PART II

Chapter 4
"Ordinary Buying and Selling"

The new economic policy turned Moscow into a vast market place. Trade became the new religion. Shops and stores sprang up overnight, mysteriously stacked with delicacies Russia had not seen for years. Large quantities of butter, cheese, and meat were displayed for sale; pastry, rare fruit, and sweets of every variety were to be purchased. . . . Men, women, and children with pinched faces and hungry eyes stood about gazing into the windows and discussing the great miracle: what was but yesterday considered a heinous offense was now flaunted before them in an open and legal manner.
—Emma Goldman

By the end of NEP's first summer, it seemed to many observers that Russia was awash in private trade, especially in comparison to the lean years of War Communism. After moderate growth in the spring and summer of 1921, private trade spread rapidly following a decree from the Council of People's Commissars (Sovnarkom), issued on August 9, that permitted small-scale private manufacturing and the free sale of goods produced by such operations. Two months later, Lenin conceded that the state plan to establish direct commodity exchange with the peasantry had been elbowed aside by "ordinary buying and selling."^[1] Armand Hammer, who began his long business relationship with the Soviet Union in 1921, was amazed at the changes that had taken place in Moscow when he returned at the end of August, following a trip to the Urals:

I had been away little more than a month, but short as the time was, I rubbed my eyes in astonishment. Was this Moscow, the city of squalor and sadness, that I had left? Now the streets that had been so deserted were througed with people. Everyone seemed in a hurry, full of purpose, with eager faces. Everywhere one saw workmen tearing down the boarding from the fronts of stores, repairing broken windows, painting, plastering. From high-piled wagons goods were being unloaded into the stores. Everywhere one heard

the sound of hammering. My fellow travelers, no less surprised than I, made inquiries. "NEP, NEP," was the answer.^[2]

Many other witnesses recorded similar impressions, including the New York Times correspondent in Moscow, who wrote in September that the city had recently appeared every bit as barren and dilapidated as many French towns at the end of the First World War. "Now, under the stimulus of the new decrees that are constantly being issued to regulate the changed economic policy, and under the liberty of private trading, shops, restaurants, and even cafés are being opened in all directions."^[3] A Canadian living in Moscow during the first years of NEP observed ironically that some foreigners who arrived in the Soviet Union after this revival of trade considered Moscow rather shabby and run-down. But those who had known the city during War Communism, he explained, had a different perspective and were dazzled by the changes NEP produced: "The New Economic Policy had gone further than many dared hope. The Terror had largely vanished. The shops had all reopened, and the streets were now crowded until late at night with people. Even the gaping roadways, always bad in Moscow, were being repaired."^[4]

Trade was without question the Nepmen's most important occupation in the newly legalized realm of business, both in terms of rubles and in terms of the number of people involved. Private individuals generally preferred trading to other endeavors such as manufacturing because (1) comparatively little capital was needed to begin trading; (2) the return on investment was generally rapid, an important consideration when long-term business prospects seemed uncertain at best; (3) traders (particularly small-scale vendors) were mobile and better able to avoid taxes, licenses, and other forms of state regulation than were manufacturers; and (4) little business experience was necessary to begin petty trading.^[5]

Nearly all private trade was of simple, basic consumer goods. Such merchandise required relatively small amounts of capital to produce and was much in demand, given the widespread shortages of so many necessities. Food—fresh meat, vegetables, dairy products, grains, bread, and processed items—was the commodity most frequently handled by private traders. Particularly in the first months of NEP, the food shortages in most cities and towns ensured that virtually anything edible could be profitably marketed. But even in later years, food represented 40 to 50 percent of the volume of private trade. Most remaining private sales involved textile products and leather goods, such as boots and shoes,

and other manufactured (often handicraft) items of use in and around the home.^[6]

For licensing and tax purposes, the government divided private traders into ranks according to the nature and size of their business—the higher the rank, the higher the license fee. In the summer of 1921, as we have seen, there were three broad ranks of trade, but as the size and diversity of private enterprises increased, so did the number of categories. Two more were added in 1922, followed by a more detailed definition of the five categories in 1923 and the addition of a sixth in 1926.^[7] State agencies used these categories in their statistical surveys of private trade, and consequently much of the available data concerning the Nepmen are expressed in these terms. Therefore, a brief summary of the types of activity included in each trade rank might prove helpful before proceeding with an analysis of the characteristics of private trade.

On the basis of the lengthy definitions in the decree of 1922, the five trade ranks may be described as follows.

The state tried to fill the gaps in its definitions by classifying all firms that did not fit into any category as rank III operations unless their monthly business was less than 300 rubles, in which case they were assigned to rank II. Somewhat more detailed definitions of the trade ranks were included in subsequent decrees, but the main characteristics of each category remained unchanged throughout the rest of NEP.^[8]

In the first months of NEP private trade was confined almost exclusively to petty transactions in markets and bazaars, nothing more sophisticated or elaborate than had existed illegally during War Communism.^[9] People from many different professions and walks of life—factory workers, intellectuals, demobilized soldiers, prewar merchants, artisans, invalids, peasants, and a large number of housewives—plunged into trade (often the barter of personal possessions) in quest of food, clothing, and fuel. At this time there was no effective network of state inspectors to register and tax private traders, and this was all the encouragement many hungry people needed to try their hand at trade.^[10] As a fieldworker for the American Mennonite famine relief organization reported from the Ukraine in November:

When the people had no more bread their only recourse was to exchange some of their clothing, their furniture or their farming implements for food. Everything imaginable was carried to the "Toltchok" (the "jostling-place" in the village bazaar, where people exchanged or sold personal belongings). The market was soon glutted with such things, so that beds and dressers were selling for ten or fifteen pounds of barley flour, a ten horse-power naptha motor for ten bushels of barley, and other things in proportion.^[11]

A traveler in Siberia during the winter of 1921-22 noticed that "many of the homes of Irkutsk were largely empty. The families had sold their furniture bit by bit to the peasants for food."^[12]

Private traders often worked only part time or on their days off from other occupations, traveling to rural markets to buy food from the peasants, either for their own families or for resale in the cities. This type of trade, called bagging (meshochnichestvo ), became an extremely important conduit of food to the residents of cities and towns in 1921 and 1922. Because of bagging's small-scale, itinerant nature and the inability of nascent state agencies to monitor such activity at the beginning of NEP, there are almost no statistics on the volume of such trade or the number of bagmen—one source claims that over 200,000 were riding the rails by the middle of April 1921 in the Ukraine alone. In any case, many people were struck by the crowds of bagmen traveling to and from food-producing regions. The chairman of the Cheliabinsk Guberniia

Party Executive Committee reported in April that "a huge wave of bagmen, impossible to control, has flooded Cheliabinsk guberniia and Siberia." Similar telegrams were sent by officials in other cities located in the grain belt.^[13]

The railroad was generally the only means of transportation for bagmen, and they often engulfed an entire train like a legion of ants. An Izvestiia correspondent wrote in May:

In the Ukraine bagging has assumed completely inappropriate forms. That which one sees at small stations has blossomed doubly in Kiev itself.

A sort of gray caterpillar moves along the rails—this is the train, completely covered with a gray mass of bagmen. Under them neither the cars, nor the engine, nor the roofs, nor the footsteps, nor the spaces between the cars are visible. Every space is occupied, filled in. But as the train slows down in its approach to the Kiev station, its gray skin begins to slip off.^[14]

The authorities tried to prevent such travel, but without complete success. An American Relief Administration official on a trip from Voronezh to Moscow in March 1922 marveled at the tenacity of the bagmen. No matter how many times the police chased them off the cars, they managed to clamber back on again. As a result, there were more people hanging on outside the cars than there were inside.^[15] As the food short-age worsened, desperation drove people of all sorts, from professors to children, into the sea of bagmen.^[16] The competition among these traders was understandably fierce, with little to prevent the strong from seizing the provisions of the weak.

Railwaymen were in an ideal position to conduct this sort of trade, since they made daily trips to and from the countryside. It was comparatively simple for them to transport various commodities from the towns to exchange for food with the peasants, and then sell the food for a handsome profit back in the towns.

This plan [a traveler observed] was general among the railwaymen. One guard on a through express showed me his stock. He took his wife with him, occupying a big compartment, although a number of passengers had been left behind for lack of room. The lavatory attached to the compartment was stocked up. Salt was this guard's medium of exchange. The country people were clamorous for salt. His wife did the bargaining with the peasants, so many pounds of salt for a goose, so many for a suckling pig, and so on.^[17]

As in this illustration, nearly all trade between bagmen and peasants assumed the form of barter. The main reason was that most sellers refused to accept currency rendered worthless by the breathtaking inflation that marked NEP's infancy. Such concerns were, of course, not limited to the

bagmen and peasantry. An article in the Commissariat of Finance journal estimated that barter accounted for fully 50 to 70 percent of all trade in Russia during the first half of 1921/22.^[18]

There was virtually no private trade from large, permanent shops at the beginning of NEP. For one thing, relatively few people possessed the necessary resources and expertise. But the most important factor was uncertainty that NEP had actually been adopted "seriously and for a long time," as Lenin claimed. With the harsh experience of War Communism a recent memory and the Bolsheviks' express desire in the spring of 1921 to limit private trade to local barter, prospective shopkeepers did not rush to test the waters. An old trader told an acquaintance that he suspected NEP was a ploy on the part of the Cheka (secret police) to entice merchants to reveal their hidden goods and money. If they took the bait, he feared, the police would seize their merchandise and imprison them. In this spirit, individuals capable of conducting larger-scale trade generally elected to remain on the sidelines until they were certain of War Communism's demise.^[19]

Gradually, though, during the course of 1922, entrepreneurs became convinced that permanent stores would be tolerated, and the number of these establishments grew steadily.^[20] The lingering uncertainty of some Nepmen was evident in their tendency to initially give their businesses official, "Soviet" names such as Snabprodukt (Produce Supply) and organize them, ostensible, as cooperatives. As time went by, they began to conduct business more openly under their own names and transformed the "cooperatives" into private enterprises.^[21] Meanwhile, many of the "amateur" petty street hawkers and bagmen succumbed to the twin blows of competition from the growing number of permanent shops and the taxes that the Bolsheviks began to levy on private traders.^[22] From the summer of 1922 to the summer of 1923 the number of licensed private shops increased 36 percent in rank III, 70 percent in rank IV, and 188 percent in rank V, whereas the number of petty private traders in ranks I and II fell by 23 and 8 percent, respectively.^[23] Similar trends are evident in figures covering a slightly different time period (see table 1). These developments occurred first in the large cities, with the countryside lagging behind by several months or even a year in areas ravaged by the famine of 1921-22. During the first third of 1922, for example, the

number of permanent private stores swelled by 83 percent in Moscow, rising from 2,900 to 5,300. At the same time, provincial newspaper correspondents reported from many localities, particularly in the devastated middle Volga region, that large-scale private trade was virtually nonexistent.^[24]

The number of Nepmen who had prerevolutionary business experience as merchants or store employees increased after 1921, since these were generally the people opening the larger shops.^[25] The dominance of experienced traders in the upper ranks is evident in figures (table 2) collected by the Commissariat of Domestic Trade during an investigation in 1927 of the Nepmen's social origins. As one might expect, the larger a merchant's operation, the more likely he was to have been active previously in trade. Vendors with little or no business experience—most often peasants, workers, and housewives—were concentrated in the first two ranks.

Around the turn of the century the Russian business elite (krupnaia burzhuaziia in Soviet studies) numbered approximately 1.5 million merchants, financiers, and industrial magnates.^[26] Nearly all these people lost or closed their businesses, emigrated, or perished during the onslaughts of the Revolution and civil war. One exception was Semen Pliatskii, who had been a millionaire metal trader in St. Petersburg. Instead of emigrating after the Revolution, he chose to remain and to work for the state, surviving two arrests by the Cheka during War Communism. Following the introduction of NEP he set out on his own, first as a buyer and seller of scrap metal and later as a supplier of industrial products ranging from office supplies to lead pipe. He had a knack for acquiring even scarce commodities by hook or by crook. Here his many connections

with state agencies, often established with bribes, undoubtedly helped. As Victor Serge put it: "This Balzacian man of affairs has floated companies by the dozen, bribed officials in every single department—and he is not shot, because basically he is indispensable: he keeps everything going." It was not unusual for state enterprises to give Pliatskii's orders preferential treatment over those of other state agencies. Before long, he had become a millionaire again.^[27] But the ranks of the "new bourgeoisie" contained few prewar merchants of Pliatskii's stature. Nearly all the Nepmen with previous trading experience had been nothing more than small-scale entrepreneurs or shop employees before the Revolution.^[28]

After the uncertainty accompanying the introduction of NEP had been dispelled, and trade assumed a comparatively normal form, the distribution of Nepmen in the various trade ranks was roughly as follows through 1926. Half of all licensed private traders belonged to rank II, numbering between 180,000 and 260,000 persons, depending on the year and the season (as a rule, fewer people engaged in trade during the winter). Approximately one quarter (90,000 to 140,000) of all private trade licenses were held by rank III traders, and slightly over one fifth (70,000 to 120,000) belonged to rank I traders. The remaining three or four percent were issued mainly to Nepmen in the fourth rank (8,000 to 18,000), with rank V private traders accounting for less than 1 percent (1,600 to 4,000) of the total.^[29] Thus, over 70 percent of all private traders—ranks I and II—did not operate from permanent shops (more specifically, buildings designed for the customer to enter), but traded

mainly in the streets, market squares, and bazaars, either from booths or stalls or out in the open. Many small-scale traders avoided registration, and their actual number was thus undoubtedly even greater than the figure presented above.^[30]

Private traders in rank III, however, were responsible for a volume of sales roughly twice that of rank II Nepmen, according to data for the period from 1923 to 1926—even though there were twice as many traders in rank II as in rank III. This, of course, is because the permanent shops of rank III were considerably larger operations than the businesses of rank II vendors in the open markets. In fact, the Nepmen of ranks IV and V, who, taken together, numbered no more than 8 percent of the private traders in rank II, accounted for a significantly larger sales volume than did the rank II traders (from 16 to 77 percent larger for the various six-month segments of this period). Data of this sort are not available for rank I Nepmen, though their sales must have been much less than those of private traders in rank II, for the latter were over twice as numerous and ran larger businesses.^[31]

As one might conclude from these figures, more private capital was invested in rank III enterprises than in those of any other rank. In fact, data for 1924/25 indicate that the investment in rank III private trade (452.3 million rubles) was nearly as much as the capital invested in the other four ranks combined (454.5 million rubles). Also significant is that large firms in ranks IV and V, which accounted for only 3 or 4 percent of all private trading licenses, together utilized over one third of all private trade capital (138.1 million rubles for rank IV and 194 million rubles for rank V); whereas only 13 percent (114 million rubles) of private trade capital was invested in rank II, and less than 1 percent (8.4 million rubles) in rank I.^[32]

This regeneration of larger, permanent private shops was impressive, but even during the peak of the Nepmen's activity in 1925/26, private trade did not regain its prewar level of sophistication. In the years before the First World War, nearly two of every three private trading operations were fixed, permanent shops, whereas in 1925 only about one quarter of all private traders worked in such facilities. The remaining 75 percent, as just mentioned, carried their wares around with them, selling from wagons, booths, tents, trays, and so on, usually in market squares and bazaars. Thus, although there were more urban private traders in the middle of NEP than before the war, their volume of sales was only about 40 percent of prewar urban sales. Rural private traders in 1924/25

numbered only about 20 percent of their prewar counterparts—the figure rose to about 50 percent by 1926/27—and accounted for only about 13 percent of the prewar volume of rural trade.^[33]

The predominance of small-scale trade was the result of a number of factors. Even in relatively prosperous times it was impossible for most Nepmen to raise the capital necessary for a large wholesale or retail firm, while modest operations could survive on a small volume of sales and, generally, were less dependent on the state for merchandise. The expenses of such traders were minimal, because they did not have to maintain permanent stores or large numbers of employees, and they were in the lowest tax brackets for private traders. Further, mobile vendors could avoid the attention of state tax officials, the police, and other inspectors more easily than could the proprietors of larger, permanent enterprises. These advantages became virtual necessities for Nepmen during the last years of NEP, when merchandise grew scarcer and the state stepped up its campaign to eliminate private trade.

Throughout NEP, then, the majority of private traders belonged to the first two ranks, whose members were most often found in market squares and along sidewalks. All towns of any consequence had at least one market (rynok ), and cities such as Moscow, Leningrad, and Kiev contained many.^[34] The most famous was the sprawling Sukharevka in Moscow, through which it was not unusual for 50,000 people to pass on a holiday.^[35] An émigré's description of the Sukharevka resembles the portraits sketched by other observers.

Everywhere you look is an agitated, noisy human crowd, buying and selling. The various types of trade are grouped together. Here currencies are bought and sold, there the food products; further along, textiles, tobacco, cafés and restaurants, booksellers, dishes, finished dresses, all sorts of old junk, and so on.

. . . [The merchants cry out to people walking by] "I have pants in your size. Come and take a look!" "Citizen, what are you looking to buy?" "Hats here, the best in the whole Sukharevka!"

Urchins scurry all about with kvass—huge bottles of red, yellow, or green liquid in which float a few slices of lemon. One million rubles a glass [reflecting the severe inflation at the beginning of NEP]. Everyone drinks this poison from the same glass. . . .

