December 18

Comrades, during the past two weeks you have had an opportunity of hearing reports on the activities of the C.C. between the Thirteenth and Fourteenth Congresses from a number of members of the C.C. and members of the Political Bureau; extensive reports which, fundamentally, were certainly correct. I believe that there would hardly be any point in repeating those reports. I think that this circumstance eases my task at the present moment, and in view of this I consider it expedient to confine myself to presenting a number of problems connected with the activities of the C.C. of our Party between the Thirteenth and Fourteenth Congresses.

Usually, the report of the C.C. begins with the external situation. I am not going to violate that custom. I, too, will begin with the external situation.

## I THE INTERNATIONAL SITUATION

The basic and new feature, the decisive feature that has affected all the events in the sphere of foreign relations during this period, is the fact that a certain temporary equilibrium of forces has been established between our country, which is building socialism, and the countries of the capitalist world, an equilibrium which has determined the present period of “peaceful co-existence” between the Land of Soviets and the capitalist countries. What we at one time regarded as a brief respite after the war has become a whole period of respite. Hence a certain equilibrium of forces and a certain period of “peaceful co-existence” between the bourgeois world and the proletarian world.

At the bottom of all this lies an internal weakness, the weakness and infirmity of world capitalism, on the one hand, and the growth of the workers’ revolutionary movement in general, and particularly the growth of strength in our country, the Land of Soviets, on the other. What lies at the bottom of this weakness of the capitalist world? At the bottom of this weakness lie the contradictions which capitalism cannot overcome, and within the framework of which the entire international situation is taking shape—contradictions which the capitalist countries cannot overcome, and which can be overcome only in the course of development of the proletarian revolution in the West.

What are these contradictions? They can be reduced to five groups.

The first group of contradictions are those between the proletariat and the bourgeoisie in the capitalist countries.

The second group of contradictions are those between imperialism and the liberation movement in the colonies and dependent countries.

The third group of contradictions are those that are developing, and cannot but develop, between the countries that were victorious in the imperialist war and those that were defeated.

The fourth group of contradictions are those that are developing, and cannot but develop, among the victor countries themselves.

And the fifth group of contradictions are those that are developing between the Land of Soviets and the countries of capitalism as a whole.

Such are the five principal groups of contradictions, within the framework of which the development of our international position is proceeding.

Comrades, unless we briefly examine the nature and the growth of these contradictions, we shall not be able to understand the present international position of our country. Therefore, a brief review of these contradictions must necessarily form part of my report. 1. The Stabilisation of Capitalism

And so, let us begin with the first series of contradictions, those between the proletariat and the bourgeoisie in the capitalist countries. In this sphere, the basic facts may be reduced to the following.

Firstly. Capitalism is emerging, or has already emerged, from the chaos in production, trade and in the sphere of finance which set in, and in which it found itself, after the war. The Party called this the partial, or temporary, stabilisation of capitalism. What does that mean? It means that the production and trade of the capitalist countries, which had become terribly low at one time in the period of the post-war crisis (I have in mind the years 1919-20), have begun to make progress, and the political power of the bourgeoisie has begun to become more or less consolidated. It means that capitalism has temporarily extricated itself from the chaos in which it found itself after the war. Here are the figures, if we take Europe.

Production in all the advanced countries of Europe is either making progress compared with 1919, is growing, reaching in some places 80-90 per cent of the pre-war level, or is keeping on one level. Only in Britain are there some branches of production which have not yet straightened themselves out. In the main, if we take Europe as a whole, production and trade are making progress, although they have not yet reached the prewar level. If we take the production of grain, we find that Britain has reached 80-85 per cent of the pre-war level, France 83 per cent, and Germany 68 per cent. In Germany, the production of grain is rising very slowly. In France it is not rising, and in Britain it is sinking. All this is compensated for by imports of grain from America. Coal output in Britain in 1925 amounts to 90 per cent of the pre-war level, in France to 107 per cent of the pre-war level, in Germany to 93 per cent. Steel production in Britain amounts to 98 per cent of the pre-war level, in France to 102 per cent, in Germany to 78 per cent. Consumption of raw cotton in Britain is equal to 82 per cent of the pre-war level, in France to 83 per cent, in Germany to 81 per cent. Britain’s foreign trade shows an unfavourable balance and amounts to 94 per cent of pre-war; that of Germany is slightly higher than in 1919 and also shows an unfavourable balance; that of France is now higher than the pre-war level—102 per cent. The level of European trade as a whole, taking 1921, was

63 per cent of the pre-war level, but now, in 1925, it has reached 82 per cent of that level. The budgets of these countries balance in one way or another, but the balance is obtained by imposing a frightful burden of taxation upon the population. There is a fluctuation in the currency in some countries, but, in general, the former chaos is not observed.

The general picture is that the post-war economic crisis in Europe is passing away, production and trade are approaching the pre-war level. One of the European countries, France, has already surpassed the pre-war level in the sphere of trade and production, while another European country—I refer to Britain—still remains at one and the same, or almost one and the same, level without reaching the pre-war level.

Secondly. Instead of the period of flow of the revolutionary tide that we observed in Europe in the years of the post-war crisis, we now see a period of ebb. This means that the question of taking power, of the proletariat capturing power any day, is not now on the order of the day in Europe. The period of rising revolutionary tide, when the movement pushes forward and upward and the Party’s slogans cannot keep pace with the movement, as was the case in our country, for example, in 1905 or in 1917—that period of rising tide still lies ahead. At present, however, it does not exist; instead, there is a period of temporary ebb, a period in which the proletariat is accumulating forces, a period which is giving big results as regards indicating new forms of the movement, as regards the existence and growth of a mass movement under the banner of the struggle for trade-union unity, as regards establishing and strengthening ties between the working-class movement in the West and the working-class movement in the Soviet Union, as regards a swing to the Left—the British working-class movement for example—as regards the disintegration of Amsterdam, the deep fissure in it, etc., etc. I repeat, we are in a period of accumulation of forces, which is of great importance for future revolutionary actions. It is the period in which the conquest of the mass organisations of the proletariat (the trade unions, etc.) and the “removal from their posts” of the Social-Democratic leaders becomes the slogan of the communist movement, as was the case in our country in 1911-12.

Thirdly. The centre of financial power in the capitalist world, the centre of the financial exploitation of the whole world, has shifted from Europe to America. Formerly, France, Germany and Britain usually formed the centre of the financial exploitation of the world. That cannot be said now without special reservations. Now, the centre of the financial exploitation of the world is mainly the United States of America. That country is growing in every respect: as regards production, as regards trade, and as regards accumulation. I shall quote some figures. The production of grain in North America has risen above the pre-war level; it is now 104 per cent of that level. Coal output has reached 90 per cent of the pre-war level, but the deficit is compensated for by an enormous increase in the output of oil. And it must be pointed out that the oil output of America amounts to 70 per cent of world output. Steel production has risen to 147 per cent—47 per cent above the pre-war level. The national income amounts to 130 per cent of pre-war—
exceeding the pre-war level by 30 per cent. Foreign trade has reached 143 per cent of the pre-war level and has an enormous favourable balance in relation to the European countries. Of the total world gold reserve amounting to 9,000 millions, about 5,000 millions are in America. United States currency is the most stable of all currencies. As regards export of capital, America, at the present time, is almost the only country that is exporting capital in ever-growing proportions. The amount exported by France and Germany is terribly small; Britain has also considerably reduced her export of capital. Fourthly. The temporary stabilisation of European capitalism to which I referred above has been achieved mainly with the aid of American capital, and at the price of the financial subordination of Western Europe to America. To prove this, it is sufficient to quote the figure of Europe’s state indebtedness to America. That figure amounts to no less than 26,000 million rubles. This is apart from private debts to America, i.e., American investments in European enterprises, amounting for Europe to the sum of several thousand millions. What does that show? It shows that Europe has begun to get on its feet, more or less, as a result of the influx of capital from America (and partly from Britain). At what price? At the price of Europe’s financial subordination to America.

Fifthly. In view of this, in order to be able to pay interest and principal, Europe is forced to increase the burden of taxation on the population, to worsen the conditions of the workers. That is precisely what is happening now in the European countries. Already, before the payment of principal and interest has properly started, in Britain, for example, the burden of taxation as a percentage of the total national income has increased from 11 per cent (in 1913) to 23 per cent in 1924; in France it has increased from 13 per cent of the national income to 21 per cent, and in Italy—from 13 per cent to 19 per cent. Needless to say, in the very near future the burden of taxation will grow still heavier. In view of this, the material conditions of the working people in Europe, and primarily those of the working class, will certainly deteriorate and the working class will inevitably become revolutionised. Symptoms of this revolutionisation are already to be observed in Britain and in other European countries. I have in mind the definite swing to the Left of the working class in Europe.

Such are the principal facts which show that the temporary stabilisation of capitalism which Europe has achieved is a putrid stabilisation that has grown up on putrid soil.

It is very likely—I do not exclude the possibility— that production and trade in Europe will reach the prewar level. But that does not mean that capitalism will thereby reach the degree of stability it possessed before the war. That degree of stability it will never reach again. Why? Because, firstly, Europe has purchased her temporary stability at the price of financial subordination to America, which is leading to a colossal increase in the burden of taxation, to the inevitable deterioration of the conditions of the workers, and to the revolutionisation of the European countries; secondly, because of a number of other reasons—about which I will speak later—that make the present stabilisation undurable, unstable.

The general conclusion, if we sum up all that I have just said about the analysis of the first series of contradictions—the general conclusion is that the circle of major states exploiting the world has shrunk to an extreme degree compared with the period before the war. Formerly, the chief exploiters were Britain, France, Germany, and partly America; that circle has now shrunk to an extreme degree. Today, the major financial exploiters of the world, and hence its major creditors, are North America and to some extent her assistant—Britain. That does not mean that Europe has sunk to the position of a colony. The European countries, while continuing to exploit their colonies, have themselves now fallen into a state of financial subordination to America and, as a consequence, are in their turn being exploited, and will continue to be exploited by America. In that sense, the circle of major states which exploit the world financially has shrunk to a minimum, whereas the circle of exploited countries has expanded. That is one of the reasons for the instability and internal weakness of the present stabilisation of capitalism. 2. Imperialism, the Colonies
and Semi-Colonies

Let us pass to the second series of contradictions, those between the imperialist countries and the colonial countries. The basic facts in this sphere are: the development and growth of industry and of the proletariat in the colonies, especially during and after the war; the growth of culture in general, and of the national intelligentsia in particular, in these countries; the growth of the national-revolutionary movement in the colonies and the crisis in the world domination of imperialism in general; the struggle for liberation waged by India and Egypt against British imperialism; the war for liberation waged by Syria and Morocco against French imperialism; China’s struggle for liberation against Anglo-Japanese-American imperialism, etc.; the growth of the working-class movement in India and China and the increasingly important role of the working class in these countries in the national-revolutionary movement.

From this it follows that the Great Powers are faced with the danger of losing their chief rear, i.e., the colonies. Here, the stabilisation of capitalism is in a bad way; for the revolutionary movement in the oppressed countries, growing step by step, is beginning in some places to assume the form of open war against imperialism (Morocco, Syria, China), while imperialism is obviously unable to cope with the task of curbing “its” colonies.

It is said—especially by bourgeois writers—that the Bolsheviks are to blame for the growing crisis in the colonies. I must say that they do us too much honour by blaming us for that. Unfortunately, we are not yet strong enough to render all the colonial countries direct assistance in securing their liberation. It is necessary to delve deeper to find the cause. The cause is, apart from everything else, that the European states, being obliged to pay interest on debts to America, are compelled to intensify oppression and exploitation in the colonies and dependent countries, and this cannot
but lead to an intensification of the crisis and of the revolutionary movement in these countries.

All this goes to show that, in this sphere, the affairs of world imperialism are more than in a bad way. Whereas, in the sphere of the first series of contradictions, European capitalism has become partly stabilised and the question of the proletariat seizing power any day does not arise for the time being, in the colonies the crisis has reached a climax and the question of expelling the imperialists from a number of colonies is on the order of the day. 3. Victors and Vanquished

I pass to the third series of contradictions, those between the victor countries and the defeated countries. The basic facts in this sphere are the following. Firstly, after the Versailles Peace, Europe found herself split up into two camps—the camp of the vanquished (Germany, Austria and other countries) and the camp of the victors (the Entente plus America). Secondly, the circumstance must be noted that the victors, who had previously tried to strangle the defeated countries by means of occupation (I remind you of the Ruhr), have abandoned this line and have adopted a different method, the method of financial exploitation—of Germany in the first place, and of Austria in the second place. This new method finds expression in the Dawes Plan, the unfavourable results of which are only now making themselves felt. Thirdly, the Locarno Conference,51 which was supposed to have eliminated all the contradictions between the victors and the vanquished, but which, actually, in spite of all the hullabaloo around this question, did not eliminate any of the contradictions but only aggravated them. The intention of the Dawes Plan is that Germany must pay the Entente no less than some 130,000 million gold marks in several instalments. The results of the Dawes Plan are already making themselves felt in the deterioration of Germany’s economic position, in the bankruptcy of a whole group of enterprises, in growing unemployment, etc. The Dawes Plan, which was drawn up in America, is as follows: Europe is to pay her debts to America at the expense of Germany, who is obliged to pay Europe reparations; but as Germany is unable to pump this sum out of a vacuum, she must be given a number of free markets, not yet occupied by other capitalist countries, from which she could gain fresh strength and fresh blood for the reparation payments. In addition to a number of unimportant markets, America has in view our Russian markets. According to the Dawes Plan, they are to be placed at Germany’s disposal in order that she may be able to squeeze something out of them and have the wherewithal to make reparation payments to Europe, which, in its turn, must make payments to America on account of state debts. The whole plan is well constructed, but it reckons without the host, for it means for the German people a double yoke—the yoke of the German bourgeoisie on the German proletariat, and the yoke of foreign capital on the whole German people. To say that this double yoke will have no effect upon the German people would be a mistake. That is why I think that in this respect the Dawes

Plan is fraught with an inevitable revolution in Germany. It was created for the pacification of Germany,- but it, the Dawes Plan, must inevitably lead to a revolution in Germany. The second part of this plan, which says that Germany must squeeze money out of the Russian markets for the benefit of Europe, is also a decision that reckons without the host. Why? Because, we have not the least desire to be converted into an agrarian country for the benefit of any other country whatsoever, including Germany. We ourselves will manufacture machinery and other means of production. Therefore, to reckon that we shall agree to convert our Motherland into an agrarian country for the benefit of Germany, means reckoning without the host. In this respect, the Dawes Plan stands on feet of clay.

