The Activities of the Provisional Government: Food Supplies, Industry, Transport and Finance.

In the early spring of 1917 the deficiency in supplies for the Army and for the towns was rapidly growing. In one of its appeals to the peasants the Soviet said: “The enemies of freedom, the supporters of the deposed Czar, are taking advantage of the shortage of food in the towns for which they are themselves responsible in order to undermine your freedom and ours. They say that the Revolution has left the country without bread....” This simple explanation, adduced by the Revolutionary Democracy in every crisis, was, of course, one-sided. There was the inheritance of the old rÉgime as well as the inevitable consequences of three years of war, during which imports of agricultural implements had come to a standstill, labourers were taken from the land, and, as a result, the area under crops was diminished. But these were not the only reasons for the food shortage in a fertile country—a shortage which in the autumn was considered by the Government as disastrous. The food policy of the Government and the fluctuation of prices, the depreciation of the currency and a rise in the price of commodities entirely out of proportion to the fixed prices for grain also largely contributed to this result. This rise in prices was due to general economic conditions, and especially to a very rapid rise in wages; to the agrarian policy of the Government, the inadequacy of the area under crops, to the turmoil in the villages, and to the breakdown of transport. Private trade was abolished and the entire matter of food supplies was handed over to Food Supply Committees—undoubtedly democratic in character, but, with the exception of the representatives of the Co-operatives, inexperienced and devoid of a creative spirit. There are many more reasons, great and small, which may be included in the formula: The Old RÉgime, the War and the Revolution.

On March 29th the Provisional Government introduced the grain monopoly. The entire surplus of grain, excluding normal supplies, seed corn and fodder, reverted to the State. At the same time the Government once again raised the fixed price of grain, and promised to introduce fixed prices for all necessary commodities, such as iron, textiles, leather, kerosine oil, etc. This last measure, which was universally recognised as just, and to which the Minister of Supplies attributed a very great importance, proved impossible of application owing to the confused condition of the country. Russia was covered by a huge network of Food Supply Institutions, which cost 500,000,000 roubles a year, but could not cope with their work. The villages, on the other hand, had ceased to pay taxes and rents, were flooded with paper money, for which they could get no equivalent in manufactured goods, and were by no means anxious to supply grain. Propaganda and appeals were of no avail, and, as often as not, force had to be applied.

In its Proclamation of August 29th the Government admitted that the Country was in a desperate position; the Government stores were emptying; towns, provinces, and armies at the Front were in dire need of bread, although, in fact, there was sufficient bread in the country. Some had not delivered last year’s harvest; some were agitating and preventing others from doing their duty. In order to avert grave danger, the Government once more raised the fixed prices and threatened to apply stringent measures against the offenders, and to regulate prices and the distribution of articles required by the villages. But the vicious circle of conflicting political, social and class interests was narrowing, like to a tight noose, round the neck of the Government, paralysing its will-power and energy.

The condition of industry was no less acute, and it was steadily falling into ruin. Here, as in the matter of supplies, the calamity cannot be ascribed to one set of causes, as happened when the employers and the workmen levelled accusations against one another. The former were charged with taking excessive profits and having recourse to sabotage in order to upset the Revolution, while the latter were blamed for slackness and greed and for deriving selfish gains from the Revolution. The causes may be divided into three categories.

Owing to various political and economic reasons and to the fact that the old Government did not devote sufficient attention to the development of the natural resources of the country, our industries were not placed on a solid basis, and were to a great extent dependent upon foreign markets even for such material as might easily have been found in Russia. Thus in 1912 there was a serious shortage of pig-iron, and in 1913 of fuel. From 1908 to 1913 imports of metals from abroad rose from 29 to 34 per cent. Before the War we imported 48 per cent. of cotton. We needed 2,750,000 pouds[18] of wool from abroad out of a total of the 5,000,000 pouds produced.

