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p Lenin made a thorough study of the mechanism and mode of operation of the new economic laws generated by socialist relations of production.

p By applying the historical approach to social development, Lenin was able to show that the meaning of socialism was not only the replacement of one set of objective economic laws by another set corresponding to the new mode of production, but that it also meant changing the way in which economic laws operate.

p The process of socialist development cannot go on spontaneously, undirected. Lenin demonstrated the objective need to plan the economy under socialism. In The Immediate Tasks of the Soviet Government, he wrote that the main organising force in the capitalist economy is the national and the international market, which expand and develop anarchically, spontaneously.

p The socialist revolution, unlike the bourgeois revolution, does not set itself only the destructive tasks facing the working people but constructive tasks, too. It is very important to emphasise this. Socialist property calls for collective work organised on a country-wide scale. Socialist construction necessarily requires planned production and distribution. Socialism is unthinkable without state planning and organisation. Lenin was thus able to point out the objective necessity of planning progress through a single economic plan covering a number of years. Such a plan for the USSR, he said, should be a plan for building the material and technical basis of socialism, for the technical reconstruction of the country’s national economy.

p Lenin considered that a single economic plan should not only guarantee the balanced development of the economy, but also ensure its technical progress.

p Lenin insisted on the drawing up of current working plans, on the need to single out the main links in the chain of the over-all plan of work. By taking firm hold of these links it has been possible to underpin the achievements of the Soviet economy at each stage and then to move on to the next, higher stages.

p Planned progress requires a gigantic amount of organisational work. "The organisation of accounting, the control of large enterprises, the transformation of the whole of the state economic mechanism into a single huge machine, into an economic organism that will work in such a way as to enable hundreds of millions 124 of people to be guided by a single plan—such was the enormous organisational problem that rested on our shoulders."  [124•1 

p Planned development necessitates the subordination of the entire economy to a single united will directing the combined efforts of millions. This need for centralised planning is explained by the modern high level of development of the productive forces. Machine industry is the productive source and foundation of socialism, Lenin wrote. Only that construction can be called socialist, he said, which is carried out according to one general large-scale plan.

p While defending the need for the centralised planning of the whole national economy, Lenin attached exceptional importance to developing local initiative. He stressed that the Soviet state had no intention of lessening the importance of local organs of power by destroying their independence. Lenin called upon all organs of power, all collectives of working people to show initiative in everything that could lead to improvements in the new system, to a better life. At the same time he demanded struggle against localism and punishment for those guilty of it.

p Lenin believed that planning should become a national cause in which not only the workers of planning organs take part. The part played by administrative means and directives in planning has always been overestimated and is even now still overestimated in all kinds of sectarian anti-Leninist attitudes. Planning relies on the workers’ interest in the fulfilment of plans. This means that planning relies on economic incentives to stimulate labour as well as on the high social consciousness of the working people. To ensure the planned nature of economic development a network of institutions based on the principle of democratic centralism should be introduced. The economic apparatus was regarded by Lenin as part of the state apparatus that will remain and develop even after the state as a whole withers away. He insisted on the constant perfecting of this apparatus.

p The organisation of people’s accounting and control is an inseparable part of a planned economy. Lenin attached great importance to control and accounting, in which he also saw a means of drawing the widest sections of the people into economic construction. The task of public control involves the securing of the people’s interests and struggle against all distortions of economic policy.

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p Centralised planning on a genuinely democratic basis creates the most favourable conditions for the rapid development of the productive forces. Revisionists deny the principle of democratic centralism in economic management. They make a fetish of spontaneous development; they can see nothing that should or could stand in its way when social ownership is dominant in the economy. The spontaneous development which the revisionists preach leads only to abnormal profit differentials, to the uneven progress of some branches and areas of industry and of certain individual factories, and to economic crises—and, finally, it results in the revived operation of the economic laws of capitalism.

p Today Lenin’s great genius shines through in the economic construction of all the socialist countries. The principles of planning which he introduced, together with all his statements concerning the importance of planning the socialist economy and the aims to which it should be geared, have retained their full significance.

p The historical approach enabled Lenin to bring out the special features of the laws of socialism and the nature of their operation, and to indicate the only correct road to the victory of socialism.

p The mechanics of the operation of economic laws under socialism is very closely related to the activities of the socialist state. The state cannot invent objective laws, nor can it cancel or eliminate them, but it can learn and take their operation into account and organise their conscious application.

