2, pp. 458-9.)
Lenin provided the basis for the path of the transition of the peasantry to socialist lines and the new role of co-operation in the socialist reconstruction of petty commodity production.
Lenin’s plan for building socialism presupposed all-round development of the economic links between State industry and the peasant economy. From the character of small peasant economy; it follows that the vitally necessary form of economic link with the towns for the peasants is that of exchange through purchase and sale. During the, transitional period the trade bond between State industry and the small peasant economy is an economic necessity.
Consequently the existence of peasant petty commodity production in the transitional period necessitates the use of the market and a money economy in the building of socialism.
As early as the spring of 1918 the Soviet Government began to organise the exchange of goods with the countryside by means of purchase and sale. Preparation began for a monetary reform. But because of foreign intervention the whole economy had to be turned to the service of the front, in conditions of extreme shortage of material resources. Intervention greatly intensified the ruin of the country which had resulted from the first world war. The Soviet Government did not have manufactured goods to exchange for agricultural produce, supplies of which were also considerably reduced. Procurement of agricultural produce for the army and for the town by way of purchase and sale was not possible. Hence the necessity arose of food surplus appropriation, that is, the requisitioning of all the peasant food surpluses by the State. In this way objective conditions compelled the Soviet Government to introduce the policy known as “War Communism".
Besides the food-surplus appropriation system, which was occasioned by dire necessity and by the need to supply the army with bread and to save the working masses from starvation, the policy of war communism presupposed the carrying through of a number of other measures. Because the State lacked commodity resources, trade in essential products was forbidden so as to prevent them falling into the hands of speculators. Consumer products were rationed in very small quantities in the towns. A class principle of distribution was observed and in addition, the size of the ration depended on the arduousness of work and the importance of the enterprise. Universal labour service was introduced. The bourgeoisie was obliged to take part in socially useful labour. Wartime conditions forced the Soviet Government to take over not only large-scale and middle-size industry, but also a considerable part of small-scale industry. Because of the shortage of resources, a system of rigidly centralised supply-in-kind was introduced in industry, subordinated to the priority of serving the front. Concerns acquired and delivered products by requisition, without money payment and without any economic independence. All this made it impossible to apply business accounting methods such as would ensure that the enterprises paid their way and worked at a profit. The national economy of the U.S.S.R. reached an extremely low ebb as a result of the imperialist and civil wars. By 1920 large-scale industrial production had fallen to almost one-seventh of the 1913 level, while agricultural production had been approximately halved. Masses of rapidly devalued paper money were issued to cover State expenditure.
The workers in the factories, just as the soldiers in the Red Army at the front, displayed mass heroism. Forms of emulation such as “Communist Saturdays" (subbotniks) assumed great importance at that time. The working class acquired experience in administering production.
During the foreign intervention and the civil war, the military and political alliance of the working class and the peasantry was formed and consolidated. It served to unite the efforts of the workers and peasants in repulsing the onslaught of alien would-be conquerors and White Guards, and in defending their motherland, the workers’ and peasants’ State. The Soviet Government gave the peasantry land and protection from the landowner and kulak. The peasantry gave the working class food supplies through the surplus appropriation system. This was the basis of the military and political alliance of the workers and peasants under “War Communism".
“War Communism" was inevitable in the given historical conditions, those of civil war and economic breakdown. But “War Communism" with the food appropriation system and prohibition of trade deprived the peasants of material interest in production: it was incompatible with the economic bond between town and country. The proletarian State can therefore avoid “War Communism" in the absence of intervention and economic ruin resulting from a prolonged war. This has been confirmed by the experience of the People’s Democracies. Having ended foreign intervention and civil war, the Soviet Government moved on, in the spring of 1921, to the New Economic Policy, so named to distinguish it from the policy of “War Communism". The main principles of the New Economic Policy had already been worked out by Lenin in the spring of 1918. But their application was interrupted by intervention, and the Soviet Government was only able to proclaim this policy again, and to consistently carry it out three years later.
The New Economic Policy of the Soviet Government in the transitional period was an economic policy for building socialism while utilising the market, trade and monetary circulation. The essence of this policy was an economic alliance of the working class and the peasantry, which was necessary in order to draw the peasant masses into socialist construction. Expounding the tasks of N.E.P., Lenin said at the beginning of 1922:
“Link up with the peasant masses, with the rank and file toiling peasants, and begin to move forward, infinitely more slowly than we dreamed, but in such a way that the entire mass will actually move forward with us. If we do that we shall in time get an acceleration of this movement such as we cannot even dream of now." (Lenin, “Political Report of the Central Committee to the 11th Congress of the R.C.P.(B), Selected Works, 1950, English edition, vol. II, Pt. 2, pp. 636-7.),
The first task of N.E.P. was the restoration of the economy. A start had to be made with the revival of the economic interest of the working peasantry in the swift recovery of agriculture, so as to assure the urban population of provisions, and industry of raw materials. On this basis, State industry was to move forward and become closely linked with agriculture, squeezing out private capital. Subsequently, when sufficient resources had been accumulated, the problems of creating a powerful socialist industry capable of reorganising agriculture on socialist lines, had to be solved, and a decisive offensive had to be opened against the capitalist elements, so as to eliminate them completely.