. . . In the flea market [tolkuchka ], where secondhand things are sold, there are no stalls or booths. The trade is just hand to hand. Among these vendors are remnants of the old intelligentsia, selling whatever they have left, from torn galoshes to china, but mainly old clothes.

Solitary policemen stroll through the crowds. It is not clear what order they are to maintain, what laws they are to enforce. The market has its own

customs, its own understanding of honor and honesty. A row of booths sells gramophones and records. As is well known, in the countryside gramophones are valued more highly than pianos, and here in the Sukharevka interest in "musical preserves" is great. Recordings [of famous singers] compete with those of speeches by Lenin and Trotsky.^[36]

This scene, including the traditional grouping of traders according to their merchandise, was typical of urban marketplaces during NEP. As one journeyed east, particularly in the direction of the Central Asian republics, markets assumed features of the centuries-old local bazaars. In Astrakhan', a traveler reported:

We came to a marketplace where the people milled like flies, to the dirty banks of a stagnant canal where the vendors lived in unpainted wooden boats, sleeping over their "live cars" of sudac [pike perch] and swimming sturgeon. There they pulled out flapping fish to sell us. . . . We were offered milk boiled in gourd-shaped earthen urns, hacks of meat from a carcass being skinned, tubs of salted herring, buckets of still-swimming yellow perch, slabs of pink salmon. Chinamen, six feet high, with faces like yellow idols, walked about hung with ladies' garters, second-hand corsets, pencils, knives. . . . A barber shaved men's heads among the tubs of salted fish. . . . [There were also] bales of strange herbs and dyes [and] mounds of many-colored fruits.^[37]

Some of the vendors in market squares were not registered in even the lowest ranks of trade. Peasants, for example, generally did not have to buy licenses in order to bring their produce to market in the towns. Nor were most of the smallest-scale traders—people wandering about selling a handful of secondhand wares—required to purchase a license in a trade rank. Doubtless, too, many itinerant traders did not bother to obtain a required license, particularly if they planned to sell their merchandise in a day or two and move on. The majority of the more settled, "professional" private traders in markets operated out of booths, stalls, or tents, which obligated most of them to purchase rank II licenses. The largest markets, such as the Sukharevka and Tsentral'nyi in Moscow and the Galitskii and Petrovskii in Kiev, contained over a thousand merchants plying their trades from "fixed" (ustoichivyi ) facilities (such as booths). Many other markets in the large cities could boast stalls, covered tables, and the like, numbering in the hundreds.^[38]

The number of traders in any given market fluctuated sharply in accordance with the season, the availability of goods, and the level of taxation (particularly the rent charged for a trading spot). In April 1923, for example, the rents and other fees paid by traders in the Sukharevka were raised significantly. As a result, the number of occupied booths

plunged from 3,000 to 1,800. In August this financial burden was reduced, and the ranks of traders began to grow once again.^[39] Most traders sold food or textiles, and the availability of these products thus had a powerful impact on a market's vitality.^[40] The number of produce vendors varied cyclically, peaking each year in the summer and early fall (unless tax and rent increases negated this pattern). Textile traders depended less on nature and more on the state for their merchandise. If the party line of the day or the economic difficulties of the state reduced the flow of goods to the private sector, textile trade suffered greatly. Textile traders in the Sukharevka, for instance, told a Soviet newspaper reporter that they had arranged to receive goods from a state enterprise in return for keeping retail prices under certain ceilings. But, lamented the traders, the enterprise had been able to supply only a minuscule fraction of the textiles they had ordered. Similar complaints resounded in other markets.^[41]

The rural equivalent of the urban markets were the village bazaars and local fairs. Nearly every village had a primary market day each week, usually Saturday or Sunday, during which the local population did much of its shopping. These bazaars resembled their urban counter-parts, though on a smaller scale. Virtually none of the vendors was a full-time trader in a permanent booth or stall, since the bazaars generally functioned only once (sometimes twice) a week. Instead, nearly all the merchants were peasants, local artisans, and itinerant traders traveling from one bazaar or fair to the next.^[42] Most of these people were not required to purchase trade licenses or pay the other parts of the business tax, provisions that the state in any case could not enforce effectively in the seemingly boundless countryside. Though few statistics are available concerning village bazaars, their nature is evident in descriptions left by a number of observers, including a worker in the Quaker famine relief program.

The roads leading to a good market are always alive with traffic during the night before market day. All manner of livestock, fruits, vegetables, home-made furniture, ox yokes, boots, and so on, to an infinite variety, have been gathered in the square by daylight. All kinds of traders are to be found, from the peasant woman squatting by her bottle of milk or pile of gay carrots, to the swarthy Armenian cloth merchant surrounded by the oriental splendors of fluttering cotton prints that decorate his booth. Among the crowds move scores of itinerant traders with all their wares worn on the sleeve, so to speak. A pair of boots, three or four petticoats, or a half dozen shirts may comprise the entire stock. The vendor of heterogeneous junk, too, is always present with his pile of monstrous rusty locks, an unmated candlestick or so, hinges, door knobs, and a veritable Walt Whitman catalogue of other miscellany.^[43]

An American living in the Soviet Union during the last years of NEP recorded the following scenes at a rural bazaar:

In unending line peasant carts jogged by our window. From the porch of the house we could see three roads, each marked by peasants bound towards the bazaar. . . .

Following an old custom, the sellers had divided themselves off according to what they were selling. In various corners were calves and colts; wheels, wagon yokes, and harness, all home made; cheese, butter, poultry and freshly slaughtered veal. Peddlers with wood carvings, with bark sandals, roamed about; small boys played games, and idle men crowded the vodka store.^[44]

Local fairs took place once or twice a year, generally during holidays, and were usually little more than glorified bazaars with much the same types of trade described above.^[45] They had been a common means of trade before the Revolution, especially in the countryside. One study reports 14,432 rural fairs and 2,172 urban fairs in 1894. After nearly vanishing during War Communism, they sprouted up again following the introduction of NEP, particularly in localities where they had existed under the old regime. In Moscow guberniia alone, 121 fairs were recorded during 1923, and approximately 440 were reported in the Ural region in 1924. Sometimes, local officials took the lead in organizing these events, but often the fairs reappeared on their own and were registered after the fact. As one Soviet reporter put it, "where they are needed, they appear."^[46]

Although rural markets and fairs clearly attracted large numbers of small-scale peddlers and peasant entrepreneurs (a substantial majority of the population still lived in rural areas), approximately 70 percent of all licensed private traders did their business in cities and towns during the first four years of NEP. There were much higher concentrations of consumers in urban areas, of course, and the townspeople were more dependent on merchants for the necessities of life (particularly food) than were the peasants. For every inhabitant of a city or town in 1924/25, urban Nepmen made sales totaling 125 rubles, whereas rural Nepmen sold only four and one-half rubles' worth of goods for every person living in the countryside. The sources of these statistics rarely define the term city (gorod) , and there is certainly room for debate over what should be included in this category. Nevertheless, any reasonable definition of the term would not alter the generalization that most licensed private traders operated in the towns, with Moscow and Leningrad having much the largest numbers.^[47] Furthermore, the larger the shop, that is, the higher its trade rank (see table 3), the more likely it was to be found in an urban area.

In addition, rural private firms of rank V had an average of only 14 percent as much capital as the average urban private enterprise in rank V in 1925. The average rural private trader in ranks III and IV had slightly over half the capital of the average urban firm in each of these ranks.^[48] Consequently, the urban percentage of total licensed private sales volume was very high (roughly 80 to 90 percent),^[49] since most Nepmen, including virtually all the largest private firms, were in cities.^[50]

Most of the data on the Nepmen pertains to European Russia as a whole (roughly the area west of the Urals and north of the Caucasus) or to individual cities. Some information is available, though, for Transcaucasia, portions of Central Asia, and individual regions of European Russia that permits a rough comparison of the Nepmen's strength in each area. In 1926/27, for example, 62.7 percent of all reported private sales were made in the huge Russian Republic (RSFSR), which was divided into many smaller regions. Of these regions, the most important were the central-industrial (which included Moscow) with 23 percent of all reported private sales in the USSR, Leningrad and the surrounding area with 6.8 percent, the Northern Caucasus with 6.6 percent, the middle Volga region with 5.2 percent, the central black earth region with 4.2 percent, the lower Volga region with 3.5 percent, the Ural region with 2.5 percent, and Siberia with 2.1 percent. After the RSFSR, the Ukrainian Republic accounted for by far the most private trade—22.3 percent of the country's total—followed by 6.2 percent for Transcaucasia, 5.6 percent for the Uzbek Republic, 2.3 percent for the Belo-

russian Republic, and 0.9 percent for the Turkmen Republic.^[51] Nearly half of all private trade, then, took place in the central-industrial region and the Ukraine.

Although comparatively few private traders were located in Transcaucasia and Central Asia, they controlled trade in their regions to a greater extent than did Nepmen in European Russia. These border regions did not come under firm Bolshevik control until the 1920s and, for the government, were difficult locations in which to set up and supply enough state stores and cooperatives to satisfy the needs of the local populations. In the first half of 1925/26, for example, the Nepmen's share of all trading operations was 97 percent in the Uzbek Republic, 97 percent in Transcaucasia, and 93 percent in the Turkmen Republic, but "only" 80 percent in the Belorussian Republic, 81 percent in the Ukraine, 76 percent in the RSFSR, and 79 percent for the Soviet Union as a whole. Data for other years support these figures by revealing that the private share of total retail sales was higher in Transcaucasia and the Central Asian republics than in the republics of European Russia.^[52] Just as Georgia is a hotbed of illegal economic activity today, a higher percentage of private trade during NEP may well have escaped the attention of state officials in the distant Transcaucasian and Central Asian border regions than in the heart of the state. If this was the case, the Nepmen in these areas were all the more dominant than were Nepmen in European Russia.

Certain regions, most notably Belorussia and the Ukraine—the old Jewish Pale—were distinguished by a relatively large number of Jewish entrepreneurs. Approximately 60 percent of the Soviet Jewish population lived in the Ukraine and 17 percent in much smaller Belorussia. Thus, even though only 1.8 percent of the Soviet Union's people were Jewish, Jews represented 5.4 and 8.2 percent of the Ukrainian and Belorussian populations, respectively, in 1927.^[53] Many of these Jews (and others elsewhere in Russia) had traditionally been traders and artisans. According to the census of 1897, 31 percent of all "economically active" Jews were shopkeepers, hawkers, peddlers, and the like, and 36 percent worked in "industry," mainly handicrafts.^[54] A good number of the latter undoubtedly engaged in trade as well. Following the introduction of NEP, many Jews returned to these activities or emerged from the black market to practice them openly. The resumption by many Jews of their former occupations helps account for the fact that in 1927 nearly two thirds of the private traders in Belorussia and over half in the Ukraine had prerevolutionary trading experience, whereas the corresponding

figure for the RSFSR (where Jews were not as numerous) was only 38 percent.^[55]

If the various peoples of the Ukraine are considered individually, we find that 15 percent of the Jews, 3 percent of the Great Russians, and 1 percent of the Ukrainians were traders in 1926. In the case of "workers" (most of whom, particularly among the Jews, were handicraftsmen and thus frequently traders as well), the figures were 40, 20, and 4 percent, respectively. On the other hand, 91 percent of the Ukrainians, 52 percent of the Great Russians, and only 9 percent of the Jews in the Ukraine were peasants.^[56] The concentration of Ukrainian Jews in private business is further evidenced by the fact that Jews accounted for 45 percent of all disfranchised people^[57] in the Ukraine while constituting only 5.4 percent of the region's population.^[58]

An unfortunate consequence of the comparatively heavy concentration of Jews in private trade was the impulse this imparted to anti-Semitism in the 1920s. A number of observers echoed the words of Maurice Hindus on this score.

Jews of this group, the successful Jewish Nepmen, have intensified anti-Semitism in Russia. They are conspicuous in all large cities. They are among the most successful of private traders, which does not escape the attention of the Russian proletariat or of the less fortunate Russian nepman. Both point to the Jewish nepman as the real gainer by the Revolution, the man who is turning the nation's agony into personal profit and pleasure.^[59]

As historians of more recent decades have indicated, these views did not die along with NEP.

In many areas a NEP-man had become synonymous with a Jew and he was so treated in some of the belles lettres of the period. When he later [after NEP] served mainly as an employee in a state wholesale establishment or a retail store during the prevailing periods of scarcity, he was accused by the resentful consumers of diverting the scarce merchandise for his own or his friends' benefit.^[60]

There was a temporary decline in private trade from the winter of 1923-24 to the spring of 1925. The downturn may even be said to have begun a few months earlier as the "scissors crisis" took its toll on both private and "socialist" trade. At this time, the prices of manufactured goods climbed out of the reach of many consumers, and peasants were discouraged from producing food for the market.^[61] But it was not until 1924 that the Nepmen came under the heaviest fire, in the form of tax increases and reductions of supplies and credit from the state.

The effects of these measures were not long in appearing. During this period the number of licensed private traders dropped by approximately 100,000.^[62] In Moscow alone, following a sharp tax increase in the spring of 1924, 6,310 of the remaining 16,500 licensed private traders went out of business.^[63] This trend is also evident in figures (table 4) available for the Central Market, one of Moscow's largest. As Nepmen were forced out of business during 1924, the volume of private retail sales fell to a level 20 percent below that of 1922/23.^[64] Private trade reached its low water mark (that is, until the end of NEP) during the winter of 1924-25. After a drop of over 20 percent in the second half of 1923/24, sales declined an additional 14 percent in the first half of 1924/25.^[65] The number of private trade licenses dipped 5 to 6 percent.^[66] According to one report, Moscow's host of private merchants shrank fully 39 percent in this period.^[67] Since larger enterprises were generally much more vulnerable to the measures adopted by the state than were street hawkers, the sharpest declines (in percentage terms) occurred in the higher trade ranks. In fact, the number of rank I vendors actually increased slightly in the first half of 1924/25.^[68]

During 1925, the erosion of private trade was arrested as Bukharin and his allies gained the upper hand in the party. Spurred by the relaxation of state tax, credit, and supply policies (the "new trade practice"), the number of private merchants and their volume of sales rebounded briskly. There were steady increases in the number of private trade licenses from 1924/25 to 1925/26, reversing the earlier decline:^[69]

Moreover, the percentage of all trade licenses (state, cooperative, and private) that were private in the RSFSR rose in every rank from 1924/25 to 1925/26 (see table 5). Private retail trade, after declining from 1,930 million rubles (1913 rubles) in 1922/23 to 1,574 million rubles in 1923/24 to 1,550 million rubles in 1924, rose to 1,825 million rubles in 1925 and then to 2,240 million rubles in 1926.^[70]

Impressive as this recovery was, it proved to be fleeting. The private sector environment became less hospitable during 1927 and then turned openly hostile in the years from 1928 to 1930. The results of the measures taken by the state, first to restrict and then to "liquidate" the Nep-

men, are not difficult to detect. In the following gubernii , for example, the number of licensed private traders declined by the indicated percentages in 1926/27 compared to the second half of 1925/26:^[71]

Reported private retail sales fell dramatically after peaking at approximately 5.2 billion rubles in 1926 and dipping slightly to 4.96 billion rubles in 1927. In 1928, sales were off 27 percent, and during the next two years there were consecutive drops of 33 and 54 percent.^[72] The

number of licensed private traders (excluding rank I) declined in similar fashion over the years from 1925 to 1929:^[73]

Reports from various cities underscore these trends. In Kiev, the number of private wholesale and retail firms fell 40 percent during 1927/28, and sales plunged 47 percent. Of the 3,694 licensed private businesses in 17 Moscow markets (rynki ) in October 1927, only 1,571 remained a year later. Private sales as a whole in the capital plummeted 62 percent in 1928/29.^[74] Such drastic changes were noted by many observers. A longtime resident of Moscow wrote at this time that private food traders "have been steadily decreasing both in number and quality and it is very difficult to find them now, though there are still a few small ones in back streets and in the very few areas in Moscow that are not well supplied with shops."^[75] According to an American journalist:

As a matter of common convenience, we met in private cafes and ice-cream parlors. We ate in private restaurants, of which there were a dozen along Tverskaya [Moscow's main boulevard, later renamed Gorky Street]. We shopped in private stores, called in private physicians and used the services of private photographers, dentists, and other professional people. Everyone else, from commissars down, did likewise. By the end of the year [1928] most of this private traffic was ended.^[76]

One striking feature of the elimination of private traders was that this took place more swiftly than the central state planning agency (Gosplan) had anticipated and far exceeded the pace at which the "socialist" (state and cooperative) distribution system was growing.^[77] A report prepared for the Commissariat of Trade had noted this problem as early as 1927.^[78] The situation only worsened as Stalin and his supporters gained the upper hand in the party and pressed their attack on the private sector.