The War unquestionably affected industry very deeply. Normal imports came to a standstill. The mines of Dombrovsk were lost. Owing to strategical requirements, transport was weakened, supplies of fuel and of raw materials diminished. Most of the factories had to work for the Army, and their personnel was curtailed by mobilisations. From an economic point of view, the militarisation of industry was a heavy burden for the population, because, according to the estimates made by one of the Ministers, the Army absorbed 40 to 50 per cent. of the total of goods produced by the country. Finally, the War widened the gulf between the employers and the workmen, as the former made immense profits, whereas the latter were impoverished, and their condition was further aggravated by the suspension of certain professional guarantees on account of the War by the fact that certain categories of workmen were drafted by conscription to definite industrial concerns, and by the general burden of inflated prices and inadequate food supplies.

Even in these abnormal circumstances Russian industries to some extent fulfilled the requirements of the moment, but the Revolution dealt them a death blow, which caused their gradual dislocation and ultimate collapse. On the one hand, the Provisional Government was legislating for the establishment of a strict Government control of the industries of the country and for regulating them by heavily taxing profits and excess war profits, as well as by Government distribution of fuel, raw materials and food. The latter measure caused the trading class to be practically eliminated and to be replaced by democratic organisations. Whether excess profits disappeared as a result of this policy, or were merely transferred to another class, it is not easy to decide. On the other hand, the Government were deeply concerned with the protection of labour, and were drafting and passing various laws concerning the freedom of unions, labour exchanges, conciliation boards, social insurance, etc. Unfortunately, the impatience and the desire for “law-making” which had seized the villages were also apparent in the factories. Heads of industrial concerns were dismissed wholesale, as well as the administrative and technical staffs. These dismissals were accompanied by insults and sometimes by violence, out of revenge for past offences, real or imaginary. Some of the members of the staffs resigned of their own accord, because they were unable to endure the humiliating position into which they were forced by the workmen. Given our low level of technical and educational standards, such methods were fraught with grave danger. As in the Army, so in the factories, Committees replaced by elections the dismissed personnel with utterly untrained and ignorant men. Sometimes the workmen completely seized the industrial concerns. Ignorant and unprovided with capital, they led these concerns to ruin, and were themselves driven to unemployment and misery. Labour discipline in the factories completely vanished, and no means was left of exercising moral, material or judicial pressure or compulsion. The “consciousness” alone of the workers proved inadequate. The technical and administrative personnel which remained or was newly elected could no longer direct the industries and enjoyed no authority, as it was thoroughly terrorised by the workmen. Naturally, therefore, the working hours were still further curtailed, work became careless, and production fell to its lowest ebb. The metallurgical industries of Moscow fell 32 per cent. and the productivity of the Petrograd factories 20 to 40 per cent. as early as in the month of April. In June the production of coal and the general production of the Donetz basin fell 30 per cent. The production of oil in Baku and Grozni also suffered. The greatest injury, however, was inflicted upon the industries by the monstrous demands for higher wages, completely out of proportion to the cost of living and to the productivity of labour, as well as to the actual paying capacity of the industries. These demands greatly exceeded all excess profits. The following figures are quoted in a Report to the Provisional Government: In eighteen concerns in the Donetz Basin, with a total profit of 75,000,000 roubles per annum, the workmen demanded a wage increase of 240,000,000 roubles per annum; the total amount of increased wages in all the mining and metallurgical factories of the South was 800,000,000 roubles per annum. In the Urals the total Budget was 200,000,000, while the wages rose to 300,000,000. In the Putilov factory alone, in Petrograd, before the end of 1917, the increase in wages amounted to 90,000,000 roubles. The wages rose from 200 to 300 per cent. The increase in the wages of the textile workers of Moscow rose 500 per cent., as compared to 1914. The burden of these increases naturally fell on the Government, as most of the factories were working for the defence of the country. Owing to the condition of industry described above, and to the psychology of the workmen, industrial concerns collapsed, and the country experienced an acute shortage of necessary commodities, with a corresponding increase in prices. Hence the rise in the price of bread and the reluctance of the villages to supply the towns.

