The week before Lenin’s death in January 1924 saw the meeting of the 13th Communist Party Conference which had been called by the triumvirate of Kamenev, Stalin and Zinoviev to administer a final defeat on the Opposition. Stalin’s control of the Secretariat and the apparatus as a whole could now ensure a minimum of Opposition sympathizers among the 128 delegates from all over Russia who had been elected to the Conference. This was achieved partly by pressure exerted by the appointed secretaries at each level of the party and also by the process of dispersing Opposition sympathizers to posts in provincial areas of less importance or of strong support for the leading triumvirate. A few days before the conference opened Trotsky’s pamphlet The New Course was published. It included reprints of his Pravda articles of December 1923 on the party’s composition and factional groups. Some additional articles were added which formed his most important theoretical contribution to the ‘Opposition’s struggle. The first of the new articles made an analysis of the nature of bureaucratic degeneration. In the second he replied to the attempts by Stalin and Zinoviev to counterpose their own supposed ‘Leninism’ to Trotsky’s pre-revolutionary differences with Lenin. In this article he showed that Bolshevik traditions could only live and develop in struggle and not in schematic formulations and scholasticism. Two further articles dealt with the role of the peasantry on which Trotsky’s views had been misrepresented and on planned economy (see chapters 4-7 of The New Course ).
Although Trotsky was not formally defending the Opposition, the triumvirate seized upon this publication to justify their ‘theory that the whole Opposition had been engineered by Trotsky as a vehicle for supposedly Menshevik ideas. The Conference opened in Moscow on January 16 and the first item on the agenda was the resolution from the commission set up the previous October to look into the divergence between the prices of agricultural and industrial products, the so-called ‘scissors’ crisis. Rykov reported on this resolution which was entitled ‘On the Current Tasks of Economic Policy’. His speech took the form of a defence of the triumvirate’s basic contempt for the method of overall economic planning. How could you plan in a predominantly peasant country where the harvest might depend on a shower of min he asked? Pyatakov replied on behalf of the Opposition and set out a detailed and sweeping criticism of the triumvirate’s economic policy.
Comrades, if we were to approach the most complex and difficult problems of the economy of Soviet Russia and the problems of construction, state construction from the standpoint of a shower of rain and to make the state economy dependent on a shower of rain, then obviously the question of a planned economy and the question of the plan must be consigned to the archives, a cross must be put over it and we must submit to the actions of the elements. I think, comrades, that we have insufficient grounds for such a pessimistic appraisal. The fact is, of course, that if we approach the question of the planned economy that is, the question of forming a plan for the whole economy of the Republic, as Comrade Rykov approached it, then obviously we would have to say that given the existence of the colossal scale of the peasant economy at the present time, we cannot form such a plan. But something else must not be forgotten, namely, that the economic system of our republic is extremely complex and inwardly contradictory. We have in fact a privately-owned peasant economy, the rudiments of a developing capitalist economy and also a substantial sector of all the establishments which comprise our state and co-operative economy.
And so, comrades, when we talk about the plan and the management of the economy, then first and foremost there arises the question of the management of the state economy, of bringing system into its management and a regularity into its management. This question is not simply an academic debate where we say that it would be nice to brush up our state economy which is unbound by internal ties and create a more ordered system. No, this question has a colossal practical significance for us in relation to the two sectors developing and expressing themselves within our Republic: the capitalist and the socialist sectors. If we are unable to resolve the problem of strengthening the state economy in good time and if it is left to the spontaneous development of the New Economic Policy (NEP) which hitherto has taken place, then we run the risk over the coming years of the capitalist sector beginning to bring down the socialist (that is, the state and co-operative sector).
Comrade Rykov has eased my task considerably by depicting to you what the state of affairs is with our trade. Comrade Rykov showed you that everywhere the private trader holds effective sway. In order to back up Comrade Rykov a little I will quote the latest data on trade for the central, Moscow, province which lies under the nose of the government and the Central Committee of the party. In this province the shops (not the hawkers that Comrade Rykov spoke of, but trading establishments) consist of 4,185 private ones, 48 state ones and 767 co-operative ones. In other words we have the following proportion: co-operative trade forms 15 per cent, state trade 0.9 per cent and private trade 84 per cent.
Thus we can say that in the sphere of trade it is now completely clear that the commercial smychka [link with the peasantry] lies in the hands of the private entrepreneur; that is point one. Now point two. In the industrial sphere we have at present only the first swallows, only the beginning of a process of capitalist development: on the one hand, leased industry and an the other„ concession-based industry. During the past year we have concluded a relatively small number of concession agreements, but the first industrial concessions are already in effect. There are already concession-based industrial enterprises. This in itself is not a bad thing but a good thing for it assists the development of the economy. But if in future we leave private capitalist trade to develop freely, especially in the countryside, while at the same time private capitalist industry develops—and develop it will—and if we do not do what I shall speak about in due course, then obviously in the struggle between private and state enterprises victory will; go first to the private enterprises. Why? For the simple reason that, first, private enterprises are strong in capital and secondly they are strong in experience and knowledge of orientating themselves on the market. We are still weak in this respect. Every individual state enterprise is weaker than a private enterprise, but also it is considerably stronger not because it is called ‘state’, nor because it belongs to the proletarian state, but because it forms a key part of one enormous system of state economy in which you have the State Bank, the industrial bank, the railways, our state foreign trade enterprises and our state enterprises for domestic trade: here we see the enormous potential strength of the state economy whose individual sections can and must support each other in the struggle against the private capitalist economy. This is the nub of the question. Whoever does not understand that the urgent task is to gather all state enterprises into one system of state economy which is unified, consciously directed and turned in a planned way in the direction which is vital to us, does not understand that in the struggle against the private capitalist sector the state socialist sector will otherwise suffer an inevitable defeat.
