The Great October Revolution
Machine and money

Farooque Chowdhury

Denouncing Lenin and his “band” of Bolsheviks by their class enemies is endless while discussing the Great October Revolution. One of the few denouncements bases its arguments on “machines and money”.

The main argument put forward by this machines and money-group is: as an economy Russia was “not” matured for the Revolution, and Lenin with his “band” of Bolsheviks thrust their “knife” of revolution into that “immature” reality. “[T]he general image is still dominated by the perception that it was the most backward of the world’s largest economies. For example, the editors of the recently published Cambridge Economic History of Modern Europe classified the economy of the Russian Empire as “peripheral”, together with the Austro-Hungarian Empire.” (Volodymyr Kulikov & Martin Kragh, “Big Business in the Russian Empire: A European Perspective”, World Business History Congress / Annual EBHA meeting, Bergen, Norway, August 2016) A look, gleaned mainly from the mainstream, and in brief, into the economy helps find out whether their claim was correct or not.

Lenin defines “large-scale machine (factory) industry” on the basis of Marx’s theory: “a definite stage of capitalism in industry, namely, the highest stage. The principal and most important feature of this stage is the employment of a system of machines for production. [….] Large-scale machine industry is thus the last word of capitalism, the last words of its ‘elements of social progress’ and regress.” (The Development of Capitalism in Russia, Collected Works, vol. 3, Progress Publishers, Moscow, erstwhile USSR, 1972; here, in the reference and the quote, Lenin refers to Marx, Capital, vol. 1)

[Lenin, in The Development of Capitalism in Russia, points out, in detail and with examples, “unsatisfactory nature of [Russia’s] factory statistics”, which led him to conduct calculation, etc. on his own while analyzing the issue. All Russian official statistics of the period are neither acceptable nor useable.]

During 1885-1913, the growth rate in Russia accounted for 3.25% per year, and per capita — 1.75% per year. Russia, in comparison with the developed countries of the time, was one of the fastest growing economies. (P. Gregory, Russian National Income, 1885-1913, Cambridge University Press, New York, 1982, cited in Ekaterina Khaustova, “Pre-revolution living standards: Russia 1888-1917”, April 2013, paper prepared for the 2013 Annual Conference of the Economic History Society)

“Industrial growth rates were significantly higher than the average for the national economy and for the years of industrial expansion (1885–1913) reached 5.72%, and in 1890-ies — even 8.03%.” (Ekaterina, op. cit.) “During the period the average annual growth rate of industrial production in the US amounted to 5.26%, in the UK — 2.11%, in Germany — 4.49%, in Sweden — 6.17% Thus at the turn of the XIX–XX century Russia held one of the first places in the world for the pace of industrial development.” (A Gerschenkron, “The rate of growth in Russia: The rate of industrial growth in Russia, since 1885”, Journal of Economic History, vol. 7, supplement, 1947, cited in Ekaterina, op. cit.)

“In the period between 1909 and 1913 average annual increase in industrial output was 8.9% [in Russia]. Industries producing capital goods increased by 83%, and those producing consumer goods – by 35%
.” (Statisticheskii Ezegodnik Rossii za 1900-1916, SPb.-Pg., 1901-1917, cited in Ekaterina, op. cit.)
High growth rate does neither fall from sky nor does it emerge from the depth of oceans. A huge and intense exploitation of labor powers high growth rate, which invariably intensifies contradiction between capital and labor, and, the intensified contradiction carries implications in areas of society and politics. Capital was accumulating with a high rate, which is also an indicator of exploitation, as Marx writes, “Accumulation of capital is […] increase of proletariat.” (Capital, vol. 1, Progress Publishers, Moscow, erstwhile USSR, 1977) 

One of the most important functions of banks is accumulation of temporarily free money; and income of banks under capitalism is part of the surplus value appropriated from the toilers.

In 1904, there were 6,557 savings banks with 5.1 million depositors and total deposits of 1,105.5 million rubles over the whole of Russia. (Lenin, op. cit.)