The rapid "liquidation" of the Nepmen, before they could be fully replaced by state and cooperative stores, had a powerful impact on consumers because the private share of retail trade had been so substantial. To appreciate the Nepmen's importance, recall that during the first six years of NEP over 95 percent of all rank I and rank II traders were private, and even a majority of the permanent shops in rank III belonged to Nepmen. In fact, over 80 percent of rank III enterprises were privately

owned in 1922, and this figure had fallen only to about 60 percent by 1926. Even in ranks IV and V the Nepmen's share of enterprises was far from negligible—70 percent for rank IV and 50 percent for rank V in 1922, down to roughly 30 and 20 percent, respectively, by 1926.^[79]

Thus there can be no doubt that during the first years of NEP, the vast majority of consumer goods reached the public through private traders. Few statistics are available for 1921, because state agencies were not yet able to gather such data for the country as a whole. But the Nepmen's percentage of retail trade must have been extremely large, because the "socialist" distribution system was a shambles after the Revolution and civil war. In any event, even as late as 1926, private entrepreneurs accounted for 40 percent of retail trade (more if illegal and unlicensed sales are included), as shown below in the sequence of private shares of retail sales.^[80]

Given this prominence of the private sector in the first two thirds of NEP, the headlong elimination of the Nepmen after 1927 could not help producing fallout across the land. In 1929 Narkomfin's journal declared with considerable understatement (referring to the Ukraine): "There are hardly sufficient grounds to assume that the decline of private retail sales has been covered completely by an increase in sales in the cooperative sector." In 1926/27, the article explained, there were 110 people in Kiev for every retail business, 126 people per business in Khar'kov, 106 in Odessa, and 110 in Dnepropetrovsk. But by 1928/29, the number of people per shop in these cities had risen to "a minimum of 150 to 160."^[81] It was not unusual by 1928 to see such newspaper headlines as "Private entrepreneur eliminated but not replaced."^[82]Torgovo-promyshlennaia gazeta 's correspondents filed reports from around the country on the appearance of "trade deserts" (torgovye pustyni ), which, as the name suggests, were regions in the countryside where no "socialist" shops appeared to fill the void created when the local Nepmen were driven out of business. In such cases, peasants often had to travel several (sometimes even thirty to forty) kilometers to purchase essential products. Even if a village had a cooperative store or two, they were frequently empty of desirable goods. When a shipment of merchandise arrived, the useful

items were snatched up in a day or two by customers who had often been standing in line for many hours.^[83]

These problems were most acute in the countryside, but the rapid "liquidation" of private traders in Moscow prompted at least one Soviet reporter to apply the expression "trade desert" to the capital itself. A colleague in Smolensk wrote that the elimination of private traders there was proving to be something less than an unmitigated blessing for consumers. "Indeed," he explained, "it is unbelievable, but true, that at present not a single commodity may be purchased in the city without waiting in line. Every day the population wastes many thousands of working hours standing in lines."^[84] Such reports would not have provoked an argument from Eugene Lyons, who made the following observation.

That first winter [early 1928] was an exceptionally bitter one, even by Moscow weather standards. Waiting on queues for bread and other necessities was that much more agonizing. Everywhere these ragged lines, chiefly of women, stretched from shop doors, under clouds of visible breath; patient, bovine, scarcely grumbling. Private trade channels were being rapidly shut off, before the government was able to replace them with official channels.^[85]

As pressure mounted on the Nepmen from 1926/27 through the rest of the decade, private trade not only declined but changed in character as well. Virtually all operations able to survive the onslaught of the state were very small scale. The larger enterprises in permanent facilities were most visible, most obviously "capitalist," and thus the first to be eliminated. In 1925/26, for example, 17 percent of all private sales reported to the state were wholesale, whereas four years later virtually all licensed private wholesalers had been driven out of business. This is hardly surprising, for it was next to impossible for large private retail and wholesale operations to escape the attention of state officials, especially wholesale enterprises dependent on the state for much of their merchandise. Taxes and fees levied on large firms were higher than those imposed on petty traders, and Nepmen in the upper ranks could not pick up their businesses and elude a policeman or tax inspector the way rank I and some rank II traders could.^[86] An American living in Moscow at the end of the decade wrote that "there are almost no privately owned stores in the city; any who wish to continue the unpopular profession of merchant for their own profit must trade from these rickety stands in the market places or at street corners."^[87] The state Central Statistical Bureau reported that by January 1, 1930, nearly two thirds (64 per-

cent) of the 123,000 registered private traders were peddlers and street hawkers (raznoschiki ) and that 19 percent operated from tents, booths, or stalls. Only 17 percent still conducted their business from even the most modest shops (lavki ) or stores (magaziny ).^[88]

A demand that far exceeded the supply of most consumer products, combined with the declining number of private traders, spawned a revival of bagging. The shortages of both food and manufactured items, labeled the "goods famine" (tovarnyi golod ) by the press, produced streams of people traveling in opposite directions—some trekking to the countryside in search of food and others coming to the towns to trade for manufactured goods.^[89] This type of "amateur" trade continued after NEP. As famine began to stalk the Ukraine in 1932, for example, a Russian who had emigrated in 1914 and then returned to the Soviet Union found on a trip to Odessa "that the train guards, conductors, and attendants were all speculators. They were buying food in Moscow, always better provided for than other cities, and selling it at fantastic prices down in the stricken southern land."^[90] Although bagging seems not to have been as widespread at the end of NEP as it had been during War Communism and 1921/22, its resurgence in 1928/29 indicated the inadequacy of the "socialist" consumer goods production and distribution system when the Nepmen were driven out of business.

Another consequence of the state crackdown on the Nepmen was that a greater percentage of private trade was conducted illegally, without licenses. As taxes and harassment from local officials became more onerous, an important survival skill for many private traders was the ability to avoid detection. This generally meant operating underground in the black market or selling goods without a license in the streets and running whenever the police approached. As one woman was buying peaches from a private trader in the summer of 1928, "the pedlar and his enormous tray suddenly disappeared as completely as the vanishing gentleman of a conjuror's trick. A warning of the approach of a policeman had passed down the line [of hawkers] and the line dissolved. The vendors are required to have licenses; this one was among the hundreds who had none." Another foreign resident reported that "the government attempted to restrict this peddling by means of taxation, but the pedlars always tried to evade these taxes. A frequent sight in Moscow in 1929 was to see a whole mob of petty dealers running before a policeman or two, carrying baskets on their heads or arms, pushing wheelbarrows, as they attempted to save themselves from the wrath of the law."^[91] The wife of an American mining consultant in the Soviet Union, noting that most markets were closed by the state in 1929/30 with the onset of

mass collectivization, indicated that it was still possible to purchase food surreptitiously from resourceful peasants.^[92]

Thus private trade came full circle by the end of NEP. As the state stoked up its campaign to "liquidate the Nepmen," adopting "administrative measures" of the sort that had distinguished War Communism, private trade returned increasingly to the forms it had assumed in the years immediately following the Revolution. During War Communism this meant almost exclusively small-scale, unsophisticated, illegal (or barely tolerated) sales and barter, sometimes conducted by bagmen. Little changed immediately after the introduction of NEP except that this activity became less risky and attracted more people. But before long, as we have seen, the number of larger, permanent private shops began to increase (at the expense of many of the marginal petty vendors) and peaked in 1925/26 after suffering a brief downturn in 1924. In 1926, then, the Nepmen were as far from the atmosphere of War Communism as they would get, and thereafter their path turned, slowly at first, back in the direction of an environment bracing for Bolsheviks but bleak for private merchants. The state policies at the end of the decade eliminated virtually all private traders except the very small scale and the surreptitious—the same sort characteristic of the era of War Communism.

Although it is beyond the scope of this work to cover private entrepreneurs in the 1930s, a few words should be added as an epilogue concerning legal private trade immediately after NEP. The state grain-collection and collectivization drives at the end of the 1920s were accompanied by an intense campaign against the Nepmen. But just as the collectivization offensive was halted (temporarily) in the spring of 1930, so too was the effort to eliminate private trade. Though the permanent stores of private traders remained closed, small-scale trade was again permitted in markets and bazaars, primarily because the state was unable to supply adequate amounts of food to the urban population. The bulk of this trade, which continued throughout the decade, was conducted by collective farmers, artisans, and people selling odds and ends, as described by Julian Huxley in the summer of 1931:

Dingy rows of stalls, with narrow passages between; beyond, men and women squatting in front of the produce they had brought—here eggs, there vegetables, here again potatoes; a few carts belonging to kulaks, laden with vegetables; a row of cobblers; a few sellers of mushrooms and flowers. . . .

A big-built factory worker was holding out about a pound of raw meat,

half unwrapped from its covering of old newspaper; a neatly-dressed woman, probably a typist in some office, had three eggs, which she proffered in her open hand-bag; an old man was trying to sell two small dried fish; another woman had half a pound of butter. There were city workers who, having bought their supplies at the Cooperatives on their ration cards, were now trying to get money for some luxury by selling them in the open market, where they could get four or five times as much as what they paid for them.^[93]

An American engineer, who worked in the city of Groznyi in 1931-32, wrote:

There is still some private trade in Russia, and lately the Government has allowed it to increase. It includes the outdoor markets and some small handicraft shops for shoe repairing, tailoring, blacksmithing, barbering, dressmaking, and the like. . . .

In addition to the small and insignificant booths on the main street belonging to private traders there also existed a huge outdoor market to which the peasants brought their goods for private sale. These markets or bazaars, as the Russians call them, are found in every center and are a necessary source of food supply for the people because the cooperatives cannot yet supply the needs.^[94]

Other forms of legal private enterprise led a precarious existence in the cracks of the new planned economy. Private horse-drawn cabs, for example, were tolerated for a time, because not enough cars were produced to fill the need for taxis. At the end of 1935, a new line of trade was approved. In December the party unexpectedly removed the taboo on Christmas trees that had been in force since the end of NEP, announcing that one might celebrate the New Year with a New Year's tree. "The very next morning the markets were full of trees. All night long, axes had been busy in the suburban forests of Moscow and at dawn the roads leading to Moscow saw a procession of peasant carts laden with trees." But ornaments were difficult to find on such short notice after several years without Christmas trees. As a result, old women appeared on street corners selling "old-fashioned Christmas toys, hidden for years, mostly little angels. They did good business."^[95]

Chapter 5
Supplying the Nepmen

It is the NEP-man who hurries here and there, and by devices which are always suspect, obtains exceptionally interesting goods, which somehow the Cooperatives do not always manage to offer. But why that is I could not find out.
—Theodore Dreiser

It is difficult to find a more convenient field of operations for all sorts of pretenders than our expansive country, filled either with exceedingly suspicious or exceedingly gullible administrators, managers, and social workers.
—Ilya Ilf and Evgeny Petrov

Throughout NEP the main obstacle facing traders (state, cooperative, and private) was obtaining goods, not selling them, since demand for many products far outstripped supply. Soon after launching his first business ventures in Russia, Armand Hammer discovered that the shortage of most commodities was so great "that any article of general use or consumption produced inside the country at anything like a reasonable price is generally sold beforehand."^[1] One advantage held by the Nepmen over the state and cooperative retail network was their ability to acquire merchandise more efficiently and resourcefully (and sometimes more deviously). Goods flowed into private traders' hands from a number of suppliers, whose relative significance varied with the nature of a Nepman's business and with changes in the economic and political climate.

One of the most important sources was the "socialist" sector itself. During the course of 1921 and 1922 most state factories were ordered to operate on a cost-accounting (khozraschet ) basis, meaning that they could no longer rely on the state to provide them with raw materials, pay their workers, and absorb their finished products regardless of how inefficiently they operated. Instead, with the umbilical cord cut, state enterprises found themselves on their own in the marketplace, frequently in desperate need of funds for raw materials, wages, equipment, and so on. Many state operations in such straits sold off nonessential goods and equipment at low prices in order to obtain working capital. This phe-

nomenon was known as razbazarivanie (literally, "scattering through the bazaars"), which is usually rendered as "squandering." Very often, the only customers with ready cash were Nepmen. As a Soviet writer remarked in 1924, state firms that "plunged into the anarchy of the market became the source of extremely intensive primary accumulation for the new trading bourgeoisie."^[2]

It is, of course, impossible to ascertain the total value of goods involved, but many observers were convinced that a large amount of state property fell into private hands through this process. The state publishing house Krasnaia Zvezda, founded in 1923 to publish military literature, sold cartloads of its paper and expensive stationery to Nepmen at low prices. Somehow, the publishing house also had musical instruments, first-aid kits, and bicycles, which, not surprisingly, it was anxious to sell to anyone available. During the famine in the Volga region at the beginning of NEP, a state livestock breeding agency sold to Nepmen a large portion of its resources (scythes, sugar, salt, oats, and hay). Even some of the agency's purebred stock was sold or rented to private persons for use in horse races. Up to 1927 state enterprises and agencies had sold 1,661 cars and trucks (and 4,000 motorcycles) worth several thousand rubles apiece to private buyers for only 400 to 500 rubles each.^[3] As in the case of Krasnaia Zvezda, it was not unusual for a state operation to sell commodities that had nothing to do with its official activity. Agencies as unlikely as Glavchai and Khleboprodukt (which handled tea and grain, respectively) raised cash by unloading large quantities of textiles on the free market in 1921/22. Even Gosbank acquired a variety of goods at the beginning of NEP, some of which it sold to private entrepreneurs.^[4]

Not all state sales to Nepmen were haphazard or unsound. Private traders as a rule were more efficient than the state and cooperative retail system, and they could also charge higher prices than their "socialist" competitors (since the latter were supposed to observe price ceilings). Consequently the Nepmen were often able to absorb higher prices and harsher credit terms from state suppliers than could "socialist" enterprises in need of the same goods. As a result, many officials in state factories and trusts, forced to fend for themselves on khozraschet , found it possible to overcome any ideological scruples they may have had concerning sales to the "new bourgeoisie." Though this provoked a complaint from Tsentrosoiuz (the central agency of the cooperative system) that "large amounts of goods proceeded from trusts, not to cooperatives, but to the private market [in 1921/22]," such protests were to no

"Nepmen," a watercolor painted in the 1920s by Dmitrii Kardovskii.
(Serdtsem slushaia revoliutsiiu  . . . [Leningrad, 1980], picture no. 118)

The Sukharevka, Moscow's largest outdoor market. The name of the market was sometimes used
 as shorthand for private trading in general. ( Illiustrirovannaia Rossiia , no. 50, 1926, p. 1)

Young street traders in Moscow in 1921. Primitive trade of this sort was most widespread at the
beginning and end of NEP. (F. A. Mackenzie,  Russia Before Dawn  [London, 1923], page facing p. 82)

Furniture and other personal possessions for sale in one of Moscow's outdoor
markets at the end of NEP. (Illiustrirovannaia Rossiia , no. 23, 1930, p. 6)

A group of street traders outside a state shoe store. ( Illiustrirovannaia Rossiia , no. 10, 1927, p. 1)

A row of clay-pot vendors in a rural market. The dominance of private traders was generally
most pronounced in rural localities. (Illustrirovannaia Rossiia , no. 27, 1929, p. 5)

A baranka (ring-shaped roll) vendor plying his trade during a
village market day. (Illiustrirovannaia Rossiia , no. 30, 1926, p. 1)

A state tax inspector and policeman sealing a shop whose proprietor had
fallen behind in his tax payments. This scene became a common sight during
the last years of the 1920s. (Illiustrirovannaia Rossiia , no. 13, 1925, p. 5)

A Soviet poster depicting a Nepman uttering a prayer: "O Lord, help me,
a sinner! Help me to cheat and circumvent this [Soviet] power that I hate."
(Negley Farson,  Black Bread and Red Coffins  [New York, 1930], page facing p. 208)

A portion of a May Day parade in Leningrad. The sign below the grimacing mask reads:
"I buy from a private trader." Below the smiling mask are the words: "I shop in a cooperative."
(Sovetskoe dekorativnoe iskusstvo. Materialy i dokumenty 1917-1932. Agitationno-massovoe
iskusstvo. Oformlenie prazdnestv. Tablitsy  [Moscow, 1984], picture no. 225)

A clerk in a cooperative store (first frame) admonishes a woman:
"Wait a minute, Citizen. Notice that there are many of you, and I am alone.
Can't you see that I am busy?" This rudeness sends the woman hurrying (second frame)
to a private trader, who greets her much more solicitously. It is interesting to compare
the point of this cartoon (published in  Pravda , January 4, 1928) with the point
of the masks in the Leningrad May Day parade (photo on preceding page).

avail. Indeed, a decree of April 10, 1923, permitted state trusts to give their business to Nepmen even when state and cooperative customers were available, as long as the Nepmen offered more favorable terms. Transactions of this sort were particularly common in the first years of NEP, when the state and cooperative retail network was extremely inefficient. But even in 1926, the state salt syndicate announced that it would be desirable to sell to Nepman 30 percent of the syndicate's output, precisely because private traders could accept less credit and higher prices from the syndicate than could the cooperatives.^[5]

That there were comparatively few state and cooperative stores, particularly in the first half of NEP, was another compelling reason for state firms to sell to Nepmen. Otherwise, goods simply would not reach a large portion of the market. For every 10,000 inhabitants of the countryside in 1924/25 there were 6 cooperative shops, 1 state store, and 31 licensed private trading operations. The actual number of private traders was certainly much higher, for it was quite easy to trade on a small scale without a license, particularly in the countryside. As we have seen, private entrepreneurs also dominated trade in the cities during the first years of NEP, handling over 80 percent of urban retail trade in the estimate of the state Central Statistical Bureau. The effectiveness of the private retail network was clear to state officials in the trusts, syndicates, and factories. In the middle of NEP, for example, the state sugar trust maintained that it was essential to market 26 to 28 percent of its products through Nepmen because of the weakness of state and cooperative trade in the countryside. According to the division of the All-Russian Textile Syndicate (VTS) headquartered in Rostov-on-the-Don, private traders were practically the only people available early in NEP through whom textiles could reach consumers. On a related point, an article in one of the Council of Labor and Defense publications noted that during the "scissors crisis" in the fall of 1923, many cooperatives, "artificially supported" by the state, collapsed. Had there been no private traders to market textiles produced by state industry, factories would have been glutted with finished wares, and "it is difficult to imagine the sort of catastrophe for VTS that would have accompanied the autumn crisis."^[6] Viewed in this light, sales to Nepmen were in line with Lenin's dictum of "building communism with bourgeois hands."

