Soviet Industrial Organization

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WORLD JULY 20, 1921

Soviet Industrial Organization

Fantasy could hardly devise a situation less auspicious for nationalization of industries than that of Russia in 1918. A country with a capitalist system only thirty years old; with brand new industrial establishments modeled after western patterns forming a strange contrast to a backward home life; with manufacturers freely exploiting a vast, protected, internal market and consequently not spurred to efficiency by competition; with punctuality and mechanical exactness, those virtues of the capitalist system, hardly known to a generally lax population; with a very thin crust of the working-class in possession of a minimum of technical skill, and with foremen and managers largely drawn from abroad,—a country of this kind would have formed poor ground. for nationalization experiments even in normal times. Added to this were: the collapse of production and transportation after four years of  war; the cessation of imports which prior to 1914 had amounted to from 1.2 to 1.3 billions of rubles yearly—mainly machines, industrial equipment, chemicals, cotton; the demoralization of the workingmen as a result of war and revolution; the boycott by the intelligentsia of the new system.

The Russians were stirred by hatred of oppression and by a vague though powerful impulse to free themselves. Without much planning, the workingmen of Russia had started  the process of nationalization under the Kerensky regime. It was then called "workmen's control" and consisted of shop committees invading  the business offices and arbitrarily establishing standards of profit,—but it was potential nationalization. The owners would not and could not work under the Damocles sword of dispossession.

Their attitude was branded as sabotage by the revolutionary workmen, but it need not have been a conscious sabotage, though in many instances it was. Former absolute masters of industrial plants could not peacefully cooperate with potential absolute masters from a new class. Things went from bad to worse. One side or the other had to quit. The October revolution only gave legislative formulation to  the then existing distribution of power. Even so, the unnatural combination lasted eight months after the ascendency of the Soviets. Managing boards and central committees of the various industries still admitted representatives of capital with a minority of not more than one third. Almost a year after the revolution,  the system showed workmen in power dragging after their chariot the unhappy, nominal owners who were shorn of all privileges but heaped with abuse and made responsible for ill-success.

The system had to be cleared. The decree of  June 28, 1918, ordering the nationalization of the larger plants—those with a capital of not less than half a million rubles—showed a way out of  the tangle. Nationalization of the joint stock companies, the banks and the merchant marine, was a natural consequence. The proletariat was victorious. The end of 1918 was marked by a riot of dispossession all over the country. Not till the end of 1920, however, was the process accomplished in the rough.  Out of 6,775 industrial establishments (exclusive of mines) of which account was taken, 2,522 were nationalized before October I, 1919; by April 1, 1920, the number grew to 4,140, and by the end of 1920, to 4,420, embracing the most vital and well equipped factories, plants and shops. It is thus evident, that the management of nationalized industries in Russia is hardly more than two and a half years old.

Two tasks confronted the Soviet republic after the first wave of nationalization: first, to secure fuel and raw materials for its industries, second, to establish a new industrial management.  The first task was not accomplished till the end of 1919. The gold and iron ore of Siberia, the iron, copper and coal of the Ural, the cotton of Turkestan, the oil of Baku, the coal of the Donetz region and the steel of the Yekaterinoslav region were secured only after the victories of the Red army over Kolchak, Denikin, Yudenitch, Krasnov and a number of minor enemies within and without. But this very work of restoring to Russia her natural resources made the work of organization extremely difficult, if not entirely impossible.

The organization of  the management was not a well planned and executed system. It grew with the revolution, undergoing adaptations or catastrophic changes. It started with shop committees of employees managing  "their" concerns. Syndicalist tendencies were marked at the end of 1918 and the beginning of 1919. To put it in  the words of V. Miliutin, " The workingmen thought it natural that the management of nationalized enterprises should pass into the hands of the respective labor unions. The railroad workers considered the railroads almost as their property, which should be in their complete possession; the employees of the merchant marine established  the same practice in relation to their craft. Similarly  the workmen of nationalized factories considered them their own." This tendency was soon checked. Centralization was dictated by war emergency and by need of an organized distribution of man power, raw materials and fuel. The state was gradually gaining hold over the factories and mines. A central committee of nationalized industries and main committees for each branch of industry were established. The work was greatly aided by the labor unions, which, according to the practice prevailing up to the end of 1919, furnished one-third of the membership of all such economic organizations, the rest consisting of state appointees including technical advisers. The committees were large and the work of management was at first dissipated in endless discussions. As an example, the central committee of the textile industries may be cited.  It was established by the decision of a convention of the textile workers' union in February, 1918, and consisted of seventy members: thirty from the union elected at their national convention, fifteen from the owners—who at that time were not yet entirely dispossessed—and twenty-five representatives of the various administrative and economic organizations of the country—including one member of the non-existing peasants' organization of flax growers—so far went the forethought of the founders in their reverence for industrial democracy. This body elected a praesidium of eleven to discharge current duties. Both bodies were incapable of quick and uncompromising actions. Gradually the labor group assumed all responsibilities. The owners' group ceased to attend the sessions. But even a membership of thirty was too cumbersome. By the end of 1918 it shrank to seven. In a similar fashion, the shop committees which originally managed the nationalized factories, were superseded by individual managers appointed by the state with the approval of the labor unions. The system was gradually straightening out, strengthening its machinery, gaining control over the factors of production, and making it its task to eliminate waste and increase productivity.

