In May, 1918, Commissar of Finances Gukovsky, staggered by the enormous loss incurred upon every hand, in his report to the Congress of Soviets called attention to the situation. He said that the railway system, the arterial system of the industrial life of the nation, was completely disorganized and demoralized. Freight-tonnage capacity had decreased by 70 per cent., while operating expenses had increased 150 per cent. Whereas before the war operating expenses were 11,579 rubles per verst, in May, 1918, wages alone amounted to 80,000 rubles per verst, the total working expenses being not less than 120,000 rubles per verst. A similar state of demoralization obtained, said Gukovsky, in the nationalized marine transportation service. In every department of industry, according to this highly competent authority, waste, inefficiency, idleness, and extravagance prevailed. He called attention to the swollen salary-list; the army of paid officials. Already the menace of what soon developed into a formidable bureaucracy was seen: “The machinery of the old régime has been preserved, the ministries remain, and parallel with them Soviets have arisen—provincial, district, volost, and so forth.”

In June, 1918, after the railways had been nationalized for some time, Kobozev, Bolshevist Commissar of Communications, said: “The eight-hour workday and the payment per hour have definitely disorganized the whole politically ignorant masses, who understand these slogans, not as an appeal to the most productive efficiency of a free citizen, but as a right to idleness unjustified by any technical means. Whole powerful railway workshops give a daily disgraceful exhibition of inactivity on the principle of ‘Why should I work when my neighbor is paid by time for doing no work at all?’”

Although nationalization of industry had been decided upon in February, and a comprehensive plan for the administration and regulation of nationalized enterprises had been published in March, promulgated as a decree, with instructions that it must be enforced by the end of May, it was not until July that the Soviet Government really decided upon its enforcement. It should be said, however, that a good many factories were nationalized between April and July. Many factories were actually abandoned by their owners and directors, and had to be taken over. Many others were just taken in an “irregular manner” by the workers, who continued their independent confiscations. For this there was indeed some sort of authority in the decree of March, 1918.[44] Transportation had broken down, and there was a lack of raw materials. It was officially reported that in May there were more than 250,000 unemployed workmen in Moscow alone. No less than 224 machine-shops, which had employed an aggregate of 120,000 men, were closed. Thirty-six textile factories, employing a total of 136,000 operatives, were likewise idle. To avert revolt, it was necessary to keep these unemployed workers upon the pay-roll. Under czarism the policy of subsidizing industrial establishments out of the government revenues had been very extensively developed. This policy was continued by the Provisional Government under Kerensky and by the Bolsheviki in their turn. Naturally, with industry so completely disorganized, this led toward bankruptcy at a rapid rate. The following extract from Gukovsky’s report to the Central Executive Committee in May requires no elucidation:

[44] See text of the decree—Appendix.

Our Budget has reached the astronomical figures of from 80 to 100 billions of rubles. No revenue can cover such expenditure. Our revenue for the half-year reaches approximately 3,294,000,000 rubles. It is exceedingly difficult to find a way of escape out of this situation. The repudiation of state loans played a very unfavorable part in this respect, as now it is impossible to borrow money—no one will lend. Formerly railways used to yield a revenue, and agriculture likewise. Now agriculturists refuse to export their produce, they are feeding better and hoarding money. The former apparatus—in the shape of a Government Spirit Monopoly and rural police officers—no longer exists. Only one thing remains to be done—to issue paper money ad infinitum. But soon we shall not be able to do even this.

At the Congress of the Soviets of People’s Economy in May, Rykov, the president of the Superior Council of the National Board of Economy, reported, concerning the nationalization of industries, that so far it had been carried out without regard to industrial economy or efficiency, but exclusively from the point of view of successfully struggling against the bourgeoisie. It was, therefore, a war measure, and must not be judged by ordinary economic standards. Miliutin, another Bolshevist Commissar, declared that “nationalization bore a punitive character.” It was pointed out by Gostev, another Bolshevist official, that it had been carried out against the wishes of many of the workers themselves quite as much as against the wishes of the bourgeoisie. “I must laugh when they speak of bourgeois sabotage,” he said. “We have a national people’s and proletarian sabotage. We are met with enormous opposition from the labor masses when we start standardizing.” For good or ill, however, and despite all opposition, Bolshevism had turned to nationalization and to the erection of a powerful and highly centralized state. What the results of that policy were we shall see.

IX
THE NATIONALIZATION OF INDUSTRY—I

To judge fairly and wisely the success or failure of an economic and political policy so fundamental and far-reaching as the nationalization of industry we must discard theories altogether and rely wholly upon facts. Nothing could be easier than to formulate theoretical arguments of great plausibility and force, either in support of the state ownership of industries and their direction by state agencies or in opposition to such a policy. Interesting such theorizing may be, but nothing can be conclusively determined by it. When we come to deal with the case of a country where, as in Russia, nationalization of industry has been tried upon quite a large scale, there is only one criterion to apply, namely, its relative success as compared with other methods of industrial organization and management in the same or like conditions. If nationalization and state direction can be shown to have brought about greater advantage than other forms of industrial ownership and control, then nationalization is justified by that result; if, on the other hand, its advantages are demonstrably less, it must be judged a failure.

Whether the nationalization of industry by the Bolshevist Government of Russia was a sound policy, wisely conceived and carried out with a reasonable degree of efficiency, can be determined with a fair approach to certainty and finality. Our opinions concerning Karl Marx’s theory of the economic motivation of social evolution, or Lenin’s ability and character, or the methods by which the Bolsheviki obtained power, are absolutely irrelevant and inconsequential. History will base its estimate of Bolshevism, not upon the evidence of the terrorism which attended it, ample and incontestable as that evidence may be, but upon its success or failure in solving the great economic problems which it set out to solve. Our judgment of the nationalization of industry must not be warped by our resentment of those features of Bolshevist rule which established its tyrannical character. The ample testimony furnished by the official journals published by the Bolshevist Government and the Communist Party enables us to visualize with great clearness the conditions prevailing in Russia before nationalization of industry was resorted to. We have seen that there was an alarming shortage of production, a ruinous excess of cost per unit of production, a great deal of inefficiency and waste, together with a marked increase in the number of salaried administrative officials. We have seen that during the period of industrial organization and direction by the autonomous organizations of the workers in the factories these evils grew to menacing proportions. It was to remedy these evils that nationalization was resorted to. If, therefore, we can obtain definite and authoritative answers to certain questions which inevitably suggest themselves, we shall be in a position to judge the merits of nationalization, not as a general policy, for all times and places, but as a policy for Russia in the circumstances and conditions prevailing when it was undertaken. The questions suggest themselves: Was there any increase in the total volume of production? Was the average per-capita production raised or lowered? Did the new methods result in lessening the excessive average cost per unit of production? Was there any perceptible marked increase in efficiency? Finally, did nationalization lessen the number of salaried administrative officials or did it have a contrary effect?

We are not concerned with opinions here, but only with such definite facts as are to be had. The replies to our questions are to be found in the mass of statistical data which the Bolsheviki have published. We are not compelled to rely upon anybody’s opinions or observations; the numerous reports published by the responsible officials of the Bolshevist Government, and by their official press, contain an abundance of statistical evidence affording adequate and reliable answer to each of the questions we have asked.