Comrades, this question has the most colossal importance both in principle and in practice. Yesterday Comrade Kamenev, speaking against me at the plenum of the Central Committee, found a substitute for this very task when he stated that they had already set me this task when they posted me to the Supreme Council of National Economy. When the Central Committee resolved to post me to the Supreme Council of National Economy and set specific tasks I found myself with the job of tightening up accountability so as to clarify what we have in the state enterprises and to build up a system of management for the state trusts so that they would on the one hand have a complete freedom of manoeuvre on the market and on the other form part of a single system of state industry which would conduct a definite price policy and a definite profit policy and give support to individual enterprises in the struggle against private capital. To do this it was first of all necessary to separate the management function from the function of the overall regulation of industry. All this was not undertaken by me personally for reasons beyond my control (I had to go away), but this work is at present continuing.
Consequently the Central Committee then agreed that in the industrial sphere it was necessary to separate the management function from the function of the overall regulation of all industry—private, concession-based, state-owned and so on. We thus split the Supreme Council of National Economy into two sections: first, the Main Economic Administration, which undertook the general regulation of industry (drafting laws and so on) and the second, the Central Management of State Industry, which was given the job of the management of the 72 trusts and we will carry out the tasks which have been assigned to the Supreme Council of National Economy at the direction of the Council of People’s Commissars.
When I reported on this reform to the Central Control Commission meeting jointly with the People’s Commissariat for Workers’ and Peasants’ Inspection, the thought occurred to many: so what now? It is absolutely clear that if this reform is to be carried through, the remainder of the state economy cannot stay in the same position that it is in now. When the State Bank, the activity of the state enterprises for foreign and domestic trade, the activity of transport, industrial enterprises and so on are not bound up together and when there is no co-ordination in the work of the co-operatives, what will happen? I maintain that had the Central Committee taken the standpoint of the necessity of the corresponding reforms in the management of industry, then it would have posed the task of the organization of ‘the whole state economy and the problem of the management of this economy as a whole.
That is the first question on which I have found it necessary to introduce an amendment to the Central Committee’s theses. The second question is that if we build up this system of management of the state economy—let me stress, the whole state economy, not the peasant nor the private part but that part which forms the property of the proletarian state—then it is quite clear that we have to tackle this economy of ours with some sort of plan of work. When a little shopkeeper or a small-scale enterprise begins to operate, they have a given plan. But in actual fact we do not know of a state economy as such. Why? Not at all because Rykov and Kamenev are bad or because this or that particular comrade is bad, but because hitherto we have not approached this task and its solution, the formation of a system and a plan for running this economy. I want to elaborate on this with a concrete example. Let me recall here—Comrade Kamenev is sitting here and I hope that he will not decline to confirm that this is true—how the problem of the organization of the individual state enterprises was solved.
Comrade Kamenev had then just come on to the Council of People’s Commissars and immediately ran up against one of the painful and really absurd phenomena of our life: namely that the state industrial enterprises were completely ill-defined enterprises and we did not know what trusts were. So then Comrade Kamenev posed above all the task of defining at all costs the shape’ of this lower cell of the state economy, the state trust. As the result of prolonged and very hard and dogged work in which I took an energetic and, I hope, a not unfruitful part, we managed to form the trust. That was how the trust was formed and exists today. But it exists today by its very nature as an independent enterprise, just like a privately-owned enterprise which operates as it likes without any direction, like a manager of a private enterprise would operate with his activity governed only by general laws.
I say, therefore, that we have the following task which the Central Committee theses do not propose; nor by chance is it not proposed, for throughout its recent practice the Central Committee itself has not approached this task. The task consists of this: gathering all the enterprises together into a single system. So think how can we go about this. As we did in Kamenev’s commission. We have to extend the experiment and set the problem of tackling its solution before the whole party. This is not an irrelevance, for the decisive question of future economic development is how we shall manage our state economy and, above all, how we can carry out a plan in our state economy. If we do not stand firm with all our might and main over just these two questions we shall not solve the problem of the smychka because we shall have a smychka between the private capitalist and the peasant and not one between the state economy and the peasant economy. Moreover we would then destroy our embryo of a socialist economy while the private capitalist sector would advance spontaneously against us and grow stronger at our expense. In other words we shall not achieve the perspective of a socialist development.
Naturally if someone objects that we cannot build socialism this year, I shall not begin to quarrel with him. But we do need to press on in this direction with all our energy and to put this problem of the management of the state economy and not sweep a plan aside: then we shall move towards the solution of the question of the planned direction of our state economy.
How little these questions have really been posed in practice is evident from Comrade Rykov’s report. How does he talk? ‘I beg your pardon but we are strengthening the State Planning Commission with such and such people and we are putting such and such people into the Supreme Council of National Economy. Everything’s taken care of.’ I say though that it is not a matter of people but of a definite system which needs to be built but is not being built and the task of whose construction has not been set out in the Central Committee’s theses. What do we have in practice? We have the following: when in my absence trust chiefs complained at a meeting of trust chiefs with the presidium of the Supreme Council of National Economy about the lack of direction from the side of the Supreme Council of National Economy, Comrade Rykov said: ‘I cannot answer for this matter, it is not my business.’ That was said by the chairman of the Supreme Council of National Economy. The deputy chairman, Comrade Bogdanov gets up and says: ‘I am not responsible for direction.’ So who then is responsible? Neither the chairman nor the deputy chairman takes responsibility for directing. The second deputy, your most humble servant, was not even at that time, within the frontiers of the Soviet Republic. [The second deputy. Pyatakov himself, was in Germany during October 1923 on party business.] If you ask: ‘who directs the trusts?’ the answer is no one.
And no one directs the state economy either. If people do not direct, do institutions then? Let Comrade Kamenev tell us. Does the Politburo direct the state economy? Yes, when this or that acute problem is thrust to the fore and reaches the Politburo, the Politburo is obliged to solve it and to issue the appropriate directive. But does the Politburo generally occupy itself with such questions? By its very nature the Politburo cannot occupy itself with the problems of tying up the activity of the separate sections of the state economy. Nor can the Council of Labour and Defence. Nor can the Council of People’s Commissars. Nor can the State Planning Commission. So there isn’t even an institution that can deal with this matter because we have not as yet put this question in practical terms and I would go as far as to say that we have not even yet realized the need to face this question.