In 1922 the state system of industrial trusts and syndicates sold roughly 50 percent of its goods directly to private traders. The figure proceeded to fall to 35 percent by 1922/23; 15 percent in 1923/24; 10 percent in 1924/25; and about 8 percent in 1925/26.^[7] The declining per-

centages should not be taken as an indication that the state continually reduced sales to Nepmen during this period. Since the total output of state industry increased markedly in these years, sales to private traders, though falling in percentage terms, did not decline in absolute value after 1923/24 (see table 6). It seems likely that the volume of such sales to Nepmen was off somewhat in 1923/24 compared to 1922/23, as a result of the crackdown on private trade in 1924. But the paucity of comparable data for 1922/23 hinders quantitative comparisons. In any case, volume rebounded in the following years despite the shrinking percentages for those years.

Private merchants were primarily interested in the output of consumer goods branches of state industry, commodities such as food products (tea, coffee, sugar, and salt), textiles, kerosene, tobacco, matches, and leather and rubber items such as footwear. Information is fragmentary for the beginning of NEP, but it is safe to assume that trusts and syndicates in these branches of production generally made between one quarter and one half of their sales to Nepmen.^[8] By the middle of the decade, record keeping had improved sufficiently to permit more detailed estimates (see table 7). Approximately 80 percent of direct private purchases from trusts and syndicates were concentrated in just a half dozen or so branches of production. In 1924, textiles alone (primarily cotton cloth) accounted for over half such sales to private entrepreneurs. But the demand for textiles far exceeded the state supply, and as the number of state and cooperative stores increased, textile trusts and syndicates were instructed to sell more of their goods to "socialist" enterprises.^[9] The results were apparent as early as 1925 and were striking by 1926 (see table 8).

In addition to legal, direct purchases from state agencies, private traders could obtain goods from the "socialist" sector by various illegal, semilegal, and indirect means, much the same way large quantities of state property reach private hands today in the Soviet Union. Although little quantitative information on this activity is available, it is clear that a considerable volume of commodities reached private traders through "informal" channels. Few Bolsheviks knew how to trade during the early years of NEP, as Lenin lamented repeatedly, and state enterprises often had to hire people with experience in private trade to help market goods or obtain raw materials. These people were then in a position to divert state supplies into the private sector, because they were often more aware of what materials were on hand than were the nominal managers.^[10] It was not unheard of at the beginning of NEP for a private trader to have a second "full-time" job in a state enterprise. In 1922, for instance, the state trading agency Gostorg had a number of employees who simultaneously operated private businesses that were well stocked with Gostorg's wares. Occasionally a private contractor or supplier for a state agency who was also an official in that agency could buy and sell goods to and from himself—on rather unattractive terms for the state, one might suspect. One Nepman even wrote letters proposing transactions to himself in his other capacity as an official in a state firm.^[11]

Some of the first private stores opened in 1921 were owned by former state employees who had used their official positions to acquire the goods they then sold on their own. Other people remained in state service, registering their shops under someone else's name (often a close relative), and then supplied the stores with products they controlled as state officials. The search for goods was also joined by relatives scattered about in the "socialist" sector (nevesta v treste, kum v GUM, brat v narkomat; "a fiancée in a trust, a godparent in GUM [Moscow's leading department store], and a brother in a People's Commissariat," as Mayakovskii once quipped). In 1922, for example, an agent of Gostorg at the Nizhnii Novgorod fair delivered supplies at low prices to the private firm Transtorg, whose director happened to be his brother. Nor did the ties between the two enterprises end here. A member of the board of directors of Transtorg was also head of a division of Gostorg, and the founder of Transtorg was at the same time an agent for Gostorg—all quite legally.^[12]

In December 1922, on the heels of similar directives and draft decrees prepared by several state agencies, the Council of People's Commissars (Sovnarkom) adopted a law making it illegal to engage in private busi-

ness activity while employed by the state.^[13] If Sovnarkom's intent was to dam the "unofficial" flow of state resources into the private sector, the decree was futile for a number of reasons. First of all, the accounting practices in many state enterprises, especially at the beginning of NEP, were sloppy or nonexistent, and it was relatively easy to steal goods from an agency that did not even realize it possessed them. The disappearance of supplies from state and cooperative operations as a result of poor record keeping and other sloppy practices was dubbed the "four u's"—utruska, usushka, utechka , and ugar (roughly, "spillage," "shrinkage," "leakage," and "waste"). Eight years after the Revolution, for example, officials at the Leningrad naval yard had still not made an inventory of the vast amount of goods lying around the facility. Entire warehouses, listed as empty in the naval yard's books, were actually full of valuable commodities at the mercy of thieves and the elements. Millions of rubles' worth of state goods were stolen across the land, and much of this loot found its way into the hands of private traders. To illustrate, a Nepman named Brounshtein, representing a private firm with virtually no capital, contracted to supply a state factory with nine hundred tons of oil in return for some steel pipe. After promising the steel pipe to another enterprise in exchange for some roofing iron, Brounshtein stole the oil he needed from the Leningrad naval yard. He then carried out all of the transactions described above, leaving himself with a supply of roofing iron, which he sold. Part of the proceeds went to certain naval yard employees who had helped him steal the oil. In 1922, American Relief Administration officials in Rostov-on-the-Don learned that bands of thieves were stealing state supplies from railroad freight yards and selling them to private wholesalers. These Nepmen sometimes bribed the station agents to ship their newly acquired goods to various markets by rail. At times the thieves could be brazen. Employees in the state factory Treugol'nik stole cable from the factory and then sold it back to the factory through a private firm, Kontora Martinova, they had set up.^[14]

Even Walter Duranty, Moscow correspondent of the New York Times , and Herbert Pulitzer, son of Joseph Pulitzer, were peripherally involved in the theft and resale of state property at the beginning of NEP. As Duranty tells it:

Among our flock of American wage-slaves there was one white crow in the person of Herbert Pulitzer, the principal owner of The New York World , in whose vineyard he then chose to labor as a mere reporter. The knowledge of his wealth must have reached Moscow, for one day a Russian came to his

room at the Savoy, where I was sitting, and circumlocutively invited him to buy a carload of sugar. I think the price was $1,200, and the Russian, who had a note of recommendation from the restaurant in the Arbat where we always took our meals, declared that it could be sold immediately for $5,000. There would be some small commissions, he smiled knowingly, but we could count on a clear profit of at least 200 per cent. I was interested, but the rich Pulitzer asked crudely, "Who owns the sugar now, and where is it?" "Oh," said the Russian airily, "it is Government property stored in freight cars at one of the Moscow depots. But they've forgotten all about it, and of course some of it would go to sweeten the only official who knows anything. I assure you there is not the slightest risk."

During another meeting over a good deal of French champagne, the Nepman coaxed $500 from Pulitzer and $100 from Duranty and raised the rest elsewhere. After completing the transaction, he spent half of his thousand-dollar profit on a lavish banquet (to which Pulitzer and Duranty were invited) and gambled the rest away the same evening. Duranty learned later that in the following months he had made approximately $50,000 in similar business operations and then slipped out of the country to Paris.^[15]

Despite warnings and decrees from the state, some Nepmen maintained cozy relationships with state officials (frequently with bribes) in order to obtain merchandise or special services. This system, called by some wags krugovaia poruka (an old Russian term meaning mutual responsibility), was the next best arrangement to being both a Nepman and a state employee oneself.^[16] The businessman I. D. Morozov, for instance, had had many connections in the West before the Revolution, and after opening a store in Moscow during NEP, he decided to try to renew some of these old ties in order to obtain Western goods. To this end he enlisted the aid of the chairman of a Soviet trust who was about to go abroad on a business trip—and who had been the director of one of Morozov's factories before the Revolution. The director of the Northern Section of the Association of State Workers Artels (ORA) illegally rented the services of one workers' artel' of five hundred men to a private contractor of ORA, named Kornilov, for four months at the rate of one ruble per head. Kornilov employed these workers in his own business ventures, which had nothing to do with ORA (such as cutting, loading, and unloading firewood).^[17]

To be sure, few Nepmen contemplated international maneuvers or rented brigades of state workers. Most of the collusion between state officials and private entrepreneurs bore a greater resemblance to the fol-

lowing cases. In 1921 a man named Alkhazov was arrested for cocaine trafficking and sentenced to a year in prison. Following this setback he managed to install himself as an official in a state trading agency (Dagtorg) and soon began to conduct shady transactions. In Moscow he met an old acquaintance, now a director of a private firm, and they contrived to be of use to each other. On one occasion Alkhazov went to the Nizhnii Novgorod fair and purchased (from another state agency) a large quantity of textiles in Dagtorg's name, even though Dagtorg had instructed its representatives not to buy textiles. According to the sales agreement, the goods were to be sold to the people of Dagestan (in the eastern portion of the Caucasus), but Alkhazov hurried back to Moscow and sold half the textiles to his friend. The rest reached private traders through other channels. To cite another example, in 1922 the OGPU charged the director of a state tobacco-processing factory and two former private wholesalers with creating a "black trust" that sold 90 percent of the factory's output to Nepmen.^[18] In some instances, state agencies that officially had nothing to do with the trade of various products obtained them anyway from trusts and syndicates for resale to private wholesalers.^[19]

Nevertheless, most private traders were small-scale vendors in markets and bazaars and thus in no position to strike special deals with influential state officials. If such junior Nepmen (and many larger-scale merchants as well) wished to obtain goods directly from the "socialist" sector, they had to tap the state distribution system farther down the line. This would often entail bribing a clerk in a state or cooperative store to withhold goods and sell them to the private trader. On other occasions "socialist" clerks, store managers, and others took the lead in these transactions, knowing that they could sell merchandise to private traders at prices well above the official ceilings. This activity was widespread, prompting the Supreme Council of the National Economy (VSNKh) in July 1924 to send out a directive to the enterprises under it forbidding the practice. But this and numerous other official complaints proved futile, and the sale of goods to Nepmen from state and cooperative wholesale distribution agencies and retail stores continued to flourish.^[20]

If bribes seemed too risky, a private trader could simply purchase merchandise from state or cooperative stores as a normal customer and then resell the items. It was not difficult to find people willing to pay more for the products than the prices charged by the state, particularly in the

provinces, where shortages were acute.^[21] A report of the All-Russian Textile Syndicate issued in the fall of 1925 describes this phenomenon.

Squeezed in the grip of a goods shortage in the provincial market, private trading capital has moved to Moscow, and here, in the streets of Moscow, conducts the sort of transactions for cotton cloth that Moscow has not seen before. Crowds of unemployed people and invalids stand in lines for textiles outside retail stores of trusts and syndicates. Those who obtain goods sell them to bagmen who pay twenty to thirty kopecks per meter. The bagman brings the goods to the market where they are bought by a provincial retailer, who in turn sells them in the countryside, marked up 100 to 150 percent.^[22]

It was not uncommon for a larger-scale private trader to mobilize relatives and friends or hire people (often invalids and the unemployed, as stated above) to stand in lines at state and cooperative stores to buy goods for resale elsewhere. Nepmen used these hired buyers throughout the decade, though the latter became particularly numerous in the final years of NEP as the state began shutting off the direct flow of its goods to private traders.^[23]

Soviet correspondents and store employees estimated that as many as three fourths of the people standing in lines outside state and cooperative shops intended to resell the merchandise they purchased. Whatever the actual figure, there was no doubt that small armies of hired buyers were involved. More than a few Nepmen had good contacts in the "socialist" distribution system and seemed to be more aware, one correspondent observed, of which scarce commodities were in various state and cooperative stores than were some of the state's own marketing officials. When word leaked out that a desirable product was about to go on sale in a particular store, a line of surrogate buyers generally formed well before the doors opened.^[24] Toward the end of the decade, as rationing was introduced, surviving Nepmen turned more frequently to trade unionists, people in members-only cooperatives, and others with access to newly restricted merchandise. Some of these people were induced either to buy goods for the private traders or to "rent" their documents to the latter, who then made the purchases themselves. Other Nepmen eliminated the "middleman" by obtaining multiple copies of cooperative membership books and ration cards.^[25]

As we have seen, both Lenin and Bukharin believed that the cooperatives had to win the economic struggle with the Nepmen if socialism were to triumph in the Soviet Union. In order to tip the scales in favor of the cooperatives, the state granted various supply, credit, and tax privi-

leges to them. These measures, while improving the cooperatives' position, also encouraged some private businessmen to disguise their operations as cooperatives (or other favored organizations) in order to share the benefits of cooperatives and escape their own heavier obligations. More specifically, one advantage of the ruse was easier access to state goods (as depicted by Ilf and Petrov in The Little Golden Calf ), since supply agencies were often instructed to show special favor to the cooperatives.^[26] Toward the beginning of NEP, for example, a man named Vitkun arrived in Moscow from Siberia with only a hundred rubles in his pocket. Along with his wife and some friends, he announced the formation of a joint-stock gold mining company. Shortly thereafter, one of the "partners" was dispatched to the Urals, whence he sent back telegrams describing the work in the fictitious gold fields in glowing terms. Armed with these cables and exploiting the desire of the state to increase the output of gold, Vitkun obtained provisions on credit from various state agencies, allegedly to supply workers in the gold fields. In reality, the goods were resold. The ploy even worked for a fourteen-year-old boy in Leningrad, who proclaimed the organization of a producers' cooperative, the Detskaia artel' imeni t. Lenina. The Commissariat of Finance gave him eight thousand rubles to get started; the Commissariat of Communications provided free travel tickets for the use of the cooperative; and the Leningrad Soviet donated seventy-two hundred pounds of clothing. Actually, the cooperative was just a front, and the youth (who may have been a front himself) used the money and various resources he had been given to open a movie theater.^[27]

It is impossible to determine precisely the amount of goods that belonged at one time to the "socialist" sector but were marketed ultimately by private traders. The shadier the transaction between a state enterprise and a Nepman, the less likely it was recorded accurately or at all. This, along with the chaotic or nonexistent bookkeeping of many state operations, particularly in the early years of NEP, renders statistics on this score rough estimates at best. An extensive study of private capital in the USSR, prepared for VSNKh in 1927, estimated that close to half the output of state industry in the middle of NEP reached consumers through private traders.^[28] Whatever the actual percentage, there is no doubt that the "socialist" sector represented an important source of goods for Nepmen until the closing years of the decade, when the state tried to turn off the flow. In 1925/26, urban private traders received approximately 40 percent of their merchandise from state and cooperative enterprises, agencies, and stores—an estimate that fell to 33 percent in

1926/27, 25 percent in 1927/28, and 17 percent in 1928/29.^[29] As it became more difficult to pry manufactured products from the state, some Nepmen were forced out of business. But the more nimble and resourceful among them turned to other sources of supply.

Over half the Nepmen's wares originated in the private sector. A significant portion was produced by the peasantry, since food products were the items most frequently sold by private entrepreneurs. The number of peasants in collective farms and producers' cooperatives was negligible during NEP, which meant that virtually all the fresh, unprocessed food (vegetables, meat, eggs, dairy products) in private shops and markets was produced on individual peasant farms. Lenin had hoped that the peasants would shun the Nepmen and sell their goods to the state via cooperatives. In return the peasants were supposed to be supplied with manufactured goods at reasonable prices in the cooperative stores. This arrangement was intended to strengthen the smychka between the workers and peasants and draw the latter voluntarily into the cooperatives, thus preparing the foundation for socialism in the countryside. Throughout NEP, however, private middlemen competed successfully with state agencies for that portion of the peasantry's products which the peasants did not consume, save, or market themselves.

One reason for the Nepmen's success was that the state and cooperative zagotovka agencies (whose task was to buy grain and other products from the peasantry) had relatively few officials out in the countryside and inadequate supplies of cash and commodities to offer the peasants. In fact, the official zagotovka network was so underdeveloped that many state agencies were forced to buy from private zagotovka enterprises.^[30] Probably the Nepmen's main advantage was their freedom to offer the peasants higher prices than could state zagotovka agents (who were supposed to operate under price ceilings). In the cities and towns the demand for farm products generally exceeded the supply, enabling private middlemen to outbid the state buyers and still resell the products for a profit.^[31] Private buyers also profited frequently from closer relations with the peasantry than those maintained by state zagotovka personnel. The success of a private mill operator named Klassen was based on such factors: (1) Klassen accepted all the crops that the peasants brought him rather than just some, which was the practice at state and cooperative agencies; (2) he did not pass on local fees to the peasants, which state and cooperative agencies did; (3) he knew the peasants per-

sonally and paid the transportation costs of those who, he knew, had to have their grain brought across the river (unlike the state and cooperative mills); and (4) he provided free sacks. As a result of these measures, in 1924 he collected 2,160 tons of grain, which he shipped all over the country.^[32] Undoubtedly, Klassen was able to provide all these services for the peasants because he knew he could command a high price for his flour.

