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Book Review: Russia’s Last Capitalists

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Russia’s Last Capitalists: The Nepmen, 1921-1929
by Alan M. Ball (Berkeley: University of California Press, 1990); 226 pages; $11.95.

In 1921, Russia was in a state of economic and social collapse. The country had undergone three years of the First world war — between 1914 and 1917.

In November 1917, the Bolsheviks, under Lenin’s leadership, overthrew the Provisional Government that had ruled Russia after the abdication of the Czar in February of that year. In the spring of 1918, the Bolsheviks introduced what became known as “war communism — they nationalized industry, banking, and retail trade, imposed collectivized planning on Russian agriculture, and abolished wages, prices, and money. A great leap was made directly into full socialism.

In the summer of 1918, civil war broke out between the Bolsheviks and those Russians who became known as “the Whites” — anti-Bolshevik military forces, defenders of monarchy, democratic forces, anarchists and various national groups striving for independence. These anti-Bolshevik forces were soon joined by large military contingents sent by Great Britain, France, the United States and Japan. Five thousand American soldiers fought the Red Army in northern European Russia around the port of Archangel. And ten thousand American troops patrolled the Trans-Siberian railway in eastern Siberia.

By the end of 1920, American and other foreign troops had almost completely withdrawn from Russia, and the Bolsheviks had successfully defeated their anti-Bolshevik opponents. Russia was in the grip of socialism.

But the economy was in shambles. Three years of civil war and the chaos created by economic planning had left the social and economic order in ruin. And at the end of February 1921, the “Red Sailors” of Kranstadt a naval fortress near Petrograd (Leningrad), revolted against the Bolshevik government.

In a major reversal, Lenin declared that war communism had not been meant to be a permanent system but had been imposed as merely a wartime emergency. Russia was not ready for a full and immediate leap into either socialism or communism. What Russia needed, at least for a time, was a return to bourgeois capitalism.

And this is the subject of Alan Ball’s book Russia’s Last Capitalists: The Nepmen, 1921-1929. In the spring of 1921, Lenin announced the institution of a “New Economic Policy.” A new currency was put into circulation. Agricultural land was returned to the ownership and control of the peasants. After the peasants paid an in-kind tax to the Soviet state, the farmers were permitted to sell whatever they produced to whomever they wanted at market-determined prices. Retail businesses, small companies and medium-sized industries were permitted to be established. Only foreign trade and what the Bolsheviks called the “commanding heights” of the economy — heavy and large industry — remained in state-owned and state-managed hands.

The economy boomed. Food supplies, while not particularly cheap, were available in plentiful supply in all the cities. Shops were filled with consumer goods, and service industries abounded. Freed from the dead hand of total and rigid central planning, the entrepreneurial spirit blossomed among the Russian people. The Russians showed themselves to be as industrious and productive as any of the peoples of the West, once they had the opportunity to earn profits on the market, and once they could own private property and feel a degree of security in its possession.

But it was an island of Russian capitalism in a sea of socialist ideology and control. The party apparatus resented the reestablishment of a “capitalist class.” Was it for this, they asked, that a great revolution was fought and won? The Soviet state kept changing the economic rules of the game as power struggles were waged in the Communist Party after Lenin’s death in 1924. Taxes would be increased and then decreased. The regulations concerning the use and ownership of property would be tightened and then loosened. The Nepmen — as the capitalists under the New Economic Policy were called — were dependent upon state industries for supplies of resources and commodities; and these would be provided one month and cut back another. Bribery and black markets pervaded the system.

Russia’s limited capitalism was hampered and straight-jacketed at every turn. But what the Nepmen demonstrated is that Russia could be wealthy and prosperous — if only ordinary Russians were left free to produce and trade. Russian culture and history did not keep the Russians poor. It was totalitarian ideology and economic regulations and controls that prevented Prosperity.

This last experiment in Russian capitalism — as limited as it was — finally came to an end in 1929. With Stalin’s rise to power in the Communist Party, total central planning was reinstituted. Private property was again nationalized. Then, in one of the worst crimes and tragedies of the 20th century, Stalin ordered the collectivization of all farming into state farms; and his plan was effected through planned famines, mass murders and deportations to slave labor camps in Siberia.

What Russia needs again is a new economic policy — not the limited type of the 1920s, but full unregulated capitalism. And when that day comes, Russians will not only be politically free, they will also finally gain the economic prosperity they have for too long been denied.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).