The Soviet Union and its successor states, 1917-2000

¶ … Capitalism and the NEP in Soviet Russia: The View from Park Avenue

In historical research today, it is not politically correct to focus upon single individuals. It seems that historians would be better served studying genealogy (especially regarding corporate elites and their families) rather than the social sciences as a way of understanding the world though considering the inadequacy of the left-right paradigm to explain nuances in political development. The utter uselessness of this reliance upon a fictitious ideological continuum is seen in its inadequacy to explain the emergence of the NEP and its fruition into the Stalinist terror. The nuances of the history of the period can only be grasped by throwing out the paradigm, starting from scratch, noting the state capitalist nature of the regime and the individuals in both Russia and the United States that made it possible. The most unexpected to this author were the Park Avenue elites.

This is especially the case when describing profound social events such as the Russian Revolution and the subsequent history of the Soviet Union spanning the period of 1917-1930. However, when one encounters powerful personalities on the Russian side such as Vladimir Lenin, Leon Trotsky and Joseph Stalin and then observes in fascination that they react on a favorable or even friendly basis with equally powerful personalities across the Atlantic such as Armand Hammer and the Wall Street power brokers he represented such as Henry Ford, one must give themselves pause to reflect upon the inadequacy of the right-left paradigm to capture even a scintilla of the reality of actual events. Certainly, it is the opinion of this author that it is simply an artificial construct that has little basis in reality and does much to obscure the reality of power where ideology is secondary and power is really the only thing that matters. The ability of all of the participants, Lenin, Trotsky, later Stalin, Armand Hammer and Henry Ford to deal with economic matters in such a cavalier manner and then to function differently in their home environments with their everyday constituents is an almost Orwellian exercise in doublethink.

Should it surprise anyone that it would be required that a historian read both Armand Hammer's biographical accounts of his adventures in Soviet Russia in its early days and Leon Trotsky's writings in the wake of his exile to understand the state capitalist nature of the emerging Soviet State? Although Trotsky could not bring himself to use the dirty words "state capitalism" and instead in his exile calls the Soviet Union a degenerated worker's state, there is really no difference. After all, if he had not been sent into exile and could have made an accommodation with Stalin, would he not have done it? He had flip-flopped positions before from Menshevik to Bolshevik. Was this really a bigger leap of ideological imagination? In addition, should it surprise anyone that an American billionaire such as Henry Ford would prefer to deal with one government dictator rather than several companies in a free market and that he did it both in the Soviet Union and later on and consecutively in Hitler's Nazi Germany?

One of the great tragedies of historical scholarship in the opinion of this author is the pillorying of the late Dr. Antony Sutton California State University Los Angeles. The British born academic received his D.Sc. degree from the University of Southampton, England and was a research fellow at Stanford University's Hoover Institution from 1968 to 1973. Largely ignored, vilified and reviled by mainstream academic historians, he meticulously documented the strange relationship of the Park Avenue business elites and the Soviet and later Nazi elites. In particularly, his earliest work, Western Technology and Soviet Economic Development 1917 to 1930 was very important in changing this author's opinion on the history of the Soviet Union. Although the author does feel that some of his polemical positions can be extreme, he bases his facts upon well-documented research that is academically unethical to ignore. Certainly, one must allow for the emotional embitterment that a gifted academic as Dr. Sutton must endured as he was subsequently shunned by former colleagues. Indeed, the above mentioned early work, prior to his falling out with the corporately approved and funded academia was praised by Zbigniew Brzezinski: "For impressive evidence of Western participation in the early phase of Soviet economic growth, see Antony C. Sutton's Western Technology and Soviet Economic Development: 1917-1930, which argues that 'Soviet economic development for 1917-1930 was essentially dependent on Western technological aid' (Sutton 1968, 283), and that 'at least 95 per cent of the industrial structure received this assistance (Brzezinski 1970, 348).'" Unfortunately, the memory hole does not just exist in the Orwellian universe. It is alive and well in twenty-first century academia and it is high time to rehabilitate Dr. Sutton's work by quoting him and sourcing him from other directions. Essentially, he makes the claim that corporations such as Ford Motor Company made a lot of money from playing both sides against the middle and by supporting both the Soviet and Nazi War machines. The grotesque and macabre joke is that business was they made a killing and that business was very good indeed.

