"Socialism in One Country" and The Soviet Economic Debates of The 1920s

“Socialism in One Country”
and the Soviet economic

debates of the 1920s
A series of lectures by Nick Beams
World Socialist Web Site Online Pamphlet Series
wsws.org
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World Socialist Web Site
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“Socialism in One Country” and the Soviet economic

was originally published on the World Socialist Web Site

in four parts from 4 May through 7 May 2009
“Socialism in One Country”
and the Soviet economic
By Nick Beams
4 May 2009
Nick Beams, national secretary of the Socialist Equality Party (Austra-

lia) and a member of the International Editorial Board of the WSWS, de-
livered two lectures at a summer school of the SEP in Ann Arbor Michi-
gan in August 2007. The lectures deal with some of the crucial conflicts
over economic policy in the Soviet Union during the 1920s. One of the
motivations for the lectures was to answer the distortions advanced by
the British academic Geoffrey Swain in his book Trotsky published in
2006. Further material can be found in Leon Trotsky & the Post-Soviet
School of Historical Falsification by David North.
Lecture One
It would be a mistake to believe that the issues that arose in the so-called
economic debates in the Soviet Union, culminating in the conflict over
Socialism in One Country, were restricted merely to economic matters.
In fact, the issues of economic perspective encompassed all the most
fundamental issues: the assessment of international perspectives and the
prospects for the socialist revolution; the relations between the work-
ing class and the peasantry in the Soviet Union; plan versus market in
the construction of a socialist economy; the relations between different
4 A WSWS Online Pamphlet
sections of industry; and last, but by no means least, the relationship of

economic development to the cultural advancement of the working class
and the impact of these processes on the party regime.
The struggle between the different tendencies was shaped at every stage
by the international context within which it unfolded. Likewise, the po-
sitions adopted by the different tendencies had vast implications for the
development of the international socialist movement.
The first point to make in reviewing this history is that none of the
participants entered the struggle over the economic development of
the Soviet Union with a worked-out plan. In fact, there could not have
been such a plan because no one conceived of a discussion of economic
perspectives in an isolated workers’ state surrounded by hostile capital-
ist powers. No one believed that the revolution could survive for any
extended period of time outside a victory of the working class in at least
one or more of the major European countries, let alone did anyone con-
sider the construction of socialism in Russia alone.
In the struggle against the Trotsky and the Left Opposition, one of the
constant refrains of Stalin and his supporters was that if it was not pos-
sible to build socialism in one country, then why was the revolution
undertaken in the first place? To deny the possibility of building social-
ism in the Soviet Union, irrespective of whether or not the working class
came to power in the advanced capitalist countries, was to undermine
the historical legitimacy of the Russian Revolution, they claimed.
The argument was completely specious. The historical legitimacy of

the Russian Revolution derived not from the possibility of creating an
isolated socialist Russia but from the fact that it was the opening shot of
the world socialist revolution. The contradictions of the world capitalist
system—which had violently exploded in World War 1, threatening civi-
lization with a relapse into barbarism—had unfolded in such a way that
the possibility of a detachment of the working class coming to power
had first presented itself, and been seized, not in one of the advanced
capitalist countries but in a backward one, Russia. Throughout the pe-
riod leading to the insurrection Lenin insisted that the working class had
a responsibility to take power, not because it could establish socialism in
a single country, but in order to open the way for the conquest of power
by the European and international proletariat.
The parties of the Second International had betrayed the working class
and the cause of socialism when they lined up to support their “own”
ruling class in the war. It was necessary not only to use the weapon of
criticism in denouncing this betrayal and expose the Second Interna-
“Socialism in One Country” & the debates of the 1920s 5
tional, but to pass over to the criticism of weapons in the actual seizure
of power.
The German revolutionist Rosa Luxem-

burg, by no means uncritical of the some
of the policy decisions of the Bolshe-
viks, was in no doubt about the enduring
significance of the revolution. It lay in
the fact that “the Bolsheviks have based
their policy entirely upon the world pro-
letarian revolution.” Lenin and Trotsky,
she concluded, were the first “who went
ahead as an example to the proletariat of
the world; they are still the only ones up
to now who can cry with Hutten: ‘I have
dared!’ This is the essential and enduring
in Bolshevik policy. In this sense theirs Rosa Luxemburg
is the immortal historical service of hav-
ing marched at the head of the international proletariat with the con-
quest of political power and the practical placing of the problem of the
realization of socialism, and of having advanced mightily the settlement
of the score between capital and labor in the entire world. In Russia, the
problem could only be posed. It could not be solved in Russia. And in
this sense, the future everywhere belongs to ‘Bolshevism.’”
Ninety years on, that assessment has lost none of its relevance. I make
these points at the outset because we sometimes hear the position ad-
vanced that, given all that followed, and the enormous problems created
by the isolation of the first workers’ state, it might have been better had
the revolution not taken place.
Our movement has a completely different perspective. The socialist

revolution in the coming period will have a very different form from the
Russian Revolution. But it will be led and organized by those who have
assimilated all the lessons of the first attempt by the international work-
ing class to conquer power and establish socialism.
The initial measures taken by the Bolsheviks upon the conquest of

power did not represent major steps towards the socialization of the
economy. The first major economic decree was the nationalization of the
land. Here the revolutionary government took over the program of the
peasant party, the Socialist Revolutionary Party. Land was nationalized
but the peasants had the right to its use. In essence, the decree did little
more than give sanction to the outcome of the peasant war against the
landlords that had formed such a decisive component of the revolution-
ary upsurge.
From the standpoint of the development of the socialist program in the

sphere of agriculture, a program that is based on the large-scale devel-
opment of industrial methods of production, thereby ending what Marx
termed the idiocy of rural life, the land policy was a step back. Some of
the larger estates were reduced in size, as land was allocated to poorer
peasants, and the average size of landholdings decreased while the
number of peasant households with land increased as poor and landless
peasants gained from the redistribution. There was no overall policy, or
set decision on the size of holdings. Each village made its own arrange-
ments and there were wide variations both within and between regions.
So far as industry was concerned, one of the first major decrees, is-
sued on November 21, 1917, concerned “workers’ control.” It gave the
factory committees, which had already acquired certain powers under
the Provisional Government, additional authority. They could actively
intervene in all aspects of production and distribution, and had the right
to supervise production, had the right to obtain data on costs and to lay
down indicators for output. The owners had to make available all ac-
counts and documents. Commercial secrecy was abolished.1
The Bolsheviks did not enter the revolution with any kind of plan to na-
tionalize all industry, or even the key sectors, apart from the banks and
transport. In an article published on the eve of the revolution entitled
“Can the Bolsheviks Retain State Power?” Lenin made clear that the
crucial question was to establish political power. Economic policy was
subordinated to that objective.
“The important thing,” he wrote, “will not be even the confiscation

of the capitalists’ property, but country-wide, all-embracing workers’
control over the capitalists and their possible supporters. Confiscation
alone leads nowhere, as it does not contain the element of organization,
of accounting for proper distribution. Instead of confiscation, we could
easily impose a fair tax ...”2
The revolutionary government established the Supreme Council of Na-

tional Economy on December 15, 1917 and defined its task as the orga-
nization of national economy and state finance working in collaboration
with local authorities as well as the factory, trade union and working
class organizations. While nationalization was beginning, it was not a
central priority. Often such nationalizations as did take place were car-
ried out on the initiative of local organizations. Indeed, in January 1918
and again in April the Supreme Council declared that no nationalization
1 Alec Nove, An Economic History of the USSR, Penguin, 1990, p. 42.
2 Nove, p. 37.
should take place without its specific authority, adding on the second oc-
casion that any enterprises nationalized without its authority would not
receive finance.
In June 1918 the situation changed dramatically. There was now a

sweeping expropriation of capital. This transformation was not brought
about by a change in doctrine, but in the external situation. The launch-
ing of the civil war, fueled in large measure by the decision of the
imperialist powers to intervene and secure the overthrow of the Bolshe-
vik government, meant that the bourgeoisie and owners of capital who
might, under different circumstances, have been prepared to submit to
workers’ control were not prepared to do so. From the first day after the
conquest of power, the American cabinet was discussing the situation
in Russia and how it might intervene. In Britain, Churchill spoke of the
necessity to strangle the Bolshevik baby in its cradle. The French, the
biggest creditors of the tsarist regime, were determined to reverse the
situation, while the German bourgeoisie and military high command
were laying down their demands for the appropriation of large areas of
Russia and its resources as the condition for peace.
This led to a situation inside Russia where the bourgeoisie refused to ac-
cept the loss of power ... it was a temporary setback that would soon be
overcome with the assistance of outside friends and allies. This was the
political impetus for the program of nationalization.
As Trotsky explained in 1920:
“Once having taken power, it is impossible to accept one set of conse-

quences at will and refuse to accept others. If the capitalist bourgeoisie
consciously and malignantly transforms the disorganization of produc-
tion into a method of political struggle, with the object of restoring
power to itself, the proletariat is obliged to resort to socialization, inde-
pendently of whether this is beneficial or not at the given moment. And,
once having taken over production, the proletariat is obliged, under the
pressure of iron necessity, to learn by its own experience a most difficult
art—that of organizing a socialist economy. Having mounted the saddle,
the rider is obliged to guide the horse—in peril of breaking his neck.”3
Two years later, in his report to the Fourth Congress of the Communist
International held in November 1922, Trotsky elaborated further on the
reasons for the nationalization of industry. In a civil war, he explained,
decisions had to be taken which from the standpoint of economic devel-
opment were completely irrational but which were politically neces-
sary—such as the blowing up of bridges.
3 Nove, p. 75.
It would be perfectly in order for a workers’ state to carry out the

expropriation of the bourgeoisie provided it was able to organize the
development of the economy on new foundations. However that was not
the situation in Russia in 1917-18. The organizational capacities of the
workers’ state lagged far behind the tasks posed by total nationalization.
But the Civil War made nationalization a necessity. That is, measures
that were irrational from an economic point of view were politically
necessary.
And the key factor giving rise to this economic irrationality was the
contradictory character of the revolution itself. The working class had
first come to power, not in Western Europe but in Russia. Had the
socialist revolution taken place in the wake of a victory in Europe, then
developments would have assumed a very different form. The Russian
bourgeoisie would not have dared raise so much as a little finger against
the revolution and it would have been possible to carry out the reorgani-
zation of industry in relative tranquility.
However, the situation facing the Bolsheviks was very different. Under
conditions where capital remained dominant in the rest of the world, the
Russian bourgeoisie refused to take the revolution seriously.
“The initial decrees of the revolutionary power were greeted with

scornful laughter; they were flouted; they remained unfulfilled. Even
the newspapermen—as cowardly a set as you can find—even they
refused to take seriously the basic revolutionary measures of the work-
ers’ government. It seemed to the bourgeoisie as if it was just a tragic
joke, a misunderstanding. How else was it possible to teach our bour-
geoisie and its flunkies to respect the new power, except by confiscating
its property? There was no other way. Every factory, every bank, every
little office, every little shop, every lawyer’s waiting room became a
fortress against us. ... It was necessary to smash the enemy, to deprive it
of its sources of nourishment, independently of whether or not organized
economic activity could keep up with this.” 4
The expropriations undertaken in 1918 were from the economic stand-

point “irrational.” But that only serves to demonstrate the fact that the
world is not governed by economic rationality—if it were the bour-
geoisie would have been long gone—but that socialist revolution is
necessary in order that reason can be introduced into the regulation of
economic and social life.
The compelling economic task that confronted the revolutionary govern-

