Friday, March 10, 2023

Lenin on State Capitalism


To the Workers Who Support the Struggle Against the War and Against the Socialists Who Have Sided With Their Governments

And the war itself, which is imposing an unprecedented strain upon the peoples, is bringing mankind to this, the only way out of the impasse, is compelling it to take giant strides towards state capitalism, and is demonstrating in a practical manner how planned social economy can and should be conducted, not in the interests of the capitalists, but by expropriating them, under the leadership of the revolutionary proletariat, in the interests of the masses

The Seventh (April) All-Russia Conference of the R.S.D.L.P.(B.) APRIL 24–29, 1917

Before the war we had the monopoly of trusts and syndicates; since the war we have had a state monopoly. Universal labour conscription is something new, something that constitutes part of a socialist whole—this is often over looked by those who fear to examine the concrete situation.

The first part of the resolution concentrates on an analysis of the conditions of capitalist economy throughout the world. It is noteworthy that twenty-seven years ago Engels pointed out that to describe capitalism as something that "is distinguished by its planlessness" and to overlook the role played by the trusts was unsatisfactory. Engels remarked that "when we come to the trust, then planlessness disappears", though there is capitalism. This remark is all the more pertinent today, when we have a military state, when we have state monopoly capitalism. Planning does not make the worker less of a slave, but it enables the capitalist to make his profits "according to plan". Capitalism is now evolving directly into its higher, regulated, form.

The Seventh (April) All-Russia Conference of the R.S.D.L.P. (B.) APRIL 24–29 (MAY 7–12), 1917


Monopoly capitalism, which has been developing into state-monopoly capitalism in a number of advanced countries with especial rapidity during the war, means gigantic socialisation of production and, consequently, complete preparation of the objective conditions for the establishment of a socialist society

Economic Dislocation and the Proletariat's Struggle Against It

And only pedants, who understand Marxism as Struve and all liberal bureaucrats
"understood" it, can assert that "skipping state capitalism is utopian" and that "in our country, too, the very type of regulation should retain its state-capitalist character". Take the sugar syndicate or the state railways in Russia or the oil barons, etc . What is that but state capitalism? How can you "skip" what already exists?

The Impending Catastrophe and How to Combat It

That capitalism in Russia has also become monopoly capitalism is sufficiently attested by the examples of the Produgol, the Prodamet, the Sugar Syndicate, etc. This Sugar Syndicate is an object-lesson in the way monopoly capitalism develops into state-monopoly capitalism.

And what is the state? It is an organisation of the ruling class — in Germany, for instance, of the Junkers and capitalists. And therefore what the German Plekhanovs (Scheidemann, Lensch, and others) call "war-time socialism" is in fact war-time state-monopoly capitalism, or, to put it more simply and clearly, war-time penal servitude for the workers and war-time protection for capitalist profits.

Now try to substitute for the Junker-capitalist state, for the landowner-capitalist state, a revolutionary-democratic state, i.e., a state which in a revolutionary way abolishes all privileges and does not fear to introduce the fullest democracy in a revolutionary way. You will find that, given a really revolutionary-democratic state, state- monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!

For if a huge capitalist undertaking becomes a monopoly, it means that it serves the whole nation. If it has become a state monopoly, it means that the state (i.e., the armed organisation of the population, the workers and peasants above all, provided there is revolutionary democracy) directs the whole undertaking. In whose interest?
Either in the interest of the landowners and capitalists, in which case we have not a revolutionary-democratic, but a reactionary-bureaucratic state, an imperialist republic.

Or in the interest of revolutionary democracy—and then it is a step towards socialism.

For socialism is merely the next step forward from state-capitalist monopoly. Or, in other words, socialism is merely state-capitalist monopoly which is made to serve the interests of the whole people and has to that extent ceased to be capitalist monopoly.

There is no middle course here. The objective process of development is such that it is impossible to advance from monopolies (and the war has magnified their number, role and importance tenfold) without advancing towards socialism.

Either we have to be revolutionary democrats in fact, in which case we must not fear to take steps towards socialism. Or we fear to take steps towards socialism, condemn them in the Plekhanov, Dan or Chernov way, by arguing that our revolution is a bourgeois revolution, that socialism cannot be "introduced", etc., in which case we inevitably sink to the level of Kerensky, Milyukov and Kornilov, i.e., we in a reactionary-bureaucratic way suppress the "revolutionary-democratic" aspirations of the workers and peasants.

Revision of the Party Programme

War and economic ruin have forced all countries to advance from monopoly capitalism to state monopoly capitalism. This is the objective state of affairs. In a revolutionary situation, during a revolution, however, state monopoly capitalism is directly transformed into socialism. During a revolution it is impossible to move forward without moving towards socialism—this is the objective state of affairs created by war and revolution. It was taken cognisance of by our April Conference,which put forward the slogans, "a Soviet Republic" (the political form of the dictatorship of the proletariat), and the nationalisation of banks and syndicates (a basic measure in the transition towards socialism). Up to this point all the Bolsheviks unanimously agree. But Comrades Smirnov and Bukharin want to go farther, they want to discard the minimum programme in toto.

For Bread And Peace

Capitalism had developed into imperialism, i.e., into monopoly capitalism, and under the influence of the war it has become state monopoly capitalism. We have now reached the stage of world economy that is the immediate stepping stone to socialism.

The socialist revolution that has begun in Russia is, therefore, only the beginning of the world socialist revolution

Session of the All-Russia C.E.C..
April 29 1918

In regard to domestic issues, we see the same thing on the part of the group of Left Communists, who repeat the main arguments levelled against us from the bourgeois camp. For example, the main argument of the group of Left Communists against us is that there can be observed a Right Bolshevik deviation, which threatens the revolution by directing it along the path of state capitalism.

Evolution in the direction of state capitalism, there you have the evil, the enemy, which we are invited to combat. When I read these references to such enemies in the newspaper of the Left Communists, I ask: what has happened to these people that fragments of book-learning can make them forget reality? Reality tells us that state
capitalism would be a step forward. If in a small space of time we could achieve state capitalism in Russia, that would be a victory.

How is it that they cannot see that it is the petty proprietor, small capital, that is our enemy? How can they regard state capitalism as the chief enemy? They ought not to for get that in the transition from capitalism to socialism our chief enemy is the petty bourgeoisie, its habits and customs, its economic position. The petty proprietor fears state capitalism above all, because he has only one desire—to grab, to get as much as possible for himself, to ruin and smash the big landowners, the big exploiters. In this the petty proprietor eagerly supports us.

