The USSR and the World Economy: Isolation or Integration?
During much the same period that the doctrine of "socialism in one country" was being introduced and adopted, what has been called "the industrialization debate" was also going on among the party/state elite. Contrary to what has at times been assumed, the context of this debate was not a turn away from the international scene and toward the tasks of internal development as part of an ideological assimilation of the disappointing results of the revolution export project of the years 1917-1923. In actuality, the debate over industrialization was closely linked to considerations of foreign relations and, in particular, to a foreboding conception of world politics: The world was divided into two camps, a "capitalist camp" headed by the Anglo-Americans, and the camp of the Soviet Union. As both camps stabilized, the contradictions between them became stronger. New wars loomed, both interimperialist and interventionist, and, as a prelude to such wars, capitalist Europe would impose diplomatic isolation and economic blockade on the USSR. It was on the basis of this scenario that the collective leadership of the party concluded that the Soviet Union must achieve economic independence from the capitalist states.
Bukharin was convinced that the capital required for the economic development and socialist construction of the USSR would not come from Europe. The abortive "German October" insurrection made clear that a Communist Germany was not about to become Soviet Russia's economic provider. And neither the Genoa Conference of 1922 nor the Anglo-Soviet Conference of 1924 had resolved the issue of Russian debts or unleashed large-scale, long-term development loans from European banks. Initially, Bukharin believed that the grain surplus held by prospering farmers might be sold abroad to finance imports of industrial equipment. However, the difficulties encountered by the government in procuring that surplus from the harvest of 1925 convinced him that the economy could not be dependent on an international market controlled by the bourgeoisie. He concluded that the capital for economic development could be amassed only from the increasing profitability of state industry, from a progressive income tax on entrepreneurs prospering under NEE and by mobilizing the voluntary savings deposits of the peasantry. None of these sources would
provide vast sums very soon, however, and Bukharin's program for socialization included no clear solution to the problem of capital accumulation for industrialization. Apparently it was not a critical issue for him. Vast amounts of capital were unnecessary, he thought, because existing industrial machinery could be used more intensively, and socialism could develop in the USSR without vast new investment—slowly, gradually, and "at a snail's pace," as he stated in December 1925.[62] Bukharin's contribution to the industrialization debate was, therefore, to recast the New Economic Policy, which Lenin had introduced in order that the Russian economy could be partially integrated into that of the capitalist world system, and identify it with building socialism in isolation under conditions of slow, autarkic economic development.
Stalin seems to have given little thought to how industrialization would be financed when he first proclaimed that socialism could be constructed in Russia separately in 1924-25. Apparently he believed that funds for capital investment could simply be borrowed from the state treasury. Of greatest importance, he thought, was the international political situation. Ties to world capitalism, that is, economic dependence on Europe, led "to a whole series of new dangers," as it was expressed in the phrase incorporated in the resolutions of the Fourteenth Party Congress, or, as Stalin himself stated it, the USSR would be "vulnerable to blows from the side of our enemies."[63] The immediate challenge, he thought, was the Dawes Plan. Western observers from John Maynard Keynes to Stanley Baldwin were suggesting publicly that the best solution to the problem of postwar international indebtedness would be for Germany to create the favorable balance of payments necessary to fund reparations to France and Britain by selling manufactured goods to the USSR in exchange for agricultural commodities and raw materials. Stalin objected to such proposals. They were intended, he maintained, to "squeeze money out of the Russian market for the benefit of Europe." "We have no desire," he added, "to be converted into an agrarian country for the benefit of any other country whatsoever, including Germany."[64]
Stalin's own distinctive program for the industrialization of the USSR aimed directly at economic independence, which to him meant that Russia would produce the means of production rather than acquiring them from abroad. The Soviet Union must be converted, he stated, "from a country which imports machines and equipment into a country which produces machines and equipment.... In this manner the USSR ... will become a self-sufficient economic unit building socialism."[65] This policy position contrasted sharply with the integrationist consensus that had formed in 1920-21, and it constituted a sharp break from the intentions that had
guided economic development and foreign policy since then. Moreover, it is significant that, in Stalin's concept of economic development, independence was the goal of industrialization, but not only the goal. Industrialization was not merely the way for the USSR to become independent of capitalism; the USSR had to be independent in order to industrialize. The central premise of Stalin's economics as of 1925 was that both the capital and the technology for industrialization could, should, and would come from Russia's own resources. Otherwise, the capitalist states could stifle or interrupt Soviet industrialization by imposing economic blockades. In this manner, autarky was the means as well as the end of Soviet economic development for Stalin.