ment in 1918 was the provision of economic resources for the Red Army
4 Leon Trotsky, The First Five Years of the Comintern, Volume 2, New Park,
1974, p. 227.
now engaged in a life and death civil war, both against the old ruling
classes of Russia and the imperialist bourgeoisie of the United States
and Europe ... and even from interventionist forces from as far away as
Australia. This was the basis of the policy that has gone down in history
under the name of War Communism.
Trotsky reviewing Red Army troops
The central foundation of War Communism was the requisitioning of

grain surpluses from the peasants to supply the Red Army and feed the
cities. Industrial policy involved exchanges between state enterprises
increasingly without the use of money, which became steadily worth-
less. According to a resolution of the second All-Russian Congress of
Economic Councils, state enterprises were to deliver their products to
other state enterprises without payments and the railways and merchant
fleet should transport gratis the products of all state enterprises. The aim
of this proposal, the resolution stated, was to “see the final elimination
of any influence of money upon the relations of economic units.”5
Money lost its function within the state sector of the economy and
played virtually no role at all. So devalued was the currency that the
economic historian of Soviet Russia, Alec Nove, recalls as a child hand-
ing a note of considerable face value to a beggar only to be told that it
was worthless. As money lost all value, private trade was declared ille-
gal and nationalization was extended to practically all enterprises, there
was a belief that a socialist economy was being established. Of course
5 Nove, p. 57.
insofar as “communism,” based on equality, was being established, it

was a communism of poverty. Yet the measures of War Communism
were seen as a stepping stone to a socialist system.
Viewed from the standpoint of impoverished Russia, such conceptions

were completely irrational. How then could they arise? The answer lies
in the fact that they were developed on the basis of the perspective that
had animated the revolution in the first place—that the taking of power
in Russia was but the immediate prelude to the European socialist revo-
lution.
As Trotsky later explained, while War Communism had been imposed

on the workers’ state there was a certain expectation that it could lead to
socialism without any major economic turns. This was based on the be-
lief that the revolutionary development in Western Europe would come
more rapidly than it did.
“If the European proletariat had conquered power in 1919, it could have
taken our backward country in tow—backward in the economic and cul-
tural sense—could have come to our aid technically and organization-
ally and thus enabled us, by correcting and modifying our methods of
War Communism, to move straight toward a genuine socialist economy.
Yes, admittedly, such were our hopes. We have never based our policy
on the minimizing of revolutionary possibilities and perspectives. On
the contrary, as a living revolutionary force we have always striven to
expand these possibilities and exhaust each one to the very end.”6
While entertaining the prospect that the European revolution could

unfold quite rapidly, Trotsky, at the same time, held out no hope for any
assistance from the West to overcome the economic burdens afflicting
the workers’ state, either in the form of concessions—the establishment
of foreign-owned investment projects in Soviet Russia—or loans. After
all, as leader of the Red Army, Trotsky was engaged in the day-to-day
struggle to throw back the imperialist-backed counterrevolution.
Consideration of these issues helps to expose the outright falsifications

of Geoffrey Swain and the unclarities in the analysis by the historian
Richard Day upon which Swain seeks to base himself.
On the first page of his book Swain writes: “Richard Day, writing more
than 30 years ago, argued convincingly that Trotsky, far from being an
internationalist, firmly believed in the possibility of socialism in one
country.”7
6 Trotsky, The First Five Years of the Comintern, Volume 2, p. 230.

7 Geoffrey Swain, Trotsky, Longman, 2006, p. 1.
In the first place, this is a complete falsification of what Day actually

wrote. “The operative question for Trotsky,” he wrote, “was not whether
Russia could build socialism in advance of the international revolution,
but how to devise an optimal planning strategy, taking into account both
the existing and future international division of labour.”8
According to Day, in the period of War Communism two tendencies,

one “isolationist” the other “integrationist,” emerged within the Bol-
shevik Party. The isolationists tended to look upon Soviet Russia as an
exile from the world economy while the integrationists maintained that
Russia had to resume her position in international affairs. If Trotsky’s
position had been consistent with the normal interpretation placed on the
perspective of permanent revolution, he continued, then Trotsky would
have fallen into the integrationist category.
“For want of a better alternative he would have subscribed to the

widely held view that every possible device must be employed to solicit
economic aid from abroad, including both a restoration of international
trade and even foreign investments from capitalist Europe. But the
evidence shows he in fact emerged as the central theorist of economic
isolation.”9
But, contrary to Day, there was nothing inconsistent in Trotsky’s posi-

tion. He insisted that no reliance could be placed on economic assistance
from the West and that, because of the weakened economic position of
Soviet Russia, the imperialist powers would seek to use any economic
concessions as a means of undermining the workers’ state, just as they
were seeking to do by military means.
In early 1920, when the Allied economic blockade on Russia was lifted,
Lenin entertained hopes that economic aid would be forthcoming.
Trotsky held a different viewpoint. In February 1920 he noted that if
economic connections with Europe were restored under conditions of
economic recovery this could be beneficial for socialist construction.
But there was also another, and more likely, possibility:
“Given our further economic deterioration, terms will be dictated to us

by the world merchants who have commodity supplies at their disposal.
In one manner or another they will reduce us to the position of an en-
slaved colonial country.”10
As Richard Day noted in a later article on the economic policies of the

8 Richard Day, Leon Trotsky and the Politics of Economic Isolation, Cambridge
University Press, 2004, p.4.
9 Day, p. 5.
10 Day, p. 27.
Left Opposition, Trotsky had been “reluctant to restore contact with Eu-
rope until Russia’s own recovery was under way, fearing that unfavour-
able terms would be dictated and that the Bolsheviks would be forced to
acknowledge the Tsarist debts in exchange for ‘a pound of tea and a tin
of condensed milk.’”11
Trotsky’s belief was borne out, that concessions and loans would be ex-
tremely limited and attached with conditions aimed at undermining the
workers’ state. At the Genoa conference of April 1922, called by Lloyd
George to attempt an economic reorganization of Europe under British
tutelage, the demands of the imperialist powers for denationalization
and the payment of the tsarist debts were so severe that even before the
conference began Lenin insisted that it was time to call a halt.
Notwithstanding the hopes of the Bolsheviks about the prospects for a

speedy development of the socialist revolution in Western Europe, the
program of War Communism was doomed to failure. The basic problem
was that while the program of grain requisitioning could, at least for a
time, secure supplies to the Red Army, it could not ensure the supply of
agricultural products to the city without which industrialization could
not proceed. The peasants had come to the side of the Bolsheviks in
the course of the civil war understanding through bitter experience that
only they could prevent the return of the landlords. But support for the
economic policies of the new regime was another question. The attitude
of the peasants was summed up in the phrase that, while they supported
the Bolsheviks, they opposed the Communists.
By the end of 1919 it was clear that, while the existing policy could
continue for a period, in the long run society faced a breakdown unless
there were a radical reorientation.
The first move in this direction came from Trotsky at the beginning of
1920. Drawing on observations he made while stationed in the Urals,
he advanced a proposal to end the program of grain requisitioning and
replace it with a tax in kind. Under this proposal, the peasant, while hav-
ing to supply grain to the state, would be able to improve his individual
lot. In February 1920 he submitted his proposal to the Central Commit-
tee.
“The present policy of equalized requisition according to the food scale,

of mutual responsibility for deliveries, and of equalized distribution of
manufactured products, tends to lower the status of agriculture and to
disperse the industrial proletariat, and threatens to bring about a com-
plete breakdown in the economic life of the country,” he wrote.
11 Richard Day, “Trotsky and Preobrazhensky: The Troubled Unity of the Left
Opposition,” in: Studies in Comparative Communism, 1977, p. 73.
“The food resources are threatened with exhaustion, a contingency that

no amount of improvement in the methods of requisition can prevent.
These tendencies towards economic decline can be counteracted as fol-
lows: (1) The requisitioning of surpluses should give way to a payment
on a percentage basis (a sort of progressive tax in kind), the scale of
payment being fixed in such a way as make an increase of the ploughed
area, or a more thorough cultivation, still yield some profit; (2) a closer
correspondence should be established between industrial products sup-
plied to the peasants and the quantities of grain they deliver; this applies
not only to rural districts (volosts) and villages, but to the individual
peasant households, as well.”12
Lenin, however, opposed the proposal and it was defeated by 11 votes to

4 on the central committee. The ninth congress of the party was held in
March 1920. Trotsky did not raise the proposal there, but in collabora-
tion with Lenin advanced measures for the more stringent application of
the policies of War Communism.
One of the central problems confronting the revolutionary government

was the breakdown and collapse of industry. It was necessary to begin
the task of physically reassembling the industrial working class in order
to revive production. Some workers had fled to the country, others were
involved in the black market, others were simply engaged in the search
for food. It was in this context that Trotsky developed the concept of the
militarization of labour. The revolution had sent hundreds of thousands
to die on the battlefield, through
methods of compulsion. Why
should not such methods be used
on the no less important eco-
nomic front? In fact, if the battle
to revive the economy were not
won, then all the sacrifices on the
military front would have been
in vain.
In the early 1920s, as the civil

war started to come to a close,
Trotsky had begun to deploy
military units for tasks of civilian
labour. What was the point of
demobilizing troops under condi-
tions where there was no industry
for them to return to? Far better
Trotsky
to deploy them on necessary eco-
12 Trotsky, My Life, Penguin, 1988, p. 482.
nomic tasks than see them simply dispersed into a chaotic economy.
“If we seriously speak of planned economy,” he told the Ninth Congress,

“which is to acquire its unity of purpose from the centre, when labour
forces are assigned in accordance with the economic plan at the given
stage of development, the working masses cannot be wandering all over
Russia. They must be thrown here and there, appointed, commanded,
just like soldiers.... Without this, under conditions of ruin and hunger,
we cannot speak seriously of any industry on new foundations.” 13
Lenin advanced no less stringent

measures. He supported the pas-
sage of a resolution, moved by
Trotsky, which called for com-
pulsory labour and for disciplin-
ary measures “the severity of
which must correspond to the
tragic character of our economic
situation.”14
He denounced the collegial

system in factory management,
under which the trade unions had
representation in factory manage-
ment, as “utopian,” “impractical”
and “injurious.” A resolution
introduced by him at the congress
set out the responsibility of the
Lenin trade unions to explain to the
broadest sections of the working class the necessity to reconstruct the
entire industrial administration through the “maximum curtailment of
administrative collegia and the gradual introduction of individual man-
agement in units directly engaged in production.”15
In the middle of 1920, the government faced a crisis which, had it not
been overcome, could well have led to the collapse of the workers’
state. Engineers had forecast a date, only a few months ahead, when not
a single railway in Russia would be working. The system was rapidly
grinding to a halt. Trotsky was called upon to intervene, despite his pro-
testation that he knew nothing about running the railways.
Through what became a famous order, Number 1042, Trotsky placed