At the same time Bolshevism introduced a permanent ferment into the labouring masses. It flattered the lowest instincts, fanned hatred against the wealthy classes, encouraged excessive demands, and paralysed every endeavour of the Government and of the moderate Democratic organisations to arrest the disruption of industry: “All for the Proletariat and through the Proletariat....” Bolshevism held up to the working class vivid and entrancing vistas of political domination and economic prosperity, through the destruction of the Capitalist rÉgime and the transfer to the workmen of political power, of industries, of the means of production, and of the wealth of the country. And all this was to come at once, immediately, and not as a result of a lengthy, social, economic process and organised struggle. The imagination of the masses, unfettered by knowledge or by the authority of leading professional unions, which were morally undermined by the Bolsheviks, and were on the verge of collapse, was fired by visions of avenging the hardships and boredom of heavy toil in the past, and of enjoying amenities of a Bourgeois existence, which they despised and yet yearned for with equal ardour. It was “Now or Never: All or Nothing!” As life was destroying illusions, and the implacable law of economics was meting out the punishment of high prices, hunger and unemployment, Bolshevism was the more convincingly insisting upon the necessity of rebellion and explaining the causes of the calamity and the means of averting it. The causes were: the policy of the Provisional Government, which was trying to reintroduce enslavement by the Bourgeoisie, the sabotage of the employers, and the connivance of the Revolutionary Democracy, including the Mensheviks, which had sold itself to the Bourgeoisie. The means was the transfer of power to the Proletariat.

All these circumstances were gradually killing Russian Industry.

In spite of all these disturbances, the dislocation of industry was not immediately felt in the Army to an appreciable degree, because attention was concentrated upon the Army at the expense of the vital necessities of the country itself, and also because for several months there had been a lull at the Front. In June, 1917, therefore, we were provided adequately, if not amply, for an important offensive. Imports of war material through Archangel, Murmansk, and partly through Vladivostok had increased, but had not been sufficiently developed by reason of the natural shortcomings of maritime routes, and of the low carrying capacity of the Siberian and of the Murmansk Railways. Only 16 per cent. of the actual needs of the Army were satisfied. The military administration, however, clearly saw that we were living on the old stores collected by the patriotic impulse and effort of the country in 1916. By August, 1917, the most important factories for the production of war materials had suffered a check. The production of guns and of shells had fallen 60 per cent., and of aircraft 80 per cent. The possibility of continuing the War under worse material conditions was, however, amply proved later by the Soviet Government, which had been using the supplies available in 1917 and the remnants of Russian Industrial production for the conduct of civil war for more than three years. This, of course, was only possible through such an unexampled curtailment of the consuming market that we are practically driven back to primitive conditions of life.

Transport was likewise in a state of dislocation. As early as May, 1917, at the Regular Congress of Railway Representatives at the Stavka, the opinion was expressed, and confirmed by many specialists, that, unless the general conditions of the country changed, our railways would come to a standstill within six months. Practice has disproved theory. For over three years, under the impossible conditions of Civil War and of the Bolshevik RÉgime, the railways have continued to work. It is true that they did not satisfy the needs of the population even in a small measure, but they served the strategical purposes. That this situation cannot last, and that the entire network of the Russian Railways is approaching its doom, is hardly open to doubt. In the history of the disintegration of the Russian Railway System the same conditions are traceable which I have mentioned in regard to the Army, the villages, and especially the industries: the inheritance of the unwise policy of the past in regard to railways, the excessive demands of the War, the wear and tear of rolling stock, and anarchy on the line, due to the behaviour of a licentious soldiery; the general economic condition of the country, the shortage of rails, of metal and of fuel; the “democratisation” of Railway Administration, in which the power was seized by various Committees; the disorganisation of the administrative and technical personnel, which was subjected to persecution; the low producing power of labour and the steady growth of the economic demands of the railway employees and workmen.

In other branches of the Administration the Government offered a certain resistance to the systematic seizure of power by private organisations, but in the Ministry of Railways that pernicious system was introduced by the Government itself, in the person of the Minister Nekrassov. He was the friend and the inspirer of Kerensky, alternately Minister of Railways and of Finance, Assistant and Vice-President of the Council of Ministers, Governor-General of Finland, Octobrist, Cadet (Constitutional Democrat), and Radical Democrat, holding the scales between the Government and the Soviet. Nekrassov was the darkest and the most fatal figure in the Governing Circles, and left the stamp of destruction upon everything he touched—the All-Russian Executive Committee of the Union of Railways, the autonomy of the Ukraine, or the Kornilov movement.