You will ask: how must the state economy be built? Let me stress as much as I can that the following are still my very raw and undeveloped ideas which I did not propose to submit nor have I yet submitted either to a broad party meeting or even a narrow one; I conveyed them at the time to Comrade Kamenev. I consider that our task consists in my proposals and the proposals of other comrades being brought together and discussed. How is this to be done? The way we did it with forming the trusts. Comrade Kamenev collected the opinions of very many comrades and in the end we devised quite a good law. I think that if on this or that question I am mistaken on this question, then with a collective and really serious discussion and formulation of this question we shall find the truth.
And now, how do I conceive this question? It is necessary above all for our state economy to construct in an organized way an appropriate system of organs. I have hinted a little at this. We have industrial enterprises of central, republican, importance, and industrial enterprises of local importance. Each province must have its own management of its enterprises and the republic its own too. I shall speak only about the Union of Republics. The Union of Republics has 72 trusts and these 72 trusts are headed by the Central Management of State Industry. We have, besides, other sections of the state economy. We have a wholly-nationalized transport, we have a banking system and we have some state trading enterprises, which must be brought together by a special organ. I do not know whether this will be a reorganized Council of Labour and Defence or a specially created organ which would be in charge of special matters. But there must be an operational organ, as it were, that on the one hand keeps account of all our state economy and on the other gives the appropriate orientation to the individual enterprises from which it would obtain its reports.
That is how, in general terms, I picture the setting up of this business and its corresponding departments. My approach is perhaps incorrect and I will not insist on it. I have no intention or inclination to propose this system of measures. These measures I am not proposing but I do insist that the party must now place at the centre of its attention the task of the organization of the state economy. For this is a task that cannot be leapt over, it is a task that turns up in front of us from every corner of life and is not dreamt up out of somewhere in the head. And we shall have to tackle this task even in the event of your turning down my amendments. Although we have in fact approached the fundamental questions wrongly both in the Central Committee’s resolution and in the Central Committee’s practice it is absolutely clear that these shortcomings and miscalculations find a reflection in certain problems. And for this reason alone I shall now touch on certain questions in the amendments that I shall move when the conference comes to the voting.
We have above all the presentation of the question of prices in the resolution and the recent work of the Central Committee. Every one of you will appreciate that we have made a certain step forward in comparison with Comrade Lenin’s first formulation of the smychka question, for the smychka question is a question of the relationship of prices and a key question in our economic activity. So this then is how we approach the question of the regulation of prices. It is a highly instructive example of how not to run our state economy. We had thought, and in the resolution it is said that we could simply, by an appropriate directive, reduce prices and thus force the trusts to reduce their overheads, reduce their profits, improve production and the prices would fall. I maintain that it will not turn out like that for we have had some experience of price regulation to which we should pay attention.
I have here some data on the movement of sugar prices over the last year and a half, how these prices have been fixed by the Commission on Internal Trade and the actual prices at which sugar was sold on the free market. And so remembering that at least 80 per cent of trade is in the hands of private individuals and that we cannot regulate private trade I shall read out these figures and ask you to ponder where the difference between the selling price at which the trust sells sugar and the price at which the customer buys the same sugar goes to.
When I asked Ivan Ivanovich Radchenko, chairman of the Sugar Trust: ‘What is the situation in actual fact?’ he said: ‘We have been selling sugar in Archangel at 9 roubles 50 kopecks. But this sugar is being sold to the most well-to-do and rich peasant (because only the most well-to-do can afford sugar) at 27 to 28 roubles.’
Nine roubles and 27 roubles—a difference of 18 roubles. Where does this difference go to? It is perfectly plain that it does not go into the pocket of the Sugar Trust but into the pocket of the purchaser, a private capitalist. With this sort of price regulation we will not achieve a smychka between the peasantry and our industry but an accumulation of capital with the private entrepreneur and a smychka between the private entrepreneur and the peasantry.
So, you may ask, how then must prices be regulated? If we start out from the premise that Comrade Rykov gave here, to the effect that we have an over-production of industrial goods and that therefore we have a crisis of saturation, then I have to say that there is obviously no other means of regulating prices. If we did have an over-production of industrial goods in many cases it would be possible to sell them at lower prices in order to expand their sales, and even to trade at a loss if only to find a sale for the goods. Prices of granulated sugar State Commission Free Market for Internal roubles Trade kopecks roubles kopecks September 1922 29 14 31 10 October 1922 7 10 10 20 November 1922 7 30 11 50 December 1922 6 70 7 60 January 1 1923 7 71 8 4 February 1 1923 7 7. 6 84* March 1 1923 8 33 9 52 April 1 1923 7 61 7 23 May 1 1923 8 0 8 70 June 1 1923 8 0 9 0 July 1 1923 9 0 15 40(?) August 1 1923 9 0 22 0(!!) September 1 1923 10 0 14 0 October 1 1923 10 0 15 75 *below State Commission price
But then you will ask, whence the ‘scissors’? Why are industrial products dearer than agricultural ones? Why did the ‘scissors’ first open and are now beginning to close a little again? Now it becomes quite clear that the heart of the matter is that we have an under production of industrial goods. We have a scarcity of industrial products and a relative surplus of agricultural products, a relative surplus of bread. This can be shown with figures. So on this basis we have a relative rise in the prices of industrial products and relative cheapening of agricultural products. Consequently the basic method of struggle against the ‘scissors’ lies in expanding production, expanding industry and expanding state industry. But from Comrade Rykov’s premise there inevitably follows the need to reduce prices below cost, curtail industry so as to bring it into line with agriculture. No other conclusion can be drawn from his words.
That means the first question is the expansion of our state industry. The second is that the expansion of state industry runs into certain difficulties in view of the shortage of our capital for the increase in the turnover of our industry. So what should we do here? Do what we are doing at present, that is, force the trusts to sell below market prices or must we, while forcing the trusts to sell below market prices, simultaneously take steps to lower market prices themselves,? That is how the problem stands if we approach the question not simply from the standpoint of the political necessity of reducing prices, but from the standpoint of economic necessity and the development of our state economy. In this case, then, we have to say that prices in Archangel must be reduced, granulated sugar must be sold there at nine to ten roubles. For if the private trader sells granulated sugar in Archangel not at ten roubles but 27 roubles then the result is that sugar is bought by the more well-to-do layers which can pay the high price and thanks to this the price rises to such a degree that the less well-off layers cannot afford it. Such a reduction must be accompanied by certain economic measures: in particular by the import of foreign commodities so that the private trader does not make this profit, this price difference, but that any difference goes into the state’s pocket.
