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State Capitalism in the Transition to Socialism—
Lenin’s remarkable Contribution to the
Revolutionary Theory on Progress

p Both in the theoretical field and that of practical politics, Via dimir Hitch Lenin’s work represents an immense source of scientific knowledge on the social revolution and the construction of a new society.

p In his Principles of Leninism, Stalin synthesized the essential elements of Lenin’s legacy to the class struggle of the proletariat in all its different aspects. This book contributed to the formation of generations of communists, through an inspired understanding of the fecund and revolutionary thought of Marx and Engels’ follower, who led with great success the first large socialist revolution in history.

p Lenin’s contribution to the issues related to the period of transition to socialism, however, have received little attention. After the victory in 1917, he lived on for only six years. This was a difficult and unique period. In theory, the problems of the defeat of capitalism and of the taking of power by the working class and its allies were already solved. However, nothing had been developed yet in relation to the construction of the regime that had just been established. There were known generalized indications from the classics of Marxism, which were rightly prudent in advancing only abstract solutions. Furthermore, the revolution had taken place in a backward economy, where different forms of economy predominated, above all the petty-bourgeois form of production.

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p Lenin developed a theory of universal value on the first steps of the transition to the construction of the society of the future. This transition obeys objective laws that, if not understood and respected properly, may lead to the failure of revolution itself. Under certain circumstances, the taking of power in itself is not so difficult. What is really difficult - and experience has proved this to be the case - is building the new regime, identifying and seizing, one by one, the links of an infinite chain of complicated social and economic problems in which, many times, the new appears mingled up with the old.

p The Leninist theory of transition involves questions related to timing, methods and placing of the revolutionary dynamics. Alongside the question of political positioning and ordering, it stresses the economic aspect - in which the rebuilding of the economy on the basis of heavy industry, in the hands of the proletariat, and the employment of state capitalism, play a leading role.

The particular focus of this article is on the theme of state capitalism. Related to this, some observations will be made on the significance of stages for the construction of socialism.

State Capitalism in the socialist system

p After recognizing that not everything done in the first years after the revolution could be considered to have been appropriate, Lenin stated firmly: "Vie, the vanguard, the advanced contingent of the proletariat; are passing directly to socialism; but the advanced contingent is only a small part of the whole of the proletariat, while the latter, on its turn, is only a small part of the whole population. If “we” are to successfully solve the problem of our immediate transition to socialism, we must understand what intermediary paths, methods, means and instruments are required for the transition from pre-capitalist relations to socialism.”

p Such a profound reflection, based on materialist dialectics, led him to elaborate an original conception of state capitalism in the conditions of a backward country where the proletariat has taken power.

p From September 1917 to January 4th, 1923 (when his intellectual capacity was starting to diminish due to the disease he was suffering from), he touched on this topic more than thirty times in 131 various articles, interventions, bulletins, theses, speeches and letters. He entered into polemics with Bukharin and Martov, Shlyapnikov and Preobrazhensky, Sokolov and the anarchist Gue, with the "left communists" and the "worker’s opposition”, as well as with the Mensheviks and the S.R.’s. Being a convinced materialist, he always insisted on the idea that searching for success demands adapting, in a certain manner, to prevailing conditions so as to advance safely.

p The concept of state capitalism was bom out of the overwhelming need to overcome the backwardness of economic relations. In the first years of the revolution, Soviet Russia was ruined - the level of its productive forces was very low. No resources existed for the development of the economy. The disorganization of the state machinery reached almost absurd levels. The new social sectors which assumed power did not have the necessary experience to make the productive machine and the transport system function properly, and even less so in relation to the complicated financial system. It was imperative to introduce the method of register and control of all materials, essential condition for the smooth running of the socialized enterprises.

p Socialism is a more advanced system than capitalism. Russia was suffering, however, from a serious lag in the level of its productive forces in relation to the more developed capitalist countries. The revolution had granted political power to the proletariat, but it did not (and could not) supply the resources, the experience and the technique needed for economic growth. It was absolutely essential to create favourable conditions for the strengthening of the socialist industrial base and for the country’s progress.

p Analyzing this situation, Lenin concluded that "economically speaking, state capitalism is unquestionably superior to the current economic system”. "Reality has taught us”, he also said, "that the state capitalism would represent a step forward for us”.

p He then detailed the concept on which he had already been working since 1917 - that of the adequate use of capitalism in the first stage of the construction of socialism in an impoverished country. The essential aspects were the maintenance and consolidation of the political power of the proletariat, without which the expansion of capitalism would have an anti-worker and bourgeois-reformist content.