13 Robert Daniels, The Conscience of the Revolution, Harvard University Press,
1965, p. 121.
14 Isaac Deutscher, Trotsky, Volume 1, Oxford University Press, 1970, p. 499.
15 Daniels, p. 124.
the railways and the railway men under martial law and secured the
rehabilitation of the railways ahead of schedule. This experience led to
his proposal for a “shake-up” of the trade unions, sparking the so-called
trade union controversy at the end of 1920.
In view of the later controversies about Trotsky’s call for the “milita-
rization of labour,” it is necessary to point out that his proposals were
grounded upon the program of War Communism. He later explained the
logic of this program as follows:
“In the system of War Communism in which all the resources are, at
least in principle, nationalized and distributed by government order I
saw no independent role for trade unions. If industry rests on the state’s
ensuring the supply of all the necessary products to the workers, the
trade unions must be included in the system of the state’s administration
of industry and distribution of its products. This was the real substance
of making the trade unions part of the state organizations, a measure
which flowed inexorably from the system of war communism, and it
was in this sense that I defended it.”16
The conclusion of the civil war at the end of 1920 saw the Russian
economy in a disastrous state after seven years of war, revolution, coun-
terrevolution, civil war and imperialist military intervention. National
income was less than one third the level of 1913. Industry produced less
than a fifth of its pre-war output, coal mines one tenth, iron foundries
one fortieth. The industrial workforce, which had numbered about 3
million before the war, was down to half that figure, and many of them
were not productively employed. The railways, notwithstanding the suc-
cess of Trotsky’s emergency measures, were in a shambles. Moscow had
only one half of its pre-war population and Petrograd only one-third.
The situation was so desperate that cannibalism had made its appearance
in parts of the country.
These were the economic conditions that led to a series of peasant re-
volts at the end of the civil war culminating in the Kronstadt rebellion in
February 1921 during the 10th congress of the Communist Party.
The proposal which Trotsky had first advanced a year before, that grain
requisitioning be replaced by a tax in kind, was now put forward in
the form of the NEP. At first the measures were limited ... Lenin even
envisaged that exchange may take place on a kind of barter basis. But
once the system of trading was established, it rapidly developed accord-
ing to its own inexorable logic. In October 1921 Lenin declared that the
retreat had not gone far enough and that a further retreat was necessary.
The money system had to be brought back. “Nothing came of commod-
16 Trotsky, My Life, pp. 482-83.
ity exchange [in kind]; the private market proved too strong for us; and
instead of exchange of commodities we got ordinary buying and selling,
trade.”17
The shift to the NEP was conditioned both by conditions in Russia and
a change in the international situation. It was clear by the beginning of
1921 that the immediate revolutionary crisis of the postwar years had
passed—the betrayals of the social democracy had ensured that the
bourgeoisie remained in the saddle. As Trotsky drew out at the Third
Congress, against the “lefts” both in the German and Russian parties,
while capitalism had not been able to establish a new equilibrium, such
as had existed in the pre-war period, it had achieved a certain stabiliza-
tion. Against the “left” theory of the continuous offensive it was neces-
sary to prepare for a more protracted development in which the task of
the party was not the immediate struggle for power, but the development
of tactics to win the masses away from social democracy towards and
into its ranks. Accordingly, the NEP in Russia was a manoeuvre, an
adaptation to this new situation.
While the switch to the NEP was adopted without opposition, conflict-
ing attitudes towards it were to arise almost from the outset. There were
those for whom the NEP was a retreat—necessary but a retreat nonethe-
less. For these forces, of which Trotsky was one, the introduction of the
NEP and the turn to the market did not do away with the issues of plan-
ning that had arisen in the period of War Communism.
As early as May 1921, just two months after the adoption of the NEP,
Trotsky wrote to Lenin on the importance of a balanced economic re-
construction. “Unfortunately, our work continues to be carried out plan-
lessly and without any understanding of the need for a plan. The State
Planning Commission represents a more or less planned negation of the
necessity to work out a practical and business-like economic plan for the
immediate future.”18
There was no response from the Politburo where Lenin opposed

Trotsky’s conception. He was not against long-term planning as such
but regarded it as premature and therefore something of a “bureaucratic
utopia” in a country of 20 million scattered farms, disintegrated industry
and primitive forms of private trade.
At the same time, another current rapidly made its appearance. Insisting
that the entire policy of War Communism was wrong, it was therefore
somewhat misleading to characterize the NEP as a retreat. It was the
policy which would have been adopted but for the civil war.
17 Day, “Trotsky and Preobrazhensky,” p. 65.
18 Deutscher, Trotsky, vol. 2, p. 42.
In the wake of the experiences of War

Communism there was a backlash
against measures of government inter-
vention, let alone planning, and policies
that could be seen as adversely affecting
the peasantry. Everything had to be done
to maintain the smychka—the bond or
alliance between the working class and
the peasantry without which the workers’
state would be placed in grave danger.
These tendencies, which insisted that the

failure of War Communism had shown
that it was necessary to develop the
methods of the market, found spokes-
men in Sokolnikov, the head the Finance
Commission, and Rykov, the chairman Sokolnikov
of the economic council.
In discussing these issues it is necessary to emphasise at the outset that

the complexities of the situation meant that there were no easy, cut and
dried answers. The answer to the myriad problems that beset the revolu-
tionary government was not to be found in the adoption of the appropri-
ate slogan, but only through a deep-going analysis of the situation.
(This point should be kept in mind

when we come to discuss the issue of
“Socialism in One Country” and seek to
discover why it was that Trotsky did not
immediately link up with Zinoviev and
Kamenev once they came into conflict
with Stalin over this question in 1925.)
Consider for a moment the question of

grain supplies. In order for industry to
expand it was essential that the supply
of grain to the towns be increased. But
an increase in the supply of grains would
come from the development of larger,
more efficient peasant farms. These
farms would acquire more land, larger
stocks, and hire more labour. And the Rykov
policy of the NEP and its reliance on
the market encouraged such a process. But in doing so it was inevitably
giving rise to a class differentiation in the countryside. The operation of
the market to bring about an increased supply of grain, so necessary for

the development of industry in the cities, would also see the emergence
of richer peasants, kulaks, and the danger of political opposition to the
workers’ state.
All tendencies in the party agreed, at least in principle, on the need for
industrialization. But the issue was how was it to be undertaken. The
economic reasoning of the right wing was that it should arise from the
growth of peasant demand, which would finance the expansion of indus-
try. It followed that in order to stimulate peasant production, and above
all sales to the market, there had to be a stable currency. If value of the
currency were eroded through inflation, the peasant would tend to hoard
his surplus or use it for other purposes, such as the making of alcohol,
the provision of loans to other peasants or to feed livestock. But a stable
currency meant that state subsidies and credits to unprofitable sections
of industry had to cease as they were among the chief causes for infla-
tion and the erosion of currency values. Tight credit, argued Sokolnikov,
was necessary to ensure currency stabilization. Industry had to be made
to pay its own way.
These positions came into conflict with the views of Trotsky who,
among others, such as Preobrazhensky, insisted on the need to begin the
planned development of industry with the provision of state credit.
A Communist Party speaker in a peasant village
The right-wing pro-market agenda continue to unfold throughout 1922

culminating in a proposal to do away with the monopoly of foreign
trade. Currency stabilization required a favourable balance of trade and
if price advantages pointed to the importation of consumer goods, then

this should be undertaken. Sokolnikov, with the support of Bukharin and
Stalin, secured the passage of a resolution on the Central Committee
against the foreign trade monopoly.
The decision of the Central Committee, taken in the absence of both

Lenin and Trotsky, did not go so far as to admit private business into
foreign trade, but it did loosen central control over Soviet trade agencies
and opened the door for the abandonment of the policy which Trotsky
had called “socialist protectionism.”
Lenin objected to the plan upon hearing of it and called on Trotsky to

defend their common view about the need to preserve and reinforce the
monopoly of foreign trade. Trotsky agreed with Lenin, but pointed out
that the move against the foreign trade monopoly was a consequence of
the tendency to submit to the forces of the market. It was precisely in
order to counter the pressure of the market that planning under the direc-
tion of Gosplan had to be undertaken. He and Lenin reached agreement
that if they were not able to reverse the Central Committee decision they
would publicly oppose it.
In the event, that was not necessary as Trotsky secured the reversal of
the decision when it came up for review in the second half of December.
The move against the trade monopoly and its implications for the poli-
cies of the government appear to have had a major impact on Lenin’s
outlook. On December 27, 1922 he wrote to the Politburo proposing a
significant shift on the question of planning and Gosplan.
Set up in the last days of War Communism, Gosplan had largely been
pushed aside during the initiation and expansion of the NEP. Its re-
sponsibilities did not extend to economic planning on a broad scale but
were confined to giving advice on administrative matters to the various
industries.
Lenin’s letter to the Politburo proposed a definite shift, and signaled his
withdrawal of support for those in the party leadership who had opposed
Trotsky on the need to expand Gosplan’s role.
“Comrade Trotsky, it seems, advanced this idea [about Gosplan’s pre-

rogatives] long ago,” he wrote. “I opposed it ... but having attentively
reconsidered it I find that there is an essential and sound idea here:
Gosplan does stand somewhat apart from our legislative institutions ...
although it possesses the best possible data for a correct judgment of
[economic] matters. ... In this, I think one could and should go some of
the way to meet Comrade Trotsky...”19
By the beginning of 1923 the first signs of a crisis in the NEP were
clearly apparent. While the 1922 harvest had been a good one, problems
were developing in the economy as a whole. The most obvious symp-
tom of the imbalances was the growing divergence between agricultural
and industrial prices. NEP had not assisted the growth of industry in
the cities on which the advance of any economy depended. Rather, it
had tended to stimulate primitive and backward local industries. Heavy
industry had recorded no significant improvement.
According to the account by the historian E.H. Carr, the situation in

trade and distribution was “no less disquieting.” “In the first place, NEP
had brought into the open the mass of private traders who had eked out
an illegal existence in the penumbra of war communism, and encour-
aged the appearance of many more, so that the great bulk of retail trade
was now conducted by private traders, greater and lesser nepmen, whose
energy and resourcefulness, in conditions of free competition, drove the
state trading institutions and cooperatives from a large part of the field.
Figures compiled in early 1924 showed that 83.4 percent of retail trade
was in private hands, leaving 10 percent to the cooperatives and only 6.6
percent to the state organs and institutions.”20
Even though his advocacy of consistent planning and the development

of industry had won support from Lenin, Trotsky’s proposals met with
intensified opposition from inside the Politburo, which, with his lone
opposition, refused to publish Lenin’s article in increasing the powers of
Gosplan. However the Politburo majority could not, at this stage, come
out openly against Trotsky and so agreed that he should give the report
on industry at the upcoming 12th congress of the Communist Party.
The Theses on Industry that he prepared for the congress emphasized the
political importance of industrialization in the creation of an unshake-
able foundation for the workers’ state. There had to be a correct relation-
ship between the market and planning which ensured that the dangers
of War Communism were averted while at the same instituting control
over the market where necessary. State activity as a whole had to “place
its primary concern on the planned development of state industry.” In
his report, Trotsky called for a “more harmonious, more concentrated
economic offensive.”21
20 E.H. Carr, The History of Soviet Russia, vol. 4, Penguin, 1969, p. 11.
21 Daniels, pp. 202-203.
The function of planning, he insisted, was ultimately to overcome the