The peasantry was an important source of goods for private traders throughout NEP, but particularly at the beginning of the period (before consumer goods industries had recovered from War Communism) and at the end (when the state tried to cut off the flow of manufactured goods from the "socialist" sector to the Nepmen). The smychka , which seemed so crucial to Lenin and Bukharin, had little chance of becoming a reality during NEP, because the state refused to offer the peasants free-market prices for their crops and a significantly larger supply of manufactured consumer goods. These and similar policies were not forthcoming from a government committed to channeling its modest resources into industrialization. Consequently, the peasantry seemed as inclined to form a bond with private traders as with the state, a development that caused considerable concern in the party. One wonders how or whether Lenin, who in his last years repeatedly warned against alienating the peasants and driving them into the arms of the Nepmen, would have tried to preserve and strengthen the smychka in the second half of the decade while pursuing at the same time a policy of industrial growth.

Most of the private traders' merchandise not produced by the "socialist" sector or the peasantry came from private manufacturing enterprises inside the Soviet Union, that is, from other Nepmen. We will consider these undertakings in the following chapter, and for the present need only note that nearly all the private "industrial" output came from small artisan shops. The craftsmen in these facilities generally produced clothing, footwear, food products (mainly bread), or various common household utensils, that is, items in demand by consumers and hence by private traders. Not surprisingly, most (approximately 80 to 90 percent) of the output from private manufacturers found its way to consumers through Nepmen.^[33]

By the second half of the decade, private traders began to obtain increasing percentages of their wares from artisans (see table 9), largely as a response to the growing difficulty of tapping state industry.^[34] A study

in Irkutsk revealed that although the total volume of private trade there declined in 1926/27, sales in some branches of trade were up. Nearly all of the increased business involved merchandise (leather goods, dresses, hats, pottery) produced by artisans. The authors concluded that as a general rule, most of the private traders still active in Irkutsk obtained their wares from small-scale producers. Some Nepmen went as far as to close their shops, purchase goods from artisans, and resell these items as if they themselves were the producers. In this way they disguised their position as middlemen or "nonlabor elements" and so avoided the license fee and heavy taxes levied on private traders.^[35]

Thus the peasantry and small-scale manufacturers, always important suppliers to the Nepmen, emerged as their most dependable sources of merchandise at the end of the 1920s. Of course the "socialist" sector continued to provide goods to private traders, both knowingly and otherwise. But the increasing unreliability of this connection forced most surviving Nepmen to search for merchandise among rural private producers—peasant farmers and artisans—in the waning years of NEP. This trend was reported from many regions, including Kiev, where a Soviet journalist wrote at the end of 1928 that those private traders still in business were supplied almost entirely by peasants and handicraftsmen.^[36] The other side of the coin was the shrinking portion of goods received by Nepmen from the state (see table 10).

Smugglers provided a smaller but by no means negligible quantity of goods to private traders, particularly in the early years of NEP when

domestic manufactured products were scarcest. Probably the largest volume of illicit imports came in across Russia's western border with Estonia, Latvia, and Poland, though a considerable quantity also flowed across the vast Central and East Asian frontiers.^[37] Although few statistics are available for such surreptitious activity,^[38] markets in many towns (especially those near the border) were reportedly well stocked with contraband.^[39] According to customs estimates for October-December 1923, illegal imports equaled slightly over one third the value of legal imports.^[40] During the two previous years the figure was undoubtedly even higher. A report at the end of 1922 by the Central Commission in the Struggle Against Contraband, noting that "our most important markets, not only in border . . . regions but also in the largest urban centers, are flooded with contraband," concluded that the influx of smuggled goods "far exceeded" legal imports.^[41]

The bulk of this trade involved textiles, yarn, haberdashery (galantereia ), and footwear, with sugar, tea, cocoa, medicines, narcotics, liquor, perfume, and technical equipment accounting for most of the rest.^[42] Prices for these commodities were considerably higher in Russia than in neighboring countries, and thus many people were willing to accept the risks associated with smuggling. Staging areas, transit camps, and inns sprang up all along the western side of Russia's European border where deals were struck, money changed, and loads of merchandise assembled for the trip east. Authorities in Poland, Estonia, and Lat-

via winked at this activity, and consequently smugglers had only to employ their ruses against Soviet border officials.^[43] The state estimated that only about one tenth of the contraband entering the country was intercepted, and, ironically, even this one tenth found its way to private traders more often than not. Most of the illegally imported items seized by the state were sold at auction. The ubiquitous Nepmen attended these auctions, purchased the goods, and then resold them—all within the law. Frequently the auction prices were lower than the cost of a special import license and customs duties.^[44]

Private traders also received foreign products through the mail from relatives or partners living abroad. These goods were known as "semilegal contraband" because it was illegal to resell them but not to receive them. To avoid attention some Nepmen had packages sent to friends and relatives, and a few large-scale operators had receiving networks of up to one hundred people scattered through several cities.^[45] On occasion, private entrepreneurs acquired merchandise in packages from the American Relief Administration (ARA) during its campaign against the famine in the first years of NEP. Upon receipt of ten dollars for food or twenty dollars for clothing, the ARA put together a parcel to be delivered to the person designated by the American making the payment. Many Jews in particular had emigrated to the New World in the preceding decades, and through this service were able to send packages to friends and relatives who had remained behind. The process was often initiated in Russia, where ARA officials distributed cards printed in English and Russian requesting such aid. People filled in the name and address (sometimes no more than the name of a state or the word America ) of a prospective benefactor in the United States and mailed the cards.^[46] The contents of these parcels were very much in demand and thus were sometimes resold.^[47] They became in effect, as one observer put it, "the foundation of many small businesses."^[48] There were even employees at Gosbank who obtained goods through the mail and posted advertisements for their wares around the premises. Daily announcements such as the following appeared in the women's restrooms at Gosbank: "Foreign shoes for sale, inquire at the debits section." On March 15, 1926, higher postage rates and a five-kilogram limit were applied to packages mailed from abroad, apparently in an effort to bring this trade under control. Whatever the intent of the measure, it did sharply reduce the number of packages in the mail.^[49]

The last resort for private traders with no access to any of the sources of goods mentioned above was to sell their personal property. This trade was generally conducted in market squares and along sidewalks by people desperate for funds to purchase food, fuel, and shelter. In Moscow, much of this activity took place in the large, open-air Smolensk market, where on Sundays people without trading licenses could sell their wares. A foreigner in Russia toward the end of 1928 described the scene:

Imagine a bitterly cold day with the thermometer registering twenty to thirty degrees of frost, and the ground covered with snow. The trams pass through the centre of the street, and with tingling bells drive great lanes through this immense crowd. Furniture and household goods stretching for miles are piled up on both sides of the road, leaving the pavements clear for prospective purchasers. Outside this mass of junk stand men, women and young girls of all ages, mostly belonging to the [prerevolutionary] upper and middle classes to judge by their looks and general demeanour. Here they stand or squat shivering in the snow for hour after hour in the hope of selling the few remaining articles left in their homes in order to raise a few roubles for the purchase of food. Many are blue in the face, paralyzed with hunger and cold, and all have a dumb, expressionless, resigned look, as if all hope had long since departed from their souls.

. . . You could furnish your home with second-hand articles by just moving along this line of frozen survivors of the old brigade. Double beds, single beds, pianos, wardrobes, wash-hand-stands, pots without handles lie in the snow side by side with hundreds of sacred Ikons, and piles of old blankets and worn-out sheets. Old tin tubs, knives, forks, plates, glasses, and dishes lie jumbled together. There are old clothes of all shapes and sizes, pokers and shovels, musical instruments, family portraits, paintings, photographs, odd toilet requisites, looking-glasses, electric fittings, boxes of nails, worn-out shaving brushes, second-hand tooth-brushes, toothless combs, and half-used cakes of soap. There are a number of odd boots and shoes, because many Russians only have one, and are looking for another to match it.^[50]

Many of the people selling their possessions were members of the nobility or other wealthy and privileged segments of society before the Revolution. Now the tables had been turned, and they were called "former people" (byvshie liudi ). Most were denied work in state agencies, state-subsidized housing, and food ration cards when these were introduced at the end of NEP. Consequently, as many observers noted, these people were forced into petty trade, generally of their personal possessions, in a struggle for life's necessities.^[51] Sometimes the goods for sale were so worn or useless that the spectacle of these "former people" was pathetic.

And here, standing in the mud, is a [formerly well-to-do] woman, about fifty years old, in a dilapidated velvet coat and broken shoes. Her face is grey and motionless, her eyes dead. Straight before her she holds the single article which she has to sell: a plush-mounted stereopticon, one of those instruments in vogue a quarter of a century ago into which one stuck photographs and colored cards, to see them magnified.

No one in the market seemed at all interested in it.^[52]

The three main sources of goods for private trade, therefore, were the state, the peasantry, and private industry (mainly small-scale artisans), with a considerably smaller amount of merchandise coming from smuggling operations and personal belongings. As a general rule, to which there were many exceptions, large private retail and wholesale operations depended on state enterprises for a higher percentage of their goods than did less sophisticated forms of private trade. It was often the easiest and sometimes the only way for large businesses to obtain sizable quantities of manufactured products. This comparatively heavy reliance on the "socialist" sector was one of the reasons large private firms were particularly vulnerable when the state cracked down on the Nepmen in the last years of the decade. Those private entrepreneurs, mostly smaller-scale businessmen, who did not succumb at once to the pressure found themselves more dependent than ever on peasants and artisans for merchandise. A growing number of traders in the second half of NEP tried to eliminate all contact with the state by supplying artisans with raw materials purchased from the peasantry and then selling the artisans' products to consumers. These arrangements, known as "closed circles," are treated in the following chapter, where we will see that the evolution of private manufacturing in the 1920s had much in common with the development of private trade.

Chapter 6
At the Foot of the Commanding Heights

New millionaires are enslaving the kustar' workers [handicraftsmen] and all small producers in general. Is everything being done to restrict and eliminate by economic means these exploiting elements who link the kustar' workers with cooperatives or state agencies? There is no room for doubt that far from everything is being done in this area. In the meantime this is a serious problem for us.
—I. V. Stalin

Both state trade and industry prefer to place their orders [for small-scale metal goods] with private manufacturers, independent arteli [groups of craftsmen working together], and the like, assuming that since this is a private entrepreneur, he will do the job better and on time.
—Torgovo-promyshlennaia gazeta

A survey of party pronouncements concerning the Nepmen leaves no doubt that the Bolsheviks were more worried about private trade than private industry. This was undoubtedly in part because of the conspicuous swarms of private traders stirred up by NEP in the cities and towns. Many in the party, not to mention some ordinary citizens,^[1] viewed most private traders as crafty, parasitic speculators, taking advantage of shortages to net huge profits by selling goods they themselves had not produced. The term Nepman , especially when employed with a sharply negative connotation, almost always suggested a person engaged in avaricious trade (generally labeled "speculation"), not industry. Lenin, for example, remarked that "this word [Nepman] first appeared in journalese as a joking name for the small trader or person using free trade for all sorts of abuses."^[2] Even worse, given the importance the Bolsheviks attached to the smychka , private traders appeared to be menacing the very foundation of the young Soviet state as they carved out a large

share of rural trade and competed effectively with the state for the peasants' surplus produce.

The existence of private manufacturing seemed less alarming to the Bolsheviks. As larger factories—the so-called commanding heights of industry dominated by the state—were brought back into production, the Bolsheviks found their position considerably more hegemonic in industry than in trade. To be sure, there was the specter of workers being exploited once again in private factories. But the vast majority of private "industrialists" during NEP were small-scale handicraftsmen, not titanic robber barons. Though many private manufacturers also engaged in trade (usually to market their finished products), the party generally viewed them more favorably than it did private middlemen, who profited from goods produced by others.^[3] Comparatively speaking, then, Bolsheviks felt less anguish convincing themselves that private "industry" (as opposed to private trade) was necessary as a temporary supplement to the "socialist" sector.^[4] The need for such a supplement was certainly clear to Soviet consumers, who relied heavily on private manufacturers for many essential goods throughout NEP.

One of the early indications that NEP was more than a set of concessions to the peasantry appeared on May 17, 1921, when the Council of People's Commissars (Sovnarkom) issued two decrees legalizing private manufacturing. One law stressed the need to increase "small-scale and handicraft" industrial production, particularly by producers' cooperatives but also by independent manufacturers. It was imperative, Sovnarkom declared, to "avoid needless regulation and formalism that hampers the economic initiative of individuals and groups of the population." Thus small-scale producers were allowed to dispose of the fruits of their labor on the free market, unless they used raw material supplied by the state under special conditions.^[5] This decree was followed on July 7 by an announcement that any citizen was permitted to engage in handicraft (kustarnyi ) work, and, if he was at least eighteen years old, operate a "small-scale manufacturing enterprise" employing up to "ten or twenty" hired workers. These producers, too, were allowed to sell their output to anyone.^[6]

Sovnarkom's second decree of May 17 abolished a law issued by the Supreme Council of the National Economy (VSNKh) on November 29, 1920, that had nationalized all factories with over five workers (ten workers if the factory had no mechanization). Those enterprises that had not yet been actually taken over by the state, Sovnarkom announced, were to be returned to their owners as private property.^[7] Many local offi-

cials were confused by, if not hostile to, this policy change, and VSNKh felt compelled three months later to reiterate the main points of Sovnarkom's decree, adding that private factories could no longer be nationalized except in unusual cases and only with special permission from the highest state agencies. On December 10, 1921, Sovnarkom and the All-Russian Central Executive Committee (VTsIK) reaffirmed the decree of May 17 and also ordered that smaller-scale workshops not in fact nationalized by April 26, 1919, could again become the property of their former owners upon the latter's request.^[8]

Information concerning the number of denationalized factories, and the people who gained ownership of them, is fragmentary. To further cloud the picture, rumors anticipating the denationalization decrees prompted some former owners to sell "their" businesses to people willing to gamble that the enterprises in question would be denationalized. During War Communism approximately 37,000 "factories" were nationalized (at least on paper), most of them quite small. Only one third employed at least sixteen workers per plant, and roughly 5,000 had only one or two workers each. Following the decree of May 17, which elicited a considerable number of petitions from expropriated owners, VSNKh itself returned 150 factories by the end of 1921/22 and 76 in 1922/23. Local officials doubtless returned many more, as a report from Smolensk guberniia indicates. There, by the beginning of 1922, former owners regained 60 "enterprises" and 1,300 grain mills.^[9]

The state returned numerous factories to the private sector on lease, that is, temporarily and under specific conditions. Some provincial authorities, not wanting the responsibility of administering thousands of workshops, began leasing them to nearly anyone available in the spring of 1921, despite warnings from VSNKh to wait for a decree permitting such activity. The decree to which VSNKh referred was issued by Sovnarkom on July 5 and spelled out the procedure by which private persons and cooperatives could lease industrial enterprises from the state. In the following years this decree was joined by several supplementary provisions, including the stipulation that the lease had to run for at least one year. This, it was felt, would discourage rapacious exploitation of the plant and encourage the leaseholder to make repairs and improvements. In no case, however, was the lease to exceed twelve years.^[10]

Over half the leases granted to state, cooperative, and private manufacturers were approved during the last quarter of 1921. Thereafter the total number of leases increased gradually for two years before peaking in 1923/24 at close to 6,500 factories. To this sum should be added ap-

proximately 7,000 grain mills, a sizable majority of which were leased to private operators.^[11] Data available for the years 1921 and 1922 indicate that 28 percent of the leased enterprises (excluding grain mills) manufactured food products and 21 percent tanned hides. Of the remaining operations, the most numerous were devoted to metalworking (11 percent), chemicals (10 percent), and woodworking (10 percent). Textile mills represented only 6 percent of these undertakings but accounted for many of the largest enterprises and thus an impressive 23 percent of all workers in leased industry. Taken together, the various branches of leased factories were responsible for 13 percent of the output of all nationalized industry in 1922.^[12] Were grain mills included in the data, the figure would be still higher.