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p In different works, he outlined a program of concessions which allowed for several different types of foreign capital investment, such as the leasing of certain mines, forest areas, petrochemical explorations, etc. as well as allowing the formation of mixed companies and the establishment of large capitalist companies. The payment to the concessionaries was to be obtained with a substantial part of the products obtained. It was, no doubt, a heavy tribute that the proletarian state had to pay to the world bourgeoisie. Lenin did not hide this fact. "We must clearly understand that it suits us to disburse this concession to speed up the rebuilding of our big industry and to improve the situation, principally, of the workers and peasants”. He declared there was no danger in handing concessionaires of a certain number of factories, provided the large bulk stayed in the hands of the socialist state. "Of course, it would be absurd for the Sovietpower to hand out the bulk of its property in the form of concessions. That would not be concessions, but a return to capitalism”. He further declared - "Let the small private industry develop itself to a certain limit, and let state capitalism develop - Soviet power should not fear this”.

p But in a country where the revolution has been successful, capitalism should not operate without any type of restraint and, even less, in open and unlimited competition with the socialized part of the economy. Lenin established conditions: "We do not fear state capitalism because it is up to us to determine the measure ( dimension) upto which concessions will be granted”. There is no reason to fear it, "if we have the control of the factories, of transportation and foreign trade”. He adduced further: The proletarian state can, without changing its nature, allow for free trade and the development of the capitalism within pre-detennined dimensions, and under the condition that trade and the private capitalism are kept under state regulation (vigilance, control, determining of forms and methods)”. Indubitably, the primary condition was that state power remained in the hands of the proletariat.

p Precisely, the lack of understanding of the new which had emerged - the advent of the socialist state - generated the wrong positions assumed by some revolutionaries. They were caught in bookish ready-made formulas which corresponded to a previous epoch of revolution. "State capitalism is capitalism" they said, to contest Lenin’s ideas. They were mistaken. After all, what kind of capitalism was Lenin defending? His indications regarding this 133 subject revealed important aspects of a new economic theory. "State capitalism in a society where the political power belongs to Capital, and state capitalism within a proletarian state are two different concepts”, stated Lenin. In the capitalist state, state capitalism serves the bourgeoisie; in the socialist state, on the contrary, it helps the working class to rise and face the still powerful bourgeoisie, and to fight against it”. Evidently, the existence of proletarian state power gave a new content to social phenomena, including the class struggle. To ignore this radical change in the character of the state could only lead to dogmatism.

p These were Lenin’s opinions on concessions in the form of state capitalism.

p From this Leninist concept of the utilization of Capital by the proletarian state, certain norms stand out and are bound together in a whole: 

p It is favorable and necessary, in backward countries where the political power is in the hands of the proletariat, to use the capitalism whenever possible, so as to strengthen the productive forces and to speed up the development of the country; 

p the utilization of state capitalism must be regulated ( controlled) by socialist power. It must be allowed to grow, but limits have to be established to its performing areas, so as to prevent it from extrapolating permitted boundaries; 

p it is a must to guarantee and strengthen the socialist based economy - irreplaceable base of the new system. The main means of production must belong to the working class. State capitalism is an accessory. If priorities and the constant strengthening of the socialist base are not considered, the uncontrolled expansion of capitalism will result in the formation of a capitalist economy, in detriment to socialism; 

p there must be pre-determined (though flexible) deadlines, for the time span of the concessions, depending on the intensity of the transition process. The concessions cease to be necessary when the socialist economy acquires the capacity to stimulate effective economic progress without foreign help; 

p class struggle continues under distinct forms. Wherever there is capitalism, of any nature, there will always be class struggle. Capitalism will always try, in one way or another, to defeat socialism.

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p Lenin’s remarks help to prevent leftist misunderstandings (refutation of the possibility of utilizing capitalism to facilitate the advancement of the productive forces), as well as the rightist misunderstandings (guarantee of free course to the diffusion of capitalism, neglecting the creation and strengthening of the socialist economy).