The Ministry had no economic or technical plan. As a matter of fact, no such plan could ever be carried out, because Nekrassov decided to introduce into the Railway Organisation, hitherto strongly disciplined, “the new principles of Democratic Organisation, instead of the old watchwords of compulsion and fear”(?). Soviets and Committees were implanted upon every branch of the Railway Administration. Enormous sums were spent upon this undertaking, and, by his famous circular of May 27th, the Minister assigned to these organisations a very wide scope of control and management, as well as of the “direction” which they were henceforward entitled to give to the responsible personnel in the Administration. Executive functions were subsequently promised to these organisations.... “Meanwhile the Ministry of Railways and its subordinate branches will work in strict accordance with the ideas and wishes of the United Railway Workers.” Nekrassov thus handed over to a private organisation the most important interests of the State—the direction of the Railway policy, the control of the Defence, of industries, and of all other branches dependent upon the railway system. As one of our contemporary critics has said, this measure would have been entirely justified had the whole population of Russia consisted of railway employees. This reform, carried out by Nekrassov on a scale unprecedented in history, was something worse than a mere blunder. The general trend of Ministerial policy was well understood. In the beginning of August, at the Moscow Congress, which was turned into a weapon for the Socialist parties of the Left, one of the leaders declared that “the Railway Union must be fully autonomous and no authority except that of the workers themselves should be entitled to interfere with it.” In other words, a State within a State.

Disruption ensued. A new phase of the arbitrariness of ever-changing organisations was introduced into the strict and precise mechanism of the railway services in the centre as well as throughout the country. I understand the democratisation that opens to the popular masses wide access to science, technical knowledge, and art, but I do not understand the democratisation of these achievements of human intellect.

There followed anarchy and the collapse of Labour discipline. As early as in July the position of the railways was rendered hopeless through the action of the Government.

After holding the office of Minister of Railways for four months, Nekrassov went to the Ministry of Finance, of which he was utterly ignorant, and his successor, Yurenev, began to struggle against the usurpation of power by the railwaymen, as he considered “the interference of private persons and organisations with the executive functions of the Department as a crime against the State.” The struggle was conducted by the customary methods of the Provisional Government, and what was lost could no longer be recovered. At the Moscow Congress the President of the Union of the Railwaymen, fully conscious of its power, said that the struggle against democratic organisations was a manifestation of counter-Revolution, that the Union would use every weapon in order to counteract these endeavours, and “would be strong enough to slay this counter-Revolutionary hydra.” As is well known, the All-Russian Executive Committee of the Union of Railways subsequently became a political organisation pure and simple, and betrayed Kornilov to Kerensky and Kerensky to Lenin. With a zeal worthy of the secret police of the old rÉgime, it hunted out Kornilov’s followers, and finally met an inglorious end in the clutches of Bolshevik Centralisation.

We now come to another element in the life of the State—Finance. Every normal financial system is dependent upon a series of conditions: general political conditions, offering a guarantee of the external and internal stability of the State and of the country; strategical conditions, defining the measure of efficiency of the National Defence; economic conditions, such as the productivity of the country’s industries and the relation of production to consumption; the conditions of labour, of transport, etc. The Government, the Front, the villages, the factories, and the transport offered no necessary guarantees, and the Ministry of Finance could but have recourse to palliatives in order to arrest the disruption of the entire system of the currency and the complete collapse of the Budget, pending the restoration of comparative order in the country. According to the accepted view, the main defects of our pre-War Budget were that it was based upon the revenue of the spirit monopoly (800,000,000 roubles), and that there was scarcely any direct taxation. Before the War the Budget of Russia was about 3½ milliards of roubles; the National Debt was about 8½ milliards, and we paid nearly 400,000,000 roubles interest per annum; half of that sum went abroad, and was partially covered by 1½ milliards of our exports. The War and Prohibition completely upset our Budget. Government expenses during the War reached the following figures:

The enormous deficit was partially covered by loans and by paper currency. The expenses of the War were met, however, out of the so-called “War Fund.” At the Stavka, in accordance with the dictates of practical wisdom, expenditure was under the full control of the Chief-of-Staff of the Supreme Commander-in-Chief, who determined the heads of expenditure in his Orders, schedules, and estimates.