The New Economic Policy allowed for capitalism within certain limits while retaining the key positions in the hands of the proletarian State. It allowed for the struggle of the socialist elements against the capitalist elements, for the victory of the former, and for the elimination of the exploiting classes and the creation of the economic basis of socialism.
Trade was the main link at the beginning of N.E.P. which it was necessary to grasp, in order to drag forward the whole chain of economic construction. The end of the war made it possible to replace the requisitioning of food surpluses by the food tax. The food tax, the scales of which were laid down in advance of the spring sowing, was smaller than the assessments under the requisitioning scheme, and left the peasants with a surplus of grain and other products for free sale on the market and for exchange for industrial goods. Lenin underlined the urgent need to learn to trade, to enable socialist industry to satisfy the needs of the peasantry.
The need for commodity circulation between town and country determined the development of trade links in industry itself, and necessitated an improvement in the monetary economy of the country. With the adoption of the new economic policy, supply-in-kind within industry was abolished. State concerns were put on a basis of economic accounting and began increasingly to work on a self-supporting and profitable basis. Consumer rationing was replaced by free trade. The monetary reform was completed in 1924 and provided the country with a stable currency.
Basing itself on the law of the planned development of the national economy, the Soviet Government gradually restricted the operation of the law of value and commenced, step by step, to plan State industry.
Within the confines of the State sector, direct planning was carried out, setting production targets down to factory levels. Fixed prices were established for the commodities produced by State enterprises. Such planning was not possible in respect of the peasant economy. The State influenced the peasant economy by means of indirect economic regulation—through trade, supply, purchases, prices, credit and finance. These economic instruments were used to strengthen the bond with the peasant economy as well as the leading role of socialist economy. The operation of the law of value on the private market showed itself in the free formation of prices and the retention of competition. Speculation existed, and capitalist elements enriched themselves at the expense of the working people. By concentrating in its hands a growing quality of commodities, and constantly extending its purchases of agricultural produce, the Soviet State began, in stubborn struggle with the capitalist elements, to lay down the main prices of grain and other important commodities, in every possible way limiting the free play of market prices. The regulating role of the State, in relation to the private market, constantly increased.
The 11th All-Russian Conference of the R.C.P.(B) posed the task:
“Recognising its existence and taking account of its laws, the market must be mastered. Regulation of the market and monetary circulation must be taken in its own hands with systematic economic measures which have been strictly conceived and based on an exact assessment of market processes." The C.P.S.U. in Resolutions and Decisions of its Congresses, Conferences and Central Committee Meetings, seventh Russian edition, Pt. I, p. 588.)
The Communist Party and the Soviet State coped successfully with this task.
With the aid of socialist industry, the financial and credit system, State trade, and the co-operatives, the Soviet Government in the course of an intense class struggle carried out a consistent policy of restricting and squeezing out the capitalist elements-manufacturers, kulaks and traders. Taxation of the capitalists was increased and their opportunities for using the means of production and hired labour were reduced. This meant that the operation of the law of surplus-value was being increasingly restricted. Whereas during the first years of N.E.P. there was to some degree a revival and growth of the capitalist elements, their role in the economy soon began to decline with increasing rapidity.
The use of the personal material interests of the workers in the development of socialist production was essential for the growth of State industry. Basing itself on the law of distribution according to work, the Socialist State built up the wages of manual and clerical workers more and more in accordance with the quantity and quality of labour expended by each worker. This encouraged a steady increase in the productivity of labour.
The economy of the transitional period underwent a two-fold process. On the one hand, for a certain time and within certain limits, there was a free growth of capitalist elements. On the other hand there was a steady and far more rapid planned growth of the socialist elements which determined the course of the entire national economy.
The share of the private sector accounted for one-quarter of industrial production in the first years of N.E.P. but had fallen to one-tenth by 1929. Whereas the share of private trade in retail turnover amounted to about three-quarters in 1921-2, by 1926 State and co-operative trade was successfully squeezing out the private traders and had a firm hold of the main positions in retail turnover.
