Capitalism-and-Its-Critics-A-History-From-the

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On the perfidy of Kautsky and other leaders of the SPD, Luxemburg agreed with Lenin. At the start of 1916, the antiwar International Group that she and Liebknecht and Zetkin had created renamed itself the Spartacus League. (The name came from the Thracian gladiator who led a slave revolt in 73–71 BC.) In April 1917 the Spartacus League merged with another antiwar group that had broken off from the SPD, the Independent Social Democratic Party. By this time, the February 1917 revolution in Russia had given Luxemburg hope that the war might finally be coming to an end. Later in the year, she welcomed the Bolsheviks’ seizure of power. Although she and Lenin had had their differences over theory and tactics, she admired the speed and ruthlessness with which he and his colleagues acted. “All the revolutionary honor and capacity which western Social-Democracy lacked was represented by the Bolsheviks,” she commented in a pamphlet she wrote in 1918.77

In watching events in Russia unfold, however, Luxemburg didn’t suspend her critical faculties. Although she was a socialist revolutionary, she was also a democrat. She strongly disagreed with the Bolsheviks’ decision, in January 1918, to dissolve the popularly elected Constituent Assembly. “Without general elections, without unrestricted freedom of press and assembly, without a free struggle of opinion, life dies out in every public institution, becomes a mere semblance of life, in which only the bureaucracy remains as the active element,” she wrote. “Public life gradually falls asleep, a few dozen party leaders of inexhaustible energy and boundless experience direct and rule.”78

This prophetic analysis wasn’t published immediately. Luxemburg spent much of 1918 in prison. In the late summer, when an allied counteroffensive broke through the German lines, the troop morale was shattered, and the regime in Berlin crumbled from within. On November 9 the chancellor, Prince Maximilian of Baden, who himself had been in office barely a month, announced that Kaiser Wilhelm II had abdicated. The prince handed power to the parliamentary leaders of the SPD, Friedrich Ebert and Philipp Scheidemann, and Scheidemann declared Germany a republic. On that same day, the authorities released Luxemburg from prison in Breslau, and she hastened to Berlin. On November 11, an armistice went into effect.

The war was over, but Germany was in turmoil. Disgruntled military veterans were streaming back from the front. In many cities, workers’ councils were demanding power. Rushing to keep up with events and seize the initiative, Leibknecht, Luxemburg, and some other Spartacists began publishing a new daily newspaper, Red Flag. “The abolition of capitalist rule and the realisation of a socialist order of society—this and nothing less is the historical theme of the present revolution,” Luxemburg wrote in her first article after being released from prison.79 She listed some immediate demands, which included the disarmament of the police; the establishment of a workers’ militia (a “Red Guard”); a transfer of power to workers’ and soldiers’ councils; and the seizure of all large capitalist enterprises. The provisional government led by Ebert and Scheidemann had no intention of doing any of these things. It was intent on maintaining order. To this end, Ebert had reached a secret agreement with General Karl Groener, the Deputy Chief of Staff of the German army, in which the new president agreed to respect the army’s independence and Groener agreed that his forces would support the government.

Inside the Spartacist groups, some radicals were calling for an immediate rising. Luxemburg, aware that the military was supporting Ebert’s government, was skeptical about the chances of a successful revolution. In the last two days of 1918, the Spartacus League combined with other revolutionary groups to form the Communist Party of Germany (KPD) under the leadership of her and Liebknecht. In a speech to the party’s founding congress, she suggested that the revolutionary timetable could be a lengthy one: “I shall not venture to prophesy how long the whole process will take.”80 Many of the younger Spartacists were in no mood to wait. On January 5, 1919, they instigated an armed uprising in Berlin. The government ordered the Freikorps, a nationalist militia largely made up of combat veterans, to enter the city and put down the insurrection.

Once the fighting began, Luxemburg joined the rising. At great danger to herself, she moved around the city supporting the Spartacist fighters. She also wrote supportive articles in Red Flag. But the Spartacists numbered only a few thousand, and they received no support from local police or army units. As the Freikorps rounded up Spartacist leaders, Luxemburg and Liebknecht went into hiding. From the Berlin suburb of Wilmersdorf, Luxemburg wrote another article for Red Flag, some copies of which were still being printed. Dated January 14, 1919, it ran under an ironic headline, “Order Reigns in Berlin,” and it ended with a defiant declaration: “You stupid lackeys! Your order is built on sand. Tomorrow the revolution will rear ahead once more and announce to your horror amid the brass trumpets: ‘I was, I am, I always will be!’”81

These were Luxemburg’s last published words. On January 15 a unit of the Freikorps captured her and Liebknecht.82 The unit’s commanding officer interrogated them at an upscale hotel in the center of Berlin, then handed them over to some of his men, supposedly for transport to prison. Rather than taking Luxemburg there, one of the paramilitaries knocked her unconscious, shot her in the head, and tossed her body into the Landwehr Canal. Liebknecht was taken out of the hotel separately. After being beaten, he was shot in the back.