As for Locarno, it is merely a continuation of Versailles, and the only object it can have is to preserve the “status quo,” as they say in the language of diplomacy, i.e., to preserve the existing order of things, under which Germany is the defeated country and the Entente the victor. The Locarno Conference gives this order of things juridical sanction in the sense that Germany’s new frontiers are preserved to the advantage of Poland, are preserved to the advantage of France; that Germany loses her colonies, and at the same time, pinioned and forced into a Procrustean bed, must take all measures to pump out 130,000 million gold marks. To believe that Germany, which is growing and pushing forward, will resign herself to this situation means counting on a miracle. If, in the past, after the Franco-Prussian War, the question of Alsace-Lorraine, one of the key points of the contradictions of that time, served as one of the gravest causes of the imperialist war, what guarantee is there that the Versailles Peace and its continuation, Locarno, which legalise and give juridical sanction to Germany’s loss of Silesia, the Danzig Corridor and Danzig; the Ukraine’s loss of Galicia and Western Volhynia; Byelorussia’s loss of her western territory; Lithuania’s loss of Vilna, etc.—what guarantee is there that this treaty, which has carved up a number of states and has created a number of key points of contradiction, will not share the fate of the old Franco-Prussian Treaty which, after the Franco-Prussian War, tore Alsace-Lorraine from France?

There is no such guarantee, nor can there be. If the Dawes Plan is fraught with a revolution in Germany, Locarno is fraught with a new war in Europe. The British Conservatives think that they can both maintain the “status quo” against Germany and use Germany against the Soviet Union. Are they not wanting too much?

There is talk about pacifism, there is talk about peace among the states of Europe. Briand and Chamberlain embrace, Stresemann lavishes compliments on Britain. That is all nonsense. We know from the history of Europe that every time treaties were concluded about the disposition of forces for a new war, those treaties were called peace treaties. Treaties were concluded that determined the elements of the subsequent war, and the conclusion of such treaties was always accompanied by a hullabaloo and clamour about peace. False bards of peace were always found on those occasions. I recall facts from the history of the period after the Franco-Prussian War, when Germany was the victor, when France
was the vanquished, when Bismarck did everything to maintain the “status quo,” i.e., the order of things that was created after Germany’s victorious war against France. At that time Bismarck stood for peace, because that peace gave him a whole series of privileges over France. France, too, stood for peace, at all events at the beginning, until she had recovered from the unsuccessful war. Well, in that period, when everybody was talking about peace and the false bards were lauding Bismarck’s peaceful intentions, Germany and Austria concluded an agreement, an absolutely peaceful and absolutely pacifist agreement, which later served as one of the bases of the subsequent imperialist war. I am speaking of the agreement between Austria and Germany in 1879. Against whom was that agreement directed? Against Russia and France. What did that agreement say? Listen: “Whereas close collaboration between Germany and Austria threatens nobody and is calculated to consolidate peace in Europe on the principles laid down in the Berlin Treaty, their Majesties, i.e., the two Sovereigns, have resolved to conclude a peace alliance and a mutual agreement.” Do you hear: close collaboration between Germany and Austria for the sake of peace in Europe. That agreement was treated as a “peace alliance,” nevertheless all historians agree that the agreement served as a direct preparation for the imperialist war of 1914. A consequence of that agreement for peace in Europe, but actually for war in Europe, was another agreement, the agreement between Russia and France of 1891-93—also for peace—for nothing else! What did that agreement say? It said:

“France and Russia, animated by an equal desire to maintain peace, have reached the following agreement.” What agreement—was not openly stated at that time. But the secret text of the agreement said: in the event of war, Russia must put up against Germany 700,000 troops and France (I think) 1,300,000.

Both these agreements were officially called agreements for peace, friendship and tranquillity throughout Europe.

To crown all this, six years later, in 1899, the Hague Peace Conference assembled and the question of reduction of armaments was brought up there. That was at the time when, on the basis of the agreement between France and Russia, French General Staff officers came to Russia to draw up plans for troop movements in the event of war, and Russian General Staff officers went to France to draw up plans in conjunction with the French generals for future military operations against Germany. That was at the time when the General Staffs of Germany and Austria were drawing up a plan and drafting the terms on which Austria and Germany were jointly to attack their neighbours in the West and in the East. At that very time (all this, of course, was done on the quiet, behind the scenes) the Hague Conference of 1899 assembled, and there peace was proclaimed and a lot of hypocritical noise was raised about reducing armaments. There you have an example of the matchless hypocrisy of bourgeois diplomacy, when by shouting and singing about peace they try to cover up preparations for a new war.

Have we any grounds, after this, for believing the songs about the League of Nations and Locarno? Of course not. That is why we can believe neither Chamberlain and Briand when they embrace, nor Stresemann when he is lavish with his compliments. That is why we think that Locarno is a plan for the disposition of forces for a new war and not for peace.

Interesting is the role played by the Second International in this question. It is the leaders of the Second International who most of all are leaping and dancing, assuring the workers that Locarno is an instrument of peace and the League of Nations an ark of peace, that the Bolsheviks refuse to join the League of Nations because they are opposed to peace, etc. What does all this noise made by the Second International amount to, taking into account what has been said above and, in particular, the historical information that I cited about the conclusion after the Franco-Prussian War of a whole series of agreements that were called peace agreements, but which actually proved to be war agreements? What does the present position of the Second International in relation to Locarno show? That the Second International is not only an organisation for the bourgeois corruption of the working class, but also an organisation for the moral justification of all the injustices of the Versailles Peace; that the Second International is a subsidiary of the Entente, an organisation whose function is, by its activities and its clamour in support of Locarno and the League of Nations, to give moral justification to all the injustices and all the oppression that have been created by the Versailles-Locarno regime.

4. The Contradictions between the Victor

Countries

I pass to the fourth series of contradictions, to those between the victor countries. The basic facts here are that, in spite of the existence of a sort of bloc between America and Britain, a bloc founded on an agreement between America and Britain against the annulment of Allied debts, in spite of this bloc, I say, the conflict of interests between Britain and America is not being allayed, on the contrary, it is becoming more intense. One of the principal problems now facing the world powers is the problem of oil. If, for example, we take America, we find that she produces about 70 per cent of the world output of oil and accounts for over 60 per cent of total world consumption. Well, it is just in this sphere, which is the principal nerve of the entire economic and military activities of the world powers, that America everywhere and always encounters opposition from Britain. If we take the two world oil companies—Standard Oil and Royal Dutch-Shell, the former representing America and the latter Britain—we find that the struggle between those companies is going on in all parts of the world, wherever oil is obtainable. It is a struggle between America and Britain. For the problem of oil is a vital one; because who will command in the next war depends on who will have most oil. Who will command world industry and trade depends on who will have most oil. Now that the fleets of the advanced countries are passing over to oil propulsion, oil is the vital nerve of the struggle among the world states for supremacy both in peace and in war. It is precisely in this sphere that the struggle
between the British oil companies and the American oil companies is a mortal one, not always coming into the open, it is true, but always going on and smouldering, as is evident from the history of the negotiations and from the history of the clashes between Britain and America on this ground. It is sufficient to recall the series of Notes of Hughes, when he was United States Secretary of State, directed against Britain on the oil question. The struggle is going on in South America, in Persia, in Europe, in those districts of Rumania and Galicia where oil is to be found, in all parts of the world, sometimes in a concealed and sometimes in an open form. That is apart from such a fact of no little importance as the conflict of interests between Britain and America in China. You no doubt know that the struggle there is a concealed one, and that very often America, operating in a more flexible manner and refraining from the crude colonial methods which the British lords have not yet abandoned, succeeds in putting a spoke in Britain’s wheel in China in order to oust Britain and pave the way for herself in China. Obviously, Britain cannot look upon this with indifference. I shall not dwell at length on the opposition of interests between France and Britain arising from the struggle for supremacy on the European continent. That is a generally known fact. It is also clear that the conflict of interests between Britain and France takes place not only over the question of hegemony on the continent, but also in the colonies. Information has got into the press that the war in Syria and Morocco against French imperialism was organised not without Britain’s participation. I have no documents, but I think that this information is not altogether groundless.

Nor shall I dwell on the opposition of interests between America and Japan—that, too, is common knowledge. It is enough to recall the recent American naval manoeuvres in the Pacific and the Japanese naval manoeuvres to understand why they took place. Lastly, I must mention a fact which must surprise everybody, namely, the colossal growth of armaments in the victor countries. I am speaking about the victors, about the contradictions among the victor states. These victors are called allies. True, America does not belong to the Entente, but she fought in alliance with it against Germany. Well, those allies are now arming themselves to the utmost. Against whom are they arming? In the past, when the Entente countries piled up armaments, they usually referred to Germany, saying that she was armed to the teeth and constituted a danger to world peace, owing to which it was necessary to arm for defence. But what about now? Germany as an armed force no longer exists; she has been disarmed. Nevertheless, the growth of armaments in the victor countries is proceeding as never before. How, for example, is the monstrous growth of the air force in France to be explained? How is the monstrous growth of armaments, and especially of the navy, in Britain to be explained? How is the monstrous growth of the navies of America and Japan to be explained? What and whom are Messieurs the “Allies,” who jointly defeated Germany and disarmed her, afraid of? What are they afraid of, and why are they arming? And where is the pacifism of the Second International, which shouts about peace and does not see—pretends that it does not see—that the “Allies,” who have officially called each other friends, are feverishly arming against
a “non-existent” enemy? What have the League of Nations and the Second International done to put a stop to this furious growth of armaments? Don’t they know that with the growth of armaments “the guns begin to go off of their own accord”? Don’t expect a reply from the League of Nations and the Second International. The point here is that the conflict of interests among the victor countries is growing and becoming more intense, that a collision among them is becoming inevitable, and, in anticipation of a new war, they are arming with might and main. I shall not be exaggerating if I say that in this case we have not a friendly peace among the victor countries, but an armed peace, a state of armed peace that is fraught with war. What is now going on in the victor countries reminds us very much of the situation that prevailed before the war of 1914—a state of armed peace.

The rulers of Europe are now trying to cover up this fact with clamour about pacifism. But I have already said what this pacifism is worth and what value should be attached to it. The Bolsheviks have been demanding disarmament ever since the time of Genoa.52 Why do not the Second International and all the others who are chattering about pacifism support our proposal? This circumstance shows once again that the stabilisation, the temporary, partial stabilisation, that Europe has achieved at the price of its own enslavement, is not lasting, for the contradictions between the victor countries are growing and becoming more intense, not to speak of the contradictions between the victor countries and the defeated countries.

5. The Capitalist World
and the Soviet Union

I pass to the fifth series of contradictions, those between the Soviet Union and the capitalist world. The basic fact in this sphere is that an all-embracing world capitalism no longer exists. After the Land of Soviets came into being, after the old Russia was transformed into the Soviet Union, an all-embracing world capitalism ceased to exist. The world split up into two camps: the camp of imperialism and the camp of the struggle against imperialism. That is the first point that must be noted.

The second point that must be noted in this sphere is that two major countries—Britain and America, as an Anglo-American alliance—are coming to stand at the head of the capitalist countries. Our country—the Soviet Union—is coming to stand at the head of those discontented with imperialism and who are engaged in mortal struggle against it.

The third point is that two major, but opposite, centres of attraction are being created and, in conformity with this, two lines of attraction towards those centres all over the world: Britain and America—for the bourgeois governments, and the Soviet Union—for the workers of the West and for the revolutionaries of the East. The power of attraction of Britain and America lies in their wealth; credits can be obtained there. The power of attraction of the Soviet Union lies in its revolutionary experience, its experience in the struggle for the emancipation of the workers from capitalism and of the oppressed peoples from imperialism. I am speaking of the attraction of the workers of Europe and of the revolutionaries of the East towards our country. You know what a visit to our country means to a European worker or to a revolutionary from an oppressed country, how they make pilgrimages to our country, and what an attraction our country has for all that is honest and revolutionary all over the world. Two camps, two centres of attraction.

The fourth point is that in the other camp, the camp of capitalism, there is no unity of interests and no solidarity; that what reigns there is a conflict of interests, disintegration, a struggle between victors and vanquished, a struggle among the victors themselves, a struggle among all the imperialist countries for colonies, for profits; and that, because of all this, stabilisation in that camp cannot be lasting. On the other hand, in our country there is a healthy process of stabilisation, which is gaining strength, our economy is growing, our socialist construction is growing, and in the whole of our camp all the discontented elements and strata of both the West and the East are gradually and steadily rallying around the proletariat of our country, rallying around the Soviet Union.

Over there, in the camp of capitalism, there is discord and disintegration. Over here, in the camp of socialism, there is solidarity and an ever-increasing unity of interests against the common enemy—against imperialism. Such are the basic facts which I wanted to point out in the sphere of the fifth series of contradictions—the contradictions between the capitalist world and the Soviet world.

I should like to dwell particularly on the fact which I have called the attraction of the revolutionary and socialist elements of the whole world towards the proletariat of our country. I have in mind the workers’ delegations which come to our country, delegations which carefully probe every detail of our work of construction in order to convince themselves that we are able not only to destroy, but also to build the new. What is the significance of these workers’ delegations—this pilgrimage of workers to our country—delegations which today reflect an entire stage in the development of the working-class movement in the West? You have heard how leaders of the Soviet state met a British workers’ delegation, and a German workers’ delegation. Have you noticed that our comrades, directors of various spheres of administration, not only provided the representatives of the workers’ delegations with information, but actually rendered account to them? I was not in Moscow at the time, I was away, but I read the newspapers, and I read that Comrade Dzerzhinsky, head of the Supreme Council of National Economy, not merely gave the German workers’ delegation information, but rendered account to them. That is something new and special in our life, and special attention should be paid to it. I have read that the directors of our oil industry—Kosior in Grozny and Serebrovsky in Baku—not merely gave the workers’ delegates information as is done to tourists, but rendered account to these workers’ delegations as if to a higher supervising authority. I have read that all our higher institutions, the Council of People’s Commissars and the Central Executive Committee of Soviets, right down to the local Executive Committees of Soviets, were prepared to render
account to the workers’ delegations, whose visits to us they regarded as the friendly, fraternal supervision by the working class of the West of our work of construction, of our workers’ state.

