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    Comrades, one hears the most varied and highly confusing opinions on the question of the tax in kind and the change in our food policy, and also on the Soviet government's economic policy. Permit me, by arrangement with Comrade Kamenev, to share our subjects in such a way that he will give a detailed outline of the laws which have just been issued. This will be all the more appropriate for he chaired the commission which was appointed by the Party's Central Committee and later endorsed by the Council of People's Commissars, and which drew up all the recent laws at a number of conferences with representatives of the departments concerned. The last of these laws was issued yesterday, and we saw it in the newspapers this morning. There is no doubt that each of these laws raises a number of practical questions, and it will take some work to familiarise all the local Party and Soviet workers with them and to devise the proper methods of applying them in the localities.

    I should like to draw your attention to their general significance, or the principle behind them. How are we to explain the fact that the Soviet government and the dictatorship of the proletariat are about to accept some freedom of trade? To what extent can unrestricted trade and individual enterprise be permitted side by side with the socialist economy? To what extent can we permit such a revival of capitalism, which may seem to be inevitable with a free market, however restricted? What has called

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forth this change? What is its real meaning, character and significance? And how should members of the Communist Party understand it? How is it to be explained, and what are the limits of its practical application? This, approximately, is the task I have set myself.

    The first question is: what has called forth this change, which many think to be too drastic and not sufficiently justified?

    The fundamental and principal reason for the change is the extraordinarily acute crisis of peasant farming, and its very difficult condition, which has proved to be much harder by the spring of 1921 than could have been expected. On the other hand, its consequences have affected the restoration of our transport system and of our industry. I should like to point out that most mistakes on the question of substituting the tax in kind for the surplus-grain appropriation system, and on the significance of the change, are made because there is no effort to analyse the nature of the change and its implications. Here is a picture of peasant farming by the spring of 1921: an extremely severe crisis caused by the war-time ruin and aggravated by a disastrous crop failure and the resultant fodder shortage (for the failure also affected the hay crop) and loss of cattle; and the weakening of the productive forces of peasant farming, which in many places was doomed to utter ruin. And here we come to this question: what is the connection between this terribly acute crisis of peasant farming and the Soviet government's abolition of the surplus-grain appropriation system? I say that if we are to understand this measure we must ask ourselves: what is the transition we are making?

    In the event of a workers' revolution in a country with a predominantly peasant population, with the factories, works and railways taken over by the working class, what, in essence, should be the economic relations between the working class and the peasantry? They should obviously be the following: the workers producing in the factories and works, which now belong to them, all that is necessary for the country -- and that means also for the peasants, who constitute the majority of the population -- should transport all these things on their railroads and river vessels and deliver them to the peasants, in return for the surplus

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agricultural produce. This is absolutely obvious and hardly requires detailed explanation although it is constantly forgotten in the tax discussions. But it should be borne in mind, because if we are to explain the significance of the tax in kind, which is only a transitional measure, we must have a clear understanding of what we want to achieve. What I have said makes it clear that we do not want the peasants' products to be delivered to the workers' state as appropriations of surplus grain, or a tax. We want them in exchange for all the goods the peasants need delivered to them by our transport system. We must have such an arrangement. It is a basis for the economy of a country which has adopted socialism. If peasant farming is to develop, we must also assure its transition to the next stage which must inevitably be one of gradual amalgamation of the small, isolated peasant farms -- the least profitable and most backward -- into large-scale collective farms. That is how socialists have always visualised it, and that is exactly how our own Communist Party sees it. I repeat, the greatest source of error and confusion is in appraising the tax in kind without making allowance for the specific features of the transitional measures which we must take, if we are to attain the goals which we can and must reach.

    What, then, is the tax in kind? It is a measure in which we see something of the past and something of the future. A tax is something the state takes from the population without compensation. If it is fixed at approximately one half of last year's rate of surplus-grain appropriations it alone will not suffice for the workers' state to maintain its Red Army, the whole of industry, and the whole of the non-agricultural population, and to develop production and relations with foreign countries, whose assistance in the way of machinery and equipment we need. On the one hand, the workers' state wants to rely on the tax at approximately one-half the surplus-grain appropriations rate, and on the other, on the exchange of manufactured goods for the surplus products of peasant farming. Hence, the tax contains a moiety of the old appropriation system and a moiety of that which is the only correct system, namely, the exchange of the manufactures of big socialist factories for the products of peasant farming through the medium

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of food supply organisations of the working-class state and workers' and peasants' co-operative societies.