The killings sparked unrest in a number of German cities. As some leftists in these locales tried to launch uprisings, the army and the Freikorps crushed them, too. Back in Berlin, Jogiches, Luxemburg’s former partner, who was also active in Spartacus League, tried to identify those ultimately responsible for the killing of her and Liebknecht, but he didn’t get very far. In early March, he was arrested and murdered while in police custody.83 Jogiches was fifty-one. Rosa Luxemburg was forty-seven. Her life had been cut short in brutal fashion. But in death her legend would only grow.

“The rhythm of long cycles”

Nikolai Kondratiev and the Dynamics of Capitalist Development

A week after demonstrators took to the streets of Petrograd (St. Petersburg) on February 23, 1917 (by the old Julian calendar), Tsar Nicholas II abdicated, and a provisional government took power. It was made up of moderates from the Constitutional Democratic Party and some representatives from more radical groups, including the Party of Socialist Revolutionaries. The SRs, as they were known, were agrarian socialists whose support was based in the peasantry. Whereas Lenin’s Bolshevik Party was committed to state control of agriculture and industry, the SRs’ economic vision of the future was based on expanding Russia’s selfgoverning village communities of peasant households, known as mirs. In May 1917 Viktor Chernov, a veteran SR, became minister of agriculture in the provisional government, which coexisted uneasily with new workers’ councils (soviets) that had sprung up in Petrograd and other cities. One of Chernov’s advisers was a young economist named Nikolai Dmitrievich Kondratiev.

The task facing Chernov, Kondratiev, and their colleagues was a forbidding one. In large parts of the country, acute food shortages that had contributed to the collapse of the tsarist regime were continuing. One of the provisional government’s first acts was to introduce bread rationing and establish a state monopoly on the procurement and distribution of grain. The question of what to do about the land was another pressing issue. Many peasants were demanding a breakup of the great feudal estates. In some places, they were taking matters into their own hands, seizing the land and dividing it among themselves.

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Kondratiev had firsthand experience of Russia’s rural economy. He was born on March 17, 1892, near the town of Vichuga, about two hundred miles northeast of Moscow. The eldest of ten children in a poor peasant family, he attended school in the village of Khrenovo, where he developed radical views: at the age of fourteen, he was elected to a local SR party committee. According to an invaluable book about Kondratiev’s life and works by the English historian Vincent Barnett, his political activism got him expelled from high school and jailed for seven months. In 1908 he moved to St. Petersburg, where, a few years later, he was admitted to the law school at St. Petersburg University. He studied political economy, and in 1915 he graduated with a first-class diploma. The same year he published a treatise on the economic impact of the zemstvos, the popularly elected local and regional councils that Tsar Alexander II had created in 1864, after he emancipated the serfs. Kondratiev emphasized the zemstvos’ role in providing public services, such as education and healthcare. He said their activities constituted a “public law” economy that responded to public needs rather than market incentives.1

Scholarly and hardworking, Kondratiev seemed destined for a quiet life as an academic. The February revolution and its aftermath changed all that. As well as advising SR officials on food policy, he wrote pieces for an SR newspaper, The People’s Will. At this stage, Kondratiev supported the idea of breaking up large estates and socializing the land, which he regarded as nature’s dowry. In a pamphlet entitled The Agrarian Question: Land and the Land Order, he proposed allotting the peasants plots of communally owned land that were big enough for them to feed themselves and their families. When he entered the government, he had to subordinate his views on land reform to the immediate task of ensuring an adequate food supply and preventing mass starvation. To this end, he supported the introduction of rationing and central procurement of grain. But he was also concerned that the government’s interventions, if they went too far, would have a negative impact on food production. “We see that under pressure from the developing crisis, there is a successive shift  … to fixed prices and state purchasing of food,” he wrote. “We are thus sliding on a downward slope towards extending the scope of government regulation of economic life towards wartime state socialism.”2

In June 1917 Kondratiev was elected to the executive committee of the All-Russian Council of Peasant Deputies. A month later Alexander Kerensky, the charismatic leader of the moderate SRs, who was also vicechairman of the Petrograd Soviet, became leader of a new coalition government composed of SRs, liberals, and Mensheviks, the left-wing rivals to the Bolsheviks. Kondratiev’s stock rose. In the early fall, he was promoted to minister of food supply, a hefty responsibility for a twentyfive-year-old.