Even after allowing for a number of cooperatives and producers' collectives (arteli ) that were organized by private entrepreneurs as fronts through which to lease factories, most estimates place the private share of leases at approximately two thirds. The rest were taken by cooperatives, state agencies, and genuine arteli .^[13] Numerous reports from around the country illustrate the Nepmen's importance as leaseholders. Of the 731 enterprises (including 380 bakeries) leased in Moscow by October 1924, 72 percent (including 76 percent of the bakeries) were operated by private entrepreneurs. In the Ukraine, where 1,709 factories had been leased by October 1923, Nepmen accounted for 80 percent. In the region including Rostov-on-the-Don, the private share was 71 percent in 1921/22 and 65 percent in 1922/23. Finally, from Siberia came a report that by the end of 1922, half of all leased enterprises in the Novonikolaevsk region were in private hands.^[14] As one would expect, a significant portion of private leaseholders—roughly 50 percent—were former owners of the factories they operated.^[15]

Generally, factories leased to state and cooperative organizations were considerably larger than those leased to Nepmen. In Moscow guberniia , for example, the average number of workers per private operation was 33, less than half the average in enterprises leased to the "socialist" sector. For the country as a whole in 1923/24, 16 to 18 people worked in the average factory leased to a private entrepreneur. As we will see, this was a large operation compared to most ordinary (non-leased) private workshops, though tiny in relation to the average state plant, which employed 230 workers in 1924/25.^[16]

The overwhelming majority of these small, privately leased enterprises, many of them simply glorified handicraft shops, turned out the same types of items that dominated private trade—simple, essential con-

sumer products. Given the shortages that prevailed, especially in the countryside, it was not difficult to market such wares. Again, the uncertainty of the Nepmen's future prodded private manufacturers into the production of basic consumer goods, since these items could be turned out rapidly, with a minimum investment, and often with raw materials purchased from the local peasantry. Figures for the end of 1922 (which do not include grain mills) indicate that one quarter of all factories leased to Nepmen produced food, most cases being bakeries or breweries. Enterprises that turned out leather and fur products were nearly as numerous, accounting for 21 percent of all privately leased operations. The shares of other important branches of production were distributed as follows: textiles, 14 percent; metalworking (frequently smithies), 11 percent; brick making, 9 percent; chemical production (including household products such as soap and candles), 8 percent; and woodworking, 7 percent. In these areas of production Nepmen generally received at least 50 percent of the leases granted by the state, whereas in the case of food (including flour), textiles, and leather products, the share of leases held by the private sector was closer to 80 percent.^[17]

Leases usually involved an agreement on the Nepmen's part to some combination of the following obligations: (1) repairing the factory; (2) getting production up to specific levels by specific dates; (3) paying the state either a percentage of production or a certain amount in cash or kind; and (4) giving state agencies preferential treatment over other customers—lower prices and priority handling of orders, for example.^[18] Of all the lease payments due the state in 1921-22 (from both the "socialist" and private sectors), roughly 90 percent were to be made in kind. Though this was understandable, given the instability of the currency at the time, the apparatus for collecting and storing these products was woefully inadequate. Largely as a result of this, only 31 percent of the fees in kind due the state by October 1922 were actually received, as opposed to 85 percent of cash payments. Not surprisingly, then, the state converted most lease payments to cash in 1923 when inflation succumbed to monetary reform.^[19]

These rents, in kind or cash, varied sharply in different regions. The fees were so low in some areas that they did not even cover depreciation of the equipment, whereas elsewhere they were sometimes prohibitive. Figures for the period ending on October 1, 1922, indicate that approximately 10 percent of all leases were annulled, often because the leaseholder could not carry out the terms of the lease or pay the taxes. Nepmen, interestingly, were apparently better risks in this regard than

were "socialist" agencies. State investigators, assessing the results of leasing enterprises in the period from 1921 to 1923, concluded that private leaseholders, and especially former owners, were the most conscientious in fulfilling the obligations they had assumed with the leases.^[20]

Most leases to Nepmen, as well as to state and cooperative organizations, were for relatively short durations. In fact, a majority were scheduled to last for periods of no more than three years, and virtually none exceeded six years. Nor did the state renew most leases as they expired, because by the middle of the decade it was better able to operate these facilities itself.^[21] This was the reason that, as previously noted, the number of private leaseholders began to decline after 1924, well before the state launched its final crackdown on the Nepmen.

Private producers were organized in ranks for licensing and tax purposes by a string of business-tax decrees in the period from 1921 to 1923. Under these laws, private manufacturers paid the same levies as private traders, namely, the license fee, leveling tax, and surcharge on the production of luxury goods. Private "factories" were divided initially into twelve ranks, determined by the number of workers (including family members) involved in the operation. According to a decree of July 26, 1921, rank I workshops had 1 to 3 workers, rank II firms had 4 to 6, rank III enterprises 7 to 10, and so on up to rank XII, which was reserved for factories with over 75 workers. As in private trade, the higher the rank of a business, the higher its license fee. Very small scale operations could often qualify for exemption from the business tax. These included peasant farmers who engaged in handicrafts as a subsidiary occupation and employed no "special equipment" or extra labor beyond family members. Also exempt were certain craftsmen who used no additional labor, even from family members.^[22] A series of subsequent decrees made some changes in the number of workers that delimited each "industrial" rank and later added three ranks to the original twelve. But the basic features of the system were not altered.^[23]

Those private manufacturers who were required to purchase a license in one of the twelve (later fifteen) ranks of the business-tax table are often divided by Soviet statistics into two categories, called census and noncensus industry. Census firms were large-scale operations, at least by the standards of the private sector, and may be defined broadly as all mechanized enterprises with at least fifteen workers and all nonmechanized factories with at least thirty workers.^[24] Nepmen preferred to lease

census factories from the state rather than risk the sizable, long-term investment (of which few private entrepreneurs were capable, in any case) needed to build large new facilities. In 1923/24 and 1924/25 nearly 70 percent of all private census plants were leased rather than privately owned, and these leased enterprises accounted for over three fourths of all private census production. Even in 1926/27, when the number of private leaseholders had been declining for two years, slightly over 70 percent of private census output still came from leased factories.^[25]

Nearly all private census operations were much smaller than state plants. Even though they represented close to 20 percent of all census factories during 1923/24 and 1924/25, private enterprises employed less than 3 percent of all the workers in census industry.^[26] Viewed from another angle, the average number of workers per private census factory ranged from a low of 21 in 1923/24 to 34 in the first half of 1925/26, whereas the average state plant employed approximately ten times as many workers.^[27] These figures, in addition to casting light on the nature of private census enterprises, indicate that many of these operations violated the twenty-worker limit announced, rather vaguely as we have seen, at the beginning of NEP. The uncertainty surrounding this matter was never dispelled, and over one hundred private factories operated freely with labor forces exceeding three hundred workers.^[28] Nevertheless, the important point for our purposes is that although a number of private census firms exceeded the twenty-worker "restriction," few exceeded it by much.

There are numerous gaps in the statistics concerning the development of private census industry during the course of NEP, particularly early in the decade, when there was administrative chaos in many regions. Nevertheless, the information available is more than sufficient to indicate a number of important general trends. For example, the number of private census factories (leased and privately owned enterprises taken together) increased from under 1,000 in mid-1922 to a peak of somewhat under 2,000 operations in 1923/24. This total fell to slightly under 1,800 in 1924/25 and remained at this level in 1925/26. The decline after 1923/24 was primarily the result of the government decision in the middle of the decade not to renew most leases, since the state was now more capable of operating these facilities itself.^[29] The harsh measures taken against private capital in 1924 (such as reductions of supplies and credit) may also have played a part, though this crackdown seems to have mainly affected private traders.

Although there was virtually no increase in the number of private

census enterprises after 1924—in contrast to developments in private trade—the output of these factories continued to grow as it had since at least 1923/24 (and probably since 1921). More specifically, private census factories decreased in number by about 8 percent from 1923/24 to 1924/25, but at the same time boosted their production by 30 percent. During the following year production rose by almost 50 percent, but the number of enterprises increased only marginally.^[30] These results indicate that many private census firms were growing larger in this period. The total number of workers engaged in private census production swelled from 41,000 in 1923/24 to 61,000 in 1925/26, so that, as noted above, the average number of workers per factory climbed 65 percent, from 21 to 34.^[31] Thus, according to the data, for large-scale private industry as well as for private trade, 1925/26 was the most prosperous year. In fact, the private percentage of total (state, cooperative, and private) census production reversed its decline and increased a few tenths of a point (to about 4 percent) in this period, despite the continued growth of industry in the "socialist" sector.^[32] But as we will see, this prosperity began to wither by 1927 and thereafter vanished as quickly as it had come.

Just as most private trade was conducted by small-scale entrepreneurs, so nearly all private "factories" hired only a handful of workers. In each case the reasons were much the same, since both lines of activity were conducted in the same uncertain business climate. Given the shaky political prospects for the private sector and the economic collapse accompanying the civil war, small handicraft shops had a number of advantages over larger operations: (1) small shops needed comparatively little capital for equipment and raw materials; (2) small enterprises were less visible and could often elude the attention of state officials, particularly in the countryside; (3) in any case, endeavors without hired labor were generally less subject to inspections of various kinds; and (4) taxes on artisans were much lower than those on entrepreneurs in census industry. Thus, through 1924/25 approximately 80 percent of the manufacturing licenses issued to Nepmen for the twelve ranks of the business-tax table were for rank I, that is, operations with no more than three workers.^[33] Even in the following years, when most small-scale producers were freed from the business tax, a majority of the private manufacturers still paying the tax were in rank I.^[34]

In contrast to private traders, who were concentrated in cities and towns, roughly two thirds of private producers with business-tax licenses worked in the countryside, according to data for 1923 and 1924/25.

This was primarily because many small-scale artisans were or had been peasants. In addition, such craftsmen obtained most of their raw materials from peasants and sold the bulk of their output in the countryside. Not surprisingly, private census factories were more likely to be located in cities—Moscow and Leningrad in particular—than were petty handicraftsmen. This point is underscored by a government report revealing that in 1923 Moscow and Petrograd contained a merely respectable 14 percent of the licensed private "industrial" enterprises, but fully 35 percent of the hired workers in these operations.^[35]

The private sector's share of all business-tax manufacturing licenses was impressive, though somewhat deceptive. Because of the numerous small-scale private operations, approximately 90 percent of "industrial" licenses went to private entrepreneurs until 1925. Nearly all the enterprises in ranks I and II (from 1 to 3 and from 4 to 6 workers, respectively) were privately owned in these years, and over half the businesses in the next two ranks belonged to Nepmen. Even as late as 1927, in rank V (from 21 to 30 workers in a factory without mechanization or 13 to 20 workers plus mechanization) one quarter of all firms were in private hands. At this time in the capital itself, on the eve of the final campaign against the "new bourgeoisie," private entrepreneurs ran over 90 percent of the sum of all enterprises in ranks I through V.^[36] But it must be borne in mind that the state enjoyed a similar hegemony in the top half of the fifteen (by 1926) industrial ranks, thus rendering the Nepmen's share of total industrial production considerably smaller than their share of licensed "factories."

Private manufacturing was slower to develop than private trade and did not hit full stride until the end of 1922/23. As late as the end of 1922, only about 60,000 private "industrial" licenses had been issued, but during the next nine months, the total swelled to about 250,000. After modest gains early in 1923/24, the number of licenses dropped slightly (not as precipitously as in private trade), reflecting the tougher line of the state against private entrepreneurs. This decline was short-lived, however, and during the first half of 1924/25, the number of private manufacturers with business-tax licenses peaked at over 300,000. Then the figure suddenly plunged toward the end of 1925 to approximately 80,000, where it remained during 1926. At first glance this drop might seem puzzling, coming as it did during the most lenient treatment of the Nepmen by the state. Actually, the decline was a direct result of several decrees that exempted most small-scale producers, including some with hired labor, from the business tax. Such artisans were now

only required to obtain an inexpensive "license for personal productive activity" (patent na lichnoe promyslovoe zaniatie ), and a wave of roughly 350,000 individuals did so by the second half of 1925/26.^[37]

Up to now we have only considered private producers who belonged to the twelve (later fifteen) ranks of "industry" defined by the business tax. The tax reforms of 1925, which drained approximately 200,000 people from rank I alone, direct our attention to the largest group of private manufacturers.^[38] These made up the vast sea of handicraftsmen, often called kustari , who operated either with lichnye promyslovye licenses or with no licenses at all.^[39] Less information is available concerning these people, because they do not appear in business-tax statistics and were heavily concentrated in the countryside. The scope and nature of their activity resembled that of producers in the lowest "industrial" ranks, which is indicated by the large number of the latter who obtained lichnye promyslovye licenses in 1925. At times it will be convenient to refer to both kustari and private manufacturers with low (noncensus) business-tax licenses as a single group under the label petty private industry. Kustari made up over 90 percent of this category, which meant that most petty producers were simply handicraftsmen working at home or in a nearby shop, either alone or with help from family members, apprentices, and occasionally a hired hand.^[40]

The number of people engaged in petty industry grew from approximately two million in 1922/23, to three million by 1925/26, and reached nearly four and a half million by the end of the decade. An overwhelming 75 to 80 percent of these artisans worked in the countryside, which one would expect on the basis of the foregoing discussion of small-scale manufacturers. In particular, a large percentage of kustari were peasants who engaged in handicrafts during the agricultural off-season. According to figures for 1924/25, peasants with small plots (up to 5.4 acres) obtained over half their income from such activity.^[41]

At the beginning of 1922, the Central Committee sent a directive to guberniia party committees complaining that party work among kustari was still "extremely weak" and urging local officials to organize kustari into producers' cooperatives. This was easier said than done, however, in the far-flung countryside, and nothing significant came of such demands from Moscow until the end of NEP. In the early years of the decade, the private sector reigned virtually unchallenged in petty industry, accounting in 1923/24 for over 90 percent of the workers and just under 90 percent of the total output in this category of manufacturing. By

1926/27 these figures were still in the neighborhood of 80 percent, and as late as 1929/30, only 45 percent of the kustari were to be found in the state system of producers' cooperatives.^[42]

Thus private "industry" during NEP was overwhelmingly small-scale. One might think that private census factories, often mechanized and considerably larger than peasant handicraft operations, would have accounted for an impressive percentage of total private industrial production. But even in the middle of the decade, when private census industry was at its peak, the millions of petty enterprises accounted for over 80 percent of the total private industrial output.^[43]

Taken as a whole, the private sector made a particularly large contribution to the Soviet Union's industrial production in the first years of NEP, when the "socialist" sector was a shambles. Unfortunately, little statistical information could be collected on this (and most other) topics given the disruptions and chaos that had to be overcome. Furthermore, one suspects that the data published for 1921/22 and 1922/23 (and, to a lesser degree, throughout NEP) understate the Nepmen's role in industry, for many private entrepreneurs, particularly in the countryside, undoubtedly managed to escape the scrutiny of the nascent state bureaucracy. Even so, figures for 1922/23, which include only the twelve business-tax ranks (i.e., not kustari ), place the Nepmen's share of industrial production between 40 and 50 percent. Thus, if information on the value of goods manufactured by kustari were also included in the calculations, the portion of total industrial production attributable to the private sector at this time would be more accurately measured at well over 50 percent.^[44]

As the state gradually brought large factories back to life, it assumed the leading role in the industrial activity of the country. Even though private production continued to increase in absolute terms, the portion of total industrial output that it represented dropped to about one quarter in 1923/24 and to one fifth in 1924/25 and 1925/26.^[45] Though comparable statistics are surprisingly scarce for the last years of NEP, there is no doubt that private manufacturing dropped off sharply in this period. It is somewhat misleading, however, to speak simply in terms of the Nepmen's share of total industrial production. Private manufacturers had virtually no desire or capability to produce heavy capital equipment and were nearly all engaged in turning out consumer goods.^[46]

Thus, an understanding of the Nepmen's significance in industry requires a more specific assessment of their activity in several branches of light industry.

The entire group of private producers concentrated in the same lines of activity as private leaseholders, and for the same reasons. Five categories (see table 11) dominated private manufacturing completely, in terms of both the number of people involved and the ruble value of output. In each division, certain products and occupations were more important than others: (1) textiles: finished articles of clothing, felt boots, wool, linen, and cotton fabrics; (2) food: bread baking, milling of flour, groats, and vegetable oil; (3) processed animal products (not including wool): footwear, other leather products such as harnesses, furs, sheepskin coats, and processing of hides to produce leather; (4) wood products: furniture, barrels, carts, sleighs, spinning wheels, charcoal, and pitch; (5) metalworking (mostly by blacksmiths): common household and agricultural tools and utensils.