For having “a general idea of the volume of bank turnover and capital accumulation”, Lenin cites a series of data, which include: “Total withdrawals from the State Bank rose from 113 million rubles in 1860-1863 (170 million rubles in 1864-1868) to 620 million rubles in 1884-1888, and total deposits on current account from 335 million rubles in 1864-1868 to 1,495 million rubles in 1884-1888. The turnover of loan and savings societies and banks (rural and industrial) grew from 2 ¾ million rubles in 1872 (21.8 million rubles in 1875) to 82.6 million rubles in 1892, and 189.6 million rubles in 1903. [….] The operations of savings banks grew particularly in the 80s and 90s. In 1880, there were 75 savings banks, in 1897 – 4,315 (of which 3,454 were post-office banks). In 1880, deposits amounted to 4.4 million rubles, in 1897 to 276.6 million rubles. [….] The annual capital increase is particularly striking in the famine years 1891 and 1892 (52.9 and 50.5 million rubles) […]” (ibid., emphasis in the original)

“The basic capital […] increased significantly during the second industrial boom in Russia, between 1909 and 1914. […] [I]n 1905, 19 companies operated in Russia with a standard capital of at least £2 million, nine of which were railroad companies. In 1914, […] the number of such firms was 52 (including 21 railroad companies). Similar tendencies can be observed in the financial sector. Russian commercial banks doubled their share capital from January 1908 to January 1913 from £35.2 million to £74.0 million.” (Volodymyr Kulikov & Martin Kragh, op. cit.)

Subsidies, tariffs, etc. granted to the capitalists in capitalist system are privileges to the exploiters at the cost of the exploited. Ultimately, these privileges of the exploiters are burden on the toilers.

“Many Russian industrialists received a significant part of their income through state subsidies, tariffs, and preferential state orders. Following the economic reforms of the 1890s, the importance of cartels significantly increased, and they started to dominate most capital industries such as iron, steel, oil, coal, and railway engineering. These cartels decided on sales quotas for their members and determined wholesale prices.” (Paul Gregory & Robert Stuart, Soviet Economic Structure And Performance, Harper & Row, New York, 1986, and R W Davies, Mark Harrison & S G Wheatcroft, The Economic Transformation of the Soviet Union, 1913-1945, Cambridge University Press, New York, 1994, cited in Anton Cheremukhin, Mikhail Golosov, Sergei Guriev, Aleh Tsyvinski, “The industrialization and economic development of Russia through the lens of a neoclassical growth model”, July 2014)

“Between 1890 and 1900, the [Russian] Ministry of Finance issued 1,260 corporate charters, more than what had been issued in the entire history of the Russian Empire up to 1891. Between 1900 and 1910, the Ministry approved another 1,386 and another 953 between 1910 and 1914. [….] By the twentieth century, the most common sector for incorporation was manufacturing, followed by transportation, mining, wholesale […], and finance. Far fewer corporations specialized in services, construction, retail, public administration, or other industries, and no corporations over the entire period were classified as primarily agricultural.” (Amanda Gregg and Steven Nafziger, “Capital structure and corporate performance in late imperial Russia”, June 2017)

Large investments accelerated railway development in Russia. In 1860, the railway network in Russia was 1,626 km; in 1870, it increased to 10,731 km; in 1880, it reached 22,865 km. The industrial boom of the ’90s experienced over 2.5 thousand km of railways built annually. In 1893-1902, 27 thousand km of railways were put into operation. Its total length exceeded 55 thousand km. The construction of the Trans-Siberian Railway began in 1891, and it was largely completed in the beginning of the 20th century. The rapid railway expansion boosted production in other industries including mechanical engineering, mining, metallurgy, power. (Ekaterina, op. cit.)

“The length of the Russian railway system increased from 3,819 kilometers in 1865 to 29,063 km. in 1890, i.e., more than 7-fold. Similar progress was made by Britain in a longer period (1845 – 4,082 km.; 1875 – 26,819 km., a 6-fold increase), by Germany in a shorter period (1845 – 2,143 km; 1875 – 27,981 km., a 12-fold increase). [….] There have been two boom periods in railway development in Russia: the end of the 60s (and the beginning of the 70s), and the latter half of the 90s.” (Lenin, op. cit.)

The capacity of Russian mercantile shipping capacity from 1856 to 1894 (39 years) grew 12.1-fold. (ibid.)

“During the 1890s, the production of pig iron more than tripled and that of coal more than doubled; oil output rose by 250 percent. By 1905 there were more than 40,000 factories in Russia generating an output worth more than 4 billion rubles.” (Frank W Thackeray, ed., Events that Changed Russia since 1855, Greenwood Press, Connecticut and London, 2007)

“By the early 80’s of nineteenth century, along with continued development of handicrafts, the role of factory production was increasing. An important feature of its formation was gradual transition from manual labour to mechanization. The greatest development of machine technology was in the manufacturing sector. Metallurgy industry, which contained 24.8% of all engines and concentrated 77.5% of all workers, gave 86.3% of total production industry.” (Ekaterina, op. cit.)