The alternative to the autarkical development strategies of Bukharin and Stalin was formulated by Trotsky, who of all the leading Bolsheviks, Richard B. Day has argued, examined the difficult and complex issues of industrialization most realistically.[66] After his dismissal from the office of commissar for military and naval affairs in January 1925, Trotsky served on the Supreme Council of National Economy (Vesenkha) and as chairman of the Principal Concessions Committee, posts at which he experienced firsthand the many problems involved in planning and managing the weak and undeveloped industrial sector of the Soviet economy. During the most intense period of the industrialization debate, Trotsky identified low labor productivity—rather than the threat of dependence on the capitalist camp— as the most critical problem for Russian economic development. And the solution, he decided, was to encourage foreign trade and capital imports, to transfer the advanced technology of America and Europe to the USSR, and to achieve thereby a rapid tempo of industrialization and a high level of productivity. Industrialization "at a snail's pace," he thought, simply perpetuated the misery of the masses. Development based on Russia's indigenous engineering and metallurgy would merely bind the USSR to a primitive technology, require an industrialization period of ten to twenty years, and result in low-quality products. Importing the most sophisticated and expensive technology, by contrast, would catapult the USSR into the industrial future and allow it to create the objective basis for true economic independence from capitalism. For these reasons, Trotsky argued, the Soviet Union could not isolate itself from the global economy. Industrialization required, he concluded, not a reduction but an increase in relations with the outside world and, likewise, a temporary increase in dependence on the world market.
Accordingly, Trotsky was in 1925-26 the leading exponent among the party leadership of economic integration into the world economy and political accommodation with Europe and America. Russia, he maintained,
lacked not only advanced technology but also capital; it needed foreign concessions to develop Russia's natural resources and foreign credits to purchase machinery. He announced this in a Pravda article in June 1925, and in August he told the British representative in Moscow of the horrible state of Soviet technology, stressed the crucial importance of a machine-building industry, and informed him that unless the British stopped insisting on cash-and-carry and granted the USSR credits, they would lose out in machine sales to the United States.[67] Trotsky did not hesitate to follow the logic of his development strategy and economic foreign policy to their diplomatic consequences. He supported the debt/loan negotiations that opened with France in February 1926, seeing in them prospects for foreign credits three times the size of what Vesenkha expected to be able to invest in industry in 1925-26, and he urged noninterference in the British General Strike the following May in order not to jeopardize the prospects for loans from Britain and other European states.[68]
The crucial issues of socialist construction and economic development were the material of the Fourteenth Party Congress in December 1925. There the Central Committee committed the party to building socialism separately and to transforming the USSR into a self-sufficient industrial nation. Important issues were left undecided, however. At what tempo would socialism be constructed? With what technology would the USSR be industrialized? How would industrialization be capitalized? The reason for such irresolution was intraparty politics. The commitment of Stalin and Bukharin to "socialism in one country," transcribed as "autarkical economic development," bound them in theory to industrializing the USSR with indigenous technology and capital. To deny this would have constituted a victory for Trotsky. On the other hand, to call for industrialization and to prioritize production of the means of production, and to do so without designating the sources of investment capital and assuming that it could come from the state treasury, that is, from deficit spending, ran the risk of ruinous inflation.
Unless capital was supplied by foreign loans, the only available policy alternative was the one espoused by the leading party economist, Evgenii Preobrazhenskii. He advocated immediate and rapid industrialization, with priority given to large-scale heavy industry, and with investment capital mobilized by transferring to state industry what could be accumulated internally within the private sector, especially in agriculture. At the center of his strategy for industrialization was the expropriation of agrarian surpluses, which he termed "primitive socialist accumulation."[69] Preobrazhenskii's proposal represented a direct challenge to the smychka , the worker-peasant alliance on which NEP was based, and to Bukharin's gradu-
alist, voluntarist, and harmonious concept of how "socialism in one country" would be constructed. Bukharin in turn ridiculed Preobrazhenskii's strategy as "super-industrialization," industrialization at any cost, and he included in his condemnation Trotsky, who shared Preobrazhenskii's preference for rapid industrial growth but did not identify himself with the notion of peasant expropriation.[70] Stalin simply ignored the problem of industrial investment, probably to avoid possible dispute with his ally Bukharin.
"The stabilization of capitalism" was no mere Comintern catchphrase. It integrated ideologically the concepts of socialist construction, economic development, and foreign relations adopted in the period 1924-1926. It also had a basis in international reality. Starting in late 1924, following within months of the breakthrough to diplomatic recognition that had begun the previous February, Soviet foreign relations sustained serious reversals. The Germans engineered a rapprochement with Britain and France that undermined the "specialness" of the Soviet-German relationship symbolized by the Treaty of Rapallo. That rapprochement posed a possible threat to Soviet security, in the estimate made by the NKID, unless Berlin gave the proper guarantees to Moscow. Moreover, the Conservative government in England renounced the Anglo-Soviet Draft Treaty negotiated by their Labour predecessors and subsequently refused to discuss measures to improve or even to repair relations with Moscow. And as part of the reestablished Anglo-French Entente of 1924, the British Foreign Office and the French Foreign Ministry agreed to coordinate their policies toward the USSR. Finally, all three powers—Germany, Britain, and France—in effect put relations with the USSR on hold in 1925 while they resolved their differences and subjoined treaties regulating war debts, trade, and security to the Dawes Plan. Chapter 7 considers how these reversals were managed by those who conceived and conducted the foreign relations of the USSR.