What is state capitalism under Soviet power? To achieve state capitalism at the present time means putting into effect the accounting and control that the capitalist classes carried out. We see a sample of state capitalism in Germany. We know that Germany has proved superior to us. But if you reflect even slightly on what it would mean if the foundations of such state capitalism were established in Russia, Soviet Russia, everyone who is not out of his senses and has not stuffed his head with fragments of book learning, would have to say that state capitalism would be our salvation.

I said that state capitalism would be our salvation; if we had it in Russia, the transition to full socialism would he easy, would be within our grasp, because state capitalism is something centralised, calculated, controlled and socialised, and that is exactly what we lack: we are threatened by the element of petty-bourgeois slovenliness, which more than anything else has been developed by the whole history of Russia and her economy, and which prevents us from taking the very step on which the success of socialism depends. Allow me to remind you that I had occasion to write my statement about state capitalism some time before the revolution and it is a howling absurdity to try to frighten us with state capitalism. I remind you that in my pamphlet the Impending CatastropheSee present edition, Vol. 25, pp. 319-65.—Editor. I then wrote. . . .
(He reads the passage.)

I wrote this about the revolutionary-democratic state, the state of Kerensky, Chernov, Tsereteli, Kishkin and their confreres, about a state which had a bourgeois basis and which did not and could not depart from it. I wrote at that time that state capitalism is a step towards socialism; I wrote that in September 1917, and now, in April 1918, after the proletariat's taking power in October, when it has proved its capacity: many factories have been confiscated, enterprises and banks nationalised, the armed resistance of the bourgeoisie and saboteurs smashed—now, when they try to frighten us with capitalism, it is so ludicrous, such a sheer absurdity and fabrication, that it becomes surprising and one asks oneself: how could people have this idea? They have forgotten the mere trifle that in Russia we have a petty-bourgeois mass which sympathises with the abolition of the big bourgeoisie in all countries, but does not sympathise with accounting, socialisation and control— herein lies the danger for the revolution, here you have the unity of social forces which ruined the great French revolution and could not fail to do so, and which, if the Russian proletariat proves weak, can alone ruin the Russian revolution. The petty
bourgeoisie, as we see, steeps the whole social atmosphere with petty-proprietor
tendencies, with aspirations which are bluntly expressed in the statement: I took from the rich, what others do is not my affair.

Here is our main danger. If the petty bourgeois were subordinated to other class elements, subordinated to state capitalism, the class-conscious worker would be bound to greet that with open arms, for state capitalism under Kerensky's democracy would have been a step towards socialism, and under the Soviet government it would be three-quarters of socialism, because anyone who is the organiser of state capitalist enterprises can be made one's helper. The Left Communists, however, adopt a different attitude, one of disdain, and when we had our first meeting with the Left Communists on April 4, which incidentally proved that this question from remote history, which had been long discussed, was already a thing of the past, I said that it was necessary, if we properly understood our tasks, to learn socialism from the organisers of the trusts.

Only the development of state capitalism, only the painstaking establishment of accounting and control, only the strictest organisation and labour discipline, will lead us to socialism. Without this there is no socialism. (Applause.)

The situation is best among those workers who are carrying out this state capitalism: among the tanners and in the textile and sugar industries, because they have a sober, proletarian knowledge of their industry and they want to preserve it and make it more powerful—because in that lies the greatest socialism.

In Germany, state capitalism prevails, and therefore the revolution in Germany will be a hundred times more devastating and ruinous than in a petty-bourgeois country—there, too, there will be gigantic difficulties and tremendous chaos and imbalance. Therefore I do not see the slightest shadow of a reason for despair or despondency in the fact that the Russian revolution accomplished the easier task to start with—that of overthrowing the landowners and bourgeoisie—and is faced now by the more difficult socialist task of organising nation-wide accounting and control. It is facing the task with which real socialism begins, a task which has the backing of the majority of the workers and class-conscious working people. Yes, the majority of the workers, who are better organised and have gone through the school of the trade unions, are wholeheartedly with us.

This majority raised the questions of piece-work and Taylorism—questions which
the gentlemen from Vperyod are scoffingly trying to reject

If the Left Communists have not noticed this, it is because they do not see life as it really is but concoct their slogans by counterposing state capitalism to ideal socialism. We, however, must tell the workers: yes, it is a step back, but we have to help ourselves to find a remedy. There is only one remedy: organise to the last man, organise accounting over production, organise accounting and control over consumption

First of all I must reply to Comrade Bukharin's speech. In my first speech I remarked that we were nine-tenths in agreement with him, and so I think it is a pity that we should disagree as regards the other tenth. He is one-tenth in the position of having to spend half his speech disassociating and exorcising himself from absolutely everyone who spoke in support of him. And no matter how excellent his intentions and those of his group, the falsity of their position is proved by the fact that he always has to spend time making excuses and disassociating himself on the issue of state capitalism.

Comrade Bukharin is completely wrong; and I shall make this known in the press
because this question is extremely important. I have a couple of words to say about the Left Communists' reproaching us on the grounds that a deviation in the direction of state capitalism is to be observed in our policy; now Comrade Bukharin wrongly states that under Soviet power state capitalism is impossible. So he is contradicting himself when he says that there can be no state capitalism under Soviet power—that is an obvious absurdity. The large number of enterprises and factories under the control of the Soviet government and owned by the state, this alone shows the transition from capitalism to socialism, but Comrade Bukharin ignores this.

Now we cannot help bringing up the problem of state capitalism and socialism, of how to act in the transitional period, in which you have bits of capitalism and socialism existing side by side under Soviet power. Comrade Bukharin refuses to understand this problem; but I think we cannot throw it out all at once, and Comrade Bukharin does not propose throwing it out and does not deny that this state capitalism is something higher than what is left of the small proprietor's mentality, economic conditions and way of life, which are still extremely prevalent. Comrade Bukharin has not refuted that fact, for it cannot be refuted without forgetting the word Marxist.

I have given you the example of the workers' organisations that are doing it, and the state capitalism of other enterprises, other branches of industry; the tobacco workers and tanners have more state capitalism than others, and their affairs are in better order, and their road to socialism is more certain.

And when they say, when Bukharin says, this is no violation of principle, I say that here we have a violation of the principle of the Paris Commune. State capitalism is not money but social relations. If we pay 2,000 in accordance with the railway decree, that is state capitalism.

"Left-Wing" Childishness

If the words we have quoted provoke a smile, the following discovery made by the
"Left Communists" will provoke nothing short of Homeric laughter. According to them, under the "Bolshevik deviation to the right" the Soviet Republic is threatened with "evolution towards state capitalism". They have really frightened us this time! And with what gusto these "Left Communists" repeat this threatening revelation in their theses and articles. . . .

