The Kornilov plot had failed. But thanks to the Socialist Revolutionaries and Mensheviks the power remained in the hands of the bourgeoisie. Not daring to come out openly, the capitalists adopted Ryabushinky’s precept and conducted their offensive against the working class by striving to bring about a famine.
Disaster menaced the country. The railway system was falling to pieces. The extraction of fuel declined. The supply of food to the cities diminished. War aggravated the general state of disorganisation. A collapse was inevitable. But far from adopting emergency measures to combat famine, the government engineered what was obviously Kornilovism in the economic sphere. The members of the government talked a great deal about the control and regulation of industry. But in actual fact they ignored their own “measures,” delayed decisions and set up unwieldy bureaucratic organisations, which were placed under the complete control of the capitalists.
In opening the inaugural session of the recently formed Economic Council on July 21, Kerensky optimistically defined the aims of the new institution as being
“to draw up a plan for gradually regulating the entire economic and financial life of the country on the principle of subordinating all interests to the interests of the state.”(1)
A Chief Economic Committee was set up at the same time to act as the executive body of the Economic Council, but the instructions governing the Chief Economic Committee virtually made it an independent organisation. Its decisions could be rescinded only by the Provisional Government. At a meeting of the Economic Council held on August 9, N. N. Savin, Vice-Chairman of the Committee and a prominent figure in industrial circles, admitted that he did not know “what the Economic Committee is to do.”(2) On September 12 the members of the Chief Economic Committee declared in their turn that the Economic Council only hindered the work of the Committee, and N. I. Rakitnikov, the representative of the Ministry of Agriculture, bluntly declared that both the Council and the consultative body of the Committee were unbusinesslike organisations.
The confusion was heightened by the preservation of the “Special Councils” that had been created under the tsar. The Special Defence Council, which was invested with emergency powers, decided important questions affecting the economic life of the country. Its chairman was P. I. Palchinsky, an engineer, who in the past had worked in the gold industry and on railway construction. Palchinsky was at one and the same time Assistant Minister of Commerce and Industry, Chairman of the Special Defence Council and Chief Agent for Metal and Fuel Supply. In all three capacities he was equally emphatic in his opposition to the revolution.
Lenin wrote of him:
“By this struggle, Palchinsky acquired a sad notoriety and became known all over Russia. He acted behind the screen of the government, without openly appearing before the people (in the very same way as the Cadets generally preferred to act, willingly putting forward Tsereteli ‘for the people’s sake,’ while they themselves manipulated all the important affairs on the quiet). Palchinsky thwarted and destroyed every serious measure taken by the spontaneous democratic organisations. For not a single measure could go through without a ‘dent’ in the immense profits and the self-willed rule of the Kit Kityches.”(3)
The Provisional Government did not venture to destroy the old tsarist bureaucratic Council of Defence, but on the other hand it took vigorous measures against the democratic organisations, the various local committees of supply and food committees of the Soviets, which were endeavouring to combat famine from below. It was by directly rescinding the orders of the democratic organisations that Palchinsky acquired notoriety. In other words, while doing nothing themselves, they prevented the toilers from trying to avert the catastrophe.
The “republican” government permitted only an insignificant number of workers to serve on its regulating bodies. In the Economic Council there were ten representatives of the Provisional Government, twelve representatives of bourgeois organisations (the Union of Cities, Union of the Congresses of Representatives of Commerce and Industry, etc.), and six professors, but only nine representatives of the Soviets and the trade unions. As a business body, the Economic Committee consisted of representatives of the Ministries appointed by the government; its Chairman was the Prime Minister. It was quite impossible to secure the appointment of representatives of the working population to the Committee. They were allowed only on the consultative organ set up by the Chief Committee. But even here, while there were ten representatives from the Economic Council, six from bourgeois organisations, fourteen from government institutions, thirteen state purchasing agents and a number of private persons appointed by the Committee, there were only three representatives from the Soviets and the trade unions. These three workers were to mask the complete absence of representatives of the people on the Chief Committee. A band of old bureaucratic die-hards against three representatives of the toiling population—such was the balance of forces in the bodies set up by the Provisional Government. In discussing the regulations governing the District Economic Councils, the Chief Committee devoted particular attention to the composition of these bodies, and a dozen or so sittings were devoted to the consideration of this question. The Chairman of the Committee reported that representatives of the democratic bodies demanded half the seats, but this was impossible because the industrialists would boycott such councils. He asserted that the best way would be to borrow the principle of distributing seats adopted by the Chief Economic Council, that is to say, the representatives of the democratic bodies should receive one-fourth of the total number of seats. Fearing the sabotage of the capitalists the Committee adopted the proposal of its Chairman.
The Economic Council, the Chief Economic Committee and the District Economic Councils were designed by the Provisional Government to serve as general staffs of Kornilovism in the economic sphere.