It is often pointed out to me that such a view of the situation implies the wrecking of state industry. I suggest that you give some thought to this view of the problem. What can wreck state industry? The import of foreign goods? The import of what precisely? I have not nor do not propose an opening up of frontiers. I proposed imports through our state organs under out monopoly of foreign trade with strictly limited quotas to strictly limited areas. So what then can wreck state industry? The import of foreign goods in itself or rather a reduction of prices? What do we fear from foreign competition? What we fear is not just that foreign goods appear but that prices can fall to a level where our industry cannot operate. That, of course, is the reason for out protectionism of which I am a passionate advocate. But do 1 propose this? No, I do not. What I am saying is that although the price on the market is high and we are forcing the trusts to sell at below this price on the market, we also have to knock the free market (retail) price down. That is why the administrative regulation of prices must be coupled with the corresponding economic measures and in particular, commodity intervention (selective imports). That’s the first point.
The second mistake in the Central Committee’s theses on economic policy is on the profits question. The order that Comrade Rykov read out does belong to me: I wrote it and I have to admit that I have not read it for a long time, but when Comrade Rykov read it out I will say that I consider it to have been quite correct in principle. For economic enterprises the question cannot be posed in any other way.
First of all a little bit of historical information and then to the heart of the matter. The information consists of the fact that when I was posted to the Supreme Council of National Economy a hue and a cry went up in the Politburo and all our top-level Soviet and party circles that we must achieve the profitability of our state commercial and industrial enterprises. This then was not just the general feeling but the universal feeling. If this was not so then let someone try to prove to me that there was any other feeling in the autumn of 1923. Consequently I am not in isolation in this connection, only in that I understand the essence of the question today, while some people have now ceased to understand the essence of the question, mixing up the ‘scissors’ problem with the problem of the profitability of our trusts.
A second piece of historical information: the law that Comrade Kamenev and myself wrote on the trusts spoke quite clearly in its first clause; a state enterprise and an industrial enterprise, i.e. a trust, is an enterprise which operates along commercial lines, that is with the object of making a profit. We set the trust a definite task—to earn a profit. This law was accepted by the Central Committee, a plenum, and everything short of a party congress. If we set the trust chief a task he has to carry out that task. The trade unions, our party organizations and our higher bodies which stand above the trusts must check the work of this manager. When we ask: ‘Is this or that trust good or bad?’ We judge it by reference to the rise in its profit. That task was set and has to be solved.
But now comrades come up and say: ‘If the trust chiefs chase after profit then first they will inflate their prices and secondly they will reduce wages and thus generally plunder the workers and the peasants and through this get their high profit.’ Hence they draw the conclusion: it is a bad thing to make a big profit. So here, comrades, a shortcoming in our system emerges—I would not say a shortcoming of management, for we do not yet have such a management—but one of the system of our state economy as a whole. If we raise wages but reduce prices and then demand: ‘produce an accumulated profit’ what does this mean? It means: ‘kindly improve production, kindly cut overheads and kindly run your business better. For we are setting you definite conditions: raise wages, reduce prices and at the same time show the maximum profit.’
If two comparable trusts, let’s say textile trusts, operate under these same conditions (it is all the same whether it is the summer of 1923 or now in the winter of 1924) then I hold that if the one trust produces a much bigger profit than the other then with all other conditions being equal it was working better because the business was run better. I would judge it by that criterion. But you prefer to take another path, a path which completely confuses our trusts, our trade unions and our party organizations. Your path is the following: tell the trust chief to ‘produce the minimum profit’ i.e. the least profit. I am not now speaking of the fact that this is a bad formula because the minimum profit is zero. In setting the object of a minimum profit we are setting the goal of running an enterprise without a loss which is radically wrong. I suggest that the comrades really meant, when they formulated this resolution, not a minimum profit ,but a ‘moderate profit’. So I shall not quibble over words.
So we advance the demand: produce a moderate profit. The trust chief today has a collective agreement with the trade union which determines the wage levels and has, let us assume, a selling price controlled, regulated and fixed in accordance with the price policy we have formulated, over which he dare not sell. Under these conditions he manager to reduce his overheads, improve production, make economies in the marketing apparatus, squeeze out middlemen and dodge them one way and another, find new customers and expand turn-over and so on and thus increases his profit. At the end of the year a large profit shows on the trust’s account and he is horror-stricken. ‘Please excuse me, for I did have a party directive to produce a moderate profit.’ So as you can see the heart of the matter is not in the slogan of a ‘moderate’ profit—no, the heart of the matter is a correct price policy and a correct wage policy. It is essential and necessary to issue a directive within these conditions: produce the greatest profit for an economy cannot be run in any other way and otherwise we would be corrupting our economic managers, disorganizing the party and debasing the trusts to the level of state financial institutions.
Now let me pass to the next question which was pretty well confused both in the Central Committee’s resolution and in Comrade Rykov’s speech: that is the question of our foreign trade balance.
As regards the active balance. Once again owing to the fact that we have a certain disjointedness between the various parts of our state economy and that financial problems have again, to a certain extent, cropped up, there is set down in the Central Committee’s theses that over the recent period, or at any rate prior to my departure from’ Moscow, we had a definite swing towards a tightening up on imports and the so-called active balance. Here first of all, comrades, we must be quite clear how to pose this question. Yesterday, in the Hall of Columns, Comrade Kamenev explained the active balance in this way: if we trade with foreign countries and maintain an active balance that means the net balance is in our favour; a passive balance is when we trade abroad and the net balance goes in their favour.
Comrades, the active balance has an entirely specific meaning which Comrade Rykov explained more or less intelligibly and does not at all lie in whose favour the balance of trade is but in which country the gold is deposited.
