Between NEP and Industrialization

The New Economic Policy did not satisfy the many firebrands in the All­Union Communist Party who reluctantly accepted this program as a short-term strategy in the early 1920s. Recognizing the USSR’s overall economic inferiority and its dependency on imports from capitalist coun­tries, these radicals claimed that economic restoration to pre-war (1913) levels by 1926 did not go far enough.

By highlighting Soviet vulnerabilities, the artificially induced “war scare” of 1926-7 built on the political panics of the early 1920s and justi­fied the need for a rapid industrialization drive. Although the great fear of 1926-7 emerged from a set of real crises the USSR experienced in those two years, Soviet paranoia and Stalin’s opportunism stoked the flames.

Shortly after Moscow’s leaders assessed the state of its military prepared­ness in 1923-4 and acknowledged its weaknesses (a poorly equipped army, an obsolete military technology, and the complete lack of an adequate mobilization plan for war), the USSR experienced a large number of inter­national setbacks and diplomatic embarrassments.⁷ In May 1926, Jozef Pilsudski - the Soviet arch-enemy - staged a military coup and remained Poland’s strongman for another nine years. In the first half of 1927, a large number of Soviet spies were arrested in Europe and Turkey and several important OGPU officers defected to Western capitals. In April 1927, as the Chinese Nationalist leader Chiang Kai-Shek sought to consolidate his power over the Chinese Nationalist Revolution, he massacred thirty to forty thousand of his former allies, the Chinese communists and their sup­porters.

Why did all of these reversals happen so quickly and over a short period of time? Various factions within the All-Union Communist Party and the OGPU proposed a vast conspiracy led by Great Britain with its allies, France and Poland (which allegedly supported underground nationalist groups in Georgia and Ukraine), to launch a second war against the USSR. According to this convenient explanation, the world’s first proletarian state was in danger of attack by hostile capitalist powers. As a prophylac­tic measure, the OGPU launched a wave of arrests and a series of sum­mary executions of its class enemies, including twenty noblemen. By the peak of the official media’s coverage of this war threat in late May and early June, many Soviet citizens embraced this interpretation and started to hoard food and basic staples.⁸

Although Stalin and his allies initially minimalized the danger of foreign intervention in the winter of 1926-7, he started to exaggerate the Soviet Union’s “dire straits” by the summer of 1927 in order to mobilize support for his own policies. Now he insisted that the outbreak of a new imperialist war against the USSR was not a vague danger, but a “real and actual threat.”⁹ In this dangerous political climate, he accused his internal enemies of try­ing to split the party. By October 1927, Stalin’s allies expelled Leon Trotsky and Grigory Zinoviev from the party’s Central Committee and, over the next month, from the party.

Due to the war scare, rapid industrialization became the new mantra and the communist state’s first priority. In light of the Soviet government’s repudiation of the tsarist debt in January 1918 and its international reputa­tion as a credit-unworthy state, only the sale of exportable agricultural har­vests and valuable artwork could finance the purchase of new machinery from abroad, introduce new technologies, and fund the industrialization effort. This political choice required that the government gain control of all of its economic resources and institute central planning. In order to estab­lish this administrative-command economy, the authorities radically modi­fied the division of economic responsibilities between Moscow and the republics originally negotiated in the early 1920s. This new state-sponsored intervention radically enlarged the Soviet bureaucracy at the central, repub­lican, and local levels and expanded its functions.¹¹ With industrialization, the state now penetrated all of society’s layers, including the countryside, and blurred the boundaries between itself and society at large.

At the Fourteenth Party Congress in December 1925, delegates approved resolutions committing the party to transform the USSR into a self-sufficient industrial power. The Fifteenth Party Conference in October-November 1926 reaffirmed the necessity of the Soviet industrialization drive, but did not create a set schedule or clear goals. Only in December 1927, at the Fifteenth Party Congress, did the party launch a highly ambitious and ac­celerated industrialization campaign to catch up with the Western capital­ist states.

To finance this vast modernization project and to feed the military and the new and expanding urban labour force, party leaders sought to gain di­rect control over agricultural production in all of the Soviet republics and to exploit the USSR’s natural resources more efficiently.

The five-year plans, especially the first, infused enormous sums into the industrial sector, not the consumer goods sector. The Soviet state increased expenditures in Ukrainian industry from 438 million rubles in 1929 to 1.2 billion in 1932.¹³ In this period, nearly one-fourth of the nearly 1,500 in­dustrial plants built in the USSR were located in Ukraine. The gigantic Dneprostroi/Dniprohes hydroelectric dam on the Dnieper, Europe’s larg­est, symbolized the entire Soviet industrialization effort.¹⁴

Central planners placed most capital investments in Ukraine in the tra­ditional industrial areas of the Donbas and the lower Dnieper region, not the densely populated and agriculturally oriented Right Bank, which they believed would serve “as a potential theater of war in the event of a conflict with Poland or Germany.”¹⁵ In light of the economic commissars’ prefer­ence for industry over agriculture, Soviet authorities reinforced the split between Ukraine’s eastern and southern industrial areas and its western and central agricultural regions.

With the rapid expansion of Soviet Ukraine’s industrial infrastructure, the new factories, mines, and industrial centres needed millions of new workers in order to operate at full capacity. The new urban opportunities, collectiv­ization, and the escalating violence in the countryside pushed millions to migrate to the cities.

Despite these radical socio- economic developments within the Ukrainian SSR, this republic’s importance in the overall Soviet industrialization effort declined during the second and third five-year plans.¹⁷ Already in the 1920s, Moscow extracted a considerable share of economic and human re­sources from Ukraine.¹⁸ In the 1930s, central planners shifted capital and labour from Ukraine to construction sites in the Urals, the Kuznets Basin, and the Volga region, areas far from the contentious Polish-Ukrainian frontiers. The Ukrainian SSR’s share of the total capital investments in the USSR fell from 18.3 per cent in 1933 to 13.5 per cent in 1939, as Soviet au­thorities sought to develop Siberia’s industrial infrastructure. Despite this downtrend, Ukraine remained an important Soviet industrial centre.¹⁹

The first five-year plan consolidated the Soviet government’s centraliza­tion of power and limited the sovereignty of the Ukrainian SSR and the other republics. In 1929 the central authorities subordinated the Ukrainian Commissariat of Agriculture to the newly established USSR Commissariat of Agriculture. In 1932, the Soviet government abolished the Supreme Council of the National Economy of the USSR (Vesenkha) and of the Ukrainian SSR, replacing it with the All-Union Commissariat of Heavy Industry.

Whereas the Soviet Ukrainian government controlled - directly or indi­rectly - 81.2 per cent of its industry in 1927, five years later it supervised only 37.5 per cent of all industries located on its territory.²⁰ The central ministries in Moscow now managed most of the Ukrainian economy, de facto as well as de jure.