Trotsky’s “alternative policies”; inflation and the gold standard; “Children of the Arbat”

Zack has written with three questions: here they are, with responses from Martin.

1. In Economic growth and the zigzags of the leadership, I wasn’t sure about DP 2 (I wasn’t able to make that session). “Trotsky is critical of all three phases. What alternative does he propose?”

It wasn’t clear to me that he proposed one alternative policy for the whole period. You could I guess argue that in his later writing he might be critical of all of them in terms of the class (or similar) interests they are serving, and in not being adequately democratic.

Response: In the 1920s, I think Trotsky had a fairly consistent response:

• Planned, organised, higher-speed industrialisation, financed by a greater squeeze on the kulak, but enabling support to be rebuilt in the countryside because the cities would have more, better, and cheaper manufactured goods to exchange for agricultural produce.

• The planning to be done by manipulation of the state budget and credit allocation, on the basis of a stable (gold-linked) currency, rather than administrative production targets and an attempt to set prices administratively.

• A revival of working-class democracy, also enabled by the factories working better and more and unemployment being reduced. (From after the end of the civil war, all the Bolsheviks saw the mass of the countryside as fed up and resentful, and ready to support any Thermidor or substantial-looking move against the regime which could differentiate itself even a little from the old landlords. Bukharin wanted to placate the countryside by letting the kulaks “enrich themselves”, the Left Opposition by different methods, as above. But all saw the regime as holding on precariously, so that easing off restrictions on democracy had to be done cautiously).

• None of the above, for Trotsky, could resolve the dilemmas. It could only buy time. The survival and flowering-again of the workers’ state depended on revolutions winning elsewhere, in more advanced countries.

With the third “phase”, the turn to forced-march industrialisation and collectivisation, Trotsky did at first continue to counterpose his consistent policy. Over the years, though, he shifted from presenting the regime’s policy as mistaken (i.e. a mistaken route towards more or less shared aims), and towards seeing it as shaped by alien interests (whatever mistakes it included, in terms of its aims, being secondary to the fact that the aims were alien). I think that shift is not complete even as late as Revolution Betrayed</em>.


But would he/was he arguing for something like a quicker end to war communism, with then a combination of some economic liberalisation (analogous to the NEP) and policies towards rapid industrialisation, maybe with some collectivisation?

My response: Yes, basically. No-one much dissented from war communism from late 1918 and in 1919, if only because whatever its problems it seemed the only expedient to avoid being crushed in the civil war. In February 1920 Trotsky started to argue for a move away from war communism towards NEP-type policies. At first he got no support, and dropped the argument for a while. Then he supported Lenin when Lenin proposed the same move in early 1921, and by that time everyone could see that war communism was fomenting peasant revolt and had to be replaced.

Zack: 2. In the chapter on “The struggle for the productivity of labour”, I had a question. I don’t think I was able to attend the meeting itself, but in any case I still have a question on gold standard and inflation. If I recall correctly, my question was about two distinct but related desiderata for a currency and monetary policy under a workers’ state, as I felt was implied within the chapter.

On the one hand, it seems desirable, as Trotsky argues, for economic policies to be such that there is little or no inflation. If my understanding of borgeois economics is correct, that generally involves aiming for a positive but low and consistent inflation rate, such that the currency is stable and predictable, but that inflation in itself encourages circulation? And that seems not unreasonable, likewise, for a workers’ government or workers’ state’s policy.

On the other hand, or additionally, Trotsky seems to argue for a currency which is independent of the state, i.e. as he advocates, a gold standard. In today’s economy (to my understanding) we don’t have a gold standard, and haven’t for some time. I can’t see why we would advocate a workers’ government implementing a gold standard; the modern equivalent would be some kind of “cryptocurrency” (some advocates of bitcoin style cryptocurrencies even see them as based on a labour theory of value type logic, I believe). Of course, in moves towards a decentralised, stateless society, an independent currency would become increasingly useful…

While the two things seem related, is, or should Trotsky be arguing for the latter – independence of the currency – as well as or independently from the former – no inflation?

My response: The idea of aiming for a positive but low inflation rate is a surprisingly recent move in bourgeois economic thinking. Before that, the established wisdom was that price stability was desirable, meaning an approximation to a constant price index. (You can see that, for example, in the summary of official US thinking, The Business Cycle in a Changing World, by Arthur F Burns, in 1969). In practice, though, well before 1969 both capitalist and Stalinist administrators had settled for a modest positive inflation rate as at least a good-enough substitute for price stability.

To control inflation, a government needs either an external peg for the currency (in the era when Trotsky was writing, primarily gold) or sufficient economic and financial clout (diversified foreign-exchange reserves, capacity to produce a wide range of goods and services internally) that its IOUs will be taken as reasonably stable against a wide range of products. The USSR didn’t have that.

Zack: 3. You recommended a novel in one session, which I thought sounded good, but I didn’t catch the name. Possibly in the family/youth/culture; possibly about bureaucratism — I don’t remember. Do you remember?

My response: That would have been Children of the Arbat, a novel written in the 1960s, published in 1987, but set just before the Kirov assassination in 1934. It depicts young people responding in different ways to the Stalin regime – genuinely pro-regime, cynically careerist, “just scraping by”, privately rebellious but publicly careful.

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