Russian relations with the West were mercurial. Britain’s first Labour government granted diplomatic recognition to the USSR in early 1924, and Italy and France—although not the United States—soon followed. By October, however, relations already became strained when the ‘Zinoviev letter’ caused a scandal during British elections. Allegedly a directive on tactics from the Comintern to the British Communist Party, the publication of this forgery played a role in the Conservative victory. By May 1927 matters deteriorated to the point that Britain severed diplomatic ties, and France demanded in October that the Soviet Union recall its ambassador. Stalin capitalized on the furore: although legitimately concerned, he publicly exaggerated the imminent danger of military conflict and deftly exploited the ‘war scare’ against the Trotsky–Zinoviev–Kamenev bloc in the politics of succession.
In the end, the Soviet state achieved little in foreign relations during NEP: nor was it able to ignite international revolution to improve appreciably its standing in Europe. When Stalin ascended to top leadership, he replaced Lenin’s policy of ‘peaceful coexistence’ with a philosophy that emphasized the link between internal mobilization and foreign threats: the concept of hostile capitalist encirclement. But behaving as if surrounded by enemies bent on the destruction of the country only served further to estrange the USSR. Hence Soviet Russia ended the 1920s much as it had begun the decade—without reliable allies and widely distrusted.
‘Building Socialism with Capitalist Hands’
Economic life in 1921–9 reflected the full measure of the national crisis the Bolsheviks inherited, the consequences of party political struggles, and the limitations that ideology imposed on proposed courses of action. The problems were fundamental and ubiquitous; conflict over the correct policy of industrialization left the party deeply divided. An incomplete and inconsistent commitment to NEP both nationally and locally undermined its effectiveness. Ongoing economic chaos and recurrent crises continued to plague the grass roots.
In terms of national development, the leadership felt an acute need for a strategy of industrialization. By 1921 the economy certainly had to be resuscitated for practical reasons, but other important considerations also played a part. Above all, orthodox Marxism had posited that socialism could come into being only in a fully industrialized economy. That was hardly the case in Russia: the Bolsheviks had made a ‘proletarian revolution’ in an overwhelmingly agrarian country. To square the circle, all party leaders accepted as axiomatic that Soviet Russia must industrialize to continue on the road to socialism. But that left the door open for fundamental disagreements over the tempo and short-term priorities. In the event, implementing NEP as a step in this long-term undertaking (what Lenin called ‘building socialism with capitalist hands’) in no way ensured unity even at the highest levels.
There were more pressing matters, however, before industrialization reached the top of the agenda. By 1921 the country faced almost total economic collapse: gross industrial output had fallen to less than one-fifth of the level before the First World War, production in some industries such as textiles was a mere one-tenth. Matters were hardly less catastrophic in agriculture: when the 1921 harvest produced significantly less than half the pre-war average, famine and epidemics ensued, claiming millions of lives. By 1922 hyper-inflation had driven prices, particularly those for agricultural products, to astronomical heights. In response, the government created a new currency backed by gold, the
The year 1923 witnessed the famous ‘scissors crisis’, a complete reversal of the price relationships of the previous year. In essence, agriculture had now begun to recover more quickly than industry. Although food was still not abundant, the shortage was no longer desperate. The supply of agricultural products thus outstripped the production of manufactured goods; as a result the index for industrial prices in 1923 rose to a level three times higher than agricultural prices. When plotted on a graph, these price indices—industrial prices rising, agricultural prices falling—resembled scissors, hence the name. In response, peasants resorted to grain-hoarding and a low level of marketing in the subsequent two years; that caused agricultural prices to recover in 1924–5, although obviously not in the way the state desired. As a result, the scissors crisis further exposed the fragility of NEP, suggested an incompatibility of private agricultural and industrial sectors, and—perhaps of greater long-term significance—reinforced the chronic fears of the kulak.