What do all those facts show? They show two things. Firstly, that the working class of Europe, at all events the revolutionary part of the working class of Europe, regards our state as its own child, that the working class sends its delegations to our country not out of curiosity, but in order to see how things are here, and what is being done; for, evidently, they regard themselves as being morally responsible for everything that we are building here. Secondly, that the revolutionary part of the proletariat of Europe, having adopted our state, and regarding it as its child, is ready to defend it and to fight for it if need be. Name another state, even the most democratic, that would dare to submit to fraternal supervision by workers’ delegations from other countries! You cannot name such a state, because there is no such state in the world. Only our state, the workers’ and peasants’ state, is capable of taking such a step. But, in placing the utmost confidence in the workers’ delegations, our country thereby wins the utmost confidence of the working class of Europe. And that confidence is more valuable to us than any loans, because the workers’ confidence in our state is the fundamental antidote to imperialism and its interventionist machinations. That is what lies at the bottom of the change in the mutual relations between our state and the proletariat of the West that has taken place, or is taking place, on the basis of the workers’ pilgrimages to our country. That is the new factor, which many have failed to discern, but which is decisive at the present time. For if we are regarded as a part, as the child, of the working class of Europe, if on those grounds the working class of Europe assumes moral responsibility, undertakes the task of defending our state in case, say, of intervention by capitalism, the task of defending our interests against imperialism, what does that show? It shows that our forces are growing and will continue to grow very rapidly. It shows that the weakness of capitalism will increase very rapidly. For without the workers it is impossible to wage war nowadays. If the workers refuse to fight against our Republic, if they regard our Republic as their child in whose fate they are closely concerned, then war against our country becomes impossible. That is the secret, that is the root, that is the significance of the pilgrimages to our country that we have had, which we shall have more of, and which it is our duty to encourage to the utmost as a pledge of solidarity and a pledge that the ties of friendship between the workers of our country and the workers of the Western countries will be strengthened. Perhaps it will not be superfluous to say a word or two about the number of the delegations that have visited our country. I heard recently that at the Moscow Conference a comrade asked Rykov: “Are not those delegations costing us too much?” Comrades, we must not say such things. We must never talk in that strain about the workers’ delegations that visit us. It is disgraceful to talk like that. We cannot and must not shrink from any expense, or any sacrifice, to help the working class in the West to send their delegates to us, to help them to convince themselves that the working class, after capturing power, is capable not only of destroying capitalism,
but also of building socialism. They, the workers of the West, many of them at any rate, are still convinced that the working class cannot do without the bourgeoisie. That prejudice is the chief disease of the working class in the West, injected into it by the Social-Democrats. We shall not shrink from any sacrifice to give the working class in the West the opportunity, through their delegates, to convince themselves that the working class, after capturing power, is capable not only of destroying the old order, but also of building socialism. We shall not shrink from any sacrifice to give the working class in the West the opportunity to convince themselves that our country is the only state in the world that is a workers’ state, which they in the West ought to fight for, and which is worth defending against their own capitalism. (Applause.) Three kinds of delegations have visited us: delegations of intellectuals—teachers and so forth; delegations of adult workers, I think there have been, roughly, about ten of them; and delegations of young workers. In all, 550 delegates and tourists have visited our country. Another sixteen delegations, registered with the All-Union Central Council of Trade Unions, are expected. We shall continue to promote these visits in the future in order to strengthen the ties between the working class of our country and the working class in the West, and thereby erect a barrier against any possibility of intervention. Such are the characteristic features of the basic contradictions that are corroding capitalism. What follows from all these contradictions? What- do they show? They show that the capitalist world is being corroded by a whole series of internal contradictions which are enfeebling capitalism; that, on the other hand, our world, the world of socialism, is becoming more and more closely welded, more united; that because of this, on precisely this basis, there arose that temporary equilibrium of forces that put an end to war against us, that ushered in the period of “peaceful co-existence” between the Soviet state and the capitalist states.

I must mention two other facts which also helped to bring it about that instead of a period of war we have a period of “peaceful co-existence.”

The first fact is that at the present moment America does not want war in Europe. It is as though she were saying to Europe: I have loaned you thousands of millions; sit still and behave yourself if you want to get more money in future, if you don’t want your currency to get into a mess; get down to work, earn money and pay the interest on your debts. It scarcely needs proof that this advice of America’s, even if it is not decisive for Europe, is bound to have some effect.

The second fact is that since the victory of the proletarian revolution in our country, a whole vast country with tremendous markets and tremendous sources of raw materials has dropped out of the world capitalist system, and this, of course, was bound to affect the economic situation in Europe. The loss of one-sixth of the globe, the loss of the markets and sources of raw materials of our country, means for capitalist Europe that its production is reduced and experiences a severe shaking. And so, in order to put a stop to this alienation of European capital from our country, from our markets and sources
of raw materials, it was found necessary to agree to a certain period of “peaceful co-existence” with us, in order to be able to find a way to our markets and sources of raw materials—without this, it appears, it is impossible to achieve any economic stability in Europe. 6. The External Position
of the U.S.S.R.

Such are all those factors that have led to a certain equilibrium of forces between the camp of socialism and the camp of capitalism all over the world; that have caused the period of war to be replaced by a period of respite; that have converted the brief respite into a whole period of respite, and have enabled us to carry out a sort of “collaboration,” as Ilyich called it, with the capitalist world. Hence the series of “recognitions” of the Soviet Union which has commenced, and which is bound to continue.

I shall not enumerate the countries that have “recognised” us. I think that America is the only one of the big countries that has not done so. Nor shall I dilate on the fact that after these “recognitions” we concluded trade agreements, with Germany and Italy, for example. I shall not deal at length with the fact that our foreign trade has grown considerably, that America, a country which exports cotton to us, and Britain and Germany, countries which import our grain and agricultural produce, are particularly interested in this trade. There is one thing I must gay, namely, that this year is the first year since the advent of the period of “co-existence” with the capitalist states in which we are entering into rich and wide commercial relations with the capitalist world on a more or less large scale.

That, of course, does not mean that we have already done away with all those, so to speak, reservations, and all those claims and counter-claims, as they might be called, that have existed and still exist between our state and the states of the West. We know that payment of debts is being demanded of us. Europe has not yet forgotten this, and probably will not forget it, at any rate, not so soon. We are told that our pre-war debts to Europe amount to 6,000 millions, that the war debts are estimated at over 7,000 million rubles, hence, a total of 13,000 millions. Allowing for depreciation of currency, and subtracting from this sum the share of the border countries, it works out that we owe the West-European states not less than 7,000 millions. It is known that our counter-claims in connection with the intervention of Britain, France and America during the civil war amount, I think, to the figure (if we take Larin’s calculations) of 50,000 million rubles. Consequently, they owe us five-times more than we owe them. (Larin, from his seat: “We shall get it.”) Comrade Larin says that in good time we shall get all of it. (Laughter.) If, however, we make a more conservative calculation, as the People’s Commissariat of Finance does, it will amount to no less than 20,000 million. Even then we stand to gain. (Laughter.) But the capitalist countries refuse to reconcile themselves to this, and we still figure in their lists as debtors.

It is on this ground that snags and stumbling-blocks arise during our negotiations with the capitalists. That
was the case with Britain, and it will probably be the case with France as well.

What is the position of the Central Committee of our Party on this question?

It is still what it was when the agreement was being concluded with MacDonald.53

We cannot repeal the well-known law of our country, promulgated in 1918, annulling the tsarist debts.54 We stand by that law. We cannot repeal the decrees which were proclaimed, and which gave legal sanction to the expropriation of the expropriators in our country. We stand by those laws and will continue to do so. But we are not averse to making certain exceptions in the course of practical negotiations, in the case of both Britain and France, concerning the former tsarist debts, on the understanding that we pay a small part and get something for it. We are not averse to satisfying the former private owners by granting them concessions, but again on the understanding that the terms of those concessions are not enslaving. On that basis we were able to reach agreement with MacDonald. The underlying basis of those negotiations was the idea of virtually annulling the war debts. It was precisely for this reason that this agreement was frustrated. By whom? Undoubtedly, by America. Although America did not take part in the negotiations between Rakovsky and MacDonald, although MacDonald and Rakovsky arrived at a draft agreement, and although that draft agreement provided a way out for both parties and more or less satisfied the interests of both parties, nevertheless, since that draft was based on the idea of annulling the war debts, and America did not want to create such a precedent, for she would then have stood to lose the thousands of millions that Europe owed her, she, i.e., America, “advised,” and the agreement did not come about. Nevertheless, we still take our stand on the basis of the above-mentioned draft.

Of the questions concerning our foreign policy, of the questions that arose in the period under review, questions that are exceptionally delicate and urgent, that concern the relations between our government and the governments of the West-European countries, I should like to mention two: firstly, the question that the British Conservatives have raised more than once and will raise again—that of propaganda; and, secondly, the question of the Communist International.

We are accused of conducting special propaganda against imperialism both in Europe and in the colonies and dependent countries. The British Conservatives assert that the Russian Communists are people whose mission it is to destroy the might of the British Empire. I should like to state here that all this is utter nonsense. We do not need any special propaganda, either in the West or in the East, now that workers’ delegations visit our country, see for themselves the state of things here and carry their information about the state of things here to all the Western countries. We do not need any other propaganda. That is the best, the most potent and most effective propaganda for the Soviet system and against the capitalist system. (Applause.)

We are told that we are conducting propaganda in the East. I assert that this, too, is utter nonsense. We do not need any special propaganda in the East, now that, as we know, the whole of our state system rests on the
basis of the co-existence and fraternal co-operation of the extremely diverse nationalities in our country. Any Chinese, any Egyptian, any Indian, who comes to our country and stays here six months, has an opportunity of convincing himself that our country is the only country that understands the spirit of the oppressed peoples and is able to arrange co-operation between the proletarians of the formerly dominant nationality and the proletarians of the formerly oppressed nationalities. We need no other propaganda, no other agitation, in the East except that the delegations that come here from China, India and Egypt, after working here and looking about them, should carry their information about our state of things all over the world. That is the best propaganda, and it is the most effective of all forms and types of propaganda.

But there is a force that can and certainly will destroy the British Empire. That force is the British Conservatives. That is the force that will certainly, inevitably, lead the British Empire to its doom. It is sufficient to recall the Conservatives’ policy when they came to power. 55 What did they begin with? They began by putting the curb on Egypt, by increasing the pressure on India, by intervening in China, and so forth. That is the policy of the Conservatives. Who is to blame, who is to be accused, if the British lords are incapable of any other policy? Is it difficult to understand that by proceeding on these lines the Conservatives must, inevitably, as surely as twice two are four, lead the British Empire to its doom?

A few words about the Comintern. Hirelings of the imperialists and authors of forged letters are spreading rumours in the West to the effect that the Comintern is an organisation of conspirators and terrorists, that Communists are touring the Western countries for the purpose of hatching plots against the European rulers. Among other things, the Sofia explosion in Bulgaria is being linked with Communists. I must declare what every cultured person must know, if he is not an utter ignoramus, and if he has not been bribed—I must declare that Communists never had, do not have, and cannot have, anything in common with the theory and practice of individual terrorism; that Communists never had, do not have, and cannot have, anything in common with the theory of conspiracies against individual persons. The theory and practice of the Comintern consists in organising the mass revolutionary movement against capitalism. That is true. That is the task of the Communists. Only ignoramuses and idiots can confuse plots and individual terrorism with the Comintern’s policy in the mass revolutionary movement.

Two words about Japan. Some of our enemies in the West are rubbing their hands with glee, as much as to say: See, a revolutionary movement has begun in China. It is, of course, the Bolsheviks who have bribed the Chinese people—who else could bribe a people numbering 400 millions?—and this will lead to the “Russians” fighting the Japanese. All that is nonsense, comrades. The forces of the revolutionary movement in China are unbelievably vast. They have not yet made themselves felt as they should. They will make themselves felt in the future. The rulers in the East and West who do not see those forces and do not reckon with them to the degree that they deserve will suffer for this. We, as a state,
cannot but reckon with this force. We consider that China is faced with the same problem that faced North America when she was uniting in a single state, that faced Germany when she was taking shape as a state and was uniting, and that faced Italy when she was uniting and freeing herself from external enemies. Here, truth and justice are wholly on the side of the Chinese revolution. That is why we sympathise and will continue to sympathise with the Chinese revolution in its struggle to liberate the Chinese people from the yoke of the imperialists and to unite China in a single state. Whoever does not and will not reckon with this force will certainly lose. I think that Japan will understand that she, too, must reckon with this growing force of the national movement in China, a force that is pushing forward and sweeping everything from its path. It is precisely because he has not understood this that Chang Tso-lin is going under. But he is going under also because he based his whole policy on conflicts between the U.S.S.R. and Japan, on a deterioration of relations between them. Every general, every ruler of Manchuria, who bases his policy on conflicts between us and Japan, on a deterioration of our relations with Japan, is certain to go under. Only the one who bases his policy on an improvement of our relations with Japan, on a rapprochement between us and Japan, will remain on his feet; only such a general, and such a ruler, can sit firmly in Manchuria, because we have no interests that lead to our relations with Japan becoming strained. Our interests lie in the direction of rapprochement between our country and Japan.

7. The Party’s Tasks

I pass to the question of our Party’s tasks in connection with the external situation. I think that here our Party’s tasks, in the sense of its work, should be outlined in two spheres: the sphere of the international revolutionary movement, and then in the sphere of the Soviet Union’s foreign policy. What are the tasks in the sphere of the international revolutionary movement?

The tasks are, firstly, to work in the direction of strengthening the Communist Parties in the West, of their winning a majority among the masses of the workers. Secondly, to work in the direction of intensifying the struggle of the workers in the West for trade-union unity, for strengthening the friendship between the proletariat in our Union and the proletariat in the capitalist countries. This includes the pilgrimages of which I have spoken and the significance of which I described above. Thirdly, to work in the direction of strengthening the link between the proletariat in our country and the movement for liberation in the oppressed countries, for they are our allies in the struggle against imperialism. And fourthly, to work in the direction of strengthening the socialist elements in our country, in the direction of the victory of these elements over the capitalist elements, a victory that will be of decisive significance for revolutionising the workers of all countries. Usually, when speaking about our Party’s tasks in the sphere of the international revolutionary movement, our comrades confine themselves to the first three tasks and forget about the fourth task, namely, that our struggle in our
country, the struggle for the victory of the socialist elements in our country over the capitalist elements, our struggle in the work of construction, is also of international significance, for our country is the base of the international revolution, for our country is the principal lever for expanding the international revolutionary movement; and if our work of construction here, in our country, proceeds at the proper tempo, it means that we are performing our work in all the other channels of the international revolutionary movement precisely in the way the Party demands that we should perform it. Such are the Party’s tasks in the sphere of the international revolutionary movement. Now about the Party’s tasks in the sphere of our Union’s foreign policy.