If the words we have quoted provoke a smile, the following discovery made by the
"Left Communists" will provoke nothing short of Homeric laughter. According to them, under the "Bolshevik deviation to the right" the Soviet Republic is threatened with "evolution towards state capitalism". They have really frightened us this time! And with what gusto these "Left Communists" repeat this threatening revelation in their theses and articles. . . .

It has not occurred to them that state capitalism would be a step forward as compared with the present state of affairs in our Soviet Republic. If in approximately six months' time state capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year socialism will have gained a permanently firm hold and will have become invincible in our country.

I can imagine with what noble indignation a "Left Communist" will recoil from these words, and what "devastating criticism" he will make to the workers against the "Bolshevik deviation to the right". What! Transition to state capitalism in the Soviet Socialist Republic would be a step forward?. . . Isn't this the betrayal of socialism?

Thirdly, in making a bugbear of "state capitalism", they betray their failure to
understand that the Soviet state differs from the bourgeois state economically

The shell of our state capitalism (grain monopoly, state controlled entrepreneurs and traders, bourgeois co-operators) is pierced now in one place, now in another by profiteers, the chief object of profiteering being grain.

It is in this field that the main struggle is being waged. Between what elements is this struggle being waged if we are to speak in terms of economic categories such as "state capitalism"? Between the fourth and the fifth in the order in which I have just enumerated them. Of course not. It is not state capitalism that is at war with socialism, but the petty bourgeoisie plus private capitalism fighting together against both state capitalism and socialism. The petty bourgeoisie oppose every kind of state interference, accounting and control, whether it be state capitalist or state socialist. This is an absolutely unquestionable fact of reality, and the root of the economic mistake of the "Left Communists" is that they have failed to understand it

Those who fail to see this show by their blindness that they are slaves of petty-bourgeois prejudices. This is precisely the case with our "Left Communists", who in words (and of course in their deepest convictions) are merciless enemies of the petty bourgeoisie, while in deeds they help only the petty bourgeoisie, serve only this section of the population and express only its point of view by fighting—in April 1918!!—against . . . "state capitalism". They are wide of the mark!

The petty bourgeois who hoards his thousands is an enemy of state capitalism.

This simple illustration in figures, which I have deliberately simplified to the utmost in order to make it absolutely clear, explains the present correlation of state capitalism and socialism. The workers hold state power and have every legal opportunity of "taking" the whole thousand, without giving up a single kopek, except for socialist purposes. This legal opportunity, which rests upon the actual transition of power to the workers, is an element of socialism.

State capitalism would be a gigantic step forward even if we paid more than we
are paying at present (

whereas not only will the payment of a heavier tribute to state capitalism not ruin us, it will lead us to socialism by the surest road. When the working class has learned how to defend the state system against the anarchy of small ownership, when it has learned to organise large-scale production on a national scale, along state capitalist lines, it will hold, if I may use the expression, all the trump cards, and the consolidation of socialism will be assured.

In the first place, economically, state capitalism is immeasurably superior to
our present economic system.

To make things even clearer, let us first of all take the most concrete example of state capitalism. Everybody knows what this example is. It is Germany. Here we have "the last word" in modern large-scale capitalist engineering and planned
organisation, subordinated to Junker-bourgeois imperialism. Cross out the words
in italics, and in place of the militarist, Junker, bourgeois, imperialist state put also a state, but of a different social type, of a different class content—a Soviet state, that is, a proletarian state, and you will have the sum total of the conditions necessary for socialism.

While the revolution in Germany is still slow in "coming forth", our task is to
study the state capitalism of the Germans, to spare no effort in copying it and
not shrink from adopting dictatorial methods to hasten the copying of it. Our
task is to hasten this copying even more than Peter hastened the copying of
Western culture by barbarian Russia, and we must not hesitate to use barbarous
methods in fighting barbarism.

At present, petty-bourgeois capitalism prevails in Russia, and it is one and the same road that leads from it to both large-scale state capitalism and to socialism, through one and the same intermediary station called "national accounting and control of production and distribution". Those who fail to understand this are committing an unpardonable mistake in economics. Either they do not know the facts of life, do not see what actually exists and are unable to look the truth in the face, or they confine themselves to abstractly comparing "capitalism" with "socialism" and fail to study the concrete forms and stages of the transition that is taking place in our country. Let it be said in parenthesis that this is the very theoretical mistake which misled the best
people in the Novaya Zhizn and Vperyod camp. The worst and the mediocre of these, owing to their stupidity and spinelessness, tag along behind the bourgeoisie, of whom they stand in awe. The best of them have failed to understand that it was not without reason that the teachers of socialism spoke of a whole period of transition from capitalism to socialism and emphasised the "prolonged birth pangs" of the new society. And this new society is again an abstraction which can come into being only by passing through a series of varied, imperfect concrete attempts to create this or that socialist state.

It is because Russia cannot advance from the economic situation now existing here without traversing the ground which is common to state capitalism and to socialism (national accounting and control) that the attempt to frighten othersas well as themselves with "evolution towards state capitalism" (Kommunist No. 1, p. 8, col. 1) is utter theoretical nonsense. This is letting one's thoughts wander away from the true road of "evolution", and failing to understand what this road is. In practice, it is equivalent to pulling us back to small proprietary capitalism.

In order to convince the reader that this is not the first time I have given this "high" appreciation of state capitalism and that I gave it before the Bolsheviks seized power I take the liberty of quoting the following passage from my pamphlet The Impending Catastrophe and How to Combat It , written in September 1917.
". . . Try to substitute for the Junker-capitalist state, for the landowner-capitalist state, a revolutionary-democratic state, i.e., a state which in a revolutionary way abolishes all privileges and does not fear to introduce the fullest democracy in a revolutionary way. You will find that, given a really revolutionary-democratic state, state-monopoly capitalism inevitably and unavoidably implies a step, and more than one step, towards socialism!
". . . For socialism is merely the next step forward from state-capitalist monopoly.
". . . State-monopoly capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no intermediate rungs " (pages 27 and 28)

Please note that this was written when Kerensky was in power, that we are discussing not the dictatorship of the proletariat, not the socialist state, but the "revolutionary-democratic" state. Is it not clear that the higher we stand on this political ladder, the more completely we incorporate the socialist state and the dictatorship of the proletariat in the Soviets, the less ought we to fear "state capitalism"? Is it not clear that from the material, economic and productive point of view, we are not yet on "the threshold" of socialism? Is it not clear that we cannot pass through the door of socialism without crossing "the threshold" we have not yet reached?

From whatever side we approach the question, only one conclusion can be drawn: the argument of the "Left Communists" about the "state capitalism" which is alleged to be threatening us is an utter mistake in economics and is evident proof that they are complete slaves of petty-bourgeois ideology.