If we implement the demand of this most important, and I would say, decisive, resolution of the Central Committee, which will pre-determine our policy for a certain and immediate period of time, i.e. the demand to achieve an active balance and maintain an active balance, what does this entail? It entails tightening up on imports and pushing up exports as hard as we can go. That is the trade balance policy.
I shall therefore pose the question in this way: our exports must be forced up above all in view of the upsurge in our peasant agriculture but also in order to acquire opportunities abroad for purchasing what our economy is short of and needs to import from abroad.
Our foreign trade must therefore be built not all around an active balance but around the balancing of imports against exports, that is around stepping up exports but in doing so attempting to import what we lack and not allowing the difference to be deposited in the form of gold. Why? Because it is a bad thing for us to accumulate gold. Of course it is very nice to store up a bit or even quite a lot of gold but is it timely? No. It is not timely today because we do not need gold, but a revival of our industry and our economy, and this cannot be done by depositing gold with Sokolnikov or Sheinman. [Sokolnikov was the People’s Commissar for Finance and Sheinman was the director of the State Bank.]
Instead of the policy of an active trade balance we have to establish a policy of balancing imports and exports. If we simultaneously carry out the demand to obtain, as the resolution said quite correctly, a foreign loan and if we continue to follow a policy of attracting foreign capital into the country then the question arises: what does concluding a loan agreement signify in terms of commodities? Does it mean that we are thereby importing gold currency? No, it signifies that we are importing commodities to the corresponding amount even if gold was borrowed to do this. What does the import of foreign capital in the form of attracting concessions and in other ways signify? It signifies, in the final analysis, the import of the corresponding volume of foreign commodities. That is the only possible positive meaning that a foreign loan and a concession policy has.
Therefore simultaneously to put forward as a demand or task of our economic policy the negotiating of foreign loans and the attraction of foreign capital on the one hand and the demand for an active trade balance on the other means not to link up our industry with our trade and finance. This cannot be done in actual practice.
These several partial mistakes which I have set out in the form of specific amendments which will be distributed bring us back to the old question that I started with. That is the need to carry out a plan for the creation of an overall system of state economy and to pose the task of the management of the state economy in such a way that in the struggle between the two tendencies, the New Economic Policy (NEP) elements, the merchant-capitalist element, and the state socialist element, victory will remain with the state socialist principle.
Herein lies the difference between the formulation of the question in the Central Committee’s theses and the formulation that I have given.
Just two more words. Does this mean that I am thereby counterposing my own economic policy to that of the Central Committee? Not in the least. It means only that while following a correct and definite line in the sphere of our economy the Politburo is not yet posing those practical questions which now require to be posed and which life itself, as it were, has thrust to the fore; it is absolutely necessary to pose these practical questions in the near future lest the NEP element, the merchant-capitalist element, grip us and drown those beginnings of a socialist economy which we already have in the form of the co-operative and the state economy.
Following the discussion on economic policy, Stalin presented the report of party-building. He concentrated his attack on Trotsky and proceeded to distort and misrepresent the ideas expressed in ‘The New Course’. Stalin introduced a personal element into his attack by declaring that Trotsky had ‘elevated himself into a superman standing’ above the Central Committee’. Finally, and most important, he publicly revealed for the first time the provisions of the l0th Congress 11921) resolution on party unity relating to disciplinary procedure against Central Committee members (Pyatakov and Rakovsky as well as Trotsky were Central Committee members of the Opposition.) This was a threat to suppress the Opposition. Preobrazhensky gave the Opposition’s reply to Stalin in the speech we print below.
Comrades, we shall understand nothing about the processes taking place inside our party if we from the very outset refuse to link up these processes with those phenomena which are taking place in our social and economic sphere and in inter-class relations. Our party has very fine traditions in this matter—it has nearly always at a new turn, however major and whether inside or outside our party, given first place to and put in the foreground an assessment of the general situation and then afterwards proceeded in a Marxist fashion to an assessment of the situation inside the party. Therefore, I cannot subscribe to Comrade Stalin’s proposal not to deal with the history of the emergence of our differences because this history is closely interwoven and is necessarily closely interwoven with an analysis of all those processes which are taking place in our country and above all in the working class, that is, the class whose vanguard we represent. Therefore I shall begin my report from this angle.
We entered the New Economic Policy (NEP) period in 1921. In our party we made a completely unanimous turn towards the NEP. We carried through the first phase, the first stage of NEP under Comrade Lenin’s leadership. But from 1923 we entered into a new period of NEP, over which there cannot be any doubts in our party. What does this consist of, what influences will it exert on our party in the future, increasingly from month to month and year to year? What is the essence of this new period? Its essence consists of the following: while previously we developed the productive forces in our economy in an entirely spontaneous way, slackening the reins on our state industry, leaving our trusts to extricate themselves under market conditions from the difficulties that they had found themselves in; while we took the general point of view of a development of the productive forces in all forms of the economy as there was great scope for development of both NEP capital, state industry and small-scale industry etc. (in as far as these antagonistic forms did not conflict) then in this period the whole matter was largely one of a spontaneous drift.
The economic policy of our party in this period did not bring the new problems to light, for this to a large extent, could not have been otherwise. But 1923 was a turning point in this respect. In the spring we had the first portents of a sales crisis. Already in March and April of 1923 we had completely clear signs of an opening of the scissors around which Comrade Trotsky had constructed a section of his report to the 12th Congress. Thus we have here entered a new period and our party’s task was to comprehend all the tendencies of this period in good time and to adjust correspondingly our internal policy and our inner-party policy. But what do we see and what reflections has all this found in party decisions?
We saw that at the 12th Party Congress a resolution on industry was adopted that took account of this process, and took account of it in good time. But what happened afterwards? Did we take account of all this in inner-party changes that would have to follow this? No, we did not. Comrade Lenin once said that about a couple years would pass following the transition to the New Economic Policy and then a new situation would arise in relation to the question of party unity. I think that when Comrade Lenin said ‘about a couple of years’ he assessed the position correctly. But the majority of the Politburo of the Central Committee maintained that it was two and a half years. I think that even Comrade Lenin could not then have foreseen those especially rapid advances which we have made in industry. But from that point there grew a gradual divergence of inner-party policy from the objective tasks of the party in the NEP situation, because the process of de-classing the capitalist elements began to cease and the working class began to grow. In the face of this process we had to weaken the bureaucratic tendencies not strengthen them. There occurred, moreover, a divergence between processes inside the party and the tasks which the conditions of party work have posed before us.