    Why are we compelled to resort to a measure of which a moiety belongs to the past and a moiety only is put on proper lines? After all, we are not at all sure that we shall be able to put it on proper lines at once, or that it will be at all considerable. Why are we compelled to resort to such a half-measure? Why must we rely on such measures in our food and economic policy? What is it that makes it imperative? Everyone knows, of course, that it is not the Soviet government's preference for some particular policy. It is the grinding need and the desperate situation. You know that for several years after the victory of the workers' revolution in Russia, after the imperialist war, we had to endure a civil war, and it is now no exaggeration to say that Russia suffered more than any other country involved in the imperialist war, including those which had suffered because it was fought on their territory. For after four years of imperialist war we endured three years of civil war, which brought more havoc and industrial dislocation than any external war, because it was fought in the very heart of the country. This terrible devastation is the main reason why initially during the war -- particularly when the Civil War cut us off from grain areas, like Siberia, the Caucasus and the whole of the Ukraine, and from our supplies of coal and oil, and reduced our possibilities of obtaining other types of fuel -- we could hold out -- in a besieged fortress -- only through the surplus-grain appropriation system, that is, by taking from the peasant whatever surplus produce was available, and sometimes even a part of his necessaries, in order to keep the army in fighting trim and to prevent industry from going to pieces altogether. During the Civil War, this problem was one of extraordinary difficulty, and was declared insoluble by all the other parties. Take the Mensheviks and Socialist-Revolutionaries, i.e., the parties of the petty bourgeoisie and the kulaks. At the most acute moments of the Civil War they did the most shouting about the Bolsheviks' having undertaken a crazy task, and the impossibility of holding out when all the powers were assisting the whiteguards. Indeed, the problem was one of exceptional diffi-

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culty, and called for a supreme effort. It was successfully solved only because of what, you might say, was the superhuman sacrifices on the part of the working class and the peasantry. The working class never suffered such malnutrition, such starvation, as it did in the first years of its dictatorship. This naturally left as the only alternative the appropriation system, which meant taking from the peasant all of his surplus and a part of his necessaries. He was told: "You, too, will have to go hungry for a while, but together we shall save our cause and drive off Denikin and Wrangel." That was the only conceivable solution.

    This was not an economic system or an economic plan for a policy, adopted from a number of possible choices. That was not the case at all. We could not think of restoring industry without ensuring a minimum of food and fuel. Appropriation of surpluses without remuneration -- because you can't call paper currency remuneration -- was the only answer to the task we set ourselves to preserve the remnants of industry, to keep the workers from dispersing altogether, and to maintain the army. We had no other way out. That is what we are discarding, and I have already told you what we are adopting. The tax is to help us make the transition. If it were possible to restore our industry faster, then perhaps, with a better harvest, we could make an earlier transition to the exchange of manufactured goods for agricultural products.

    Many of you may remember that the question of switching efforts to the economic front was raised at the Ninth Party Congress. At the time, all attention was focused on it. We thought that we had finished with the war: after all, we did offer bourgeois Poland incredibly favourable peace terms. But the peace was disrupted, and there followed the Polish war and its sequel -- Wrangel, etc. The period between the Ninth and the Tenth congresses was almost entirely a period of war. You know that we signed a final peace treaty with the Poles only very recently; and a few days ago we signed a peace agreement with the Turks, which alone will rid us of interminable wars in the Caucasus. We have only now concluded a trade agreement with Britain, which is of world-wide significance. Only now has Britain been compelled to enter into

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commercial relations with us. America, for example, still refuses to do so. This will give you an idea of how hard it was for us to extricate ourselves from the war. Had we been able to realise the anticipations of the Ninth Congress right away, we would, of course, have been able to provide a much larger quantity of goods.