As it appeared towards the beginning of 1921, the management of Russian industries was a highly centralized bureaucratic body. At the head of it was the Highest Council of National Economy, a body of thirteen with the rights of a people's commissariat (corresponding to la ministry in constitutional countries). Its members were elected at a national convention of the local councils of national economy with the approval of the national convention of the labor unions. The Highest Council of National Economy is the head of all Russian industries but not the manager of all Russian production and distribution.  In addition to it there exist the Commissariat of Transportation, the Commissariat of Supplies, which collects the agricultural products from the village population and distributes both those products and the manufactured goods, the Commissariat of Labor, now incorporated in the national committee of the labor unions but formerly independent, the Commissariat of Agriculture, and the Commissariat of Foreign Trade, besides the various extraordinary commissions for the supply of the army which flourished in war-time and are now losing importance. This division, in many ways artificial, is a remnant of  former days, and, as is  true of many a survival, it is in process of elimination.

The realm of the Highest Council of National Economy is thus not definitely circumscribed. In the main, however, ,it is supposed  to manage the chief industries of the country. Its work is carried out by three kinds of subsidiary organizations: commissions, administrative branches and industrial departments of  the commissions. The most important are ( a) the Commission On Production, whose task it is "to collect the various production programs of the various branches of industry, to revise and unify them and submit them to the praesidium (of  the Highest Council)," and (b) the Council of Provision and Distribution, which assigns to each branch of industry the raw materials and semi-manufactures obtained from  the mines and factories and from the Commissariat of Supplies. The administrative branches embrace: the Branch of Communication with Local Councils, the Branch of Finance, the Branch of Inspection, the Branch of Statistics etc. The industrial departments each correspond to a separate branch of industry and represent special committees supervising the industries. The departments, however, do not occupy themselves with the actual management of plants or groups of plants. This work is done by main and central committees (the names are used promiscuously) established for each industry. The number of such committees at the end of 1920 was fifty-nine and it is through them that the industrial departments carry out the decisions of the Highest Council. The chief industrial departments were those of (1) metals, (2) mines, (3) chemicals, (4) foodstuflfs, (5) textiles, (6) leather, (7) clothing,  (8) electric works, (9) polygraphy (printing works etc .), (10) automobiles, (11) peat, (12) state constructions, (13) lumber and timber. The number of main committees in each department varies according to the industries embraced by that department. The jurisdiction of the departments and committees is in process of change. Some departments show a tendency to absorb the activities of  the committees. Thus the Department of Textiles is the actual managing body of the industry and has only executive offices for the various sections of its work. On the other hand, some main committees succeed in freeing themselves from the supervision of their departments and becoming directly connected with the Highest Council.

Each main or central committee has a great deal of independence within its realm. It is often likened by the Russians to the board of directors of a trust in a capitalist country, but it seems to be more concerned with technical problems of production than a board of directors. The factories and plants under each main or central committee are combined in clusters or groups ("bushes" in Russian) according to location. Each group of factories has its own management. The machinery, equipment, raw material, fuel, man power, technical aid of the group are pooled together. Its financing is also done from one centre.  The lowest unit of the system is an individual factory or plant. Thus going down the scale of the organization we find: The Highest Council of National Economy—the Industrial Department—the main committee—the group management—the individual factory. The members of the main committees—ordinarily not more than three in number—are appointed by the Highest Council with the consent of the respective labor union. The management of groups (bushes) and plants are appointed by the main committee also with the consent of the union. The group is ordinarily headed by a body of not more than  three; in the individual factory, the single manager prevails. In 1920, out of 2,483 factories of which statistics were collected, 2,183 had single managers. The number of workmen in the managers'- office is large. Out of 1,124 managers or members of managing bodies in the textile industry in 1920, 726 were former workmen and 398 belonged to  the former technical personnel.

