International Trade and Socialism in Russia: Historical Insights
29. International Trade Relations in the Interwar Period.
The growing trend towards the opening of national economies that had characterized the prewar period slowed down during this time due to the slowdown in the expansion of international trade in relation to production, international migration controls, and the problems of the international monetary system.
International trade grew at a slower pace partly for structural reasons, but mainly due to the spread of tariff quotas, quotas, and exchange controls. In reality, governments expanded and diversified the objectives of protectionism, from the protection of infant industries to the protection of employment in general and, now, the balance of payments. However, in the U.S. case, a strongly protectionist tariff of 1922 had no justification and was inconsistent with its role as the world’s largest creditor. Indeed, the high tariff made it difficult for debtor countries to obtain U.S. dollars to service their debt, and gold was scarce. Only the tendency of Americans to continue to provide overseas eased the difficulties of debtors.
Migratory movements retreated due to the effects of the restrictive policies of the major countries of emigration: the fear of impoverishment after the closure of the border, the scarcity of fertile land, and the growing problems of primary overproduction led the U.S. government to impose quotas and immigration restrictions in the years 1921-1925, even though wages were rising more slowly than in the traditional European countries of departure.
The tendency to overcapacity and rising foreign trade restrictions caused imbalances in the international economy. The raw material-exporting countries and food producers found it difficult to balance their payments due to global oversupply, which tended to depreciate the value of exports and therefore reduce their ability to import and attract foreign investment. The same was true regarding Germany’s ability to pay war reparations (since after World War I, Germany was burdened with repair costs). These countries had to choose between adhering to the gold standard, which meant deflation and consequent contraction of monetary reserves, or deficit financing through foreign loans.
Once the gold standard was restored, capital movements were released from the previous period. However, the international monetary system found it difficult to accommodate the balance of payments imbalances of some countries. Besides, the restored gold standard during the interwar period was unstable for three reasons: 1) restoration of the gold standard at the prewar rate in Great Britain, 2) the accumulation of gold reserves by France and Germany, due to fears of inflation, posed a virtual monetary sterilization, and 3) the U.S. shrank from playing its rightful leading role, and protectionism was incompatible with its international position as a major world commodity market and the biggest lender.
Indeed, global imbalances (protectionism, overcapacity) caused an increase in international borrowing. Consequently, the balance of the international economy rested on U.S. credit, i.e., on domestic savings and the surplus of U.S. payments. In 1929, the volume of assets was higher than in 1914, making the U.S. the largest investor. However, foreign lending, especially from the U.S., was characterized by volatility (large fluctuations depending on interest rates and stock market speculation), and the destination was not always productive, with fixed interest rates and high costs, whether in gold or dollars when prices were tending downward and short-term, all of which ultimately increased the vulnerability of debtor countries such as Germany, Austria, Latin America, and new countries overseas before an eventual withdrawal of American loans, especially because many central banks and trade constituted reserves with such loans.
30. Characteristics of Socialism in Russia and Each of the Stages of Implementation.
Socialist economies have constituted the most important contemporary alternative to the capitalist economic system. They were born from the historical experience of the USSR and spread to various countries on different continents, affecting more than half the world population. In contrast to private property and free market capitalism, the socialist economic system is committed to the collective ownership of the means of production and allocation through central planning techniques by the state.
In the socialist economy, the priority is: investment over consumption, industry over other economic sectors, heavy industry over light industry, production over consumption, and the productive sector over non-productive sectors. This involves a series of economic imbalances, such as over-industrialization, a focus on heavy industry, and weak development of agriculture and consumer industries. For socialist economies, the external sector is not considered a factor in economic growth; rather, its role is reduced to providing resources that are insufficient in the country.
As for the PHASES:
The October Revolution of 1917. In January 1917, the deposition of the tsar (Russian ruler) was achieved through a bourgeois revolution that established a parliament and formed a new government headed by the moderate Kerensky. The greatest mistake of this new government was continuing the war against Germany without better organizing the country. It was relatively easy for socialist propaganda, led by Lenin and his Bolshevik party, to breach the people’s support, organizing revolutionary councils (soviets) that in October 1917 launched the attack on the bourgeois government (Russian revolution). The new regime was based on the revolutionary program of Lenin, which can be summarized in three points: liquidation of the war, socialization of the economy, and dictatorship of the proletariat. The dictatorship of the proletariat was carried out through the country’s industrialization.
War Communism (1917-1921). After the October Revolution, four years of civil war followed, during which the economy operated under a system of war communism. The measures taken during these years included: 1) the abolition of large estates, 2) the abolition of capital (confiscation of precious metals and foreign currencies and nationalization of banks), 3) the abolition of private trade, 4) the imposition of compulsory labor, 5) nationalization of industries (the state confiscated all companies), and 6) the free supply of certain essential services. However, the results of war communism were catastrophic. In this situation, Lenin presented a theory of transition from capitalism to collectivism, whereby it was essential to go through a state capitalism.
The New Economic Policy (NEP, 1921-1928). The NEP represented a partial return to the market economy in agriculture, industry, consumer, and domestic trade in exchange for stricter state control over key sectors such as mining, heavy industry, transport, and foreign trade. The NEP can be classified as the first experience of a mixed economy, in which the state develops an overall program function and manages a number of nationalized companies, leaving everything else to the market. The State Bank and other financial institutions for credit in industrial sectors were created between 1921 and 1922. By 1927, the results of the NEP showed that the USSR had reached the level of pre-war production. The situation had improved. At this time, a new orientation was adopted with respect to the fundamentalist dogma of collectivism (a return to socialism). This option was chosen to recognize that the NEP was a timely emergency solution aimed at rebuilding the economy. For Lenin, Trotsky, and Stalin, the consolidation of Soviet Russia’s industrialization necessarily meant achieving this as quickly as possible while respecting socialist principles.
Rapid Industrialization and Forced Collectivization in Agriculture (1928-1941). The liberalization of the NEP had no parallel in the political arena. Lenin’s death in 1924 opened a period of struggle for power, featuring Trotsky and Stalin, with the latter emerging victorious. To return to authentic socialism, industrialization was required, which was impossible without productive agriculture. This is why a series of five-year plans were developed with specific objectives: From 1928 to 1932, the target was heavy industry and the energy sector; from 1933 to 1937, the focus was on the steel industry; and from 1938 to 1942, the emphasis was on mechanical engineering.
The impact of these five-year plans on industry was significant, especially in the arms industry, which began producing tanks, ships, planes, and artillery. The major objective of the Stalinist policy of rapidly industrializing the Soviet Union was fulfilled. As for agriculture, forced collectivization was imposed on peasants over five years. The state enhanced two types of agribusiness: the kolkhoz (collective farms maintaining communal ownership of the means of production) and state farms (state farms with agricultural salaries). Stalin also targeted the kulaks.
By 1941, the industrial production of the Soviet Union had grown dramatically. In just a few years, it could produce enough material to defeat Germany, becoming the third industrial power in the world after the USA and Germany.