    Today I had a visit from Comrade Korolyov of Ivanovo-Voznesensk, our most industrial, proletarian, Red gubernia. He gave me some facts and figures. In the first year only six factories were in operation, and not one of them ran for a month without stoppages. Industry was grinding down to a standstill. During the past year, 22 factories were started for the first time, some running for several months, others up to half a year, without stoppages. The planned target was set at 150 million arshins, and according to the latest figures they produced 117 million arshins, getting only half the fuel they had been allocated. That is how production plans were disrupted, not only in Ivanovo-Voznesensk, but all over Russia. This was due to a large extent to the decline of peasant farming, to loss of cattle, and the impossibility of transporting a sufficient quantity of firewood to the railway stations and river wharves, all of which gave Ivanovo-Voznesensk less firewood, less peat, and less oil than it should have had. The miracle is that, with only half the fuel they should have got, they turned out 117 million arshins of the planned 150 million. They increased the productivity of labour and transferred the workers to the best factories, obtaining a high percentage of output. Here is a pretty good example, on our own doorstep, illustrating our position. The Ninth Congress fixed the textile target output at over 600 million arshins, but we produced less than one-third of this because even Ivanovo-Voznesensk Gubernia, which proved to be the best, made only 117 million arshins. Picture to yourselves Russia's millions and these 117 million arshins of cotton goods! This is poverty! The rehabilitation of industry lagged on such a scale that by the spring of 1921 it seemed to be quite hopeless. We had to have a huge army, and it was built up to several millions. Because of the dislocation of transport, it was very hard to demobilise it quickly in the winter. We did it only by a supreme effort.

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    That was the situation we faced. Was there any other way out but to cut food appropriations to the limit, taking 240 million poods of grain instead of 423 million? That is the least we must collect with a medium harvest, if we are to get by. If we are to have more, we must give peasant farming an opportunity to revive. This requires some measures, and the best one, of course, would be to restore large-scale industry. The best and the only economically correct measure would be to increase industrial output and give the peasant more of the things he needs, not only cotton goods for the farmer and his family, but also badly needed machines and implements, even if they are of the simplest kind. But the metal industry was in the same state as the textile industry. That was the situation we faced. We failed to restore industry after the Ninth Congress because we were hit by a year of war, fuel shortage, lack of transport facilities, and the prostration of peasant farming. What can be done to give the utmost assistance to peasant farming? Only a reduction of food appropriations and their conversion into a tax of 240 million poods, given a medium harvest, and even less, if the harvest is bad. The peasant must be sure that after paying a certain amount, fixed at the minimum level, he will be absolutely free to grow as much as he can and use the rest of his products to get what he needs and improve his farm not only with the help of industry, which would be the best and most rational way, but would take more resources than we now command. The tax is fixed at the minimum, and its enforcement in the localities will stimulate small industry, for we cannot set large-scale industry to rights as soon as we should like. This has been proved by the Ivanovo-Voznesensk programme, which yielded the largest portion of what we had planned for. We must wait another year until fuel stocks are large enough to ensure the operation of all the factories. We shall be lucky to do it in a year, or even two. Can we assure the peasant of supplies? We can, if the harvest turns out to be a good one.

    When the question of the tax in kind was being decided at the Party Congress the delegates were given a pamphlet by Comrade Popov, Director of our Central Statistical Board, on grain output in Russia. An enlarged edition will be

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published within a few days, and all of you should read it. It gives an idea of grain production, with the figures calculated from the returns of our census, which gave us the exact figures of the population and an estimate of the size of farms. It says that with a yield of 40 poods per dessiatine, peasant farming on Soviet Russia's present area could provide 500 million poods of surplus grain that would cover the 350 million poods required by the urban population and leave us a fund for foreign trade and the improvement of peasant farming. The harvest was so bad that the yield was no more than an average of twenty-eight poods per dessiatine. This produced a deficit. If we accept the statisticians' figure of requirements at eighteen poods per head, we must subtract three poods per head and oblige every peasant to go on short rations in order to keep the army and the industrial workers on half-rations. In that situation, we could do nothing but reduce the surplus appropriations to a minimum and convert them into a tax. We must concentrate on improving small peasant farming. We had no cotton goods, machines or other goods produced by large factories to give the peasant farmers, but it is a problem requiring urgent solution, and we have to solve it with the aid of small industry. We should have some results from the new measure this very first year.

