Dorothy Thompson

Buffalo News/February 9, 1928

Sells Goods Abroad at a Loss, But Balances Ledger by Increasing Prices at Home

In this article, the fourth of a series on Soviet Russia, Dorothy Thompson, a Buffalo girl, describes how Sovietism has deviated from its original principles.

Soviet Russia after ten years has abandoned one by one many of its original collectivist tenets. Although the land is “nationalized,” efforts to have it collectively worked have not thus far been very successful. 

The system of tenancy in perpetuum as long as the lend is worked, with the possibility of the tenant passing it on to his heirs, amounts in practice to private ownership, with the difference that the tenancy does not extend to natural resources such as minerals or oil, which may be found on the property.

Soviet Russia has learned that people will not live collectively. If the government could afford it, every worker would have three rooms, a bath, standardized built-in furniture and a kitchen outfitted with the latest electrical devices.

The right to personal property has been restored. The Soviet government has learned that one cannot exchange goods for goods without the medium of currency, and has, in stabilizing the chervonetz (the ten-ruble note) adopted not some new-fangled and —from a Socialist viewpoint—more rational system like that proposed by John Maynard Keynes, but Wall Street’s own basis—gold.

The Soviet government has revived the system of money credits; despite all its theories about unearned increment, it encourages saving to the extent of taking enforced loans from the population.

It has “freed” a great many of the distributing processes and opened them to private initiative. As fast as it can, it is trying to put state industries on in economic cost-plus basis. It has abandoned in these industries the Marxist principle of “To Every One According to His Needs,” and in most of the factories work is done on a piecework basis, whereby the worker is paid, not according to his needs, but according to his production.

A Different Capitalism

It does not return to the worker in the form at wages “the full product of his work” or anything approaching the full product. According to Soviet figures, it returns to him between 17 and 22 per cent. Soviet Russia is, indeed, not a Socialistic state. It is a system of state capitalism.

The Soviet state is a single super trust, controlling the entire income and resources of the largest geographical unit, and at the same time the potentially richest unit, on the globe. It is a super-trust, vertical and horizontal, embracing every form of exploitation, production and manufacture, letting out this or that resource occasionally to private corporations or individuals, delegating this or that distribution medium to private persons or co-operatives, but exclusively controlling credits and foreign trade.

Its ledgers are not subject to the checking of the people who live in this state and therefore, in theory, it would seem, would be the state. They are not subject to any control whatever except the control of the members of the corporation. And the members of the corporation are not even in theory the citizens of the state.

Communists Comparatively Few

In theory there are the proletariat, In practice, all the votes on this superboard are dummy votes, except those cast by the 700,000 members of the Communist party, who determine policy, in a pyramidal indirect system, which gets the ultimate power into the hands of a very few and leaves it there with little control.

This super-trust, run by the supreme economic council, employs a great many people who are not Communists, just as any capitalistic trust employs many people who are not members of the board of directors.

There are less than 1,000,000 communists in the whole of Russia; with its 137,000,000 population there are 2,500,000 government employees, using the word in its most restricted sense. Because in its large sense, of course, everyone who works in Russia—the peasants and the negligible number of people employ by private businesses and foreign concessions excepted—is a government employee.

Not Rule of People

But it employs them just as a capitalist employs labor. If they show any disloyalty to the firm, they lose their jobs. The difference between this trust and any other is that they not only lose their jobs, but they may go to jail. And the employer is at the same time judge, jury and executioner.

The state, this super-trust, is not the people. The theory is that it will become synonymous with the people when the revolution is over. Because Russia considers herself still in a state of revolution. The bourgeoisie as a ruling class have been conquered, to be sure. They have been more than conquered, they have been exterminated.