Herein lies the fundamental mistake that has been made by the Central Committee, Since Comrade Lenin left his work the Central Committee has made several mistakes including some major ones. These mistakes have one feature in common and can be given a general characterization. This common characteristic of the Central Committee’s mistakes lies in that it has not proved able (as it was able when Comrade Lenin was at its centre) to predict well in advance this or that process which had spontaneously ripened, and to react to it at an early stage by making turns and to do so in such way as not to stop half way with them. ‘I shall show this from a number of examples.
We can see that in the end we are being dragged finally out of this state of somnolence and a certain bureaucratic cosiness inside the apparatus that has come about with the unanimously adopted resolutions and the lack of discussion of decisions which come down from above, already made in advance, about which Comrade Zinoviev has written. What is dragging us out of this state of somnolence? The working class. It is dragging us out of this somnolence by its strikes, in other words the party is being spontaneously urged on to change its course. This means that on this basic question which is linked with the turn to the new course the Central Committee has, if you pardon a certain historical comparison, acted somewhat ‘tailistly’ - old Bolsheviks will know what this means. The party was pushed on by spontaneous processes instead of foreseeing them. Only as a result of a deepening and clearly emerging crisis which has manifested itself in the form of abscesses like the ‘Workers’ Truth’ group and the ‘Workers’ Group’, only as a result of such processes did the Central Committee awake to the need to review the methods of work inside our party.
Moreover as regards the economic questions, matters stand in just the same way. At the 12th Congress we adopted a resolution on the question of industry which foresaw all those discrepancies which afterwards developed and foresaw the need for a transition to planning. But for the present leadership things remained exactly as before and spontaneous objective crises were necessary in order for the party’s Central Committee to arrive at the need to take the path of a greater degree of planning in our economy far more energetically. At least that was how it was stated in the resolution that was adopted by this conference yesterday.
Here, comrades, permit me to pass on to the next mistake of the Central Committee which it made at the plenum of the Central Committee and the Central Control Commission in October. I must say that for we who signed the document of the 46 the situation had already become quite clear even before we signed that document. We consider it to have been our mistake that we had not done so earlier. It could have had some useful consequences inside our party had we signed it earlier. But in assessing this document you have to understand one thing and that is the conditions in which we then found ourselves. The conditions were those of a mounting crisis whose limits no one could foresee. Then the divorce of our party organizations from the working masses which was revealed ruthlessly by those strikes which showed in Moscow in particular the cost to the party of a law-abiding committee which, however, overlooks the basic processes taking place in the broad working masses. What is the cost? The events of July and August and subsequent events showed this. Thus in coming out with the document of the 46 we clearly and definitely posed two fundamental questions; first, the question of the transition to workers’ democracy and secondly the transition to a more planned system in our economy.
Above all I must protest categorically against one entirely impermissible distortion which was committed in connection with this document, not only at Moscow meetings but also in the Politburo’s official document. On page 34 of this document you will read: ‘This statement of the 46 which broadly repeated Comrade Trotsky’s letter and was known to Comrade Trotsky before it was introduced in the Central Committee, said that the Central Committee is leading the party and the country to ‘disaster.’
The quotation is given in inverted commas. These words are not in our document. You cannot make quotations like that in an official document. At meetings everywhere Comrades Kamenev and Bukharin have quoted these words as the words of our document. We introduced a clear-cut resolution at the plenum on the question of workers’ democracy. In order to be clear about how the discussion at the plenum of the Central Committee and the Central Control Commission in October proceeded then arguing practically and not formally this is what the question was. We proposed on the question of workers’ democracy that the plenum adopta resolution which was subsequently incorporated in the document of December 5 in’ a more precise, definite and sharper form.
Consequently, what is the question here? Why, when it carne to the voting, had this document to be rejected with only one or two votes for it and five or six abstaining? Why did the Central Committee and the Central Control Commission not accept our proposal? What did this consist of? We have observed a series of processes in our party and express our fears over the Central Committee’s policy. Let us discuss the situation that has arisen, hear us out and listen to our proposal, we said. Twelve of us were invited, we were listened to and our proposal was turned down by an overwhelming majority, almost unanimously in fact, and a long resolution containing condemnations of all sorts was carried. Should the party’s Central Committee really react like this to a proposal that originates from a number of responsible comrades whose combined party membership, that of the ‘46’, is no less than the combined party membership of the whole Central Committee? Surely you cannot seriously and conscientiously use such a method when there is disquiet in the party, crises are maturing and when any self-respecting Bolshevik who can see them and really wants to be worthy of his calling of a communist and a Bolshevik, must go to the Central Committee and say: ‘I am rather alarmed but this is how I see a way out of the situation’?
When in October the plenum rejected our resolution and put forward its own resolution of condemnation which rejected our basic proposal which we had introduced, the basic theme of all of our speeches and articles was that we should make the transition to the new course without exciting the party with a discussion from above. At that plenum we said that the position was such (the German events were maturing at that point) that we could not postpone this measure for otherwise we would not be sufficiently combat ready in those ultra-difficult conditions, for the German revolution. Nor, however, could we allow a discussion on this matter because it would be untimely. The Central Committee rejected such a formulation of the question and that was a mistake.
The Central Committee, moreover, rejected the approach to the problem of strengthening the function of planning in the economy, calling our speech - I cannot remember the exact words used by Comrade Rykov and others but they were unflattering anyway - academic, high-schoolish and so on, only later to accept three-quarters of what we had proposed in their own resolution of December 5. We had proposed that the Central Committee carry through this transition not on the basis of a panic nor on the basis of pressure from below, but from above in the most organized fashion. The Central Committee rejected such an approach to the question and later events ‘developed spontaneously just as we had told and warned our party’s Central Committee.
