Ussr

Russian industry was also aided by a rapidly developing system of joint stock banks, many of which made long-term advances to industry on a considerable scale, on the model of the German "commercial banks," playing the role of collecting individual savings as deposits, and then re-lending them to industry. The State Bank, which was both the Government's banker and the • Bank of Issue, also engaged in considerable direct dealings with industry, often appointing nominees on the Boards of companies which it financed, and, in particular engaged in financing and in direct dealings in the grain trade. Unlike many other central banks, its branch system was considerably developed, and in it possessed nearly i,000 local branches and agencies. A distinct tendency had appeared, however, before the war for the State Bank to assume more and more the position of a "bankers' bank," like the Bank of England and the Federal Reserve Banks of U.S.A., conducting rediscount operations for other banking in stitutions, rather than financing industry and trade direct; and between 1912 and 1914 about half of its loan and discount opera tions were of this kind.

Effect of the World War.

The financial strain of the World War, with its resulting currency inflation, the heavy demands of war requirements on industry and an inadequate transport system, combined with the cessation of certain vital imports from the West, had already begun to produce signs of economic exhaustion and collapse by the winter of 1916. The fact that Russia was self-sufficing in foodstuffs did not help her as much as is often supposed, since the power of inducing the peasant to sow his fields and bring his grain to market depended (apart from methods of compulsion) on the ability of the towns to offer manufactured goods to the peasant in return; and the preoccupation of industry and transport with the needs of war and the consequent scarcity of ordinary manufactured goods soon aroused the peasant to the fact that he was selling his grain for paper money which had a steadily diminishing purchasing power, with the result that his willingness to market his produce sharply decreased. This caused a growing food shortage in the towns, which reacted on the position of industry in a vicious circle, and raised the wind of a gathering discontent among the masses—a discontent finding vent in the first revolution of March 1917, and later, as the economic crisis worsened, in the Soviet revolution of November 1917. To pre vent competition in grain purchase from enhancing food prices, the Provisional Government which came into existence on March 15, 1917, adopted on March 19 a State grain monopoly with fixed maximum prices.

While inflation, therefore, continued to exert its full influence in raising industrial prices, the price which the peasant received for his produce was forcibly kept down. This increased the tend ency for the peasant to hold back his grain from the market, thereby accentuating the food crisis in the towns at the same time as it fanned the flame of social discontent in the villages. The new Soviet Government, accordingly, assumed power in face of a serious food situation, of a decline of industrial production to a level of less than 7o per cent of the normal, and of a transport crisis of which the fact that a third of the railway locomotives were derelict or awaiting repair was a crucial symptom. In turn, this situation was aggravated in another vicious circle by an acute fuel crisis as a result of the difficulties of moving coal from the pitheads. The passing of war into civil war, and its continuance until the end of 192o, together with a blockade from the West and the occupation by invading armies of some of the most important industrial areas, such as the Donetz coal field and the oil fields, continued this economic decline until in 1921, when drought and famine stalked through the Volga region, it threatened complete and catastrophic collapse.

The Economic Policy of the Bolsheviks.

The policy of the Bolsheviks when they assumed power in November 1917 was not to achieve complete socialism at one fell swoop, as is often imagined. Lenin's theory based itself on the Marxian analysis of capitalism as a system under which a class that monopolised property lived by exploiting a propertyless class, and which con sequently tended to become increasingly unstable and inefficient as a result of the class antagonism that it engendered between exploiters and exploited. In such a class system, to his view, the State, even if clothed in democratic forms, was simply the instru ment of the ruling class, designed to perpetuate the dominance of that class. Hence the pre-requisite of any fundamental change of system was that the workers should seize power through their own organs of control (a revolutionary Party, the Soviets and the Trade Unions), and set up a new State machine subordinated to the interests of the workers. Having by this first step occupied the "key positions," which gave the possibility of shaping the de velopment of society on a new course, the further task was to abolish class monopoly of economic property by transferring property into the hands of the new Workers' State, and to achieve the economic transition to socialism.