Information from numerous localities supports the contention that private manufacturers were concentrated in the five branches of production listed above. The main differences from region to region were in the distribution of people and resources within these five branches, which was dictated by the characteristics of each area. For example, in the Ukraine and other regions where agriculture was important, a large number of private grain mills magnified the already impressive position that food production occupied in private industry. Journeying from the Ukrainian countryside to a city, one would find that food production (most often in bakeries), though still significant, had to share more of the spotlight with private entrepreneurs turning out clothing, footwear, and metal products. Sometimes the location of a city or region encouraged specific industries such as fishing in Rostov-on-the-Don and Astrakhan', flax and linen production in Belorussia, and gold mining in Siberia. But everywhere, regardless of these local variations, the five categories of production listed above reigned supreme in the private sector.^[47]

Although it is easily established that private manufacturers were concentrated in certain lines of activity, the question remains: What portion of the Soviet Union's total output in these areas did they contribute? An author in Sverdlovsk, addressing a similar question in an article on the Ural region, instructed his readers simply to take a walk in the countryside. There, he declared, they could not fail to notice that nearly all the peasants' agricultural equipment, household utensils, furniture, and clothing were produced by kustari .^[48] Indeed, the entire population, not

just the peasants, relied on private producers for a number of essential goods. As late as 1926, nearly half of all processed food products were turned out by private manufacturers, and earlier in the decade the private sector's share of production must have been even greater.^[49] Private bakeries, for example, accounted for close to 90 percent of the nation's bread in 1923—an impressive figure, given the importance of bread in the population's diet.^[50]

Nor were private producers important only in the realm of grain products, for in 1926 roughly 80 percent of the Soviet Union's footwear and 60 percent of its fur products (as well as related items such as sheepskin coats) were manufactured in the private sector.^[51] Private individuals, working mainly in modest tailoring enterprises, were also responsible for approximately 70 percent of the clothing (shveinaia ) industry's output in the middle of NEP. At this time private entrepreneurs turned out between one quarter and one third of common wood and metal consumer goods, hauled in 75 percent of the fish catch, and mined most of the country's gold. In addition, private manufacturers were quite strong in the makhorka (coarse tobacco) and vegetable oil industries, accounting for 30 to 40 percent and 50 to 60 percent, respectively, of total production in 1923.^[52] Finally, Nepmen were able to maintain considerably

more than a toehold in grain milling, despite the state's concern that private entrepreneurs in this activity constituted a particularly grave threat to the smychka . As late as 1925/26, the private share of flour production was 20 percent, and it had been close to 40 percent in 1923/24.^[53] Given the weakness of the "socialist" sector of the economy at the beginning of NEP, private millers must have ground well over half the country's flour in 1921/22. In light of such figures there is no room to doubt that private "industry" was close to indispensable for Soviet consumers in the 1920s—a view supported by estimates that place the private share of total consumer goods production at 44 percent in 1923 and 32 percent in 1925/26.^[54]

We have seen that the Nepmen's position began to deteriorate gradually by 1926/27 when their taxes increased, and supplies and credit became more difficult to obtain from the state. These developments, combined with the decrees of 1925 that exempted many small-scale producers from the business tax, brought about striking changes in private manufacturing during the last years of the decade. One of the Nepmen's responses to higher taxes and more aggressive regulation was to shift their activities to the countryside, where state officials were far less numerous. This also had the advantage of bringing private producers closer to their only reliable source of raw materials, the peasantry. Even at the beginning of NEP such considerations helped account, as we have seen, for a majority of private craftsmen working in rural areas. But once the state stepped up the pressure on the Nepmen in 1926/27, so-called closed circles (zamknutye krugi ) multiplied rapidly throughout the countryside. These were networks of private manufacturers and traders that shunned any contact with state agencies or officials. More specifically, private craftsmen obtained raw materials from peasants, either directly or via private middlemen. They sold their finished products to private traders, who then retailed them to private customers. The "system," then, was a response to both increased taxes and regulation on the one hand and the state reduction of supplies to the private sector on the other. Consequently, the arrangement was far more prevalent after 1926 than in the first half of NEP.^[55]

Another way for private producers to avoid large tax bills was to atomize their businesses. After most artisans were freed from the business tax in 1925, many owners dissolved their workshops and transferred

their operations to a "putting-out" or "domestic" system. By this arrangement an entrepreneur provided raw materials and some form of payment to ostensibly independent craftsmen (who often worked in their homes) and then marketed the finished products.^[56] The advantages were that no factory existed on which the business tax could be levied, and the scope of the organizer's activity was camouflaged. For these reasons some Nepmen had used the domestic system since the beginning of the decade.^[57] It became more widespread, however, in the second half of NEP, after most small-scale artisans were exempted from the business tax, and as taxes on private factories steadily mounted. In a sense, this trend was a reversal of the traditional pattern of industrial development, a reversion to a more "primitive" (pre-Industrial Revolution) mode of production. Such arrangements were popular with Nepmen for much the same reason that zamknutye krugi were, and it is hardly surprising that the latter frequently took the form of domestic systems. By 1927, estimates place approximately one quarter of all kustari in domestic systems, some of which involved several hundred and even a thousand handicraftsmen.^[58]

Other Nepmen chose not to abandon their factories but to disguise them as arteli (producers' cooperatives). These false arteli , as they were called, assumed a number of forms. Sometimes an owner would "give" his factory to an artel' and appear to join the artel' himself while actually continuing to function as the director of the enterprise. More often, the owner simply had his workers registered as an artel' while he himself remained inconspicuous. He would supply raw materials, sometimes "lease" the facility to the workers, and market the finished product. Thus it was frequently difficult to be certain whether an artel' was genuine or merely a front.^[59]

Private manufacturers formed false arteli for several reasons. First of all, by the beginning of 1925, most arteli had been freed from a number of taxes (including the business tax), which made them, like kustari , attractive to private businessmen.^[60] Another advantage of the arteli , one not shared by independent kustari , was that the former were considered part of the "socialist" sector. Consequently, they had greater access to raw materials, credit, and other products from the state than did the Nepmen. It was not unusual for false cooperatives and arteli to be formed primarily to exploit this opportunity. In Moscow, for example, there appeared a cooperative called Moskredkoop (Moscow Credit Cooperative), organized ostensibly to supply its member kustari with raw

materials and other goods from various state agencies. As it turned out, several members were Nepmen who saw to it that Moskredkoop resold most of its goods to private entrepreneurs.^[61]

The activity of the sewing artel' Proletarii (Proletarian) was more brazen, matching the prior antics of its founder. Previously he had been a circus performer, billing himself as "Mister Sem, possessor of the Tibetan secret of divining the present, past, and future." One of his first exploits after organizing Proletarii was to have it classified as an artel' of invalids, a move that initially paid handsome dividends. As a representative of such an organization, he was successful in securing official documents requesting that other state enterprises give him privileged treatment. In the end, the artel' was caught selling textiles and other goods obtained illegally from an army warehouse.^[62]

Though false arteli sprouted throughout NEP, they appear to have multiplied most rapidly in the second half of the decade. This was probably because of both the tax benefits (not to mention other privileges) that most arteli had received by 1925 and the worsening position of legitimate private manufacturers after 1926. In other words, as NEP waned, the advantages of false arteli must have seemed increasingly attractive to private producers struggling to stay afloat.^[63] In any case, the Commissariat of Finance estimated in 1927 that two thirds of all producers' cooperatives were false; VSNKh set the figure at 80 percent. If one remains skeptical of these estimates, there is nevertheless no room to doubt the sardonic assessment made in 1927 by a Soviet observer: "It must be said that if our country feels a shortage of something, it is not of illustrations of the fact that producers' cooperatives very often turn out to be false cooperatives."^[64]

Predictably, private manufacturers suffered heavy losses during the assault on the Nepmen launched by the state in 1928. In addition to using stiff tax increases and "administrative" pressure, which could be directed at any private entrepreneur, the state aimed a number of measures specifically at private industry. One of these was simply to nationalize private, especially census, factories. After a campaign to do so in 1928/29, only 177 private census enterprises remained in the Soviet Union. In fact, many of these were too small to be considered census operations within the traditional definition, for they employed altogether a total of only seventeen hundred workers.^[65] As early as 1926/27 the state began annulling many leases on factories operated by Nepmen, particularly in branches of production such as grain milling and

leather working, where the private sector was firmly ensconced. During 1928/29, nearly all remaining "private" leases were revoked, so that in Leningrad, for example, only eight such factories (with a total of sixty-six workers) remained by May 1929. For the country as a whole, the value of production in privately leased census enterprises plunged from 149 million rubles in 1926/27 to 25 million in 1928/29. Total private census production (i.e., from leased and privately owned factories) fell to less than 1 percent of the country's census industrial output.^[66]

Private census operations, like private traders in "permanent" facilities, were eliminated more completely at the end of the decade than were small-scale entrepreneurs. One reason, of course, was that large factories were more visible and immobile. From the point of view of the Bolsheviks, large factories were more irritating ideological eyesores than were the independent artisans, because the former, with their comparatively large complements of hired labor, were more clearly "capitalist" enterprises. In the realm of small-scale private production, the primary goal of the state campaign was to break up domestic systems and false arteli . Local officials were ordered to scrutinize the cooperatives in their regions and not only drive out but also prosecute any "capitalists" they uncovered. Arteli were instructed not to sell to private middlemen products made with goods supplied by the state. Little information is available concerning the results of these decrees, though it is known that out of 3,716 arteli investigated in the Russian Republic (RSFSR) during 1928/29, 630 were liquidated.^[67]

Even more difficult to measure, though undeniably important, were the problems created for artisans by the concomitant campaigns of the state against private traders and the peasantry. The collectivization drive, for instance, affected craftsmen in a number of ways. It disrupted the activity of many peasants who worked part time as kustari and made it more difficult for other producers to obtain raw materials (since these had generally been supplied by the peasantry). The crackdown on private trade created other difficulties. Those producers who marketed their own wares, including peasants who continued to sell their surplus grain, were by 1928 more vulnerable to the charge of "speculation," which some local officials extended to cover virtually all private trade. Further, as private middlemen were forced to abandon the field, many artisans found it difficult to get their goods to market. For instance, Torgovo-promyshlennaia gazeta reported that a large number of private metalworkers had to close up shop after the traders who purchased

their goods were driven out of business. The "socialist" distribution system was still too underdeveloped to replace the private middlemen and market the artisans' output.^[68]

The state coupled its offensive against false arteli and domestic systems with an attempt to draw kustari into the network of producers' cooperatives. The party, however, clearly considered this task less urgent than the industrialization and collectivization efforts of the day, and by 1930 the cooperative system had absorbed less than half the total number of kustari .^[69] Much as it permitted free collective-farm trade to supplement "socialist" trade after NEP, in the 1930s the state tolerated (and even extended tax incentives to) independent artisans who used no hired labor.^[70] These craftsmen continued to turn out the same basic consumer goods they had produced in the 1920s, which were still in short supply. As late as 1939, approximately 1.3 million kustari had not yet, in the words of a Soviet historian, "linked their fate with the socialist sector of the economy."^[71] They, along with collective-farm traders, were the primary legal remnants of the private economic activity that had flourished during NEP.

In conclusion, private manufacturing, like private trade, consisted of a comparatively modest number of large enterprises and a swarm of petty entrepreneurs. However diminutive these handicraft operations were individually, they still accounted collectively for one third of the Soviet Union's total consumer goods production as late as the middle of NEP. But it was not only consumers who benefited from private manufacturing. As a number of articles in Soviet periodicals explained in the 1920s, private producers, by helping to fill vacuums in light industry and turn out goods essential for day-to-day living, supplemented rather than harmed state industry.^[72] In other words, far from menacing the commanding heights, these Nepmen freed the state to invest more resources in heavy capital-goods production. Of course, as the "socialist" sector expanded, competition was bound to develop with private manufacturers for both customers and raw materials. But when this occurred, one article explained, the state would represent a threat to the private sector, not vice versa. Certainly, something of the sort happened. By the end of the decade the state had pushed private producers far back from the positions they had held in 1925/26. This, however, could be attributed not only to a burgeoning complex of large-scale state factories but also to "administrative" pressure of the sort described in previous chapters. Just as Nepmen were driven out of trade before the state and

cooperatives were capable of replacing them, so the state was unable at the end of NEP to satisfy the population's demand for manufactured goods. Had the competition with the "socialist" sector been solely a test of economic competence, private producers would not have succumbed as rapidly as they did.

Chapter 7
Secondary Endeavors

Cooperatives not only do not dominate the market; they even utilize the services of private individuals as contractors. . . . The trusts have ceased being masters of their own affairs and have found themselves in the hands of [private] middlemen. They appear to be state institutions in name only, in reality depending on private people and serving their interests.
—Report presented at a meeting of the Petrograd Party Central Committee

Private capital has seized the initiative and almost completely dominates the zagotovka market.
—Torgovo-promyshlennaia gazeta

In addition to conventional trade and manufacturing, smaller numbers of private entrepreneurs engaged in a wide variety of other activities. These businesses included cafés, restaurants, boardinghouses, inns, bathhouses, and shipping operations (using cars, trucks, horse carts, and boats on inland waterways). There was even a private airline (expropriated in 1929) based in the Ukraine and serving Khar'kov, Rostov-on-the-Don, Odessa, Kiev, and Moscow. One could also obtain a license to operate facilities such as private theaters, billiard halls, ice-skating rinks, gymnasiums, tennis courts, and the like.^[1] In addition, a government survey in 1923 (excluding Moscow and Petrograd) indicated that 9 percent of the "legitimate theaters," 29 percent of the cinemas, and virtually all variety theaters were privately owned.^[2] This list of activities might also be stretched to cover the "free professions" (doctors, dentists, architects), even though these individuals were not included in the same harsh tax category as most other private entrepreneurs.^[3] Although there is comparatively little information on private ventures outside trade and manufacturing, there is sufficient material to sketch at least the outlines of selected realms of endeavor—book publishing, middleman transactions, zagotovka work, joint-stock companies, and credit organizations—distinct in one way or another from the activities covered in previous chapters.

Book publishing was one of the few lines of private business not outlawed during War Communism. In 1918 there were 111 private publishers registered with the state, and during the next three years at least some of these operations issued books, both on their own initiative and to fulfill orders from the state publishing agency (Gosizdat). Nevertheless, the state effort to eliminate private trade during War Communism applied also to the sale of books, and this greatly hampered the activity of private publishers.^[4] The initial decrees heralding the transition to NEP said nothing of the book trade, and it was not until late in the summer of 1921 that the Moscow Soviet permitted the free sale of books by independent publishing houses.^[5] Only in December did the Council of People's Commissars (Sovnarkom) officially extend NEP to the publishing business and announce a new set of rules for this activity. As spelled out in Sovnarkom's decree, licensed private publishers were allowed to own printing equipment, sell their output at free-market prices, and import books (after obtaining special permission). All manuscripts had to be approved by the state, and Gosizdat reserved the right to buy at wholesale prices all or any number of the copies of a book being printed.^[6]

Following Sovnarkom's decree, the number of private publishing houses swelled rapidly, so that by the end of May 1922, there were 319 registered in Moscow and Petrograd (though only a handful in the rest of the country). But many of these were ephemeral operations or fronts for other business schemes and published few if any works. In Moscow, for example, of the 220 private publishers registered by May 26, 1922, fully 133 did not submit a single manuscript to Gosizdat for approval in the period after mid-November 1921. Another 60 firms requested clearance for one to five books each, and only 10 sought permission to publish at least eleven titles per enterprise. The situation was similar in Petrograd, where, during the period from January 31, 1922, to May 29, 1922, 44 of the 99 registered private publishers did not approach Gosizdat with a manuscript, and only one operation submitted as many as eleven.^[7] Either Gosizdat's censors were not particularly strict or most publishers limited themselves to safe works (including books issued under contract for Gosizdat), because only 41 of the 1,003 manuscripts presented for approval were rejected.^[8]

As a general rule, private publishing was most heavily concentrated in the humanities, accounting by the beginning of 1923 for a third of all titles on philosophy and psychology, for over 40 percent in the area of poetry, belles-lettres, and literary criticism, and for half the books on painting, theater, and sports.^[9] The private share of all books published

was under 20 percent in 1922 and under 25 percent a year later (see table 12).

In absolute terms private publishing declined dramatically at the end of the decade, paralleling the fate of the Nepmen in general. If their output in 1927 is labeled 100, then private publishers issued 61.9 titles in 1928, 49.6 in 1929, 14 in 1930, and 2.4 in 1931.^[10] All of these figures may prompt one to conclude that private publishing was insignificant. Certainly it cannot be considered one of the Nepmen's major areas of activity, with regard to either the number of people involved or their impact on the state and population. Nevertheless, by virtue of their concentration in the fine arts and the willingness of some to issue works from a variety of literary circles, private publishers contributed to the cultural richness and diversity that help distinguish NEP in Soviet history.^[11]

Whereas the endeavors of private publishers were less than critical to the nation's economy, another group of entrepreneurs—private middlemen—played a significant economic role in the "socialist" sector itself. We have already noted the Nepmen's importance in marketing goods produced by the state and will focus here on their activity as supply agents for state and cooperative organizations.

Raw materials and other supplies were frequently as scarce as finished consumer goods, and many inexperienced "socialist" enterprises, thrust out on their own in the marketplace, were forced to engage the

services of private middlemen even to obtain products from other state agencies. Soviet scholars such as I. Ia. Trifonov concur on this point: "Lacking experience and skill in trade-money operations, state enterprises [at the beginning of NEP] appeared helpless, carrying on isolated and unorganized trade. Even business between state enterprises could not be conducted without private middlemen."^[12] Some Nepmen sold products to state agencies as just a part of their operations, continuing to deliver goods to private customers as well. But often a middleman was more closely linked to a state firm, making purchases and sales in the latter's name and agreeing (not always sincerely) to conduct no additional business on the side. Under this arrangement, a Nepman could garner a handsome commission (generally at least 10 to 15 percent of the transaction) without investing any capital of his own.^[13] These private middlemen, acting as plenipotentiaries for "socialist" enterprises and traveling with official documents and passes, were a common sight on trains in the first years of NEP.^[14]

Data available for October 1922 indicate that fully 32 percent of state industry purchases were made from Nepmen (dropping to 11 percent in September of the following year). Even in Moscow, where official supply agencies were concentrated, some state stores in 1922 relied heavily on private middlemen for manufactured consumer goods such as textiles.^[15] The situation was similar with the cooperatives. As a general rule, the farther one looked into the countryside, the weaker the state distribution system became, and the more cooperatives depended on Nepmen for supplies. On the periphery of Moscow guberniia, for example, cooperatives obtained roughly 45 percent of their merchandise through private middlemen in 1922. Taken as a whole, the cooperative system bought between 30 and 40 percent of its wares from Nepmen at this time. According to a report from the Petrograd Guberniia Party Committee, some cooperatives even received loans from the private sector.^[16]

In the case of nonagricultural products, a private middleman delivering goods to a state enterprise generally acquired them from a second state agency. At an official congress on trade and industry in Rostov-on-the-Don, delegates from around the region told of the poor or nonexistent relations between "socialist" operations in 1922, which resulted in the "'organic' functioning of private middlemen in transactions between various state trade agencies." Similar reports elsewhere emphasized that this state of affairs was common throughout the land.^[17] At times, the helplessness of state enterprises was breathtaking. "It would seem apparent," complained an official in the Workers' and Peasants'

Inspectorate (RKI), "that oil and coal could be bought from state fuel agencies, electric lamps from the Electric Trust, but even here [state firms] often run for help to middlemen." To cite but one example: In 1922 a Nepman contracted to supply GUM (the main state department store) with two million pudy (36,000 tons) of coal at sixty-five kopecks per pud . He simply took the advance payment from GUM over to Torgugol' (a state agency whose name indicates that it sold coal), where he was able to buy coal at thirty-eight kopecks per pud and thus have a considerable quantity of coal left over after delivering GUM its share.^[18]