In Russia, however, it was not possible to completely put into practice the Leninist policy of concessions, due to unfavorable conjunctural factors. This, however, does not deny its importance and validity.

State Capitalism in the Rural Areas

p Lenin’s theory on the state capitalism is not limited to concessions. It was consolidated and acquired historical significance with its application to the rural areas.

p After the revolution, Russia lived a hard period when it literally lacked the essential foodstuff for its people, hindering even the very functioning of industry and trade. Hunger and famine spread throughout the whole country. The "War Communism" policies were adopted as an attempt to face this situation, forcing the Kulaks and peasants in general to deliver the little wheat produced to the government, at a fixed price. Motivated by the civil war, this policy generated great discontent in the countryside, affecting the very worker-peasant alliance.

p Based on his concept of state capitalism, Lenin formulated his well-known New Economic Policy, (NEP). Through NEP, he intended to stop using the appropriation system and implement the tax in kind. This meant that the peasants, once they had paid their tax (in wheat), could freely sell their surplus stock or exchange it for other consumer goods.

p Thus emerged capitalist trade, even if only within certain limited areas. "Wherever there are small enterprises and freedom of exchange, capitalism will appear”.

p But Lenin was not afraid. "Provided transportation and industry are in the hands of the proletariat, socialism will not be in danger. On the contrary, the development of a capitalism controlled and regulated by the proletarian state (that is, of “state” capitalism in the real sense of the word) it is advantageous and necessary (within certain limits), in a country of small 135 peasantry incredibly ruined and backward, because it can speed up the immediate re-establishment of the peasant agriculture".

p NEP was decisive in the overcoming of the food crisis (which was quite dramatic in 1921) and for permitting the reconstruction of a very weakened economy. The New Economic Policy saved revolution from possible demise.

p With NEP, there was a considerable improvement in the country’s general situation. But the future of socialism in the countryside was still unresolved, as were the forms and methods of organizing peasants, which remained exceedingly dispersed as individual producers.

p Under Lenin’s orientation, sovkhozes —socialist state farms — started to be settip,making use of thebestagricultural soil. The first agricultural communes were started as well, supported by government through subsidies and loans. However, they did not yet provide sufficient experience to permit definite conclusions.

p These conclusion came with the study of cooperativism. There are basic differences between cooperatives in capitalist and in socialist systems. "The cooperatives in the socialist state”, said Lenin, "are collective capitalist institutions”. He noted, however, that "under our current system”, cooperatives were distinct from private companies since they were collective companies. "They were not different, however, from the socialist companies since they operated in land of the state and the means of production belonged to the state, that is to say, to the working class”.

p Through this thread of thought, Lenin deduced that, given the particular characteristics of the socialist regime, "the peasant cooperatives had an exceptional meaning - they were in agreement, almost always, with socialism”. He, thus, strongly stated: "Now we have the right to say that for us, the simple development of cooperation    identifies itself with the development of socialism”. In this manner, one of the most delicate and complex problems of socialist construction was solved theoretically, that is, the unification of the dispersed peasant masses which composed the majority of the population and their integration into the new socialist productive system.

p Theconcretizationofthisobjectivedemandedtheorganization of a vast educational work among the peasantry, to teach them how to read and work with books so that they could better assimilate the 136 new objectives and tasks of collective activity. In general terms, it was indispensable to proceed with the cultural revolution so as to advance on the risk-laden struggle for the implementation of socialism in a culturally backward country.

p It was necessary, as well as, to provide economic support for the development of the cooperatives. Clarifying doubts in relation to state capitalism, Lenin stated: There is another side to the question, of where we need state capitalism, or something equivalent to it - mat is, the cooperatives”. Introducing this change in the socialist economy was not simple. "Every sodal regime, in its start, is strongly supported by a specific class”, Lenin claimed, pointing to the example of capitalism itself. The cooperative regime also needed an extraordinary help to establish itself. This could only come from the working class. "It is necessary”, said Lenin, "to grant the cooperatives a series of economic/ financial and banking privileges. This is the support given by the socialist state to the new principle on which the population should organize itself”.

p Lenin demonstrated an acute strategic vision in his propositions. "If we can attract all peasantry to cooperativism”, he stated, "we will stand with two feet on socialist ground”. Prophetically, that is exactly what happened in the course of the following decade.

