The Development of Capitalism in Russia

Lenin’s economic work on the inevitability and formation of capitalism in Russia which also depicted its specific development forms. Written between the end of 1895 to January 1899, it was published in the 5th and 6th issues of the journal of Scientific Review in May and June 1900 and was published in March 1899 as a booklet.

The Chinese translation is included in Vol. 3 of the second edition of the Complete Works of Lenin.

From the 1880s to the 1890s, the central issue between Marxists and liberal Narodniks was the fate of Russian capitalism. This problem is closely related to the future of the Russian Revolution and the leadership of this revolution. Danielson, the representative of liberal Narodniks, claimed that the development of capitalism in Russia does not have a foundation, for him capitalism in Russia was purely the result of artificial measures. Narodniks argued that Russia could avoid capitalism and achieve “socialism” through rural communes. This conclusion was bound to deny the historical position of the Russian working class and the leading role of the proletarian party, and became an important obstacle to the spread of Marxism and the establishment of Marxist political parties. By examining the process of development of capitalism in Russia, and analyzing Russian economic and social class structure, Lenin thoroughly criticized liberal Narodnism and cleared up the ideological obstacles for the spread of Marxism and establishing a proletarian party in Russia. There are eight chapters in the book, which can be divided into three parts.

In the first part, namely the first chapter, Lenin analyzes and criticizes the theoretical errors of the Narodnik economists, and focuses on several basic theoretical principles of capitalist domestic market.

First of all, Lenin pointed out that the emergence of Russian capitalism has its realistic basis, that is, it is inevitable. He pointed out that due to the separation of manufacturing industry from the raw materials industry, and of the separation of manufacturing industry from agriculture, agriculture itself has become an industry, a branch of commodity production. The process of specialisation that seperates diverse varieties of the manufacture of products from each other not only causes an exchange between the agricultural products and the industrial products, but also causes an exchange between various agricultural products. This growing specialization transforms their respective products into commodities for exchange, so that the market is formed, and the formation of the market is the prerequisite for the development of capitalism. Therefore, the social division of labor is the basis of the entire process of development of commodity economy and capitalism. The process of capitalist development is not the result of artificial measures as advocated by the Narodnik theorists. It is the necessity of the social division of labor in Russia after the reform.

Secondly, the Narodniks asserted that the ruin of the small producers would inevitably lead to the shrinking of the domestic market, which Lenin refuted, arguing that the ruin of the small producers did not lead shrinking of the domestic market, on the contrary, creation and expansion of the domestic market. The ruin of the small producers inevitably leads to the ownership of their means of production by others. The new owners of these means of production produce the goods originally consumed by the producers themselves in the form of commodities, thus expanding the domestic market. In addition, for the market, what is important is not the well-being of the producers, but their possession of money. In short, the separation of direct producers from their means of production marks the transformation from simple form of commodity production to capitalist commodity production, as well as marks the establishment of the domestic national market.

Thirdly, Lenin argued that the expansion of Russian capitalism and the expansion of the domestic market depended on a large extent on the production of the means of production. According to Marx’s theory, the total product of a capitalist country, like any individual product, consists of the following three component parts: constant capital, variable capital, and surplus-value.  It is necessary to distinguish between the two major departments of capitalist production–the production of means of production and the production of consumer goods. It can be concluded from Marx’s theory of realization that the capitalist production, and consequently, the home market, does not grow so much on account of the means of consumption as on account of means of production. Lenin pointed out that clarifying the difficulty of realization is the premise of clarifying the question of national income and national consumption.

Fourthly, Lenin discussed the problem that capitalist countries must have foreign markets. Lenin pointed out that the capitalist countries must have foreign markets based on the following points: capitalism is merely the result of the extensive development of commodity circulation beyond the national boundaries; the proportion of various parts of social production needs to be maintained properly. The law of capitalist production is the constant transformation of production mode and the unlimited expansion of production scale. Therefore, the search for foreign markets is not, as Narodnik economists have described it, proof that capitalism cannot be sustained. On the contrary, this need clearly shows the historical role of capitalist progress, which links all countries in the world into a unified economic whole.

The second part is the second to the fourth chapter. Lenin summarized the characteristics of the evolution of Russian agricultural capitalism after the 1861 serfdom reform of Russia.

Lenin made a systematic exposition on the problem of “the differentiation of peasants”. Lenin first pointed out that the social environment of Russian peasants’ differentiation is commodity economy. In this social environment, modern Russian peasants are completely dominated by the market, and there are all contradictions inherent in any commodity economy and in any capitalism, such as competition, rent grabbing, land grabbing, concentration of production, etc. Russian village peasants are not in an antagonistic positon to the bourgeoisie mode of production, instead they are the most profound base of capitalism. The capitalist factors within the village are forming. The inevitable result of the village peasants falling into the market vortex is to promote the differentiation of peasants. Lenin further pointed out that the differentiation of peasants means the complete disintegration of the old patriarchal peasants and the formation of new rural residents in Russia. There are two new types of rural residents, one is the rural bourgeoisie or the rich peasants, who have an absolute advantage in the whole peasant economy and are the masters of modern rural areas; the other is the rural proletariat, that is, the land-based wage working class, the most typical rural proletariat is the land-based wage peasants, day laborers, small laborers, construction workers and other workers. The characteristic of the middle peasants between them is that the development of commodity economy is the worst, and most of them are destined to enter the rural proletariat. In addition, Lenin also pointed out that the result of the differentiation of peasants is to establish a capitalist domestic market. However, the commercial capital, usury capital and labor-service system in Russian countryside hinder the development of rural capitalism. It can be seen that the rural communes are not as perfect as the Narodniks imagine and argue. In the countryside, the differentiation of peasant class is becoming more and more profound and fierce.