If these concrete conditions are carefully considered, it will become clear that we can and ought to employ two methods simultaneously. On the one hand we must ruthlessly suppress[3] the uncultured capitalists who refuse to have anything to do with "state capitalism" or to consider any form of compromise, and who continue by means of profiteering, by bribing the poor peasants, etc., to hinder the realisation of the measures taken by the Soviets. On the other hand, we must use the method of compromise, or of buying off the cultured capitalists who agree to "state capitalism", who are capable of putting it into practice and who are useful to the proletariat as intelligent and experienced organisers of the largest types of enterprises, which actually supply products to tens of millions of people.

But Bukharin went astray because he did not go deep enough into the specific features of the situation in Russia at the present time—an exceptional situation when we, the Russian proletariat, are in advance of any Britain or any Germany as regards our political order, as regards the strength of the workers' political power, but are behind the most backward West-European country as regards organising a good state capitalism, as regards our level of culture and the degree of material and productive preparedness for the "introduction" of socialism.

Kerensky's friends, who, together with him, conducted an imperialist war for the
sake of the secret treaties, which promised annexations to the Russian capitalists, the colleagues of Tsereteli, who, on June 11, threatened to disarm the workers, the Lieberdans, who screened the rule of the bourgeoisie with high-sounding phrases—these are the very people who accuse Soviet power of "compromising with the bourgeoisie", of "establishing trusts" (that is, of establishing "state capitalism"!), of introducing the Taylor system.

The workers are not petty bourgeois. They are not afraid of large-scale "state capitalism", they prize it as their proletarian weapon which their Soviet power will use against small proprietary disintegration and disorganisation.

They have begun to learn steadily and cautiously with easy things, gradually passing on to the more difficult things. If things are going more slowly in the iron and steel and engineering industries, it is because they present greater difficulties. But the textile and tobacco workers and tanners are not afraid of "state capitalism" or of "learning from the organisers of the trusts", as the declassed petty-bourgeois intelligentsia are. These workers in the central leading institutions like Chief Leather Committee and Central Textile Committee take their place by the side of the capitalists, learn from them, establish trusts, establish "state capitalism", which under Soviet power represents the threshold of socialism, the condition of its firm victory.

The Tax in Kind (The Significance Of The New Policy And Its Conditions)

The alternative (and this is the only sensible and the last possible policy) is not to try to prohibit or put the lock on the development of capitalism, but to channel it into state capitalism. This is economically possible, for state capitalism exists—in varying form and degree—wherever there are elements of unrestricted trade and capitalism in general.

Can the Soviet state and the dictatorship of the proletariat be combined with
state capitalism? Are they compatible? Of course they are. This is exactly what I argued in May 1918. I hope I had proved it then. I had also proved that state capitalism is a step forward compared with the small proprietor (both small-patriarchal and petty-bourgeois) element. Those who compare state capitalism only with socialism commit a host of mistakes, for in the present political and economic circumstances it is essential to compare state capitalism also with petty-bourgeois production.

The whole problem—in theoretical and practical terms—is to find the correct methods of directing the development of capitalism (which is to some extent and for some time inevitable) into the channels of state capitalism, and to determine how we are to hedge it about with conditions to ensure its transformation into socialism in the near future. In order to approach the solution of this problem we must first of all picture to ourselves as distinctly as possible what state capitalism will and can be in
practice inside the Soviet system and within the framework of the Soviet state.

Concessions are the simplest example of how the Soviet government directs the
development of capitalism into the channels of state capitalism and "implants" state capitalism. We all agree now that concessions are necessary, but have we all thought about the implications?

They are an agreement, an alliance, a bloc between the Soviet, i.e., proletarian, state power and state capitalism against the small-proprietor (patriarchal and petty-bourgeois) element.

By "implanting" state capitalism in the form of concessions, the Soviet government strengthens large-scale production as against petty production, advanced production as against backward production, and machine production as against hand production.

Compared with other forms of state capitalism within the Soviet system, concessions are perhaps the most simple and clear-cut form of state capitalism

But these are minor difficulties compared with the other problems of the social revolution and, in particular, with the difficulties arising from other forms of developing, permitting and implanting state capitalism.

The most important task that confronts all Party and Soviet workers in connection with the introduction of the tax in kind is to apply the principles of the "concessions" policy (i.e., a policy that is similar to "concession" state capitalism) to the other forms of capitalism—unrestricted trade, local exchange, etc.

But, unlike private capitalism, "co-operative" capitalism under the Soviet system is a variety of state capitalism, and as such it is advantageous and useful for us at the present time—in certain measure, of course.

It resembles state capitalism in that it facilitates accounting, control, supervision and the establishment of contractual relations between the state (in this case the Soviet state) and the capitalist. Co-operative trade is more advantageous and useful than private trade not only for the above-mentioned reasons, but also because it facilitates the association and organisation of millions of people, and eventually of the entire population, and this in its turn is an enormous gain from the standpoint of the subsequent transition from state capitalism to socialism.

Let us make a comparison of concessions and co-operatives as forms of state capitalism

Take a third form of state capitalism. The state enlists the capitalist as a merchant and pays him a definite commission on the sale of state goods and on the purchase of the produce of the small producer. A fourth form: the state leases to the capitalist entrepreneur an industrial establishment, oilfields, forest tracts, land, etc., which belong to the state, the lease being very similar to a concession agreement. We make no mention of, we give no thought or notice to, these two latter forms of state capitalism, not because we are strong and clever but because we are weak and foolish. We are afraid to look the "vulgar truth" squarely in the face, and too often yield to "exalting deception''.

We keep repeating that "we" are passing from capitalism to socialism, but do not bother to obtain a distinct picture of the "we". To keep this picture clear we must constantly have in mind the whole list—without any exception—of the constituent parts of our national economy, of all its diverse forms that I gave in my article of May 5, 1918. "We", the vanguard, the advanced contingent of the proletariat, are passing directly to socialism; but the advanced contingent is only a small part of the whole of the proletariat while the latter, in its turn, is only a small part of the whole population. If "we" are successfully to solve the problem of our immediate transition to socialism, we must understand what intermediary paths, methods, means and instruments are required for the transition from pre-capitalist relations to socialism. That is the whole point.

Inasmuch as we are as yet unable to pass directly from small production to socialism, some capitalism is inevitable as the elemental product of small production and exchange; so that we must utilise capitalism (particularly by directing it into the channels of state capitalism) as the intermediary link between small production and socialism, as a means, a path, and a method of increasing the productive forces.