While the “regulating” bodies were discussing the composition of their committees and commissions and fooling the people by promises to introduce control and accountancy, the bourgeoisie engaged in unrestricted profiteering. Commodities disappeared from the market. Working people stood in lines for hours on end in order to secure a starvation ration, while surreptitiously any commodity could be obtained in any quantity. The capitalists speculated and grew rich on the shares of industrial enterprises, which for the most part were fictitious and existed only on the stock exchange lists. In the first nine months of 1916, 150 joint stock companies were formed with an aggregate share capital of 209,530,000 roubles; in the four months, March-June 1917, fifty-two companies were formed with an aggregate share capital of 138,650,000 roubles, and in August 1917 alone sixty-two companies were formed, with an aggregate share capital of 205,350,000 roubles. There was an unparalleled increase in September, when 303 companies were formed with an aggregate share capital of 800,000,000 roubles. The number of applications for permission to form companies was enormous. In the first nine months of 1917 sanction was given for the formation of new companies with aggregate share issues of 1,900,000,000 roubles—six and a half times as much as in 1913. Sanction was given to existing companies to issue additional shares to an aggregate value of 1,500,000,000 roubles—six times as much as in 1913. Russia exceeded even Great Britain in share issues. The bulk of the permits were granted between July and September. If it is borne in mind that the registered capital of the companies formed in 1917 totalled 469,519,000 roubles, and that they sought permission to issue shares to an amount of nearly 2,000,000,000 roubles, the gigantic scale on which the capitalists hoped to speculate will be clear.
This is what the Den, which openly supported the bourgeoisie, wrote on August 6:
“While the whole of industry is on the verge of collapse and factories are being closed down or are passing under the control of the government owing to exorbitant expenditures . . . on the stock exchange the shares of these or similar factories are without rhyme or reason being forced up tens and hundreds of roubles, and the difference, amounting to millions of roubles, is daily pocketed by bankers, shady promoters (former illicit stock-brokers) and the speculating public.”(4)
Speculation was dragging the shattered economy of the country into the abyss.
The Soviets, the factory committees and the food committees combated profiteering and speculation, but the government pretended to know nothing about it. At a meeting of the Economic Council held on July 24, the Ministry of Commerce and Industry was asked:
“Is there any surveillance . . . over the development of speculative trade, and what is the result of this surveillance?”(5)
V. E. Varzar, the representative of the Ministry, a prominent member of the firm of Siemens-Schuckert and at the same time chief of one of the departments of the Ministry of Commerce and Industry, nonchalantly replied:
“I must say that we consider it impossible to exercise surveillance over every trifling detail of life.”(6)
That the people were starving was a trifling detail in the eyes of the capitalist government. No measures against profiteering were taken, although they were being demanded even by the petty-bourgeois press. Apart from Article 29, which empowered the courts to impose fines, and then only in rare cases of patent violation of the law, the criminal law contained no provisions against profiteering. If the courts acted at all, it was only against the small fry; the big stock exchange sharks were, of course, left unmolested. When, however, the labour organisations displayed initiative in endeavouring to impose control over the operations of the capitalists, the government raised an outcry and accused the working class of “anarchy.”
Profiteering soon assumed such huge dimensions that even Konovalov grew alarmed.
On October 3, while Minister of Commerce and Industry in the last government, he wrote a letter to N. N. Savin on the concealment of stocks by oil firms. The firm of Nobel, which was in a position to consign 150,000,000 poods, had declared 82,000,000 poods for consignment, and actually consigned 65,000,000 poods. The Mazut Company, with stocks of 54,000,000 poods, declared 47,000,000 poods for consignment, and actually consigned 37,000,000 poods. There was a shortage of fuel, factories were coming to a standstill, but the oil speculators concealed nearly half their stocks despite the introduction of an oil monopoly. Instead of coming down heavily on the saboteurs who were creating a fuel shortage in the country Konovalov modestly requested Savin
“to take measures to get the oil firms to increase consignments of oil from Astrakhan at least to Nizhni Novgorod.”(7)
But the firm of Nobel jeered at the government and its monopoly and bluntly informed the Moscow Fuel Department that they
“were not in a position to release oil for the Moscow area, even for the first category factories.”(8)
In exactly the same way the capitalists sabotaged the coal monopoly introduced by the government on August 1.
On August 12, Prokopovich, the Minister of Commerce and Industry, admitted at the Council of State that “the monopoly is still not functioning quite properly,” but he confidently added, “by the middle of August we shall nevertheless succeed in organising the coal monopoly.”(9)
The Minister was applauded, but the capitalists continued to pursue their own course. Prokopovich hoped and waited, bur the profiteers concealed the coal. On October 20, the newspaper Izvestia Yuga, stated:
“We have before us a table showing existing stocks of coal at the mines of the Novenki district alone, where not more than 5,000 workers are employed at thirteen collieries, but where the stocks of coal amount to 10,000,000 poods. . . . And these stocks are not being consigned simply because the industrialists do not want to consign them.”(10)
It should be added that scores of collieries in the Donetz coalfield were piling up stocks against a rainy day, and that therefore scores of millions of poods of coal were lying unconsigned, so as to force up prices for profiteering purposes.