In the Politburo’s reply to Comrade Trotsky we find the following point: ‘ ”We are experiencing a rapidly-growing party crisis.” Comrade Trotsky considers that to be self-evident and to require no proof.’ This, comrades, was written at the time when we were warning that a party crisis was inevitable in this situation, ‘hut when comrades from the Central Committee were asserting that there can be no question of any crisis—with an optimism that has spread progressively in their assessment of the situation ever since Comrade Lenin’s retirement, an optimism which is highly dangerous to our party.
Comrades, we cannot make such a great political error. For what happened here was indeed a great political error. In the course of the discussion we were to have a whole number of statements from Politburo members: that the party is undergoing a crisis, the party is in a state of fever, and so on. But this was said in December while in October it was denied categorically. Can we really permit such lack of foresight ‘but it was permitted and we note this fact.
How did things then proceed? Comrade Zinoviev produced his article which opened the discussion, a public discussion, in our party. Following this a whole number of reactions came in from the localities, while in Moscow a debate on this question began in the districts. At the Sverdlov University, Comrade Zinoviev was able to see the growing mood, which came unexpectedly to us as well, that had arisen there.
(Voice from a seat: What about Comrade Preobrazhensky’s article?)
There was my article too. It come out on the same day as this happened at the Sverdlov University. Now how did this business develop subsequently? You know the content of the speeches. It was not denied that a certain shift had occurred within our party which was completely unexpected by the Central Committee. Comrade Kamenev presented the report to a meeting in the Bauman district where the resolution we moved was carried with only six against.
Thus comrades from the Central Committee were now convinced that things were serious. But everything proceeded in a spontaneous way. Central Committee members find the moment absolutely ripe to launch the December 5 document upon the wave of public opinion that had now begun to surge in the party. This decision could have been taken earlier, it could have been taken in October when the whole transition could have been carried out with far less upheaval. But thanks to the fact that here too the Central Committee was waiting for a jolt from below, it once again pursued a somewhat ‘tailist’ [Lenin had described the policy of the Economist trend in Russian Social-Democracy at the beginning of the century as ‘tailism’ as it amounted to following behind the spontaneous struggles of the working class.] position, if you excuse the expression, and we had a situation which was to sharpen somewhat more in this discussion.
How did subsequent events develop? Here in Moscow we could come out either for or against all the proposals and thus the Moscow organization had the maximum opportunity to listen to the viewpoints and make its own assessment of the moods and opinions. But with regard to the provinces this was not the case for there an enormous part was played by the information in Pravda , including the slogans that had been launched by the party’s central organ from the very beginning of the discussion.
This question has great importance. When a discussion arises the Central Committee bears a huge responsibility in this respect: what are the slogans it should give to this discussion, how should it define the situation and how should it characterize the movement which has started inside the party? Everything that follows depends upon this. So we saw that the Central Committee, which was in a complete panic over what had happened in the Moscow organization, adopted a slogan that was to play an ultra-negative role throughout the discussion by intimidating the party and depriving it of an opportunity to understand objectively everything that had happened in the party and which, by its very essence, entailed a series of accidental secondary mistakes made by the party’s central organ and provincial party organs.
How you assess us is the major, principal and key factor. There exists on this question a good deal of confusion and a tangle of opinion—how do you define the social subsoil of what is called the ‘Opposition’? The Central Committee has launched a slogan to the effect that it represents a Menshevik deviation over organizational and economic questions and this highly-polemical slogan has been launched so as to create the best conditions in which to fight and destroy the Opposition moods inside the party. This slogan, which has nothing in common with what is actually happening and amounts to a completely impermissible polemical device, this very slogan was then taken up within the party as something of a Central Committee directive.
At this moment, a moment of panic within the Central Committee, when it subjected us to an artillery bombardment in entirely impermissible forms which has never been done before inside our party prior to a congress, comrades came out with different proposals from the Central Committee’s and the struggle sharpened. Nor did events further develop at all as Comrade Stalin depicted them. He considers that after the publication of the document of December 5 no differences remained. I do not subscribe to this in the least. If you take the December 5 document then we have virtually disagreements apart from the item on appointment of secretaries which was not expressed quite in the spirit of workers’ democracy. The main thing is not this but how we are going to work together in the future. Comrade Stalin has quoted as an example my resolution which was proposed in the Hall of Columns (at the Moscow Provincial Congress) and expressed his surprise—I don’t know whether he was serious or joking—that this resolution was not adopted. I must say that this typifies exactly the state of affairs. When, following this document, we had as a result of the directive given in the central organ an attitude towards comrades that at once put them, as it were, ‘on the other side’ in this controversy, there carne about what can be called a gradual forcing of a grouping by the Central Committee, a forcing of a section of the party into a grouping. That’s what happened. And so, comrades, everything that ensued was only the logical working out of this state of affairs. I can give only a general characterization of the mistakes of the Central Committee which had been committed before Comrade Trotsky produced his open letter of December 8. This characterization amounts to the fact that in the absence of Comrade Lenin the party’s Central Committee displayed a very great conservativeness, an insufficient reckoning of the process maturing inside the party and at the same time a certain diffidence in taking this or that decision over this matter.
The next question which you have to examine is that of how our relations will take further shape in the process of our discussion. For the slogan about the Opposition’s Menshevism and so on which has been launched has now been developed. Besides, Comrade Trotsky’s letter appeared. In this connection the Central Committee ought not to have done what it did. Here it made the following mistake which was harmful to the party and whose consequences we cannot fully calculate at the present time. If the Central Committee considered that Comrade Trotsky had violated an agreement by publishing a commentary that diverged from the resolution of December 5, it should have solved the problem in a purely formal way. It ought to have convened the Politburo and put forward a formal decision in relation to the letter and bring it to the knowledge of the party. We can see how events here again have developed uncontrolledly. Comrade Stalin published his article (December 15). No one knows whether he was writing in the capacity of secretary of the Central Committee or merely as an old Bolshevik, or even what the Central Committee’s formal attitude to this public statement was. Then a process of divesting the merits of individual party members, which had accumulated over the past six or seven years, began to take place. Following Comrade Stalin’s article, other Central Committee members began to be divested by recalling October 1917 and so on. As a result, we had a general discrediting of members as individuals. Why was this necessary? Couldn’t you have settled this question by a formal decision of the Central Committee? What was done by the Central Committee was a mistake.