    Now, why is peasant farming the focus? Because it alone can give us the food and the fuel we need. If the working class, as the ruling class exercising its dictatorship, wants to run the economy properly, it must say: the crisis of peasant farming is the weakest spot. It must be remedied, and another start made on the revival of large-scale industry, 90 that in Ivanovo-Voznesensk district, for instance, all 70 factories -- and not just 22 -- are running again. These large factories will then satisfy national demand, and the working class will deliver the goods to the peasants in exchange for farm produce, instead of taking it in the form of a tax. That is the transition we are making, and the price is short rations all round, if we are to save those who alone can keep what is left of industry and the railways going, and the army in the field to fight off the whiteguards.

    Our grain appropriations-were maligned by the Mensheviks, who said that the Soviet power had given the

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population nothing but grain appropriations, want and destruction. They gloated over the fact that after the partial restoration of peace, after the end of the Civil War, the swift rehabilitation of our industry had proved to be impossible. But even the richest countries will take years to get their industry going full blast again. Even a rich country like France will take a long time to revive her industry, and she did not suffer as much from the war as we did, because only a small part of her territory was devastated. The astonishing thing is that in the first year of a partial peace we were able to start 22 factories out of 70 in Ivanovo-Voznesensk, and to produce 117 million arshins of cotton goods out of an anticipated 150 million. The grain appropriations had once been inevitable, but now we have had to change our food policy: we have had to switch from the surplus appropriation system to the tax. This will undoubtedly improve the peasant's condition, and give him an assurance and a sense of certainty that he will be free to exchange all his available grain surplus at least for local handicraft wares. This explains why the Soviet government must conduct an economic policy on these lines.

    Now, in conclusion, let me explain how this policy can be reconciled with the communist standpoint and how it has come about that the communist Soviet power is promoting a free market. Is it good from the standpoint of communism? To answer this question we must make a careful examination of the changes that have taken place in peasant farming. First, we witnessed the assault of the whole of the peasantry on the rule of the landowners, who were fought both by the poor peasants and the kulaks, although, of course, their motives were different: the kulaks wanted to take the land away from the landowners to develop their own farms. That was when it became clear that the kulaks and the poor peasants had divergent interests and aims. In the Ukraine, this divergence of interests is still much more in evidence than it is over here. The poor peasants could derive very little direct benefit from the transfer of land from the landowners to themselves, because they had neither the materials nor the implements. We find the poor peasants organising to prevent the kulaks from seizing the land taken away from the landowners. The Soviet government

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helped the Poor Peasants' Committees that sprang up in Russia and in the Ukraine.[91] As a result, the middle peasants have become the predominant element in the rural areas. We know this from statistics, and everyone who lives in the country knows it from his own observations. The extremes of kulak and poor have been rounded off, and the majority of the population have come closer to the status of the middle peasant. If we want to raise the productivity of our peasant farming we must reckon chiefly with the middle peasant. The Communist Party has had to shape its policy accordingly.

    Since the middle peasants now predominate in the rural areas, we must help them to improve their farming; moreover, we must make the same demands on them as we do on the workers. The principal question discussed at the last Party Congress was that of food propaganda: concentrate on the economic front, raise the productivity of labour and increase output. No progress is possible unless these tasks are fulfilled. If we say this to the worker, we must say as much to the peasant, but will demand in return that, after paying the tax, he should enlarge his farm, in the knowledge that no more will be exacted from him and that he will be free to use the whole of his surplus to develop his farm. Consequently, the change in policy in respect of the peasants is due to the change in their status. There are more middle peasants in the make-up of the rural areas and we must reckon with this, if we are to boost the productive forces.