The Revolution dealt the death-blow to our finance. As Shingarev, the Minister of Finance, said, the Revolution “induced everyone to claim more rights, and stifled any sense of duty. Everybody demanded higher wages, but no one dreamt of paying taxes, and the finances of the country were thus placed in a hopeless position.” There was a real orgy; everyone was desperately trying to grab as much as possible from the Treasury under the guise of democratisation, taking advantage of the impotence of the Government and of powerlessness to resist. Even Nekrassov had the courage to declare at the Moscow Congress that “Never in history had any Czarist Government been as generous and prodigal as the Government of Revolutionary Russia,” and that “the new Revolutionary rÉgime is much more expensive than the old one.” Suffice it to quote a few “astronomic” figures in order to gauge the insuperable obstacles in the way of a reasonable Budget. The decline of production and the excessive rise in wages resulted in the necessity of enormous expenditure for subsidies to expiring concerns and for overpayments for means of production. These over-payments in the Donetz Basin alone amounted to 1,200,000,000 roubles; the increase in the soldiers’ pay, 500,000,000 roubles; railwaymen’s pay, 350,000,000 roubles; Post Office employees, 60,000,000 roubles. After a month the latter demanded another 105,000,000 roubles, while the entire revenue of the Posts and Telegraphs was 60,000,000 roubles. The Soviet demanded 11 milliards (in other words, nearly the total of the Budget for 1915) for allowances to soldiers’ wives, whereas only 2 milliards had been spent till 1917 under this head. The Food Supply Committees cost 500,000,000 roubles per annum, and the Land Committee 140,000,000 roubles, etc., etc. Meanwhile the revenue was falling steadily. Thus, for example, the Land Tax fell 32 per cent. in the first few months of the Revolution; the revenue from town property, 41 per cent.; the House Tax, 43 per cent., etc. At the same time, our internal troubles caused the depreciation of the rouble and a fall in the price of Russian securities abroad. The Provisional Government based its financial policy upon “reorganisation of the Financial System on democratic lines and the direct taxation of the propertied classes” (Death Duties, Excess Profits Taxes, Income Taxes, etc.). The Government, however, would not adopt the measure recommended by the Revolutionary Democracy—a compulsory loan or a high Capital Levy—a measure distinctly tainted with Bolshevism. All these just taxes, introduced or planned, did not suffice even partially to satisfy the growing needs of the State. In the month of August the Finance Ministry was compelled to increase indirect taxation on certain monopolies, such as tea, sugar, and matches. These measures were, of course, extremely burdensome, and therefore highly unpopular.

Expenditure was growing, revenue was not forthcoming. The Liberty Loan was not progressing favourably, and there could be no hope for foreign loans on account of the condition of the Russian Front. Internal loans and Treasury Bonds yielded 9½ milliards in the first half of 1917. Ordinary revenue was expected to yield 5,800,000,000 roubles. There remained one weapon established by the historical tradition of every revolution—the Printing Press.

Paper currency reached colossal proportions:

According to the estimates of July, 1917, the total of paper currency was 13,916,000,000 roubles (the gold reserve was 1,293,000,000 roubles), as against 2 milliards before the War. Four successive Finance Ministers were unable to drag the country out of the financial morass. This might possibly have been achieved by the awakening of the national spirit and an understanding of the interests of the State, or by the growth of a wise and strong power which could have dealt a final blow to the anti-State, selfish motives of the Bourgeois elements that based their well-being upon the War and upon the blood of the people, as well as of the Democracy, which, in the words of Shingarev, “so severely condemned through its representatives in the Duma the very same poison (paper currency) which it was now drinking greedily at the moment when that Democracy had become its own master.”