PART I
Chapter 1
Building Communism with Bourgeois Hands
Small traders were springing up everywhere, crowds swarmed over the markets, the taverns exhaled their music, barefoot youngsters ran in the streets at dawn, following the cabs to offer flowers to lovers.
—Victor Serge
They have coined a new word—nepman—and no person who has not visited Russia can appreciate how mean a word it has become in that country. Nepman—symbol of degradation, object of scorn and contumely! Pariah, social swine! Villain on the stage, villain in the motion pictures, villain in everyday life! Nepman—label, curse, anathema!
—Maurice Hindus
To revolutionaries of diverse hues, such as the Menshevik leader F. I. Dan and Alexander Berkman, an anarchist deported from America to Russia, the legalization of private trade in 1921 seemed a clear signal that the Bolsheviks had jettisoned the fundamental ideals of the Revolution. Dan was released from a Bolshevik prison in January 1922 and wandered the streets of Moscow for a week before being exiled abroad. He was shocked by the sight of opulent Nepmen strutting around the capital with impunity.
This [new private] trade clearly dealt mainly with the luxuries of the "new rich," shamelessly standing out against a background of general impoverishment and appalling hunger, troubling echoes of which reached Moscow in the form of reports of widespread death, terrible instances of cannibalism, and so on. But all of these reports were received as if they were from another planet, and Moscow made merry, treating itself with pastries, fine candies, fruits, and delicacies. Theaters and concerts were packed, women were again flaunting luxurious apparel, furs, and diamonds. A "speculator" who yesterday was threatened with execution, and quietly stayed to the side trying to
avoid notice, today considers himself important and proudly shows off his wealth and luxury. This is evident in every little custom. Again after a number of years one can hear from the mouths of cab drivers, waiters, and porters at stations the servile expression, which had completely disappeared from use—"your honor" [barin ].[1]
Many Bolsheviks, bewildered by the party's new course, shared Dan's sentiments and bitterly explained the acronym NEP as the New Exploitation of the Proletariat. A bourgeois tide appeared to be sweeping away the cooled lava of revolutionary idealism. Alexandre Barmine, a young Bolshevik in 1921, recalled discussing NEP with some of his comrades:
We felt as though the Revolution had been betrayed, and it was time to quit the Party. "Capitalism is returning. Money and the old inequality that we fought against are back again." . . .
If money was reappearing, wouldn't rich people reappear too? Weren't we on the slippery slope that led back to capitalism? We put these questions to ourselves with feelings of anxiety.[2]
These concerns were expressed openly at party congresses and conferences in 1921 and remained common among Bolsheviks throughout the decade. At the end of October 1921, Lenin delivered the closing speech at the Seventh Moscow Guberniia Party Conference and turned his attention to queries passed up on pieces of paper by the delegates: "Questions such as the following are asked: 'Where is the limit to the retreat?' Other notes ask similar questions: 'How far must we retreat?' . . . This question indicates a mood of despondency and dejection that is totally groundless."[3]
To convince such wavering and skeptical party members, Lenin repeatedly outlined the considerations that had compelled the party leadership to legalize private trade. The upsurge of peasant unrest and revolts in 1920 and 1921, spawned in part by War Communism's attack on private trade, was the most immediate threat to the new regime. In a predominantly rural country, Lenin argued, the Bolsheviks could not survive in the face of a hostile peasantry. Or, as Bolsheviks often phrased it, if the smychka (the bond of revolutionary solidarity and economic cooperation between the proletariat and peasantry, represented by the hammer and sickle) collapsed, so would the Revolution. Consequently, free trade had to be legalized (along with the replacement of arbitrary grain requisitions by a lower, fixed tax in kind) to help placate the countryside. "We must satisfy the middle peasantry economically by going to free exchange," Lenin told the Tenth Party Congress. "Otherwise it will
be impossible—economically impossible—to preserve the power of the proletariat in Russia, given the delay of the international revolution."[4] In less than a decade, Stalin would prove that the party could not only retain power but also industrialize while antagonizing the peasants. But in 1921, as the nascent Soviet state faced revolt in the countryside and economic collapse, Lenin was undoubtedly correct to argue that free trade, by pacifying the peasants and encouraging greater production, would improve the precarious position of the state.
In the spring of 1921 Lenin thought that private trade should and could be restricted to the simple exchange of goods in local markets. The state was to supply the peasants with manufactured goods in return for the latter's surplus food, thus breathing life into the smychka .[5] Although this project possessed a certain elegant simplicity, it had no chance of surmounting the obstacles represented by the state's tiny supply of desirable consumer goods and the almost complete absence of a state distribution network in the countryside. Consequently, by the end of NEP's first summer, a wave of private buying and selling had rolled into the void and swept the plan aside.[6] Lenin was quick to acknowledge this setback, conceding, for example, at the Seventh Moscow Guberniia Party Conference in October that "nothing came of commodity exchange [between the state and the peasantry]. The private market proved to be stronger than we, and in place of commodity exchange there arose ordinary buying and selling, trade." In his closing speech to the delegates he added that the party had hoped that "through commodity exchange we could achieve a more direct transition to socialist construction. But now we clearly see that we will have to follow a more roundabout path—through trade."[7] Consequently, by the end of 1921 Lenin was willing to accept not only bartering by peasants but also regular wholesale and retail private trade as the only way to move Russia toward socialism.
According to Marx, capitalists were largely responsible for casting off the commercial restrictions of the Middle Ages, industrializing the West, and thus creating the economic foundation for socialism. Developing this point in his pamphlet The Tax in Kind (1921), Lenin argued that capitalism was not an evil in all circumstances. Compared to primitive, small-scale production, it was an improvement, the last leg of the journey to socialism. Consequently, under state supervision and regulation, "capitalism" could be used in the Soviet Union "as the connecting link between small-scale production and socialism, as the means, path, and method of increasing the productive forces." In a speech to the Sec-
ond All-Russian Congress of Political Education Departments in October 1921, Lenin told the delegates that private manufacturers could help build a Soviet proletariat. This was a crucial task, because an industrial labor force—"which in our country, thanks to the war and extreme devastation, has been made déclassé, that is, knocked from its class niche, and has ceased to exist as a proletariat"—was a sine qua non in the Bolsheviks' conception of a socialist society.[8]
Although private manufacturing could help revive the Russian proletariat, Lenin was counting on state industry (labeled the "commanding heights" and including nearly all large factories) to perform the lion's share of this task. But even here, in the development of state industry, Lenin saw an important role for private entrepreneurs. In order to industrialize, the state needed large reserves of grain and other agricultural products both to feed the burgeoning proletariat that would be created by a restoration of industry and to export for Western currency (needed to buy foreign equipment and hire Western specialists). Without such reserves, Lenin warned the Third All-Russian Food Conference in June 1921, "neither the restoration of large-scale industry nor the restoration of currency circulation is possible, and every socialist knows that without the restoration of large-scale industry—the only real base—there can be no talk of socialist construction." Thus private trade was essential, Lenin argued, to encourage the peasants to produce the surplus food needed by the state. Those who increase the exchange of goods between agriculture and industry, even by means of private economic activity, he wrote in May, are doing more for the development of socialism than those who worry about the purity of communism, or those who draft all sorts of rules and regulations without stimulating trade. "It may seem a paradox: private capitalism in the role of socialism's accomplice? It is in no way a paradox, but rather a completely incontestable economic fact."[9]
Actually, as the bewilderment in the party suggested, it was paradoxical in the extreme to use the "new bourgeoisie" in the construction of socialism. Nor was it certain that the Nepmen would scrupulously fill the role of "socialism's accomplice" designed for them by the state. As private traders swept over the land, marketing large quantities of the state's own goods for sizable profits, it was difficult to avoid the conclusion that the Nepmen were fleecing the state at least as much as they were helping to build socialism. To be sure, despite the paradox and uncertainty associated with the legalization of private business activity in 1921, Lenin was almost certainly correct that this was a necessary step
for the Bolsheviks. A retreat was essential in order to placate the peasantry, supply the urban population, and revive industry following the Bolsheviks' failure to storm the heights of socialism during War Communism. Clearly some Bolsheviks could accept this with a minimum of trauma. But it is also evident from the foregoing discussion that other party members simply could not bring themselves to regard the Nepmen as "socialism's accomplices."
Faced with this response from many in his own party, Lenin felt compelled to argue his case repeatedly in the last years of his life. "The idea of building communism with communist hands is childish, completely childish," he informed the Eleventh Party Congress in March 1922. "Communists are only a drop in the sea, a drop in the sea of people. . . . We can direct the economy if communists can build it with bourgeois hands while learning from this bourgeoisie and directing it down the road we want it to follow." Such exhortations to learn from the Nepmen, undoubtedly distasteful advice for many party members, were prompted by the reality that most Bolsheviks were unprepared to administer state trading and manufacturing enterprises. As Lenin told the Eleventh Party Congress:
The point is that the responsible communist—even the best, who is certainly honest and devoted, who in the past endured imprisonment and did not fear death—does not know how to carry on trade, because he is not a businessman. He did not learn to trade, does not want to learn, and does not understand that he must start learning from the beginning.[10]
Just as the Bolsheviks were not afraid to learn from the nonparty military experts during the civil war, Lenin wrote in The Tax in Kind , "we must not be afraid to admit that there is still a great deal that can and must be learned from the capitalist ."[11]
Since the state in the aftermath of War Communism was unable to produce sufficient amounts of even the most basic consumer goods and distribute them to the population, the party's least objectionable option was to call on the Nepmen. After confronting Bolsheviks and other state employees with such realities, Lenin often left them with instructions similar to those in the following excerpt from a speech given in October 1921:
Get down to business, all of you. The capitalists will be beside you. . . . They will make a profit from you of several hundred percent. They will profiteer all around you. Let them make a fortune, but learn from them how to run a business. Only then will you be able to build a communist republic.[12]
However sound this advice, Lenin never explained precisely the process by which state officials were to acquire business acumen from private entrepreneurs. Furthermore, even his most general instructions along this line were not readily accepted by many Bolsheviks, most of whom bridled at the prospect of learning anything from a Nepman. It quickly became apparent that some local officials would rather stifle the Nepmen than learn from them, thus hindering the implementation of the New Economic Policy.
Considering Lenin's preeminence in the party and his position as head of the Council of People's Commissars (Sovnarkom), it is not surprising that his views on the legalization of private business activity were rapidly reflected in party resolutions and government decrees. In the early months of NEP Lenin spoke of permitting only local trade by peasants of surplus produce they might have after paying the new tax in kind. This was the conception of the new freedom to trade outlined in a resolution adopted in March 1921 by the Tenth Party Congress. Transforming this declaration into a law, the All-Russian Central Executive Committee (VTsIK) decreed a week later that "exchange [of the peasants' surplus produce] is permitted inside the boundaries of local economic trade [oborot ] through cooperatives and at markets and bazaars." The state, VTsIK claimed, was assembling a large supply of manufactured goods to exchange for the peasants' surplus grain.[13]
But as Lenin began to realize during the course of 1921, plans to restrict private trade within such narrow limits were rendered nugatory by the swelling army of private middlemen, vendors, and shopkeepers. As the months went by, government acceptance of this new reality gradually became evident in official directives. On May 24 a decree from Sovnarkom permitted not only the free sale of surplus food by peasants but also trade by other citizens of goods produced by small-scale private manufacturers. These sales were not restricted to marketplaces and bazaars but could be conducted from permanent facilities as well as from stalls, booths, and hawkers' trays, for example. Further, state agencies were given permission to market their products through private traders if cooperative outlets were unavailable or not up to the task. Sovnarkom followed this order with another on July 19, declaring that anyone over sixteen could obtain the license that was now required to sell agricultural and manufactured goods from a permanent shop or in a market square. This decree, legalizing an already-existing trade, provided de-
tails on obtaining licenses and instructed the local authorities to set trading hours and enforce sanitation and safety regulations.[14]
Even though a good deal of private trade had been conducted in 1921 (and during War Communism) before it was legalized, many other prospective merchants, particularly those thinking of opening permanent shops, were reluctant to begin business in the first months of NEP when its future still seemed uncertain. According to a number of observers, a decree from Sovnarkom on August 9 helped break the ice and call forth a new surge of private trade by the end of the summer. Undoubtedly the portion of the directive most reassuring to Nepmen was Sovnarkom's insistence that state agencies implement more rapidly the decrees issued earlier in the year establishing the foundations of NEP. In case anyone failed to get the message, the text of the decree and a front-page commentary appeared in Pravda on consecutive days. "It is necessary," Pravda declared, "to realize clearly that under current conditions, the strengthening and development of the revolution are only possible in this way [i.e., through NEP]." The need for extreme state economic centralization had passed with the civil war, and consequently "it has become possible within certain limits to permit free trade and make room for private enterprise." Nationalized firms without great significance to the economy could be returned to cooperatives "and even private individuals."[15]
From August 1921 through 1922 the state churned out several laws that increased the area of legal activity for private traders. Some of the more interesting decrees include one from Sovnarkom on August 8, 1921, that allowed private persons to buy, sell, and own nonmunicipalized buildings, and another on December 12, 1921, that permitted the establishment of private publishing houses.[16] During the course of 1922, private trade in medicines was legalized (though special permission had to be obtained to conduct the trade); private hospitals and clinics were allowed to open; the state monopoly on the sale of agricultural tools and equipment was repealed; the Railroad Charter of the RSFSR (Russian Republic) ended restrictions on freight shipments belonging to Nepmen; horses could once again be bought and sold freely in the RSFSR; and private businessmen received the right to set up credit and savings and loan associations. After April 4, 1922, it was no longer a crime to own foreign currency, precious stones, or gold, silver, and platinum coins and ingots, though Gosbank, the main state bank, retained for a time its exclusive right to buy and sell precious metals and valiuta (foreign currencies). Finally, and in contrast to socialist principles, a tax de-
cree of November 11 allowed a person to inherit up to 10,000 gold rubles at a tax rate rising from zero to only 4 percent. With permission from the state, people could pass on larger amounts of wealth to their heirs at a tax rate that increased 4 percent for each additional 10,000 gold rubles and was not to exceed 50 percent.[17] This right to bequeath property freely was an incentive to reinvest profits in a business rather than consume extravagantly to keep them from falling into the state's hands at a person's death.
Just as private traders were being given more legal room in which to operate during the course of 1921, small-scale private manufacturers and artisans were being encouraged by the state. On May 17 Sovnarkom declared that the output of these producers had to be increased, and thus "needless regulation and formalism that hampers the economic initiative of individuals and groups" were to be avoided. These manufacturers had to be allowed to market their products freely unless they had used raw materials supplied by the state under special conditions. In another decree issued the same day, Sovnarkom repealed laws of previous years that had nationalized small-scale factories, though enterprises already put into operation by the state were not to be returned to their former owners. VTsIK and Sovnarkom spelled out the rights of small-scale manufacturers more completely on July 7, announcing that any citizen was free to engage in handicrafts and, if eighteen or older, set up a "small-scale manufacturing enterprise" (melkoe promyshlennoe predpriiatie ). These producers could legally sell their output on the free market and purchase raw materials and equipment there. According to this decree, a "small-scale manufacturing enterprise" could employ "not more than ten or twenty hired workers," and no one could own more than one firm. This latter stricture, interestingly enough, was omitted from the Civil Code published later in the year. Nepmen (and cooperatives) were also permitted to lease factories from the state, following an order by Sovnarkom on July 5, implementing a resolution to this effect adopted by the Tenth Party Conference in May.[18]
The state not only bestowed its approval on a growing number of private business activities, but by the end of the summer it also began to permit its own enterprises to conduct business with Nepmen. The Eleventh Party Conference declared in December 1921 that state factories had to be allowed to buy and sell on the free market because the state industrial supply and distribution systems were inadequate. This had been obvious for months, and a number of decrees issued in the late summer and fall of 1921 granted state enterprises the right—in fact,
forced many of them—to satisfy their needs on the free market. State firms were instructed to take their business first to cooperative buyers or suppliers, and to turn to private businessmen only as a last resort. But the cooperative system was so inefficient and underdeveloped at the beginning of NEP that state enterprises frequently gave business to Nepmen.[19]
The property rights and legalized spheres of business activity that had been granted to Soviet citizens during the first two years of NEP were collected and set down in the Civil Code of the RSFSR, which went into effect on January 1, 1923. Although not a dramatic extension of the rights of private businessmen, the Civil Code, as a compilation of the main points in many of the decrees discussed above, represented a clear reversal of the policies of War Communism. As a result, the code undoubtedly helped convince Nepman and Bolshevik alike that NEP had indeed been adopted, in Lenin's words, "seriously and for a long time." In summary, the key articles of the code concerning the Nepmen allowed private persons to own trading and manufacturing enterprises whose hired workers did not exceed the numbers to be set by special laws. (These numbers were never clearly spelled out for the different branches of manufacturing. A few authors cite twenty as the maximum figure, but some private factories legally employed many more.) Private trade in all items was permitted, except for those officially banned, such as weapons, explosives, aircraft, telegraph and radio-telegraph gear, certain securities, platinum, radium, helium, liquor above the legal strength, and various strong poisons. In a more ominous tone, article 30 warned that all business transactions "harmful to the state" were to be declared null and void, though a reasonably scrupulous entrepreneur had little to fear from this provision in 1922-23.[20]
In any scholarly or political debate in the Soviet Union, those who are able to claim most effectively that their line is consistent with Lenin's thought have a decided edge. Certainly this was clear to both sides in the party debates over the appropriate policy to adopt concerning the Nepmen after Lenin's death in January 1924. During this debate both those who called for continued toleration of the Nepmen and those who desired the "liquidation of the new bourgeoisie" could make a case that they were the true followers of Lenin. The Lenin most prominent in the preceding discussion—the man who argued that private trade and small-scale manufacturing must be allowed in order to satisfy the peas-
ants' needs, gain their support for the Soviet regime, and encourage them to produce the surplus grain needed for industrialization—would tend to support the call for toleration of the Nepmen. On a number of occasions Lenin supplemented his contention that private business activity had to be legalized temporarily with the argument that such a revival of "capitalism" represented no risk or threat to Soviet power.