It was not, as the capitalists complained, a reduction in the productivity of labour that disrupted the supply of fuel to industry and to the population. The chief reason was the sabotage of the capitalists.
The government set out to meet the wishes of the coal profiteers. Placing a premium on sabotage, it steadily raised the price of coal: 7 copecks per pood were added in July and 14 copecks in September. The increase as compared with pre-war prices was 100 per cent and more in two months. The country’s finances were collapsing, yet the government generously awarded the employers. On the one hand it wrote resolutions introducing monopolies and voted for fixed prices, while on the other it sanctioned increases in prices in the interests of the capitalists.
Not content with profiteering and forcing up prices, the employers conducted an offensive against the working class in the form of lock-outs. Promyshlennost i Torgovlya stated on the basis of preliminary and very incomplete reports that in August and September 231 factories were closed down and 61,000 workers flung on to the streets. These measures were taken by the employers in protest against the attempts of the government to regulate industry. But most frequently of all the capitalists justified lock-outs on the grounds that the workers were making excessive demands. Thus, in one of its declarations to the Provisional Government, the Council of Congresses of Representatives of Commerce and Industry frankly declared:
“The closing down of mills and factories is an act of natural death due to excessive loss of blood.”(11)
Characteristic in this respect was the conduct of the owners of the Nevsky Stearine Factory in Petrograd. The output of the factory declined from day to day. The workers demanded an explanation from the factory-management, and received the reply:
“There is a shortage of raw material . . . a Zeppelin raid on Petrograd is expected and consignments of raw material are therefore out of the question.”(12)
As a matter of fact, the saboteurs were consigning stearine—the principal raw materials used in the factory—to Moscow and Finland.
The capitalists in the South of Russia, in particular, discarded all restraint. At a conference held in September 1917, they addressed a stern ultimatum to the Provisional Government:
“The representatives of the coal, anthracite, iron-ore, metallurgical and manufacturing industries of the South of Russia deem it necessary categorically to declare to the Provisional Government once more that if the local authorities are unable or unwilling to guarantee the safety and personal inviolability of the members of the factory managements, the firms will be unable to work in such an atmosphere and will have to close down.”(13)
Here, too, the government met the wishes of the capitalists. At a meeting of the chief Economic Committee on September 22 a resolution was adopted on the motion of Palchinsky which was designed as a programme of action for the government. The chief point in the resolution stated:
“In the event of violation of the agreement by the workers, factories may be closed down in whole or in part and all or part of the personnel discharged.”(14)
Thus the government intended to make lockouts the basis of its labour policy. Instructions were given to draft a bill to this effect in short order.
At a meeting of the Special Defence Council on September 23, Varzar, another prominent representative of industry, advanced the following thesis in defence of the absolute legitimacy and necessity of lockouts:
“No authority exists in the factories, and therefore the only way in which the manufacturers can combat the workers is to close down the factories.”(15)
Varzar even objected to the clause in the bill which stipulated that industrialists could close down factories only with the consent of the government, for in his opinion this restriction would hamper the owners in resisting excessive demands of the workers.
The mine owners threatened a general lockout in the Donbas. By the beginning of October forty factories had been closed down in Petrograd. In October the Moscow manufacturers wanted to declare a lockout of 300,000 workers. Fifty per cent of the factories in the Urals were closed down. On the eve of the October Revolution 50,000 workers had been thrown on to the streets in Ekaterinoslav. The lockouts became country-wide.
The Menshevik Ministers supported the avowed Kornilovites. As far back as July 26, P. N. Kolokolnikev, the Assistant Minister of Labour and a member of the same party as the Menshevik Gvozdyev, had openly declared at a meeting of the Economic Council that the Ministry of Labour recognised the right of employers to resort to lockouts.
The offensive against the social gains won by the working class in the revolution proceeded apace. At the beginning of September the Chief Committee of United Industry—one of the most important organs and economic centres of the bourgeoisie—resolved not to pay members of Soviets, factory committees and shop stewards’ councils for time spent at meetings of these bodies. This blow at the working-class organisations was the culmination of a series of vigorous measures adopted by the Menshevik Skobelev. Not long prior to this, soon after he became the Minister of Labour, Skobelev had demagogically threatened to deprive the capitalists of 100 per cent of their profits. But as a matter of fact, Skobelev tried to deprive the workers of 100 per cent of their gains. On August 28 and 29 the Minister of Labour forbade the factory committees to meet during working hours or to interfere in the hiring and dismissal of workers. This was tantamount to abolishing the factory committees. Thus the “Socialist” Minister, having shaken his fist at the bourgeoisie, brought it down on the head of the working class.