Firstly, to work in the direction of fighting against new wars, in the direction of maintaining peace and ensuring so-called normal relations with the capitalist countries. The basis of our government’s policy, of its foreign policy, is the idea of peace. The struggle for peace, the struggle against new wars, the exposure of all the steps that are being taken to prepare a new war, the exposure of those steps that cover up actual preparation of war with the flag of pacifism—such is the task. It is precisely for this reason that we refuse to join the League of Nations, for the League of Nations is an organisation for covering up the preparations for war; for, to join the League of Nations, we must choose, as Comrade Litvinov has rightly expressed it, between the hammer and the anvil. Well, we do not wish to be either a hammer for the weak nations or an anvil for the strong ones. We want neither the one nor the other; we stand for peace, we stand for the exposure of all those steps that lead to war, no matter by what pacifist bunting they may be concealed. Whether the League of Nations or Locarno, it makes no difference—they can’t fool us with a flag, nor frighten us with noise.

Secondly, to work in the direction of expanding our trade with the outside world on the basis of the monopoly of foreign trade.

Thirdly, to work in the direction of rapprochement with the countries that were defeated in the imperialist war, with those capitalist countries which were most humiliated and came off worst, and which, owing to this, are in opposition to the ruling alliance of Great Powers.

Fourthly, to work in the direction of strengthening our link with the dependent and colonial countries. Such are the tasks that face the Party at the present time in the sphere of international relations and the international working-class movement.

## II THE INTERNAL SITUATION IN THE SOVIET UNION

I pass to the second part of the Central Committee’s report. This part deals with the internal situation in our state and with the Central Committee’s policy on questions concerning the internal situation. I should like to quote some figures. Although quite a number of figures have been published in the press recently, we cannot, unfortunately, avoid quoting some here.

### 1. The National Economy as a Whole

But, before passing to the figures, permit me to set out several general propositions which define our work in the building of a socialist economy (I intend to start with our economy).

The first proposition. We are working and building in the circumstances of capitalist encirclement. That means that our economy and work of construction will develop in the contradiction, in conflicts, between our system of economy and the capitalist system of economy. We cannot possibly avoid this contradiction. It is the framework within which the struggle between the two systems, the socialist and the capitalist systems, must proceed. It means, furthermore, that our economy must be built not only amidst its opposition to the capitalist economy outside our country, but also amidst the opposition between the different elements within it, the opposition between the socialist elements and the capitalist elements. Hence the conclusion: we must build our economy in such a way as to prevent our country from becoming an appendage of the world capitalist system, to prevent it from being drawn into the general system of capitalist development as a subsidiary enterprise of this system, so that our economy develops not as a subsidiary enterprise of world capitalism, but as an independent economic unit, based mainly on the home market, based on the bond between our industry and peasant economy in our country.

There are two general lines: one takes as its starting point that our country must for a long time yet remain an agrarian country, must export agricultural produce and import equipment, that we must adopt this standpoint and develop along this line in the future. In essence, this line demands that we should wind up our industry. It found expression recently in Shanin’s theses (perhaps some of you have read them in Ekonomicheskaya Zhizn). To follow this line would mean that our country would never be able, or almost never be able, to become really industrialised; that instead of being an economically independent unit based on the home market, our country would, objectively, have to become an appendage of the general capitalist system. That line means the abandonment of our construction tasks.

That is not our line.

There is another general line, which takes as its starting point that we must exert all efforts to make our country an economically self-reliant, independent country based on the home market; a country that will serve as a centre of attraction for all other countries that little by little drop out of capitalism and enter the channel of socialist economy. That line demands the utmost expansion of our industry, but proportionate to and in conformity with the resources at our command. It emphatically rejects the policy of converting our country into an appendage of the world capitalist system. That is our line of construction, the line followed by the Party and which it will continue to follow in the future. That line is imperative as long as the capitalist encirclement exists. Things will be different when the revolution is victorious in Germany or France, or in both countries together, when the building of socialism begins there on a higher technical basis. We shall then pass from the
policy of transforming our country into an independent economic unit to the policy of drawing our country into the general channel of socialist development. But until that happens, it will be absolutely essential for us to have that minimum of independence for our national economy without which it will be impossible to safeguard our country from economic subordination to the world capitalist system.

That is the first proposition.

The second proposition, by which we must be guided in our work of construction as much as by the first, is that we must on each occasion take into account the specific features of our management of the national economy distinguishing it from such management in capitalist countries There, in the capitalist countries, private capital reigns; there, the mistakes committed by individual capitalist trusts, syndicates, or one or other group of capitalists, are corrected by the elemental forces of the market If too much is produced—a crisis ensues; but later, after the crisis, the economy resumes its normal course. If they indulge too much in imports and an unfavourable balance of trade results—the rate of exchange will be shaken, inflation will ensue, imports will drop and exports will rise. All this in the form of crises. No mistake of any magnitude, no overproduction of any magnitude, or serious discrepancy between production and total demand takes place in capitalist countries without the blunders, mistakes and discrepancies being corrected by some crisis or other. That is how they live in capitalist countries. But we cannot live like that. There we see economic, commercial and financial crises, which affect individual groups of capitalists. Here, in our country, things are different. Every serious hitch in trade, in production, every serious miscalculation in our economy, results not in some individual crisis or other, but hits the whole of our national economy. In our country, every crisis, whether commercial, financial or industrial, may develop into a general crisis that will hit the whole state. That is why special circumspection and foresight in construction are demanded of us. That is why we here must manage our economy in a planned way so that there are fewer miscalculations, so that our management of economy is conducted with supreme foresight, circumspection and accuracy. But since, comrades, we, unfortunately, do not possess exceptional foresight, exceptional circumspection, or an exceptional ability to manage our economy without error, since we are only just learning to build, we make mistakes, and will continue to do so in the future. That is why, in building, we must have reserves; we must have reserves with which to correct our blunders. Our entire work during the past two years has shown that we are not guaranteed either against fortuities or against errors. In the sphere of agriculture, very much depends in our country not only on the way we manage, but also on the forces of nature (crop failures, etc.). In the sphere of industry, very much depends not only on the way we manage, but also on the home market, which we have not yet mastered. In the sphere of foreign trade, very much depends not only on us, but also on the behaviour of the West-European capitalists; and the more our exports and imports grow, the more dependent we become upon the capitalist West, the more vulnerable we become to the blows of our enemies. To guarantee ourselves against all these fortuities and inevitable mistakes, we need to accept the idea that we must accumulate reserves.

We are not guaranteed against crop failures in agriculture. Hence we need reserves. We are not guaranteed against the fortuities of the home market in the sphere of the development of our industry. That is apart from the fact that, living on the funds that we ourselves accumulate, we must be exceptionally frugal and restrained in spending accumulated funds; we must try to invest every kopek wisely, i.e., in such undertakings as it is absolutely essential to develop at the given moment. Hence the need for reserves for industry. We are not guaranteed against fortuities in the sphere of foreign trade (covert boycott, covert blockade, etc.). Hence the need for reserves.

We could double the sum allocated for agricultural credits; but then the necessary reserve for financing industry would not be left, the development of industry would lag far behind agriculture, the output of manufactured goods would shrink, resulting in inflated prices of manufactured goods and all the consequences following from that. We could double the assignments for the expansion of industry; but that would mean a rapid rate of industrial development which we would not be able to maintain owing to the great shortage of free capital, and it would certainly lead to a breakdown, not to speak of the fact that the reserve from which to provide credits for agriculture would be lacking.

We could push forward the growth of our imports, chiefly import of equipment, to twice the amount we import now, in order to promote the rapid development of industry; but that might cause an excess of imports over exports, which would result in an unfavourable balance of trade and in the depreciation of our currency, i.e., the only basis on which it is possible to plan and develop industry would be undermined. We could recklessly develop exports to the utmost, ignoring the state of the home market; but that would certainly cause great complications in the towns in the form of a rapid rise in the prices of agricultural produce and, consequently, in the form of the undermining of wages and a certain degree of artificially organised famine with all the consequences resulting from that. We could raise wages of the workers to the utmost, not merely to the pre-war level, but higher; but that would reduce the tempo of development of our industry, because under our conditions, in the absence of loans from abroad, in the absence of credits, etc., the expansion of industry is possible only on the basis of the accumulation of a certain amount of profit necessary for financing and promoting industry, which, however, would be excluded, i.e., accumulations of any serious magnitude would be excluded if the tempo of raising wages was excessively accelerated.

And so on, and so forth.

Such are the two fundamental guiding propositions that must serve as the torch, the beacon, in our work of construction in our country.

Permit me now to pass to the figures.

But just one more digression. Our system of economy exhibits a certain diversity, it contains no less than five forms. There is one form of economy that is almost
on the level of natural economy: the peasant farms that produce very little for the market. There is a second form of economy, the commodity production form—the peasant farms which produce chiefly for the market. There is a third form of economy—private capitalism, which is not dead, which has revived and will continue to revive, within certain limits, as long as we have NEP. The fourth form of economy is state capitalism, i.e., the capitalism that we have permitted and are able to control and restrict in the way the proletarian state wishes. Lastly, there is the fifth form—socialist industry, i.e., our state industry, in which production does not involve two antagonistic classes—the proletariat and the bourgeoisie—but only one class—the proletariat. I should like to say a word or two about these five forms of economy, because otherwise it will be difficult to understand the group of figures I intend to quote and the trend that is observed in the development of our industry; the more so that Lenin already dealt in considerable detail with these five forms of economy in our social system and taught us to take the struggle among these forms into account in our work of construction. I should like to say a word or two about state capitalism and about state industry, the latter being of a socialist type, in order to clear up the misunderstandings and confusion that have arisen in the Party around this question.

Would it be right to call our state industry, state-capitalist industry? No. Why? Because under the dictatorship of the proletariat, state capitalism is a form of organisation of production involving two classes: an exploiting class which owns the means of production, and an exploited class which does not own the means of production. No matter what special form state capitalism may assume, it must nevertheless remain capitalist in its nature. When Ilyich analysed state capitalism, he had in mind primarily concessions. Let us take concessions and see whether two classes are involved in them. Yes, they are. The class of capitalists, i.e., the concessionaires, who exploit and temporarily own the means of production, and the class of proletarians, whom the concessionaire exploits. That we have no elements of socialism here is evident if only from the fact that nobody would dare turn up at a concession enterprise to start a campaign to increase productivity of labour; for everybody knows that a concession enterprise is not a socialist enterprise, but one alien to socialism.

Let us take another type of enterprise—state enterprises. Are they state-capitalist enterprises? No, they are not. Why? Because they involve not two classes, but one class, the working class, which through its state owns the instruments and means of production and which is not exploited; for the maximum amount of what is produced in these enterprises over and above wages is used for the further expansion of industry, i.e., for the improvement of the conditions of the working class as a whole.

It may be said that, after all, this is not complete socialism, bearing in mind the survivals of bureaucracy persisting in the managing bodies of our enterprises. That is true, but it does not contradict the fact that state industry belongs to the socialist type of production. There are two types of production: the capitalist,
including the state-capitalist, type, where there are two classes, where production is carried on for the profit of the capitalist; and there is the other type, the socialist type of production, where there is no exploitation, where the means of production belong to the working class, and where the enterprises are run not for the profit of an alien class, but for the expansion of industry in the interests of the workers as a whole. That is just what Lenin said, that our state enterprises are enterprises of a consistently socialist type.

Here an analogy with our state could be drawn. Our state, too, is not called a bourgeois state, for, according to Lenin, it is a new type of state, the proletarian type of state. Why? Because our state apparatus does not function for the purpose of oppressing the working class, as is the case with all bourgeois states without exception, but for the purpose of emancipating the working class from the oppression of the bourgeoisie. That is why our state is a proletarian type of state, although any amount of trash and survivals of the past can be found in the state apparatus. Lenin, who proclaimed our Soviet system a proletarian type of state, castigated it for its bureaucratic survivals more strongly than anybody else. Nevertheless, he asserted all the time that our state is a new proletarian type of state. A distinction must be drawn between the type of state and the heritage and survivals still persisting in the system and apparatus of the state. It is equally imperative to draw a distinction between the bureaucratic survivals in state enterprises and the type of structure of industry that we call the socialist type. It is wrong to say that because our economic bodies, or our trusts, suffer from mistakes, bureaucracy, and so forth, our state industry is not socialist. It is wrong to say that. If that were true, our state, which is of the proletarian type, would also not be proletarian. I can name quite a number of bourgeois apparatuses that function better and more economically than our proletarian state apparatus; but that does not mean that our state apparatus is not proletarian, that our type of state apparatus is not superior to the bourgeois type. Why? Because, although that bourgeois apparatus functions better, it functions for the capitalist, whereas our proletarian state apparatus, even if it does fumble sometimes, after all functions for the proletariat and against the bourgeoisie. That fundamental difference must not be forgotten. The same must be said about state industry. We must not, because of the defects and survivals of bureaucracy that are to be found in the managing bodies of our state enterprises, and which will exist for some time yet, we must not, because of those survivals and defects, forget that, in their nature, our enterprises are socialist enterprises. At the Ford plants, for example, which function efficiently, there may be less thieving, nevertheless they function for the benefit of Ford, a capitalist, whereas our enterprises, where thieving takes place sometimes, and things do not always run smoothly, nevertheless function for the benefit of the proletariat. That fundamental difference must not be forgotten. Let us now pass to the figures concerning our national economy as a whole.

Agriculture. Its gross output in 1924-25, comparing its level with the pre-war level, that of 1913, reached 71 per cent. In other words, the output in 1913 amounted
to something over 12,000 million rubles at pre-war prices, and in 1924-25, the output amounted to something over 9,000 million rubles. In the coming year, 1925-26, we anticipate, on the basis of data of our planning bodies, a further rise that will bring the output up to 11,000 million rubles, i.e., up to 91 per cent of the pre-war level. Agriculture is growing—such is the natural conclusion to be drawn.

Industry. Taking all industry—state, concession and private—its gross output in 1913 amounted to 7,000 million rubles; in 1924-25, the gross output amounted to 5,000 million. That is 71 per cent of the pre-war level. Our planning bodies anticipate that next year output will reach 6,500 million, i.e., it will amount to about 93 per cent of the pre-war level. Industry is rising. This year it rose faster than agriculture.