Those who achieve the best results in this sphere, even by means of private capitalism, even without the co-operatives, or without directly transforming this capitalism into state capitalism, will do more for the cause of socialist construction in Russia than those who "ponder over" the purity of communism, draw up regulations, rules and instructions for state capitalism and the co-operatives, but do nothing practical to stimulate trade. Isn `t it paradoxical that private capital should be helping socialism?

Not at all. It is, indeed, an irrefutable economic fact. Since this is a small-peasant country with transport in an extreme state of dislocation, a country emerging from war and blockade under the political guidance of the proletariat—which controls the transport system and large-scale industry—it inevitably follows, first, that at the present moment local exchange acquires first-class significance, and, second, that there is a possibility of assisting socialism by means of private capitalism (not to speak of state capitalism).

It is by presenting the question in this way (the Council of People's Commissars has already started, that is to say, it has ordered that work be started, on the revision of the anti-profiteering laws) that we shall succeed in directing the rather inevitable but necessary development of capitalism into the channels of state capitalism.

The fight against profiteering must be transformed into a fight against stealing and the evasion of state supervision, accounting and control. By means of this control we shall direct the capitalism that is to a certain extent inevitable and necessary for us into the channels of state capitalism.

Report on the Tax in Kind
Report on the Tax in Kind Delivered at a Meeting of Secretaries and Responsible
Representatives of R.C.P.(B.) Cells of Moscow and Moscow Gubernia
April 9, 1921

In the course of the argument with these comrades I said, among other things: State capitalism is nothing to fear in Russia; it would be a step forward. That sounded very strange: How could state capitalism be a step forward in a Soviet socialist republic? I replied: Take a close look at the actual economic relations in Russia.

What is state capitalism in these circumstances? It is the amalgamation of small-scale production. Capital amalgamates small enterprises and grows out of them. It is no use closing our eyes to this fact. Of course, a free market means a growth of capitalism; there's no getting away from the fact. And anyone who tries to do so will be deluding himself. Capitalism will emerge wherever there is small enterprise and free exchange. But are we to be afraid of it, if we have control of the factories, transport and foreign trade? Let me repeat what I said then: I believe it to be incontrovertible that we need have no fear of this capitalism. Concessions are that kind of capitalism.

What are concessions from the standpoint of economic relations? They are state
capitalism. The Soviet government concludes an agreement with a capitalist. Under it, the latter is provided with certain things: raw materials, mines, oilfields, minerals, or, as was the case in one of the last proposals, even a special factory (the ball-bearing project of a Swedish enterprise). The socialist state gives the capitalist its means of production such as factories, mines and materials. The capitalist operates as a contractor leasing socialist means of production, making a profit on his capital and delivering a part of his output to the socialist state.

That is how we get state capitalism. Should it scare us? No, it should not, because it is up to us to determine the extent of the concessions. Take oil concessions. They will give us millions of poods of paraffin oil right away, and that is more than we produce ourselves. This is to our advantage, because in exchange for the paraffin oil—and not paper money—the peasant will give us his grain surplus, and we shall immediately be able to improve the situation in the whole country. That is why the capitalism that is bound to grow out of a free market holds no terrors for us. It will be the result of growing trade, the exchange of manufactured goods, even if produced by small industry, for agricultural produce.

Let small industry grow to some extent and let state capitalism develop—the Soviet power need have no fear of that. We must face the facts squarely and call a spade a spade, but we must also control and determine the limits of this development.


We have no fear of capitalism, because the proletariat has the power, transport and large-scale industry firmly in its hands and will succeed, through its control, in channeling it into state capitalism. Under these conditions, capitalism will help to combat red tape and the scattering of the petty producers.

Third Congress Of The Communist InternationalJune 22-July 12, 1921

On the contrary, the development of capitalism, controlled and regulated by the
proletarian state (i.e., "state" capitalism in this sense of the term), is advantageous and necessary in an extremely devastated and backward small-peasant country (within certain limits, of course), inasmuch as it is capable of hastening the immediate revival of peasant farming. This applies still more to concessions: without denationalising anything, the workers' state leases certain mines, forest tracts, oilfields, and so forth, to foreign capitalists in order to obtain from them extra equipment and machinery that will enable us to accelerate the restoration of Soviet large-scale industry.

This freedom of exchange implies freedom for capitalism. We say this openly and
emphasise it. We do not conceal it in the least. Things would go very hard with us if we attempted to conceal it. Freedom to trade means freedom for capitalism, but it also means a new form of capitalism. It means that, to a certain extent, we are re-creating capitalism. We are doing this quite openly. It is state capitalism. But state capitalism in a society where power belongs to capital, and state capitalism in a proletarian state, are two different concepts. In a capitalist state, state capitalism means that it is recognised by the state and controlled by it for the benefit of the bourgeoisie, and to the detriment of the proletariat. In the proletarian state, the same thing is done for the benefit of the working class, for the purpose of withstanding the as yet strong bourgeoisie, and of fighting it. It goes without saying that we must grant concessions to the foreign bourgeoisie, to foreign capital. Without the slight denationalisation, we shall lease mines, forests and oilfields to foreign capitalists, and receive in exchange manufactured goods, machinery, etc., and thus restore our own industry.

Of course, we did not all agree on the question of state capitalism at once.

What compels us to do this? We are not alone in the world. We exist in a system of capitalist states

We admit quite openly, and do not conceal the fact, that concessions in the system of state capitalism mean paying tribute to capitalism.

New Times and Old Mistakes in a New Guise

The Mensheviks are shouting that the tax in kind, the freedom to trade, the granting of concessions and state capitalism signify the collapse of communism. Abroad, the ex-Communist Levi has added his voice to that of the Mensheviks. This same Levi had to be defended as long as the mistakes he had made could be explained by his reaction to some of the mistakes of the "Left" Communists, particularly in March 1921 in Germany[11]; but this same Levi cannot be defended when, instead of admitting that he is wrong, he slips into Menshevism all along the line.

To the Menshevik shouters we shall simply point out that as early as the spring of 1918 the Communists proclaimed and advocated the idea of a bloc, an alliance with state capitalism against the petty-bourgeois element. That was three years ago! In the first months of the Bolshevik victory! Even then the Bolsheviks took a sober view of things. And since then nobody has been able to challenge the correctness of our sober calculation of the available forces.

We need a bloc, or alliance, between the proletarian state and state capitalism against the petty-bourgeois element. We must achieve this alliance skilfully, following the rule: "Measure your cloth seven times before you cut." We shall leave ourselves a smaller field of work, only what is absolutely necessary.

Fourth Anniversary of the October Revolution

It appears that a number of transitional stages were necessary—state capitalism and socialism—in order to prepare—to prepare by many years of effort—for the transition to communism.

we must first set to work in this small peasant country to build solid gangways to socialism by way of state capitalism. Otherwise we shall never get to communism, we shall never bring scores of millions of people to communism. That is what experience, the objective course of the development of the revolution, has taught us.