NEP, which had been established for a long time, but not forever.
“In the final analysis we will spread the planning principle to the entire
market, thus swallowing it and eliminating it. In other words, our suc-
cesses on the basis of the New Economic Policy automatically move
towards its liquidation, to its replacement by a newer economic policy,
which will be a socialist policy.”22
The resolution of the 12th congress was, on paper, a victory for Trotsky.
But the program he advanced, including the increased involvement of
Gosplan, remained, by and large, a dead letter.
The phenomenon of the scissors crisis—the divergent movement

between the agricultural and industrial prices—attracted considerable
attention. In March of 1923, Trotsky noted, industrial prices stood at
140 percent of their 1913 level while agricultural prices were below 80
percent ... and the divergence was widening.
But very different conclusions were being drawn about the policies that
should be employed to overcome the crisis.
The advocates of industrialization, Preobrazhensky in particular, under-

took a comprehensive analysis of the crisis. It was bound up with vast
changes in the situation facing peasant agriculture brought about by
the revolution. Prior to the revolution the peasantry had been forced to
supply a considerable amount of grain in payments to the tsarist regime
and the nobility for which there was no return. Now the peasants had a
larger surplus to dispose of. To the extent that there was an insufficient
output from industry to meet this additional demand, prices would tend
to rise. The closing of the scissors therefore involved the development of
industry and an increase in its efficiency in order to increase the supply
of industrial goods that the peasant needed to purchase. Only in this way
could the flow of goods to the city be maintained through market mecha-
nisms and without resort to the methods of compulsion that had formed
the basis of War Communism.
However, as the crisis became more severe, the right-wing defence

of the market became more strident. The way to bring down prices, it
argued, was to restrict the supply of credit to state industry, forcing it to
lower prices and increase cash flow through the sale of stocks.
The situation rapidly worsened and came to a head in the late summer as
the disparity between industrial and agricultural prices widened week by
week. By October retail prices of industrial goods stood at 187 percent
22 Day, p. 82.
of their pre-war level and agricultural prices at 58 percent. The prob-

lem, however, was not lack of production. The harvest had been good
and consumer goods were being produced. The mechanism to establish
terms of trade that ensured the flow of goods from the country to the city
and vice versa had broken down.
As E.H. Carr notes: “What NEP had created was not the much vaunted
‘link’ or ‘alliance’ between the proletariat and the peasantry, but an arena
in which these two main elements of the Soviet economy struggled
against one another in competitive market conditions, the battle swaying
sharply first to one side, then to the other ...”23
The position of the majority was that everything must be done to take
pressure off the peasantry and that pressure must be applied to industry
to reduce prices. Strikes of workers took place in August and September
and the credits to industry were cut in order to try to force down prices.
On October 8, 1923 Trotsky initiated a battle against the majority of the

Central Committee in a letter on the mounting economic and political
crisis. Acutely aware that his actions would be interpreted as a challenge
for the leadership of the party as Lenin lay incapacitated, he made clear
that his views would only be made known to a “very narrow circle of
comrades.”
The re-emergence of fractional groups within the party, he stated, was a

result of two causes: the incorrect and unhealthy regime within the party
and the dissatisfaction of the workers and peasants with the economic
situation that had been brought about not only by objective economic
difficulties but also by “flagrant radical errors of economic policy.”
The resolution of the 12th congress on Gosplan and the planning princi-
ple had been pushed into the background and decisions about economic
issues were increasingly being taken by the Politburo “without prelimi-
nary preparation, out of their planned sequence.” Nationalized industry
had not been developed according to a plan but had been sacrificed to
the financial policy.
There was no mechanism within the present set of policies for a ratio-
nal resolution of the crisis. “The very creation of a committee to lower
prices,” he wrote, “is an eloquent and devastating indication of the way
in which a policy which ignores the significance of planned and manipu-
lative regulation is driven by the force of its own inevitable consequenc-
es into attempts to command prices in the style of war communism,”
Trotsky wrote.24
23 Carr, p. 87.
24 Carr, pp. 105-106.
The Politburo leadership ignored the warnings about the direction of

policy and insisted that Trotsky was motivated by the drive for personal
power.
According to the Politburo majority: “We consider it necessary to say

frankly to the party that at the basis of all the dissatisfaction of Comrade
Trotsky, all his attacks against the Central Committee which have con-
tinued already for several years, his determination to disturb the party,
lies the circumstance that Trotsky wants the Central Committee to place
him ... at the head of our industrial life...”25
In his reply, in which he detailed the past history of his disputes with the
majority, Trotsky again insisted that “one of the most important causes
of our economic crisis is the absence of correct uniform regulation from
above.”26
The Declaration of the 46, which was issued immediately following

Trotsky’s letter, made the same criticisms on economic policy.
“The casualness, thoughtlessness, lack of system in the decisions of the

Central Committee, not making ends meet in the area of the economy,
has led to this, that with undoubted large successes in the area of
industry, agriculture, finance, and transport, successes achieved by the
country’s economy essentially not thanks to, but in spite of the unsatis-
factory leadership, or rather in the absence of any leadership—we face
the prospect not only of the cessation of this success, but of a serious
general economic crisis.”27
While the party leadership made certain concessions to the Left Opposi-
tion these were of a purely verbal character. The opposition was con-
demned at the 13th party conference in January 1924 and defeated at the
13th party congress held in May of that year. In October Trotsky pub-
lished his Lessons of October, which saw a ferocious campaign against
him, as part of which Stalin, for the first time, unveiled the theory of
socialism in one country. As a result, Trotsky was forced to resign as
commissar of war. In May of 1925, following his recovery from illness,
he took up work in the Concessions Committee where he turned more
deeply into the issues confronting the Soviet economy and its relations
with the world market.
25 Daniels, p. 217.
26 Carr, p. 106.
27 Daniels, p. 218.
Lecture Two
The analysis in Towards Capitalism
or Socialism, one of the fruits of
Trotsky’s intellectual labours while
working in the Concessions Commis-
sion and on other economic projects,
is one of the most concentrated and
far-reaching summaries of his per-
spective on the development of the
Soviet economy. Its central ideas are
completely distorted and falsified by
Geoffrey Swain.
According to Swain, “Trotsky was

never opposed to the idea of ‘social-
ism in one country’ if the correct
economic policy were followed.”
He was therefore “happy” to as-
sociate himself with this task and
his essay [Towards Capitalism or
Socialism] made “very clear” that Trotsky
the Soviet Union was “on its way to
socialism.”1
Swain is here deliberately confusing two different issues for the purpose
of falsifying Trotsky’s position. Trotsky always insisted on the possibil-
ity and necessity of undertaking measures of socialist construction in the
Soviet Union—contrary to the Stalinist caricature of permanent revo-
lution which insisted that it claimed nothing could be done until there
was a revolution in the West. Economic construction was both possible
and necessary, but far from building socialism in one country, this very
process created further problems and challenges.
In a 1922 preface to his book 1905, Trotsky set out his position in a pas-
1 Geoffrey Swain, Trotsky, Longman, 2006, p. 159.
sage that was to be quoted repeatedly by his opponents: “The contradic-

tions in the position of a workers’ government in a backward country,
with an overwhelming peasant population, will be resolved only in an
international context in the arena of the world proletarian revolution.”2
The opening pages of Towards Capitalism or Socialism set out some of

those contradictions as they emerged in the sphere of the economy. The
construction of socialism, Trotsky began by pointing out, depends on
the growth of the productive forces, a process that involves engaging the
personal interest of the producers themselves in the social economy.
In the case of workers, one method was to make their wages dependent
on the productivity of their labour. The personal interest of the peasant
arose from the fact that he functioned as a private individual producing
for the market. And here emerged a crucial difference with the worker.
While a system of wage differentials did not give rise to a class differen-
tiation—one worker, even though he is paid more than another, is still a
worker—the enrichment of the peasantry does. As the individual peasant
acquires more wealth he begins to employ others, brings more land un-
der his control and begins to gain control over others through loans and
other measures.
That is, a class differentiation begins to take place. Such a differentia-

tion of course does not occur if the peasant economy does not grow. But
the growth of peasant production—above all the increase in the supply
of grain to the cities—is vital for the expansion and development of
industry, upon which the development of socialist economy depends.
Thus NEP was a highly contradictory process. There was a struggle
within the NEP between capitalist and socialist tendencies. It was both a
competition and collaboration between these tendencies. The only way
to counter the inevitable process of class differentiation in the village
was through the development of industry that would provide the basis
for a higher form of production that could supersede individual peasant
production—collectivised agriculture using advanced industrial machin-
ery.
The right wing, with Zinoviev in the lead, insisted that the peasant could
grow over into socialism through the development of cooperatives.
Trotsky did not deny their significance but insisted that cooperatives as a
form of organization were not sufficient. In order to advance the social-
ist reconstruction of agriculture it was necessary to industrialize it.
The occasion for Towards or Socialism was the publication of the 1925-
26 control figures for the economy by Gosplan. Trotsky had two tasks:
to refute the claims of the social democratic and Menshevik opponents
2 Leon Trotsky, 1905, Penguin, 1973, p. 8.
of the revolution that the Bolsheviks had

ruined the economy and that capital-
ism was returning, and to bring forward
the new problems which confronted the
Soviet economy as it restored industrial
capacity to the levels of 1913 and em-
barked on a new era, not just of restora-
tion but of new construction.
Trotsky pointed out that the Gosplan fig-

ures on the state control of the economy
had an historic significance. They were
the “first, though as yet imperfect, bal-
ance sheet of the first chapter of the great
experiment of transforming bourgeois
society into socialist society. And this
Zinoviev balance sheet is entirely favourable to
socialism.”3
No country, he continued, had been so ruined and exhausted by a series

of wars as the Soviet Union. But in contrast to the capitalist countries,
which had recovered with foreign assistance, the Soviet Union, the most
backward, the most exhausted, had made a recovery entirely by her own
efforts against the active opposition of the entire capitalist world. What
was to account for this remarkable development?
“It is only owing to the complete abolition of feudal landholding and

bourgeois property, only owing to the nationalization of all the principal
means of production, to state socialist methods, and to the mobilization
and distribution of the necessary resources, that the Soviet Union has
risen out of the dust and is now forcing its way into the system of world
economy as factor of increasing importance.”4
For Trotsky, however, the task was not simply to note the achievements
of the Soviet economy but to chart the course ahead by identifying the
new problems and dangers—resulting from the very advances made by
the Soviet economy—and pointing to the means to begin to overcome
them.
The crucial question, he insisted, was not just the relationship between
state and private industry within the Soviet Union—decisive as that
was—but the “far more important” question of the relationship of Soviet
economy to the world economy as a whole. As the Soviet economy
3 Leon Trotsky Towards Capitalism or Socialism, in: Leon Trotsky, The Chal-
lenge of the Left Opposition 1923-25, Pathfinder Press, 1980, p. 343.
4 Towards Capitalism or Socialism, p. 343.
entered the world market not only did its prospects increase, but also the
dangers.
This was because the fundamental superiority of the capitalist states lay
in the cheapness of goods—the market expression of the fact that they
had a higher productivity of labour, and it was the productivity of labour
that would determine, in the final analysis, whether capitalism or social-
ism was victorious.
“The dynamic equilibrium of the Soviet economy should by no means

be considered as the equilibrium of a closed and self-sufficient unit,” he
wrote. “On the contrary, as time goes on, our internal economic equi-
librium will be maintained more and more by the accomplishments of
our imports and exports. This circumstance deserves to be traced to its
logical conclusion, with every inference drawn. The more we are drawn
into the system of the international division of labour, the more openly
and directly are such elements of our domestic economy as the price and
quality of our goods made to depend on the corresponding elements in
the world market.”5
A new yardstick had to be found to measure the progress of the Soviet

economy. Up to that point it had been the degree to which industry, ag-
riculture, transport and other sectors of the economy had returned to the
levels achieved in 1913, the last year before the outbreak of war. Now
that those levels had either been attained or were about to be reached,
new criteria were necessary—coefficients that measured Soviet industry
against the world market comparing both price and quantity. In this way
it would be possible to identify economic weak points and to determine
a rational plan for imports and exports. The development of such figures
had clear implications for investment as well. It would be possible to
determine the relative advantages and disadvantages of importing cer-
tain classes of machinery and equipment or trying to manufacture them
domestically. Clearly in those areas where the Soviet coefficients were
furthest from world standards, it would be more advantageous to import
as opposed to those where the coefficients more closely approximated
the international benchmark.
With the Soviet economy reaching or approaching its pre-war levels of

production, the relationship to the world market underwent a change as
well. In the period of War Communism, we recall, Trotsky had insisted
on the need for Soviet Russia to rely on its own capacities lest the im-
perialists secure significant inroads into nationalized property in return
for “a pound of tea and a tin of condensed milk.” But the recovery of the
Soviet economy meant that new opportunities, as well as new dangers,
were opening up.
Previously the world market had been considered from the standpoint of
the economic dangers lurking within it. No one had been more insis-
tent than Trotsky on the recognition of these dangers, which had to be
combated with the measures of “socialist protectionism” embodied in
the monopoly of foreign trade. But the capitalist world market not only
contained great dangers, it also opened up new opportunities for the
Soviet economy.
“It enables us to secure more and more access to the accomplishments of

technology, to its most complex achievements. While the world market,
when it adds a socialist economic system to its other units, conjures up
certain dangers for this socialist system, it also affords the socialist state
powerful antidotes for these dangers, provided that the state properly
regulates its economic intercourse. If we use the world market for our
own ends in the right way we shall be able to considerably accelerate the
process of altering the comparison coefficients in favour of socialism.”6
Contrast this analysis with the pro-

nouncements of Stalin at the 14th
congress of the Communist Party
just four months later in December
1925. According to Stalin it was
necessary to “conduct our economic
construction in such a way as to
convert the USSR from a country
which imports machines and equip-
ment into a country which produces
machines and equipment. ... In this
manner the USSR ... will become a
self-sufficient economic unit building
socialism.”7
In opposition to this nationalist Stalin

outlook, Trotsky insisted that it was
necessary to have regard for the complex system of interrelations that
had existed before the war between the economy of capitalist Russia and
the world market. Almost two thirds of the inventory of the factories
had been imported from abroad and this condition remained virtually
unchanged.
This meant, Trotsky continued, that it would not be advantageous to