Lenin studied the characteristics of the transition of the landowners’ economy from a corvée economy to a capitalist economy. Different from Narodniks, Lenin reveals the historical progress and long-term nature of this process. In his opinion, capitalist economy can not be produced at once, and corvée economy can not be eliminated at once. The landlord economic system after reform can only be a transitional system that includes both the characteristics of corvée system and capitalist system. The capitalist system, which employs workers to cultivate land with private owners’ farm tools and livestock, is undoubtedly more advanced than the labor-service system. The evolution of this system promotes the generation of “migration” and destroys the labor-service system; it causes the flow of residents and brings “pure economic” benefits.

Lenin also discussed the development of commercial agriculture. Lenin pointed out that the basic characteristic of agricultural evolution after the reform was that agriculture was more and more commercial, that is, the nature of enterprise, and the growth of commercial agriculture established the capitalist domestic market. The reason is that the specialization of agriculture leads to the exchange of agricultural products among agricultural areas, farms and peasants, and the increase of rural residents’ demand for processing industrial products for personal consumption. The demand for means of production is accelerating; the demand for labor is increasing. Lenin also pointed out that although capitalism caused many contradictions among the agricultural population, the development of Russian agricultural capitalism still has its progressive significance. At the same time, we should not forget the historical temporality of this economic system or its inherent profound social contradictions. The Narodniks obliterated the differentiation of the peasants, ignored the capitalist nature of the machines used in Russian agriculture, and covered up the formation of the rural wage earner working class with “agricultural sideline” and so on.

In the third part, namely the fifth, sixth and seventh chapters, Lenin elaborated the development of Russian industrial capitalism. The development of capitalism in Russian industry has gone through three main stages, namely, the production of small commodities, the handicraft industry of capitalist workshops and the large machinery industry. There is the most direct and close relationship and inheritance between these three industrial forms.

The production of small commodities is characterized by complete handicraft technology. Home industry, craftsmen and small commodity producers all adopt the form of handicraft technology. They are afraid of competition and fear that it will destroy the original patriarchal paradise of small craftsmen. However, the influence of competition and capitalism is inevitable. The regional local market formed in this stage is bound to be a unified domestic market and the capitalist world market.

Capitalist handicraft production includes all forms of industry from the beginning of family handicraft and handicraft to the employment of large handicraft workshops. But Narodnik economists confuse all kinds of economic organizations, and regard “handicraft industry” as something that is single in economy and the same in itself. And it is opposed to capitalism, which is understood as “factory” industry. In Lenin’s view, this removed a large number of capitalist workers from capitalism who were classified as “handicraftsmen”. In the stage of workshop handicraft industry, division of labor is adopted, and technology is fully developed compared with the previous stage. A large number of traditional peasants become workers and craftsmen. Because it still adopts manual technology, which is very close to the production of small commodities. At the same time, its development promotes the emergence of industrial workers, so that the masses of workers are heavily dependent on capital, which is close to the future stage of the factory. It can be seen that this stage is the key to connect small commodity production and factories.

The biggest difference between the stage of machinized industry and the previous stage is the socialization of labor. For example, for the production of huge domestic market and international market, there are close business relations with various regions and countries in purchasing raw materials and auxiliary materials, huge technological progress, concentration of production and population caused by huge enterprises, and formation of population mobility. The increase of workers’ demand and the improvement of the level of civilization, etc., indicate the increasing socialization of domestic production, and also indicate the increasing socialization of production participants. Lenin pointed out that with the rapid development of Russian factory industry, a huge and expanding market for means of production and consumer goods has been established. Big machine industry is the peak of capitalism.

The fourth part is the eighth chapter, which studies the formation of the domestic market. According to Russian statistical data, Lenin made a comprehensive study and analysis of Russia’s socio-economic system and social structure from the aspects of commodity circulation, industrial and commercial population, the use of hired labor and the formation of the domestic market of labor, etc., thus giving a powerfully proof that capitalism has become a dominant mode of production in both rural and urban areas, and Russia has become a capitalist country. This conclusion constituted a powerful refutation to the Narodnik theory of “leaping over capitalism”.

Lenin defended and developed Marxist political economy in this work, and his relevant arguments became the basis for the Bolshevik party to formulate the program and tactic later, which had guiding significance for Russian revolutionary practice.