In essence, Dr. Sutton's work is so massive in this one study that to serve the brevity of this short paper, we will only consider the Ford Motor's Company's experience. This can be amply sourced in parallel in the scholarly sources about and in the autobiographical writings of Armand Hammer and in academic studies of Henry Ford. Then, we will briefly consider Trotsky to round out our journey across the continuum of the imaginary left-right paradigm. Certainly, the hypocrisy of Trotsky is particularly interesting. He could sit across from Armand Hammer happily and deal with the Americans while an ensconced and powerful member of the Soviet regime, but then goes on the denounce this system that he later does not describe as "state capitalist" (it would be embarrassing to admit that he was an integral part of a state capitalist system, the NEP) but called it a "degenerated workers state."

It is the contention of this author that Leon Trotsky's allegation that the former Soviet Union was essentially a degenerated worker's state (really state capitalist) is essentially correct. Certainly, he should have known. He helped to create it along with Lenin. While the motivations of the Soviet leadership, in particular Lenin, may have started off with pragmatism alone, they quickly developed into an embrace of the concept in whole cloth. Across the aisle, Armand Hammer profitably facilitated this creation as the fixer of American industry in the nascent Soviet Union.

While Sutton focuses on the aspect of the Ford Soviet concession that dealt with farm tractors and ended up as largely a loss for Ford (Sutton 1968, 138), this was far made up for by profits in the also extended to automobiles. For instance, in 1929, Henry Ford signed an agreement to build a factory in Nizhniy-Novgorod (now Gorky) for cars and trucks on the Volga River. To quote Hammer:

During the thirties, this plant was to produce upward of one hundred thousand units a year. Henry Ford received thirty million dollars for his side of the deal and Russians paid the cost of equipping and building the factory (Hammer 1987, 236-237).

What Hammer documents as a primary source is that while the Soviet Union remained unrecognized by the United States and was in the waning days of the New Economic Program (NEP) and following the death of Lenin, the exile of Trotsky and the ascension of Joseph Stalin, Henry Ford made a cold thirty million gold-backed dollars and the Soviets paid for the infrastructure and physical plant. This was a huge sum of money for the time and shows that the cozy relationship between American business and the Soviet regime outlasted Lenin and the NEP. Stalin was also a partner as well in politics of profit once the Soviet regime changed hands. In fact, the big money for Ford was not under Lenin, but under Stalin when his regime was secure in power. All of this was happening while Ford operated profitable manufacturing plants in Nazi Germany (Reich 1990, 110-121).

Hammer is certainly a central figure in this dance. The younger Hammer was continuing the work of Allied American Corporation that his father Julius Hammer had started. The Hammer concession was one of the few in the U.S.S.R. At the time to make substantial profits and to be able to export them (Sutton 1968, 285-287). While he and his Allied American Corporation obtained the Ford Agency in 1922; they later dropped out as the central U.S.-Soviet facilitator for it by 1925 when Hammer admitted he could not compete with the official Soviet agency Amtorg. However, he still was an important advisor for the American power elite that needed up-to-date information on the ins and outs of the Soviet regime (Wood and Wood, 60). It was this network of personal relationships that was responsible for the success of the first concession granted by Lenin to Armand Hammer and it set the pattern for further business relations with the Soviet state in the future (Gillette 1981, 355). Certainly, one wonders if this was just another example of the "new" Soviet regime using leftovers from the time of the Czar. Hammer's uncle Alexander Gomberg had held a Ford agency prior to the Revolution in Southern Russia and facilitated his nephew's meetings with Henry Ford to renew the business under the new Soviet regime (Hammer 1987, 167). There was a new regime and new faces on both sides of the trading table, but the old networks were in use. However, there were now differences, developments that would become a feature of U.S.-Soviet trade throughout the Cold War. In December, 1921, the first shipment of U.S. grain made its way to Russia to Leningrad in barter exchange for Russian furs, hides and caviar (ibid, 164). Anyone old enough to remember the Cold War will remember the very common grain deliveries to Soviet Union in exchange for goods. It seems as those Hammer set this very common paradigm of U.S.-Soviet trade that was to last for almost seven decades.

