Vladimir Smirnov's Contribution to the Debate on the Soviet Economy

This is the first signed article by Vladimir Smirnov in the Kommunist project. It appeared in issue 4 in June 1918. Smirnov was of the same revolutionary generation as fellow Kommunist contributors Bukharin and Ossinsky whom he met at Moscow University. Joining the Bolsheviks in 1907, he distinguished himself in 1917 by leading the artillery assault on the Kremlin and forcing the officer cadets holding it to surrender.

Like so many in the Moscow section of the Party he joined the “Left Communists” in their opposition to the Treaty of Brest-Litovsk and resigned all his party offices. Unlike Bukharin and Radek though he remained very committed to the idea that socialist revolution was always about the self-activity of the working class. He never ceased to question the anti-working class path the Revolution was taking in many areas. In 1919, in opposition to the bureaucratic degeneration of the Revolution and the increasing domination of the Party, he was a founder of the Democratic Centralist (Decist) faction alongside Ossinsky and Sapronov. Also in 1919 he was the main spokesman of the Military Opposition. Whilst not opposing the employment of former Tsarist officers as spetsy he stood up to Trotsky on the question of the re-adoption of the military discipline of bourgeois armies with the saluting of officers, who were given special privileges and living quarters. He also opposed Trotsky at the Ninth Party Congress in 1920 over the militarisation of labour, which he recognised would destroy what little initiative was left to the working class. In 1923 he was still trying to defend the remnants of democratic centralism when he signed (along with other leading Decists) the “Declaration of the Forty-Six” which criticised the economic and political failures of the Communist Party. It stated that:

The party is to a significant degree ceasing to be that living self-activating collective, which really embraces living activity, being linked by thousands of threads with this activity. Instead of this we observe more and more a progressive division of the party, no longer concealed by hardly anyone, into the secretarial hierarchy and the “laymen”, into the professional party functionaries, selected from above, and the simple party masses, who do not participate in its group life…(1)

In fact it was too little too late. The document was euphemistic – the living self-active collective (the Party), which had replaced the self-active class of 1918 during the civil war, had been disappearing ever since the banning of factions at the Tenth Party Congress at the time of Kronstadt in March 1921.

Smirnov would continue to try to reverse the counter-revolutionary direction of the Revolution. Although he joined the faction fight of the United Opposition, he had come to the conclusion that real opposition could only come via the creation of a new working class party. He was expelled from the Party in 1926 but readmitted in 1927. In 1929 along with the Trotkskyists he and other Left Communists were arrested and sent to the Verkhne-Uralsk “isolator” or prison. There he was involved in a group of mainly Left Communists discussing how the revolution had been lost. According to the only witness, Anton Ciliga, he had now given up on the Revolution altogether:

The young Decemist [sic, Decist today] Volodya Smirnov even went so far as to say: "There has never been a proletarian revolution, nor a dictatorship of the proletariat in Russia, there has simply been a 'popular revolution' from below and a dictatorship from above. Lenin was never an ideologist of the proletariat. From beginning to end he was an ideologist of the intelligentsia." These ideas of Smirnov were bound up with the general view that the world was steering straight towards a new social form – State capitalism, with the bureaucracy as the new ruling class. It put on the same level Soviet Russia, Kemalist Turkey, fascist Italy, Germany. "Communism is an extremist fascism, fascism is a moderate communism", he wrote in his article, Comfascism. That conception left the forces and perspectives of socialism some-what in the shade. The majority of the Decemist fraction, Davidov, Shapiro, etc., considered that young Smirnov's heresy had gone beyond all bounds and he was expelled from the group, amid uproar.(2)

His despair is understandable. Released in 1935 having completed his sentence he was rearrested after 2 months and sent to another “isolator” where he was condemned to death and shot in 1937.

This article by him which follows is historically interesting in that it (as all the texts in Kommunist do) bears witness to the fact that the Bolshevik Party in its revolutionary character was never a monolith nor was it full of yes men overwhelmed by the leadership of Lenin (whose economic position is here described as “an embarrassment”). It also reveals that the Bolshevik Party had no real plan for economic transformation but was literally in constant crisis mode making up policy on the hoof. Smirnov here thinks this is the problem. The Bolsheviks are simply adopting conventional capitalist policies to deal with the economic crisis they inherited from the capitalists.