Special reference must be made to the question of electrification. The GOELRO plan in 1921 provided for the erection in the course of 10-15 years of thirty electric power stations of a total capacity of 1,500,000 kw. at a cost of 800,000,000 gold rubles. Before the October Revolution, the total capacity of electric power stations amounted to 402,000 kw. Up to the present we have built stations with a total capacity of 152,350 kw. and it is planned to put into operation in 1926 a total capacity of 326,000 kw. If development continues at that rate, the plan for the electrification of the U.S.S.R. will be fulfilled in ten years, i.e., approximately by 1932 (the earliest date planned for). Parallel with the growth in electric power construction runs the growth of the electrical engineering industry, the 1925-26 programme of which provides for bringing output up to

165-170 per cent of the pre-war level. It must be observed, however, that the erection of big hydro-electric power stations leads to a large over-expenditure of funds compared with what had been planned. For example, the original estimate for the Volkhov project amounted to 24,300,000 “conventional” rubles, but by September 1925 it had risen to 95,200,000 chervonets rubles, which is 59 per cent of the funds spent on the erection of the first priority stations, although the capacity of the Volkhov project amounts to 30 per cent of the capacity of those stations. The original estimate for the Zemo-Avchaly station amounted to 2,600,000 gold rubles, but the latest request amounts to about 16,000,000 chervonets rubles, of which about 12,000,000 have already been spent.

If we compare the output of state and co-operative industry, associated in one way or another, with the output of private industry, we get the following: in 1923-24, the output of state and co-operative industry amounted to 76.3 per cent of the total industrial output for the year, while that of private industry amounted to 23.7 per cent; in 1924-25, however, the output of state and co-operative industry amounted to 79.3 per cent of the total, and that of private industry was no longer 23.7 per cent, but 20.7 per cent.

The relative importance of private industry declined in this period. It is anticipated that next year the share of state and co-operative industry will amount to about 80 per cent, while that of private industry will sink to 20 percent. In absolute figures, private industry is growing, but as state and co-operative industry is growing faster, the relative importance of private industry is progressively declining.

That is a fact that must be reckoned with, and which shows that the preponderance of socialist industry over private industry is an indisputable fact.

If we take property concentrated in the hands of the state and property in the hands of private business people, we find that in this sphere too—I have the State Planning Commission’s control figures in mind—preponderance is on the side of the proletarian state, for the state possesses capital funds amounting to not less than 11,700 millions (chervonets rubles), whereas private owners, mainly peasant farms, possess funds amounting to not more than 7,500 millions.

This fact shows that socialised funds constitute a very large share of the total, and this share is growing compared with the share of property in the non-socialised sector. For all that, our system as a whole cannot yet be called either capitalist or socialist. Our system as a whole is transitional from capitalism to socialism— a system in which privately-owned peasant production still preponderates as regards volume of output, but in which the share of socialist industry is steadily growing. The share of socialist industry is growing in such a way that, taking advantage of its concentration and organisation, taking advantage of the fact that we have the dictatorship of the proletariat, that transport is in the hands of the state, that the credit system and the banks are ours—taking advantage of all this, our socialist industry, the share of which in the total volume of national production is growing step by step, this industry is advancing and is beginning to gain the upper hand over private industry and to adapt to itself and take the lead over all the other forms of economy. Such is the fate of the countryside—it must follow the lead of the towns, of large-scale industry. That is the fundamental conclusion that follows if we raise the question of the character of our system, of the share of socialist industry in this system, of the share of private capitalist industry in it and, lastly, of the share of small commodity—chiefly peasant—production in the total national economy.

A word or two about the state budget. You no doubt know that it has grown to 4,000 million rubles. Counting in pre-war rubles, our state budget amounts to not less than 71 per cent of the state budget of the pre-war period. Further, if to the amount of the general state budget we add the amounts of the local budgets, as far as they can be calculated, our total state budget will amount to not less than 74.6 per cent of the 1913 budget. A characteristic feature is that in our state budget the proportion of non-tax revenues is much higher than that of revenues from taxes. All this also shows that our economy is growing and making progress. The question of the profits that we obtained from our state and co-operative enterprises last year is of very great importance, because ours is a country poor in capital, a country that does not obtain big loans from abroad. We must closely scrutinise our industrial and trading enterprises, our banks and co-operatives, in order to ascertain what we can have at our disposal for the purpose of further expanding our industry. In 1923-24, state industry of Union importance and industry under the Chief Metal Board yielded a profit of, I think, about 142,000,000 chervonets rubles. Of this sum, 71,000,000
were assigned as state revenue. In 1924-25 we already have 315,000,000. Of this sum, it is planned to assign 173,000,000 as state revenue.

State trade of Union importance yielded in 1923-24 about 37,000,000, of which 14,000,000 went as state revenue. In 1925, the amount is smaller—22,000,000, as a result of the policy of reducing prices. Of this sum about 10,000,000 will go as state revenue.

From our foreign trade in 1923-24 we obtained a profit of something over 26,000,000 rubles, of which about 17,000,000 went as state revenue. In 1925, foreign trade will yield or, rather, has already yielded, 44,000,000. Of this sum 29,000,000 will go as state revenue. According to the calculations of the People’s Commissariat of Finance, in 1923-24 the banks yielded a profit of 46,000,000, of which 18,000,000 went as state revenue; in 1924-25 the profit amounted to over 97,000,000, of which 51,000,000 have gone as state revenue. The consumer co-operatives in 1923-24 yielded a profit of 57,000,000 and the agricultural co-operatives— 4,000,000.

The figures I have just quoted are more or less understated. You know why. You know how our economic bodies calculate with a view to keeping as much as possible for the expansion of their enterprises. If these figures seem small to you, as indeed they are, then bear in mind that they are slightly understated. A few words about our foreign trade turn-over. If we take our trade turn-over for 1913 as 100, we shall find that our foreign trade in 1923-24 reached 21 per cent of the pre-war level, and in 1924-25—26 per cent of the pre-war level. Exports in 1923-24 amounted to

522,000,000 rubles; imports—439,000,000; total turnover—961,000,000; favourable balance—83,000,000. In 1923-24 we had a favourable balance of trade. In 1924-25 exports amounted to 564,000,000; imports— 708,000,000; total turn-over—1,272 million; balance— minus 144,000,000. This year we ended our foreign trade with an unfavourable balance of 144,000,000. Permit me to dwell on this somewhat.

People here are often inclined to attribute this unfavourable balance of trade in the past economic year to the fact that we imported a large quantity of grain this year owing to the crop failure. But we imported grain amounting to 83,000,000, whereas the trade deficit amounts to 144,000,000. What does that deficit lead to? To this: by buying more than we sell, by importing more than we export, we put in jeopardy our balance of payments and therefore our currency as well. We received a directive from the Thirteenth Party Congress that the Party should at all costs secure a favourable balance of trade.58 I must admit that all of us, both the Soviet bodies and the Central Committee, committed a gross error here in failing to carry out the directive given us. It was difficult to carry it out; nevertheless we could have obtained at least a small favourable balance if we had made a real effort. We committed this gross error and the congress must rectify it. Incidentally, the Central Committee itself attempted to rectify it in November this year at a special meeting at which it examined the figures of our imports and exports and adopted a decision that next year—at that meeting we outlined the chief elements of our foreign trade for the coming year—that next year our foreign trade should end with a favourable balance
of at least 100,000,000. That is essential. That is absolutely essential for a country like ours, where we have little capital, where import of capital from abroad does not take place, or only to a minimal degree, and where the balance of payments, its equilibrium, must be maintained by the balance of trade in order to prevent our chervonets currency from being shaken and in order, by maintaining our currency, to preserve the possibility of further expanding our industry and agriculture. You have all experienced what an unstable currency means. We must not fall into such an unfortunate position again; we must take all measures to eradicate all factors that could later on result in conditions capable of shaking our currency.

Such are the figures and considerations concerning our national economy as a whole, concerning industry and agriculture in particular, concerning the relative importance of socialist industry in relation to the other forms of economy, and concerning those leading ideas in the building of socialism of which I have spoken, and which the Central Committee of our Party takes as the basis for its stand.

### 2. Industry and Agriculture

If, further, we take the questions that directly concern the interrelations of industry and agriculture now and in the immediate future, they can be reduced to the following points.

Firstly. We are still an agrarian country: agricultural output predominated over industrial output. As regards industry, the main thing is that it has already approached the limit of the pre-war level, that further steps in industry mean developing it on a new technical basis, with the utilisation of new equipment and the building of new plants. That is a very difficult matter. To step across this threshold, to pass from the policy of utilising to the utmost all that we have had in industry to the policy of building up a new industry on a new technical basis, on the basis of building new plants, to cross this threshold calls for large amounts of capital. As, however, we suffer from a considerable shortage of capital, the further development of our industry will, in all probability, proceed at a less rapid tempo than it has done up to now.

That is not the case in agriculture. It cannot be said that all the potentialities latent in agriculture on its present technical basis are already exhausted. Unlike industry, agriculture can make rapid progress for a certain time even on its present technical basis. Even simply raising the culture of the peasant, literacy, even a simple thing like cleaning seed, could increase the gross output of agriculture 10-15 per cent. Just reckon up what that means for the entire country. Such are the potentialities still latent in agriculture. That is why the further development of agriculture does not, for the time being, encounter the technical difficulties that our industry does. That is why the discrepancy between the balance of output of industry and the balance of output of agriculture will continue to grow during the next few years, because agriculture possesses a number of inherent potentialities which are far from being utilised yet, and which are due to be utilised during the next few years. What are our tasks in view of this circumstance?

First of all, to raise our large-scale state industry at all costs, overcoming the difficulties that confront us. Next, to raise the local type of Soviet industry. Comrades, we cannot concentrate only on the development of Union industry, because Union industry, our centralised trusts and syndicates, cannot satisfy all the diverse tastes and requirements of a 140,000,000-population. To be able to satisfy these requirements, we must see to it that life, industrial life, is pulsating in every district, in every okrug, in every gubernia, region and national republic. Unless we unleash the forces latent in the localities for the purpose of economic construction, unless we lend local industry every support, beginning with the districts and okrugs, unless we unleash all these forces, we shall not be able to achieve that general upswing of economic construction in our country that Lenin spoke about. Unless we do this, unless we link the interests and benefits of the centre with the interests and benefits of the localities, we shall not solve the problem of stimulating initiative in the work of construction, the problem of a general economic upswing in the country, the problem of securing the speediest industrialisation of the country. Secondly. Formerly, the problem in relation to fuel was that of over-production. Now we are approaching the problem of a fuel crisis, because our industry is growing faster than the fuel supply. We are approaching the level on which our country stood under the bourgeois system, when there was a shortage of fuel and we were obliged to import it. In other words, the position is that there is a discrepancy between the balance of fuel output and the balance of output of industry, the requirements of industry. Hence the task of accelerating the development of our fuel industry, of improving its technical equipment, so that its development should overtake, should be able to overtake, the development of industry. Thirdly. There is some discrepancy between the balance of output of metals and the balance of the national economy as a whole. If we calculate the minimum metal requirements and the maximum possibility of producing metals, we shall find that we have a shortage running into tens of millions. Under these conditions, our economy, and our industry in particular, cannot make further progress. That is why this circumstance must receive special attention. Metal is the foundation of foundations of our industry, and its balance of output must be made to correspond to the balance of industry and transport. Fourthly. The discrepancy between the balance of our skilled labour power and the balance of our industry. A number of figures have been published in the press and I will not quote them; I will merely say that the additional skilled labour power required for the whole of industry in 1925-26 amounts to 433,000 people, and we can supply only a fourth of the number required. Fifthly. I should like to mention one other defect and discrepancy, namely, that the standards for using railway rolling stock exceed all limits. The demand for rolling stock is so great that next year we shall be obliged to use locomotives and freight wagons, not to 100 per cent of their capacity, but to 120-130 per cent. Thus, the fixed capital of the People’s Commissariat of Transport will be subjected to excessive wear and tear, and we may be faced with disaster in the near future if we do not take resolute measures.

Such are all the defects and discrepancies which exist in our national economy in general, and in our industry in particular, and which must be overcome. 3. Questions Concerning Trade

Permit me now to pass to questions concerning trade. The figures show that in this sphere, as in the industrial sphere, the relative importance of state-based trade is increasing as compared with trade on a private capitalist basis. If we take the total internal trade turnover before the war as being equal to 20,000 million commodity rubles, we find that the turn-over for 1923-24 amounted to 10,000 million, i.e., 50 per cent of pre-war, while that for 1924-25 equals 14,000 million, i.e., 70 per cent. The general growth of the internal turn-over is beyond doubt. Speaking of the state’s share in that turnover, we find that in 1923-24, the state’s share amounted to 45 per cent of the total internal trade turn-over; the share of the co-operatives was 19 per cent, and the share of private capital 35 per cent. In the following year, i.e., in 1924-25, the state’s share amounted to 50 per cent; the share of the co-operatives, instead of 19 per cent, was 24.7 per cent, and the share of private capital, instead of 35 per cent, was 24.9 per cent. The share of private capital in the total turn-over is falling; the shares of the state and of the co-operatives are rising. If we divide the turn-over into two parts, wholesale and retail, we shall see the same trend. The state’s share of wholesale trade in 1923-24 amounted to something over 62 per cent of the total turn-over; in 1924-25 it amounted to 68.9 per cent. An obvious increase. The share of the co-operatives shows an increase from 15 to 19 per cent. The share of private trade was 21 per cent; now it is 11 per cent. In retail trade, the state’s share in 1923-24 amounted to 16 per cent; in 1924-25 it was almost 23 per cent. The co-operatives’ share of retail trade last year was 25.9 per cent, and in 1924-25 it was 32.9 per cent. The growth is beyond doubt. Private capital’s share of the retail trade in 1923-24 amounted to 57 per cent; now it is 44.3 per cent. We have obviously crossed the threshold in the sphere of retail trade. Last year, private capital predominated in retail trade; this year, the state and the co-operatives predominate. The growth of the importance of the state and the co-operatives in the procurement of raw materials and grain is shown by the following figures: oil seeds in 1924-25—65 per cent; flax—94 per cent; raw cotton— almost 100 per cent; grain in 1923-24—75 per cent and in 1924-25—70 per cent. Here we have a slight drop. On the whole, the growth of the state and co-operative bases in the sphere of internal trade is beyond doubt, both as regards wholesale and retail trade. Although the state’s share of grain procurement is preponderant, nevertheless, it is not growing as much as it did last year, and that points to mistakes committed in the procurement of grain. The fact of the matter is that the miscalculation in regard to procurement was a miscalculation not only on the part of the Soviet bodies, but also of the Central Committee, for it is the latter’s duty to supervise the Soviet bodies, and it is responsible for everything they do. The miscalculation consists in the fact that when planning we failed to take into account that this year the state of the market, the conditions for grain procurement, presented something new, something special, compared with last year and the year before. This is the first year in which we have come into the grain market without resorting to coercive administrative measures, in which we have reduced the burden of taxation, the tax pressure, to a minimum, and in which the peasants and the government’s agents come face to face in the market as equals. These were the circumstances that were left out of account by our planning bodies, which intended by January 1, 1926, to procure 70 per cent of the total grain procurement for the year. We failed to take into account the fact that the peasant is also able to manoeuvre, that he puts his currency commodity—wheat—into store for the future in anticipation of a further rise in prices, and prefers, for the time being, to come into the market with other, less valuable grain. That is what we failed to take into account. In view of this, the plan for grain procurement has been revised, and the plan for grain exports has been reduced, just as the plan for imports is also being correspondingly reduced. The exports and imports plan is being revised; it has to show a favourable balance of trade of not less than a hundred million rubles, but it has not yet been finally drawn up.