Alongside of the management of  the individual plant, works  the local shop committee elected by the workmen. It forms the nucleus of the labor union, and its main task is to organize and educate the workmen and increase the productivity of their labor, but  it often cooperates with the management in a number of purely technical problems. This is the machinery in its vertical divisions. Horizontally it is divided into province councils of national economy and county councils of national economy forming departments of the local Soviets and appointed by the executive committee of the Soviets with the consent of the province committees or county committees of the labor unions. The subdivisions of  the province councils correspond to the industrial departments of the Highest Council. In war-time, all the important plants were managed from Moscow, the province councils being disregarded. The eighth all-Russian congress of Soviets (December, 1920) decided  that all the work of management should be conducted through the local economic councils.

Casting a glance at the work of this organization we find the following main characteristics:

1. It suffers from an over-abundance of offices and a lack of clearly defined jurisdiction. Under a uniformly managed industrial system, the railroads cannot be independent, and the commissariat of supplies cannot stand as a sovereign body.  T he Highest Council of National Economy has a Department of Agriculture and a Department of General Distribution and a Department of Foreign Trade, duplicating in a measure  the work of other commissariats. On the other hand, it has joint commissions with other commissariats and interlocking boards. This clogs the machinery and creates an interminable amount of red tape. The main committees have become a byword in Russia for their bureaucratic methods. However, the system is improving. A commission on a uniform economic plan is in session, and an important work of consolidation was done by the last convention of councils of national economy in May, 1921. A process of decentralization with a tendency toward increasing the initiative of local groups is taking place.

2. In order to combine and unify all the economic activities of the country, a temporary military Council of Labor and Defence was established in the course of the war, with dictatorial powers. After the termination of the war, the council remained as an interdepartmental body, a sort of economic clearing house, pending the working out of a general uniform economic plan which does not seem to be far off.

3. The productivity of labor has decreased on an average forty-five per cent, according to official statistics. According to Strumilin, the decrease was only thirty-five per cent. This is due primarily to worn-out machinery and to the diminished vitality of the workers. In 1908-16, the daily food of a city worker in Russia was equivalent to 3,820 calories, in 1921 it is equivalent to 2,830. Two thousand being  the minimum required for the maintenance of the body without work, the worker has now 45.6 per cent of his former surplus of energy to be put into work. Mental drawbacks due to demoralization etc. are on the decline and have almost disappeared. The average number of workdays in 1920 was 241 as against 268 in 1914. The decrease was due first to sickness (19 days in 1920 as against 7.4 in 1913-16), second, to stoppage in consequence of the disorder in the economic system. According to all testimony, the willingness of the worker to work is now beyond question, provided he is assured ample food and continuous employment. The role of  the labor unions in this respect should not be undervalued.

4. The output of the Russian industries in 1920 ranged from twenty to thirty per cent of the pre-war output sometimes, as in the production of cast iron, falling below ten per cent. The imperfection of the new management may account for a certain part of this decline. It seems, however, that it was mainly caused by six years of war, by the impossibility of obtaining machinery and materials from abroad, by the temporary loss of many provinces rich in minerals and fuels, and by the impaired vitality of the workers. Under such conditions, even the maintenance of the industrial skeleton seems a considerable achievement. Progress of any kind, however slight, appears a great victory. Progress of considerable extent should be recorded in the coal production of the Moscow area (in 1920 an increase of 175 per cent over that of 1918 and 1919), in the Ural coal region (an increase of 150 per cent as compared with 1918), in the repair of locomotives and rolling stock, in the construction of subsidiary railway lines, in the construction of electric power plants (Shatury and the Svir-Volkhov works), in the manufacture of substitutes, in the construction of motors and aeroplanes, and in the extraction of peat and shale for fuel. Many experiments in the technical field were successfully conducted and many inventions made.

5. The industrial system is gradually changing from a war to a peace footing. Accordingly, the system of "shock industries," demanding that certain plants and factories be operated on high scale of productivity at any cost, a system which yielded a maximum of production to the detriment of the entire economic organism, has been superseded by a more economical use of materials and equipment. With trade between Russia and other countries rapidly increasing, this augurs well for the near future.

6. Nationalization was not only an outcome of the revolution but also a war emergency measure. It never included the small shops and the home industries. With return to peace conditions, more freedom is given to private initiative, and the small producer and cooperative producing societies are being encouraged. Said  the chairman of the Highest Council of National Economy at the last economic convention: "There is no rule, custom, law or decree which should not be abolished, if as a result, we obtain more commodities, better commodities, an increased exchange with the villages, an improved economic system  . . . If a factory could be operated under private management and it stands still under our control, it is a crime not to hand it over to a private owner when we are not in a position to run it. The main task is to overcome the crisis in goods as quickly as possible at whatever cost." 

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