The New Economic Policy
And The Tasks Of The Political Education Departments
Report To The Second All-Russia Congress Of Political Education Departments
October 17, 1921

Even if all of you were not yet active workers in the Party and the Soviets at that time, you have at all events been able to make, and of course have made, yourselves familiar with decisions such as that adopted by the All-Russia Central Executive Committee at the end of April 1918.[2] That decision pointed to the necessity to take peasant farming into consideration, and it was based on a report which made allowance for the role of state capitalism in building socialism in a peasant country; a report which emphasised the importance of personal, individual, one-man responsibility; which emphasised the significance of that factor in the administration of the country as distinct from the political tasks of organising state power and from military tasks.

Seventh Moscow Gubernia Conference of the Russian Communist Party
October 29-31 , 1921

When in the spring of 1918, for example, in our polemics with a number of comrades, who were opposed to concluding the Brest peace, we raised the question of state capitalism, we did not argue that we were going back to state capitalism, but that our position would be alleviated and the solution of our socialist problems facilitated if state capitalism became the predominant economic system in Russia. I want to draw your particular attention to this, because I think it is necessary to bear it in mind in order to understand the present change in our economic policy and how this change should be interpreted.

The political situation in the spring of 1921 revealed to us that on a number of economic issues a retreat to the position of state capitalism, the substitution of "siege" tactics for "direct assault", was inevitable.

The New Economic Policy was adopted because, in the spring of 1921, after our
experience of direct socialist construction carried on under unprecedentedly difficult conditions, under the conditions of civil war, in which the bourgeoisie compelled us to resort to extremely hard forms of struggle, it became perfectly clear that we could not proceed with our direct socialist construction and that in a number of economic spheres we must retreat to state capitalism. We could not continue with the tactics of direct assault, but had to undertake the very difficult, arduous and unpleasant task of a long siege accompanied by a number of retreats. This is necessary to pave the way for the solution of the economic problem, i. e., that of the economic transition to
socialist principles.

I cannot today quote figures, data, or facts to show the results of this policy of reverting to state capitalism. I shall give only one small example.

We see the development of state capitalist relations.

and this is largely due to the improvement of production in small mines, to their being exploited along the lines of state capitalism. I cannot here go into all the data on the question

are what we are beginning to obtain as a result of the partial reversion to the system of state capitalism. Our ability, the extent to which we shall be able to apply this policy correctly in the future, will determine to what extent we shall continue to get good results.

shall now go back and develop my main idea. Is our transition to the New Economic Policy in the spring, our retreat to the ways, means and methods of state capitalism, sufficient to enable us to stop the retreat and prepare for the offensive? No, it is not yet sufficient.

Since we are now passing to state capitalism, the question arises of whether we should try to prevent the methods which were suitable for the previous economic
policy from hindering us now.

In the spring we said that we would not be afraid to revert to state capitalism, and that our task was to organise commodity exchange. A number of decrees and
decisions, a vast number of newspaper articles, all our propaganda and all the
laws passed since the spring of 1921 have been directed to the purpose of
stimulating commodity exchange

Now we find ourselves in the position of having to retreat even a little further, not only to state capitalism, but to the state regulation of trade and the money system.

The position which our New Economic Policy has created—the development of small
commercial enterprises, the leasing of state enterprises, etc.—entails the development of capitalist relations; and anybody who fails to see this shows that he has lost his head entirely. It goes without saying that the consolidation of capitalist relations in itself increases the danger. But can you point to a single path in revolution, to any stage and method that would not have its dangers?

Next, the first lesson, the first stage which we had reached by the spring of 1921—the development of state capitalism on new lines. Here certain successes can be recorded; but there are still unprecedented contradictions We have not yet mastered this sphere of activity.

A wholesale merchant seems to be an economic type as remote from communism as
heaven from earth. But that is one of the contradictions which, in actual life,
lead from a small-peasant economy via state capitalism to socialism.

The Importance Of Gold Now And After The Complete Victory Of Socialism

We retreated to state capitalism, but we did not retreat too far. We are now retreating to the state regulation of trade, but we shall not retreat too far. There are visible signs that the retreat is coming to an end; there are signs that we shall be able to stop this retreat in the not too distant future. The more conscious, the more unanimous, the more free from prejudice we are in carrying out this necessary retreat, the sooner shall we be able to stop it, and the more lasting, speedy and extensive will be our subsequent victorious advance.

Ninth All-Russia Congress of Soviets
December 23-28,1921

That is why we have retreated, that is why we have had to retreat to state capitalism, retreat to concessions, retreat to trade.

Draft Theses on the Role and Functions of The Trade Unions Under the New Economic Policy

In particular, a free market and capitalism, both subject to state control, are now being permitted and are developing; on the other hand, the state enterprises are being put on what is called a profit basis, i.e., they are in effect being largely reorganised on commercial and capitalist lines.

2. State Capitalism in the Proletarian State and the Trade Unions

3. The State Enterprises that Are Being Put on a Profit Basis and the Trade Unions

Role and Functions of the Trade Unions Under The New Economic Policy
Decision Of The C.C., R.C.P.(B.), January 12, 1922

In view of the urgent need to increase the productivity of labour and make every
state enterprise pay its way and show a profit,

V. I. Lenin 597 To: L. D. TROTSKY

Therefore, it would be perhaps extremely useful if you were to join open battle in the press right away, naming this Menshevik, explaining the malicious whiteguard character of his speech, and issuing an impressive call to the Party to pull itself together. The term "state capitalism" is, in my opinion (and I have repeatedly argued with Bukharin about it), the only theoretically correct and necessary one to make inert Communists realise that the new policy is going forward in earnest. But, of course, such malicious helpmates of the whiteguards, as all Mensheviks are, can pretend that they do not understand that state capitalism in a state with proletarian power can exist only as limited in time and sphere of extension, and conditions of its application, mode of supervision over it, etc.


The fighting role of the P.C.J. is equally important in the sphere of NEP, and here the P.C.J.'s weakness and apathy is even more outrageous. There is no evidence of any understanding of the fact that we recognise and will continue to recognise only state capitalism, and it is we— we conscious workers, we Communists—who are the state. That is why we should brand as good-for-nothing Communists those who have failed to understand their task of restricting, curbing, checking and catching red-handed and inflicting exemplary chastisement on any kind of capitalism that goes beyond the framework of state capitalism in our meaning of the concept and tasks of the state.

We allow only state capitalism, and as has been said, it is we who are the


3. (b) The test by competition between state and capitalist enterprises (both commercial and industrial; both Russian and foreign).

