N. I. Bukharin

NOTES OF AN ECONOMIST AT THE BEGINNING

OF A NEW ECONOMIC YEAR

...The transition to the period of reconstruction does not signify a radical change of economic policy as was, without doubt, the case in 1921. However, it has a much greater significance, so to speak, in another dimension. For there exists a great difference between, let us say, a simple repair of a bridge and its construction: the latter requires knowledge of both higher mathematics and the resistance of materials and a thousand other wisdoms. The same is true on the scale of the economy as a whole. The period of reconstruction has raised a number of very complex technical tasks (projecting of new enterprises, new technology, new branches of industry), a number of very complex organizational and economic tasks (a new system of organization of labor in enterprises, question of location of industry, regionalization, the forms of the entire economic administration, etc.), a number of very difficult tasks of general economic leadership (the combination of the basic elements of the economy under the new conditions, the question of socialist accumulation, economic questions in connection with questions of the class struggle, again under the new conditions of the struggle, etc.), and finally, a number of problems concerning the human material (the drawing of masses into the process of rationalization on the one hand, the problem of skilled personnel on the other). The major technological achievements of the capitalist world (particularly in Germany and in the United States) and the growth of world production put our internal problems into an extremely sharp focus. And yet we have not undertaken the necessary regrouping of our forces, or more correctly, we have not undertaken it to that extent and at the rate and with that energy, which the objective march of events required....

II

The reconstruction period requires from economic leadership the most thorough thinking through of the problems of current policy. In this connection there appears again, above all, that “cursed” question of the relationship between the city and the village, and the old prescriptions which are supposed to save us from all evil and misfortune are being warmed up once more: the Trotskyite ventriloquists, those gardeners who are pulling the plant by the top to make it grow more rapidly, and the petty bourgeois who mourn and whimper about the "forced attack on the kulaks,” all of them have swarmed against the background of the difficulties associated with grain deliveries; they have revived, they have renewed the production of their panaceas, they have come up-for how many a time!-with their desires, their demands, their warnings, and their threats. We too should once again examine this “problem of problems,” critically reviewing our course.

We have made the historical break between the capitalist world and the world of the proletarian dictatorship, but it is useful for us to make use of the historical experience of capitalism. It is useful for us to make use of this experience also from the point of view of the problem which interests us, the more so since we all recall the proposition of Marx: various types of relationships between the city and the village mark entire historical eras.

Within the limits and the framework of capitalism it is not difficult to distinguish three basic types of relationship. The first type, semifeudal agriculture, is the most backward; the peasant is a pauper, there are starvation leases, ruthless exploitation of the peasant, the capacity of the domestic market is weak. (Example: prerevolutionary Russia.) The second type contains much smaller remnants of feudalism; the feudal landlord is already to a considerable degree a capitalist, the peasantry is more well-to-do, the capacity of the peasant market is greater, etc. The third type is the “American” type: there is almost complete absence of feudal relationships, “free” land, initially there is absence of absolute rent, there are prosperous farmers, the domestic market for industry is tremendous. And what of that? It is not difficult to see that the power and force of industrial development, the power and force of the productive forces were at their maximum precisely in the United States.

The Trotskyites, by raising the problem of a maximum transfer (to take everything that is “technologically attainable;” to take more than the tsarist regime, etc.), want to place the USSR in this historical sequence “behind” old Russia, at the same time that it should be placed “behind” the United States of America. For if the United States is realizing the most rapid development of agriculture and progress of productive forces in general with the limits of capitalism, then we-on the basis of socialism, on the basis of decisive struggle with all capitalist elements-must proceed even more rapidly in close association with the decisive masses of the peasantry. In their naivete, the ideologists of Trotskyism believe that a maximum annual transfer from peasant agriculture into industry secures the maximum rate of development of industry in general. But this is clearly incorrect. The maximum continued rate of growth will be experienced with such a combination when industry will advance on the basis of rapidly growing agriculture. It is precisely then that industry will experience record achievements of its development. But this assumes the possibility of rapid real accumulation in agriculture, hence by no means the Trotskyite policy. The period of transition unveils a new era in the relationship between the city and the village, an era which marks the end of the systematic lag of the village, the “idiocy of village life,” which lays the foundation of the course aimed at the abolition of the polarity between the city and the village, which turns industry itself “face to the village” and which industrializes agriculture, leading it out of the historical wings onto the stage of economic history. Consequently, the Trotskyites do not under stand the fact that the development of industry depends on the development of agriculture....