The revival of trade turnover and strengthening of the trade bond between town and country made possible a rapid restoration of the economy and the growth of socialist industry. Taking advantage of the superiority of socialist industry, the Soviet Government secured the restoration of the volume of output of large-scale industry to the 1913 level by 1926. Thanks to the varied help extended to the working peasantry by the Soviet Government, agricultural production exceeded the 1913 level by 1926.
With the restoration of industry and agriculture the transition to the socialist reconstruction of the entire national economy began. As industrial and agricultural output increased, the material and cultural level of the working people was raised.
During the transitional period from capitalism to socialism the Soviet State and the working people of the U.S.S.R., led by the Communist Party, accomplished the following tasks in conformity with economic law. The key positions of the national economy were taken over through socialist nationalisation; the trade bond between socialist industry and the peasant economy was established and the supply of consumer goods to the countryside was organised; socialist industrialisation was carried out and a production bond of the town with the countryside, through the supply to it of advanced machine technique, was set up: agriculture was collectivised and the economic basis of socialism brought into being in the countryside.
With the consolidation of socialist relations of production in industry, extensive possibilities for socialist industrialisation of the country were opened up. By under-pinning agriculture with an advanced technical base, socialist industrialisation created at the same time the material foundation for the socialist collectivisation of the peasant economy. The objective necessity for industrialisation of the country and for collectivisation of agriculture springs from the law of the obligatory correspondence of relations of production to the character of the productive forces, and from the basic economic law of socialism. These laws call for the consolidation of socialist production relations throughout the national economy, in agriculture as well as in industry. The productive forces can only acquire full scope for their development under these conditions. Socialist industrialisation of the country and collectivisation of agriculture ensure the victory of socialism throughout the national economy, the systematic growth of production and of the living standards of the people.
The New Economic Policy was the practical expression of Lenin’s plan for building a socialist economy in the U.S.S.R., which was elaborated further in the works of Stalin and in the decisions of the Communist Party. The fundamental principles underlying the New Economic Policy in the U.S.S.R., serve as a guide to action for any country building socialism. However, the concrete forms of economic construction in particular countries must take account of the peculiarities of the development of each, and the circumstances in which the socialist revolution takes place. Lenin pointed out that:
“Marx did not commit himself—or the future leaders of the socialist revolution—to matters of form to methods and ways of bringing about the revolution; for he understood perfectly well that a vast number of new problems would arise, that the whole situation would change in the process of the revolution, and that the situation would change often and considerably in the process of revolution." (Lenin, “The Tax in Kind", Selected Works, 1950, English edition; vol. II, Pt. 2, p. 535.)
The construction of a socialist economy in the People’s Democracies takes place in more favourable circumstances than was the case in the U.S.S.R., which was the only country building socialism. It first fell to the Soviet Union to open up the path for the transition to socialism. Today each of the People’s Democracies is supported by the tremendous assistance of the whole camp of socialism, and can use the accumulated experience of the building of socialism in the U.S.S.R.
(1) The great October Socialist Revolution for the first time in the history of mankind opened up the path to socialism. The historical inevitability of the proletarian revolution stems from the law of the obligatory correspondence of relations of production to the character of the productive forces. A transitional period is necessary for the revolutionary transformation of capitalist into socialist society. The State in the transitional period is the dictatorship of the proletariat, taking the form of either Soviet power of a people’s democracy. Socialist nationalisation of the principal means of production belonging to the exploiting classes brings about the creation of a socialist form of economy, embracing the key positions of the national economy.
(2) The main forms of the social economy in the transitional period are: socialism, petty commodity production and capitalism. The working class, the peasantry and the bourgeoisie are the corresponding classes. The main classes in the transitional period are the working class and the peasantry. The highest principle of the dictatorship of the proletariat is the alliance, directed against the exploiting classes, of the working class and the peasantry, under the leadership of the working class. The basic contradiction of the transitional period is that between growing socialism and dying capitalism. The restriction and squeezing out, and subsequent elimination of the capitalist elements is achieved in the course of an intense class struggle.
(3) During the transitional period, as the socialist sector grows and strengthens itself and capitalist elements are overcome, the economic laws of capitalism, which express relations of exploitation, quit the stage. The economic laws of socialism, on which the proletarian State relies, come into being and gradually extend the sphere of their operation. The law of value, trade, money and credit are used to an increasing extent by the proletarian authority to the detriment of capitalism and, in the interests of socialism.
(4) The economic policy of the proletarian dictatorship in the transitional period is directed towards the victory of the socialist over the capitalist elements and the construction of a socialist economy, using commodity production and the market. This policy secures the economic bond between socialist industry and the peasant economy, as well as socialist industrialisation of the country and collectivisation of agriculture.