7 Richard Day, Leon Trotsky and the Politics of Economic Isolation, Cambridge
University Press, 2004, pp. 120-21.
produce anything more than perhaps two fifths or at most one half of
the necessary new machines over the next period. Any sudden leap to
the production of new machinery would adversely disturb the relations
between the various branches of the economy and generally retard the
rate of economic development. Such retardation would be much more
dangerous to the Soviet economy than the importation of foreign ma-
chines or necessary foreign commodities in general.8
Now let us return to Swain’s contention that Trotsky was “perfectly

happy” with the conception that it was possible to build socialism in one
country.
The importance of the Gosplan figures, Trotsky insisted, was that they
showed the predominance of socialist tendencies in the economy over
capitalist tendencies on the basis of the general advance of the produc-
tive forces. But that was just the starting point.
“If it were our intention (or rather, if it were possible for us) to remain
an economically isolated state forever, we might consider this question
solved in principle. Danger would then threaten us only in the politi-
cal field, or in the event of a military penetration of our isolation from
outside. But now that we have entered the field of the universal division
of labour, economically speaking, and have thus become subject to the
operation of the laws controlling the world market, the cooperation and
struggle between the capitalist and socialist tendencies in the economy
acquire far greater proportions, which involves greater and greater
hardships.”9
So much for Swain’s falsifications. One can only concur with the
conclusion reached by Isaac Deutscher that Trotsky had refuted the
fundamental precepts of Stalin’s theory of socialism in one country even
before it had been imposed as official policy.
We come now to a very important foundation of Trotsky’s analysis, one

with far reaching implications not only for the historical struggle against
Stalinism and its doctrine of socialism in one country, but for the con-
temporary struggle in which we are engaged for international socialism.
This is Trotsky’s conception of the objective significance of the interna-

tional division of labour. Here the arguments in the sphere of economy
are grounded on the same basic conceptions that were developed by
Trotsky in his analysis of culture and his opposition to the theory of
proletarian culture.

In the article Culture and Socialism, published in 1927, Trotsky began

by explaining that historical society has developed as an organization
for the exploitation of man by man. Consequently culture has served the
class organization of society, and an exploiters’ society has given rise to
an exploiters’ culture. Does this mean that we are against all the culture
of the past?
“There exists, in fact, a profound contradiction here. Everything that has

been conquered, created, and built by man’s efforts and that serves to
enhance man’s power is culture. But since it is not a matter of individual
man but of social man, since culture is a social-historical phenomenon
in its very essence, and since historical society has been and continues
to be class society, culture is found to be the basic instrument of class
oppression. Marx said: ‘The ruling ideas of an epoch are essentially the
ideas of the ruling class of that epoch.’ This also applies to culture as a
whole. And yet we say to the working class: master all the culture of the
past, otherwise you will not build socialism. How is this to be under-
stood?
“Over this contradiction many people have stumbled, and they stumble
so frequently because they approach the understanding of class society
superficially, half-idealistically, forgetting that fundamentally it is the
organization of production. Every class society has been formed on the
basis of definite modes of struggle with nature, and these modes have
changed in accordance with the development of technology. What is
the basis of bases—the class organization of society or its productive
forces? Without doubt the productive forces. It is precisely upon them,
at a certain level of their development, that classes are formed and re-
formed. In the productive forces is expressed the materialized economic
skill of mankind, our historical ability to ensure our existence. On this
dynamic foundation there arise classes, which by their interrelations
determine the character of culture.”10
It was from within this broad historical framework that Trotsky consid-
ered the development of the international division of labour, regulated
through the operation of the world market, and its relationship to the
question of socialist construction in the Soviet Union.
The international division of labour had been taken forward by capitalist

economy, but it was an historical and social mechanism through which
the productivity of labour had been increased and the productive forces
developed.
In other words, in considering the international division of labour, it is

10 Leon Trotsky, Culture and Socialism, in: Problems of Everyday Life, Pathfinder
Press, 1973, p. 228.
clear that the same question arises as in the sphere of culture: what is the
basis of the bases, the class organization of society or the development
of the productive forces? That is, the international division of labour,
through which the productive forces of mankind had been developed,
was a more fundamental social category than the class organization of
society. This meant that the development of socialist measures in the
Soviet economy had to be undertaken in accord with the international
division of labour and in that way the economic measures carried out in
the Soviet Union would pre-figure the international socialist economy.
In an article published on August 1, 1925, Trotsky explained that, in the
final analysis, economic processes would prevail over political barriers.
“The world division of labour and exchange which derives from it is not
disrupted by the fact that a socialist system prevails in one country while
a capitalist one prevails in the others. ... The fact that the workers and
peasants in our country wield state power and own trusts and syndicates
in no way upsets the world division of labour, which results [not from
ideology but] from differences in natural circumstances and national
history.”11
This meant that the Stalinist perspective of keeping the Soviet Union ec-
onomically isolated until the socialist revolution had spread internation-
ally was false to the core. The future United States of Europe, indeed the
future world socialist economy, was not simply a question of a political
perspective. Rather, the political perspective was itself an expression of
objective economic processes. It was, so to speak, lodged in the interna-
tional division of labour itself. Socialism is justified historically to the
extent that it can bring about a development of the productive forces—a
development that takes place on the ground of the international division
of labour.
Trotsky expressed these ideas in a number of places over the next
period. In 1927 he wrote: “A properly regulated growth of export and
import with the capitalist countries prepares the elements of the future
commodity and product exchange [which will prevail] when the Euro-
pean proletariat assumes power and controls production.” Accordingly,
the building of socialism did not take place in distinct stages separated
by an “abyss.”
The same idea is expressed in another way in the critique of the draft
program for the Sixth Congress of the Comintern in 1928. The perspec-
tive of Stalin and Bukharin of “socialism in one country” envisioned the
world socialist economy as being constructed from a series of national
socialist economies, “after the manner in which children erect structures
with ready-made blocks.”
11 Day p. 130.
“As a matter of fact, world socialist

economy will not at all be a sum of
national socialist economies. It can take
shape in its fundamental aspect only on
the soil of the worldwide division of
labour which has been created by the
entire preceding development of capi-
talism. In its essentials, it will be con-
stituted and built not after the building
of ‘complete socialism’ in a number of
individual countries, but in the storms
and tempests of the world proletarian
revolution which will require a number
of decades. The economic success of the
first countries of the proletarian dictator- Bukharin
ship will be measured not by the degree
of their approximation to a self-sufficing ‘complete socialism’ but by the
political stability of the dictatorship itself and by the successes achieved
in preparing the elements of the future world socialist economy.”12
The circumstances surrounding the

opening of the battle over socialism in
one country in the Communist Party
have provided material for conjecture
over Trotsky’s motives and actions at the
time. In the preface to the Russian edi-
tion of Permanent Revolution he made
clear that the battle against socialism
in one country involved all the central
questions of a revolutionary perspective.
The alternative of permanent revolution
or socialism in one country, he wrote,
“embraces at the same time the inter-
nal problems of the Soviet Union, the
prospects of revolution in the East, and
Kamenev finally, the fate of the Communist Inter-
national as a whole.”13
The conjectures over Trotsky’s actions arise because at the 14th party
congress held in December 1925 at which the conflict first arose, the
battle was initiated by Zinoviev and Kamenev while Trotsky remained
silent. The triumvirate of Zinoviev, Kamenev and Stalin, which had
come together in order to block and eventually exclude Trotsky from a
12 Leon Trotsky, The Third International After Lenin, New Park, 1974, pp. 42-43.
13 Leon Trotsky, The Permanent Revolution, New Park, 1975, p. 11.
leadership role, was now falling apart over the most fundamental ques-
tion of perspective. Yet the initial battle did not involve Trotsky.
Commenting on these events, E.H. Carr wrote: “The split in the triumvi-
rate at the fourteenth party congress left behind it one puzzling enigma:
the position of Trotsky. Hostility to Trotsky was the main foundation on
which the triumvirate had stood.” At the congress, however, Trotsky’s
position had seemed the most rigid, Carr continued. “Though a del-
egate at the congress, he had sat haughtily throughout the proceedings,
while the two new factions tore one another to pieces without rising to
speak.”14
Deutscher, noting that the conflict between the triumvirs had been sim-
mering for a year, commented: “This, it might have seemed, was the
realignment for which Trotsky had waited, the opportunity to act. Yet
throughout all this time he was aloof, silent about the issues over which
the party divided, and as if unaware of them.”15
Geoffrey Swain, however, has a ready answer to hand. Despite all the
frustrations brought by “interference” from the Politburo in economic
decision-making, progress was being made “and he was prepared to
work with Stalin to see it through.”16
And why would he come into conflict, given that, according to Swain,
he agreed with Stalin that socialism could be built in one country if only
the correct policies were carried out?
Trotsky’s silence and apparent inaction in the face of the split in the
triumvirate is only a “mystery” if it is considered from the standpoint of
a struggle for political power. From this standpoint it would seem obvi-
ous to initiate a course of action designed to take maximum advantage
of a split in the ranks of one’s opponents. However, when viewed in the
correct perspective, that is, from the standpoint of the issues of program
and perspective with which Trotsky was concerned, the meaning of the
events surrounding the 14th congress can be readily grasped.
The doctrine of socialism in one country had its origins in an article

published by Stalin in December 1924 directed against Trotsky’s theory
of permanent revolution entitled “The October Revolution and the Tac-
tics of the Russian Communists.”
“According to Lenin,” Stalin wrote, “revolution draws its forces above

all from among the workers and peasants of Russia itself. According
14 E.H. Carr, Socialism in One Country, Volume 2, Penguin, 1970, pp. 182-83.
15 Isaac Deutscher, Trotsky, Volume 2, Oxford University Press, 1970 p. 248.
16 Swain, p. 163.
to Trotsky we have it that the indispensable forces can be found only

