by the dictators appointed by the state. The railway workers' unions were no longer recognized, and the right to strike was denied and strikes declared to be treason against the state. The railway workers' councils were not abolished at first, but were reduced to a nominal existence as "consultative bodies," which in practice were not consulted. Here was the apotheosis of the state: the new policy could not be restricted to railways; nationalization of industry, under state direction, was to take the place of the direction of industry by autonomous workers' councils.

In May, 1918, Commissar of Finances Gukovsky, staggered by the enormous loss incurred upon every hand, in his report to the Congress of Soviets called attention to the situation. He said that the railway system, the arterial system of the industrial life of the nation, was completely disorganized and demoralized. Freight-tonnage capacity had decreased by 70 per cent., while operating expenses had increased 150 per cent. Whereas before the war operating expenses were 11,579 rubles per verst, in May, 1918, wages alone amounted to 80,000 rubles per verst, the total working expenses being not less than 120,000 rubles per verst. A similar state of demoralization obtained, said Gukovsky, in the nationalized marine transportation service. In every department of industry, according to this highly competent authority, waste, inefficiency, idleness, and extravagance prevailed. He called attention to the swollen salary-list; the army of paid officials. Already the menace of what soon developed into a formidable bureaucracy was seen:

"The machinery of the old régime has been preserved, the ministries remain, and parallel with them Soviets have arisen-provincial, district, volost, and so forth."

In June, 1918, after the railways had been nationalized for some time, Kobozev, Bolshevist Commissar of Communications, said: "The eight-hour workday and the payment per hour have definitely disorganized the whole politically ignorant masses, who understand these slogans, not as an appeal to the most productive efficiency of a free citizen, but as a right to idleness unjustified by any technical Whole powerful railway workshops give a daily disgraceful exhibition of inactivity on the principle of 'Why should I work when my neighbor is paid by time for doing no work at all?""

means.

Although nationalization of industry had been decided upon in February, and a comprehensive plan for the administration and regulation of nationalized enterprises had been published in March, promulgated as a decree, with instructions that it must be enforced by the end of May, it was not until July that the Soviet Government really decided upon its enforcement. It should be said, however, that a good many factories were nationalized between April and July. Many factories were actually abandoned by their owners and directors, and had to be taken over. Many others were just taken in an "irregular manner" by the workers, who continued their independent confiscations. For this there was indeed some sort of authority in the decree of March, 1918.1 Transportation had 1 See text of the decree-Appendix.

16

broken down, and there was a lack of raw materials. It was officially reported that in May there were more than 250,000 unemployed workmen in Moscow alone. No less than 224 machine-shops, which had employed an aggregate of 120,000 men, were closed. Thirty-six textile factories, employing a total of 136,000 operatives, were likewise idle. To avert revolt, it was necessary to keep these unemployed workers upon the pay-roll. Under czarism the policy of subsidizing industrial establishments out of the government revenues had been very extensively developed. This policy was continued by the Provisional Government under Kerensky and by the Bolsheviki in their turn. Naturally, with industry so completely disorganized, this led toward bankruptcy at a rapid rate. The following extract from Gukovsky's report to the Central Executive Committee in May requires no elucidation:

Our Budget has reached the astronomical figures of from 80 to 100 billions of rubles. No revenue can cover such expenditure. Our revenue for the half-year reaches approximately 3,294,000,000 rubles. It is exceedingly difficult to find a way of escape out of this situation. The repudiation of state loans played a very unfavorable part in this respect, as now it is impossible to borrow money-no one will lend. Formerly railways used to yield a revenue, and agriculture likewise. Now agriculturists refuse to export their produce, they are feeding better and hoarding money. The former apparatus -in the shape of a Government Spirit Monopoly and rural police officers-no longer exists. Only one thing remains to be done-to issue paper money ad infinitum. But soon we shall not be able to do even this.

At the Congress of the Soviets of People's Economy in May, Rykov, the president of the Superior Council of the National Board of Economy, reported, concerning the nationalization of industries, that so far it had been carried out without regard to industrial economy or efficiency, but exclusively from the point of view of successfully struggling against the bourgeoisie. It was, therefore, a war measure, and must not be judged by ordinary economic standards. Miliutin, another Bolshevist Commissar, declared that "nationalization bore a punitive character." It was pointed out by Gostev, another Bolshevist official, that it had been carried out against the wishes of many of the workers themselves quite as much as against the wishes of the bourgeoisie. "I must laugh when they speak of bourgeois sabotage," he said. "We have a national people's and proletarian sabotage. We are met with enormous opposition from the labor masses when we start standardizing." For good or ill, however, and despite all opposition, Bolshevism had turned to nationalization and to the erection of a powerful and highly centralized state. What the results of that policy were we shall see.

IX

THE NATIONALIZATION OF INDUSTRY-I

To judge fairly and wisely the success or failure

of an economic and political policy so fundamental and far-reaching as the nationalization of industry we must discard theories altogether and rely wholly upon facts. Nothing could be easier than to formulate theoretical arguments of great plausibility and force, either in support of the state ownership of industries and their direction by state agencies or in opposition to such a policy. Interesting such theorizing may be, but nothing can be conclusively determined by it. When we come to deal with the case of a country where, as in Russia, nationalization of industry has been tried upon quite a large scale, there is only one criterion to apply, namely, its relative success as compared with other methods of industrial organization and management in the same or like conditions. If nationalization and state direction can be shown to have brought about greater advantage than other forms of industrial ownership and control, then nationalization is justified by that result; if, on the other hand, its advantages are demonstrably less, it must be judged a failure.