He couldn’t know it, but his political career had already peaked. With Kerensky insisting on continuing the war, the provisional government’s popularity had collapsed. As popular anger rose, it was outflanked by Lenin and the Bolsheviks, who were promising to deliver “peace, land, and bread.” In a crucial development, the workers associated with the Petrograd Soviet turned against the government and embraced the Bolsheviks, electing Leon Trotsky, the veteran Bolshevik, as the soviet’s chairman.

During the last week of October, the Bolsheviks seized power, with Trotsky playing a leading role in the takeover. Although Lenin had proclaimed “All Power to the Soviets!” it soon became clear that the Bolsheviks’ immediate goal was to consolidate control for themselves. The new regime established a new body, the People’s Commissariat of Food Supply. When Kondratiev and some colleagues at the Ministry of Agriculture refused to quit their offices, they were arrested and forced to leave. In December 1917, Kondratiev was elected a deputy from his home province to the national constituent assembly, which the provisional government had created to fashion a democratic constitution. But when the new assembly met, in January 1918, the Bolsheviks dissolved it after the first day, thereby ending Russia’s short flirtation with parliamentary democracy.3

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As Lenin and his colleagues cemented their control, Kondratiev returned to his studies. In 1918 he moved from St. Petersburg to Moscow, where he joined the Petrov Agricultural Academy, which had been set up in the 1860s to foster rural development. From his new perch in academia, Kondratiev continued to engage in policy debates. Although the Bolshevik Party controlled the government, it wasn’t yet a monolithic dictatorship that quashed dissident views. In 1920 Kondratiev established a research center within the Petrov Agricultural Academy that he called the Conjuncture Institute. The new institute started out tracking Russia’s vast agricultural sector but soon expanded its coverage to other industries. It put out a monthly bulletin of economic statistics and analysis that was widely read by economists and government officials alike.

In 1920 Kondratiev resigned from the SR party, some members of which had called for the overthrow of the Bolsheviks and the reestablishment of parliamentary democracy. For a time, he joined another dissident political group, the Union for the Regeneration of Russia, but it had little impact. Despite his history as a former SR, his Conjuncture Institute was able to forge close ties to several government agencies, including the People’s Commissariat of Finance (NKFin) and the People’s Commissariat of Agriculture. From 1922, the year in which the Soviet Union was officially founded, NKFin was headed by Grigory Sokolnikov, a veteran Bolshevik who had been an early associate of Nikolai Bukharin, a Marxist theorist who was a prominent party figure. Sokolnikov had a doctorate in economics from a French university, and he valued the reports produced by Kondratiev’s institute. In 1922 it became an official research arm of the NKFin, a status it retained until Stalin’s regime closed it down at the end of the 1920s. The institute’s staff swelled to more than fifty.4 Among them were some brilliant young economists, including Eugen Slutsky, who had already developed the Slutsky equation that is still used in the formal theory of consumer demand.

Economic debates raged inside and outside the Bolshevik Party. As an orthodox Marxist, Lenin originally believed that Russia would need to undergo a lengthy stage of capitalist industrialization before it would be ready for the transition to socialism. After the revolution, he quickly departed from this idea. In The State and Revolution, a pamphlet he wrote in August and September 1917, he proposed the Paris Commune of 1870 as an economic model, demanding an immediate state takeover of heavy industries and the expropriation of the capitalists who owned them. After this change in ownership, workers’ committees would take responsibility for organizing production, which Lenin portrayed as a trivial matter. “All citizens become employees and workers of a single countrywide state ‘syndicate,’” he wrote. “All that is required is that they should work equally, do their proper share of work, and get equal pay; the accounting and control necessary for this have been simplified by capitalism to the utmost and reduced to the extraordinarily simple operations—which any literate person can perform—of supervising and recording, knowledge of the four rules of arithmetic, and issuing appropriate receipts.”5

After taking power, Lenin and his colleagues quickly discovered that things weren’t so simple. World War I was still raging, and the Russian economy was in chaos. In March 1918, Lenin ended Russia’s involvement in the war by accepting a punitive peace settlement with the Central Powers in the Treaty of Brest-Litovsk. The respite from war proved temporary. Within months, counterrevolutionary White Armies invaded Russia on several fronts. In response to this new crisis, the Bolsheviks raised a Red Army under the leadership of Trotsky and adopted a draconian program of centrally directed economic production, which became known as War Communism. The regime requisitioned grain directly from peasant farmers and empowered its security police, the Cheka, to enforce this policy. In urban areas, it seized control of heavy industries, including coal and steel, and it amalgamated banks into a single state-controlled institution. It also banned private trade and workers’ strikes.