Between the lines we can see Smirnov alluding to this crisis. We can also grasp the fact that money is becoming valueless (mainly due to the “resort to the printing press”). A lot of this money is already earmarked for the newly formed Red Army but equally a great amount is being set aside to pay the costs of nationalisation. These costs are not compensation to the owners (normal in a capitalist regime) but simply in running the factories that have been taken over by the Soviet government, mostly at the request of the workers who have either found that the boss had run away or was not paying them. Initially the Bolsheviks were reluctant to take control of these production units but given the pressure from below they felt obliged to. In the very month this article was written they finally made the decision to turn what was forced on to them into a virtue by passing the Decree on Nationalisation.

The Decree was passed on 28 June 1918.(3) The Decree tried to leave the financial responsibility with the former owners by leasing back their factories to them “pending a special decision of the Supreme Economic Council” (Vesenkha) of which Smirnov, like Ossinsky and Kritsman, was a member. The decree also threatened the former owners with the seizure of all their property if they attempted to flee their responsibilities. It was one way they hoped to reduce the costs to the Soviet power.

This Decree though brings us to the central issue of the piece and an issue we have highlighted in previously published translations from Kommunist. Nationalisation is not at this point understood as a form of state capitalism and the state capitalism that the Left Communists in general, and Smirnov here in particular, were criticising was precisely that paragraph in the Decree on Nationalisation which still gives a role to private capitalism. Outright ownership by the state was their idea of a step to socialism. It would take the experience of the Russian working class in these years of turmoil to demonstrate that as long as money and state ownership of the means of production existed then real socialisation (i.e. where private property and exploitation have been completely eviscerated) cannot take place. They did at least base their view on the premise that they thought that the proletariat was in power at the time (an illusion which was valid when Smirnov was writing but which would be dissipated in the next couple of years of economic crisis and civil war).

And if we look back at the passage quoted from Ciliga above, we can see that Smirnov would ultimately see that state capitalism was, in fact, a general trend in a decadent and imperialist capitalism. It was no accident that all over the world, and under widely different political regimes, state capitalism and imperialism were indelibly linked as a way for the system to respond to its crisis of accumulation. It was a process that Bukharin, at the height of his revolutionary lucidity in 1915, understood better than anyone.(4) Bukharin though abandoned his earlier work in order to defend the one party state capitalist regime that he had come to accept even when it was no longer the kind of society he had once envisaged. Smirnov, on the other hand, stuck to his principles, but in the end came to an equally erroneous conclusion. Correctly recognising the state capitalist regime that had been set up in Russia, his solution was not to see its origins in the fact that socialism could not have been built in Russia without the assistance of an international revolution. Instead he concluded that the working class could not have made a revolution in 1917 Russia in the first place. It has been repeated by many well-meaning commentators of the councilist type many times but does violence to the fact that a genuine proletarian revolution took place, but in the context of the time and place could not on its own do anything other than try to match global monopoly capitalism through the creation of a state monopoly capitalism. It did not represent a future (although states around the world copied the model) but a horrendous dead end, the impact of which the world working class is still trying to shake off.

And some never learn. Today all the social democrats of both Labourist and Stalinist tendencies are peddling a far more reactionary message in calling for nationalisation and state intervention by the capitalist state.(5) Such a policy will be, and has been, adopted by capitalist states around the world when the crisis has forced them to but it has not shifted the world one whit nearer to socialism. Indeed it has been the very opposite. It has brought temporary salvation to a system in crisis, but then that has ever been the role of the left wing of capitalism.

(1) Quoted in R V Daniels, The Conscience of the Revolution, p.219

(2) The Russian Enigma, pp.280-1. Ciliga is very patronising here. Apart from using a familiar form of Smirnov’s name, Ciliga was over ten years younger than the “young Volodya” Smirnov who was 48 years old when he left the isolator.