p Socialist relations cannot emerge, develop and strengthen without the leading role of the state of the new type, the dictatorship of the proletariat. The latter, in its turn, cannot consolidate itself unless it creates a socialist economy and eliminates capitalist property and landownership.

p According to Lenin, the main function of the socialist state is its economic function. This point was elaborated in the greatest detail in The State and Revolution and in “Left-Wing” Childishness and the Petty-Bourgeois Mentality.

p The setting up of the dictatorship of the proletariat itself expressed the urgent need for the solution of definite economic tasks with its help.

p When working out his plan for the building of socialism, Lenin relied on his investigations into the objective economic laws of development of the socialist mode of production. Furthermore, he indicated the great organising and directing roles that the Soviet state and the Communist Party were called upon to play.

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p A socialist economy cannot develop spontaneously. Objective economic laws have to be consciously applied. In keeping with Marxist principles, Lenin took into account the special features of the operation of economic laws when public ownership is dominant in the economy. These laws do not then act spontaneously but are consciously implemented by society and the state that represents it. That is why the field of economic policy is considerably wider under socialism than under pre-socialist formations; it embraces all the planning, organising and directing activities of the state.

p But the part that politics plays is not confined to this. Lenin, in his criticism of Trotsky and Bukharin during the discussion on the trade unions,  [126•1  spoke of the priority of politics over economics. But he did not mean that politics should, as it were, be turned into a base and economics into a superstructure. He meant that the task of building socialism could be solved only under the definite political conditions, under the dictatorship of the proletariat, and in order to preserve and strengthen this it was quite indispensable to establish a correct relationship between the working class and the peasantry, and to work for the satisfaction of their economic interests as much as possible.

p Lenin said that politics is a concentrated expression of economics. This means that class interests are expressed in their most concentrated form in politics. So when he spoke of the priority of politics over economics he did not mean that the laws of historical materialism did not operate under socialism, but that a correct political approach, i.e., one pursuing the interests of society as a whole and the interests of the alliance of workers and peasants, was necessary for the successful achievement of economic aims. This point is explained in "Economics and Politics in the Era of the Dictatorship of the Proletariat" and in the discussion on the trade unions that took place in 1921. Lenin showed how under the extremely hard conditions of the first years of Soviet power, in 1918 and 1919, with the economy devastated and with terrible want everywhere, the Soviet Government still managed to store a considerable quantity of grain and to win its first victories in the battle against petty-bourgeois spontaneity and chaos. The priority of politics over economics does not deny the subordination of politics to economics in the building of socialism, since in the final analysis all political 127 activity is aimed at one and the same goal, the creation of the economy of a communist society.

p Before it succeeds in establishing the dictatorship of the proletariat, the revolutionary party pursues a directly political aim, the struggle for the victory of the revolution. But once the dictatorship of the proletariat has been established, this purely political aim is replaced by others. The task then is to subordinate political power completely to the creation of a new mode of production. It is in this sense that politics is subordinated to economics.

It is obvious that so long as the state remains necessary, so long as society solves the tasks that face it through the agency of the state, the necessity for politics remains, too. The correct political solution of the questions that arise in the course of building communism remains the prerequisite for the proper implementation of economic laws in the interests of the whole of society and for the solution of the economic tasks facing society.

p While proceeding from the primacy of production, Lenin also carefully analysed the significance of the other spheres of the economy, their interconnection and their effect on production itself under socialism. He showed that the specific features of the different spheres of the economy are determined by the nature of production and are closely linked to it. His work on these questions led Lenin to key discoveries in the field of the political economy of socialism, confirming and deepening his theses that the direction of the socialist economy should not be reduced to administrative measures alone (to say nothing of coercion), and that socialist planning must rely on and make use of a definite economic mechanism in the interests of socialist construction.

p In clarifying the character of socialist production, and developing Marx’s theses, Lenin dealt in detail with the question of socialist incentives to work. We have already mentioned the breakthrough that Lenin made into the essence of the new relations of production by his discovery of socialist competition and emulation as a manifestation of the new class-conscious attitude to work. But under socialist conditions, moral stimuli are not the only incentives to work. The level of development of the productive forces is as yet insufficient to meet all the needs of every member of society. That is why, alongside socialist 128 equality in relation to the means of production, there still exists inequality in meeting the needs of the people. Since society cannot yet produce a sufficient quantity of goods, it is compelled to give more to working people who create more values for the whole collective than others.