4. ((State capitalism. "We" are the state.)) (c) "State capitalism." Scholastic versus revolutionary and practical meaning of this term.

Eleventh Congress Of The R.C.P.(B.)

The second, more specific lesson is the test through competition between state and capitalist enterprises

The third, supplementary lesson is on the question of state capitalism. It is a pity Comrade Bukharin is not present at the Congress. I should have liked to argue with him a little, but that had better be postponed to the next Congress. On the question of state capitalism, I think that generally our press and our Party make the mistake of dropping into intellectualism, into liberalism; we philosophise about how state capitalism is to be interpreted, and look into old books. But in those old books you will not find what we are discussing; they deal with the state capitalism that exists under capitalism. Not a single book has been written about state capitalism under communism. It did not occur even to Marx to write a word on thissubject; and he died without leaving a single precise statement or definite instruction on it. That is why we must overcome the difficulty entirely by ourselves. And if we make a general mental survey of our press and see what has been written about state capitalism, as I tried to do when I was preparing this report, we shall be convinced that it is missing the target, that it is looking in an entirely wrong direction.

The state capitalism discussed in all books on economics is that which exists under the capitalist system, where the state brings under its direct control certain capitalist enterprises. But ours is a proletarian state it rests on the proletariat; it gives the proletariat all political privileges; and through the medium of the proletariat it attracts to itself the lower ranks of the peasantry (you remember that we began this work through the Poor Peasants Committees). That is why very many people are misled by the term state capitalism. To avoid this we must remember the fundamental thing that state capitalism in the form we have here is not dealt with in any theory, or in any books, for the simple reason that all the usual concepts connected with this term are associated with bourgeois rule in capitalist society. Our society is one which has left the rails of capitalism, but has not yot got on to new rails. The state in this society is not ruled by the bourgeoisie, but by the proletariat.

We refuse to understand that when we say "state" we mean ourselves, the proletariat, the vanguard of the working class. State capitalism is capitalism which we shall be able to restrain, and the limits of which we shall be able to fix. This state capitalism is connected with the state, and the state is the workers, the advanced section of the workers, the vanguard. We are the state.

State capitalism is capitalism that we must confine within certain bounds; but we have not yet learned to confine it within those bounds. That is the whole point. And it rests with us to determine what this state capitalism is to be. We have sufficient, quite sufficient political power; we also have sufficient economic resources at our command, but the vanguard of the working class which has been brought to the forefront to directly supervise, to determine the boundaries, to demarcate, to subordinate and not be subordinated itself, lacks sufficient ability for it. All that is needed here is ability, and that is what we do not have.

Never before in history has there been a situation in which the proletariat, the
revolutionary vanguard, possessed sufficient political power and had state
capitalism existing along side it. The whole question turns on our understanding
that this is the capitalism that we can and must permit, that we can and must confine within certain bounds; for this capitalism is essential for the broad masses of the peasantry and for private capital, which must trade in such a way as to satisfy the needs of the peasantry.

We must organise things in such a way as to make possible the customar operation of capitalist economy and capitalist exchange, because this is essential for the people. Without it, existence is impossible. All the rest is not an absolutely vital matter to this camp. They can resign themselves to all that. You Communists, you workers, you, the politically enlightened section of the proletariat, which under took to administer the state, must be able to arrange it so that the state, which you have taken into your hands, shall function the way you want it to. Well, we have lived through a year, the state is in our hands; but has it operated the New Economic Policy in the way we
wanted in this past year? No. But we refuse to admit that it did not operate in the way we wanted. How did it operate?

The machine refused to obey the hand that guided it. It was like a car that was going not in the direction the driver desired, but in the direction someone else desired; as if it were being driven by some mysterious, lawless hand, God knows whose, perhaps of a profiteer, or of a private capitalist, or of both. Be that as it may, the car is not going quite in the direction the man at the wheel imagines, and often it goes in an altogether different direction. This is the main thing that must be remembered in regard to state capitalism. In this main field we must start learning from the very beginning, and only when we have thoroughly understood and appreciated this can we be sure that we shall learn.

First of all about state capitalism.

"State capitalism is capitalism," said Preobrazhensky, "and that is the only way it can and should be interpreted." I say that that is pure scholasticism. Up to now nobody could have written a book about this sort of capitalism, because this is the first time in human history that we see anything like it. All the more or less intelligible books about state capitalism that have appeared up to now were written under conditions and in a situation where state capitalism was capitalism.

Now things are different; and neither Marx nor the Marxists could foresee this.
We must not look to the past. When you write history, you will write it magnificently; but when you write a textbook, you will say: State capitalism is the most unexpected and absolutely unforeseen form of capitalism—for nobody could foresee that the proletariat would achieve power in one of the least developed countries, and would first try to organise large-scale production and distribution for the peasantry and then, finding that it could not cope with the task owing to the low standard of culture, would enlist the services of capitalism. Nobody ever foresaw this; but it is an incontrovertible fact.

The position now is that we have to deal with an enemy in mundane economics, and
this is a thousand times more difficult. The controversies over state capitalism that have been raging in our literature up to now could at best be included in textbooks on history. I do not in the least deny that textbooks are useful, and recently I wrote that it would be far better if our authors devoted less attention to newspapers and political twaddle and wrote textbooks, as many of them, including Comrade Larin, could do splendidly. His talent would prove most useful on work of this kind and we would solve the problem that Comrade Trotsky emphasised so well when he said that the main task at the present time is to train the younger generation, but we have nothing to train them with. Indeed, from what can the younger generation learn the social sciences? From the old bourgeois junk. This is disgraceful! And this is at a time when we have hundreds of Marxist authors who could write textbooks on all social problems, but do not do so because their minds are taken up with other things.

As regards state capitalism, we ought to know what should be the slogan for agitation and propaganda, what must be explained, what we must get everyone to understand practically. And that is that the state capitalism that we have now is not the state capitalism that the Germans wrote about. It is capitalism that we ourselves have permitted. Is that true or not? Everybody knows that it is true!

At a congress of Communists we passed a decision that state capitalism would be
permitted by the proletarian state, and we are the state. If we did wrong we are to blame and it is no use shifting the blame to somebody else! We must learn, we must see to it that in a proletarian country state capitalism cannot and does not go beyond the framework and conditions delineated for it by the proletariat, beyond conditions that benefit the proletariat.

Now that we are passing from the Cheka to state-political courts we must say at
this Congress that there is no such thing as above-class courts. Our courts must
be elected, proletarian courts; and they must know what it is that we are permitting. They must clearly understand what state capitalism is.