In April 1921, for example, he told a meeting of party officials from Moscow and the surrounding region:
Of course free trade means the growth of capitalism; there is no getting around this. . . . Wherever there is small-scale production and free exchange, capitalism will appear. But need we fear this capitalism if we control the factories, transportation systems, and foreign trade? . . . I think it is incontrovertible that we need have no fear of this capitalism.[21]
The following month, in a set of instructions to local government agencies, Lenin wrote that "the workers' state has sufficient means to restrict within proper bounds the development of these relations [free trade], which are useful and necessary for small-scale production."[22] Thus, if we were to go no further, we would have a Lenin who seemed to support posthumously that segment of the party which, in the second half of NEP, maintained that the Nepmen furnished important benefits and posed no fundamental threat to the development of socialism in the USSR.
Nevertheless, Lenin was actually ambiguous on this critical question, at times appearing to consider the Nepmen a serious menace to the new regime. As early as the Tenth Party Congress in March 1921, when he argued for the adoption of NEP, he also felt compelled to warn the delegates that "free trade, even if it is at first not linked to the White Guards as Kronstadt was, nevertheless leads inevitably to White Guardism, to the triumph of capital and its full restoration. We must, I repeat, be clearly aware of this political danger." In the fall of 1921, speaking to the Second All-Russian Congress of Political Education Departments, Lenin asked:
How can the people recognize that in place of Kolchak, Wrangel, and Denikin we have in our very midst the enemy that has been the undoing of all previous revolutions? If the capitalists triumph there will be a return to the old regime, as all previous revolutions have demonstrated. Our party must make people realize that the enemy among us is anarchic capitalism and commodity exchange. We must clearly understand—and make sure that the masses of workers and peasants clearly understand—that the essence of the struggle is: "Who will win? Who will get the upper hand?"[23]
This struggle was primarily one between the state and the Nepmen to cement a smychka with the peasantry. Would the state be able to supply the cooperatives with enough consumer goods to encourage the peasants to join the cooperatives and provide a grain reserve to support the government's industrialization plans? Or would the peasants find it more advantageous to sell their produce to private buyers and patronize private shops? These questions were of extreme importance to Lenin, which is evident in one of his last works, written for the Twelfth Party Congress in January 1923: "In the final analysis the fate of our republic will depend on whether the peasantry sides with the working class, preserving this alliance, or allows the 'Nepmen,' that is, the new bourgeoisie, to separate it from the workers, splitting off from them."[24] Thus here (and on other occasions) Lenin suggested that the Nepmen posed a far more serious danger than was implied in his assurances that the state could control the Nepmen and had nothing to fear from them. At times he even worried aloud that the state had lost its ability to check the swelling torrent of private enterprise loosed by NEP. He confessed late in 1921 to the delegates from the Political Education Departments that the Nepmen, "whom we are letting in the door and even in several doors," were also coming in through "many doors of which we ourselves are not aware, which open in spite of us and against us." By the Eleventh Party Congress in March of the following year, the state seemed even more helpless against the onslaught of private entrepreneurs.
Here we have lived for a year with the state in our hands, and has it carried out the New Economic Policy the way we wanted? No. We do not like to admit this, but the state has not operated the way we wanted. And how has it operated? The machine has torn itself from the hand that guides it and goes not where it is directed but where some sort of lawless, God-knows-whence-derived speculator or private capitalist directs it. The machine does not go quite the way the driver imagines, and often goes in a completely different way.[25]
This statement must have alarmed the delegates, given the consequences Lenin attached to a victory by the Nepmen. It was also the concern of Lenin recalled a few years later by those in the party who desired a crackdown on the "new bourgeoisie."
All Bolsheviks desired the eventual elimination of the Nepmen, but there was no consensus on when and how this should be accomplished. Part of the problem was that Lenin's ambiguous statements on the duration of NEP left no clear guidelines on how long the Nepmen should be tolerated. During the first months of NEP, Lenin seemed concerned pri-
marily with convincing the party and the public that NEP had been adopted in earnest and was not a momentary zigzag in the state's domestic policy. At the Tenth Party Congress in March, he estimated that the restoration of large-scale industry would take "many years, not less than a decade, and probably more given our economic havoc. Until then we will have to deal for many long years with the small-scale producer, and the slogan of free trade will be inevitable." Two months later, at the Tenth Party Conference, Lenin reiterated more forcefully the need to accept NEP, in an often-repeated phrase, "seriously and for a long time."
"Seriously and for a long time"—we must definitely get this into our heads and remember it well, because from the habit of gossip rumors are spreading that this is a policy in quotes, in other words, political trickery that is only being carried out for the present day. This is not true.[26]
Although adamant that NEP had been adopted "seriously and for a long time," Lenin was considerably less certain how long a "long time" would be. In March, as we have seen, his estimate was "not less than a decade, and probably more." At the Tenth Party Conference in May, he rejected the guess of another delegate that "seriously and for a long time" meant twenty-five years, but he conceded that he could not predict NEP's duration: "I will not venture an estimate on how long the period should be, but this [twenty-five years], in my opinion, is too pessimistic. We will be lucky to project our policy five to ten years into the future, because usually we cannot even do it for five weeks."[27]
Thus the impression that emerges from Lenin's scattered remarks on NEP's future is one of uncertainty. On balance, his comments tended to support those in the party who felt the Nepmen would be needed for a considerable period of time. But on some occasions he appeared less patient, as in a speech to an All-Russian Congress of Metalworkers in March 1922: "We can now see clearly the situation that has developed in our country and can say with complete firmness that we can now stop the retreat that we began and are already stopping it. Enough. " Three weeks later he announced to the Eleventh Party Congress that the party was approaching "'the last and decisive battle'" with "Russian capitalism growing out of and supported by the small peasant economy. The battle will be in the near future, though it is impossible to determine the date precisely."[28] Although these statements were not free from ambiguity (for instance, did Lenin understand "'the last and decisive battle'" to mean economic competition or a violent clash?), this did not prevent Bolsheviks who favored a showdown with the Nepmen from
contending a few years later that "the near future" had arrived. Stalin, for example, cited remarks such as this—and Lenin's comment at the end of December 1921: "We will carry out this policy [NEP] seriously and for a long time, but, of course, as has already been correctly noted, not forever"[29] —to support his liquidation of the Nepmen at the end of the decade.[30]
Lenin was faced in 1921-22 with the task of designing a policy concerning the Nepmen, who, he had indicated, provided essential skills while threatening simultaneously the very existence of the state. At times Lenin seemed uncertain about how much private enterprise to permit and how to keep it from corrupting the Revolution. In the fall of 1921 he conceded to the Second All-Russian Congress of Political Education Departments that NEP "means the restoration of capitalism to a significant extent—to what extent we do not know." At the Tenth Party Congress he posed a question undoubtedly on the minds of many in attendance: "Can the Communist party really accept and permit freedom of trade? Are there not irreconcilable contradictions here? To this one must reply that, of course, in practice the solution to this problem is extremely difficult to determine."[31] This statement betrays in Lenin more than a hint of the misgivings that were harbored by other Bolsheviks—and that Lenin tried to dispel by claiming that no paradox existed in using Nepmen to build socialism.
Lenin's health deteriorated before he could work out a detailed system of restraints to keep the private sector within limits the party deemed safe. In fact, he had no clear idea even about what these limits might be (and there was certainly no consensus in the party on this score until Stalin imposed it at the end of the decade). On his death in January 1924, Lenin left only his notion of "state capitalism" to guide his successors. "State capitalism," he explained to the Eleventh Party Congress in March 1922,
is a completely unexpected and unforeseen type of capitalism. After all, nobody could foresee that the proletariat would gain power in one of the most underdeveloped countries, try at first to organize large-scale production and distribution to the peasants, and then, failing in this effort because of the low standard of culture, enlist the services of capitalism.[32]
Specifically, state capitalism as it pertained to the Nepmen was an arrangement whereby the party retained all political power and control of
important economic enterprises but permitted the Nepmen (and a handful of foreign entrepreneurs operating concessions) to conduct business. The Bolsheviks hoped to restrict this private activity in a number of ways, as we will see, and guide it into spheres most beneficial to the state.[33]
Some years earlier, in the spring of 1918, Lenin had attached a different meaning to the term state capitalism .[34] At this time he argued that the new Soviet state should engage the services of large-scale capitalists—the only people with the expertise to carry out production and distribution on a national scale. The state, stopping short of nationalizing the enterprises of these businessmen, would limit itself to controlling or directing them, much the way the government managed the economy in wartime Germany. This, Lenin maintained, would be a great step forward for Russia—a triumph over the petty bourgeoisie (small-scale traders, craftsmen, and peasant entrepreneurs) and the last stage in the transition from capitalism to socialism. By the summer of 1918, however, Lenin abandoned the concept of state capitalism. Few capitalists were available or interested, and, in any event, as the party entered War Communism Lenin (and most Bolsheviks) apparently felt that a much more direct route to socialism was available.
Following the introduction of NEP, Lenin resurrected his pre-War Communism theory of state capitalism as a means to convince apprehensive Bolsheviks that NEP was not entirely an unanticipated or striking departure from party doctrine. But once again, few large-scale capitalists (domestic or foreign) stepped forward to work with the Bolsheviks. Consequently, as the months went by, Lenin began to describe state capitalism as a system of using and controlling small-scale entrepreneurs (the vast majority of Nepmen)—the very people earlier designated as the principal enemy when Lenin had explained state capitalism in the spring of 1918.
Toward state capitalism's goal of bridling the Nepmen, Sovnarkom and VTsIK announced on March 22, 1923 (with a supplementary order on June 14), that all private businessmen were required to register within three months with the guberniia economic councils (sovnarkhozy ). Even Nepmen who had been in business for some time and had already registered with the state and purchased licenses were required to present copies of their registration forms to the guberniia sovnarkhozy . The decree instructed guberniia officials to scrutinize all registrations by July 22 and reject those that violated NEP's ground rules. Also that spring, Sovnarkom and VTsIK reaffirmed the state monopoly of foreign trade and ordered the People's Commissariats of Justice and Foreign
Trade to crack down on infringements. A number of other decrees and rulings in 1923 addressed narrower lines of activity. For example, private purchases and sales of gold, silver, foreign currencies, and securities were permitted at various state exchanges, but private trade in platinum was forbidden. Further, in August private film production and distribution firms were banned, and a state monopoly proclaimed.[35]
Apart from permitting or forbidding specific economic activities, state capitalism restrained the Nepmen by taxation. The first direct tax on the nonpeasant population after the introduction of NEP was the "business tax" (promyslovyi nalog ) announced on July 26, 1921, consisting of a license fee and a "leveling fee" (uravnitel'nyi sbor ). The license fee, which increased with the size of the business, was to be paid every six months, though special three-month and one-month licenses were also available. The leveling fee was a monthly 3 percent tax on production and sales and accounted for a sizable majority of business-tax receipts (about 71 percent in 1922/23 compared to 29 percent for the license fee). In 1921 the bureaucracy was in no condition to assess and collect this tax from all producers and traders, so the tax was implemented gradually, beginning with the fifty-eight largest cities. The following year the tax was extended to the country as a whole, though doubtless many holes remained in the bureaucratic net through which Nepmen could slip.[36]
Individual craftsmen working alone were exempted from the tax, as were peasant handicraftsmen who received help only from family members and also farmed part time. More substantial private manufacturing enterprises were divided into twelve ranks, according to the number of workers employed (from not more than three in rank I to over seventy-five in rank XII), and assessed a license fee that increased with each rank. Private trade was divided into three categories, with the license fee rising from rank to rank. Rank I covered sales by individual hawkers and peddlers from trays, baskets, sacks, and the like in bazaars and market squares. Rank II encompassed sales from tables, stalls, booths, and kiosks, with sales from larger, permanent establishments falling into rank III.[37]
On February 10, 1922, VTsIK and Sovnarkom issued a new business-tax decree, dividing trade into five ranks and introducing a surcharge on the business tax for firms producing or trading "luxury goods." The term luxury goods was defined simply by including a long list of individual items such as products made from precious metals and stones, fireworks, photographic equipment, rugs (except those made
from hemp or felt), various silk, wool, and linen fabrics, furs, various sorts of footwear, caviar, sturgeon, foreign cheeses, mayonnaise, out-of-season vegetables, cigars, foreign tobacco and cigarettes, art objects, furniture, carriages, cars, "fashionable women's clothes," live flowers, pastries and candies, perfumes, and cosmetics. Producers of "luxury goods" were required to pay half again the normal license fee of businesses their size. Traders of ranks I, II, and III who handled "luxury goods" were ordered to pay an additional license fee equal to 100 percent of the standard fee for rank III. Traders in rank IV were assessed a surcharge amounting to 150 percent of the standard rank III fee, whereas merchants in the fifth rank paid an additional two and one-half times the cost of a standard rank III license. The leveling tax rate on the production and sale of "luxury goods" was raised to 6 or 12 percent, depending on the specific products involved. State and cooperative firms lost their immunity to the business tax in 1922 and were initially taxed at the same rates as private businesses. But in 1923 another business-tax decree raised the Nepmen's rates while the state was busy extending tax advantages to the "socialist" sector.[38]
In November 1922 VTsIK and Sovnarkom introduced an income tax on all individuals living in towns and receiving income from business activity, securities, and other sources. Also taxed were people who lived in the countryside but whose source of income was in a town, and people who lived in towns but received income from the countryside. Most workers' wages were exempt from this tax, and if they had other income, they were taxed at lower rates than Nepmen. The tax was to be levied every six months on a progressive scale that ranged from 0.8 percent to only 14.6 percent, though by 1924 the upper end of the scale had increased to 35 percent.[39]
By the end of 1922, Nepmen were subject to many other taxes and fees besides the business and income taxes. Easily the most substantial of these was the fee for the use of business facilities (rent paid for shops and market stalls, for example), generating twice as much revenue from private traders as the business tax in 1922. The announcement of higher rents in January 1923 accounted, along with the winter weather, for a sharp (40 percent) reduction in the number of private traders in the first quarter of 1923. During this period in Moscow, over one fifth of the applications to rent private trading facilities were withdrawn by the Nepmen themselves. There were also ad hoc taxes, such as the special levy for famine relief funds imposed in January 1923 on producers and traders of "luxury goods." The tax amounted to 50 percent of the li-
cense fee and 1 percent of sales or production, and even higher rates were applied to certain enterprises that sold food or drink. In addition, the government drained off some of the Nepmen's profits by requiring them to purchase insurance from the state for their businesses and workers. In 1923, for example, holders of trade and manufacturing licenses and other income tax payers were required to spend on insurance an amount equal to 16 percent of the money they paid in wages. Nepmen were also pressured to buy government bonds, frequently in the tone adopted by G. Ia. Sokol'nikov, commissar of finance, at the Tenth All-Russian Congress of Soviets in December 1922: "If a man is able to support the loan and does not support it, we can and shall interpret this as a refusal to support the Soviet Government in general."[40]
It was one thing to announce these new taxes, but quite another to collect them. Particularly in the early years of NEP, the state's ability to assess and collect taxes and prevent unlicensed trade was extremely limited, both in the provinces and in the large cities. This was the result in large part of the size of the country and all the economic and political disruptions since 1917. But another factor was the disdain of most Bolsheviks for work in a tax bureaucracy. As an official in the People's Commissariat of Finance (Narkomfin) complained on the eve of the Eleventh Party Congress: "Financial and especially tax work is still not at the center of attention of party and Soviet agencies, and thus the old scornful attitude toward financial and particularly tax work is evident."[41] For these reasons, then, a considerable amount of private economic activity undoubtedly eluded taxation.