‘in the arena of a world-wide proletarian revolution’. And what if the
world revolution is fated to come late? Is there a gleam of hope for our
revolution? Comrade Trotsky gives us no hope at all ... According to
this plan, our revolution has only one prospect: to vegetate in its own
contradictions and have its roots rot while waiting for the worldwide
revolution.”17
Just 10 months earlier, in his Foundations of Leninism, Stalin had

summed up Lenin’s views as follows: “The overthrow of the power of
the bourgeoisie and the establishment of a proletarian government in
one country does not yet guarantee the complete victory of socialism.
The main task of socialism—the organization of socialist production—
remains ahead. Can this task be accomplished, can the final victory of
socialism in one country be attained, without the joint efforts of the
proletariat of several advanced countries? No, this is impossible. To
overthrow the bourgeoisie the efforts of one country are sufficient—the
history of our revolution bears this out. For the final victory of Social-
ism, for the organization of socialist production, the efforts of one coun-
try, particularly of such a peasant country as Russia, are insufficient. For
this the efforts of the proletarians of several advanced countries are nec-
essary. Such, on the whole, are the characteristic features of the Leninist
theory of the proletarian revolution.”
However, by the end of the year the book was reissued with the affirma-
tion that the “proletariat can and must build the socialist society in one
country,” followed by the assertion that this constituted the “Leninist
theory of proletarian revolution.”
The significance of the new doctrine, however, was not immediately

apparent. E.H. Carr noted that it did not figure in the resolution drafted
by Zinoviev that condemned Trotsky in January 1925. Stalin did not
mention it in his speech on that occasion, and nobody thought of invok-
ing it in the disputes over agrarian policy that took place in the winter of
1924-25. “Its original appearance in the article of December 1924 was
followed by a three months’ silence, during which the theory of social-
ism in one country seems to have been ignored by party leaders and
publicists, including its author.”18
It was Bukharin who took it up and developed it, arguing in the spring
of 1925 that the counterpart of the recognition of the stabilization of
capitalism had to be an acknowledgement of the possibility of building
socialism in one country. The stabilization of capitalism in the West,
17 Robert Daniels, The Conscience of the Revolution, Harvard University Press,
1965, p. 251.
18 Carr, p. 43.
he maintained, “to a certain degree influences the way we consider the

question of our internal economic position.” If it was admitted that
capitalism in Western Europe is recovering, he continued, “does it not
follow that this implies an end to our hope of building socialism? In
other words, can we succeed without the direct help of a victorious
European proletariat? This reduces to a question of the possibility of
building socialism in one country.” It was possible to build socialism as
the resources would be acquired through a more vigorous application of
labour.19
By the time of the 14th congress in December 1925 the political useful-
ness of the new doctrine as a weapon for beating the opposition was
becoming ever more apparent. Socialism in one country was to become
the nationalist doctrine of the rising bureaucracy as it consolidated its
position in the battle against the program and perspective of socialist
internationalism and Marxism.
When the conflict between the triumvirs erupted on the floor of the 14th
congress Trotsky was taken by surprise. As he later told the Dewey
Commission: “The expectation of a struggle between Stalin and Zino-
viev and Kamenev was unsuspected at the Congress. During the Con-
gress I waited in uncertainty, because the whole situation changed. It
appeared absolutely unclear to me.”20
Having been taken unawares, he sought to orient himself as to the mean-

ing of the conflict and the tendencies that the opposing factions repre-
sented. On December 14, he made a note that outlined the method by
which he would proceed.
“Neither classes nor parties,” he wrote, “can be judged by what they

might say about themselves nor by the slogans they raise at a given
moment. This fully applies to groupings within a political party as well.
Slogans must be taken, not in isolation, but in relation to all their sur-
roundings, and especially in relation to the history of a particular group-
ing, its traditions, the selection of human material within it, etc.”21
In the case of the Zinoviev-Kamenev grouping it was by no means clear

what the opposition to the Stalin-Bukharin bloc signified. In the first
place, Zinoviev had been in the forefront of the denunciations of Trotsky
for “underestimating” the peasantry. The conflict, which had erupted in
the lead-up to the congress, between the Leningrad organization, headed
by Zinoviev, and the central committee undoubtedly had its social roots
in the relations between the proletariat and the peasantry, Trotsky noted.
19 Day, p. 103.
20 The Case of Leon Trotsky, Merit, New York, 1969, p. 322-23.
21 Trotsky, Challenge of the Left Opposition 1923-25, p. 390.
But no specific proposals had been advanced nor any platforms clarify-
ing the basic principles elaborated. Furthermore, there was “extraordi-
nary difficulty” in drawing out the precise nature of the class tendencies
at work in the different factions because of the “absolutely unprec-
edented role” of the party apparatus. This had led to a situation where
the Leningrad organization directed a resolution, virtually unanimously,
against the central committee, while the Moscow organization—without
even a single abstention—adopted a resolution against Leningrad.
Trotsky could not simply take on face value Zinoviev’s newfound op-
position to Stalin and his doctrine of socialism in one country. After all,
it was not at all clear what Zinoviev’s real position was.
In April 1925 he had told a party conference that Lenin had believed that
the “full victory” of socialism was possible in “a country such as ours,”
but that as an international revolutionary, Lenin had “never ceased to
underline the fact that without an international revolution our victory is
unstable and incomplete.” Thus, according to Zinoviev’s jumbled logic,
a “full” but “incomplete” and “unstable” victory of socialism was pos-
sible in one country.
The composition of the new opposition was a further complication.

Sokolnikov, one of the leaders of the advocates of “financial orthodoxy,”
was among the leaders of the Leningrad opposition. His opposition to
“socialism in one country” would come from the right rather than the
left. Earlier he had been an advocate of weakening the monopoly of
foreign trade—characterized by Trotsky as “socialist protectionism”—
in the name of tighter control of government finances. “He was and
remains,” Trotsky wrote, “the theoretician of economic disarmament
of the proletariat in relation to the countryside.” In the absence of any
clear, worked-out perspective from Zinoviev, Sokolnikov’s program
would have become the platform of the new opposition.
This danger was underscored by the fact that “Kamenev, Zinoviev and
the others still consider industry a component part of state capitalism.”
In 1921, at the start of the NEP, Trotsky noted, Lenin had characterized
the overall economic regime as state capitalism. But this was at a time
when industry was in a state of paralysis and it was anticipated that eco-
nomic development would proceed by way of mixed companies, some
of them attracting foreign investment. In fact, this did not take place.
Development occurred on more favourable lines and state industry
ended up with the decisive position while mixed companies, concessions
and leased enterprises took an insignificant share of the market. How-
ever, the leaders of the new opposition continued to use the term.
“They held this point of view in common two or three years ago, and ad-
vanced it in an especially persistent fashion during the 1923-24 discus-
sion,” Trotsky wrote. “The essence of this point of view is that industry
is one of the subordinate parts of a system that includes peasant econo-
my, finance, cooperatives, state-regulated privately owned enterprises,
etc. All these economic processes, regulated and controlled by the state,
constitute the system of state capitalism, which is supposed to lead to
socialism through a series of stages. In this schema, the leading role of
industry completely vanishes. The planning principle is almost entirely
pushed aside by credit-finance regulation [the program of Sokolnikov],
which assumed the role of an intermediary between the peasant econo-
my and state industry, regarding them as two parties in a lawsuit.”22
The essence of the question lay in the development of industry. Only in

this way could fundamental changes be made in the countryside. The
regulation of credit and finance did not include any principle of planning
and could not contain any guarantee of an advance to socialism.
There was another aspect to the significance of planning and industri-

alization—the regime inside the party. Trotsky did not consider, unlike
Zinoviev, that the central problem was Stalin as an individual. Rather
Stalin and the bureaucratic regime he headed, based in the party appara-
tus, was, in the final analysis, an expression of the economic and cultural
backwardness of the Soviet Union and the impoverished position of the
working class. Therefore bureaucratism could only be overcome through
a program of economic and cultural development, of which planning
and industrialization were the key components.
Notwithstanding his concerns over the perspectives of the Leningrad

leadership and the nature of the regime they headed, Trotsky concluded
that the emergence of this opposition did represent, in a distorted man-
ner, the growing opposition of the working class to the continuous con-
cessions to the peasantry and the backsliding by the central leadership
and that, by the same token, some of the hostility to Leningrad reflected
the opposition of the countryside to the city.
It was considerations of this kind that led Trotsky to form a united oppo-
sition with Kamenev and Zinoviev. At the April 1926 Central Committee
plenary sessions Trotsky proposed a five-year plan aimed at overcoming
the shortage of industrial goods by 1931, including more progressive
agricultural taxes and expanded capital commitments to industry. At the
same meeting Kamenev put forward the view that industry was now
lagging behind agriculture and this deficiency had to be overcome. This
convergence of opinion led to the formation of the Joint Opposition.
22 Trotsky, Challenge of the Left Opposition 1923-25, p. 391.
Over the next 18 months Trotsky was to engage in a political struggle

so intense that in comparison his conflicts with the triumvirs were
“mere skirmishes.” Deutscher captures the scope of the battle: “Tire-
less, unrelenting, straining every nerve, marshalling matchless powers of
argument and persuasion, ranging over an exceptionally wide compass
of ideas and policies, and at last supported by a large section, probably
the majority, of the Old Guard which had hitherto spurned him, he made
a prodigious effort to arouse the Bolshevik party and to influence further
the course of the revolution. As a fighter he may appear to posterity not
smaller in the years 1926-27 than he was in 1917—even greater.”23
In the end the Opposition was

defeated and Trotsky exiled. The
roots of the defeat lay, in the final
analysis, in the further blows
to the international revolution,
now prepared by the policies
of the Stalinist apparatus itself,
which caused the masses to hold
back. While the ruling factions
needed only the passivity of the
masses, the opposition needed
their arousal and active involve-
ment and that was not forthcom-
ing under the impact of further Trotsky
defeats, especially the defeat of
the Chinese Revolution in 1926-27.
While Trotsky held the preeminent position within the Opposition,

Evgeny Preobrazhensky played a significant role in the sphere of eco-
nomic policy. Preobrazhensky was to capitulate to the Stalin regime.
But his analysis, and the theoretical conceptions within it, which led to
his eventual recantation, contain important issues that have lost none of
their relevance.
Preobrazhensky was born on 15 February 1886 in Bolkhov, a small

town in central Russia established in the 13th century, and was shot in
Stalin’s purge of 1937. The son of an Orthodox priest and Bible teacher,
Preobrazhensky later maintained that his youthful radicalism developed
in opposition to “all the religious quackery” he could see around him.
While at high school he emerged as a political militant and founded a
political journal. He joined the Russian Social Democrats in 1903 at the
age of 17 and was arrested during his first year as a student at the Mos-
cow University Law Department.
He took part in the 1905 Revolution, and, after its suppression, went to
the Urals where was chosen to attend the 1907 all-Russia party confer-
ence in Finland where he met Lenin. Preobrazhensky was repeatedly
arrested for his political activities and in September 1909 was sent to
internal exile. When the February Revolution erupted he did not support
the provisional government and was one of the first to accept Lenin’s
April Theses.
During the negotiations at Brest-Litovsk in 1918, Preobrazhensky was

among those who opposed the agreement and was closely aligned with
Bukharin. Elected as an alternate member of the Central Committee
in 1917, he became a full member in 1920. Preobrazhensky was one
of those during the period of War Communism who sought to develop
a system of centralized planning. He was a critic of the NEP from the
beginning and as early as December 1921 criticized Lenin for describing
War Communism as a mistake.
Preobrazhensky was a prominent signa-

tory of the Declaration of the 46 in 1923,
and, after the introduction of the NEP,
was in sharp and continuous conflict
with the theories of Bukharin, the chief
spokesman of the right wing. In 1929,
after the opposition had been crushed,
Preobrazhensky was one of the first to
break with Trotsky on the grounds that
the Stalin regime had turned to the left
and was implementing measures on
industrialization demanded by the Op-
position.
He was expelled again from the party