The sabotage of the capitalists very soon resulted in a marked decline of production. In the metallurgical industry, forty-two blast furnaces were operating in the second quarter of the year, forty-one in the third quarter, and only thirty-three by the end of October. The decline in production was particularly severe in the period July-October. There was also a disastrous fall in the output of coal; 119,000,000 poods of coal were extracted in July, 115,000,000 poods in August and 110,000,000 poods in September.
Productivity of labour was most of all affected by mobilisation. It was in the regions where the number of women, adolescents and prisoners of war had increased most among the workers (the Donbas and the Urals) that the decline of productivity was greatest. The capitalists themselves admitted that the efficiency of prisoners of war was half the normal efficiency, and in the Urals and the Donbas more than one-third of the workers were prisoners of war. The irregular supply of fuel and raw material, and the deterioration in their quality, the worn-out condition of machinery, the failure to carry out necessary repairs, and the lowered skill of the workers were all factors that unfavourably affected productivity of labour. The closing down of factories only crowned the disruption of the normal course of production. It is noteworthy that in the case of factories which passed under the control of the workers even before the October Revolution, as, for instance, the Guvjon Metal Works in Moscow, productivity of labour steadily rose.
But what most affected productivity of labour was the deterioration in the workers’ food. In September and October the workers of Moscow and Petrograd received less than one half-pound of bread a day, while in some districts they simply starved. According to information supplied by the Ministry of Labour, wages in Moscow increased during the war by 515 per cent, while prices of staple food-stuffs increased during this same period by 836 per cent, and prices of consumers’ goods by as much as 1,109 per cent. In Petrograd the average hourly wage of a metal worker increased between March and May by 57.8 copecks, and between May and August by only 8.2 copecks. The rate of increase of wages declined after the July events and was practically reduced to zero by the bourgeois offensive against the working class. Prices, on the other hand, increased extraordinarily in the period May-August. The price index in Russia increased from 4.20 to 7.25, that is to say, almost doubled, which implied a drop in real wages by nearly 50 per cent. Average real wages in 1917 were only 57.4 per cent of real wages in 1913. The working class therefore became thoroughly impoverished during the war, and especially during the eight months of the bourgeois régime. The workers were worse nourished and clothed than before. And this semi-starved or starved condition of the workers had a disastrous effect on productivity of labour.
Lenin summed up the activities of the industrialists as follows:
“The capitalists are deliberately and consistently sabotaging (damaging, stopping, disrupting, hampering) production, hoping that a terrible catastrophe may mean the collapse of the republic and democracy, of the Soviets and the proletarian and peasants’ unions generally, thus facilitating the return to a monarchy and the restoration of the full power of the bourgeoisie and landlords.”(16)
Kornilovism in industry assumed ever large proportions and spread to other spheres of economic life.
[1] Verbatim Report of the Sittings of the Economic Council of the Provisional Government, July 21, 22, 24, 26 and 31, August 3, 9 and 10, 1917, Petrograd, 1917, p. 1.
[2] Ibid., p. 26.
[3] Lenin, “The Threatening Catastrophe and How to Fight It,” Collected Works (Russ. ed.), Vol. XXI, p. 180.
[4] “The Stock Exchange Boom,” Den, No. 128, August 6, 1917.
[5] Verbatim Report of the Sittings of the Economic Council of the Provisional Government, July 21, 22, 24, 26 and 31, August 3, 9 and 10, 1917, Petrograd, 1917, p. 27.
[6] Ibid.
[7] Central Archives of the October Revolution, Records—3, Chancellery of the Prime Minister of the Provisional Government, File No. 6, folio 142.
[8] Ibid., folio 142.
[9] Central Archives, The Council of State, Moscow, 1930, p. 31.
[10] “Who is to Blame?” Izvestia Yuga (Southern Gazette), No. 186, October 20, 1917, Kharkov.
[11] Archives of National Economy, Records 151, “Council of Congresses of Representatives of Industry and Commerce, 1905-1918,” File No. 373, folios 5-6.
[12] Central Archives of the October Revolution, Records—472. “Central Council of Factory Committees,” File No. 32, folio 65.
[13] Central Archives of the October Revolution, Records—3, “Chancellery of the Prime Minister of the Provisional Government,” File No. 82, folio 189.
[14] Ibid., folio 88.
[15] Central Archive of Military History, Special Council of Defence, File No. 420-024, folio 123.
[16] Lenin, “The Threatening Catastrophe and How to Fight It,” Collected Works (Russ. ed.), Vol. XXI, p. 159.
Previous: The Revolt of the Generals Crushed
Next: Financial Collapse