p Under socialism, Lenin stressed, raising productivity requires the use of material incentives. That is why he attached great importance to the worker’s material interest in the results of his work. At the outset of the revolution he proposed the payment of wages related to the general output, and demanded the introduction of a well-grounded scientific system of rating and organising labour. He considered it extremely important to borrow from capitalism and use in the interests of socialism everything that was scientific and progressive in the capitalist methods of organising labour.

p Lenin opposed egalitarianism. He believed that in the management of the economy material incentives should be applied both to each individual worker and to whole collectives and enterprises. Lenin insisted on the payment of bonuses for more efficient work, particularly organisational work. The socialist economy, he said, should be built not on the enthusiasm of the masses alone, but, aided by this enthusiasm, it should be based on the combination of moral and material incentives.

p Closely connected with the question of the significance of the material incentive in the organisation and development of socialist production is the question of commodity relations. Lenin studied this question closely. He established the need for commodity production in the period of transition from capitalism to socialism and advanced the basic ideas required to understand the nature of commodity relations under socialism.

p The question of commodity exchange arose above all in connection with the relations between the socialist urban economy and the small rural economy. This was a serious economic and social problem. In 1918 Lenin suggested the development of commodity exchange in the interests of establishing normal economic ties between town and country. However, the consistent realisation of this was made impossible by the shortage of industrial products at that time.

p The sharpening of the class struggle and the dislocation of the national economy in the period of foreign military intervention and the Civil War made necessary a complete ban on free trade, the taking away of all surpluses from the farms, the introduction of extreme centralisation in the distribution of the 129 few resources which Soviet government bodies possessed, and direct suppression of capitalist elements. There emerged a system of War Communism with some of the features of a natural economy and direct exchanges of products between town and country.

p All this created in the minds of some Communists the wrong idea that the objective need for commodity production had already withered away. But Lenin, even when War Communism was in full swing, while insisting on the ban on free trade, upheld the theoretical postulate that the preservation of small farm production meant, of necessity, the retention of commodity production, trade, and money. In his speech to the First All-= Russia Congress on Adult Education (1919), he spoke of private individual farmers as a class representing a patriarchal epoch, reared on slavery throughout the centuries, but having under capitalism formal freedom and formal equality. The small farmer existed as a property owner and a possessor of foodstuffs. The economic conditions of his life are such that he is wedded to commodity production, he is used to exchanging grain for money. One cannot change this habit at once; money cannot be eliminated instantly. In order "to abolish money you must organise the distribution of products for hundreds of millions of people".  [129•1 

p The need to make use of commodity relations, primarily for strengthening economic ties between town and country, became particularly urgent after the Civil War ended. The policy of War Communism could not be the normal policy for constructing socialism. It was a temporary measure due to emergency conditions, the Civil War and the devastation that went with it, and it could not be regarded as an economically logical stage of revolutionary development that would be unavoidable in other countries. With the transition to peaceful construction, continuing the policy of War Communism caused dissatisfaction among the peasants and undermined their interest in developing production. In the conditions of need and hunger that then prevailed, speculation grew, and petty-bourgeois elements rendered the necessary control and accounting impossible.

p Lenin suggested a change in economic policy, replacing War Communism by the New Economic Policy (NEP). The starting-= point of NEP was the abolition of the surplus-requisitioning system and its replacement by a tax in kind levied on peasant 130 households, while leaving them a free hand to sell their surplus produce on the market. NEP was substantiated by Lenin in a number of works “(The Tax in Kind”, "The .Importance of Gold Now and After the Complete Victory ot Socialism”, in his reports to the Tenth and Eleventh Party Congresses, in his speech at the Seventh Party Conference of the Moscow Gubcrnia, and others). This policy took into consideration the fact that during the change-over from capitalism to socialism there must inevitably coexist a number of socio-economic sectors. Alongside the socialist sector, leading the country’s over-all economy, there existed four others—the patriarchal peasant economy, small commodity production, private capitalism and state capitalism.

p NEP was designed to make use of commodity production and the market to strengthen ties with individual peasants and so to draw them along the road to socialism in the interests of overcoming capitalism. This policy was based on recognition of the objective necessity for commodity production when, alongside state socialist industry, there existed an individual peasant economy and other economic sectors.

p There was more of the old than the new in NEP, said Lenin, who as far back as 1918, before NEP was introduced, asserted that commodity production could not be eliminated overnight. But the questions arising from this had not been theoretically worked out before the Civil War came to an end. The transition from the Civil War to peaceful construction required, as a matter of urgency, that commodity relations be used to stimulate the peasant economy materially.