Thanks to the initiative of E. A. Preobrazhenskii, the ideologists of Trotskyism imagine that the law of socialist accumulation is bound more and more to violate the law of value, which is the law of equilibrium of commodity production. This is not the place to analyze in detail the whole absurdity of this proposition. We shall show here that the very contraposition of the law of value as the law of commodity of production and the law of socialist accumulation as the substitute and successor of the law of value is already absurd, for the simple reason that even under capitalism there was a law of accumulation which functioned on the basis of the law of value: for this reason the law of value may be transformed under our conditions into whatever you please except into a law of accumulation. The law of accumulation itself assumes the existence of another law on whose basis it functions. What it is-whether the law of labor outlays or something else-makes no difference to us under the given conditions. One thing is clear: if any branch of production systematically fails to receive back the expenses of production plus a certain additional amount corresponding to a part of surplus labor and capable of serving as a source of expanded reproduction, then it either stagnates or regresses. This law is also appropriate for grain production. If the neighboring branches of production in agriculture find themselves In a better position, tïere takes place a process of reallocation of productive forces. If this does not take place, there will occur under our conditions a general process of movement toward subsistence farming. To think that the growth of a planned economy means the possibility (on that dear old basis of withering away of the law of value) of acting any way one pleases amounts to failure to understand the ABC of economic science. These considerations are a sufficient basis to determine the bounds of the “transfers.” The opponents of industrialization object to any withdrawals, even of a part of the surplus product, i.e., to any “transfer.” But in that case the rate of growth of industrialization is slowed down. The Trotskyites determine the magnitude of the transfer within the limits of what is “technically attainable” (i.e., going actually beyond the limits of the surplus product). It is clear that in such a case there can be no question of development of agriculture or of its grain-producing branch, which is necessary for the development of industry. Here the truth lies in the middle.

But the development (expanded reproduction) of agriculture in general (including the production of raw materials and of grain production) is also necessary from the point of view of exports and imports. We have to pay for our imports of equipment. The same is true for the imports of raw materials. It would be a wild thing indeed if we should, after the decline of grain exports brought about by the grain crisis, reorient ourselves altogether in such a way as to consider those exports lost forever. It is enough that we should be temporarily dependent on foreign countries with respect to the iinports of equipment. To depend on them simultaneously with respect to equipment and with respect to raw materials and grain is inconceivable. What we must do is, relying on our agricultural base and utilizing its output, to pay for the imported equipment with the “agricultural currency” (which, of course, does not exclude the necessity of strengthening industrial exports as well), and developing our heavy industry, emancipate ourselves gradually from dependence with respect also to equipment, and come to stand in this way more and more on our own feet (which, of course, does not exclude the necessity of further utilization of international economic relations)....

Our economic organs have not yet understood the absolutely urgent necessity of a thorough and thoughtful study of the structure of demand^1. for industrial products, even though its signifi-canee from the viewpoint of the analysis of reproduction is completely exceptional. According to exceedingly rough and only approximate calculations undertaken upon my urging by some comrades and presenting an idea not so much about precise proportions as about the order of the magnitudes in which we are interested, matters stand as follows:

In this connection the demand created by the socialized capital construction (including the wages of construction workers) enters into the aggregate demand for industrial products in the dimension probably of 16 to 17 per cent.

Thus these approximate calculations, which are concerned with the structure of the demand for industrial products in the coming year 1928/29, indicate that village demand, even when taken as a whole, amounts to only one-fifth or one-fourth of the aggregate demand for industrial products.

As regards the other portions of demand (i.e., three-fourths or even four-fifths of the whole), then, you see, here is the same “lagging”! In particular, even industry itself, which is developing furiously at record rates of growth, also has a furious demand for industrial products, but it cannot satisfy it. Trotsky states that industry lags behind the growth of village demand, behind the growth of agriculture; but this argument may appear satisfactory only at first sight. But here, with a careful analysis, it turns out that industry “lags” behind itself! How should this formula be interpreted? It means that industry in its development is running into the limits of that development. There you have the conclusion that is avoided by the superindustrialist Trotsky and is being slurred over by discourses about village demand for industrial goods, viewed in isolation from the aggregate demand for industrial products.