The state was aware of this problem and took what steps it could to enforce its tax decrees. In May 1922, for example, a Domestic Trade Commission (Komvnutorg) was created and attached to the Council of Labor and Defense (STO). Komvnutorg (which two years later was reorganized and upgraded as the People's Commissariat of Domestic Trade, Narkomvnutorg) was supposed to organize a system to gather data on the Nepmen, study trends in private trade, present drafts of decrees to Sovnarkom and STO encouraging "socialist" trade over private trade, and comment on trade decrees prepared by other agencies. In addition to revamping its own bureaucracy, the state issued a number of orders in 1922/23 requiring trade and manufacturing firms (state, cooperative, and private) to keep business records and make these available to tax agents inspecting the firm. The local police (militsiia ) were instructed to help register private traders, assist Narkomfin in collecting taxes from Nepmen, and enforce other trade regulations. Unlicensed
private businesses and those that did not pay their tax arrears could be closed by the police.[42]
In accordance with his concept of state capitalism, Lenin indicated that the courts would interpret laws the way the Bolsheviks understood them and not in favor of the Nepmen, insisting at the same time that state agencies act within the law and respect the economic rights that were being granted to individuals. "The task before us now," he told the Ninth All-Russian Congress of Soviets in December 1921,
is to develop trade as demanded by the New Economic Policy, and this requires greater revolutionary legality. . . . The closer we get to firm and lasting power and the further trade develops, the more essential it becomes to adopt firmly the slogan of greater revolutionary legality, and the narrower becomes the realm of activity of the agency [the Cheka] that responds with blows to the blows of conspirators.[43]
A few days later Lenin appealed to the congress for a balanced regulation of private entrepreneurs. The People's Commissariat of Justice, he explained, must "carefully observe the activities of private traders and manufacturers, permitting not the slightest restraint of their activity, but at the same time punishing most severely the slightest attempt to violate the laws of the republic."[44]
This was easier said than done, in part because the restrictions that state capitalism placed on the Nepmen were quite vague. To be sure, certain undertakings such as foreign trade and heavy industry were for all practical purposes closed to the Nepmen, but in domestic trade the legal boundaries were considerably murkier. Initially, as we have seen, the state tried to restrict private trade to the simple exchange of products in local markets, and only grudgingly accepted ordinary private shops and markets when the former scheme was outdistanced by reality. Thus it was next to impossible for even the most alert local official to know which activities were permitted and which not. Provincial officials were not the only ones confused; numerous complaints appeared in leading Soviet economic periodicals in 1922 and 1923 on the lack of a clear and complete body of trade law.[45]
Many Nepmen were also uncertain about the new rules—and not only during the first months of NEP. In May 1923, for example, a correspondent from Torgovo-promyshlennaia gazeta (Trade and Industry Gazette) talked with a number of private meat vendors in Moscow.
More than anything else they complained that the state had still not worked out a definite set of principles to guide its officials in the supervision of the private sector. As a result, the butchers claimed, they were subjected to widely varying treatment from different state agencies and individual inspectors. Most often this took the form of arbitrary tax assessments, which could fluctuate dramatically even within a single district. Sometimes an individual shop was hit with such heavy tax surcharges that it had to close, while stores nearby remained comparatively unscathed.[46]
Another problem was the concept of "speculation," which the authorities could stretch to ban nearly all private trade, if they chose. Following Lenin's call for a revision of the speculation laws in order to increase state control of the Nepmen, Sovnarkom decreed in July 1921 that anyone who conspired to raise prices or withhold goods from the market was to be imprisoned or have property confiscated, or both.[47] Interpreted strictly, this decree forbade peasants to store their grain until prices improved and made it a crime for a private middleman to offer peasants or any other producers a higher price for their products than that offered by the state. Of course, such open-ended decrees were not enforced with unremitting zeal in the early 1920s. An attempt to do so would have scuttled NEP immediately after its launching. Nevertheless, the police cracked down in one place or another often enough to create considerable confusion about what, precisely, constituted speculation. As Ilya Ehrenburg observed:
There was a very fine dividing line between permissible profit and illegal speculation. From time to time the GPU arrested a dozen or a hundred enterprising traders; this was called "skimming the NEP." The cook knows when to skim the fish-soup, but I doubt whether all the NEPmen understood which they were: the scum or the fish.[48]
This uncertainty remained, and the state later found it easy to launch offensives against the Nepmen when it wished to, on the basis of existing speculation decrees.
Adding to the legal confusion, the state sometimes resorted to emergency measures in an effort to eliminate manifestations of private trade that the Bolshevik leadership found threatening or unpalatable. In 1921-22, for example, officials were alarmed by the many thousands of bagmen, persons who, generally traveling by train, took a small number of articles to the countryside to barter for food. On May 27, 1921, Lenin sent a telegram to F.E. Dzerzhinskii, head of the Cheka, noting that "all
the Ukrainian comrades most urgently insist on intensification of the struggle against bagging in the Ukraine, which threatens to disrupt the purchases of grain for famine-stricken regions of the Republic. . . . I ask you," Lenin continued, "to devote intense attention to this and inform me whether extreme measures are being taken, what these measures are, and their results." Though a number of "administrative measures" were adopted in various localities, such as forbidding bagmen to board trains, confiscating their merchandise, and pressing them into labor gangs, bagging continued to flourish until a more normal food distribution system was established.[49] The state also reserved the right to suspend private trade of particular products, and even shut down local markets completely, in regions where it was having difficulty collecting the tax in kind on these items. By December 1, 1921, private trade of various agricultural products (such as grain, dairy goods, potatoes, wool, and hay) had been banned in five entire gubernii and in parts of nineteen others. In some localities all private sales were banned, though it proved impossible, as it did during War Communism, to suppress small-scale private trade completely in these areas.[50]
The ambiguous attitude and policies of Lenin and the central government with regard to the Nepmen were matched by the treatment that private entrepreneurs experienced at the hands of local officials. Part of the problem was simply the result of the mixed signals coming from Moscow. But even when they received clear instructions to tolerate one form or another of private trade, some local officials bridled. Many Bolsheviks had serious misgivings about the legalization of private trade, and those in positions of local authority often showed little inclination "to build communism with bourgeois hands." Thus a number of provincial officials attempted to restrict or suspend private trade on their own authority. In December 1922, for example, local decrees of this sort were issued in Tambov, Simbirsk, Stavropol', Penza, Minsk, Gomel', and other gubernii . This activity prompted STO to send out a circular stressing that such decrees violated Soviet law. Local authorities were reminded that they must not take measures that contradicted "the basic principles concerning trade set forth in the decrees and orders of the central government." Besides, STO added, as if for good measure, these attempts to ban private trade simply did not work.[51]
Uneasiness over the Nepmen, however, was too firmly ensconced in the party to be checked by a few circulars. Local officials were particularly concerned about rising prices—which they were inclined to blame on greedy Nepmen—and consequently they sometimes imposed illegal
price controls on private trade in their regions. Now and then they went further. In December 1921, Pravda reported disapprovingly, an official in Central Asia wrote an article in Tashkentskie izvestiia (Tashkent News ) recommending the use of the Cheka and the "old methods of work" in combating rising prices. Following this advice, the Samarkand Executive Committee, with the help of the local Cheka, arrested many Nepmen and imposed price controls temporarily on all commodities. In Torgovo-promyshlennaia gazeta , the author of an article on private trade in the provinces concluded that "the attitude of local authorities toward private trade is not always favorable. . . . Traders live in constant fear of losing their property." This was certainly the case in Voronezh. Following the introduction of NEP, grain and meat appeared again in the market, and prices declined. But the local authorities, hostile to NEP and free trade, confiscated private traders' supplies of these products. As a result, grain and meat vanished almost completely from the market, and the price of what was available skyrocketed.[52]
Early in NEP the press reported that local administrators frequently imposed new taxes on the Nepmen or increased old ones without permission from Moscow. Typical were reports from Saratov, Kolomna, and Bogorodsk (a town near Nizhnii Novgorod), where private traders complained that they were charged too much for, among other things, obtaining trade licenses and renting booths or stands in the market squares. In Nizhnii Novgorod a certain tax was levied on both small-scale and more substantial private traders when, according to the law, only the latter were required to pay it. This helped explain, Torgovaia gazeta (Trade Gazette ) reported, the failure of a considerable number of private traders.[53]
The motive behind these illegal taxes was not always a desire simply to throttle private trade. Such measures could also reflect confusion over the new tax laws or a desperate need to acquire additional operating funds at a time when local officials received little financial assistance from Moscow. In Tambov, for example, the Guberniia Executive Committee levied unauthorized surcharges on, among other things, the normal fines for unlicensed sales, trade licenses, restaurants with billiard tables, and transactions at the local commodity exchange—all in order to raise money to care for victims of the famine that had ravaged the area. In Novocherkassk, among several additional taxes imposed on private traders were two to support a children's home and an old-age home.[54]
This unauthorized taxation of the Nepmen called forth a stream of
reprimands and reminders year after year from Moscow to provincial administrators. As late as December 1924, a circular from the Central Executive Committee and Sovnarkom noted that in some localities officials were still requiring private traders to pay various extra fees and "donations." "Such a state of affairs," the circular emphasized, "cannot be tolerated in the future, since it disorganizes the center's tax policy, undermines the trust of the population, and reduces its ability to pay taxes." The effectiveness of all these documents, however, clearly left something to be desired, given the need to reissue them and the continuing reports in the press of local taxation abuses.[55]
According to an article in STO's journal, the treatment of private credit organizations by provincial authorities was better in 1924/25 than it had been in the preceding years. Nevertheless, "in some localities" there were still supporters of a "struggle" with private capital who drove it underground into activities "harmful to the country." Such a "struggle" occurred in December 1925 when authorities "in many provincial towns" misinterpreted a directive from Moscow on combating "speculation" and restricted the operation of private credit institutions with more severity. This restriction, the article complained, produced results opposite those desired by Moscow, for it compelled people to turn to more clandestine and rapacious private usurers.[56]
Thus the treatment of the Nepmen varied wildly from place to place and year to year (even month to month). Given the conflicting, ambiguous statements and measures emanating from Moscow, and the dismay with which many officials regarded NEP, it is hardly surprising that, as a report prepared for STO asserted, the word chaos best characterized the implementation of the new trade policy in the provinces. In the spring of 1922, delegates at the Supreme Economic Council's First All-Russian Congress of Trade Officials complained that private entrepreneurs in the provinces were not regulated according to standardized norms. Instead, chairmen of local party committees dealt with private trade as they pleased, encouraging it in some regions and repressing it in others.[57]
Although many Bolsheviks, both in the provinces and the large cities, were wary or resentful of NEP, this was not always the case, as an American Relief Administration official in Iaroslavl' found: "In this community there is less hounding of the 'burgui' [bourgeoisie], less distrust and more cooperation between them and the Communists than in Moscow and Petrograd. To be sure, every now and then the power of the Communists makes itself felt, but on the whole life here is already beginning to flow in the prewar channels."[58]
Similar variations were evident in other localities. In the realm of manufacturing, Sovnarkom had to repeat a number of times its denationalization decrees, since many local officials were hostile (or confused) about the return of factories to private entrepreneurs. Although Nepmen who leased factories from the state were supposed to be allowed to buy raw materials on their own, authorities in various districts feared that such activity would disrupt the state campaigns to obtain the same products and therefore blocked the purchases made by private buyers—even going so far as to arrest them and confiscate their goods. In contrast, other provincial officials, eager to revive the economy in their regions and to unburden themselves of the obligation to administer large numbers of factories and workshops, hurried to return or lease many of them to Nepmen, despite warnings from Moscow to wait for a decree authorizing such procedures.[59]
These wide variations of official behavior at the local level were later matched by sharp fluctuations in the policy of the party leadership—first harsh, then tolerant, and finally merciless—toward private entrepreneurs in the five years between Lenin's death and Stalin's emergence as party leader. Such policy changes underscored the continuing absence of agreement in the party on the questions Lenin confronted repeatedly in the last years of his life: Were the Nepmen more an "accomplice" or a menace to the construction of socialism? What limits should be placed on their activity? How long should they be tolerated? Indeed, should they be tolerated at all? Despite his own uncertainty, Lenin in the first years of NEP could at least mute disputes among Bolshevik leaders on these questions. But his concept of state capitalism was unified only by the general principle of the need to both permit and restrict private economic activity, not by a consistent system of laws reflecting a consensus in the party. In fact, the tenets of state capitalism were sufficiently amorphous to permit the party faction in control at any given time after Lenin's death to alter dramatically the pressure on the Nepmen, while arguing all along that its policies were in harmony with the fundamental principles of NEP spelled out by Lenin in 1921-22.
Chapter 2
NEP's Second Wind
At the present stage [NEP], the system [does not] involve the actual prohibition of buying and selling at a profit. The policy is not to forbid these professions, but to render them precarious and disgraceful. The private trader is a sort of permitted outlaw, without privileges or protection, like the Jew in the Middle Ages—an outlet for those who have overwhelming instincts in this direction, but not a natural or agreeable job for the normal man.
—John Maynard Keynes
Uncertainty about the morrow gave a special character to the amusements of the new bourgeoisie. The Moscow that Yesenin called "Tavern Moscow" lived in a state of morbid tempestuousness; it was like a mixture of the nineteenth-century gold-fever in California and an exaggerated Dostoyevskian moral climate.
—Ilya Ehrenburg
Within the limits of "state capitalism," there was ample room to adjust the pressure on the Nepmen by such methods as enforcing existing speculation decrees with greater or less rigor, and by reducing or increasing taxes and the flow of goods and credit from the "socialist" to the private sector. Policy shifts of this sort followed the changes in party leadership that occurred during NEP, with the result that private entrepreneurs were subject to widely varying treatment throughout the decade—all supposedly in the spirit of NEP. These unpredictable policy changes were a frequent complaint of Nepmen who responded to surveys, spoke with Soviet reporters, and on rare occasions stated their views directly in newspaper columns. In 1926, for instance, a spokesman for a private textile firm wrote in the newspaper of the Commissariat of Domestic Trade, Torgovye izvestiia (Trade News ): "The main factor, from which private trade and industry suffer a great deal, is that up to now there has been no regular and consistent policy with regard to private capital. It would be easier to adapt one's activity to the harshest system than to be dependent on completely arbitrary and unanticipated developments."[1]
A. I. Sinelobov, a private trader and member of the Moscow Com-
modity Exchange, expressed similar sentiments in Torgovye izvestiia . "First of all," he urged, "it is essential that state agencies spell out precisely and definitively their policy concerning private trade." This would enable traders to plan ahead and eliminate the "speculative" leaps of some entrepreneurs from one activity to another.[2] If these views had been restricted to Nepmen, one might be inclined to shrug them off as whining. But this was not the case. The authors of several Soviet studies of the private sector, published in the 1920s, reached the same conclusion. For example, one of the contributors to the Supreme Economic Council's extensive report on the Nepmen concluded that "the main factor negatively affecting the normal development of private trade in the past few years has been the extreme instability and complete uncertainty created in the activity of private capital by the fluctuations of state trade policy."[3]
The problem was not simply the work of arbitrary local officials, uninformed or hostile toward NEP. Several times throughout the decade (first in 1921) party leaders themselves altered markedly their policy toward the private sector. On the national level, the first significant change in the business climate after the introduction of NEP came at the end of 1923 and lasted well into the following year. From the Nepmen's point of view, it was a setback of major proportions. A German correspondent in the Soviet Union throughout NEP described 1924 as "the year of the 'second Revolution.'" He reported, "At that time 300,000 private enterprises were closed in a few months, and a general attack was made on all remnants of bourgeois Russia. Churches were closed. The children of bourgeois parents were driven with merciless fanaticism from schools and universities."[4] William Reswick, a Russian who emigrated to the United States before the Revolution, worked in the Soviet Union in a number of capacities from 1922 to 1934. After a trip to New York in October 1923, he returned to Moscow at the end of December.
I was struck by the drastic change that had come over the capital in but a few weeks. Again, as in previous winters, the city was immersed in gloom. Stores, shops, and restaurants were bolted and locked. Their ice-crusted windows seemed to stare at me in stern warning of peril. . . .
The Sukharev market . . . was deserted. The feverish activity I had seen there in early autumn seemed to me like a dream. . . .
The obvious signs of fright were the speeding, shrieking Black Marias with their pitiful human cargoes. . . .
The victims of this wave of terror [a Soviet friend explained] are nearly all Nepmen, who had invested their capital in reliance on existing laws and acted in good faith.[5]
Other longtime foreign residents in the Soviet Union were also struck by this sudden change of course, with its wave of arrests and the closing of many private businesses. Nepmen who had made quick fortunes and had gradually lost their fear of an opulent life style suddenly found it risky to flaunt their wealth. Walter Duranty, the New York Times correspondent, reported that a lavish New Year's party was held that winter in Moscow's Hermitage restaurant, recently purchased by a group of Nepmen and ornately redecorated. In the midst of the gaiety, which "resembled a New Year's Eve in New York before the Crash," the GPU (secret police) burst in, arrested the host at each table if he was a state or cooperative employee, and announced that a check would be made to determine if all the Nepmen present had been paying their taxes. Shortly thereafter, the restaurant's lease was revoked.[6] The police were not the only ones to implement the harsh new line. State banks, for example, slashed the amount of credit they extended to Nepmen during 1923/24 from 42.4 to 17.8 million rubles.[7]
The reasons for the increased pressure on private entrepreneurs in this period remain shrouded in uncertainty, though undoubtedly several factors played a part. Some party members, as noted previously, were worried by the growth of private trade and feared that the state might soon find itself separated from the peasantry by the Nepmen. In February 1924 I. T. Smilga (a member of the Central Committee) warned a meeting of state economic officials:
If two years ago private capital made its first timid efforts in the area of trade and petty industry and did not appear a danger to the Soviet state economy, today we can no longer say this. In the person of the private capitalist we have a significant economic force that demands to be considered seriously. In retail trade and especially in trade with the peasants, private capital now occupies the dominant position.