This is the political slogan of the day and not a controversy about what the German professors meant by state capitalism and what we mean by it. We have gone through a great deal since then, and it is altogether unseemly for us to look back.

Fourth Congress of the Communist International

To begin with how we arrived at the New Economic Policy, I must quote from an
article I wrote in 1918.[2] At the beginning of 1918, in a brief polemic, I touched on the question of the attitude we should adopt towards state capitalism. I then wrote:

"State capitalism would be a step forward as compared with the present state of affairs (i.e., the state of affairs at that time) in our Soviet Republic. If in
approximately six months' time state capitalism became established in our Republic, this would be a great success and a sure guarantee that within a year socialism will have gained a permanently firm hold and will have become invincible in our country."

Thus, in 1918, I was of the opinion that with regard to the economic situation then obtaihing in the Soviet Republic, state capitalism would be a step forward. This sounds very strange, and perhaps even absurd, for already at that time our Republic was a socialist republic and we were every day hastily—perhaps too hastily—adopting various new economic measures which could not be described as anything but socialist measures. Nevertheless, I then held the view that in relation to the economic situation then obtaining in the Soviet Republic state capitalism would be a step forward, and I explained my idea simply by enumerating the elements of the economic system of Russia.

set myself the task of explaining the relationship of these elements to each other, and whether one of the non-socialist elements, namely, state capitalism, should not be rated higher than socialism. I repeat: it seems very strange to everyone that a non-socialist element should be rated higher than, regarded as superior to, socialism in a republic which declares itself a socialist republic But the fact will become intelligible if you recall that we definitely did not regard the economic system of Russia as something homogeneous and highly developed; we were fully aware that in Russia we had patriarchal agriculture, i.e., the most primitive form of agriculture, alongside the socialist form. What role could state capitalism play in these circumstances?

The question I then put to myself—this was in a specific controversy which had nothing to do with the present question—was: what is our attitude towards state capitalism? And I replied: although it is not a socialist form, state capitalism would be for us, and for Russia, a more favourable form than the existing one. What does that show? It shows that we did not overrate either the rudiments orthe principles of socialist economy, although we had already accomplished the social revolution. On the contrary, at that time we already realised to a certain extent that it would be better if we first arrived at state capitalism and only after that at socialism.

For example, they made no mention whatever of that very important point, freedom to trade, which is of fundamental significance to state capitalism. Yet they did contain a general, even if indefinite, idea of retreat. I think that we should take note of that not only from the viewpoint of a country whose economic system was, and is to this day, very backward, but also from the viewpoint of the Communist International and the advanced West-European countries

Now that I have emphasised the fact that as early as 1918 we regarded state capitalism as a possible line of retreat, I shall deal with the results of our New Economic Policy

The state capitalism that we have introduced in our country is of a special kind. It does not agree with the usual conception of state capitalism. We hold all the key positions. We hold the land; it belongs to the state. This is very important, although our opponents try to make out that it is of no importance at all. That is untrue. The fact that the land belongs to the state is extremely important, and economically it is also of great practical purport. This we have achieved, and I must say that all our future activities should develop only within that framework. We have already succeeded in making the peasantry content and in reviving both industry and trade.

I have already said that our state capitalism differs from state capitalism in the literal sense of the term in that our proletarian state not only owns the land, but also all the vital branches of industry. To begin with, we have leased only a certain number of the small and medium plants, but all the rest remain in our hands. As regards trade, I want to re-emphasise that we are trying to found mixed companies, that we are already forming them, i.e., companies in which part of the capital belongs to private capitalists—and foreign capitalists at that—and the other part belongs to the state.

Firstly, in this way we are learning how to trade, and that is what we need. Secondly, we are always in a position to dissolve these companies if we deem it necessary, and do not, therefore, run any risks, so to speak. We are learning from the private capitalist and looking round to see how we can progress, and what mistakes we make. It seems to me that I need say no more.

Interview With Arthur Ransome

How is it that although capitalism is the antithesis of communism, certain
circumstances are assets from the two opposite viewpoints? It is because one
possible way to proceed to communism is through state capitalism, provided the
state is controlled by the working class. This is exactly the position in the "present case".

Let us proceed further. Is it possible that we are receding to something in the
nature of a "feudal dictatorship"? It is utterly impossible, for although slowly, with interruptions, taking steps backward from time to time, we are still making progress along the path of state capitalism, a path that leads us forward to socialism and communism (which is the highest stage of socialism), and certainly not back to feudalism.

The real nature of the New Economic Policy is this—firstly, the proletarian state has given small producers freedom to trade ; and secondly, in respect of the means of production in large-scale industry, the proletarian state is applying a number of the principles of what in capitalist economics is called
"state capitalism ".

To the Russian Colony in North America

The state capitalism, which is one of the principal aspects of the New Economic Policy, is, under Soviet power, a form of capitalism that is deliberately permitted and restricted by the working class. Our state capitalism differs essentially from the state capitalism in countries that have bourgeois governments in that the state with us is represented not by the bourgeoisie, but by the proletariat, who has succeeded in winning the full confidence of the peasantry.

Unfortunately, the introduction of state capitalism with us is not proceeding as quickly as we would like it. For example, so far we have not had a single important concession, and without foreign capital to help develop our economy, the latter's quick rehabilitation is inconceivable.

On Cooperation

Whenever I wrote about the New Economic Policy I always quoted the article on
state capitalism which I wrote in 1918 ["Left-Wing" Childishness and the
Petty-Bourgeois Mentality; part III]. This has more than once aroused doubts in
the minds of certain young comrades but their doubts were mainly on abstract
political points. It seemed to them that the term "state capitalism" could not be applied to a system under which the means of production were owned by the working-class, a working-class that held political power.

They did not notice, however, that I use the term "state capitalism", firstly, to connect historically our present position with the position adopted in my controversy with the so-called Left Communists; also, I argued at the time that state capitalism would be superior to our existing economy. It was important for me to show the continuity between ordinary state capitalism and the unusual, even very unusual, state capitalism to which I referred in introducing the reader to the New Economic Policy. Secondly, the practical purpose was always important to me. And the practical purpose of our New Economic Policy was to lease out concessions. In the prevailing circumstances, concessions in our country would unquestionably have been a pure type of state capitalism. That is how I argued about state capitalism.

But there is another aspect of the matter for which we may need state capitalism, or at least a comparison with it. It is a question of cooperatives.

Under state capitalism, cooperative enterprises differ from state capitalist enterprises, firstly, because they are private enterprises, and, secondly, because they are collective enterprises. Under our present system, cooperative enterprises differ from private capitalist enterprises because they are collective enterprises, but do not differ from socialist enterprises if the land on which they are situated and means of production belong to the state, i.e., the working-class.



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