    Let me also remind you of the arguments I had with the "Left Communist" group in 1918, after the conclusion of the Brest-Litovsk peace.[92] Those who were in the Party at the time will remember that some Communists feared that the conclusion of the Brest Peace would disrupt all communist policy. In the course of the argument with these comrades I said, among other things: State capitalism is nothing to fear in Russia; it would be a step forward. That sounded very strange: How could state capitalism be a step forward in a Soviet socialist republic? I replied: Take a close look at the actual economic relations in Russia. We find at least five different economic systems, or structures, which, from bottom to top, are: first, the patriarchal

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economy, when the peasant farms produce only for their own needs, or are in a nomadic or semi-nomadic state, and we happen to have any number of these; second, small commodity production, when goods are sold on the market; third, capitalist production, the emergence of capitalists, small private capital; fourth, state capitalism, and fifth, socialism. And if we do take a close look we shall find all these relations in Russia's economic system even today. In no circumstances must we forget what we have occasion to see very often, namely, the socialist attitude of workers at state factories, who collect fuel, raw materials and food, or try to arrange a proper distribution of manufactured goods among the peasants and to deliver them with their own transport facilities. That is socialism. But alongside is small enterprise, which very often exists independently of it. Why can it do so? Because large-scale industry is not back on its feet, and socialist factories are getting perhaps only one-tenth of what they should be getting. In consequence, small enterprise remains independent of the socialist factories. The incredible havoc, the shortage of fuel, raw materials and transport facilities allow small enterprise to exist separately from socialism. I ask you: What is state capitalism in these circumstances? It is the amalgamation of small-scale production. Capital amalgamates small enterprises and grows out of them. It is no use closing our eyes to this fact. Of course, a free market means a growth of capitalism; there's no getting away from the fact. And anyone who tries to do so will be deluding himself. Capitalism will emerge wherever there is small enterprise and free exchange. But are we to be afraid of it, if we have control of the factories, transport and foreign trade? Let me repeat what I said then: I believe it to be incontrovertible that we need have no fear of this capitalism. Concessions are that kind of capitalism.

    We have been trying hard to conclude concession agreements, but, unfortunately, have not yet concluded a single one. Nevertheless, we are nearer to them now than we were several months ago, when we last discussed concessions. What are concessions from the standpoint of economic relations? They are state capitalism. The Soviet government concludes an agreement with a capitalist. Under it,

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the latter is provided with certain things: raw materials, mines, oilfields, minerals, or, as was the case in one of the last proposals, even a special factory (the ball-bearing project of a Swedish enterprise). The socialist state gives the capitalist its means of production such as factories, mines and materials. The capitalist operates as a contractor leasing socialist means of production, making a profit on his capital and delivering a part of his output to the socialist state.

    Why is it that we badly need such an arrangement? Because it gives us, all at once, a greater volume of goods which we need but cannot produce ourselves. That is how we get state capitalism. Should it scare us? No, it should not, because it is up to us to determine the extent of the concessions. Take oil concessions. They will give us millions of poods of paraffin oil right away, and that is more than we produce ourselves. This is to our advantage, because in exchange for the paraffin oil -- and not paper money -- the peasant will give us his grain surplus, and we shall immediately be able to improve the situation in the whole country. That is why the capitalism that is bound to grow out of a free market holds no terrors for us. It will be the result of growing trade, the exchange of manufactured goods, even if produced by small industry, for agricultural produce.

    Today's law tells you that workers in some industries are to be issued a certain part of the articles manufactured in their factories in the form of a bonus in kind which they can exchange for grain. For example, provided they satisfy the requirements of the state, textile workers will receive a part of the textile goods they manufacture and will be able to exchange them for grain. This must be done to improve the condition of the workers and of the peasants as soon as possible. We cannot do this on a nation-wide scale, but it must be done at all costs. That is why we do not shut our eyes to the fact that a free market entails some development of capitalism, and we say: This capitalism will be under the control and surveillance of the state. We need have no fear of it because the workers' state has taken possession of the factories and railways. It will help to stimulate the economic exchange of peasant produce for the manufactures of neighbouring craftsmen, who will

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satisfy some, if not all, of the peasants' requirements in manufactured goods. The peasant economy will improve, and that is something we need to do desperately. Let small industry grow to some extent and let state capitalism develop -- the Soviet power need have no fear of that. We must face the facts squarely and call a spade a spade, but we must also control and determine the limits of this development.

