Trotsky on the role of workers’ democracy and markets in socialist planning

Leon Trotsky

Introductory note by John Riddell: The following two excerpts from articles by Leon Trotsky present his thoughts on the state of the Soviet economy in 1932–3, at the close of a five-year campaign of forced-pace industrialization. Trotsky’s remarks on planning, markets, bureaucracy, and rank-and-file democracy are highly relevant to all twenty-first century efforts to launch a transition to a socialist economy.

In the first text, from his October 1932 article “The Soviet Economy in Danger,” the exiled Bolshevik leader examines the interplay of planning, trade conducted through markets, and economic regulation by the masses. The full text is available at marxists.org, from which this excerpt is taken. The article was written in the final year of the first Five Year Plan, during which industrialization at a forced pace was accompanied by severe economic distortions, the deportation or arrest of close to two million supposedly privileged peasants (kulaks), a deep crisis in agriculture, and – in 1932-33 – widespread famine.

The second text, taken from the conclusion of Trotsky’s April 1933 article, “Problems of the Soviet Regime,” provides a concise summary of the damage caused by a bureaucratic approach to economic planning. See also Trotsky’s 1937 study of Soviet society and economy, The Revolution Betrayed.

The Soviet economy in danger: Conditions and methods of planned economy

By Leon Trotsky. What are the organs of constructing and applying the plan like? What are the methods of checking and regulating it? What are the conditions for its success?

In this connection three systems must be subjected to a brief analysis: (1) special state departments, that is, the hierarchical system of plan commissions, in the centre and locally; (2) trade, as a system of market regulation; (3) Soviet democracy, as a system for the living regulation by the masses of the structure of the economy.

If a universal mind existed, of the kind that projected itself into the scientific fancy of Laplace – a mind that could register simultaneously all the processes of nature and society, that could measure the dynamics of their motion, that could forecast the results of their inter-reactions – such a mind, of course, could a priori draw up a faultless and exhaustive economic plan, beginning with the number of acres of wheat down to the last button for a vest.

The bureaucracy often imagines that just such a mind is at its disposal; that is why it so easily frees itself from the control of the market and of Soviet democracy. But, in reality, the bureaucracy errs frightfully in its estimate of its spiritual resources. In its projections it is necessarily obliged, in actual performance, to depend upon the proportions (and with equal justice one may say the disproportions) it has inherited from capitalist Russia, upon the data of the economic structure of contemporary capitalist nations, and finally upon the experience of successes and mistakes of the Soviet economy itself. But even the most correct combination of all these elements will allow only a most imperfect framework of a plan, not more.

The innumerable living participants in the economy, state and private, collective and individual, must serve notice of their needs and of their relative strength not only through the statistical determinations of plan commissions but by the direct pressure of supply and demand. The plan is checked and, to a considerable degree, realized through the market. The regulation of the market itself must depend upon the tendencies that are brought out through its mechanism.

The blueprints produced by the departments must demonstrate their economic efficacy through commercial calculation. The system of the transitional economy is unthinkable without the control of the ruble. This presupposes, in its turn, that the ruble is at par. Without a firm monetary unit, commercial accounting can only increase the chaos.

The processes of economic construction are not yet taking place within a classless society. The questions relating to the allotment of the national income compose the central focus of the plan. It shifts with the direct development of the class struggle and that of social groups, and among them, the various strata of the proletariat itself.

These are the most important social and economic questions: the link between the city and the village, that is, the balance between that which industry obtains from agriculture and that which it supplies to it; the interrelation between accumulation and consumption, between the fund for capital construction and the fund for wages; the regulation of wages for various categories of labour (skilled and unskilled workers, government employees, specialists, the managing bureaucracy); and finally the allotment of that share of national income which falls to the village, between the various strata of the peasantry. All these questions by their very nature do not allow for a priori decisions by the bureaucracy, which has fenced itself off from intervention by concerned millions.

The struggle between living interests, as the fundamental factor of planning, leads us into the domain of politics, which is concentrated economics. The instruments of the social groups of Soviet society are – should be: the Soviets, the trade unions, the co-operatives, and in first place the ruling party. Only through the inter-reaction of these three elements, state planning, the market and Soviet democracy, can the correct direction of the economy of the transitional epoch be attained. Only thus can be assured, not the complete surmounting of contradictions and disproportions within a few years (this is utopian!), but their mitigation, and through that the strengthening of the material bases of the dictatorship of the proletariat until the moment when a new and victorious revolution will widen the arena of socialist planning and will reconstruct the system.

Suppression of the NEP, monetary inflation, and liquidation of Soviet democracy

The need to introduce the NEP, to restore market relationships, was determined first of all by the existence of 25 million independent peasant proprietors. This does not mean, however, that collectivization even in its first stage leads to the liquidation of the market. Collectivization becomes a viable factor only to the extent to which it involves the personal interest of the members of the collective farms, by shaping their mutual relations, and the relations between the collective farms and the outside world, on the basis of commercial calculation. This means that correct and economically sound collectivization at this stage should lead not to the elimination of the NEP but to a gradual reorganization of its methods.

The bureaucracy, however, went the whole way. At first it might have thought that it was taking the road of least resistance. The genuine and unquestionable successes of the centralized efforts of the proletariat were identified by the bureaucracy with the successes of its a priori planning. Or to put it differently: it identified the socialist revolution with itself. By administrative collectivization it masked the unsolved problem of establishing a link with the village. Confronting the disproportions of the NEP, it liquidated the NEP. In place of market methods, it enlarged the methods of compulsion.

