Ussr

Capital Accumulation and Industrialisation.

The rate at which capital can be accumulated and industry developed in the future is, therefore, closely bound up with the problem of the relation between village and town. To procure this capital by borrowing from abroad, as have so many other agrarian countries which have become rapidly industrialised, was not in existing circumstances practicable. The opposition, and Preo brajensky most explicitly, inclined to the view that State industry could only find the means for expansion if it treated peasant agriculture as a "colonial" area and drew a large profit by turning the terms of exchange between town and village in favour of the former. The official view, however, opposed this policy; and this second source of capital accumulation was also ruled out. The problem essentially consists in the fact that if labour and economic resources are turned to building factories, railways and electric-power-stations, there must necessarily be less avail able for producing commodities for immediate consumption, like boots and clothes and tobacco.

In so far as the "scissors" still exists, part of the brunt is being borne by the peasantry; but in so far as this checks the supply of foodstuffs and raw materials, it reacts unfavourably on the development of industry. The only remaining method of accumu lating the required capital consists in causing the real wages of workers, and hence urban consumption, to rise more slowly than industrial production expands, so devoting the first-fruits of every increase of industrial productivity to capital investment Nearly all the problems and the economic controversies in present-day Russia hinge on this fundamental question concern ing the proportion in which economic resources are to be devoted to serving the needs of capital construction, of the peasantry,. or of the urban workers. There exists among Russian one trend of opinion which would slow up the rate of capital accumulation, and consequently the development of the heavy industries and the import of constructional materials, in order to make finished industrial goods more plentiful to the peasantry, and so encourage the development of agriculture. Another trend of opinion, on the other hand, would exact more from the peasant at the moment, even at the expense of a check to agriculture, in order to give more to the town worker and to the development of capital construction work. The opposition view leans towards the latter policy; the official view steers a middle course.

So far as one can judge from available statistics, the rate of capital accumulation at present, as a proportion of the national income, does not fall short of the pre-war amount. A fair amount of constructional work is being done in the building of new factories, in electrification schemes, in the mechanisation of coal mining, in oil boring and refining, in housing and public buildings, in the extension of transport facilities. In the year

1925-26, after making allowance for that part of construction and repair work which merely replaces current depreciation, the resources devoted to capital purposes amounted to some 1,300 million roubles. Of this amount about a third represented invest ment in industry, about a fifth in agriculture, a further fifth in housing, and about loo million roubles in electrification and 150-180 million in transport. In 1926-27 the aggregate figure was raised to about 1,75o million roubles.

Of the State investments the major part comes from the profits of industry. To some extent Trusts and Syndicates build up reserve funds out of their profits, and then draw upon these reserves for capital purposes. More important than this, how ever, is that part of the surplus of the more profitable branches of industry—chiefly the lighter finishing trades like textiles— which goes into the Treasury and is then advanced in the form of grants for capital construction to those branches of industry which are considered to require them most—primarily the heavy constructional trades. This sum is added to by further grants out of taxation, and also out of the proceeds of special State Loans, issued to the general public and generally earmarked for this purpose, such as the 1927-28 special Industrialisation Loan. Finally, a certain amount is provided through the banking system in the shape of long-term credits advanced to trade and industry.

State Finance.

The fact, therefore, that a major part of the new capital for industry, which in other countries would pass through the Stock Exchange by private share subscriptions, in Russia passes through the Budget, gives to the Russian Budget special importance, and also gives to State expenditure an ap parently inflated appearance. The following summary of the chief items in the Budget for 1926-27 shows the important role that both the receipts from industry and also new State investment in industry play in the total Budget turnover:— Of the total taxation revenue the largest part—about a half—is played by customs and excise. The Agricultural tax yields about 15 per cent, and the Income Tax on individuals and on corpora tions yield about 25 per cent. A large part of the expenditure on education, health and police, and also a large part of the financing of local industry, figures in the budgets of the separate republics and not in the Budget of the whole Union. The revenue is here raised, partly by subventions from the central Budget to the amount of between 25 and 3o per cent, and the remainder by local surcharges, or additional percentages, added to the central taxes, together with the profits of local industry and municipal enterprises.