p At the Seventh Party Conference of the Moscow Gubernia, Lenin explained that the relations between socialist industry and the peasant farm economy had to be based on commodity and money circulation, regulated by the socialist state, because experience had shown that direct exchanges of products were impossible.

p Organising normal economic ties between town and country was a necessary precondition for the realisation of Lenin’s plan of co-operation; indeed it was one of its major points. The bond between town and country achieved through trade was of vital importance at the time. Later on this bond in trade developed into a production bond, but without in any way lowering the importance of economic relations based on trade between industry and agriculture.

p With the introduction of NEP, it became still more obvious that a struggle between socialist and capitalist elements was 131 inevitable in the transitional economy, a struggle to decide "who will beat whom".

p With the prevailing private ownership in peasant farming, the growth of trade inevitably gave rise to further capitalist elements. Commodity exchange between town and country became a central arena of struggle between the socialist proletariat and the individual farmer. Commodity relations had a dual character. They were necessary for the advance of socialist industry, but, at the same time, it was possible, to a certain extent, for capitalist elements to exploit them. So in order to facilitate the victory of socialism over capitalism, it was necessary to restrict the free market, to keep the commanding heights of the economy in the hands of the proletariat, develop big socialist industry, protect its alliance with small farm production, and to wage a struggle against capitalist elements.

p By following Lenin’s advice, the Communist Party of the Soviet Union soon established close economic unity between town and country and secured the victory of socialist elements over capitalist.

p Lenin indicated that NEP did not introduce a specifically Russian form of relationship between town and country, but was a policy that applied universally. The experience of socialist construction in other countries fully confirms this thesis of Lenin’s, demonstrating the need for economic relations between socialist industry and private small-scale farming to be based on commodity exchange.

p With the transition to NEP the principle of the personal material incentive found application throughout the whole economic organisation of socialist industry. In his report to the Second All-Russia Congress of Political Education Departments, Lenin said that "every important branch of the economy must be built up on the principle of personal incentive".  [131•1  He thus gives the theoretical grounds for the use of commodity relations in socialist construction, not only between industry and small peasant farming, but also between state enterprises themselves.

p The existence of commodity relations between town and country, the use of material incentives, and the need for the strictest socialist accounting and control required changing the whole system of planning and organising state enterprises. It became necessary for enterprises to function as independent economic units, covering their own expenses out of the revenue 132 earned by the sale of their products, and contributing part of their profit to the state besides. It became necessary to apply both commodity relations and the principle of self-support in mutual relations between state enterprises. Lenin explained that selfsupporting enterprises were bound to become the predominant, if not the sole type of enterprise.  [132•1  He demanded the severe punishment of managerial staff who incurred losses through non-= economical “business” and expected the state to cover them.

p The principle of self-support does not expose industry to the clanger of un-planned, spontaneous development. Self-support is a principle of a planned economy and is subordinated to the over-all planning of economic progress, as is evinced by the example of heavy industry in the USSR, which could never have come into existence on a commercial basis since it was originally unprofitable. Lenin pointed out that heavy industry was in need of subsidies and that if the state did not find means for it, it would perish not only as a socialist state but as a civilised state in general.  [132•2 

p Commodity production and trade created the objective necessity for money, and that is why Lenin urged from the first to strengthen money circulation in the interests of building socialism. With the transition to NEP, he spoke about the need to "establish a sound currency backed by gold".  [132•3 

p Since gold has the traditional role of a universal equivalent, and money circulation is indispensable for the building of socialism, Lenin took the view that gold will remain in use as money up to the time of the victory of the proletariat throughout the world. He regarded the banking and credit systems as the backbone of the apparatus for the planned accounting of production and distribution of goods throughout society, covering all socialist enterprises. The credit and financial system must in every way promote control over the circulation of goods and help state enterprises to raise their profitability.

p Lenin always stressed the substantial difference between commodity production under socialism and that under capitalism. Speaking of the character of commodities in conditions when socialist enterprises hold the leading positions in the economy, he wrote: "...the manufactured goods made by socialist factories and exchanged for the foodstuffs produced by the peasants are 133 not commodities in the politico-economic sense of the word; at any rate, they are not only commodities; they are no longer commodities, they arc ceasing to be commodities."  [133•1 

p Indeed, under capitalism a product is transformed into a commodity because of the existence of individual private owners who arc linked only by spontaneous economic forces, whereas when the proletariat controls the economy and plans economic progress, the commodity no longer expresses either the complete separatcncss of individual proprietors or spontaneous development. A commodity then becomes a product designed by a plan for the satisfaction of the needs of society through exchange.

