Nansen’s book Russia and Peace was written in response to Lenin’s retreat from the hard-line and almost suicidal ‘War Communism’ of post-revolutionary Russia. Money was abandoned altogether while bands of Revolutionaries scoured the countryside for hidden food. However, under the ‘New Economic Policy’ small businesses began to flourish, the food supply improved, and Nansen threw his weight behind an attempt to have Russia welcomed back into the world community with the establishment of world-wide free trade.
It is well known that Mikhail Gorbachev, as President of the U.S.S.R., stunned the world by rejecting communism in favour of capitalism. What is not so well known is that Russia’s leaders had, on a previous occasion, rejected that most central aspect of Russian Communism, state control of all business activity. It is all the more surprising that this occurred in 1921, only a few years after the great Russian Revolution and in the early years of the Communist regime. This was sixty-four years before Gorbachev was elected President. Amazingly, the radical change was carried out at the behest of the architect of Russian Communism - Lenin.
Lenin’s policy change was in response to the breakdown of Russian infrastructure and widespread starvation. Lenin announced the ‘New Economic Policy’ [or N.E.P.] only a week after protests at the Kronstadt naval base. This new policy returned agriculture, retail sales and light industry to private ownership. It also enabled foreign companies to trade in Russia. Nansen had been made responsible for the European effort to save the Russian peasants from the famine which followed the First World War, the Revolution and subsequent Russian civil war. But now he wanted to go further and see Russia accepted back into the world-wide economic community. Nansen’s faith in the youthful new Russia was mainly based on Lenin’s New Economic Policy.
Nansen received the Nobel Prize for Peace in recognition of his work with the millions of refugees resulting from the Russian Revolution and the First World War. In 1923 he applied the prize-money to establishing model farms in the Ukraine at Ekaterinoslav and Saratov. Remarkably, in anti-capitalist Russia, the model farms were run on commercial lines. That this could happen was due entirely to Lenin’s ‘New Economic Policy’. The N.E.P. gave Nansen the confidence to embark on this enterprise and he battled to encourage recognition of Russia by the members of the League of Nations and launch foreign investment in the country. This same year, 1923, Nansen’s book, Russia and Peace, was published in which he attempted to chronicle the change of heart of the Bolshevik government:
“I was able to observe,” he wrote, “the serious and methodical way in which they were trying, by strenuous efforts, to carry out their economic reconstruction based on the principles of the N.E.P. Even the caution with which they proceed is really a reason for believing that their work will succeed... They have a full understanding of the complexity of the economic phenomena and the dangers which lie in constant interference by the State in the life of industry, trade and agriculture.”
Nansen’s colleague on his trip to the Caucasus, Captain Vidkun Quisling, shared Nansen’s opinion that following the many years of death and destruction and extreme Communism, all that was required was a reversion to capitalism; and , indeed, this instantly provoked a rapid improvement.
Neither Nansen nor Quisling was an economist but there were others who had a belief in the revitalised capitalistic Russia. Individuals and organisations were prepared to take the risk and invest in Russia - not because they adhered to the Communist ideal, but in the hope of making a profit. Both Herbert Hoover [American Secretary for Commerce] and Harry Sinclair [an American oil magnate] believed that the Russian economy would enjoy a rapid growth under N.E.P. German businesses were keen to invest in Russia. Jonas Lied, the Norwegian businessman who founded the Siberian Company which sent Nansen on his epic trip through Siberia in 1913, had business dealings on a daily basis under both Tsarist and Communist regimes. He had no difficulty in finding backers to invest in his new Russian ventures under the N.E.P.
However, looking back from a twenty-first century perspective, it seems astonishing that anyone could believe that the communists would turn to capitalism in the 1920’s. And, at the time, the change in Russian policy was greeted with general scepticism. Nansen and Quisling’s belief in a fundamental change in Russia was regarded as naïve.
Could the Russians have sustained this return to capitalism almost seventy years before Gorbachev took his remarkable decisions in the 1980’s?
In reading the following pages it is instructive to keep in mind that great critique of socialist/communist/capitalist dynamics, George Orwell’s Animal Farm.
The more one sees of the unbounded incompetence and national self-righteousness everywhere so blatantly manifest today, the more clearly does one become convinced that the first condition for finding a way - if a way there be - out of Europe’s present confusion and advancing disintegration must be the attainment of a better mutual knowledge and understanding between its various peoples.
Another people's outlook, actions, and conditions generally, should be judged as far as possible by the norm of its own psychology, way of thinking, and preconceptions, and not by our own. This is surely the first and chief condition for being able to understand, and yet it is the one sinned against most often, indeed daily, and not least in the case of Russia and Russian affairs.