The Red Army eventually drove back the White Armies, but the Bolsheviks’ harsh economic policies proved counterproductive. Grain production declined further, and food prices continued to rise on the black market. Paper money lost its value, and many Russians resorted to bartering physical goods. Many urban workers abandoned the cities and returned to their villages: by the end of 1920, Moscow and Petrograd had lost more than 40 percent of their populations.6 In 1920 industrial production was running at about a seventh of its 1913 level,7 and the grain harvest was barely half of the prewar average.8 After visiting the country that same year, the British novelist H. G. Wells wrote: “Our dominant impression of things Russian is an impression of vast irreparable breakdown.”9

Kondratiev was scornful of what he regarded as a lack of economic expertise among the Bolshevik leaders; he believed they were improvising without any larger plan. “They issue slogans ‘to seize’ this or that part of the economic structure, absolutely ignoring how this is to be done or its consequences,” he wrote in 1918.10 As the economic situation deteriorated, popular unrest increased. At the beginning of March 1921, sailors, soldiers, and civilians in the port city of Kronstadt launched a rebellion, demanding free elections, a free press, the liberation of political prisoners, and a relaxation of controls on peasant farmers. Deploying the Red Army, the Bolsheviks crushed the rebellion using ground and air power. But Lenin realized that a drastic change of course was essential.

At the Tenth Party Congress, which took place as the uprising was being snuffed out, the Bolsheviks adopted a New Economic Policy (NEP) that met some of the rebels’ demands. The government abandoned the wholesale requisitioning of grain, replacing it with a tax in-kind, and legalized private trade. Once the peasants had met the new tax and fed their families, they would be allowed to sell any surplus product on the open market. The government also reversed the nationalization of small businesses and converted some large firms it had taken over into independent trusts. Completing the U-turn, it introduced a new currency backed by gold.

The policy reversal quickly had the desired effect. Factory and farm production rebounded, inflation fell, and traders of all kinds reappeared. Some disgruntled Bolsheviks bemoaned the rise of kulaks (peasant proprietors) and “NEP men” (private traders), but they couldn’t dispute the fact that the economy was recovering. By 1925, grain output had risen by more than half compared to 1920; industrial production had more than quintupled.11

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Kondratiev supported the NEP. He continued to participate in official debates, particularly within Zemplan, the planning arm of the People’s Commissariat of Agriculture. Like virtually all Russian economists in the 1920s, he believed planning was essential: the long-term development of the economy couldn’t be left entirely to the anarchy of the market. Unlike many Bolshevik economists, however, Kondratiev didn’t equate planning with centralized control of production and prices. He warned that this approach depended on a level of knowledge and forecasting ability that economists and government officials didn’t possess. In his view, the proper role of planning was to coordinate the independent growth of different sectors, using policy tools such as taxes, subsidies, and public works, but also taking account of the objective tendencies of the economy, which included its natural resources, endowments of labor, and prior development.12

In 1924 Kondratiev started working on a broad economic plan for the farming sector, which Zemplan had commissioned. He argued that the main thing holding back Russian agriculture wasn’t an obdurate peasantry but a series of structural problems: a lack of modern equipment, poor transport links, an overvalued exchange rate, and a dearth of scientific expertise. To help remedy these problems, Kondratiev called for extensive government interventions and regional specialization, with different parts of the Soviet Union producing farm products that were most suitable for their soil, climate, and workforces.13 An obvious challenge to all economic development plans during this period was a lack of financial resources: the country was still recovering from a decade of war and chaos. To get around this problem, Kondratiev advocated the import of foreign capital to invest in Soviet agriculture, a proposal that wasn’t as outlandish as it may sound. Before his death, Lenin supported granting concessions to foreign capitalists in some parts of the economy. Even the agricultural section of Gosplan, the state planning agency established in 1921, had said the Soviet Union should seek capital from a number of foreign countries.14

Kondratiev’s proposals were part of a larger vision. Many Bolsheviks were determined to pursue a policy of rapid industrialization, which they believed would enable the Soviet Union to catch up with the capitalist West. Kondratiev argued that, at least initially, the country should concentrate on exploiting its vast stocks of land and natural resources to expand agriculture. By exporting farm products and other primary commodities, it could raise rural incomes, which would create a market for domestic industry. He drew up a list of the most promising exports: it included rye, wheat, pigs, butter, and poultry.

In 1924–25 Kondratiev made a fact-finding trip to Great Britain, Germany, and the United States under the auspices of the People’s Commissar of Agriculture. During his trip, he took the opportunity to meet with some prominent Western economists. In Britain, he met John Maynard