Is economic reform compatible with political authoritarianism? Can the two be combined with any success? Different countries at different times have attempted to provide answers to these questions. Augusto Pinochet in Chile, Deng Xiaoping in China, and in his earlier years, Suharto in Indonesia; each in their own way attempted to implement a vision of a society in which the people would prosper and politics would be the preserve of just one party, group, or person. In their search for a foothold in a more prosperous and calmer future, the Russians too have come back to the compatibility question and have been observing events in other countries with an interest in search of an answer.
The Russians though, are fond of pointing out their specific nature and searching for "uniquely Russian" roads. Given this predilection for being the exception, it is perhaps no bad thing that Russian history is full of examples and illustrations of the pitfalls one can encounter and the stumbling blocks to avoid.
One interesting period in this respect is the few brief years of the economic experiment known as the New Economic Policy, or NEP.
In March 1921, the tenth congress of the Russian Communist (Bolshevik) Party, as it was called then, approved a change in course. Lenin had said the only way to save the socialist revolution was to come to an agreement with the peasants. The congress listened to Lenin and supported his proposals. Peasants were to pay a produce tax instead of seeing more or less their entire harvest expropriated. Also, they were given the right to exchange surplus produce for other goods. Later, in 1922, a new land code made it possible, within limits, to rent land and use hired labour.
The Bolsheviks previously had tried to encourage collective farms, but once the NEP began they quickly fell apart.
Individual farms accounted for 98.5 percent of agricultural production under the NEP. Private enterprise reappeared in the cities, and by the mid-20s, the private sector accounted for 27 percent of industrial output. By 1923, 75 percent of retail trade and 18 percent of wholesale trade was in private hands. State enterprises became self-financing and were responsible for organising their own supplies and sales. The labour market also underwent reform. Instead of being 'mobilised', workers could be freely hired. Wage reform meant that instead of an 'equal' wage for all, workers were paid according to their qualifications and their output.
Another important aspect of the NEP was the revival of the monetary and banking system. Here, the Bolsheviks drew on the experience of specialists who had worked during the tsarist era. A state bank was set up to oversee a newly created network of credit, insurance and banking cooperatives. A convertible currency - the chervonets - was introduced, up until mid 1926 it was valued at more than $6 on world money markets and became in many people's minds a symbol of the NEP period.
The NEP became closely associated with Lenin's name and is one of the explanations for the influence he still holds over some people. His supporters have always liked to cite it as an example of his genius and foresight. Some say that if he had not died and Stalin had not gained the upper hand in the struggle for power, everything could have been so different, so much better.
Facts tell a different story, however. The first proposals for economic reform were made by the economist M. A. Larin at the beginning of 1920 and Lenin ensured that those proposals were rejected by the Central Committee. "Free circulation of goods equals free trade, and free trade equals a return to capitalism," he said in defence of his position. That he eventually came round to Larin's ideas was not a sign of genius, but simple political calculation. The harsh measures of "war communism," a most repressive form of economic dictatorship, had led to peasant uprisings around the country, protesting against the government's policies.
That was why Lenin spoke of the need to come to an agreement with the peasants, because it had become clear that there was a limit to what they would endure.
Lenin accepted the NEP as a tactical manoeuvre, "we retreat... so as to spring further forward," was how he expressed it. The aim was still socialism, the country was still marching toward that, only it was taking a few detours.
Greater economic freedom did not go hand in hand with political freedom. That same tenth party congress that approved the NEP, also passed a resolution, upon Lenin's initiative, "on the unity of the party." That resolution banned factions, stifled any last remnants of internal democracy and gave the party the monolithic and rigid form it kept until it fell apart under the pressure of Mikhail Gorbachev's perestroika during the 1980s. Shortly afterwards, the Bolsheviks clamped down on political opposition outside the party, reminding potential opponents that the only tactic to be used against them, would be that of "ruthless struggle" as carried out by the Cheka, the secret police.
That contradiction between economic freedom and political repression acted to undermine any sustainable improvement in the general situation. The NEP resulted in most production indicators reaching their pre-World War I levels by 1926 and 1927. The priority, however, was given to heavy industry. Lenin himself emphasised the need to develop this sector. But the revolution and the civil war had left industry in ruins. Its reconstruction was financed by the villages through taxes and price fixing. Prices for manufactured goods were kept artificially high while prices for agricultural produce were lowered. This led to a situation where the peasants, who could not afford the goods that flowed in from the towns, began to withhold grain in protest. Most farms had only the most primitive equipment; one third did not even have horses. Another problem was that the kulaks, or rich peasants, in an attempt to escape the increasing tax burden, broke their land up into smaller parcels, thereby decreasing both output and efficiency.
The proportion of agricultural output that reached the market decreased from year to year. By 1926, peasants were consuming 85 percent of their own production. The villages were overcrowded and in the towns, unemployment was rising.
The government hoped to attract foreign investment by granting mining and other concessions. The response was more than half-hearted. Potential investors were reluctant to invest in a country where industry was backward and there was no guarantee of profit. Most investment was in coal and gold mining, oil production and timber.
The relative calm of the NEP years enabled certain results to be obtained in the social sphere. Life expectancy increased, the working day was shortened and housing programmes were set up, though with limitid success. In 1913, town dwellers had an average of seven square metres of living space. By 1928, that figure was down to 5.8 square metres.
At the same time, political repression was gathering strength. The Cheka, renamed OGPU, accounted for a large part of budget spending, coming after defence and education in the list of non-producing establishments. The number of people in the camps was growing all the time, and it was no surprise that the Soviet leaders eventually hit upon the idea of putting all those people to work for the "good of the country". The policy of industrialisation - at all costs - required a vast and cheap labour force.
Lenin's would-be defenders say all of that was Stalin's doing; the repression, the Gulag, the political and economic terror; they see it as a deviation from the "true Leninist path." But in reality, all the seeds of what became known as Stalinism, were sown by Lenin. And that fact should not be ignored. It serves as a reminder of what any experiment with authoritarianism can lead to.
Those who persist in thinking that with the NEP, Lenin had embarked on a new course that would ultimately lead to peace and prosperity, have only to read his letter to fellow Bolshevik Lev Kamenev of 3 March 1922, in which he writes "it is a great mistake to imagine that the NEP means an end to terror. We will yet come back to terror, including to economic terror." Kamenev had a chance to verify that for himself. He finished his life before one of Stalin's firing squads.
Lenin's experiment would suggest that economic reform and political authoritarianism do not make a healthy mixture. The problem is that economic and political life are so closely intertwined, and moving in two different directions at once only giving rise to tensions that eventually cause collapse. Reform has to be all encompassing, and it has to be coherent. It is no good repeating Lenin's mistake, making a few superficial repairs here and there, and adding just a dash of capitalist spice to the socialist muddle. These days, there are no party congresses decreeing this or that change of tack, but there are still plenty of people out there whose words and slogans have about them a distinct whiff of the 1920s.