Smilga went on to voice a concern that the "new bourgeoisie" was now positioned between the state and the peasantry, a warning repeated by Stalin a few months later at a course held for local party secretaries: "The merchant and the usurer have wedged themselves between the state on the one hand and the peasantry on the other, thus making it very difficult to set up the smychka between socialist industry and the peasant economy."[8] Lenin had based his justification of NEP on the argument that without the support of the peasantry, the state could not hope to industrialize and build socialism. But it clearly seemed to some in the party that NEP, by unleashing private trade in the countryside,
was in fact contributing to the state's problems there, rather than alleviating them.
Meanwhile, many Bolsheviks were also irritated and alarmed by the revival of lavish "bourgeois" entertainments in the cities. During War Communism, night life of a prerevolutionary sort had vanished nearly completely, but following the introduction of NEP, expensive amusements and public displays of wealth were tolerated. Many observers, Soviet and foreign, dwelled on this facet of NEP—in part because the contrast with War Communism was so stunning and in part because such a life style seemed flagrantly out of place following a "socialist" revolution. NEP's version of the Roaring Twenties went far beyond the reopening of expensive food stores, hotels, and restaurants. Casinos and race tracks also operated legally, the privately owned establishments being required to pay the state a portion of their receipts. Many nightclubs, gambling parlors, and brothels operated semiclandestinely (without licenses or tax payments), and the trade in bootleg liquor flourished. Those in the know had little difficulty acquiring heroin and cocaine.[9] According to Walter Duranty,
the biggest gambling establishment [in Moscow] was a place called Praga at the corner of the Arbat Square. In the main outer room there were two roulette tables both with zero and double zero, two baccarat tables and a dozen games of chemin de fer. Banks at baccarat frequently ran as high as $5,000, a dozen different currencies were used, from bundles of Soviet million notes to hundred-dollar bills, English five- and ten-pound notes, and most surprising of all, no small quantity of gold, Tsarist ten-rouble pieces, English sovereigns, and French twenty-franc coins. As in France, there was an "inner cercle privé ," where only baccarat was allowed and play was higher, with banks of $25,000 or $30,000.
Among the people at the Praga were prostitutes, "whom N.E.P. had hatched in flocks, noisy and voracious as sparrows. Later in increasing numbers [appeared] the wives and families of N.E.P.-men, the new profiteers, with jewels on their stumpy fingers and old lace and ermine round their thick red necks."[10] In Petrograd, an American famine relief worker attending the opera at the beginning of 1922 found his attention drawn to "a prominent box [in which there] sat a speculator with his richly dressed wife. They placed in front of them a box of delicious sweets, and in the presence of the onlookers peeled an orange (oranges are as rare in Petrograd as in the Arctic), put it on the sweets, and walked out."[11]
It is not difficult to imagine how Bolsheviks (and others as well) could
be appalled at such spectacles and wonder what had happened to the Revolution. The German ambassador, Count Brockdorff-Rantzau, noted that the ostentatious revelry of some of the wealthier Nepmen and the reappearance of casinos and luxury restaurants "have aroused deep resentment among the workers and the rank and file of the Party, who are asking whether they made the Revolution to enrich a host of private profiteers." The well-informed Menshevik biweekly, Sotsialisticheskii vestnik (Socialist Herald ), reported similar discontent among some workers and party cadre who were demanding "the closing of all 'NEP restaurants,' the taxation of Nepmen for hundreds of millions, and so on."[12] This was also the impression left by the anarchist Alexander Berkman, himself no enthusiast of NEP, describing Moscow in 1921. "Gay music sounds from the garden nearby. At the little tables white-aproned waiters serve food and drinks to the guests. Groups gather at the gate sullenly watching the novel scene. 'Bourzhooi! Damned speculators!' they mutter. The NEP is at work."[13] Perhaps nowhere else than in the memoirs of Victor Serge is there a better description of both the amusements of the newly rich and the dismay that this life style provoked among those committed to the Revolution.
The sordid taint of money is visible on everything again. The grocers have sumptuous displays, packed with Crimean fruits and Georgian wines, but a postman earns [only] about fifty roubles a month. . . . Hordes of beggars and abandoned children; hordes of prostitutes. We have three large gaming-houses in town [Leningrad], where baccarat, roulette and chemin-de-fer are played, sinister dives with crime always hovering around the corner. The hotels laid on for foreigners and Party officials have bars which are complete with tables covered in soiled white linen, dusty palm-trees and alert waiters who know secrets beyond the Revolution's ken. What would you like—a dose of "snow"? At the Europa bar thirty girls show off their paint and cheap rings to men in fur-lined coats and caps who are drinking glasses brimming with alcohol. . . . You could take the lift to the roof of the Hotel Europa, and there find another bar, like any in Paris or Berlin, full of lights, dancing and jazz, and even more depressing than the one on the ground floor.[14]
It may also be that as Lenin lay stricken in the winter of 1923-24, the party leadership (Stalin, Zinoviev, and Kamenev), particularly Stalin, felt compelled by the political uncertainty brought by Lenin's incapacitation and impending death to move against the Nepmen—as an attempt either to gain additional support in the party or to create an atmosphere of fear in which political opposition would be more difficult. One of William Reswick's friends, a Soviet journalist with good Kremlin connections, held the latter view.
Lenin is dying. The end may come tonight, tomorrow, next week, but it cannot be long. The doctors have given up hope. The triumvirate, Stalin, Kamenev, Zinoviev, are in a panic. Hence this new wave of terror. They have practically liquidated the NEP. . . . Stalin's real motive for arresting them [Nepmen] is to create an atmosphere of fright that will tide him over the crisis that must come with Lenin's death.[15]
Not only did a political crisis appear to be in the offing toward the end of 1923, but the country was also beset by the "scissors crisis." The term price scissors is a metaphor for a contemporary graph showing that by October 1923 prices of manufactured goods were close to three times higher than those in 1913, whereas agricultural prices were slightly below the 1913 level. This state of affairs provided the peasantry little incentive to produce and market surplus grain, and thus represented a threat to the state's industrialization plans and to the urban population dependent on produce from the countryside. One of the government's responses to the problem of holding down consumer prices was an attempt to eliminate private middlemen-wholesalers by levying higher taxes and sharply reducing the supplies they received from the state.[16] In addition, price controls were set on various common products (though it proved much more difficult to enforce these decrees in private stores than in the "socialist" sector). Thus, even had there been no political motives for shortening the Nepmen's leash, the economic problems of 1923/24 were sufficient to prompt a number of measures detrimental to private entrepreneurs.
As noted above, the drop in state credit available to Nepmen, from 42.4 million rubles to 17.8 million rubles during 1923/24, was particularly dramatic. On May 14, 1924, a special joint session of the Central Control Commission and the Workers' and Peasants' Inspectorate (RKI) ordered state banks to cease "as far as possible" granting credit to private traders. The banks were not slow to comply, and by October 1, 1924, the Nepmen's share of the total credit extended by the country's five main banks had fallen to 2 percent—down from 11.5 percent in October 1923. Following suit, nearly all industrial trusts that continued to sell to Nepmen sharply reduced sales on credit to private customers. To illustrate, of the total sales to Nepmen by cotton textile trusts, the percentage made on credit plunged from 49.3 percent in the first quarter of 1924 to 2.5 percent in May and 0.2 percent in June.[17] In the same spirit, state industry cut back its direct sales to Nepmen during 1924 from 14.7 percent of total sales to 2.1 percent. Some enterprises were ordered to cease all sales to private customers, whereas others were in-
structed to sell only for cash or in small lots. This was a blow aimed primarily at private wholesalers, who had come to rely on the "socialist" sector for a large portion of their merchandise, but naturally the effect soon rippled down to private retailers as well.[18]
All of these economic and "administrative" measures adopted in 1923/24, along with increased taxes[19] and attempts to control the prices of certain goods in private shops,[20] reduced markedly the number of private traders and the volume of their trade. During 1924 Moscow's newspapers contained numerous reports from around the country with headlines employing the military metaphors so often used in describing the state's relations with the Nepmen, such as "Private capital retreating along the entire front." Looking back on this period from the more hospitable atmosphere of 1925, the Nepman A. I. Sinelobov declared that the campaign to eliminate "speculation" and bring private trade under tighter control had been counterproductive, because the pressure simply forced many traders underground and into more speculative lines of trade. "The more persistently private trade is treated as an evil," he argued, "the more inevitably it becomes an evil," and "in 1924 conditions were created in which normal and loyal private trade became almost impossible."[21] Though Sinelobov's remarks seem partly self-serving, this does not invalidate his assessment of the state policy toward the Nepmen in 1924. In fact, only a year later, articles in a number of Soviet periodicals reached similar conclusions concerning the treatment of private entrepreneurs by the state.
Early in 1924, an article in Sotsialisticheskii vestnik predicted that the campaign against private trade would inevitably produce an economic crisis that would prompt the Bolsheviks once again to offer concessions to the Nepmen.[22] The accuracy of this forecast became evident by 1925 when the Nepmen experienced another abrupt change in the business climate, this time a change toward a more hospitable environment. The rationale for this new policy was that in 1924, as during War Communism, the state had bitten off more than it could chew in trying rapidly to replace the private sector. Or, as one observer remarked, it was better for a region to have private traders than no traders.[23]
It cannot be automatically assumed, however, that such considerations would have persuaded the party leadership of 1924 (the triumvirate of Zinoviev, Kamenev, and Stalin) to abandon its policy of pressure
on the Nepmen. The key political development accounting for this economic policy change in 1925 was the party infighting from which N. I. Bukharin emerged as co-leader with Stalin at the expense of Zinoviev, Kamenev, and Trotsky (who would later unite to form the so-called Left Opposition). In late 1924 and early 1925, Zinoviev and Kamenev challenged Stalin's direction of the party apparatus, prompting Stalin to join forces with Bukharin (and Bukharin's supporters on the Politburo, A. I. Rykov and M. M. Tomskii). Stalin's alliance with Bukharin was primarily one of convenience against a common opponent in the Politburo and should not be interpreted as an indication that Stalin shared Bukharin's views. But however strained the partnership, Stalin did not openly challenge Bukharin's line until after the final defeat of the Left Opposition at the end of 1927.[24] The important point here is that Bukharin was more inclined to tolerate private businessmen than were the losers in the party power struggle in 1924-25, and consequently the Nepmen soon felt a relaxation of state pressure.
Like all Bolsheviks, regardless of their positions in the economic debates and political factions of the 1920s, Bukharin regarded industrialization as essential for the construction of socialism in Russia. His primary differences with the Bolshevik Left were over the means and tempo of industrialization; he favored a more gradual approach that relied less on "pumping over" resources from the agrarian sector and more on an expanding consumer market—an approach possible only with help from private traders. Scholars have repeatedly described and analyzed the contending positions in the "industrialization debates," and there is no need here to trace all of Bukharin's arguments once again.[25] What were his views on the Nepmen?
Bukharin believed that Russia could industrialize (and thus begin the construction of a socialist society) only through peaceful "market relations," which meant, among other things, expanding the volume of domestic trade. Voluntaristic "storming" and "great leaps," though sometimes appropriate in political revolutions, were useless—indeed counterproductive, he maintained—as approaches to the economic tasks facing Russia in the 1920s. During War Communism, Bukharin wrote in 1925, "we believed it possible to destroy market relations immediately with a single stroke. As it turned out, we will reach socialism only through market relations." Because the state and cooperative stores were not sufficiently numerous or efficient to bring about the necessary revitalization of trade by themselves, private traders had to be tolerated,
even encouraged. They functioned both as additional customers for state industry and as conveyors of goods to people living beyond the less than sweeping reach of the "socialist" distribution network.
In the towns we are not at all closing the shops of the private trader; we permit his "work." As a result we have obtained a greater revitalization of trading in the entire country. This [private] trader is a customer for our state industry and state wholesale trade, while on the other hand he sells our goods—because our own state and cooperative trading network is very weak—in diverse corners of our country. Of course he gains from this and pockets the trading profit or part of the trading profit. But nonetheless, because of the general increase of trade, he facilitates independently of his will the growth of our state trade, the more rapid turnover of capital in the country, including the capital of our state industry and state trade. Thus our production machinery operates more rapidly, the process of accumulation proceeds more rapidly, and consequently the power of our state industry—this basic foundation of socialist society—increases more rapidly.[26]
Bukharin's contention that the Nepmen played an important role in the restoration of state industry, and hence in the development of socialism in the Soviet Union, resembled Lenin's view after 1921 that communism would have to be built in Russia with noncommunist hands. Pushing this point further, Bukharin noted on a number of occasions that private entrepreneurs were also a source of tax revenue, funds that helped nourish the industrial sector. Viewed from this perspective, the Nepmen, in spite of themselves, seemed to occupy a position in the front ranks of the movement to build the world's first socialist state.[27]
In 1925 Bukharin was, in effect, directing his famous "enrich yourself" exhortation at the Nepmen as well as the peasantry, because his analysis had concluded that prosperity in the private sector benefited the state. But the Nepmen could hardly be expected to increase the volume of domestic trade if they were repeatedly harassed by state officials and gouged by rapidly increasing taxes. As Bukharin declared in the spring of 1925, "the development of commodity exchange is possible only with the eradication of the remnants of War Communism in administrativepolitical work," indicating his disapproval of the state's treatment of private entrepreneurs in 1924. The time had come for a calmer, less belligerent atmosphere, one that Bolsheviks might find less bracing, but at least more conducive to a revival of trade. In The Path to Socialism and a Worker-Peasant Union (1925), Bukharin freely acknowledged that the goal of the proletariat and its party in a capitalist society was to inflame class struggle until it reached its most savage form—armed conflict and civil war. But once the proletariat seized power, the nature of the class
struggle changed completely, and "the party of the working class in these conditions becomes a party of civil peace."[28]
In the spirit of Lenin's most optimistic statements, Bukharin contended reassuringly in Path to Socialism that the Bolsheviks had nothing to fear from the Nepmen, because "the strength and durability of Soviet power is so obvious that the utter hopelessness of any attempt to wage an active and sharp political struggle against the new order is completely clear to the bourgeois elements—the Nepmen—of our society. These elements must willy-nilly reconcile themselves with the existing order of things." But did this mean that class struggle had become inappropriate? Not at all, Bukharin replied. The struggle had simply altered its form and moved to the economic arena. A year earlier, Bukharin had argued before the Communist Academy that the Nepmen should be vanquished, "not by destroying the [private] shops in Moscow and the provinces, but through competition and the growing strength of our state industry and state organizations." It followed from this position—it was the official line by 1925—that the state's principal means of conducting the class struggle were to improve the efficiency of state and cooperative trade and to issue economic decrees placing the "socialist" sector in a privileged position vis-à-vis the Nepmen. Under these conditions, Bukharin maintained repeatedly in 1925, victory in the class struggle would be earned in the marketplace.
If in the process of competition in the marketplace state industry and trade and the cooperatives gradually drive out the private entrepreneur—this is a victory in the class struggle, not in a mechanical clash of forces, not with the help of armed combat, but a victory in a completely new form that did not exist earlier and was completely unthinkable for the working class and peasantry under the capitalist regime.[29]
Thus class struggle with the Nepmen had become commercial competition, which meant, "not to trample the [private trader] and close his shop, but . . . to produce and to sell cheaper and better . . . than he." The state's success, or lack of it, in this economic arena would be determined by the Russian consumers, because "the consumer shops where the goods are better and cheaper." Consequently, Bukharin declared, the primary task before the Bolsheviks was to demonstrate to the peasants that "the state economy is better able to satisfy the daily demands and needs of the peasantry than is the private capitalist, private trader, private merchant, or private middleman." Although this statement of the challenge before the young Soviet state was far less rousing than the battle cries of the Revolution and civil war, the stakes were every bit as
high. In 1925 Bukharin insisted (as Lenin had at the birth of NEP) that the crucial question was this: Would the peasantry form a smychka with the state or with the Nepmen?
The outcome of the class struggle depends on the answer to this question. It does not matter at all that this struggle is conducted peacefully, that we are carrying on this struggle without the clanging of metal weapons. It nevertheless has truly gigantic significance, for this struggle will decide everything.[30]
Bukharin's call for commercial, rather than violent, competition with private entrepreneurs is particularly striking in contrast to the development of the Soviet economy in subsequent decades. His reliance on the consumer as the ultimate judge of acceptable performance is a concept that Soviet economic reformers have tried to revive without much success in recent decades. At times Bukharin even appeared to regard competition between the "socialist" and private sectors as desirable, a means of whipping the former into shape. To be sure, he did not expect or want the Nepmen to remain in the field forever. The advantages of "socialist" trade—a public service, not an endeavor to extort the highest prices possible according to the laws of supply and demand—seemed clear enough to ensure the Nepmen's ultimate defeat. Even though it might take Bolsheviks a considerable period to learn to trade (as Lenin complained), Bukharin was prepared to wait, rather than expel the Nepmen from the competition and declare victory. As it turned out, many in the party were not as patient.
During his period of co-leadership with Bukharin, Stalin made few public statements concerning the Nepmen. This was in part the result of what one scholar has recently termed "a rough division of labor between Bukharin and Stalin, between policy formulation and theory on one side and organizational muscle on the other."[31] In addition, Stalin could not have been enraptured with Bukharin's views on private entrepreneurs—as his subsequent enthusiastic attacks on the Nepmen suggest—but kept his own counsel for the time being because he needed Bukharin as an ally against the Left. Indeed, the closest Stalin came to a fervent defense of NEP's most tolerant principles was in response to attacks from his political rivals on the left. For instance, he delivered the following reply to a charge from Kamenev that certain party resolutions of 1925 were concessions to "capitalist elements."