The stable currency unit, in the form of the chervonets, constituted the most important weapon of the NEP. While in its state of dizziness, the bureaucracy decided that it was already standing firmly with both feet on the soil of economic harmony, that the successes of today automatically guaranteed the progression of subsequent successes, that the chervonets was not a bridle that checked the scope of the plan but on the contrary provided an independent source of capital funds. Instead of regulating the material elements of the economic process the bureaucracy began to plug up the holes by means of printing presses. In other words, it took to the road of “optimistic” inflation.

After the administrative suppression of the NEP, the celebrated “six conditions of Stalin” – economic accounting, piecework wages, etc. – became transformed into an empty collection of words. Economic accounting is unthinkable without market relations. The chervonets is the yardstick of the link. Of what possible use for the worker can a few extra rubles a month be if he is compelled to purchase the necessities of life in the open market at ten times their former price?

The restoration of open markets came as an admission of the inopportune liquidation of the NEP, but an admission that was empirical, partial, thoughtless, and contradictory. To label the open markets as a form of “Soviet” (socialist?) trade, in contrast to private trade and speculation, is to practice self-deception. Open-market trading even on the part of the collective farm as a whole ends up as speculation on the necessities required in the nearest city, and as a result leads to social differentiation, that is, to the enrichment of the minority of the more fortunately situated collective farms.

But the chief place in the open market is occupied not by the collectives but by individual members of the collectives and by the independent peasants. The trading of the members of the collective farms, who sell their surplus at speculative prices, leads to differentiation within the collectives. Thus the open market develops centrifugal forces within the “socialist” village.

By eliminating the market and by installing Asiatic bazaars in its place the bureaucracy has created, to consummate everything, the conditions for the wildest gyration of prices, and consequently has placed a mine both under the plan and under commercial calculation. As a result, economic chaos has been redoubled.

Parallel to this the ossification of the trade unions, the Soviets, and the party, which didn’t start yesterday, continues. Coming up against the friction between the city and the village, against the demands from various sections within the peasantry, from the peasantry as a whole, and from the proletariat, the bureaucracy more and more resolutely ruled out any demands, protests, and criticism whatsoever. The only prerogative which it ultimately left to the workers was the right to exceed production limits. Any attempt to influence economic management from below is immediately described as a right or a left deviation, that is, practically made a capital offence.

The bureaucratic upper crust, in the last analysis, has pronounced itself infallible in the sphere of socialist planning (disregarding the fact that its collaborators and inspirers have turned out often to be criminal plotters and saboteurs). Thus the basic mechanism of socialist construction – the adaptable and elastic system of Soviet democracy – was liquidated. Face to face with the economic reality and its difficulties, the bureaucracy turned out to be armed only with the twisted and collapsed carcass of the plan, with its own administrative will also considerably deflated.

Balance sheet of bureaucratic industrialization

From “Problems of the Soviet Regime: The Degeneration of Theory and the Theory of Degeneration,” April 29, 1933.

The Soviet economy today is neither a monetary nor a planned economy. It is an almost purely bureaucratic economy. An exaggerated and disproportionate industrialization has undermined the foundations of agriculture. The peasantry sought salvation through collectivization. Experience very quickly showed that collectivization born of despair is not yet socialist in character. The decline of agriculture dealt a blow to industry. In order to maintain this unfeasible and disproportionate rhythm, it was necessary to intensify pressure on the proletariat.

Industry, freed of material control by mass consumption and political control by the producer, rose up above society, that is, it became bureaucratic. As a result, it lost the capacity to meet human needs even to the degree that had been achieved with much less developed capitalist industry. The agricultural economy retaliated against the powerless cities through a war of attrition.

Weighed down by the enduring disproportion between their productive efforts and the deteriorating conditions of their lives, workers, collective farmers, and independent peasants lost interest in labour and became filled with irritation against the state. That and only that – and not malicious intent of the “fragments” – is the reason why it became necessary to apply coercion on every cell of economic life: increased power of the of enterprises directors, laws against absenteeism, the death penalty for theft from collective farms by their members, measures of war to assure sowing and reaping in the countryside, the requirement that independent peasants yield up their horses to collective farms, internal passports, political departments in the villages, and so on.

We see before our eyes, newly and sharply highlighted, the parallel between the fate of money and that of the state. Economic disproportions lead the bureaucracy to speed up the inflation of paper currency. These disproportions also result in a level of production that engenders mass discontent, pushing the bureaucracy down the road of naked coercion.

Just as bureaucratic projections free themselves from political control, the planned economy frees itself by control by value. The rejection of “objective causes” – that is, material limits to acceleration of production – just like the rejection of gold as the basis of Soviet currency, represent twin “theoretical” ravings of bureaucratic subjectivism.

The Soviet monetary system is indeed withering away, but not in a socialist but in a capitalist sense, through inflation. Money is no longer a working tool of the planned economy and becomes instead a cause of its disorganization. We can truly say that the dictatorship of the proletariat is withering away – but not into a classless society, but rather into the omnipotence of bureaucracy over society.

The text has been translated from Biulleten’ oppozitsii, no. 34 (May 1933), p. 6, and compared with the French translation at Marxists.org. For another English translation, see Writings of Leon Trotsky (1932-33), Pathfinder Press, 1972, pp. 224–5.

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• Che Guevara’s final verdict on the Soviet economy
• Socialist planning and the bureaucratic economy