Evgeny Preobrazhensky in 1931 following the publication of his
book The Decline of Capitalism, which
expressed significant differences with Stalin’s chief economist Varga.
Readmitted to the party in 1932, he made a recantation at the so-called
Victors Congress in 1934, in which he made an attack on Trotsky. After
being arrested and jailed in 1935 he served as a prosecution witness in
the trial of Zinoviev in 1936. Arrested again in 1936 he was scheduled
to be tried but did not appear and was shot in 1937 after refusing to
confess.
Preobrazhensky’s major contribution to the debate on economic policy

centred on what he called the law of primitive socialist accumulation,
which was elaborated in articles and in his major book The New Eco-
nomics published in 1926.
In the Soviet economy of the NEP, he maintained, there was a conflict

between the law of value, through which the capitalist market was
regulated, and the law of primitive socialist accumulation. The equilib-
rium of the Soviet economy was established “on the basis of conflict of
[these] two antagonistic laws.”24
The concept of primitive accumulation was drawn from Marx’s analysis

of the historical development of capitalism. Before the capitalist system
had developed to the stage where it could sweep away all earlier modes
of production through the spontaneous operation of the market, it had
to establish an initial accumulation of wealth. This primitive accumula-
tion was achieved by means of colonial policy, the plundering of peasant
production, the use of taxes and, above all, the use of force by the state.
Socialist production would in its full development achieve superiority

over capitalism. But at this point, in the backward economy of the So-
viet Union, it lagged far behind. Over time, it would be possible to carry
out socialist accumulation by building up the means of production from
the resources created from within the socialist economy. But that stage
had not been reached. It was necessary to engage in “primitive socialist
accumulation.” This involved “accumulation in the hands of the state
of material resources mainly or partly from sources lying outside the
complex of state economy. This accumulation must play an extremely
important part in a backward peasant country, hastening to a very great
extent the arrival of the moment when the technical and scientific re-
construction of the state economy begins and when this economy at last
achieves purely economic superiority over capitalism.”25
Preobrazhensky rejected the claims by his right-wing opponents that he

was proposing the type of harsh measures against the peasantry that had
accompanied primitive accumulation under capitalism. The process of
accumulation, he insisted, would take place through the pricing mecha-
nism.
He explained the issues with the following example.
Industry Agriculture
100 hours of labour 150 hours of labour
100 units 100 units
100 rubles 100 rubles
24 E. Preobrazhensky, The New Economics, Clarendon Press, 1965, p. 3.

25 Preobrazhensky, p. 84.
The products of industry and agriculture have the same price. The in-
equality lies in the fact that grain, embodying 150 hours of agricultural
labour, has been exchanged for industrial commodities embodying only
100 hours of industrial labour. In the world economy it might be as-
sumed that grain, embodying 150 hours of agricultural labour, would be
able to be exchanged for a greater quantity of industrial goods. But this
is prevented by the monopoly of foreign trade. The unequal exchange
provides the basis for accumulation by the socialist industrial sector in
the form of new equipment and machinery, which lifts the productivity
of labour leading to a change in the exchange relations.
Industry Agriculture
100 hours of labour 150 hours of labour
120 units 100 units
100 rubles 100 rubles
In the second stage the exchange is still unequal but the position of the
peasantry has improved. It now receives 120 units of industrial goods
compared to the 100 units previously. Preobrazhensky acknowledged
that the appropriation of surpluses from the peasantry would “give rise
to a certain discontent.” But at the same time such a policy would begin
to create the conditions for overcoming that discontent by expand-
ing industrial production and lowering prices, thereby lessening the
exploitation of peasants by the merchants, as well as providing for the
recruitment of new workers from the countryside. On the other hand, to
continue with underaccumulation led to the continuation of the “goods
famine” and a build-up of peasant discontent “so that this pressure from
the countryside threatens our system of protectionism and the foreign
trade monopoly.”26
Preobrazhensky was not content to describe the mechanisms of this

process, he sought to discover what he believed were the objective laws
which governed it. The economy was driven by the struggle to increase
the means of production belonging to the state and this meant striving
for the maximum primitive socialist accumulation.
“The whole aggregate of tendencies, both conscious and semi-con-

scious, directed towards the maximum development of primitive social-
ist accumulation, is also the economic necessity, the compelling law of
existence and development of the whole system, the constant pressure
of which on the consciousness of the producers’ collective of the State
economy leads them again and again to repeat actions directed towards
26 Preobrazhensky, The Crisis of Soviet Industrialisation, Donald A. Filtzer ed., p. 62.

the attainment of the optimum accumulation in a given situation.”27
This emphasis on the objective character of the law of primitive socialist

accumulation, which presses itself on consciousness, becomes signifi-
cant when we consider the reasons for Preobrazhensky’s capitulation to
Stalin.
Preobrazhensky insisted that it was not enough to simply speak of the

struggle between the socialist planning principle and spontaneity of
the commodity economy because this said nothing about the particular
phase of that struggle and the conditions under which it was developing.
Moreover, he maintained that the law of primitive socialist accumula-

tion was based on tendencies within the development of capitalism itself
that undermined the operation of the law of value. Because this analysis
formed the basis of his eventual break from the Left Opposition and
Trotsky, it is necessary to elaborate the fundamental questions of Marx-
ist political economy, in particular the law of value, which are involved.
In Capital, Volume 1, Marx demonstrates that the value of any commod-

ity is determined by the amount of socially necessary labour embodied
in it. In a simple commodity society—a theoretical abstraction employed
by Marx—commodities exchange in the market at their values. On the
basis of this analysis, Marx shows how surplus value arises out of the
purchase and use of the commodity labour power that the worker sells to
the capitalist in the wage contract. Marx shows that surplus value arises
from the very laws governing commodity exchange and emerges as soon
as the buying and selling of labour power takes place. The origin of
surplus value lies in the fact that labour power is a special commodity in
that its expenditure in the process of production gives rise to more value
than it embodies itself.
Marx’s method of analysis involves a continuous movement from the

abstract to the concrete. In Capital, Volume 3, we no longer have the
exchange of simple commodities, the products of the labour of indi-
vidual producers. The commodities that now appear in the market are
the products of capitalist firms, in which the proportions of the means of
production [constant capital] to living labour differ across the range of
industries.
The price of a commodity, now no longer the product of an individual

producer but of a capitalist firm, will not be determined directly by the
amount of new labour it embodies but will be such that it returns to
the total capital that produced it an average rate of profit. This average
rate is determined across society as a whole by the relationship of the
27 Preobrazhensky, The New Economics, p. 58.
total surplus value extracted from the working class to the total capital
employed.
On the basis of this analysis Marx demonstrates that competition is the

form of the struggle between different sections of capital to appropriate
their share of the available mass of surplus value. If prices in one sector
of the economy are at a level that returns capital in that sector a profit
higher than the average rate, then capital from other sectors will move
there, increase production, and lower the price until profit rates reach
average levels again. However, if the firms already in that sector are able
to prevent the entry of new capital, that is, if, for whatever reason, they
are able to exert monopoly control, then profits in that sector will remain
at higher than the average rate. The overall mass of surplus value will
not have increased, but it will be distributed differently. The monopo-
lized sectors of capitalist industry will have benefited at the expense of
the more competitive sectors.
Preobrazhensky believed that Marx’s analysis of the impact of mo-

nopoly on the operation of the law of value had immediate relevance
for the Soviet economy where the state sector operated as a giant trust
or monopoly vis-à-vis the peasant producers competing in the domestic
market. Furthermore, the Soviet economy as a whole functioned as a
monopoly in a world market that was increasingly dominated by giant
trusts and monopoly corporations.
The state economy of the proletariat, he wrote, had arisen historically

on the basis of monopoly capitalism. This led to the creation of mo-
nopoly prices on the home market of national industry, the exploitation
of petty production and the expropriation of surplus profit. This situation
formed the basis of the pricing policy in the period of primitive social-
ist accumulation. The further concentration of industry into the hands
of a single state trust in the hands of the workers’ state “increases to an
enormous extent the possibility of carrying out on the basis of monopoly
a price policy which will be only another form of taxation of private
economy.”28
But Preobrazhensky went further, insisting that with the development

of monopoly capitalism the law of value had at least been “partially
abolished along with all the other laws of commodity production which
are connected with it.”29
Free competition was not only being eliminated within national markets
but increasingly on the world market where giant trusts, in particu-
lar those emanating from the United States, were becoming increas-
ingly dominant. The equalization of the rate of profit—the mechanism

through which the law of value operates—was rendered almost impos-
sible between the trustified branches of production that had become
“transformed into closed worlds, into the feudal kingdoms of particular
capitalist organizations.”30
We can begin to see here differences between the approach of Preobra-

zhensky and that of Trotsky. In his “Notes on Economic Questions,”
prepared in May 1926, Trotsky pointed to some of the dangers contained
in Preobrazhensky’s analysis.
“The analysis of our economy from the point of view of the interaction
(both conflicting and harmonizing) between the law of value and the law
of socialist accumulation is in principle an extremely fruitful approach—
more accurately, the only correct one,” he wrote. “Such analysis must
begin within the framework of the closed-in Soviet economy. But now
there is a growing danger that this methodological approach will be
turned into a finished economic perspective envisaging the ‘develop-
ment of socialism in one country.’ There is reason to expect, and fear,
that the supporters of this philosophy, who have based themselves up
to now on a wrongly understood quotation from Lenin, will try to adapt
Preobrazhensky’s analysis by turning a methodological approach into
a generalization for a quasi-autonomous process. It is essential, at all
costs, to head off this kind of plagiarism and falsification. The interac-
tion between the law of value and the law of socialist accumulation must
be placed in the context of the world economy. Then it will become
clear that the law of value that operates within the limited framework of
the NEP is complemented by the growing external pressure from the law
of value that dominates the world market and is becoming ever more
powerful.”31
Trotsky returned to this point in January 1927: “We are part of the world
economy and find ourselves in the capitalist encirclement. This means
that the duel of ‘our’ law of socialist accumulation with ‘our’ law of
value is embraced by the world law of value, which ... seriously alters
the relationship of forces between the two laws.”32
Trotsky maintained that industry in the Soviet Union had to be devel-

oped in accordance with the international division of labour. That is
there was not an “abyss” between the structure of economy in the Soviet
Union and that which would develop when the working class took
power in the rest of Europe. Preobrazhensky had a different conception.
If the proletarian revolution triumphed in Europe, then not only would
31 Trotsky, Challenge of the Left Opposition 1926-27, pp. 57-58.
32 Day, p. 147.
the planning principle triumph as the method of organizing the economy