    Concessions are nothing to be afraid of. There is nothing terrible about giving the concessionaires a few factories and retaining the bulk in our own hands. Of course, it would be absurd for the Soviet power to hand out the bulk of its property in the form of concessions. That would not be concessions, but a return to capitalism. There is nothing to fear in concessions so long as we retain possession of all the state enterprises and weigh up exactly and strictly the concessions we grant, and the terms and scale on which we grant them. Growing capitalism will be under control and supervision, while political power will remain in the hands of the working class and of the workers' state. The capital which will exist in the form of concessions and the capital which will inevitably grow through the medium of the co-operatives and a free market, have no terrors for us. We must try to develop and improve the condition of the peasantry, and make a great effort to have this benefit the working class. We shall be able to do all that can be done to improve peasant farming and develop local trade more quickly with concessions than without them, while planning our national economy for a much faster rehabilitation of large-scale socialist industry. We shall be able to do this more quickly with the help of a rested and recuperated peasant economy than with the absolutely poverty-stricken peasant farming we have had up to now.

    That is what I have to say on the communist appreciation of this policy, on why it was necessary, and why, if properly applied, it will bring improvement immediately, or, at all events, more quickly than if it had not been applied.

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  [90] The meeting was called by the Moscow Party Committee to explain the decisions of the Tenth Party Congress. It took place at Trade Union House, and was also attended by the Moscow Bolsheviks who had taken part in liquidating the Kronstadt counter-revolutionary mutiny, and the volost activists working among Moscow Gubernia peasant women. The report on the tax in kind was given by Lenin.    [p. 286]

  ^[91] The Poor Peasants' Committees were set up under the June 11, 1918 decree of the All-Russia Central Executive Committee, "On the Organisation and Supply of Poor Peasants". They were to take stock of the food stored on peasant farms; to uncover surplus food on kulak farms, and to help the Soviet food supply bodies in requisitioning such surpluses and distributing them among the poor peasants. They were also to distribute farming machines, manufactured goods, etc. The committees actually became organs of the proletarian dictatorship in the villages. Their activity embraced all spheres of work and signified the further development of the socialist revolution in the countryside. At the end of 1918, after they had fulfilled their tasks, the committees were merged with volost and village Soviets.
    In the Ukraine, they existed from 1920 to 1933, uniting land starved and landless peasants.    [p. 295]

  ^[92] The Peace Treaty of Brest-Litovsk between Soviet Russia and the powers of the Quadruple Alliance (Germany, Austria-Hungary, Bulgaria and Turkey) was signed in Brest-Litovsk on March 3, 1918, and ratified by the Extraordinary Fourth All-Russia Congress of Soviets on March 15. The terms of the treaty were extremely onerous for Soviet Russia: Germany and Austria-Hungary secured almost complete control over Poland, nearly the whole of the Baltic area, and a part of Byelorussia; the Ukraine seceded from Soviet Russia and became a German dependency; the cities of Kars, Batum and Ardagan were ceded to Turkey. In August 1918, Germany made Soviet Russia sign a supplementary treaty and a financial agreement whose terms were even more onerous.
    The Brest Treaty was signed as a result of a great effort on Lenin's part, who had to fight Trotsky and the anti-Party "Left Communist" group. His wise and flexible tactics in extremely complicated conditions yielded the only correct policy: the Brest peace was a reasonable political compromise, which gave

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the Soviet state a respite and an opportunity to demobilise the old disintegrating army and to create a new one -- the Red Army. It allowed the country to get on with socialist construction and to build up resources for the coming struggle against internal counter-revolution and foreign intervention. This policy generated peaceful sentiments and promoted the growth of the revolutionary mood in the armies and the population of all the belligerent countries. After the November 1918 revolution in Germany overthrew the monarchy, the Brest Treaty was annulled by the All-Russia Central Executive Committee on November 13.    [p. 295]