Soviet Economic Transformation, Comintern, and the Great Depression Recovery
The NEP (New Economic Policy)
Following the civil war and war communism, the Soviet economy sank precipitously, and shortages in cities became widespread. The revolution began to lose some of its former supporters. The rebellion of the Kronstadt sailors at the port led Lenin to propose, at the X Congress of the Russian Communist Party, a reform to improve living conditions and overcome resistance to the revolutionary process. The new direction of the revolution in the economic field was the New Economic Policy (NEP). The NEP introduced a mixed economy where some socialized sectors coexisted with a return to the market economy, allowing small property and private exchanges. The NEP quickly met economic objectives, and the Soviet economy surpassed pre-war levels. However, the return to the market pushed up prices, and the differences between agricultural and industrial prices caused hoarding and shortages in cities, while private benefits increased social inequalities. The NEP also sparked serious debate within the Communist Party, strengthening the internal clash between those who defended a mixed economy and those who supported the rapid socialization of ownership, production, and distribution of goods.
The Third International (Comintern)
The Russian revolutionaries believed that socialist parties had strayed from revolutionary proposals by accommodating bourgeois democracy and becoming reformist parties, concerned only with improving the political and social conditions of the working class. The Bolsheviks, however, defended the need to renew Marxism by creating parties ready to lead the workers’ revolution. They proposed founding a new labor internationalism, the Third International in Moscow, known as the Comintern. It called on all parties to abandon the socialist Second International and adhere to the new revolutionary International. This proposal caused divisions within world socialism, further evident when the Comintern Congress adopted the 21 conditions for membership. These conditions led to the split of many socialist parties and the rise of communist parties adhering to a new conception of Marxism-Leninism.
Stalin’s Rise to Power
The Stalinist system imposed the absolute primacy of communist ideology within the state and Soviet society. The Communist Party became a monolithic entity, suppressing debate and demanding submission to the official line. Stalin exerted a personal dictatorship, persecuting, imprisoning, or destroying anyone who opposed or overshadowed him. Aided by the bureaucracy, he created a new privileged class: the nomenklatura. The nomenklatura, including economic planners, business managers, architects, and party leaders, had access to privileges unavailable to the majority of the population. Socialist thought was reduced to dogmas, enabling the personality cult of Stalin. The state imposed rigid censorship and controlled all areas of life. This era also saw the rise of socialist realism in art and literature.
The Keynesian Proposal
Unlike those who insisted on adjusting lower wages as the sole solution to increase production, Keynes argued that the crisis was not temporary and that recovery would not arise spontaneously without government intervention. In his diagnosis of the 1929 crisis, he argued that the main problem was the lack of action before the fall of investment. He proposed increasing public spending, primarily in public works, to employ workers. State spending would generate a public deficit, increasing demand not only through expenditure but also because initial spending on salaries and goods would create new demands in other sectors (Keynesian multiplier). This would eventually increase tax revenues. To boost consumption, he advocated improving labor conditions to increase the purchasing power of the working class. Keynes argued that prosperity depended mainly on investment and consumption, not savings. He asserted that the role of capitalists was to invest and workers to consume.
Roosevelt’s New Deal
The recovery effort associated with Keynesian theories is the New Deal, an economic plan implemented by U.S. President Franklin Delano Roosevelt to overcome the crisis and mitigate its social effects. However, the program was contradictory, proposing increased state intervention while simultaneously aiming to reduce the deficit by cutting public expenditure. Key measures of the New Deal included combating falling prices by creating agencies to regulate production and prices. The Agricultural Adjustment Act created the Agricultural Adjustment Administration (AAA) to reduce agricultural production and recover prices. The National Industrial Recovery Act (NIRA) created the National Recovery Administration (NRA) to promote price agreements between firms and avoid downsizing, and the Public Works Administration (PWA) to promote large infrastructure projects, reduce unemployment, and increase demand. This included the Tennessee Valley Authority, which built large hydroelectric dams in one of the most depressed areas of the U.S. To prevent speculative and banking crises, Roosevelt established rigid state control over banks and introduced federal deposit insurance. He also formed the Securities and Exchange Commission and implemented a monetarist policy.