In this book the endeavour has been made to render, without prejudice, passion or partisanship, a brief account of the existing social, and especially economic, conditions in this vast and unhappy country, in the light of my impressions and those of my collaborators during the years that we have worked there, and of the information that we have obtained from the sources which seemed to be most reliable...
During the last decade the attitude towards Russia has changed in a very remarkable way. Before the Great War she figured as the huge menacing bugbear of the East, the barbaric despotism, the aggressive power, the great Slav peril to Western Europe and its civilisation. In particular, the treacherous oppression of the Finnish people gave Scandinavians a warning of what they could expect if they came under the iron Russian heel.
France’s alliance with the ‘barbaric despotism’ of the East was regarded as treason against the traditions of France, representing as she did the fight for liberty and the rights of man. Nowhere was this view more commonly prevalent than in Germany.
Then the World War broke out, and the Germans proclaimed that Germany’s armies were really championing the cause of Europe, and the Scandinavian nations in particular, against the barbarism of the East.
But the points of view have veered round. No longer do we detect in Germany any widespread feeling that Russia is the great menace to be kept at bay; if anything, the opposite view is held, and that, too, whether the Russian realm is contemplated as permanently Bolshevik, or as potentially Tsarist.
On the other hand, the nations farther to the west of Europe maintain a more hostile attitude towards Russia. In spite of the great services which the people of Russia rendered, at fearful cost to themselves, to the Western Powers during the most critical days of the war, the Governments of the West now seem disposed to let the Russian nation perish because it is subject to a Government to whose methods and terrorism they cannot reconcile themselves...
Russia’s civilization has not yet burst forth into blossom: it still belongs to the future. The civilization of Russia, as we have known it hitherto under the Romanoffs, has certainly not been Russian. It was a thin, West-European veneer, imported and renewed from without, just as its centre of culture, St. Petersburg, was merely an extremely uninspired copy of Europe, executed in stucco and plaster.
Only when one’s eyes catch a first glimpse of Moscow, with the Kremlin’s wonderful walls and towers, rising amid the surrounding plains, does one feel oneself on the threshold of another civilization. This is no longer Europe, nor yet the Orient; it is Russia.
Again Bolshevism cannot be said to be really Russian. While its inner mechanism is more or less a copy of Tsardom turned upside down, the revolution itself was modelled, down to the smallest detail, on Europe, just as its theory, Marxism, was almost directly imported thence. But the idealism - the remarkable capacity for devotion by which it is largely sustained - is genuinely Russian.
Not yet has the soul of the Russian people been able to cast off the yoke of Western Europe and to achieve its free development; not yet has it found a way to express its own truth. But its time will come.
When we read the literature of Russia, and perhaps even more when we listen to the national music of the Russian people, its strange charm, vibrant with the suppressed glow of passion, makes us conscious of the mighty, stirring echoes of melancholy from the limitless steppes, from the unknown depths of an alien existence; we seem to hear a soul still in bondage utter its eternal yearning for liberty, and deep down in that soul we recognise a world still unborn.
One cannot be brought into close association with this great people, in prosperity or adversity, without feeling an affection for it and acquiring faith in its possibilities...
Chapter 1 Russia and the Economic Equilibrium of Europe
In these days there is an uncanny, debilitating suspicion in the air that the old world is sick, that the civilisation and the social organisation of the West have gone into liquidation, and that its people’s vitality has broken down.
It seemed reasonable to expect that when the four year’s bloodstained nightmare of the World War was at length ended, the peoples of Europe would resolutely pull themselves together, and unite all their forces in the reconstructive labours of peace; and it was hoped that following on the great effort of rebuilding all that had been smashed to ruins, and of paying the overwhelming debts incurred by the various nations, a new era of prosperity would dawn for the countries of the West.
But nothing of the kind has happened. The hurricane of war has by no means cleared the air.
We hoped for a ‘disarmament of men’s minds,’ but the fell crop of hostility and national hatred is shooting up and spreading worse than ever between former enemies, and even former allies.
Disorder and insecurity are growing on all sides, and in several continents, while the feeling of solidarity appears daily to become weaker throughout our whole suffering human race.
Amid black storm clouds the Demon of War seems to hover again over stricken Europe, driving the unresisting nations onward to the abyss.
Everything that happens merely seems to hasten the catastrophe...
If one had the impression that the Governments of Europe had done all that lay in their power to restore peace and to reconstitute the economic life of nations upon a sound foundation - then would one indeed lose all faith in the future.