One issue that appears to have not changed much from the time of the Czars was the strategy of the new Soviet regime to combat and defeat economic backwardness. Gerschenkron in his famous 1962 essay postulated that "economically backward" regimes such as Russia historically have closed the gap with more developed economies by concentrating their scarce resources in high technology, in particular large scale industry. With a backward financial system, the government functions as the bank (Gerschenkron 1962, 21-30). This did not just happen in nineteenth century Russia under the tutelage of Count Witte, but also in Soviet Russia (ibid, 8). As documented in Hammer's autobiography earlier, the Soviet regime funded the Gorky Ford factory (Hammer 1987, 236). This gave the Soviet Union what Gerschenkron would called an "economic spurt" out of its backwardness. Gerschenkron's approach has of course not been without criticism and historians such as Clive Trebilock feels that the approach is simplistic and is especially limited to Russia (Trebilock 1996, 48-49). Trebilock also fulminates against the approach of Theodore von Laue due to the lack of continuity of such historical Witte and Stalin. Trebilock does have a point. As he points out Witte could not travel into the future thirty years and foresee the Gosplans of Joseph Stalin (ibid, 66). However, von Laue has a good point when makes the point that culture is as important as economics in the formulation of a nation. Certainly, Russia has had its various times of Perestroika and Glasnost from the times of leaders such Ivan the Terrible, Peter the Great, Alexander II and Mikhail Gorbachev. As he puts it succinctly, the crux of the problem for Russia was "How to infuse the creativity of Western urban-industrial civilization, evolved under highly favorable geographic and historical circumstances, into habits and institutions shaped by relentless adversity (Laue 1997, 3)."

As influential as American business was, we must remember the other participant in creating the "degenerated worker's state" (in reality, state capitalism) and who later became a critic of that system when Stalin was on top of Soviet heap, comrade Leon Trotsky. In Revolution Betrayed, originally published in 1937, Trotsky lays out his criticism of the nightmare that Russia had descended into. Ironically enough, it seems that all of the principals we have mentioned above, Lenin, Hammer, Stalin and Trotsky himself seemed to have issues with the "kulaks," the bone in the throat of all of those interested in throwing down economic regimentation in Russia. These individual, rugged entrepreneurs just could not seem to get with it and fall in line with the five-year plans and would later get it from the heavy hand of Joseph Stalin when he starved six million of them to death.

The muzhik was not any more pliable under "military" or "war" communism than he or she was under the iron fist of Stalin, even with less iron in the glove. Trotsky notes indignantly in Revolution Betrayed that the muzhik buried his private property to protect it from confiscation, that he was reticent to take the worthless, colored Monopoly money in exchange for the product of the sweat of his brow (Trotsky 2004, 18). How impertinent for these peasant farmers to choose to feed their families and neighbors first, when the Chekha came through with rifle, bayonet and beautiful, multicolored, worthless paper that they so kindly offered in exchange since their comrades in Germany could not join in and supply the revolution with what it needed. Trotsky concluded that "Lenin explained the necessity of restoring the market…The play of supply and demand remains for a long period a necessary material basis and indispensable corrective (ibid, 19)." In other words, state capitalism in everything but name. The dirty word "market" says it all. They had to deal with the foreign capitalists.