(3) Yuri Akhapkin (ed), First Decrees on Soviet Power, p.151

(4) See Bukharin on State Capitalism and Imperialism

(5) See The Illusion of State Intervention in the Economy: The Eternal Anti-Working Class Weapon of Reformism

The Financial Programme and State Capitalism

Despite the particularly acute character of the financial crisis that we inherited from the Tsarist regime and the Kerensky government, the budgetary policy — aside from the nationalisation of the banks (which fundamentally relates to a slightly different domain) — has occupied one of the last spots in the queue of economic policy issues faced by the Soviet power.(6) It is true that the financial crash that threatens us has greatly worried certain members of the Council of People’s Commissars, and particularly Comrade Lenin. However, no concrete solution to this problem has been proposed, nor is there a programme to deal with it. And facts must be faced: the Soviet power, on the question of the financial crisis, finds itself in an incomparably more complex situation than any bourgeois power has ever known.

And even for the latter, total financial upheaval represented a practically impossible task. Enormous spending on the military and on reconstruction weigh considerably on the State budget, which taxes of all kinds struggled to sustain. The need to put the printing machine to work, industrial ruin, all of this made the chances of normalising the financial situation laughable. However, there remained one possibility, though granted, a problematic one – appealing for foreign loans in extraordinarily unfavourable conditions and placing the country in “normal” bourgeois bankruptcy. This is how the ex-minister of finance, Bernatsky, proposed international borrowing and devaluation as a solution in an article in the review International and Economic Policy.

For Soviet power, even this solution does not exist. It is not worth raising a foreign loan. Our budgetary expenses are growing exponentially due to the nationalisations which initially require a great amount of finance, with no guarantee of reimbursement in the short term. Added to this we have the total dilapidation of the old financial apparatus. The problem is turning out to be truly impossible to resolve.

And we have to realise that there is no solution. The solidity of the financial system in its entirety depends on that of the bourgeois regime. Given that we are moving towards socialism, the notion of finances should gradually wither away. Indeed, after the nationalisation of an enterprise, it becomes impossible to tax its profits. When more and more people begin to receive material support directly from the Soviet State, the taking of taxes on revenue only represents a complicated procedure whose result can be achieved much more simply by greatly reducing the amounts to be paid. For us, the monetary and financial crisis can be resolved not by re-establishing the monetary and financial system, which would result in a return to the bourgeois system, but by abolishing this system by moving towards the socialist organisation of production.

However, if anyone has taken this fact into account, it is not visible in the attempts to establish a financial programme that have taken place recently. In his well known speech before the Central Executive Committee (CEC), the Commissar of Finance, Gukovsky, places himself in the first camp: that of re-establishing bourgeois economic relations. The CEC welcomed this programme in silence, neither approving nor criticising it, but seemingly incapable of coming up with any alternative proposition. Indeed, if the idea of obtaining tax revenue by partially re-establishing the bourgeois regime seems unacceptable to them, the other idea, namely the need to reduce expenditure, making cuts in the economy, is already being applied with a relentlessness that would be more useful in another domain. This religious respect for money and the sacred horror at a deficit are too deeply anchored in the spirits of the leaders of the Soviet power. Because of this sentiment, numerous nationalised factories are ceasing to operate, sometimes for long periods, and in recent times this tendency has continued to grow. As we see with more distance, this respect for money goes hand in hand with a relatively acerbic hatred of it.

In rejecting the return to bourgeois relations and, at the same time, trying to restore order to our monetary and financial system, the Soviet leaders place themselves squarely on the petty bourgeois and utopian terrain. And this was particularly notable in the speech given at the last Congress of Commissars of Finance.