4. Classes, Their Activity,

Their Correlation

The development of the national economy in the country has led to an improvement in the material conditions primarily of the working class. The declassing of the working class has become a thing of the remote past. The restoration and growth of the working class are proceeding at a rapid rate. Here are the figures according to data of the People’s Commissariat of Labour: on April 1,1924, counting all workers, in all forms of industry, including small-scale industry, including seasonal workers and agricultural labourers, we had 5,500,000 workers, of whom 1,000,000 were agricultural labourers and 760,000 unemployed. On October 1, 1925, we already had over 7,000,000 workers, of whom 1,200,000 were agricultural labourers and 715,000 unemployed. The growth of the working class is beyond doubt. The average monthly wage per worker in industry as a whole, in chervonets rubles, amounted in April 1925 to 35 rubles, or 62 per cent of the pre-war average. In September 1925 it was 50 rubles, or 88.5 per cent of the pre-war average. Some branches have exceeded the prewar level. The average daily real wage per worker in commodity rubles amounted in April 1925 to 0.88 ruble and in September 1925 to 1 ruble 21 kopeks. The average output per man-day worked in industry as a whole amounted, in pre-war rubles, to 4.18 in April 1924, but in 1925 it amounted to 6.14, i.e., 85 per cent of the prewar average. If we take the relation between wages and productivity of labour month by month we shall find that they run in parallel lines: when wages rise, productivity of labour rises. But in June and July wages rose; productivity of labour, however, rose less than wages. That was due to holidays and to the influx of new strata of workers—semi-peasants—into the mills and factories.

Now as regards wage funds. According to data of the People’s Commissariat of Labour, wage funds

(I have in mind industry, leaving out other branches) amounted in 1923-24 to 808,000,000; in 1924-25 they amounted to over 1,200 million; the estimate for 1925-26 is 1,700 million rubles.

I shall not, comrades, speak of the needs for which the social insurance funds are used, everybody knows that. Permit me to mention one general figure to enable you to judge how much the proletarian state spends on workers’ insurance. The total number of insured workers in 1924-25 was 6,700,000; the estimate for 1925-26 is 7,000,000. The average assignment calculated on the wage budget amounted in 1924-25 to 14.6 per cent; the estimate for 1925-26 is 13.84 per cent. Expressing this in gross figures, the amount expended on this in 1924-25 was 422,000,000 rubles; the estimate for 1925-26 is 588,000,000. Perhaps it will not be superfluous to inform you that from the fund that was allocated last year a certain sum was left in the social insurance coffers, amounting to 71,000,000 rubles.

As regards the peasants, the increase in the output of agriculture was naturally bound to be reflected in an improvement in the material conditions of the peasant population. According to data of our planning bodies, the personal consumption of the peasant population, the percentage increase in this consumption, is higher than the percentage increase in the consumption of the urban population. The peasant has begun to feed better, and he retains a far larger share of his production for himself, for his personal consumption, than was the case last year.

What assistance did the proletarian state render the households of the poor peasants, those who had
suffered from the crop failure? The People’s Commissariat of Finance calculates that financial assistance to poor peasants in 1924-25 amounted, in preliminary figures, not quite exact, to 100-105 million rubles, of which tax and insurance exemptions constituted about 60,000,000 rubles; furthermore, disbursements from the fund for combating the consequences of the crop failure amounted to 24,000,000 rubles, and credits to 12,000,000 rubles. Assistance to victims of the crop failure in 1924 covered an area with a population of over 7,000,000. The total spent for this purpose amounted to 108-110 million rubles, of which 71,000,000 came from the state budget and 38,000,000 from the funds of public organisations and banking institutions. In addition to this, a fund of 77,000,000 was set up for combating drought. Such was the assistance that the proletarian state rendered the poor strata of the peasantry, inadequate assistance, of course, but such as deserves a word or two of comment.

Improvement of the material conditions of the working class and of the peasantry is a fundamental premise of all progress in the sphere of our construction work. We see that this premise already exists.

A few words about the increase in the activity of the masses. The chief thing in our internal situation, that which strikes the eye and which one cannot possibly get away from, is that as a consequence of the improvement in the material conditions of the workers and peasants there has been an increase in their political activity, they have become more critical in their attitude towards our shortcomings, they are speaking more loudly about the defects in our practical work. We have entered
a period of greater activity of all classes and all social groupings. The working class has become more active, the peasantry, with all its groupings, has become more active, as also the new bourgeoisie, its agents in the countryside (the kulaks) and its representatives among the intelligentsia. This fact served as the basis for the turn in our policy which is expressed in the decisions of the Fourteenth Party Conference. The policy of revitalising the Soviets, the policy of revitalising the cooperatives and the trade unions, the concessions to the peasantry as regards precise regulation of questions of renting and leasing land and hiring labour, the material assistance for the poor peasants, the policy of a stable alliance with the middle peasants, the elimination of the remnants of war communism—it is these, chiefly, that express the Party’s new course in the countryside. You are well aware what the situation was in the countryside at the end of last year and in the beginning of this year. General discontent among the peasantry was growing, and here and there even attempts at revolt occurred. Those were the circumstances which determined the Party’s new course in the countryside. Such are the foundations of the Party’s policy towards the peasantry in the period of the rise in the activity and organisation of the masses; a policy calculated to regulate relationships in the countryside, to raise there the prestige of the proletariat and its Party, and to ensure a stable alliance of the proletariat and poor peasants with the middle peasantry.

You know that this policy has fully justified itself.

### 5. Lenin’s Three Slogans on the Peasant Question

Did we act rightly in steering a course towards the middle peasantry? How does the matter stand with the new course from the aspect of principle? Have we any directives from Lenin on this score?

It is said that the Second Congress of the Comintern adopted a resolution on the peasant question stating that only the poor peasants can be the ally of the proletariat in the epoch of the struggle for power, that the middle peasants can only be neutralised. Is that true? It is true. In writing that resolution,59 Lenin had in mind parties advancing towards power. We, however, are a party that has already come to power. That is where the difference lies. On the question of the peasantry, on the question of the alliance between the workers and the peasantry, or individual strata of the peasantry, Leninism has three basic slogans, corresponding to the three periods of the revolution. The whole point is correctly to discern the transition from one slogan to the next, and from that to the third.

Formerly, when we were advancing towards the bourgeois revolution, when we Bolsheviks first outlined our tactics in relation to the peasantry, Lenin said: alliance with the whole of the peasantry against the tsar and the landlords, at the same time neutralising the Cadet bourgeoisie. With that slogan we, at that time, advanced towards the bourgeois revolution and we achieved victory. That was the first stage of our revolution. Later, when we had reached the second stage, October, Lenin issued a new slogan, corresponding to the new
situation: alliance of the proletariat with the poor peasantry against all the bourgeois, at the same time neutralising the middle peasantry. That is a slogan essential for Communist Parties which are advancing towards power. And even when they have won power, but have not yet consolidated it, they cannot count on an alliance with the middle peasant. The middle peasant is a cautious man. He looks round to see who is going to come out on top, he waits, and only when you have gained the upper hand, when you have expelled the landlords and the bourgeois, does he enter into alliance with you. That is the nature of the middle peasant. Hence, at the second stage of the revolution we no longer advanced the slogan of alliance of the workers with the whole of the peasantry, but the slogan of alliance of the proletariat with the poor peasantry. And after that? After that, when we had sufficiently consolidated our power, when we had repulsed the attacks of the imperialists and had entered the period of extensive socialist construction, Lenin advanced a third slogan—a stable alliance of the proletariat and poor peasantry with the middle peasantry. That is the only correct slogan corresponding to the new period of our revolution, the period of extensive construction. It is correct not only because we can now count on an alliance, but also because, in building socialism, we have to operate not only with millions, but tens of millions of people of the countryside. It is impossible to build socialism otherwise. Socialism does not embrace only the towns. Socialism is that organisation of economy which unites industry and agriculture on the basis of the socialisation of the means and instruments of production.

If those two branches of economy are not united, socialism is impossible. That is how the matter stands with the slogans of Leninism on alliance with the peasantry. What Lenin said at the Second Congress of the Comintern was absolutely correct, for when you are advancing towards power, or have not yet managed to consolidate power after capturing it, you can count only on an alliance with the poor peasantry and on neutralising the middle peasantry. But when you have consolidated your position, after you have captured power, have begun to build, and when you already have to operate with tens of millions of people, alliance of the proletariat and poor peasants with the middle peasants is the only correct slogan.

This transition from the old slogan “alliance of the proletariat with the poor peasantry,” from the old slogan of neutralising the middle peasantry to the slogan of a stable alliance with the middle peasantry, took place as far back as the Eighth Congress of our Party. Permit me to quote a passage from Ilyich’s speech in opening the congress. Here it is:

“The best representatives of socialism of the old days— when they still believed in revolution and served it theoretically and ideologically—spoke of neutralising the peasantry, i.e., of turning the middle peasantry into a social stratum which, if it did not actively aid the revolution of the proletariat, at least would not hinder it, would be neutral and not take the side of our enemies. This abstract, theoretical presentation of the problem is perfectly clear to us. But it is not enough. We have entered a phase of socialist construction in which we must draw up concrete and detailed basic rules and instructions which have been tested by the experience of our work in the countryside, and by which
we must be guided in order to achieve a stable alliance with the middle peasantry.”*60

Such is the theoretical basis of the Party’s policy, calculated to achieve in the present historical period a stable alliance with the middle peasantry. Whoever thinks of using the resolution of the Second Congress of the Comintern, which Lenin wrote, to refute these words of Lenin’s, let him say so frankly. That is how the question stands in theory. We do not take a separate part of Lenin’s teaching, we take the whole. Lenin had three slogans in relation to the peasantry: one—during the bourgeois revolution, another —during the October Revolution, and a third—after the consolidation of the power of the Soviets. Whoever thinks of substituting some single general slogan for these three, commits a very gross error.

That is how the question stands in theory. In practice, it stands as follows: after carrying through the October Revolution, after expelling the landlords and distributing the land among the peasants, it is clear that we have made Russia into a more or less middlepeasant country, as Lenin expressed it, and today the middle peasants constitute the majority in the countryside, notwithstanding the process of differentiation. Differentiation is, of course, proceeding. Under NEP at the present stage, it cannot be otherwise. But it is proceeding at a slow pace. Recently, I read a handbook, issued, I think, by the Agitation and Propaganda

* All italics mine.—J. St.

Department of the Central Committee, and another handbook, issued, if I am not mistaken, by the Agitation and Propaganda Department of the Leningrad organisation. If we are to believe these handbooks, it appears that under the tsar the poor peasants in this country constituted somewhere about 60 per cent, but now they constitute 75 per cent; that under the tsar the kulaks constituted 5 per cent, but now—8 or 12 per cent; under the tsar there were so many middle peasants, but now there are fewer. I don’t want to indulge in strong language, but it must be said that these figures are worse than counter-revolution. How can a man who thinks in a Marxist way invent a thing like that, and print it, too, and in a handbook at that? As a member of the Central Committee, I, too, of course, am answerable for this incredible blunder. If, under the tsar, a policy of creating kulaks was practised, private property in land existed and land could be bought and sold (which exceptionally aggravates differentiation), if the government was such that it forced differentiation to the utmost, and, for all that, the poor peasants constituted no more than 60 per cent, how could it happen that under our government, under the Soviet Government, when private property in land does not exist, i.e., the land is withdrawn from circulation and, consequently, this obstacle to differentiation exists, after we have been busy with dekulakisation for a couple of years and to this day have not abandoned all methods of dekulakisation, when we are conducting a special credit and cooperative policy which is unfavourable to differentiation —how could it happen that with these obstacles it turns out, allegedly, that there is much more differentiation
today than under the tsar, many more kulaks and poor peasants than in the past? How can people who call themselves Marxists talk such absurd nonsense? It is at once comic and tragic. (Laughter.)

The same must be said about the ill-starred grain and fodder balance sheet issued by the Central Statistical Board in June, according to which the well-to-do peasants held 61 per cent of the surplus market grain, the poor peasants none, while the middle peasants held the rest. The funny thing about this is that a few months later the C.S.B. came out with a different figure: not 61 per cent, but 52 per cent. And recently, the C.S.B. has given a figure, not 52 per cent this time, but 42 per cent. Is that the way to calculate? We believe that the C.S.B. is a citadel of science. We are of the opinion that without the C.S.B.’s figures not a single administrative body could calculate or plan. We consider that the C.S.B. should provide objective statistics free from all pre-conceived opinions, for the attempt to fit statistics to any pre-conceived opinion is a crime. But, after this, how can we believe the C.S.B.’s figures if it has ceased to believe them itself?

More briefly. Since we have made the countryside middle-peasant in character as a result of the agrarian revolution, since the middle peasants constitute the majority in the countryside, in spite of the process of differentiation, and since our work of construction and Lenin’s cooperative plan call for the enlistment of the bulk of the peasant masses in this work, then the policy of alliance with the middle peasants is, under NEP conditions, the only correct policy.

Such is the practical aspect of the question.

See how Lenin formulated our tasks when he gave the grounds for the New Economic Policy. Before me lies the draft of the pamphlet The Tax in Kind, written by Lenin, in which he clearly and distinctly gives the fundamental guiding lines:

“Now, increasing the output of produce is becoming (has become) the pivot, the touchstone. . . . Consequently: ‘stake’ on the middle peasants in agriculture.

“The diligent peasant as the ‘central figure’ of our economic upsurge” (see Vol. XXVI, pp. 312-13).