I now pass to the basic error which the Politburo committed in relation to Comrade Trotsky personally. I regard the basic mistake committed by the Politburo in relation to Comrade Trotsky personally is that it treats him as an outsider in our midst. With such an attitude joint work is impossible. This should be firmly and clearly understood. It is necessary in our party to treat comrades who play an exceptional role and are necessary to our party today not like Istpart members, but as leading political figures, as party leaders, just as Comrade Lenin acted in such instances. Here we see a far greater degree of impulsiveness than political calculation by party leaders. In a letter by Comrade Lenin dealing with the national question, which for some reason is so far unknown to the party, he said that ‘in politics spite generally plays the basest of roles’. [Preohrazhensky is, like Lenin, here referring to Stalin by implication.]
So here, too, we have before us a spontaneous impulse but from another angle; an impulse from the angle of personal relationships which has finally set the whole tone that pervades this document and can only produce a nightmarish effect on rank-an-file party members.
The next question broached by the discussion is the question regarding Bolshevism and a Menshevik deviation on the organizational question. Here we must have complete clarity. In this case what has been embarked on for polemical purposes runs completely counter to the whole history of our party. For what reason are we now appealing to the party’s past in the polemic? Comrades are waging polemics in an attempt to prove that the bureaucratism in our apparatus in 1923 can be explained by our party’s history. But I maintain that our party’s history is a categorical refutation of bureaucratism. What bureaucratism did we have in the underground organization? None. When did bureaúcratism begin to sprout up? First in the Civil War period and secondly in the NEP period. This period in the history of our party was elevated by many conservatively thinking and acting comrades into an ideal one in an inner-party and organizational sense and historical perspective were thus completely distorted. We must reject this approach as a slander on the Bolshevik Party and a manifestation of apparatus conservatism against which an energetic struggle is vital. Let us go into the question more deeply and put the question of the party’s history in a true light, for we old Bolsheviks who do not stand for bureaucratism in 1923 will prove the contradiction that there is here.
Bolshevism by its very nature contradicts bureaucratism. It is linked with the masses. It is active and practical and cannot tolerate the ossification that we had when the strikes occurred. Such bureaucratism is thus anti-Bolshevik and contradicts the essence of our party. But when a struggle is conducted against us with this sort of argument, it means, in effect, that you are adducing the whole history of Bolshevism in order to justify a few hundred bureaucrats in our apparatus. That’s how you are posing the question. Comrade Lenin taught in the party that we should not take a single truth separately in isolation from the rest. That is true, but when you use this in order to defend a lie then it is shameful. For this is how you are acting. We have straightened up the party’s backbone from top to bottom and that is quite correct. There has been a two-way process, but when you resort to this method in order to justify a few hundred bureaucrats, then things are in a bad way and we oppose such a formulation. This is a polemical distortion and it gives our party an ultraincorrect conception of the real state of affairs. Yet as you know, all the provinces have been filled up with this.
The question of party unity has thus been presented as if we were the sort of splitters that have to be driven out. By posing the question in this way you have, to put it bluntly, misled all our provinces and intimidated all our party. This is absolutely impermissible.
Now i shall pass to the last question: the question of perspectives. It is quite clear to us that a new mistake is emerging here, one that the Central Committee wants to commit and which the conference must not accept. This mistake consists of the following: Why did our divorce from the working masses come about? Because in the process of the development of the NEP we had an economy that was developing spontaneously and bureaucratism was growing up in our party organizations. That bureaucratism, that gradual adaptation of our party organization to the Soviet state apparatus Comrade Stalin has spoken about. Now, if Comrade Stalin stands by what he has said here—I have absolutely no objection to the first part of his report—if he stands by the fact which is absolutely true, that our party created a state-apparatus centralism out of its party centralism and then underwent a degeneration under the pressure of that apparatus; if this is true, then I must warn you that the policy you are pursuing at the present time in relation to the so-called Opposition will lead us right back to where we have come from.
This will be quite inevitable by the logic of all great mass movements. Why will this take place? This is why it will take place. If the conference agrees to publish the point in the resolution that Comrade Stalin spoke of last if it agrees to bring out the cannon which in theory will be aimed at the Opposition, but in practice will be aimed against the document of December 5 and against all active efforts to make the turn to the new course and the inner-party democracy which none of us make a fetish of, then the following will come about. We shall drive the party into a state of silence. Because when any member who speaks out can be considered an Oppositionist, even if he has had not even an ideological connection with the Opposition, when he is driven down and categorized from the standpoint as to whether this document applies to him in this or that form, we shall have sailed the party into a dead calm. Meanwhile the tasks set before the party on December 5 will be put back for an indefinite period of time.
Now, about our apparatus. The gulf between the party and the working class and the depths of the working class will not lessen but widen. At a number of meetings Comrade Zinoviev referred to the composition of our party and pointed out the enormous degree of specialization and its excessively diversified composition in different respects. Comrades, I say that we have a situation that has come about where 18,000 party members who constitute the apparatus, minus those who do not play a leading part, have, through this specialization, ended up by being responsible for the whole party and its entire organization. As a result we have their lack of contact with the remaining mass not only of rank-and-file members but also of leading party members who work in other special fields. This process, which is a most harmful process, will strengthen and not weaken, thanks to the fact that the line you have laid down of a struggle against the Opposition will inevitably lead to this.
Prior to bringing up the artillery weapon against the Opposition the party’s Central Committee is beginning a policy of confusion. This is a sign that you are proceeding from an angle which amounts essentially to the same remedy that brought us face to face with the strikes in July and August and will confront us with new party crises. We are speaking quite frankly. The resolution of December 5 cannot be carried out in the party under such a regime. We must have a clear perspective ahead of us. On this question we propose the implementation of the December 5 resolution. We propose besides the condemnation of all those methods of struggle utilized during this discussion which mark struggle by bureaucrats in our apparatus against the growth and development of our party.
Last updated on 16 April 2007