Indubitably, Lenin’s concept of state capitalism in its different forms, aiming at successfully overcoming the transition to socialism, is of priceless value, specially for backward countries. This had never been, previously approached. "Up to now”, Lenin recognized, answering baseless criticisms, "nobody could write a book on this kind of capitalism Because it is the first time in the history of mankind that we see such a thing..... not even Marx thought of writing one single word about this subject He died without leaving any quotation or definite indication about it”. Through this immense contribution, Lenin developed Marxism creatively,asadialectic revolutionary thoughtwhich distinguishes, in different situations, what is old and what new is arising.

The stages are important milestones in the transition
to Socialism

p Leninist theory on the transition from capitalism to socialism, precious in its teachings, covers a whole set of questions regarding 137 the correct way to perceive this transition. Besides stressing the need for proletarian state power, state capitalism and the strengthening of the socialist base and of new cooperativism, it points to fundamental problems related to the pace, methods, and specially stages to be taken into consideration so as to gradual advance in the process of revolutionary conquests.

p Some revolutions have failed or faced enormous difficulties for not understanding this process. It is not easy to consolidate and advance revolution, particularly in backward countries. This demands a dear perception of the problems in question, the control of reality and knowledge of the objective laws that are in course. Revolutions do not take place in the Stone Age, but in a superior stage of society’s development. Capitalism reached high parameters in the production of material goods. Socialism cannot lag behind. It has to build something better and superior to the capitalist system. It does not however, initially have the necessary conditions to do so, and neither can it do so in an arbitrary manner, skipping necessary stages.

p Lenin identified the handicaps in the prevailing orientation after 1917. "Taken by the wave of enthusiasm that had awakened people, firstly political enthusiasm/ then military enthusiasm/ we believed that we could perform - only on the basis of this enthusiasm economic tasks with the same magnitude of the political and military tasks. We thought, or perhaps we supposed without having studied enough, that it was possible to organize in a direct form, on the basis of the simple existence of the proletarian state, state production and state distribution of goods in a communist manner, hi a country of small peasants. Experience has shown our mistake. It made us see that a series of stages are necessary hi the transition”.

p Once identifying the mistake, Lenin recommended a new fundamental approach to these economic problems "considering that the first stage could not be direct transition to socialist construction”. Itwas necessary to make use of roundabout methods,of state capitalisnvetc., without which the revolution would stagnate or perish.

p This very important question of stages had already been dealt with by Engels in 1874. Replying to Blanquist communards that thought of reaching their main objective "without stopping at 138 intermediary stages or without promises”, Engels said that stages and compromises are part of historical development, and it is through these that we can strive for and reach our final aim.

p Stages correspond to the objective demands of society’s advancement. Acknowledging this, and acting accordingly, is fundamental. It is not possible to skip stagesor simply ignore them. What we want to reach is a result of accumulation, and never the result of voluntaristic attitudes. We cannot pre-define the number of stages there will be in each socialist process. In March, 1918, at the VII Extraordinary Congress of the R.CP.(B), Lenin said that "we are still only passing through the first stage of the transition from capitalism to socialism”. Further on he added: "We have only given the first steps to free ourselves from capitalism and start the transition to socialism. We do not know and cannot know how many transitional stages there will be in socialism”. This was due to various factors. Stages in socialism are different from stages in a capitalist system. In the latter, development is spontaneous, empiric, and the period of each stage is more prolonged. In socialism, it is a conscious process. We can speed up the development and obtain, in shorter periods of time, qualitative leaps, on the condition that we do not violate existing objective laws.

p It is a pity that this scientific contribution of Lenin on the question of transition had been forgotten. This damaged the revolutionary movement. In its place, the rigid and schematic line adopted by the Soviet Union prevailed for a long time. According to this view, the developmental march of society in every field seemed to depend mainly on men’s will, on leaders, without taking into consideration that these developments have objective roots and involve certain stages.

It is absolutely necessary to pay more attention to Lenin’s works and the teachings regarding the transition from capitalism to socialism. It is not a question of mechanically repeating Lenin’s opinion at that time or the concrete solutions he indicated. The world has developed. New problems arose. Reality has other demands. What is necessary is to assimilate the essence of these teachings, the essence of the Lenin’s theory of transition, which indubitably integrates the great and valuable works of Marxism, opening broad perspectives for the construction of the advanced society of the future.