Thus, stake on the middle peasant in agriculture, the diligent peasant as the central figure of our economic upsurge. That is what Comrade Lenin wrote in 1921.

It was this idea, comrades, that served as the basis of the decisions and of the concessions to the peasantry adopted at the Fourteenth, April, Conference of our Party.

In what relation do the resolutions of the Fourteenth, April, Party Conference stand to the resolution on work among the poor peasants that the Central Committee unanimously adopted in October, 61 just as it unanimously adopted the resolutions of the Fourteenth Conference? The main task that confronted us at the October Plenum of the Central Committee was to prevent the disruption of the policy we had worked out at the April Conference, the policy of a stable alliance with the middle peasants; to prevent the disruption of this policy, for sentiments were observed in the Party expressing the view that the policy of a stable alliance with the middle peasants was wrong or unsuitable. Sentiments were also
observed expressing the view that the policy of a stable alliance with the middle peasants implied forgetting the poor peasants, that somebody was trying to bring about a stable alliance with the middle peasants over the heads of the poor peasants. That is silly, comrades, but it is a fact, for such sentiments did exist. Was the question of the poor peasants something new for us when we gathered at the October Plenum? Of course not. As long as there are poor peasants, we must be in alliance with them. We learned that as far back as 1903, when Lenin’s pamphlet To the Village Poor first appeared. Precisely because we are Marxists, because we are Communists, we must lean on the poor peasants in the countryside. Upon whom else can we lean? This question is not a new one; there was nothing new in it for us, whether in April or in October, whether at the conference or at the plenum of the Central Committee, nor could there be anything new in it. If the question of the poor peasants did come up after all, it did so in connection with the experience we had gained during the elections to the Soviets. What did we find? We had revitalised the Soviets. We had begun to implant Soviet democracy. But what for? After all, Soviet democracy means leadership by the working class. No Soviet democracy can be called genuinely Soviet and genuinely proletarian democracy if there is no leadership there by the proletariat and by its Party. But what does Soviet democracy with the leadership of the proletariat mean? It means that the proletariat must have its agents in the countryside. Who must those agents be? Representatives of the poor peasants. But in what condition did the poor peasants find themselves when we revitalised the Soviets?

In the most scattered and dispersed condition. It seemed, not only to certain elements among the poor peasants, but also to certain Communists, that abandoning dekulakisation and administrative pressure meant abandoning the poor peasants, forgetting their interests. And instead of conducting an organised struggle against the kulaks, they began to whine in the most disgraceful manner.

What had to be done to overcome those sentiments? Firstly, it was necessary to carry out the task that the Fourteenth Party Conference had set the Party, i.e., to define the conditions, methods and measures for providing material assistance for the poor peasants. Secondly, it was necessary to issue the slogan of organising special groups of poor peasants for conducting an open political struggle to win over the middle peasants and to isolate the kulaks during the elections to the Soviets, elections in the co-operatives, etc.

That is exactly what Comrade Molotov did in the theses on work among the poor peasants, as a result of his three months’ work on the Rural Commission of the Central Committee, theses that were unanimously approved by the October Plenum of the Central Committee. As you see, the resolution of the October Plenum of the Central Committee is the direct continuation of the decisions of the Fourteenth Conference. It was necessary, firstly, to present the question of material assistance concretely, so as to improve the material conditions of the poor peasants; and, secondly, it was necessary to issue the slogan of organising the poor peasants. That is the new feature, the credit for
which belongs wholly to Comrade Molotov; the slogan of organising groups of poor peasants was his idea. Why was the slogan of organising groups of poor peasants needed? It was needed in order to put an end to the dispersion of the poor peasants and to give them an opportunity of organising, with the aid of the Communists, into an independent political force capable of serving as an organised bulwark of the proletariat in the countryside in the struggle against the kulaks, in the struggle to win over the middle peasants. The poor peasants are still imbued with a dependent mentality; they put their hopes in the GPU, in officials, in whatever you like, except in themselves, in their own strength. It is from this passivity and dependent mentality that the minds of the poor peasants must be freed. We must issue the slogan for the poor peasants that they must, at last, stand on their own feet, that they must, with the aid of the Communist Party and with the aid of the state, organise themselves into groups; that in the arena of the Soviets, in the arena of the cooperatives, in the arena of the Peasant Committees, in all the arenas of rural public life, they must learn to fight the kulaks, to fight, however, not by appealing to the GPU, but by a political struggle, by an organised struggle. Only in that way can the poor peasants become steeled, only in that way can the poor peasants be organised, only in that way can the poor peasants be transformed from a dependent group into a bulwark of the proletariat in the countryside.

That is why the question of the poor peasants was brought forward in October.

### 6. Two Dangers and Two Deviations in Regard to the Peasant Question

In connection with the peasant question, two deviations are observed in our Party. A deviation in the direction of belittling the kulak danger, and a deviation in the direction of exaggerating it, in the direction of belittling and under-estimating the role of the middle peasants. I will not say that there is anything fatal for us in these deviations. A deviation is a deviation; a deviation is something that has not yet taken definite shape. A deviation is the beginning of an error. Either we allow this error to develop—and then things will become serious; or we nip it in the bud—and then the danger will be removed. A deviation is something erroneous that will produce its results later if not checked in time.

A word or two about under-estimating the kulak danger. There is talk about a kulak deviation. That is foolish, of course. There cannot be a kulak deviation in the Party. The point at issue is not a kulak deviation, but a deviation in the direction of under-estimating the kulak danger. Even if nobody had fallen victim to this deviation, even if nobody had adopted the standpoint of this deviation, some people would have done so eventually, because development in our country is proceeding in the direction of some revival of capitalism, and the revival of capitalism is bound to create confusion around our Party. On the other hand, socialist industry is developing in our country, and a struggle is going on between it and private capital. Which will outstrip the other? At present, preponderance is on the side of the
socialist elements. We shall get both the kulaks and the urban private capitalists under our control. So far, however, the fact remains that the kulaks are growing, and we have not beaten them economically by a long way yet. The kulaks are mustering their forces, that is indisputable; and whoever fails to see this, whoever says that this is of no importance, that the kulak is a bogey, puts the Party in danger of losing its vigilance and of finding itself disarmed in the struggle against the kulaks, in the struggle against capitalism, for the kulak is the agent of capitalism in the countryside.

There is talk about Bogushevsky. Of course, his is not a kulak deviation. His deviation is in the direction of under-estimating the kulak danger. If his were a kulak deviation, he would have to be expelled from the Party. Up to now, however, as far as I know, nobody has demanded his expulsion from the Party. This deviation is in the direction of under-estimating the kulak danger in the countryside, a deviation which hinders us from keeping the Party in a constant state of readiness for the struggle, and which disarms the Party in its struggle against the capitalist elements; as is known, this deviation was condemned by the decision of the Central Committee of the Party. But there is another deviation—in the direction of over-estimating the kulak danger, in the direction of consternation in face of the kulak danger, in the direction of panic: “The kulak is coming, help!” A strange thing! People introduced NEP, knowing that NEP is a revival of capitalism, a revival of the kulaks, that the kulaks would inevitably raise their heads. But it was enough for the kulaks to appear for people to start shouting “help!” and to lose their heads. And their consternation reached such a point that they forgot about the middle peasants. And yet, the basic task in the countryside at the present time lies in the fight to win over the middle peasants, the fight to wrest the middle peasants from the kulaks, the fight to isolate the kulaks by establishing a stable alliance with the middle peasants. That is forgotten by those comrades who have become panic-stricken in the face of the kulak danger. I think that if we delved down to the roots of these two deviations it would be possible to trace them to the following starting points.

The first deviation consists in belittling the role of the kulaks, and of the capitalist elements generally, in the countryside, in slurring over the kulak danger. It starts out from the wrong assumption that the development of NEP does not lead to the revival of the capitalist elements in the countryside, that in our country the kulaks, and the capitalist elements generally, are passing, or have already passed, into the sphere of history, that differentiation is not taking place in the countryside, that the kulaks are an echo of the past, a bogey, and nothing more.

What does that deviation lead to?

In practice, that deviation leads to the denial of the class struggle in the countryside.

The second deviation consists in exaggerating the role of the kulaks, and of the capitalist elements generally, in the countryside, in becoming panic-stricken in the face of those elements, in denying that an alliance of the proletariat and poor peasants with the middle peasants is possible and expedient.

That deviation starts from the belief that what is taking place in the countryside is a simple restoration of capitalism, that this process of the restoration of capitalism is an all-absorbing process that also embraces the whole, or the overwhelming part, of our co-operatives, that the result of such a development must be a continuous and large-scale growth of differentiation among the peasantry, that the extreme groups, i.e., the kulaks and the poor peasants, must grow in strength and numbers year by year, while year by year, too, the middle groups, i.e., the middle peasants, grow weaker and melt away. In practice, that deviation leads to fomenting class struggle in the countryside, to a reversion to the dekulakisation policy of the Poor Peasants’ Committees, consequently, to proclaiming civil war in our country, and thus to the disruption of all our work of construction, and thereby to the repudiation of Lenin’s co-operative plan for drawing the millions of peasant farms into the system of socialist construction. You will ask: which deviation is worse? It is wrong to put the question that way. One is as bad as the other. And if those deviations are allowed to develop they may disintegrate and destroy the Party. Fortunately there are forces in our Party capable of ridding it of both deviations. (Applause.) Although one deviation is as bad as the other, and it is foolish to ask which of them is more dangerous, nevertheless, there is another point of view from which these two deviations must be approached. Against which deviation is the Party best prepared to fight—the first or the second? That is how, in practice, the question should be put. Both deviations are dangerous, one is as bad as the other; it is wrong to ask which of them is more dangerous; but it is possible and necessary to ask: against which deviation is the Party best prepared to fight? If we were to ask Communists what the Party is better prepared for—to strip the kulaks, or not to do that but to go in for an alliance with the middle peasants—I think that 99 Communists out of 100 would say that the Party is best prepared for the slogan: strike at the kulaks. Just let them—they would strip the kulaks in a moment. As for refraining from dekulakisation and pursuing the more complex policy of isolating the kulaks by entering into an alliance with the middle peasants—that is something not so easily assimilated. That is why I think that in its struggle against both deviations, the Party must, after all, concentrate its fire on the second deviation. (Applause.) No talk of Marxism, no talk of Leninism can cover up the thesis that the kulaks are dangerous. The kulaks are kulaks, they are dangerous, no matter how much Bogushevsky may talk about bogeys. No quotations can obliterate this from the mind of a Communist. But the thesis that a stable alliance with the middle peasants is necessary—although Ilyich, in the resolution of the Second Congress, wrote about neutralising the middle peasants—this thesis can always be slurred over, obscured with phrases about Leninism, about Marxism. Here there is a rich field for quotations, here there is a rich field for everyone who wants to confuse the Party, who wants to conceal the truth from the Party, the truth that in relation to the peasantry Lenin had not one, but three slogans. Here, all sorts of manipulations can be performed in regard to Marxism. And precisely for that reason, fire must be concentrated on the second deviation.

That is how the matter stands with the question of the internal situation in the Union, its economy, its industry and agriculture, the classes, the activity of the classes, the revitalisation of the Soviets, the peasantry, and so forth.

I shall not stop to deal with certain questions concerning the state apparatus, which is growing and is striving to escape from leadership by the Party, in which, of course, it will not succeed.

Nor shall I speak about the bureaucracy of our state apparatus; I shall not do so because my report has already taken too long. I shall not deal with that question because it is in no way a new one for the Party. 7. The Party’s Tasks

I pass to the Party’s tasks in the sphere of internal policy.

In the sphere of developing the national economy as a whole we must conduct work:
a) in the direction of further increasing the output of the national economy;
b) in the direction of transforming our country from an agrarian into an industrial country;
c) in the direction of ensuring within the national economy a decisive preponderance of the socialist elements over the capitalist elements; d) in the direction of ensuring for the national economy of the Soviet Union the necessary independence in the circumstances of capitalist encirclement; e) in the direction of increasing the proportion of non-tax revenue in the total state budget.

In the sphere of industry and agriculture we must conduct work:
a) in the direction of expanding our socialist industry on a higher technical level, of increasing the productivity of labour, reducing the cost of production and accelerating the turn-over of capital; b) in the direction of bringing the balance of output of fuel and metals, and also the fixed capital of railway transport, into conformity with the country’s growing requirements;
c) in the direction of accelerating the development of Soviet local industry;
d) in the direction of increasing the fertility of the soil, raising the technical level of agriculture, developing the cultivation of industrial crops, industrialising agriculture;
e) in the direction of drawing the scattered peasant farms into socialist construction by organising co-operatives on a mass scale and by raising the cultural level of the peasantry.

In the sphere of trade we must conduct work: a) in the direction of expanding further and improving the quality of the network of trading channels (cooperatives of all kinds, state trade); b) in the direction of accelerating trade turn-over to the utmost;
c) in the direction of reducing retail prices and further increasing the preponderance of Soviet and co-operative trade over private trade; d) in the direction of establishing a united front and strict discipline in procurement among all the procurement bodies;
e) in the direction of increasing the trade turn-over with the outside world, while ensuring a favourable balance of trade, and hence, a favourable balance of payments, which is an indispensable condition for maintaining the stability of our currency and a necessary guarantee against inflation. In the sphere of planning, we must conduct work in the direction of absolutely ensuring the necessary reserves. A word or two, by the way, about one of the sources- of reserves—vodka. There are people who think that it is possible to build socialism in white gloves. That is a very gross mistake, comrades. Since we are not receiving loans, since we are poor in capital, and since, furthermore, we cannot go into bondage to the West-European capitalists, not being able to accept the enslaving terms that they offer us and which we have rejected, only one alternative remains—to seek sources in other spheres. After all, that is better than bondage. Here we have to choose between bondage and vodka, and those people who think that it is possible to build socialism in white gloves are grievously mistaken.

In the sphere of the correlation of classes we must conduct work: a) in the direction of ensuring an alliance of the proletariat and the poor peasants with the middle peasants; b) in the direction of ensuring the leadership of the proletariat in this alliance;
c) in the direction of politically isolating and economically ousting the kulaks and the urban capitalists. In the sphere of Soviet affairs we must work in the direction of a resolute struggle against bureaucracy, in the direction of enlisting the broad masses of the working class in this struggle.