But bourgeois ideas, bourgeoise tendencies, have not been completely exterminated. And until they are exterminated, the Communist party says, the revolution must go on, and Russia must maintain the dictatorship of the proletariat (i.e., the dictatorship of the self-appointed but tolerated and even popular leaders of the proletariat, the communist party) 

Efficiency Bolstered

Of this dictatorship, and how it works, I shall write in another article. Here it is sufficient to say that without doubt it lends an efficiency to the state as a trust, which it could not possibly have under a democratic system. And although, measured by western standards, the state super-trust is woefully inefficient, it must always be borne in mind that it does not need to measure itself by these standards. 

It has a complete monopoly. It can allow itself measure and mistakes which would ruin any free capitalistic organization. It is not subject to the economic laws which operate in western capitalistic society A state in control of everything cannot become insolvent as long as its citizens can stand the brunt of its administration and it does not have to mortgage itself to a foreign power. It can be categorically stated that there is no sign of any weakening of the Soviets’ political power and its debts abroad are negligible.

To illustrate: The government states that last year its profits from industrial production were 50,000,000 rubles. How did it make these profits? Inside Russia, it charged prices for industrial from two to 600 per cent above the prices for the same articles abroad.

Prices Set Arbitrarily

Russian machine works are now turning out a motor truck, the Amo. It is copied from a stolen Fiat model, and the cost of making it is 10,000 rubles One can buy it from Italy for 2,500 rubles. That is to say, one could buy it from Italy at this price, if there were not a monopoly of foreign trade. And who buys those motor trucks manufactured by the government? The government itself! One hand feeds the other. 

Two years ago an Italian co-operative organization obtained a license to import certain fruits from Russia. Among the products were lemons, which at that time in Russia cost one ruble apiece (50 cents). This co-operative offered to sell lemons for 15 kopeks apiece. The Soviet government refused to allow this price, saying that the Ukrainian co-operative organization (supposedly a “free” institution), the “Larjok,” must make a profit of 35 kopeks per lemon or fail. 

The system of governmental protection for the governmental trusts is not comparable with any protection system in the world. The Soviet government can allow itself, for instance, to sell its agricultural products abroad at a loss. It has sold oil at a loss; when occasion demanded, it has sold grain at a loss;-it has certainly sold lumber at a loss.

Wide Discrepancies

With the money obtained, it purchases such industrial products as it cannot manufacture at home, and sells them inside the country at prices sufficient to make up the Ioss.

The discrepancy between the prices of agricultural and home workshop products and manufactured goods is amazing. Black bread coats 1½ cents per pound, butter 54 cents, eggs two cents apiece, soup meat 23 cents per pound, kerosene five cents per quart, an inferior quality of cheese 40 cents per pound, milk five cents a quart, ham 66 cents per pound. 

These prices, in comparison with those of surrounding states, are about normal. Some of them are lower than prices in Germany, for instance. All agricultural products, however, which could be interpreted as luxuries are exorbitantly high. A pair of felt boots costs from $15 to $25; a set of inferior woolen underwear $12; wool stockings of an inferior grade $4; wool gloves the same. This discrepancy is the more glaring when measured with the of cost of home-made goods. Handwoven linen can be bought cheaper than machine-made calico.

Figures Inaccurate

It is an accepted belief among foreigners working in Russia that Soviet heavy industry is operating at a loss and is kept up by revenue from other sources (taxes for instance). This cannot be proved. Reliable inner statistics are lacking. This discrepancy in government statistics must always be born in mind. 

A recent government grain report issued by the Mosotorg (Moscow trading organization) gave the annual crop as 535,000,000 poods (a pood is 36 pounds). When asked how this was estimated the reply was that it was obtained by adding the amount of grain carried by cart, trains, river transport, etc. 

Obviously this is inaccurate because much of the crop must have been transported by all three mediums. A later figure gave the crop as 480,000,000. 

There is the same inaccuracy in industrial statistics. In one set of figures a factory will be evaluated at 10,000,000 rubles; in another set of government figures the same factory will be counted as worth 15,000,000 rubles.