We introduced freedom of trade, we permitted a revival of capitalism, we introduced NEP in order to increase the growth of productive forces, increase the amount of goods in the country, and strengthen the smychka with the peasants. . . .
Did Lenin know that speculators, capitalists, and kulaks [comparatively prosperous peasants] would take advantage of NEP and its concessions to the peasantry? Of course he knew. Does this mean that these concessions were actually concessions to the speculator and the kulak? No, it does not. For NEP in general and trade in particular are utilized not only by capitalists and kulaks but also by state and cooperative agencies. . . . [These] state agencies and cooperatives, when they learn how to trade, will prevail (and are already prevailing!) over the private traders, linking our industry with the peasant economy.[32]
Though Stalin said little at this time that could be construed as clear disapproval of Bukharin's program to utilize the Nepmen, his acceptance of Bukharin's views on the private sector must have seemed at most lukewarm to many party members. This attitude was evident at the Fourteenth Party Congress, held in December of 1925. The congress adopted a resolution on the Central Committee's report, which had been given by Stalin, declaring that although industry was growing, so were certain dangers. These included an increase in the amount of private capital, particularly in private trade, and an attempt by the "new bourgeoisie" to establish trade links with the kulaks. But Stalin tempered these warnings by reminding the congress that the Fourteenth Party Conference in April had declared a change [povorot ] in state policy, entailing among other things more economic freedom to the peasantry and "liquidation of the remnants of War Communism." A little later in his report he identified two possible deviations from the party line: (1) underestimating the threat to the state represented by the kulaks and "capitalist elements," and (2) overestimating this danger. After arguing that these deviations were equally serious, Stalin added that "in our struggle against these deviations, the party must concentrate on the struggle with the second."[33] This was an opinion Bukharin could share, though he was certainly less inclined than Stalin to warn the party of the danger represented by the first deviation.
Throughout NEP, resolutions of party congresses and other official gatherings contained at least brief, pro forma passages on the harm caused by driving out the Nepmen more rapidly than they could be replaced by state or cooperative operations, even when such dislocations were an obvious result of policies then being pursued (as in 1924 and at the end of NEP). But such warnings punctuated party pronouncements with greater frequency in 1925 than in 1924, suggesting that they were not merely perfunctory nods to one of NEP's tenets, which party leaders
would prefer to ignore. The condemnatory references to "administrative measures" and "survivals of War Communism" were both instructions to local officials in contact with the Nepmen and clear criticism of the crackdown on the private sector in the winter of 1923-24.[34] It is also true that some of the pronouncements of official gatherings in 1925 contained passages that reiterated the potential threat to the state (and the smychka in particular) posed by an expanding "new bourgeoisie." Apprehensions of this sort appeared now and then in party proclamations throughout NEP. But during 1925-26 these warnings were outweighed by firm condemnations of arbitrary, heavy-handed treatment of the Nepmen.
Although Bukharin's views clearly tinge the resolutions of party congresses, conferences, and other official gatherings in the middle of NEP, these pronouncements understate the magnitude of change in party policy toward the Nepmen in 1925. This is not surprising, given that these sessions generally strove to characterize their proclamations as reaffirmations or logical extensions of positions taken by congresses earlier in NEP, including the Thirteenth Party Congress in 1924. The new atmosphere of 1925 was more clearly reflected in the striking "second-NEP" tone of Soviet newspaper articles on private capital. The new year had hardly begun when the treatment of the Nepmen in the previous year was likened to the policies of War Communism and characterized as mistaken and dangerous. The articles supported a more tolerant, patient handling of private entrepreneurs, resembling the initial dose of NEP in 1921, a resemblance that was underscored when the Soviet press adopted the phrase "new trade practice" (novaia torgovaia praktika ) to describe the government's more restrained, conciliatory regulation of the Nepmen in 1925.[35]
The justification of the "new trade practice" presented in these articles took the following form. State and cooperative trade agencies had been unable to assume the portion of retail trade relinquished by the Nepmen during the state's onslaught in 1924. The only way the state could conduct a significantly larger volume of trade would be to increase greatly its investment in this area of the economy. But a transfer of funds on this scale could only be accomplished by reducing the rate of industrialization, an unacceptable alternative to Bolsheviks, given the importance they attached to industry. Consequently the Nepmen had to be permitted, even encouraged, to carry on a sizable share of the country's domestic trade so that the state could concentrate its resources in industry.[36]
With the policy of 1924 still fresh in everyone's mind, it would not be easy to reassure the Nepmen and bring about a rapid increase in the number of people engaged in private trade. This realization prompted numerous calls in the newspapers and journals for lower taxes on Nepmen in order to coax entrepreneurs from the sidelines or out of the black market and back into legitimate trade. Some articles even went as far as to characterize state tax officials as either incompetent or crudely hostile to the Nepmen and argued that as long as the state ignored complaints from private traders concerning overtaxation, there was little hope of increasing the volume of private trade. Thus, the argument concluded, the state's task should be to reject "administrative measures," entice the Nepmen back into legal business, and utilize their skills until the day, well down the road, when state and cooperative trade could satisfactorily manage the job alone. As one journalist put it, "It is essential not to destroy private capital, but to accommodate it to the needs of industry. It is a simple matter to spill water, but it does no one any good. To dam it up and force it to flow through our mill will be more difficult, but immeasurably more useful."[37]
Bukharin's relatively tolerant attitude toward the Nepmen also found backing in the Council of People's Commissars (Sovnarkom), the Supreme Council of the National Economy (VSNKh), the Commissariats of Domestic Trade (Narkomvnutorg) and Finance (Narkomfin), and other government agencies. Among the party leaders, Bukharin's most influential supporter was A. I. Rykov, a member of the Politburo and Lenin's successor as chairman of Sovnarkom. Rykov frequently expressed sentiments similar to the following from a speech delivered in April 1925: "It would be exceedingly harmful to prevent the development of private trade by any form of administrative pressure, a thing that has been practiced here and there during the last few years."[38] A. L. Sheinman, commissar of domestic trade, was another prominent spokesman for the new line. Instructing a meeting of state commodity exchange officials, Sheinman made it clear that ideological aversion to the "new bourgeoisie" ran a poor second to economic performance.
It is naive to speak about liking or disliking private capital. Our policy must be guided by only one consideration—does a particular measure help complete the main task? To the degree that state trade and the cooperatives are still not firmly on their feet and private capital can be economically useful, it [private capital] should be allowed to operate in the market.[39]
In another speech a few months later, he argued that Nepmen should be permitted to handle that portion of retail trade which was beyond the
means of state and cooperative stores so that the state could concentrate its investment in industry. Thus, Sheinman declared, the previous year's policy of sharply reducing the flow of goods and credit to private traders would be reversed, and the Nepmen's taxes would be trimmed.[40]
The government also began again to defend Nepmen more vigorously from hostile local officials. In the early spring of 1925, for example, state trade authorities in the Northern Caucasus region instructed officials there to block the development of private wholesale trade (in line with the policy of the previous year). The Commissariat of Domestic Trade's headquarters in Moscow responded with a demand that these instructions be rescinded, adding that such a policy would only be appropriate if state and cooperative wholesalers were able to market enough goods to exhaust the purchasing power of the population. As this was not the case, the dispatch continued, private wholesalers should be allowed to operate, particularly in spheres of trade where the state and cooperatives were weak. It was better to bring Nepmen into the game "than to reduce trade volume artificially because of a fear of the private wholesaler's participation." To cite one more example, a Plenum of the Supreme Court of the Great-Russian Republic (RSFSR) complained in 1925 that some Soviet judges misunderstood the meaning of the "class character" of Soviet courts and convicted Nepmen simply because they were Nepmen:
The courts must remember that the carrying out of the class attitude concerning the penal policy consists not in convicting the "Nepman" or the "kulak," and not in acquitting the toiler, or the poor or middle-class peasant, but in the clear understanding of the social danger of the act committed by the citizen brought to trial.[41]
Perhaps the most obvious indication of the new mood was a remarkable series of meetings held in state commodity exchanges (birzhi ) throughout the country during the spring and summer of 1925. The tone of these sessions resembled that of a resolution adopted at a meeting of birzha officials in April 1925, which declared that the "new trade practice" was necessary to correct the mistakes "in trade policy of the preceding period [i.e., 1924]," and draw into trade "unutilized, beneficial private capital."[42] This latter goal was generally the main topic of discussion at the individual birzhi . What makes the meetings particularly noteworthy is that private traders were invited to exchange views on economic policies with state officials (often from local offices of Narkomvnutorg, Narkomfin, and Gosbank) and representatives from
state and cooperative trading enterprises. The fact that these sessions were scheduled amounted to a statement by the government that the party and the Nepmen had certain interests in common—most important, the revival of trade—and that it might pay to listen to the Nepmen's ideas on realizing these aims.
In the discussions, and on other occasions, private traders agreed overwhelmingly that the most necessary reforms were tax relief accompanied by more goods and credit from the state.[43] Early in 1925, a group of private traders from one of Moscow's open-air markets sent a report-cum-petition to an office of local trade officials, asking them to consider the following question: Is private trade necessary and desirable? If the answer was no, the traders continued, then nothing more needed to be done, because private trade would soon be stifled by taxes. But if the answer was yes, substantial tax relief was necessary without delay. The "new trade practice" amounted to an affirmative answer. During the first half of 1925 Narkomvnutorg and Narkomfin prepared tax reduction proposals that were rapidly transformed into decrees. As a result, the Nepmen's overall tax bill crept downward in the months thereafter.[44]
Decrees during 1925 and the first months of 1926 freed small-scale entrepreneurs from certain taxes and softened the impact of these taxes on other Nepmen. Rural artisans, for example, were exempted from the business tax if they employed no hired labor (family members and the first two apprentices did not count as hired labor), while those who employed up to three hired workers were spared the leveling tax. Also, they were no longer subject to a number of local taxes and were permitted to sell their wares without having to buy a trade license. Nearly identical privileges were extended to urban handicraftsmen, and small-scale private traders were taxed at reduced rates. Some levies were abolished altogether, such as mandatory loans to the state and special taxes for local needs and victims of famine. Finally, at the beginning of 1926 the limit on the amount of property one could bequeath to one's heirs was removed, and the red tape on such transactions was reduced. A tax was maintained on these gifts and inheritances, but the state's primary purpose was, as one decree stated, "to make it easier to continue the existence of industrial and trading enterprises after the death of their owners, and also to create more favorable conditions for the circulation of material and financial resources in the country."[45]
The easing of the Nepmen's tax burden is evident in statistics available for this period, which reveal the effects not only of the decrees
noted above but also of the lower assessments made by tax officials—aligning themselves with the prevailing political current—of individual Nepmen's income and sales. The percentage of total private sales taken by the business tax fell from 1.3 percent in April-September 1924 to 1.2 percent in October 1925-March 1926, whereas the figures for cooperatives rose from 0.6 percent to 0.8 percent. Data from a special study in Orlov guberniia show that of total business-tax payments (state, cooperative, and private), the Nepmen's share fell from 55.7 percent in 1923/24 to 44.4 percent in 1924/25 and 43.2 percent in 1925/26.[46]
Income-tax data present a similar picture. For example, in 1925/26 income-tax rates for workers increased 28 percent over the previous year, and rates for government officials rose 45 percent. Among private traders and manufacturers, however, rates decreased 6 percent for small-scale businesses, 2.5 percent for medium-scale, and 3.8 percent for large-scale.[47] Perhaps the following statistics are the most revealing. When combined, the business tax, levy on living space, income tax, mandatory loans to the state, and certain other taxes took in the first half of 1924/25 53 percent of private traders' reported profits and 42 percent of private manufacturers' reported profits. But by the second half of 1924/25, these figures had fallen to 36 percent and 35 percent, respectively.[48]
The "new trade practice" was also evident in the increased flow of goods and credit from the state to the private sector. Reports from around the country told of expanding sales to Nepmen by state manufacturing concerns, and figures for the nation as a whole show that the portion of the state's manufactured goods sold directly to private entrepreneurs rose from approximately 2 percent in 1924 to 15 percent in 1925—roughly the Nepmen's share before the crackdown in 1924.[49] Credit extended to Nepmen by state banks had risen nearly 250 percent by October 1925 compared to the previous October and remained well above the 1924 level for the next twelve months. If credit obtained by private entrepreneurs from state banks via Societies of Mutual Credit is included in the calculations, the flow of state credit to the private sector was over 300 percent greater by the end of 1925 than it had been in October 1924.[50]
As a consequence of the more lenient treatment of the Nepmen under the "new trade practice," the number of private traders and the value of their sales steadily increased in 1925.[51] The state now seemed to be beckoning to private entrepreneurs even more solicitously than in the first years of NEP. Certainly the series of meetings between state officials and Nepmen in 1925 suggested less apprehension about working with
the Nepmen than was evident in the party previously. By 1925 the Nepmen had acquired "defenders" at the highest levels of government—Politburo members such as Bukharin and Rykov, who were prepared to accept the private sector for an extended period. But the dismay we have witnessed in the party's ranks over the revival of the "bourgeoisie" did not vanish. Although it is impossible to know with certainty the distribution of views among the party rank and file, it would soon become clear that Bukharin's arguments had not swept the field. In the years to come, as Stalin launched his campaign against Bukharin, Rykov, Tomskii, and their allies, he found ample support of his own in the party for the immediate "liquidation of the new bourgeoisie."
Chapter 3
The Bubble Bursts
We Oppositionists are often asked: What makes you think there is a danger of Thermidor? Our answer is simple and clear. When Bolsheviks are beaten up because they call for turning our fire to the right, against kulak, NEPman, and bureaucrat, then the danger of Thermidor is at hand.
—Leon Trotsky
I'll tell you, citizen, if you don't mind, I'd like to give you a bit of advice, [a shopkeeper informed a professor]. Today a hat is out of style. In fact, it's even unsafe—I mean in the sense of social categories. If you excuse me, who wears a felt hat nowadays? A Nepman! And what's a Nepman, if I may ask? A Nepman is like a splinter of an abolished way of life, something contemptible, not quite a man—an ape, only burdened with obligations. And, let us say, if the finance inspector should visit you, then, having a felt hat, you may altogether undeservedly be clamped into the wrong category.
—Boris Lavrenyov
As the new year dawned following the Fourteenth Party Congress in December 1925, the Nepmen's position had never been more favorable. The party line concerning the private sector clearly followed Bukharin's views rather than the Left Opposition's demands for more aggressive regulation and taxation. Indeed, Kamenev had been heckled repeatedly and even shouted down at the Fourteenth Party Congress when he claimed that the real danger in the party came, not from Zinoviev and himself, but from Bolsheviks who underestimated the threat posed by the growth of "capitalist elements."[1] The state's comparatively lenient policies toward private entrepreneurs were now in place in areas such as taxation, credit, and the supply of goods and underscored the party's repudiation of the harsher approach of 1924. Thus the economic year 1925/26 promised to be the most prosperous the Nepmen had yet enjoyed. It proved also to be the most prosperous year they would ever enjoy, for in 1926/27 the party began a transition from Bukharin's com-
paratively tolerant position of 1925 to the full-scale assault on the private sector in force by the end of the decade. Just as Bukharin's rise in the party as an ally of Stalin against the Left heralded a moderation of the state's treatment of the Nepmen, so the political decline of Bukharin, from party leader to leader of what Stalin and his supporters branded the "Right Deviation," boded ill for private entrepreneurs.
Few observers in 1926, however, could have anticipated such a dramatic reversal of the Nepmen's fortunes. The Left Opposition certainly did not detect any signs of collapse in the private sector and charged throughout 1926 and 1927 that the "new bourgeoisie" represented an increasingly serious threat. The "Platform of the Opposition" (written in September 1927 and signed by Trotsky, Zinoviev, Kamenev, and many others) warned that the Stalin-Bukharin majority "has been powerless to prevent: (1) an immoderate growth of those forces which desire to turn the development of our country in a capitalist direction; (2) a weakening of the position of the working class and the poorest peasants against the growing strength of the kulak, the NEPman, and the bureaucrat." Worse still, predicted the signatories, policies contemplated by the party majority would result in "a full capitulation on the part of the Soviet power—through a 'political NEP,' a 'neo-NEP,' back to capitalism. . . . The kulaks, the NEPmen, and the bureaucrats, taking cognizance of our concessions, would all the more persistently organize the anti-Soviet forces against our party."[2]
The Left was impatient with party resolutions that continued to emphasize caution in the struggle with the Nepmen. Bukharin and his supporters had not yet been ousted from their party positions, and their views were still prominent in official pronouncements. For instance, a Plenum of the party's Central Committee declared in February 1927 that although "the role of private capital must be systematically reduced . . . it would be an overestimation of our strength and premature if we were now to take up the task of completely eliminating private capital from the market and concentrating all trade in the hands of the cooperatives and the state." Similar restraint appeared in a resolution of the Thirteenth All-Russian Congress of Soviets two months later.[3] The congress praised the recent success of state and cooperative trade at the expense of the Nepmen, but added: "Along with this it must be noted [that there have been] a number of excesses in the regulation [of private trade] and incorrect methods of administrative influence on trade that must be resolutely eliminated in the future."[4]
Nevertheless, the tone of official statements on the Nepmen grew less
benevolent in 1926/27 compared to the previous year. The change was clearly perceptible and reflected what one scholar has called Bukharin's "reconsideration and significant modification of his policies" in 1926/27.[5] At the core of Bukharin's revised thinking lay the realization that the state could not significantly expand the country's industrial base without, first, a much larger commitment of resources and, second, a greater reliance on planning as opposed to market forces. One of the byproducts of his altered views on industrial development was a new attitude toward the Nepmen. Specifically, Bukharin concluded that private entrepreneurs should be taxed more heavily (to secure funds for industrial investment) and regulated more closely (so that their activity would not undermine the state's planning). To be sure, Bukharin continued to accept the basic principles of NEP, including the indefinite existence of a large private sector, but his modified position represented a marked change from his views of 1925.