But to be running into the limits indicates the following: (1) Clearly we have selected insufficiently correct relationships between the branches of industry itself (for instance, the clear lag of metallurgy). (2) It is clear that we have chosen insufficiently correct relationships between the growth of capital construction (both in industry and in the socialized sector as a whole). If there are no bricks and if they cannot be produced in a given season (for technical reasons) beyond a certain amount, then one cannot draw up programs of construction which exceed that limit andcreate thereby ademand which cannot be satisfied, since no matter how much you may force construction, you cannot make factory buildings and residences from thin air (we shall return once again to this question in connection with the discussion of the problem of capital outlays). (3) It is also clear that the limits of development are given by the output of raw materials: cotton, hides, wool, flax, etc., cannot be obtained from thin air either. But as everyone knows, these objects are the products of agricultural production, and their shortage is a cause of the insufficient development of the gross output of industry, which cannot, in its turn, fully satisfy either the demand of the city population or the demand of the village population. Consequently, if there is a shortage of raw materials plus a shortage of grain (and this means, among other things, also a shortage of exports and a shortage of imported products), plus a shortage of construction materials, then one must truly be a clever person to demand still a “superindustrialist” program.

To sum up in general, one must state: (1) With respect to fixed capital, gross output, and marketed output, the rate of development of industry exceeds extraordinarily the rate of development of agriculture. (2) Grain production, which is put in an extremely unfavorable situation, lags dangerously even behind the minimum necessary rate of growth. (3) One-half of the demand of the village population is not agricultural demand, and it is itself created to a considerable degree by the development of large-scale industry, of the socialized sector. (4) Further increases of Lhe rate of development of industry are limited, to a large extent, by limits of agriculture, of raw materials, and of exports. (5) It’i/dear, furthermore, that in allocating resources within industry (and with respect to capital construction, within the whole socialized sector) one must attain an all-round account of all factors which determine “a more or less crisis-free development” (from the resolution of the Fifteenth Congress), a more correct combination of the branches of industry and the branches of the socialized sector.

Of the whole complex of problems which follow from here, of first importance are the problems of capital construction and of grain production. As regards the last question, the party in its decisions-especially in its recent decisions-has underscored its tremendous significance: hence the correction in respect to price policy, hence the formulation of the question of the state and collective farms, hence the necessity of extremely vast practical efforts in the given sphere. Of course, if there were no dangerous lag of grain production, if there were no parcelization in it, if there were no decline of its marketed output, etc., then it would be more expedient, if you please, to invest the funds allocated to the state farms, let us say, in production of ferrous metals, which is a bottleneck of our industry. However, even the superiñdustrialists do not dare to attack the state farms. Why? Because it is precisely the lag of grain production which is obvious. The “purely productive” point of view, i.e., the point of view of “increasing output” (Lenin) coincides in this case with the point of view of “class substitution,” the gradual elimination of the capitalist elements of agriculture by the growing collectivization of individual poor peasants’ and middle-sizedpeasants’ farms, by the strengthening and socialization of agricultural production.

This tremendous new problem, which by no means assumes an attitude of disregard for the individual labor farm but which must, on the contrary, be solved on the basis of progress of individual farms (it is precisely in this way that the problem was formulated by Lenin), requires special attention and special efforts, precisely because of its novelty. It is to a certain extent major capital formation in agriculture, which requires also new technology (tractorization, mechanization, the application of chemistry, etc.) and a skilled labor force. The progress of individual peasant production, in particular grain production, the limitation of kulak production, the building up of state and collective farms, along with a correct price policy, along with cooperation of the masses of the peasants, etc., should correct the major economic disproportion which finds its expression in the stagnation or even regression of grain crops and in the weak development of agriculture in general. On the whole and in general, in the drawing up of our plans, one must recall the directive of the Fifteenth Congress: “It is incorrect to start from the requirement of a maximum transfer of resources from the sphere of peasant agriculture into the sphere of industry, since this demand means not only a political break with the peasantry but also the undermining of the raw material base of industry itself, the undermining of its domestic market, the undermining of exports, and the disruption of equilibrium of the economic system as a whole. On the other hand, it would be incorrect to give up using the resources of the village in the construction of industry: this would amount at the present time to a slowing down of the rate of development and a disturbance of equilibrium to the detriment of the industrialization of the country.^2. ...

Zametki ekonomista k nachalu novogo khoziaistvennogo goda, Moscow-Leningrad, Gosizdat, 1928, 56 pp.

1. By “demand” in this case we understand not only monetary demand but also “demand” satisfied, let us say, by a given production unit via its own production (for example, the demand of the fabricating enterprises of lugostal for pig iron produced by lugostal itself, etc.).

2. Resolution of the Fifteenth Congress “About Directives” of the Drawing Up of the Five-Year Plan of the National Economy.