Comrade Spunde(7), the Commissar of the State Bank, developed a programme aimed at increasing the activity of the banks. His method is particularly simple: the bourgeois foundations of banking operations having been destroyed, it will be necessary to recreate the conditions for their existence. And there we have it — a plan to maintain the coercive character of the money of the banks: all cash beyond a certain pre-established quota must be paid into an account (we notice on this subject that Comrade Lenin lobbied intensely for this idea). Never mind the instinctive embarrassment aroused by it! Because, first and foremost, if the population retains any cash, and this can be established precisely, why not simply confiscate it? Then, is it not well known that the patrimony of cash, owing to its mobile character, is the hardest to trace? Without evoking the undeniable fact that we cannot destroy the foundations without destroying the edifice itself, and that it is impossible to maintain the edifice no matter what artificial supports are put in place. It must be stated frankly: this idea is reminiscent of Proudhon(8) in an almost identical form.

On the other hand, Comrade Lenin has announced the next replacement of the old monetary instruments with new cuts. In itself, this measure is as necessary as it is usual. It is obviously impossible to continue living with such a plethora of monetary instruments —Tsarist bank notes, Kerensky notes(9), State security coupons, State bonds — currently in circulation. There is nothing objectionable about this attempt to suppress by exchange some of these values in circulation, even though there is almost no chance that this suppression will unfold the way Comrade Lenin envisages it — by the partial abolition of money corresponding to the surplus part of exchange. It is curious to see what motivates this measure: “[during the transition to socialism] the fourth task of the moment is the substitution of new currency for the old. Money, banknotes — everything that is called money today — these titles to social well-being, have a disruptive effect and are dangerous insofar as the bourgeoisie, by hoarding these banknotes, retain economic power.”(10) But if only Marx were here to see this! How can we not understand that no money reserve will suffer from the absence of a continual influx of notes and that, if this were not the case, the bourgeoisie would become like the Miserly Knight(11), sitting on their coffers and ceasing to be the bourgeoisie. How is it not abundantly clear that there is only one way to stop the accumulation of money in bourgeois pockets, and that is depriving them of their sources of revenue, that is to say, planned nationalisation and reorganisation of production? In the contrary case, it is socialist money, bearing the socialist signatures, which will accumulate in the pockets of the bourgeoisie and this, with the same rhythm of the notes sporting the figure of the Tsars and the signatures of their lackeys. And the pay-off of this petty bourgeois utopianism is precisely the declaration of this measure as being socialist, with phrases on the “latest and decisive battle against the bourgeoisie” in the theatre of hostilities. In all these tirades, the petty bourgeoisie’s hatred of money is palpable, this futile aspiration sanctified by all the petty bourgeois economists seeking to put pressure on capitalist production but, just like the lizard, they rid themselves with ease of their trapped tails before rejecting it some time later. And it is completely characteristic that these plans are proposed just at the moment when we begin discussions (and not just these ones at that) by evoking either the interruption of nationalisation, or the implementation of “State Capitalism”, which Comrade Lenin so assiduously promotes.

Comrade Spunde is trying to adapt the foundations of banking policies to make them conform to State capitalism. All businesses, those that are nationalised and those that are not, have loans from the State Bank, as well as from the public Treasury, that is, the establishment which ensures the financial management of the State and fuses with the State Bank. It is difficult to imagine the conditions under which the bank will deliver the money as part of its budget plans – the nationalised enterprises will see its colour, whatever it is, in the form of credit. But this means that the nationalised enterprises are managed according to capitalist principles — albeit it State capitalist ones — that is, they receive bank loans and implement production thanks to them. They sell their products and pay back their loans to the bank, keeping a profit, with the obligation, in all probability, to place this money in the current account of the bank. The latter in turn retains a right to control over the enterprises, which obviously means that the bank can, where necessary, exert pressure over this or that enterprise. In a word, we find ourselves back in the typical schema of the bourgeois system. Comrade Spunde has simply forgotten to say that several crucial pre-conditions of his system no longer exist. Previously, for enterprise (apart from in periods of economic upheaval) money was everything, and because of this, one could get everything one needed for production. Today, the situation is a little different: the administrations prone to “pressuring” enterprises are very numerous, and from this perspective the Bureau of fuel can exert pressure just as effectively as that exerted by the State Bank. Comrade Spunde forgets that the reports that he describes are, in bourgeois society, based not on the power of banking capital (which has played a very modest role for quite some time) but of course the concentration of banks and industrial enterprises in the hands of certain economic groupings of finance capital. Moreover, another idea has occurred to him: the control of the State Bank over national enterprises is based on the fact that the latter transforms itself progressively into a central organism compatible with socialist production. Be that as it may, the accountant must be put back in his place: it is not he who manages the enterprise.