Not surprisingly, then, party meetings in this period urged state agencies to exert more direct control over activity in the private sector. One way this could be accomplished, a Central Committee Plenum explained in February 1927, was to order state industry to supply only those private traders who agreed not to exceed price ceilings set by the state.[6] Even though such resolutions were not declarations of war on the Nepmen, they were clear indications of the party leadership's concern that private economic activity be more tightly regulated to ensure that it promoted, rather than hindered, "socialist construction."
All of this amounted to a considerable first step in the direction urged by the Left Opposition, though the party leadership was loath to admit it. Indeed, the leaders of the Left Opposition found themselves under increasingly heavy fire as the months went by, making it difficult for them to credit Bukharin's advocacy of a shorter leash for the Nepmen. As Trotsky wrote on November 8, 1927, describing the previous day's celebration of the tenth anniversary of the Bolsheviks' seizure of power:
In the tenth anniversary manifesto and the speeches of the official orators [supporters of Stalin and Bukharin] there was reference to the need for intensifying the pressure on the kulak and NEPman. Two years ago, according to the Bukharins, the time was not ripe for that. And now, just at the tenth anniversary, it suddenly becomes time. But why is it, in that case, that on November 7, 1927, placards [carried by the Left Opposition in the anniversary parade] demanding that we turn our fire to the right, against kulak, NEPman, and bureaucrat, were torn to pieces? It is enough to contrast these facts to thoroughly expose the policies of the present leadership. Stalin and Bukharin
proclaim intensified pressure on the bourgeois elements in words only. The Opposition wants to apply that pressure in fact. Why, then, do Stalin and Bukharin put the pressure on the Opposition?[7]
Following the final defeat of the Left Opposition a few weeks later, party pronouncements on the private sector embodied even more openly the impatience apparent earlier in the Left's "Platform." In December, for example, a resolution at the Fifteenth Party Congress proclaimed categorically that "a policy of still more decisive economic elimination should and can be applied" to the Nepmen. "The preconditions for a further economic attack on capitalist elements [referring to both the Nepmen and the kulaks] have been created by the previous successes of [state and cooperative] economic development." Party resolutions in the fall of 1927 did still contain occasional reminders that private entrepreneurs should not be driven out of business more rapidly than they could be replaced by "socialist" enterprises. But by now the dominant theme was not the need to patiently tolerate the Nepmen for some time to come, but rather the assertion that the struggle against them could and should be stepped up.[8]
Stalin and his allies supported an intensified struggle with the Nepmen much more wholeheartedly than they did the tolerant statements concerning private entrepreneurs made in party resolutions of 1925-26—suggesting again that the alliance with Bukharin was more a matter of political convenience against the Left than the result of an identity of views. Prior to 1927, Stalin discussed the Nepmen only rarely, but by the end of the year the volume of his comments on the private sector (both the Nepmen and the kulaks) increased dramatically. His concern and point of view were clearly evident during the Fifteenth Party Congress. At one session, instead of concentrating his fire on the now-defeated Left, he took aim in the opposite direction, claiming that some Bolsheviks (not yet naming Bukharin and his top allies) underestimated the dangers posed by the private sector, and coupled this charge with a call for a more forceful drive to vanquish the Nepmen.
The significance of these elements [private traders and manufacturers] is not as slight as it is represented on occasion by some of our comrades. This . . . is a minus in our economy. I recently read comrade Larin's book Private Capital in the USSR , which is interesting in every regard. I would recommend that our comrades read this little book. You will notice how cunningly and adeptly the capitalist conceals himself behind the flag of [he lists a variety of cooperative and state trade agencies]. Is everything being done to limit, reduce, and finally eliminate capitalist elements from the economy? I think not.[9]
Such remarks were not completely contrary to Bukharin's position, especially in its revised form of 1926-27, when Bukharin favored increased taxation and regulation of private entrepreneurs. Certainly, Bukharin, Rykov, and Tomskii agreed that the Nepmen would have to be eliminated eventually in the campaign to build socialism. But Stalin was clearly more impatient than they were with the prospect of protracted economic competition with the private sector. In focusing on the goal of an offensive against the Nepmen, and virtually ignoring the Right's stress on the dangers of overzealousness, he had begun to formulate a position that he would occupy with increasing visibility and confidence in the years to come.
The year 1928 marked a turning point in the history of the party and NEP.[10] With the final defeat of the Left Opposition in the fall of 1927, Stalin was politically free to oppose Bukharin more vigorously, and the confrontation was not long in materializing. Alarmed by the sharp decline of grain collections in the last months of 1927, the Politburo in January approved the use of "extraordinary" measures that Bukharin and Rykov thought would be limited to a brief campaign against grain "speculators." Stalin chose to supervise personally the grain collection campaign in Siberia and did so with the methods of War Communism, despite the objections of some local officials that this violated the spirit of NEP. Grain was seized from peasants who refused to sell at low state prices, and many local markets were closed—all of which amounted to a repeal of NEP's most fundamental principle, the right of peasants to sell grain freely. The grain collection drives of 1928 were, of course, aimed primarily at the peasants, with private grain traders, millers, bakers, and the like the only Nepmen directly under fire. But as the state adopted harsher measures to wring grain from the peasantry, it also greatly increased the pressure on private entrepreneurs of all sorts. Thus, although the Nepmen's position had already begun to deteriorate in 1927, the new year brought a much higher level of ferocity to the assault on private business.
Indeed, the crushing of the Nepmen in 1928-30 may be viewed as a secondary explosion accompanying the primary upheaval in the villages (first the new grain collections, then collectivization and dekulakization). In other words, the offensive against the Nepmen at the end of the decade represented action on one of several fronts (such as the campaign against "wreckers" in industry, in addition to the turmoil on the
"agrarian front") as Stalin and his supporters initiated the "third revolution" to build socialism in Russia at breakneck speed.
Stalin's triumph in the party was not simply a consequence of political muscle or organization. These factors clearly played an important part, but it would be misleading to conclude that Stalin and a handful of allies coerced the party into liquidating the Nepmen. Although Bukharin, Rykov, and Tomskii certainly had supporters in the party, we have seen that many Bolsheviks—not just those in the Left Opposition—were apprehensive about NEP in general and the "new bourgeoisie" in particular. It was difficult for them to wait patiently with Bukharin for the state to eliminate the private sector through peaceful economic competition—all the more because the Nepmen proved to be such tenacious rivals. Thus the prospect of a climactic showdown with the Nepmen struck a responsive chord in many Bolshevik hearts and inclined them to support leaders who argued that the time for an offensive had come.
Similarly, on a more general level, the de facto elimination of the rest of NEP should not be regarded as an overwhelmingly unpopular decision forced on a reluctant party. As Victor Kravchenko, a Bolshevik defector, recalled:
I was . . . one of the young enthusiasts, thrilled by the lofty ideas and plans of this period. It was a time when my country began to move into a new and in some ways more profound revolution. . . . Stalin and his close associates . . . were intent upon rooting out remnants of capitalist economy and capitalist mentality, in order to lead Russia into industrialization and into collectivization of farming. . . . There was the deep hope in the future of the country, so that it was no accident that I chose precisely this period to join the Party.[11]
Though Kravchenko's enthusiasm for the new course doubtless placed him in a distinct minority of the population (still overwhelmingly peasant), his zeal was far less anomalous inside the party. To be sure, some Bolsheviks would have preferred to continue NEP, and they regarded with dismay the upheavals to come. Such individuals had to be pushed aside or silenced. But by the end of the 1920s, the arguments against NEP had become compelling to many of their fellow party members. In the latter's view, NEP was incapable of sustaining a sufficiently rapid tempo of industrialization, in large measure because of the difficulty of acquiring grain from independent peasants. Furthermore, the existence of a private economic sector seemed at best an obstacle to the attainment of socialism and at worst a corrupter of the Revolution's ideals. Troubled by such concerns, many Bolsheviks embraced Stalin's "solution" of forced collectivization and the replacement of NEP's mixed
economy with a centralized, planned economy geared for a massive industrialization drive. The task begun in 1917 was now to be completed.
Following Stalin's Siberian campaign at the beginning of 1928, his statements on the Nepmen (and kulaks) featured a striking new theme. As the Soviet Union approached socialism, he warned, private entrepreneurs' opposition to the state would grow more desperate, violent, and widespread, thus necessitating harsher measures by the state to combat this threat. The foundation for his position was evident by December 1927, when Stalin reminded the delegates at the Fifteenth Party Congress that "the characteristic feature of the new bourgeoisie is that, in contrast to the working class and the peasantry, it has no basis to be satisfied with Soviet power." The growth of the socialist sector of the economy hurts the new bourgeoisie, he added, "hence the counter-revolutionary sentiments in this group." In the next few months, Stalin scorned those in the party (not yet by name) who believed that as the "socialist" sector developed, the threat of the Nepmen diminished. In reality, he explained to a Central Committee Plenum in July, the reverse was the case.
We often say that we are developing socialist forms of economy in the sphere of trade. But what does this mean? It means that we are driving thousands and thousands of small and medium traders out of trade. Is it reasonable to think that these traders who have been driven out of trade will sit quietly and not try to organize opposition? Of course not.
In the next two paragraphs Stalin made the same point with regard to private manufacturers and the kulaks, and then moved to his crucial point.
It follows from all this that the more we move ahead, the greater will grow the opposition of capitalist elements, the class struggle will intensify, while Soviet power, whose strength will steadily grow, will carry out a policy of isolating these elements, a policy of splintering the enemies of the working class, and finally a policy of crushing the opposition of the exploiters, thus creating a basis for the further progress of the working class and the main mass of the peasantry.[12]
Stalin hammered at this point time and time again in the months that followed. Even as late as 1933 he warned a Joint Plenum of the Central Committee (CC) and the Central Control Commission (CCC) that former Nepmen now working in state enterprises had still not embraced the Soviet state and would try to organize sabotage at every opportunity.[13]
The contention that private entrepreneurs would sharpen their resistance to the state as it moved toward socialism may have been inspired in part by the opposition peasants offered to the harsher grain collection campaigns of 1928. As one would expect, heated resistance to grain requisitioning and collectivization was indeed forthcoming in many regions. But there is no evidence that the Nepmen offered widespread, savage opposition to their own elimination. This is in part because the Nepmen were much less numerous than the peasantry and concentrated in urban areas, where they were more easily supervised and controlled. Further, officials could use less violent measures, such as tax increases and reductions in the supply of goods and credit, to drive private entrepreneurs out of business. The state had already begun in this way to reduce the number of private businessmen in 1927, and this generally produced one or more of the following responses: (1) closing the business; (2) concealment or misrepresentation of the business; (3) a shift to small-scale activity less subject to state control, such as street hawking or handicraft work in the countryside; and on at least a few occasions (4) bribery of local tax and regulatory officials. These remained the responses of the vast majority of Nepmen to the heavy-handed "administrative measures" adopted by the state in 1928-29, with most entrepreneurs forced into the first category. Thus the warning that private businessmen, with their backs to the wall, would attempt to "organize opposition" and "intensify the class struggle" proved grossly overdrawn, if not entirely unfounded. But such cries of peril—resembling the warnings about "wreckers" in industry—helped eventually to create an atmosphere in which it was difficult to defend continued toleration of the private sector.
Initially the party did not endorse Stalin's claim that the Nepmen were becoming more hostile as the country moved toward socialism. At the Fifteenth Party Congress (December 1927), where Stalin had begun to formulate this position, a directive on the preparation of the First Five-Year Plan took the opposite view. The resolution maintained that the danger posed by the Nepmen was diminishing because the socialist sector was growing more rapidly than the private sector. But within half a year the party reversed itself, an indication of the spread of Stalin's influence and the decline of Bukharin's. In July 1928, a CC Plenum announced, in words hinting at disagreement in the party, that "the development of a socialist form of economy on the basis of NEP leads not to the weakening but to the intensification of opposition from capitalist elements." By the following April the Sixteenth Party Conference not only came to this conclusion but also added that the Nepmen and
kulaks were aided in their struggle by industrial "wreckers," unreliable state officials, and even the international bourgeoisie.
The kulak and the Nepman will not give up their positions without a fight. . . . [They] are supported by counterrevolutionary wreckers in industry. They are assisted by bureaucrats in our agencies. They are supported in every way and inspired by foreign capitalists. . . .
Only by overcoming wavering and hesitation in our ranks, only by giving a shattering rebuff to the Right deviation, will the party and the proletariat be able to smash the resistance of class enemies and fulfill the five-year plan of the construction of socialism.[14]
Assertions of this kind were obviously incompatible with Bukharin's views, and during the course of 1928 Stalin and his supporters emphasized this fact with increasing boldness. Initially, the targets of their salvos were anonymous; for example, at a July CC Plenum Stalin charged that certain party members harbored "antiproletarian sentiments." These individuals, he claimed, favored the "broadening" of NEP and the "unleashing of capitalist elements," an accusation he would repeat relentlessly in the months ahead. By autumn Stalin frequently tarred his opponents with the labels Right Deviation and Right Opposition , epithets denoting a failure to appreciate and respond to the dangers posed by the "new bourgeoisie." Such errors, Stalin warned a meeting of Moscow party organizations in October, threatened Russia with nothing less than the restoration of capitalism.
In what does the danger of the Right, openly opportunist deviation in our party consist? In the fact that it underestimates the strength of our enemies, the strength of capitalism, does not notice the danger of the restoration of capitalism, does not understand the mechanism of class struggle under the dictatorship of the proletariat, and thus freely makes concessions to capitalism, demanding a slowdown of the development of our industry and an easing of conditions for capitalist elements in the towns and countryside. . . .
Without doubt the victory of the Right Deviation in our party would unleash the forces of capitalism, undermine the revolutionary positions of the proletariat, and improve the chances for the restoration of capitalism in our country.[15]
Stalin must have realized that his critique of the Right resembled the charges made against Bukharin and himself in previous years by the Left Opposition. Perhaps this was one reason he also took pains in the speech to describe his differences with the Left (even though it had been shattered the previous year). The fundamental error of the "'Left' or Trotskyite deviation," Stalin charged, was that "it overestimates the strength of our enemies, the strength of capitalism, seeing only the pos-
sibility of the restoration of capitalism and not the possibility of the construction of socialism by the forces of our own country."[16] Thus Stalin was claiming that his policies were the only ones that would lead Russia to socialism. On the one hand, he alleged that the Right's blindness to the danger of the "new bourgeoisie" was likely to bring about the restoration of capitalism. On the other, he charged that the Left so exaggerated the strength of the Nepmen and kulaks that it despaired of ever building socialism in Russia without foreign assistance.
In a series of speeches to joint sessions of the party Politburo and the Presidium of the CCC early in 1929, Stalin confronted Bukharin, Rykov, and Tomskii by name. Announcing the discovery of a Bukharinist faction within the party, he charged that the "platform" of this faction advocated "the establishment of complete freedom of private trade and the renunciation by the state of its regulation of trade." This, of course, was a gross distortion of Bukharin's views. No Bolshevik had ever argued that the state should not regulate the Nepmen, but this did not prevent Stalin from flailing Bukharin with the charge, keeping him off balance and on the defensive.[17]
Two months later, for example, Stalin developed his attack with a lengthy speech titled "On the Right Deviation in the Party," delivered to a Joint Plenum of the CC and CCC. He again chastised Bukharin by name and declared that the greatest threat to NEP came not from the Left Deviation but from the Right:
The danger from the Right, the danger from people who want to abolish the regulatory role of the state in the marketplace, who want to "emancipate" the market and thus inaugurate an era of complete freedom of private trade, is much more real [than the danger from the Left]. . . .
It should not be forgotten that petty bourgeois elements are working in just this direction—disrupting NEP from the right. It should thus be understood that the cries of the kulaks and prosperous elements, the cries of speculators and profiteers, to which many of our comrades often succumb, bombard NEP from just this direction. That Bukharin does not see this second, very real danger of the disruption of NEP shows without a doubt that he has succumbed to the pressure of petty bourgeois elements.[18]
Although Bukharin's relatively cautious handling of private entrepreneurs was certainly vulnerable to criticism from Bolsheviks eager to eliminate the Nepmen and surge ahead to socialism, it was still brazen of Stalin to accuse Bukharin of contributing to the "disruption" of NEP. At that very moment, Stalin himself was gutting NEP's foundation with his "emergency measures" in the countryside and his crackdown on private trade and manufacturing in the cities. If Bukharin was "guilty" of
anything, it was not a desire to scuttle NEP, but rather an attempt to prolong it when it could no longer support the pace of industrialization desired by the party.