p Lenin foresaw that in the course of strengthening socialist relations it would be necessary to overcome the dual character of the commodity and of money typical of the period of transition from capitalism to socialism, and that this would lead to their still greater development as tools for the management of the socialist economy. The Party Programme adopted by the Eighth Congress of the Party also pointed out that money could not be abolished before communist production and distribution had been set up. Lenin’s prediction has been fully confirmed in practice and is of great significance in the building of the communist society. Commodity production and money circulation will in fact remain necessary until the second stage of communism has been reached.

p One of Lenin’s papers, "Commercial Organisation”, contains a thought which attracts attention, namely, that attempts to do without "commercial methods" mean attemping to make the transition to communism without going through the intermediate stage of socialism.

p Thus, Lenin, proceeding from the primacy of production, showed how the different spheres of the transitional economy are interconnected. He based his views on the unity of the entire economy, a unity determined by the leading role of the socialist sector.

p Lenin gave invaluable advice on how to solve the problems of socialist reproduction. In connection with Bukharin’s denial of the existence of objective economic laws of socialism, he showed that Marx’s theses on the relations between the chief branches of social production, the ratio of Iv’rlm to lie, and the laws of accumulation, retain their significance even for full communism.

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p One ought to regard in this light Lenin’s directives concerning the overriding importance of the development of heavy industry. These directives are based on the specific conditions in which the law of the more rapid increase of the production of means of production operates under socialism. The advance of heavy industry was regarded by Lenin as the basis for the growth of production in all branches of the national economy and for the improvement of the workers’ welfare.

p Production docs not grow under socialism merely for production’s sake, but for the better satisfaction of people’s needs. That is why Lenin insisted on every possible growth of those branches of production which directly improve people’s lives. He paid special attention to farming as the source of food and of raw materials for industry.

p Lenin worked on the question of the sources of accumulation under socialism. The followers of Bukharin and the Trotskyists thought that the socialist revolution must go through a stage analogous to the first stage of capitalist development, through "primitive socialist accumulation" (meaning the expropriation of farms). A propos this idea Lenin made the note "Phew!!" in the margin of a page in his copy of Bukharin’s book. He wrote that the term "primitive socialist accumulation" was "extremely unfortunate. It merely represents the childish apeing of the terms used by grown-ups."  [134•1 

p Lenin observed at the Fourth Congress of the Comintern, when dealing with the question of the internal sources of extended socialist reproduction, that the rapid creation of a heavy industry in a capitalist country would require loans running into hundreds of millions of dollars or gold rubles. The USSR did not receive any loans but yet was able to save the necessary means to develop a heavy industry. It had to be done by economising severely on everything in every possible way, even on schools. There was no other way, since it was impossible to guarantee the country’s independence without a heavy industry.

p In his outline of the tasks of extended reproduction, Lenin linked very closely the development of the productive forces with the extension and strengthening of socialist relations of production, the consolidation of socialist property, its growth in industry, through the gradual transformation of the small peasant economy and the ousting of capitalist elements.

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p The growth of socialist productive forces was never viewed by Lenin, unlike Bukharin, as involving only technical progress.  [135•1  Lenin held that, together with technical progress, it was necessary to raise systematically the cultural level of the people by carrying through a cultural revolution.

p In 1923, in one of his last articles "Better Fewer, but Better”, when examining the historical prospects for the struggle against capitalism, Lenin wrote: "If we see to it that the working class retains its leadership over the peasantry, we shall be able, by exercising the greatest possible thrift in the economic life of our state, to use every saving we make to develop our large-scale machine industry, to develop electrification, the hydraulic extraction of peat, to complete the Volkhov Power Project, etc.

p "In this, and in this alone, lies our hope."  [135•2 

p This hope of Lenin’s has come true.

p Lenin lived at the beginning of the period of transition from capitalism to socialism and led socialist construction. Following Lenin’s precepts, the Soviet people have completed this period under the leadership of the Communist Party. Soviet experience is being utilised by other socialist countries. Its historic significance has thus been fully borne out. As the Programme of the CPSU observes, the science of building socialism, verified by experience, is now firmly established.

After Lenin’s death, in summing up the experience of socialist construction, the CPSU and later also the other Communist and Workers’ Parties developed Lenin’s theory further, particularly the Marxist-Leninist teaching on the laws governing the rise and triumph of the communist mode of production.