“but the proportions and distribution of labour and means of production
would be substantially different.”33
The differences also extended to the type of industry that should be

developed. On many occasions Trotsky pointed to the fact that in the
pre-war period almost two thirds of Russia’s technical equipment was
imported, while only one third consisted of home production, and even
this third comprised the simplest machines. The more complicated, more
important machines were brought in from abroad. In other words, eco-
nomic policy should have regard for the pre-war international division
of labour.
Preobrazhensky’s analysis moved in another direction. The law of value,

he maintained, exerted the least influence in the sphere of the produc-
tion of the means of production where the state was both the monopolist
purchaser and producer. “This means that heavy industry is the most
socialist link in the system of our socialist economy, the link where the
furthest progress has been made in the process of replacing market rela-
tions by a system of firm, planned orders and firm prices with the unified
organism of the state economy.”34
In fact, the law of value and the international division of labour could no
more be ignored in this sphere than in any other. The production of the
means of production, heavy industry, meant tying up large amounts of
capital over an extended period of time, consequently diverting resourc-
es from other areas of the economy—light industry and the production
of textiles, for example. Increased production in these areas, had it been
able to go ahead, could have resulted in a greater flow of grain to market
as peasants found more goods there that they wished to purchase.
This in turn would enable the state to sell more grain on the world mar-
ket and with the increased export revenue purchase the required capital
goods at less cost and a better quality than they could have been pro-
duced domestically. In other words, the decision on whether to go ahead
with production of a piece of capital equipment depended not simply
upon the relationships within that industry, but on those which prevailed
in the Soviet economy as a whole and more generally the world market.
The same differences emerged in relation to the concessions policy—

opening the Soviet economy to private international investment. Preo-
brazhensky warned of the dangers of concessions while Trotsky advo-
cated a relaxation of the existing policy. In the early period the Soviet
authorities were extremely cautious, one might say too cautious, he told
a delegation of German workers in July 1925:
“We were too poor and weak. Our industry and our entire economy were
too ruined and we were afraid that the introduction of foreign capital
would undermine the still weak foundations of socialist industry. ... We
are still very backward in a technical sense. We are interested in using
every possible means to accelerate our technical progress. Concessions
are one way to do this. Despite our economic consolidation, or more
precisely, because of our economic consolidation, we are now more
inclined than a few years ago to pay foreign capitalists significant sums
for ... their participation in the development of our productive forces.”35
Which is better, Trotsky asked at one point: the independent production

of a poor and costly turbine or the dependent production of a better one?
When the Stalin leadership made a turn towards planning and indus-
trialization at the end of 1928, largely in response to the crisis in grain
supplies that its own policies had produced, Preobrazhensky was one of
the first to shift away from the Opposition. In April 1929 he declared:
“One has to make the fundamental and overall conclusion that the policy
of the party did not deviate to the right after the Fifteenth Congress, as
the Opposition described it ... but on the contrary, in certain substantive
points it has seriously moved ahead on the correct path.”36
Reviewing the contrasting positions of Trotsky and Preobrazhensky it

can be seen that for Preobrazhensky the fundamental issue was plan-
ning and the industrial development of the Soviet Union. For Trotsky,
however, these issues formed part of a broader perspective—the devel-
opment of the world socialist revolution. Accordingly, the “left” turn
by the bureaucracy could not be separated from the disastrous policies
it had pursued in the Comintern, leading to the defeat in China, or from
the party regime.
For Trotsky the question of the party regime was inseparable from the
question of industrialization and socialist development. It was not pos-
sible, he insisted in June 1925, to build socialism by the bureaucratic
road and through administrative orders, but only through the initiative,
will and opinion of the masses. “That is why bureaucratism is a deadly
enemy of socialism. ... Socialist construction is possible only with the
growth of genuine revolutionary democracy.”37
While Trotsky referred at times to the “law” of socialist accumulation,

it meant something different for Preobrazhensky. The law of value in
35 Day, p. 132.
36 Daniels, p. 374.
37 Day, p. 142.
capitalist society operates as an objective tendency of development

under conditions where the economic organization of society is not
undertaken consciously. But the same cannot be said of the “law” of
socialist accumulation—it does not simply impose itself on those who
are directing the economic policies of the state. To be sure, there are ob-
jective connections and relationships on which decisions must be based,
but very different outcomes will emerge depending on the decisions that
are made.
Once they have been freed from the constrictions of feudalism, bour-
geois market relations develop spontaneously, eroding and undermining
other social formations. It is quite otherwise with socialist relations.
They have to be developed consciously under conditions where it is pos-
sible, if the incorrect policies are followed, for a reversal to take place.
The Stalinist regime undertook its “left” turn because it felt endangered
by the crisis in the economy—objective conditions forced it to act. But
the measures it undertook—forced collectivisation and a virtual civil
war in the countryside—created the conditions where, had they not been
otherwise preoccupied, the imperialist powers could well have turned
the situation to their advantage.
The differences between Trotsky and Preobrazhensky are by no means

of mere historical interest. An examination of this question helps both
to illuminate the underlying reasons for the collapse of the Soviet Union
and to clarify the socialist perspective for the future.
Preobrazhensky, as we saw, based his analysis on the impact of mo-

nopoly capitalism on the law of value. The state economy established
in the Soviet Union, he wrote, was “historically the continuation and
deepening of the monopoly tendencies of capitalism, and so also the
continuation of these tendencies in the direction of the further decay of
commodity economy and the further liquidation of the law of value. If
already in the period of monopoly capitalism commodity economy was,
in Lenin’s expression ‘undermined,’ then to what extent have it and its
laws—consequently, also its basic law of value—been undermined in
the economic system of the USSR?”38
In other words, Preobrazhensky grounded his perspective on a certain

historical form of capitalist development—the rise of national-based
monopolies and trusts,
Trotsky, however, based himself on more fundamental processes, above

all, on the inherent drive of the productive forces to leap over or drive
through the confines of the bourgeois nation-state system. International-
ism for Trotsky was not an abstract principle but, as Richard Day rightly
emphasizes, was the “subjective reflection of the objective course of
economic history.”39
However, the tendencies which Preobrazhensky had identified oper-

ated over a considerable period of time and to the extent that the world
economy was dominated by national-based monopoly corporations, the
Soviet Union, functioning as a kind of giant economic trust according
to the program of socialism in one country was able to achieve a certain
measure of stability. It has been said, and not without justification, that
nothing so much resembled the workings of the Soviet Union as the
internal operations of General Motors when it functioned as “national
champion” of the US during the post-war boom.
The processes that led to the development of national-based monopoly

capitalism were very powerful. But the law of value had not said its last
word. As we know, the law of value determines, in the final analysis, the
average rate of profit. National-based monopoly capitalism—the regime
of the national champions—could continue to function so long as the
rate of profit did not fall. But by the mid-1970s the rate of profit had
declined sharply. This led to a fundamental reorganization of the capital-
ist mode of production on a world scale. The processes of globalization
based on the disaggregation of production across national borders and
boundaries led to a new international division of labour. They made
unviable the nationally based state economies of the USSR and the other
Stalinist regimes. Preobrazhensky maintained that the state economy of
the USSR was a continuation of the tendencies of monopoly capitalism.
But those tendencies proved to be historically limited.
The new international division of labour, fashioned in the final analysis

by the working of the law of value that he claimed had been overcome,
resulted in a crisis in the Soviet economy. Fearing that this crisis would
lead to a movement from below, the Stalinist bureaucracy completed the
journey it had begun with the attack on Trotsky and the Left Opposition
in the 1920s and organized the restoration of capitalism.
For Preobrazhensky’s analysis the most fundamental question was the

growth of monopoly—that is the change in the relations between differ-
ent sections of capital as they struggled to appropriate the surplus value
extracted from the working class. For Trotsky the base of the bases—
more fundamental than either property or market form—was the global
drive of the productive forces.
Here Trotsky’s analysis has an immediate significance for the develop-

ment of the perspective of socialism in the present epoch of globalized
39 Day, “Trotsky and Preobrazhensky,” in: Studies in Comparative Communism, 1977.
production. Does not this new structure of world economy mean that it
will only be possible for the working class to come to power across the
world all at once, or at least in several countries at the same time?
If not, then the following question arises: given the disaggregated nature
of production and the fact that today the manufacture of almost any
commodity involves processes that stretch whole continents and time
zones and is no longer carried out within the confines of a single nation-
al state, how will it be possible for the working class, having come to
power in one country, to sustain the economy for the period it takes for
the socialist revolution to extend? In other words, if the globalization of
production has sounded the death knell to regimes based on the program
of “socialism in one country,” has it not also rendered impossible the
taking and holding of political power?
Only if one leaves out of consideration the objective significance of the

international division of labour. As Trotsky emphasized, this unfolds on
the basis of fundamental shifts in the productive forces—the base of the
bases—irrespective of ideology and property forms. The bourgeoisie
will no doubt greet a successful socialist revolution in any part of the
world with the same ferocity with which it met the Russian Revolution.
But the globalized character of production means that any attempts to

isolate or blockade a workers’ state established in the present era will
have far-reaching consequences for the world capitalist economy itself.
Just consider in that regard the relationship between China and the
United States.
In addition, the ferocious competitive struggle for markets and profits,

which has been a driving force of globalization, will provide oppor-
tunities for a newly established workers’ state to tack and manoeuvre
between the conflicting capitalist powers as the socialist revolution
develops internationally.
And above all, the very nature of globalized production, which has
forged the objective unity of the international working class on a scale
never before attained, means that the socialist revolution will itself take
the form of a global political movement, that, like the productive forces
themselves, will rapidly leap across time zones, national borders and
continents.
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“Socialism in One Country”

and the Soviet economic

A series of lectures by Nick Beams

World Socialist Web Site Online Pamphlet Series

“Socialism in One Country” and the Soviet economic

was originally published on the World Socialist Web Site

Nick Beams, national secretary of the Socialist Equality Party (Austra-

sections of industry; and last, but by no means least, the relationship of

The argument was completely specious. The historical legitimacy of

The German revolutionist Rosa Luxem-

Our movement has a completely different perspective. The socialist

The initial measures taken by the Bolsheviks upon the conquest of

From the standpoint of the development of the socialist program in the

“The important thing,” he wrote, “will not be even the confiscation

The revolutionary government established the Supreme Council of Na-

In June 1918 the situation changed dramatically. There was now a

As Trotsky explained in 1920:

“Once having taken power, it is impossible to accept one set of conse-

It would be perfectly in order for a workers’ state to carry out the

“The initial decrees of the revolutionary power were greeted with

The expropriations undertaken in 1918 were from the economic stand-

The compelling economic task that confronted the revolutionary govern-

Trotsky reviewing Red Army troops

The central foundation of War Communism was the requisitioning of

insofar as “communism,” based on equality, was being established, it

Viewed from the standpoint of impoverished Russia, such conceptions

As Trotsky later explained, while War Communism had been imposed

While entertaining the prospect that the European revolution could

Consideration of these issues helps to expose the outright falsifications

6 Trotsky, The First Five Years of the Comintern, Volume 2, p. 230.

In the first place, this is a complete falsification of what Day actually

According to Day, in the period of War Communism two tendencies,

“For want of a better alternative he would have subscribed to the

But, contrary to Day, there was nothing inconsistent in Trotsky’s posi-

“Given our further economic deterioration, terms will be dictated to us

As Richard Day noted in a later article on the economic policies of the

Notwithstanding the hopes of the Bolsheviks about the prospects for a

“The present policy of equalized requisition according to the food scale,

“The food resources are threatened with exhaustion, a contingency that

Lenin, however, opposed the proposal and it was defeated by 11 votes to

One of the central problems confronting the revolutionary government

In the early 1920s, as the civil

“If we seriously speak of planned economy,” he told the Ninth Congress,

Lenin advanced no less stringent

He denounced the collegial

Through what became a famous order, Number 1042, Trotsky placed

There was no response from the Politburo where Lenin opposed

In the wake of the experiences of War

These tendencies, which insisted that the

In discussing these issues it is necessary to emphasise at the outset that

(This point should be kept in mind

Consider for a moment the question of

the market to bring about an increased supply of grain, so necessary for

A Communist Party speaker in a peasant village

The right-wing pro-market agenda continue to unfold throughout 1922

if price advantages pointed to the importation of consumer goods, then

The decision of the Central Committee, taken in the absence of both

Lenin objected to the plan upon hearing of it and called on Trotsky to

“Comrade Trotsky, it seems, advanced this idea [about Gosplan’s pre-

According to the account by the historian E.H. Carr, the situation in

Even though his advocacy of consistent planning and the development

The function of planning, he insisted, was ultimately to overcome the

The phenomenon of the scissors crisis—the divergent movement