Capitalism was “endowing” Russia “the last words of its ‘elements of social progress’ and regress.” Workers were emerging as a force. 

Based on the “impressive growth of GDP in Russia after 1870”, the country rose “into the five major economies in the world. By 1913, Russia’s GDP reached 265 billion of 1990 international GK dollars, twice as much as France’s GDP, and even exceeded slightly the GDP of the UK (229.6 billion) though it was overtaken by Germany (280 billion) and the United States (517.4 billion). [….] Russian economy reached the zenith of its industrial power in 1913–14. Both the basic capital and the size of workforce increased significantly between 1909-14. For example, the Briansk Metallurgical Company, the second largest corporation in the Russian Empire concerning its workforce, employed 31,396 people in 1914 while only 13,365 in 1910. The largest metallurgical company, the South Russian Dnieper Metallurgical Company employed 20,000 workers in 1914, which is twice as many as the 10,000 in 1910.” (Volodymyr Kulikov & Martin Kragh, op. cit.)

“The rapid development of industry and railways in the late XIX century led to rapid growth of the number of workers in the country. If in 1865 there were 706 thousand people working on factories and railroads (European part), by 1879 the number of employees rose to 1179000, in 1890 it amounted to 1432000, and finally in 1900 -2208000. Over the period between the years 1865 and 1900 the number of workers in European Russia more than tripled.” (Ekaterina, op. cit.)

“The influx of cheap labour was one of the most important factors in capitalization of the country.” (Ekaterina, op. cit.)

The cheap labor allowed capital to move its wheels with low productivity. A costlier labor would have compelled capital to resort to faster-moving-wheels so that the swifter wheels could press labor to increase its productivity.

“Another explanation for the high level of labor concentration is the low productivity of labor in Russia as compared to Western Europe. According to estimates made by Dmitry Mendeleev for the textile industry, 16.6 men were needed for 1,000 spindles in Russia at the end of the nineteenth century, while in England three men were enough for the same task. The same is true for heavy industry. In coal industry the average output per worker was 153 tons in Russia in 1911, while in France it was 203 tons, in Great Britain 264 tons, and in Germany 287 tons. In metallurgy, the output per worker in Russia was about 50% of that in Great Britain and Germany in 1913.39 Due to the low labor productivity in Russia, companies had to employ more workers than their western counterparts to have the same result. […] Russia was not behind the most advanced European economies on the eve of First World War. The snapshot of big business in the Russian Empire in 1914 reflects the increasing sophistication of the country’s corporate organization. The most advanced forms of business organizations were present in Russia by that time, such as single-standing and holding companies. […] [I]t did not have such a peripheral position from the European core as it has sometimes been claimed.” (Volodymyr Kulikov & Martin Kragh, op. cit.)

With all intricate tactics, there were, in the end, the kings and captains – the masters of market.    

“Russian industrialists had market power not only in the product market but in the labor market as well. In his classical study of factories in the 19th century Russia Tugan-Baranovsky (1898) describes the factory owner as an absolute sovereign not constrained by any laws in his relations with his workers. He argues that Russian workers had ‘low wages, long working hours, and no voice’ relative to their Western counterparts. Crisp (1978) estimates that Russian wages were one-quarter or one-third of the ones in Western Europe.” (Anton Cheremukhin, Mikhail Golosov, Sergei Guriev, Aleh Tsyvinski, op. cit.)

However, the speed slowed down. There were consolidation, crisis and war at world-scale, all seemed long-anticipated.

“The number of industrial establishments decreased from 33.618 in 1888 to 27.914 in 1913 due to financial crisis in the beginning of twentieth century and also because of consolidation. The proof is increase in number of employees from 1.231500 in 1888 to 2.897969 in 1913. […] Devastating impact of World War 1 [led] to economic hardship after 1914. That made political and economical situation unstable.” (Ekaterina, op. cit.)

These, along with other factors, played respective parts in the area of politics foreshadowing the Great October Revolution.

The article is the 3rd part, in abridged form, of a series composed on the occasion of the Great October Revolution Centenary. The 1st, 2nd and 3rd parts of the series were originally carried by

Farooque Chowdhury, a Dhaka-based freelancer, has not authored/edited any book in English other than Micro Credit, Myth Manufactured (ed.), The Age of Crisis and What Next, The Great Financial Crisis (ed.), and he doesn’t operate any blog/web site.

Nov 14, 2017

Farooque Chowdhury

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