In fact, we must end this illusion once and for all that by nationalising the banks, we have nationalised credit. This is not possible when the State Bank remains an organ of bourgeois government and a faithful clerk at the heel of its capitalist masters. If this is not the case, then nothing is left of this system. By nationalising the banks, we destroyed credit, and this was a good thing, since we dealt a heavy blow to the bourgeoisie. And we have no reason to resuscitate the old finance-capitalist apparatus with a socialist flavour: this would be totally pointless.

If we develop the programme that was evoked at the Congress of Commissars of Finance (something that, happily, the authors of this speech did not do), we admit that it is a totally utopian programme, typical of those petty bourgeois who desire to construct a State capitalist system. It is only by basing ourselves on the inevitability of the disappearance of State finances that we may pose milestones on a whole series of measures in this domain, measures that will allow us to survive this period of transition. And in this case, we must pay particular attention to the countryside.

There is no doubt that the countryside remains far from the orbit of socialist production. And it is there that the source of financial means of the Socialist Republic are held. The tax system will be extremely difficult to implement on a large scale. It will only be possible to extract the money found there by selling the fruits of socialist production at a higher price.(12) By engaging in this way, it will be possible to obtain rapid results. But this will require the broad implementation of a system of socialisation of industry, and that we bestow on it a force that would make the countryside dependent on the city. The coherent planning of the socialisation of the means of production on socialist grounds is necessary as well as the refusal not only of attempts to implement semi-public programmes, but also “State capitalism”. Only by following this direction will we be able to emerge from the financial crises, and we owe it to ourselves to put all our strength into this.

V. Smirnov

(6) The preparations for the nationalisations of the banks began the day after the victory of the revolution. The State Bank was occupied on 25 October 1917. Having smashed the sabotage of the bourgeois functionaries, the Soviet power established control over private banks as a transitional step on the path to their nationalisation. The sabotage by the financial capitalists obliged the Soviet government to accelerate the nationalisation of the banks. On 14 December, by order of the government, dispatches of workers and red guards occupied the local branches of all the banks and credit establishments of Petrograd. The same day, the decrees “On the Nationalisation of the Banks” and “On the Inspection of Bank Safes” were voted in at a session of the Central Executive Council of Russia. The two decrees were published on 15 December in the Izvestia of the CEC, no. 252.

(7) Alexander Petrovich Spunde (1892-1962): son of a Latvian worker, graduated from a commercial school in Riga in 1907. Arrested several times and exiled to Siberia in 1913. Delegate to the Second All-Russian Congress of Soviets in October, 1917. Chair of the State Bank from February to November 1918. See encyclopedia2.thefreedictionary.com

(8) Pierre-Joseph Proudhon (1809-1865): French socialist, one of the first theoreticians of anarchism and of the cooperative movement, which earns him the editor’s irony here. Marx thoroughly refuted the foundations of Proudhon’s theses in his work The Poverty of Philosophy (1847).

(9) Bank notes distributed by the Provisional Government.

(10) Extract from the Report to the All-Russia Congress of Representatives of Financial Departments of Soviets, 18 May 1918: “Money, banknotes—everything that is called money today—these titles to social well-being, have a disruptive effect and are dangerous in so far as the bourgeoisie, by hoarding these banknotes, retain economic power.” In Lenin: Collected Works, Vol. 27. marxists.org

(11) Pushkin tragedy (1836) and Rachmaninoff opera (1904).

(12) Here we find a rough outline of the concept of “primitive socialist accumulation” as it would later be taken up by Preobrazhensky. Bukharin did not forget to credit Smirnov in a note in Chapter 4 of his Politics and Economics of the Transitional Period. This would merit a handwritten note over it from Lenin on this term: “extremely poorly chosen, one could speak of children copying terms used by adults”.

Monday, December 14, 2020