In such conditions it is not surprising that Nepmen often made large profits, either from hefty commission fees and gross overpayments by incompetent state agencies or in more underhanded ways such as using bribes to obtain scarce commodities or simply disappearing with the advance payment. Semen Pliatskii, whom we encountered in a previous chapter, sold a Petrograd trust 30,000 pudy of metal that happened already to be in the trust's own warehouses.^[19] These and other abuses and the profits streaming into private pockets sparked numerous outcries and reform proposals in the press.^[20] At the same time a number of government bodies were discussing ways to control the activity of private middlemen. RKI, for instance, proposed among other things that large sales be registered with the state commodity exchange and that commissions be limited to 1 percent of the value of the transaction.^[21] By an order issued on December 4, 1922, the Moscow division of the Supreme Council of the National Economy forbade state agencies in Moscow from using private middlemen in dealings with other state enterprises. State organizations could still employ Nepmen in transactions with the private sector, but could not pay commissions at a rate exceeding 3 percent.^[22] Finally, on January 2, 1923, Sovnarkom issued a decree for the country as a whole that banned private entrepreneurs from conducting business between two state agencies. Instead, state enterprises were permitted to retain their own in-house middlemen to facilitate sales and purchases.^[23]

These measures, along with increased business expertise in many state and cooperative undertakings, reduced considerably the number of private middlemen by the second half of NEP. In December 1927, a resolution of the Fifteenth Party Congress spoke confidently of the "socialist" sector's dominant position in the economy and recalled the prevalence of private middlemen at the beginning of NEP as simply an indication of how much progress had been made since.^[24] But despite the state's undeniable economic gains, investigations and reports throughout NEP in-

dicated that many "socialist" enterprises continued to rely on Nepmen (not necessarily illegally) for the supply of raw materials and other services.^[25] This is hardly surprising, since shortages and resource distribution problems refused to succumb completely to state policies. Even today, in a planned economy, these difficulties continue to plague both manufacturing and distribution operations. As a perusal of the satirical journal Krokodil confirms, some state enterprises still hire people to scour the country for scarce supplies.^[26]

Thus, just as Soviet consumers were partially dependent on private retailers, many state enterprises relied at least to some extent (especially at the beginning of NEP) on private middlemen. But even though most Bolsheviks were willing to tolerate Nepmen in the market squares for a number of years, they were considerably less patient at the spectacle of private entrepreneurs servicing the "socialist" sector. At the First All-Russian Congress of Commodity Exchange Officials early in NEP, Rykov asserted: "In the area of trade, private capital is trying to fill the cracks between our state production organizations and devoting too much of its attention and capital to middleman activity." Although there was certainly room for private capital to play a "large and useful role" in the development of trade, Rykov added, private involvement in transactions between state agencies was inappropriate.^[27] In a similar vein, the aforementioned congress (on trade and industry) in Rostov-on-the-Don declared that private retail trade was "desirable"; private wholesale trade "only tolerable"; and private middleman activity between "socialist" enterprises "completely impermissible."^[28]

In other words, even though there was widespread agreement that many nascent state undertakings had little alternative to dealing with private entrepreneurs,^[29] the official "solution" seems to have been almost exclusively a determination to eliminate private middlemen and improve at once the efficiency of the "socialist" sector. This in contrast to retail trade, where the state was more willing to accept the presence of Nepmen for a time. To the Bolsheviks, the Nepmen's transactions with state and cooperative agencies seemed a much graver threat to the development of socialism in Russia than did private sales to individual consumers.

Another important occupation of the Nepmen was the purchase of food and various raw materials in the countryside. This zagotovka work, mentioned briefly in a previous chapter as a source of merchandise for private traders, merits additional attention here for both eco-

nomic and political reasons. Private buyers roaming the countryside sought a wide variety of goods, ranging from grain, meat, vegetables, and eggs to hides, wool, and flax. These products, the vast majority of which were purchased from the peasantry, were then resold to private manufacturers and traders, "socialist" agencies, or directly to consumers. The grain zagotovka clearly assumed paramount urgency for the party, both because bread was the staple of the people's diet, and because the Bolsheviks desired to amass a grain surplus to support industrialization. Here, as in the case of private middlemen, the party found itself in the position of needing the Nepmen, but fearing their presence would undermine state control of a vital sector of the economy. Before pursuing this point, we need to examine the extent of private participation in the zagotovka of grain and other products.

There is little statistical information on the size of private grain purchases in the first years of NEP, because this activity was largely beyond the monitoring ability of the fledgling state bureaucracy. Certainly, though, the Nepmen's share was substantial, given the chaos plaguing state zagotovka efforts and the peasants' suspicion of (not to mention hostility to) state grain collection campaigns in the wake of War Communism. During 1922/23 in Tambov guberniia, for example, private buyers obtained over four times as much grain as state and cooperative zagotovka agencies.^[30] By the middle of NEP the private percentage of the grain zagotovka had fallen but was still far from negligible—roughly 30 percent in 1924/25, 20 percent in 1925/26, and 15 percent in 1926/27.^[31] In the Ukraine, private middlemen bought approximately 40 percent of the grain marketed by peasants in 1924/25 and accounted for over half the procurement in many regions of the country.^[32]

The Nepmen's share of the zagotovka of all agricultural products taken together has been estimated at 40 to 50 percent in 1924/25, 30 to 40 percent in 1925/26, and in the neighborhood of 30 percent the next two years.^[33] In the case of a number of products, including meat, butter, eggs, furs, and hides, the private sector's role was even more impressive (see table 13).

A significant portion—47 percent in 1926/27 according to one estimate—of the Nepmen's purchases in the countryside was resold to state and cooperative enterprises.^[34] It is difficult to determine the share of the state's total zagotovka that came through the hands of private middlemen, because "socialist" zagotovka agents sometimes bought goods illegally—grain, for example—through the private zagotovka network.^[35] Figures available for 1925/26 indicate that Nepmen supplied roughly 40

percent of the state's zagotovka of hides and furs,^[36] and undoubtedly considerable quantities of other products followed similar paths to the "socialist" sector.

Though conceding that private zagotovka activity was necessary to help acquire raw materials and food, Bolsheviks also harbored serious misgivings about Nepmen in this sphere of the economy. The party's concern went well beyond the risk of some "socialist" enterprises becoming dependent on private suppliers. The private zagotovka network was extensive and could offer the peasants free-market prices, in contrast to "socialist" zagotovka agents, who were supposed to observe price ceilings.^[37] As a result, the Nepmen proved to be effective contenders for the peasants' produce, and thus threatened to block the development of the state's smychka with the peasantry. This outcome, Lenin had declared a number of times, would thwart the construction of socialism.

Most ominous of all was the private sector's success in the grain zagotovka, for as we have noted several times the Bolsheviks attached great importance to accumulating a large grain surplus (and not at high free-market prices). By 1926, newspaper articles appeared frequently

with complaints that Nepmen were disrupting the state's grain collection efforts by offering peasants higher prices and taking precious space in freight trains for private grain shipments.^[38] The state moved in this period to reduce the private grain trade by cutting off credit to private zagotovka operations; limiting the amount of privately owned grain that could be milled in "socialist" facilities; revoking the leases of many large private mills; forbidding state and cooperative agencies to conduct grain transactions with Nepmen; and restricting private grain shipments by rail.

These measures helped reduce the private share of the grain zagotovka to the neighborhood of 15 percent by 1926/27. But as the volume of grain marketed by the peasants lagged farther behind demand, the gap between the official and the free-market grain prices widened sharply, prompting more peasants to seek private buyers. By 1928/29 the Nepmen's portion of the zagotovka had rebounded to just under one quarter.^[39] This rally at the expense of the grain collection effort of the state was undoubtedly one of the factors that prompted Stalin and his allies to launch their momentous collectivization drive and ban the free trade of grain. Only in this way, they no doubt concluded, would the state obtain a steady, reliable source of grain without having to pay free-market prices for it.^[40]

Most Nepmen were rather primitive petty traders and artisans, hardly meriting the label of capitalist so often applied to them in the 1920s. Nevertheless, a few private entrepreneurs (generally those with some capital and prewar business experience) operated on a larger scale, not just in permanent shops and factories but also in comparatively sophisticated ventures such as joint-stock companies and credit institutions. Private investors could participate in two basic types of joint-stock enterprises: those in which all shares were privately owned and those, known as mixed companies, where "socialist" organizations held a portion of the shares.^[41] To cite two examples of the first type, in June 1922 the state approved a private joint-stock charter for a company named Lim that manufactured sugar products. According to the agreement, Lim was required to pay 25 percent of its profits to the state. Three years later, Nepmen in Krasnodar formed a joint-stock business (Kubzhirprom) through the sale of twenty-five hundred shares of stock at one hundred rubles each. Kubzhirprom's charter permitted it to buy or lease factories for the production of goods from animal fat, conduct its own

zagotovka operations for raw materials, and open warehouses, branch offices, and stores.^[42]

Many private joint-stock companies were actually little more than previously existing enterprises with new names. Much along the lines of a false cooperative, a joint-stock charter often enabled a firm to obtain goods and credit more easily from "socialist" agencies, since the charter indicated that the business had been deemed respectable, even necessary, by the state. In addition, joint-stock undertakings received certain tax privileges, such as exemption from the leveling tax during the first year of business.^[43] In Leningrad, for example, a factory that processed liquid gases managed to avoid nationalization during War Communism and continued to function as a private plant following the introduction of NEP. The owners, deciding to take advantage of the privileges available to joint-stock companies, drew up a charter and formed a board of directors. But then they proceeded to buy all the shares of the "new" enterprise and thus controlled it as completely as ever.^[44]

Mixed joint-stock ventures were sometimes initiated by state agencies as a means to acquire additional (private) capital for a wide variety of projects. In the Novonikolaevsk region, for instance, the Siberian Revolutionary Committee declared it essential to involve private capital in the completion of the Achinsko-Minusinskaia railroad; to this end Siberia's first mixed joint-stock company was formed in the summer of 1922. At about the same time, the Northwest Economic Committee (headquartered in Petrograd) helped organize a mixed joint-stock undertaking to exploit natural resources along the Murmansk railroad and promote colonization of the region. As a final illustration, a mixed joint-stock fishing enterprise was chartered the following year in Vladivostok. The state fishing agency (Glavryba) contributed half the capital, with Nepmen supplying the rest. Glavryba retained the rights to 60 percent of any additional shares issued and after five years had the option of buying out its private partners.^[45] Despite the opportunities, however, most Nepmen with funds to invest in joint-stock companies shied away from the mixed variety.^[46] The prospect of intimate state supervision and the fact that the state was supposed to control at least half the shares in mixed enterprises undoubtedly convinced many private entrepreneurs that it would be less risky and more profitable to invest in purely private undertakings.

By the end of 1924, 114 joint-stock businesses had been chartered. Of these, 44 were funded entirely by the state, 38 were mixed (though 95 percent of the capital came from the "socialist" sector), and 32 were

private. Only 14 of the private firms were actually in operation. Two years later there were 166 joint-stock companies registered in the RSFSR, 89 of which were private.^[47] As these figures suggest, the great majority of private joint-stock enterprises sprouted up during the middle of NEP when the business climate was most encouraging. After only five new private joint-stock ventures were registered in 1924, the figure jumped to 23 (one source reports 24) new private undertakings in 1925 and an additional 50 in 1926.^[48] In the following years, reflecting the fate of the private sector in general, the number of new private joint-stock companies plummeted (table 14). As early as 1926/27, even before the onslaught of 1928, the profits of private joint-stock enterprises plunged fully 86 percent compared to the previous year.^[49]

Holding true to form, the bulk of private joint-stock investment was concentrated in the lines of consumer products that occupied the energies of nearly all Nepmen—food, textiles, haberdashery, leather goods, soap and candles, and metal tools and utensils. In addition, there were a number of firms active in construction work.^[50] According to the charters filed by private joint-stock companies, roughly equal numbers of these businesses were involved in trade and manufacturing. But in reality, many of the "industrial" undertakings simply bought and sold items produced elsewhere.^[51]

The number of private joint-stock enterprises was never very large (see table 14). During the years from 1923 to 1928 only 185 such firms registered and operated at one time or another in the entire country. Even in the peak year of 1926, the list of private joint-stock compa-

nies was well under 100, numbering 80 on October 1.^[52] Of the capital invested in all joint-stock ventures ("socialist," mixed, and private), roughly 70 to 80 percent came from the "socialist" sector.^[53] Clearly, then, the vast majority of private capital in trade and manufacturing did not flow through the coffers of private joint-stock enterprises.^[54]

Private credit organizations proved somewhat more fruitful than stock sales as a source of funds for the Nepmen. These institutions most often took the form of a Society of Mutual Credit (Obshchestvo Vzaimnogo Kredita or OVK), a sort of credit cooperative. OVKs obtained reserves through members' deposits and state loans, and then lent money to members engaged in various business activities. Five months after a decree of January 24, 1922, permitted private individuals to organize savings and loan cooperatives, the first OVK appeared (in Leningrad).^[55] In the months that followed, several others opened around the country, though the largest and most active OVKs tended to be found in Moscow, where private capital was most heavily concentrated.^[56]

The number of OVKs grew at a pace that reflected official policy on the Nepmen. The increase was least impressive in 1924 when the state adopted harsher measures toward the private sector, and most vigorous in the comparatively tolerant years of 1925 and 1926:^[57]

During the period from October 1922 to October 1926 the OVKs' membership swelled from 1,250 to 85,415 people. But as one would anticipate, in the following years these institutions withered and died—along with NEP itself. On the one hand the state began to cut back its loans to OVKs, and on the other, the elimination of private entrepreneurs removed not only another source of funds but also most of the OVKs' customers. In fact, as part of the official campaign to root out the last Nepmen, Sovnarkom decreed in November 1929 that surviving OVKs had to provide tax officials with the names of those private businessmen still receiving loans.^[58]

The majority of members in OVKs were private traders, followed by private manufacturers, with state agencies playing only a minuscule role. The dominance of private traders is evident in the distribution of OVK members in October 1923:^[59]

As a general rule, the larger the business, the more likely its owner was to join an OVK.^[60] Sizable operations tended to require more credit than did those of petty vendors and craftsmen, and they were also more likely to have sufficient cash for the required minimum deposit. The membership figures imply that the lion's share of the credit extended by OVKs went to private traders and manufacturers, and this was indeed the case. In 1924/25, for example, these two groups received roughly 80 percent of the loans made by OVKs in the RSFSR.^[61] But the distribution of these loans differed considerably in Moscow and the provinces. In the capital, with its comparatively heavy concentration of large private enterprises, the most important clients of OVKs were private wholesalers and factory owners. In the provinces, where substantial Nepmen were few and far between, smaller-scale private retailers assumed this distinction.^[62]

Records available for the three-year interval from October 1923 to October 1926 indicate a dramatic surge in the volume of money lent to Nepmen by OVKs. From just 4.8 million rubles in October 1923, the total jumped nearly 1000 percent to 51.4 million rubles in October 1926.^[63] Of all loans made to private entrepreneurs by OVKs and state banks, the portion provided by OVKs climbed from roughly 10 percent to 50 percent during this period.^[64] Many of the loans from OVKs were actually made with government funds. State banks slowly but steadily increased their loans to OVKs and in this way supplied roughly a third of the capital that OVKs loaned to Nepmen over these years.^[65]

Interestingly, when given an opportunity to voice their opinions (in surveys and short newspaper columns), Nepmen revealed a preference for loans from state banks rather than from OVKs. The reason given most frequently was that the state charged less interest, though sometimes the complaints included the extreme dearth of funds in OVKs and

the expense of becoming a member.^[66] In 1925/26 and 1926/27 private entrepreneurs paid interest on loans from state banks at annual rates in the teens—no more than half the rates charged by OVKs (table 15). Frequently, there was not sufficient credit from either the state or the OVKs, forcing Nepmen either to operate strictly on a cash basis or turn to independent moneylenders on the so-called free credit market. Here, funds could generally be obtained, but at astronomical interest rates—sometimes, depending on demand and the political and economic climate, as high as several hundred percent annually.^[67]

The formation of joint-stock companies and OVKs signaled a considerable increase in the sophistication of private economic ventures compared to the early months of NEP. But to reiterate, these initiatives remained exceptions in the private sector. Most private entrepreneurs were small-scale traders and manufacturers without the surplus capital or expertise to invest in joint-stock undertakings or OVKs. This, combined with a comparatively hostile government and uncertainty over long-term business prospects, kept such institutions well below their prewar levels of development. Shortly before the Revolution, for example, there were 1,177 OVKs with far more capital than their successors during NEP. Similarly, around the turn of the century, private joint-stock companies were over ten times as numerous as in 1926.^[68]

These contrasts are another manifestation of the generalization that private enterprises were much more likely to be simple and small-scale during NEP than before the Revolution. As noted in chapter 4, nearly two thirds of private trading operations before the war were permanent shops, whereas in 1925 only about one quarter of all private traders worked in such facilities. The reasons for this (such as a greater need to be mobile and inconspicuous, difficulties in obtaining goods and credit

from the state, the new tax decrees, and uncertainty over the future) stemmed from the Bolsheviks' ambivalent bargain-with-the-devil attitude (and policies) toward the Nepmen. Even in the heyday of 1925/26, when the state offensive at the end of the decade could hardly have been anticipated, taxation and other regulations must have led veteran private entrepreneurs to recall the prerevolutionary years as the golden age.