In the spring of 1929 Stalin added another charge to his indictment of Bukharin's thought on the "new bourgeoisie" by rejecting his contention that Russia could "grow into socialism" during NEP. As early as November 1922 Bukharin had begun to formulate the argument that with the state in the hands of the proletariat, class struggle should be transformed from violent confrontations into economic competition between the socialist and private sectors. On the assumption that eventually the socialist sector would better serve the needs of the population and thus defeat the Nepmen economically, he thought that the Soviet Union could gradually "grow into socialism" without pitched battles and breathtaking leaps. People should be convinced through example, not forced, to join cooperatives, collective farms, and so on. It was an evolutionary approach, then, that Bukharin had in mind when he remarked: "Here there can be no kind of third revolution."[19]
But a "third revolution" was precisely what Stalin had begun in 1929, though he did not bill it as such and claimed to be adhering faithfully to the tenets of NEP. He elected to attack Bukharin's theory of "growing into socialism" from the angle of class struggle, by charging in his report on the Right Deviation that Bukharin meant Nepmen could grow into socialists.
Up to now we Marxist-Leninists thought that an irreconcilable antagonism existed between capitalists in the towns and countryside on the one hand and the working class on the other. Marxist theory of class struggle is based on this. But now, according to Bukharin's theory about the peaceful growth of capitalists into socialism, all this is turned upside down. The irreconcilable antagonism of the class interests of the exploiters and exploited disappears, the exploiters grow into socialism. . . . Have we granted the possibility of the Nepmen growing into socialism? Of course not.[20]
Here again, Stalin was cleverly distorting Bukharin's position by magnifying and focusing on the portion least appealing to other Bolsheviks. Bukharin had meant that the Soviet Union as a whole could make a gradual, peaceful transition to socialism and paid scant attention to the question of whether former Nepmen could become reliable citizens in a socialist state. Only the comparatively benevolent tone of his statements could be construed on occasion as a faint suggestion that some Nepmen might be able to make this transition. But this was opportunity enough for Stalin to press the charge, undoubtedly with telling effort in party circles, that Bukharin favored coddling the "new bourgeoisie."
In addition, Stalin continued to argue that Bukharin's theories had no connection with reality, because Bukharin did not subscribe to the "axiom" that resistance from the private sector would increase as the Soviet Union neared socialism. To charges that his own policies, rather than immutable historical laws, were behind the growing strife in the land, Stalin replied that his accusers had failed to master the dynamics of class struggle set forth by Lenin.
Bukharin thinks that under the dictatorship of the proletariat class struggle must die out and disappear in order to put an end to classes. Lenin, on the other hand, teaches that classes can be destroyed only through stubborn class struggle, which becomes even more savage under the dictatorship of the proletariat than before it. . . .
The mistake of Bukharin and his friends is that they do not understand this simple and obvious truth. . . . [They try] to explain the intensification of class struggle with all sorts of fortuitous causes: the "ineptitude" of the Soviet apparatus, the "reckless" policy of local comrades, the "absence" of flexibility, "excesses," and on and on.[21]
Actually, Bukharin claimed not that class struggle would soon cease to exist, but that it should be transformed from violence into economic competition. Competition in the marketplace, however, must have seemed a rather tepid form of class struggle to many Bolsheviks, steeped as they were in the tradition of the Revolution and civil war. Thus it is not difficult to imagine many in the party responding enthusiastically to Stalin's assertions that more vigor was required in the struggle with the "new bourgeoisie." Stalin probably won additional support by representing his notion of class struggle as Lenin's teaching, even though he was on thin ice at this point. As noted above, Lenin's legacy on this score was ambiguous. Certainly, some of his pronouncements appeared to suggest the eventual need for a forceful crackdown on the Nepmen. But Lenin did not argue during NEP that class struggle would intensify as the Soviet Union approached socialism. The dominant themes and tone of his work in the last years of his life were, if anything, closer to Bukharin's position than to Stalin's.
Whatever the validity of Stalin's assertions, the important point here is the appeal of such arguments—repeated endlessly by Stalin's many in the party. This appeal, combined with Stalin's organizational leverage, enabled him first to drive Bukharin and his allies rapidly into minority opposition and then to vanquish them. On November 25, 1929, Bukharin, Rykov, and Tomskii signed a confession of their errors (published the next day) that marked the demise of the Right Opposition.[22] The defeat of the Right removed the last major obstacle to the
elimination of the "new bourgeoisie." By the end of the decade the state had launched an assault on the Nepmen (not to mention other segments of Soviet society, ranging from peasants to artists) that paralleled Stalin's conflict with the Right—cautious and muted at first, then increasingly open and unrestrained.
As indicated above, Bukharin rethought his position on the private sector in 1926-27 and concluded that the state should regulate the Nepmen's activities more closely. This reappraisal resulted in less favorable treatment for private entrepreneurs, though still within limits that the majority of Nepmen could endure. As in the past, the state relied primarily on its policies of taxation, credit, and supply to restrain the Nepmen and resorted to more forceful, "administrative" measures much less frequently than would be the case in 1928-30.[23] Taxation was the most effective state regulatory device in this period, because many Nepmen did not depend on credit or supplies from the state. Indeed, the Bolsheviks used taxes throughout NEP to restrict accumulation in the private sector, so that even in 1925, a comparatively hospitable year for the Nepmen, the taxes levied on private traders far exceeded the tax burden of prewar traders. The complaints of many Nepmen expressed in petitions, responses to surveys, and even a few newspaper columns in 1925 leave no doubt that taxation was their primary grievance, and it was here that the state applied the most pressure in 1926-27.[24]
During these two years the Nepmen—or "nonlabor elements" as they were sometimes called in tax decrees—felt the bite of the tax man in a number of places. The All-Russian Central Executive Committee (VTsIK) and the Council of People's Commissars (Sovnarkom) issued revised tables for existing taxes, raising the rates for all but the smallest-scale private entrepreneurs, and piled on new levies. Even utility bills and children's education fees, already higher for "nonlabor elements" than "workers and officials," increased in his period for relatively prosperous entrepreneurs.[25] Data gathered by the Commissariat of Finance (Narkomfin) illustrate the growth of the Nepmen's tax burden by 1926/27. Four "personal" taxes (the income tax was by far the most important of these, and they do not include the business tax) rose from 12.9 percent of urban private traders' reported profits in 1925/26 to 18.8 percent in 1926/27, a rate increase of almost 50 percent. A separate study in Orlov guberniia found that the portion of private traders' and manufacturers' total volume of business taken by the business tax, income tax, and tax
on living space climbed from 4.9 percent in 1925/26 to 8.4 percent in 1926/27. Viewed from another angle, private entrepreneurs in Orlov guberniia accounted for 55.6 percent of the total receipts from these three taxes in 1925/26 and 66.7 percent in 1926/27.[26] Thus these studies support two conclusions. The Nepmen's tax burden did increase significantly in 1926/27, but it was not yet unbearable, at least for many entrepreneurs.
Of the new taxes on the Nepmen in this period, the most important was the surcharge on "superprofits," decreed by Sovnarkom and VTsIK in June 1926. Initially, this was billed as a temporary measure directed at large and medium-sized businesses whose profits during the current tax period (six months) exceeded those of the previous period by amounts specified according to the nature of the business. In this form, the law had little effect on all save a handful of merchants and manufacturers. But in May 1927, VTsIK and Sovnarkom issued a new superprofit decree with more teeth. No longer labeled temporary, the new law contained a different definition of superprofits and extended the tax to include somewhat smaller-scale traders. Superprofits were now to be calculated as the difference between a merchant's total income and the "normal income" for a business of that type. This "normal income" was to be specified by regional and local state agencies with guidance from the central office of Narkomfin. As a result, superprofit tax assessments increased significantly, from 0.35 percent of urban private traders' reported income in 1926 to 2.46 percent in 1927.[27] Despite this rise, the superprofit tax was not nearly as heavy on the Nepmen as were a number of other taxes, such as the business and income taxes. But by permitting officials to specify arbitrarily the "normal income" of a business and tax anything more as a superprofit, the tax decree provided an additional means by which to eliminate private entrepreneurs when this became state policy in the following years.
On September 24, 1926, VTsIK and Sovnarkom raised the income tax and the business tax for all but the smallest-scale traders and manufacturers. As before, the business tax consisted of a license fee determined by the size and nature of the enterprise, a "leveling tax" on production and sales, and a surcharge on the production and sale of "luxury goods." The income tax was still assessed according to three separate rate charts—one for workers, officials, and certain professional people; another for small-scale independent craftsmen; and a third for private traders and manufacturers, middlemen, brokers, people living on investments, and so on. The most important changes wrought by the
new income-tax decree were two: large numbers of the smallest artisans and vendors were freed entirely from the tax; and the rates in each of the three tax tables were changed, reducing receipts from the first two tables (from 11.9 to 9.2 million rubles, and from 20.6 to 13.6 million rubles, respectively), but increasing the more substantial Nepmen's payments (determined by the third table) from 56.5 to 70.6 million rubles.[28]
The increased concentration of the income-tax burden on Nepmen following the September revision of the law is underscored by data collected from around the country and published by Narkomfin. In 1925/26 the Nepmen represented 15.1 percent of the people subject to the income tax, with 26.8 percent of the taxable income, and accounted for 65.6 percent of total income-tax receipts. The next year, with the new tax tables in effect, these figures increased to 23.1 percent, 37.4 percent, and 79.2 percent, respectively. The impact of this decree on the Nepmen is revealed most clearly by the following figures. From 1925/26 to 1926/27 the percentage of income taken from medium- and large-scale Nepmen by the income tax rose from 10 percent to 15.7 percent—illustrating that this tax, though far from negligible, was not yet a deathblow.[29]
Urban Nepmen also found themselves paying more for their living space in 1926/27, following a rent increase in June 1926. A person's rent was determined by occupation, income, town of residence, and the amount of floor space in the dwelling—with "nonlabor elements" assessed at a much higher rate than the proletariat. A few months later, in October, the housing tax (kvartirnyi nalog ) was also raised. This tax was directed exclusively at urban residents who paid the income tax according to the third table, which included all but the smallest-scale Nepmen. The assessment was made on the basis of a person's income and floor space, and this was the case as well with a "special housing tax" on Nepmen, proclaimed in March 1927 as a levy to acquire funds for the construction of workers' housing. Lesser taxes on the Nepmen, such as a "contribution" for the armed forces, and the fine for delinquent tax payments also increased in this period.[30] Thus the year 1926 marked a turning point in the taxation of the private sector by the state. By the second half of the year, in accordance with Bukharin's revised thinking on the subject, taxation was clearly being used more aggressively to restrict and regulate the Nepmen's profits and activity while not forcing the majority of entrepreneurs out of business.
As in the past, the state tried to coordinate its tax policy with the volume of goods and credit it supplied to the Nepmen. Consequently, increased taxes in the private sector during 1926/27 were accompanied
by a reduced flow of funds and supplies from the state. The Commissariats of Finance and Trade issued numerous directives forbidding state and cooperative enterprises from selling products (often scarce leather and textile goods) to private traders and manufacturers at any price. Though such orders were not always obeyed, they did produce hardship for Nepmen who had come to rely on the state for a substantial portion of their merchandise or raw materials. In part because of the state's revised supply policy (and also from a desire to escape the attention of state tax and regulatory agencies), private entrepreneurs after 1925/26 turned less and less frequently to the state in their search for goods.[31]
Concurrently, the state ordered Gosbank and a number of lesser state banks to curtail their loans to Nepmen. Some banks responded by simply refusing to grant unsecured loans to private customers, and others, such as the Leningrad branch of Gosbank, announced that they would no longer offer any credit to private traders. As a result, the amount of state credit extended to private borrowers fell from 70 million rubles in October 1925 to 51.5 million rubles in October 1926, a drop of over 25 percent. During the following year the plunge was even more precipitous—fully 57 percent—from 51.5 to 22.1 million rubles.[32]
From the beginning of NEP, the Bolsheviks expressed special concern over private grain trading. Few could be content with the thought that Nepmen were bidding against the state for the peasants' surplus production, as this was seen as a threat to both the symchka and industrialization. It was axiomatic in the party that Russia could not industrialize and create the foundation for socialism without a sizable grain surplus in the hands of the state (both to feed the proletariat and to export in order to pay for Western technology). Facing this problem in 1921, Lenin had argued that private grain sales had to be permitted to provide the incentive the peasants needed to produce a sufficient grain surplus. But by 1926/27 this argument was losing some of its force in the party as concern mounted over the state's inability to collect what were considered sufficient quantities of grain.
It would be a few years before the state seriously came to grips with this problem, but in the meantime the party hoped to divert a portion of the Nepmen's share of grain purchases (then roughly 20 percent) into the state's hands. This, and a desire to protect the smychka , prompted the state in 1926 to tighten the restrictions on private grain trading. With the rout of the Left Opposition in 1926-27, and Bukharin apparently secure as party theoretician, a grain-requisitioning campaign against the peasants seemed unthinkable. Instead, the state tried to
make it more difficult for Nepmen to purchase and market grain. During this period state agencies were ordered to cut off credit to private grain dealers; limits were placed on the amount of grain private traders could have milled in state and cooperative facilities; the leases of many large private mills were revoked; cooperatives were forbidden to sell grain to private traders; state and cooperative grain collectors were instructed not to buy grain from private middlemen; and restrictions, including higher freight charges, were placed on private grain shipments by rail.[33]
According to reports from around the country, these measures quickly made themselves felt, particularly on the railways. In the Ukraine, for example, Nepmen shipped 12,736 freight cars of grain during the period July—December 1925, but only 1,572 freight-car loads during the same period a year later. It is unclear, however, to what extent the total volume of private grain trade was reduced in the Ukraine or the rest of the country. Some private cargoes were transported illegally, and the Nepmen also contrived on occasion to circumvent the new restrictions by taking advantage of various legal loopholes (an approach that one Soviet observer labeled amerikanizm ). As use of the railways became more difficult, many other private middlemen turned to boats and carts to move their grain.[34] Undoubtedly the number of large, long-distance private grain shipments dropped considerably, but the local and regional private grain trade was still far from insignificant.
Thus, the period from roughly the summer of 1926 through 1927 foreshadowed the final assault on the Nepmen. The state policies in this interval, reflecting Bukharin's modified thinking on the private sector, were attempts to regulate and restrict private entrepreneurs more closely, but they did not as yet suggest that the party had elected to liquidate the Nepmen as rapidly as possible. During 1928, however, as Stalin dropped any pretense of agreement with the Right (he ushered in the year with his Siberian grain collection campaign), the atmosphere changed dramatically. Before long, Nepmen found themselves under fire heavier than anything the Left Opposition had proposed. One longtime foreign resident in Moscow reported early in the year:
We are at present witnessing an anti-NEP wave hardly less violent than that of 1924!. . .The war on trade is being waged more hotly than ever: taxes, refusals of credit by the banks which are all in the hands of the State, prohibitions of goods-deliveries to private individuals, and a thousand irritations
from laws and regulations, to violate any one of which sends the offender off, over the "administrative" route, the route of the G.P.U. to Narim and Solovietski Monastery [i.e., into the forced labor camps]![35]
Naturally, the state did not neglect its "traditional" weapons—taxation and denials of goods and credit—as it stepped up the pressure on the Nepmen after 1927. But with increasing frequency officials resorted to "administrative measures," that is, arbitrarily fining or closing private businesses and sometimes arresting the proprietors. This, for example, is a foreign observer's account of the fate of several private credit organizations: "In Moscow there had been four private banks. One day they were, and the next day they were not. The Government just swooped down and closed them up. Several American friends of mine in Moscow had accounts in these banks, and although they recovered their money, they had considerable difficulty in doing so."[36]
The pretext for such action against a Nepman was often a labor or sanitation code violation that would have been considered minor in 1925. Maurice Hindus witnessed the arbitrary enforcement of such codes while traveling through the countryside. In a village he saw a private trader charged with violating a sanitation law because she had not swept up the sunflower seed shells peasant customers had scattered on the floor of her little shop. That same day he spent some time in the village cooperative with the chairman of the local soviet and a visiting cooperative inspector, neither of whom rebuked the shop's manager or the peasants who were standing around strewing the floor with sunflower seed shells. On occasion, local authorities began trampling the Nepmen so vigorously that they had to be reined in by Moscow. This was the case in a town near Ufa, where in the summer of 1928 officials closed approximately one hundred private leather-working enterprises, allegedly for sanitation violations. Moscow's condemnation of such measures did not prevent them from continuing in many regions, particularly since this criticism from the center amounted to little more than a temporary, insincere concession to the Right from Stalin. As a matter of fact, early in 1929 VTsIK and Sovnarkom granted state labor inspectors even broader powers. A decree of January 2 authorized officials to assess "administrative levies" on employers who, though not violating the labor code, had nevertheless, in the view of the inspector, mistreated their workers.[37]
Local officials (not to mention Stalin during his Siberian campaign) relied increasingly upon "administrative measures" to throttle private grain trade and began to direct their blows not only at the Nepmen and
kulaks but also at the majority of the peasants. The markets were closed in numerous localities, and private traders were forbidden to buy grain from the peasants. Where markets remained open, the militia often required peasants to present trading licenses, which only the Nepmen had been required to obtain in the past. The militia and other local officials frequently fixed grain prices and forced the peasants to sell only to the state, sometimes even stopping them on the road and confiscating their grain. In addition, railway freight charges for private cargo were raised again in 1928, and in the following years various state agencies were empowered to forbid private rail shipments of any commodity. In Berlin the editors of Sotsialisticheskii vestnik received a report from a small village describing the consequences of the state offensive against private grain trade. "Panic is evident among the local population, caused by the prohibition of buying and selling grain. Repressive measures are being taken against private traders. The renewed arrests, confiscations, and tax increases have almost completely stifled the vitality of the little village of Podoliia." The inhabitants must have detected little difference from the grim days of War Communism.[38]
In a Soviet joke of the period, a Nepman's young daughter answered the door and called to her mother that the tax collector had come. "I'll be right there," replied her mother. "Be a good girl and offer the comrade a chair." "But, Mommy," said the child, "he wants all our furniture." This anecdote suggests the growing resemblance of taxation to the more forceful "administrative measures" employed against the Nepmen. Beginning in 1928, tax officials sharply increased the assessments on private entrepreneurs. If a Nepman managed somehow to scrape together enough money to pay the first levy, his taxes were frequently doubled on the inspector's next visit, so that before long he was unable to pay. His property was then confiscated, and he faced possible arrest for tax delinquency. Deputy Commissar of Finance Moshe Frumkin reported to VTsIK in April 1928 that Narkomfin had been directed "to fix the tax so that private mills will close" and added that "in some places we have almost completely abolished private trade by our tax policy." In the following years the state also conducted investigations of its own tax bureaucracy to weed out officials who failed to exhibit sufficient zeal in taxing the Nepmen.[39] It is not difficult to imagine how these purges affected the treatment meted out to Nepmen by those tax inspectors who remained at their jobs.