I should like to say a word or two about the new bourgeoisie and its ideologists—the Smena-Vekhites. SmenaVekhism is the ideology of the new bourgeoisie, which is growing and little by little linking up with the kulaks and the intelligentsia in the government service. The new bourgeoisie has put forward its own ideology, the Smena-Vekh ideology, which consists in the view that the Communist Party is bound to degenerate and the new bourgeoisie to consolidate itself, while it appears that, without ourselves noticing it, we Bolsheviks are bound to reach the threshold of the democratic republic, then to cross that threshold and, with the assistance of some “Caesar,” who will come forward, perhaps from the ranks of the military, or perhaps from the government service officials, to find ourselves in the position of an ordinary bourgeois republic.

Such is the new ideology with which attempts are being made to fool our government service intelligentsia, and not only them, but also certain circles that stand close to us. I shall not refute the thesis that our Party is degenerating. It is not worth while refuting nonsense. Our Party is not degenerating, and will not do so. It is not made of such stuff, and it was not forged by such a man, that it should degenerate. (Applause.) Our cadres, young and old, are growing ideologically. It is a fortunate thing for us that we have managed to publish several editions of Lenin’s Works. People are now reading, learning and beginning to understand. Not only the leaders, but also the average Party members are beginning to understand, and they cannot be fooled. Shouting about degeneration
will not frighten anybody now. People will be able to see clearly for themselves. Those others can shout as much as they please, they may try to frighten us with quotations as much as they please, but the average Party member will listen and see clearly, because he now has the works of Lenin in his hands. (Applause.) That fact is one of the fundamental guarantees that our Party will not depart from the path of Leninism. (Loud applause.) If I have mentioned the Smena-Vekhites after all, it is only in order to answer in a few words all those who are counting on the degeneration of our Party and our Central Committee. Ustryalov is the author of this ideology. He is in the transport service. It is said that he is serving well. I think that if he is serving well, let him go on dreaming about the degeneration of our Party. Dreaming is not prohibited in our country. Let him dream to his heart’s content. But let him know that while dreaming about our degeneration, he must, at the same time, bring grist to our Bolshevik mill. Otherwise, it will go badly with him. (Applause.)

## III THE PARTY

I pass to the question of the Party. I do not put the Party at the end of my report because it is the last in importance of all the factors of our development. No, not because of that, but because, with us, the Party crowns the whole edifice.

I have spoken about the successes that the proletarian dictatorship has achieved in the sphere of foreign and internal policy, in the sphere of manoeuvring abroad, in the circumstances of the capitalist encirclement, and in the sphere of socialist construction within the country. But these successes would not have been possible had our Party not been equal to its tasks, had it not grown and gained strength. The Party’s importance in this respect, as the guiding force, is immeasurable. The dictatorship of the proletariat is not exercised automatically; it is exercised primarily by the Party’s forces, under its leadership. Without the Party’s leadership, in the present conditions of capitalist encirclement, the dictatorship of the proletariat would be impossible. It would be enough to shake the Party, to weaken it, for the dictatorship of the proletariat to be shaken and weakened in an instant. It is precisely for this reason that all the bourgeois in all countries talk with such fury about our Party.

By that I do not at all mean to say that our Party is identical with the state. Not in the least. The Party is the guiding force in our state. It would be foolish to say on these grounds, as some comrades do, that the Political Bureau is the supreme organ in the state. That is not true. It is a confusion that brings grist to the mill of our enemies. The Political Bureau is the supreme organ not of the state, but of the Party, while the Party is the supreme guiding force in the state. The Central Committee and the Political Bureau are organs of the Party. I do not want to identify the state institutions with the Party. All I want to say is that in all the fundamental questions of our internal and foreign policy, the Party has played the leading role. And it was solely due to this that we achieved successes in our internal and foreign policy. That is why the question of the Party’s composition, of its ideological level, of the Party’s cadres, of
its ability to guide in the presentation of questions concerning economic construction and Soviet affairs, of its weight in the working class and among the peasantry, and, lastly, of its internal condition generally—is a fundamental question of our policy.

First of all, about the Party’s composition. The total numerical strength of the Party by April 1, 1924, not including the Lenin Enrolment, amounted to 446,000 Party members and candidates. Of these, workers numbered 196,000, i.e., 44 per cent; peasants, 128,000, i.e., 28.8 per cent; office employees and others, 121,000, i.e., 27.2 per cent. By July 1, 1925, we had in the Party not 446,000, but 911,000 members and candidates; of these, workers—534,000, i.e., 58.6 per cent; peasants— 216,000, i.e., 23.8 per cent; office employees and others— 160,000, i.e., 17.6 per cent. On November 1, 1925, we had 1,025,000 Communists.

What percentage of the working class (if we take the whole working class) is organised in our Party? At the Thirteenth Congress I said in my report on organisation that the total number of workers in our country was 4,100,000 (including agricultural workers). I did not then include the workers employed in small industry who could not be counted, as social insurance had not yet been extended to them and statistics did not deal with them. At that time I gave the figures for January 1924. Later, when it became possible to take into account the workers employed in small industry, it was found that by July 1, 1924, the total number of workers was 5,500,000, including agricultural workers. Of these, 390,000 workers, i.e., 7 per cent of the entire working class, were in the Party. By July 1, 1925, the workers numbered 6,500,000; of these, 534,000, i.e., 8 per cent of the entire working class, were in the Party. By October 1, 1925, we had 7,000,000 workers, agricultural and industrial, of small, medium and large-scale industry without distinction. Of these, 570,000, i.e., 8 per cent, were in the Party.

I am saying all this in order to show how unreasonable it is to talk about getting 90 per cent of the entire working class in the country organised in the Party in one or two years.

Now let us see in what proportion the working class section of the R.C.P.(B.) stands to the number of workers employed in statistically registered industry. The number of permanent workers, not seasonal, in large-scale statistically registered industry, state and non-state, including also the war industry, the chief railway workshops and main depots—the number of workers in all these branches, by January 1, 1924, was 1,605,000. At that time we had 196,000 workers in the Party. That amounts to 12 per cent of the total number of workers employed in large-scale industry. If, however, we take the number of workers at the bench who are Party members and see what percentage of the total number of workers employed in large-scale industry they represent, we shall find that by January 1 we had in the Party 83,000 workers at the bench, and that they constituted 5 per cent of the total number of workers employed in large-scale industry. All this was by January 1, 1924. By June 1, 1924, 1,780,000 workers were employed in large-scale industry; in the Party at that time there were 389,000 workers, i.e., 21.8 per cent of the total number of workers employed in large-scale
industry. Of workers at the bench, there were 267,000 in the Party, i.e., 15 per cent of the total number of workers employed in large-scale industry. By January 1, 1925, 1,845,000 workers were employed in large-scale statistically registered industry; the total number of workers in the Party, those at the bench and those not at the bench, was 429,000, i.e., 23.2 per cent of the total number of workers employed in large-scale industry; of workers at the bench, we had in the Party 302,000, i.e., 16.3 per cent of the total number of workers employed in large-scale industry. By July 1, 1925, 2,094,000 workers were employed in large-scale industry; the number of workers in the Party was 534,000, i.e., 25.5 per cent; the number of workers at the bench was 383,000, i.e., 18.2 percent of the total number of workers employed in large-scale industry. You see that, whereas in relation to the entire working class the growth of the proportion of workers organised in the Party to the total working class is slower than the growth of the working class itself, in large-scale industry we have the opposite: the growth of the percentage of workers in the Party is faster than the growth of the working class in large-scale industry. That must be noted in order to have in mind what our Party’s complexion is like when we speak of its working-class core; it consists mainly of workers employed in large-scale industry. Can we now, looking at all this, speak of bringing the number of workers at the bench in the Party up to 90 per cent in the course of one year? No, we cannot, because we do not want to indulge in fantasy. Because, since we have 380,000 workers at the bench in the Party, then, to get all the rest—that is about 700,000 not at the bench—to constitute 10 per cent, we would have to raise the Party membership in the course of one year to 7,000,000. The comrades have simply failed to count, and have put their foot in it with their figure of 90 per cent. Is the Party’s weight in the working class growing? This self-evident truth scarcely needs proof. You know that our Party is, in essence, a party elected by the working class. In this respect we have achieved what no other party in the world has achieved. This fact alone shows that our Party’s weight in the ranks of the working class is immeasurable, and that our Party enjoys a monopoly in the working class. As regards our Party’s weight in the countryside, the situation is rather displeasing. At the time of the Thirteenth Congress, the rural population from the age of 18 to 60 in our country amounted to 53,000,000; at the time of the Fourteenth Congress it is over 54,000,000. But the Communists in village units of the Party at the time of the Thirteenth Congress numbered 136,000, i.e., 0.26 per cent of the total adult rural population; at the time of the Fourteenth Congress we have 202,000 peasants in the Party, i.e., 0.37 per cent. Our Party’s growth in the countryside is terribly slow. I do not mean to say that it ought to grow by leaps and bounds, but the percentage of the peasantry that we have in the Party is, after all, very insignificant. Our Party is a workers’ party. Workers will always preponderate in it. That is an expression of the fact that we have the dictatorship of the proletariat. But it is also clear that without an alliance with the peasantry the dictatorship of the proletariat is impossible, that the Party must have a certain percentage of the best people among the peasantry in its ranks as an essential foothold in the countryside. From this aspect, matters are still far from well.

Further, I must note a general rise in our Party’s ideological level. As regards the organisational side, Comrade Molotov will report to you and, therefore, I shall not dwell on it; but I cannot refrain from saying one thing, namely, that all the evidence shows that the ideological level of our leading cadres, young and old, has risen considerably. One could take as an example the discussion we had with Trotskyism last year. As you know, the point at issue was the revision of Leninism, changing the leadership of the Party while on the march, so to speak. How solidly the Party encountered that anti-Party wave, you all know. What does that show? It shows that the Party has grown up. Its cadres have become strong; it is not afraid of discussion. Today, unfortunately, we have entered the period of a new discussion. I am sure that the Party will quickly get over this discussion too and nothing exceptional can happen. (Voices: “Quite right!” Applause.) In order not to anticipate events and not to irritate people, I shall not at the present moment touch upon the essence of the Leningrad comrades’ behaviour at their conference and upon the way the Moscow comrades reacted to it. I think that the members of this congress will speak about that themselves, and I shall sum up in my reply to the discussion. I am coming to the end of my report.

I have spoken about our foreign policy, about the contradictions that are corroding the capitalist world. I said that those contradictions can be overcome only by a workers’ revolution in the West.

Furthermore, I have spoken about the contradictions within the framework of which our interrelations, the interrelations between the Soviet Union and the capitalist states, develop. I said that those states will strive to convert our country into an appendage of the capitalist system, that they will try intervention against us, but that we shall repel them; that in this we count on the utmost support of the working class in the West, particularly after the workers of the West have begun to visit us frequently and to fraternise with us. Moreover, we are of the opinion that for the capitalists this fraternisation will not be without its cost. We are overcoming those contradictions too. But in the last analysis, we cannot overcome the contradictions outside our country between the capitalist world and the socialist world solely by our own efforts; for that we need the assistance of a victorious proletarian revolution in a number of countries. Furthermore, I have spoken about the contradictions within our country, between the capitalist elements and the socialist elements. I said that we can overcome these contradictions by our own efforts. Whoever does not believe that this is possible is a liquidator, does not believe that we can build socialism. We shall overcome these contradictions; we are already doing so. Of course, the sooner assistance comes from the West the better, the sooner shall we overcome these contradictions in order to deliver the finishing stroke to private capital and to achieve the complete victory of socialism in our country, the building of a complete socialist society. But even if we do not receive outside assistance we shall not become despondent, we shall not cry out for help, we shall not abandon our work (applause) and we shall not be daunted
by difficulties. Whoever is weary, whoever is scared by difficulties, whoever is losing his head, let him make way for those who have retained their courage and staunchness. (Applause.) We are not the kind of people to be scared by difficulties. We are Bolsheviks, we have been steeled by Lenin, and we do not run away from difficulties, but face them and overcome them. (Voices: “Quite right!” Applause.)

Furthermore, comrades, I have spoken about our Party’s successes and mistakes. Of mistakes there have been not a few. In the field of foreign trade, in the field of procurement, and in several other of our fields of work there have been not a few mistakes. Ilyich taught us not to become conceited. We shall not become conceited. There have been not a few mistakes. But there are also successes. Whatever the case may be, we have achieved one thing that cannot possibly be taken from us, namely, that by our extensive constructive work, by our Bolshevik assault on the economic front, by the successes we have gained in this field, we have shown the whole world that the workers, after capturing power, are able not only to beat capitalism, not only to destroy, but also to build the new society, to build socialism. That achievement, the fact that we have made this truth obvious, nobody can take from us. That is the biggest and most difficult of all our achievements up to now. For we have shown the working class of the West and the oppressed peoples of the East that the workers, who throughout history were able only to work for masters, while the masters governed, that these workers, after capturing power, have proved capable of governing a great country, of building socialism under the most difficult conditions.

What is needed to enable the proletarians of the West to win? First of all, confidence in their own strength, the consciousness that the working class can do without the bourgeoisie, that the working class is capable not only of destroying the old, but also of building the new, of building socialism. The entire work of Social-Democracy consists in imbuing the workers with scepticism, with distrust in their own strength, with disbelief in the possibility of achieving victory over the bourgeoisie by force. The significance of all our work, of all our construction, lies in that this work and this construction convince the working class in the capitalist countries that it can do without the bourgeoisie and can build the new society by its own efforts.

The workers’ pilgrimages to our country, the fact that the workers’ delegations that come to our country probe every detail of our work of construction and try to get the feel of our successes in construction, all this shows that, in spite of the Social-Democrats, the working class in the capitalist countries is beginning to acquire confidence in its own strength and in the ability of the working class to build the new society on the ruins of the old.

I do not say that we have achieved much during the year under review, but, after all, one thing must be admitted, namely, that by our successes in socialist construction we have demonstrated and proved that the working class, after overthrowing the bourgeoisie and taking power into its own hands, is capable of rebuilding capitalist society on a socialist basis. This we have achieved, and nobody can take this from us, whatever happens. This success is inestimable. For what does its
achievement mean? It means giving the workers in the capitalist countries confidence in their own strength, confidence in their victory. It means placing into their hands a new weapon against the bourgeoisie. That they are taking up this weapon and are prepared to use it is evident if only from the fact that workers’ pilgrimages to our country are not ceasing, but are becoming more numerous. And when the workers in the capitalist countries become imbued with confidence in their own strength, you may be sure that this will be the beginning of the end of capitalism and a sure sign of the victory of the proletarian revolution.

That is why I think that we are not working in vain in building socialism. That is why I think that in this work we are bound to achieve victory on an international scale. (Loud and prolonged applause. An ovation from the entire congress.)