During the period from 1928 to 1930 the income and business tax rates for private entrepreneurs were raised repeatedly, loopholes were
closed, and the period of time over which payments were spread each year was reduced.[40] Income-tax data from the Sokol'nicheskii quarter of Moscow, where many Nepmen lived, reveal the disproportionate burden on those entrepreneurs still in business at the end of the decade. In 1929/30, private traders and manufacturers represented 1.7 percent of the region's income tax payers, with 8.2 percent of the total taxable income, but accounted for 55 percent of the region's income-tax receipts. For small-scale handicraftsmen of the Sokol'nicheskii quarter, the respective figures were 18 percent, 19 percent, and 26 percent.[41]
The Nepmen's taxes increased even more rapidly at the end of the 1920s than did the rates in tax decrees. Financial inspectors often increased arbitrarily their estimates of a private entrepreneur's sales or profits, and at times simply confiscated whatever merchandise or cash happened to be on hand. Toward the end of the decade, for example, an American reporter witnessed a raid on some Nepmen in the apartment building where he lived. A man and his relatives were making stockings without a license and selling them without paying taxes, and another possessed foreign currency worth $20,000. It is not surprising that these people were arrested, but three others, who had retired from business, were told the next day that a new, retroactive tax had been levied on the sales made during their last year in business. The tax happened to coincide exactly with the value of all their possessions. "Within three days they were out in the streets with little more than the clothes they wore and some bedding."[42]
During this period the state also stepped up its pressure on the Nepmen in other ways. The constitution drawn up by the Bolsheviks in 1918, during War Communism, barred certain segments of the population from voting and holding public office. Among these people, who came to be known as lishentsy (from lishat' , "to deprive") were (1) people using hired labor to make profits; (2) people living on "unearned income," such as interest and income from "enterprises" (predpriatiia ) and property; and (3) private traders and middlemen.[43] Even though private economic activity was legalized after 1921, the new constitutions issued in the various Soviet republics during the 1920s continued to disfranchise the Nepmen in language identical to that in the constitution of 1918.[44] This must have seemed a perplexing paradox to private entrepreneurs. The Civil Code granted them the right to engage in private business, but the constitution disfranchised them if they exercised this right.
Though it was not proclaimed in Soviet constitutions, lishentsy suf-
fered other deprivations as well. They could not have careers in the military or join cooperatives, trade unions, or other semiofficial organizations. Nor could they publish newspapers or arrange gatherings. They paid much higher bills than the rest of the population for utilities, rent, medical care, schooling for their children, and other public services. Nepmen incurred these penalties throughout the decade, even in the comparatively tolerant period from 1925 to 1926. But beginning in 1928, the position of lishentsy worsened considerably. As rationing spread across the land, officials wondered aloud why lishentsy should be granted food and clothing that were in short supply among workers. "Why must we supply the full 100 percent of the population," A. I. Mikoyan (a candidate member of the Politburo) asked a meeting of cooperative officials in 1928. "Why must we supply Nepmen? The easiest way is to establish a norm, a ration card." Mikoyan meant, of course, that ration cards should be issued to everyone but lishentsy , and this is precisely what happened.[45]
In the same spirit, lishentsy were expelled from state housing at the end of the decade. Demonstrating their vigilance, many housing committees in apartment buildings searched tirelessly for reasons to disfranchise and expel tenants. The results, as might be expected, were sometimes pathetic. For example, a woman in state housing was disfranchised because her husband, who had been unemployed for over a year, eked out a living by selling cucumbers, bread, and cigarettes at a street crossing. Even former Nepmen, who had since taken up other activities, were vulnerable. Given the acute housing shortage in many cities, it is not difficult to believe reports that the policy of expelling lishentsy from state housing was greeted warmly by the urban population. As the Moscow correspondent of the New York Times reported at the end of NEP: "In the cities the overcrowding is so great that the news that hundreds or thousands of apartments will be vacated by the expulsion of Nepmen tenants is good news to all." What was to become of people denied work, food rations, and housing seems not to have concerned anyone but the lishentsy themselves. Eugene Lyons put this question to
officials, communist friends, ordinary Russians in the following years, because it was a fascinating mystery. None of them could give me a satisfactory answer, except the amazing tenacity of the human animal in clinging somehow to life.
Part of the answer of course is that a large proportion of them did not survive. Suicide and death from the diseases of undernourishment decimated their ranks. The rest hung on to existence somehow with bleeding fingers,
doing odd jobs, teaching, begging, "smuggling" themselves into jobs by lying about their status only to be exposed and driven out again before long.[46]
Not only lishentsy but their children as well felt the "class principle" of Soviet society more heavily at the end of the 1920s. Throughout the decade, Nepmen were required to pay for their children's primary education at rates several times higher than those applied to the offspring of even the most prosperous workers. Even in the middle of NEP, higher education was out of the question for the children of lishentsy unless they could disguise their parentage or pay a large fee. These students had always been vulnerable to expulsion, but at the end of the decade, purges gripped the universities in earnest. Paralleling the eviction of lishentsy from state housing, students with "nonlabor" parents were ferreted out of colleges and universities with redoubled vigor. Even other students were enlisted in the hunt. An American student at a Moscow university noticed a banner in the lobby of the main building that bore the words: "Any student who knows why another student should be deprived of his right to vote is obligated to report to the Students' Committee." Some expelled students, overcome by the hope-lessness of their position, committed suicide.[47]
Children of lishentsy who, despite these obstacles, wished to continue their education often faced the dilemma described in a report from one of Sotsialisticheskii vestnik's sources in the Soviet Union. In a provincial town, two friends of the reporter operated a small cafeteria (without using hired labor). Their daughter finished secondary school and wanted to go on to a university. But with "nonlabor elements" as parents, her way was barred. She then found work in a factory, hoping to gain admission to a university after two years of trade union activity. Soon, however, she learned that factory work would not be enough "to wash away the shame of her bourgeois origins." It was also necessary to make a "complete break" with her parents. Reluctantly, the girl agreed to move out of her family home. But she refused to publicly renounce her parents and cease visiting them, and the trade union would not include her in the group of people it sent on to college. Similarly, Maurice Hindus knew a youth who was denied admission to a university because his father owned a tea house. "He could, of course, disown his father, change his name, declare himself independent, and doors to institutions of learning would open up. Some of his friends had done so. But he could not [that is, did not choose to] follow in their footsteps."[48]
Along with forced collectivization and the elimination of the kulaks, the campaign against the Nepmen reached its peak during the winter of
1929-30. Toward the end of October 1929, representatives from various factories in Moscow met with government officials to organize what were termed "workers' brigades" (or, sometimes, "shock brigades"). These were groups of workers who visited Nepmen delinquent in their tax payments and simply seized whatever property was available to cover the arrears. As one longtime foreign resident of Moscow reported: "The regularly-appointed tax collector, when he calls on private persons, [is] almost always accompanied by a pair of these young stalwarts, who make light of protests and nip resistance in the bud." Given the methods of tax assessment in use, there was no shortage of arrears for these brigades to collect. Following their successful performance against the Nepmen (and kulaks) in the Moscow region, workers' brigades were soon in action throughout the Soviet Union. In many cities and villages, the brigades conducted "trunk weeks," going from house to house in search of anything that could be construed as a supply of goods intended for illicit economic activity. They confiscated items deemed to be hoarded and, if the supply was large enough, had the owner arrested as an illegal trader.[49]
This was also the period of the well-known "gold fever," though, as Solzhenitsyn explains, "the fever gripped not those looking for gold but those from whom it was being shaken loose." As the massive industrialization campaign of the First Five-Year Plan was launched, the state was desperate for gold, which could be used to obtain equipment and specialists from the West. Thus the police arrested anyone they thought might be hoarding gold, and many of these victims were, or had been, Nepmen. Private entrepreneurs so detained were generally not charged with a crime and thus rarely journeyed through the penal system to the labor camps. They were simply held in the prisons and tortured until they surrendered their gold. The outlook for those who actually had no gold was bleak.[50]
Toward the end of 1929 nearly all "permanent" private shops were closed. In most regions, the only private traders still tolerated were small-scale, mobile street vendors. As during War Communism, many of these "merchants" were simply peasants bringing food into the cities from the surrounding countryside, now that private middlemen had again been virtually eliminated. During the winter of 1929-30, even these itinerant street traders all but disappeared. This was partly because of the collectivization and dekulakization campaigns (which diminished the volume of surplus produce and the number of peasants free to market it), and partly because of more energetic police measures against such trade. Eugene Lyons described the state's mopping-up activity:
City Soviets would not remain behindhand as against their country colleagues and sought to match liquidation of the kulaks with a no less hasty liquidation of the miserable remnants of private trade. There were days in which tens of thousands of "speculators" were arrested, imprisoned or driven from the cities: harried creatures, denied respectable employment by law, who sold toothpicks, homemade garments, second-hand boots, stale hunks of bread, matches, a little sunflower seed oil, in the private markets. Further revisions of living space were ordered in Moscow and elsewhere, so that former Nepmen and other class enemies, whether eight years old or eighty, might be expelled from their cramped quarters.[51]
Peasants were forbidden to carry sacks of food onto trains and often had their produce confiscated if they tried to enter cities by other means. Those who managed to slip through the blockade, along with urban peddlers, were subject to heavy fines (or worse) if caught.[52]
The aftermath of the state's winter onslaught in the cities was starkly dramatic. An American mining engineer employed by a Soviet agency, who had left Moscow for a brief trip to the United States in December 1929, was struck on his return in June by the transformation Moscow had undergone. "On the streets all the shops seemed to have disappeared. Gone was the open market. Gone were the nepmen. The government stores had showy, empty boxes and other window-dressing. But the interior was devoid of goods." Another American living in Moscow observed:
The streets presented a strange appearance to one who had become accustomed to throngs of peasant pedlars. For the first time since the introduction of the rationing of food the population became almost wholly dependent upon the supply of food obtainable on their ration cards at the governmental and cooperative shops. The plight of those people who were deprived of electoral rights, and consequently of the right to have ration cards, was difficult indeed.[53]
Thus by 1930 the Nepmen's day was over. Private trade was nearly extinct in all save the remotest regions, and other private ventures such as medical clinics, dentists' offices, and barber shops were banned at this time. In addition, Sovnarkom abolished a number of institutions in which Nepmen had participated, such as credit organizations, commodity exchanges, and fairs (including the famous one at Nizhnii Novgorod). Even defense attorneys, who were state employees, began refusing to accept Nepmen any longer as clients.[54] The campaign against private entrepreneurs gained such steam in the last years of the decade that the Nepmen were driven out of business more rapidly than the state
had planned. As late as April 1929, for example, the maximum variant of the First Five-Year Plan approved by the Sixteenth Party Conference anticipated that the private share of the country's total trade volume would not drop below 9 percent by 1932/33 .[55] In reality, the economy would "achieve" this figure within the year. In many regions, particularly in the countryside, private shops and markets often closed before they could be replaced by state and cooperative stores, forcing peasants to travel several kilometers to purchase even essential items.[56]
On March 2, 1930, Stalin signaled unexpectedly (in Pravda ) that he was reining in the collectivization campaign then raging through the countryside. His article, titled "Dizzy from Success," rebuked local officials who had allegedly misunderstood the party line and tried overzealously to collectivize their regions. Twelve days later an order from the CC (to all provincial party committees) condemned "the abolition of markets and bazaars in a number of places, leading to a reduction in the supply of [food to] the towns." Party organizations were ordered "to forbid the closing of markets, to restore bazaars, and not to hinder sales by peasants, including members of collective farms, of their produce in the market." As a result of such orders, some peasant vendors reappeared in the streets and market squares. Describing the uncertain period immediately following the publication of Stalin's article, a foreign resident of Moscow recalled:
Everyone wondered, too, whether Nep would be re-established. For some time the train of events was confused. The peasant pedlars appeared again upon the streets as though by magic. The prices which they charged were, however, higher than before their disappearance. On the other hand, the shops of the Nepmen were, in most cases, not reopened.[57]
All the while, no decree was drafted to formally abolish NEP, even though its primary provisions had all been emasculated by the end of the decade. Instead, Stalin announced that NEP consisted of two "sides" or "stages" and that the second stage—now at hand—included a stepped-up offensive against the "new bourgeoisie." Speaking to a Plenum of the CC and CCC in April 1929, Stalin explained this position and remarked: "Bukharin's mistake is that he does not see the two-sided nature of NEP, he sees only the first side." In June of the following year, while presenting the CC report to the Sixteenth Party Congress, Stalin scoffed at "the complete absurdity of chatter about NEP being incompatible with an attack [against capitalist elements]."
Indeed NEP does not only presuppose a retreat and the permission of the revival of private trade, the permission of the revival of capitalism with the
state playing a regulatory role—the first stage of NEP. NEP, in fact, also presupposes, at a certain stage of development, the attack of socialism against capitalist elements, the shrinking of the field of activity for private trade, the relative and absolute decline of capitalism, the growing preponderance of the socialist sector over the nonsocialist sector, the victory of socialism over capitalism—the present stage of NEP.[58]
With remarks like these, Stalin was again selecting the combative side of Lenin's ambiguous characterization of NEP. Lenin did suggest on a number of occasions that NEP involved first a retreat and then a struggle with the "new bourgeoisie." But was this struggle to assume primarily the form of economic competition, as Bukharin insisted, or did Lenin have in mind the measures adopted by the state in 1928-30? As we have seen, Lenin's works from 1921 to 1923 leave considerable room for doubt that he shared Stalin's conception of NEP on this and other scores. With the defeat of the Right Opposition, however, this became a moot point. As new laws and resolutions abandoned NEP's old principles, police and tax officials had little difficulty gauging the direction and force of the new political winds and adjusted their treatment of private entrepreneurs accordingly.
The renewed toleration of private trade, following Stalin's "Dizzy from Success" article, applied to sales by petty producers, mainly peasants, but not to transactions by middlemen, which had been the heart of the Nepmen's activity. Numerous decrees issued during the 1930s permitted collective farmers and the dwindling number of independent peasants to sell their surplus produce freely in places such as market squares, railroad stations, and boat landings. But as a decree of VTsIK and Sovnarkom added in 1932: "The opening of stores and shops by private traders is not permitted, and middlemen and speculators, trying to profit at the expense of the workers and peasants, must be eliminated everywhere."[59] Private trade, as it had been conducted by most Nepmen, became a crime, punished as "speculation" with a sentence of five to ten years in a labor camp and loss of property.[60]
Meanwhile, Stalin offered an interesting defense of free trade by collective farmers. Speaking to a meeting of party officials in January 1933, he asked the question undoubtedly on the minds of many:
Why did the Council of People's Commissars and the Central Committee introduce [free] collective-farm trade in grain?
First of all, in order to widen the basis of trade between town and country, and improve the supply of agricultural products to the workers and urban manufactured goods to the peasants. There is no doubt that state and cooperative trade by themselves are not up to this. These channels of trade had to be supplemented with a new channel—collective-farm trade.
Stalin added that these free-market sales would provide additional income for the collective farmers and "give the peasantry a new incentive to improve the work of the collective farms both in sowing and in harvesting."[61] One wonders if anyone at the meeting perceived the ironic similarity between Stalin's justification of free collective-farm trade and Lenin's defense in 1921 of the policies Stalin claimed the Soviet Union had outgrown.[62]