Fortunately, that is very far from being the case. Fortunately, we can convince ourselves, by a rapid retrospect, that the fact has been that Europe has been suffering from an utterly absurd system of government, and we may be thankful that the damage done to it has not been still greater...
Innumerable conferences failed to secure an objective study of the various problems at the hands of Ministers and experts who were bent upon obtaining as quickly as possible decisions that would satisfy all parties. The negotiators were for the most part diplomatists and politicians who were outside international economic life, and who were much more taken up with their own, their party’s or their country’s position, than with measures to heal the deep-seated malady of Europe - men who, if anything, have made bad worse by their haphazard settlements, or have omitted to settle the most vital question of all.
The political life of Europe, as it has developed since the armistice, presents a truly discouraging picture of uncertainty, indecision and incompetence; and above all of bluff. It is not at all surprising, indeed, that this regime has failed, at any rate as far as economics go, to secure anything whatever of value for Europe.
Only one thing could, only one thing still can save Europe: it is work, methodical, peaceable work. And in so much as the States of the Old Continent are dependent upon each other to a degree that the war threw into sharper relief, the reorganisation of Europe’s work would mean the restoration of normal economic relations, permitting each country to organise its home activities in proper relation to the activities and possibilities of other countries. Europe cannot expect to thrive until it again becomes an economic organism instead of a mere aggregate of ill assorted particles.
National policy tends to make each country into a unit which is as far as possible self sufficient, by securing for it whatever it may need, through the medium of political expedients such as annexations, alliances, or the creation of spheres of interest. In the period of international economics in which we live, the results of this policy are almost always negative, and have the sole effect of enfeebling the nation which imagines it can be self-sufficing...
At the present moment the nations of Europe are living in a state of grim economic anarchy. England is groaning beneath a fearful burden of unemployment, whereas France is suffering from a shortage of labour. The German rate of exchange rushes headlong down its giddy descent, to rise again all of a sudden as the result of a mere financial manœver initiated by the Reichsbank, after which it again rushes downwards. There is no sense in all this, and it ought to have been avoided, but it is obvious that normal conditions cannot be restored on the trade market, any more than they can on the labour market and the money market, until the various countries are mutually connected again on the principle of communicating vessels.
Starting from this European point of view I shall endeavour to analyse the Russian problem.
European Russia has an area which is about half that of the whole of Europe. Her inhabitants, amounting to over a hundred million, form by far the most numerous continental people. Her fruitful lands were formerly to a great extent Europe’s granaries, besides producing other necessaries. As a market, Russia possessed great importance for European industry.
No one who looks ahead a little, can suppose that we could cut off Russia from Europe and leave her to look after herself, without this exercising a decisive influence on the prosperity and future prospects of the whole European community...
I shall confine myself for the present to emphasising the fact that Russia herself really seems to possess the conditions for adopting that economic and non-political view which has already been indicated as necessary. In the course of the Bolshevik revolution and during the long continued blockade due to the war, she had amply experienced the impossibility of living without buying from other countries. She has also been fully convinced that in order to buy it is necessary to sell. Thus the restoration of uninterrupted and undisturbed economic relations of exchange with other countries became the leading aim of her policy...
Chapter 3 The General Development of Russia's Economic Organisation.
…It is a fact that Bolshevism has passed through so many phases in its evolution that it is indeed no easy task to say what Bolshevism really is now. I must admit that I, at least, cannot undertake this, although I have spent a considerable time in trying to penetrate the mystery...
It appears to me that the kernel of the teaching of Bolshevism must - at any rate at first - have been the assertion of work as the only thing which justified a place in and right to enjoy the advantages of the community; and it denied every advantage conferred by birth and inheritance.
For work is necessary - at any rate at these latitudes - in order to extort from the soil what we need to sustain life...
I must confess that I do not share the indignation many feel at a number of the ways in which this was done; for instance, that men and women of the different classes were forced to do public work once a week, and that even ladies of the upper class and aristocracy, who had not been accustomed to any kind of work previously, had every Saturday to join in cleaning railway stations or scrubbing other public buildings... provided, of course, that they are not taken away from more important work, or that health and age do not stand in the way.
One outcome of a conviction of the importance of work was the arrangement by which the affairs of the municipalities were to be administered by local soviets, or councils, composed of representatives of the different categories of work.
That the manual worker, or labour-proletariat, was taken as the centre of gravity, while the recognition of the value of brain work was less clear, at any rate, at the outset, was natural enough in view of what has been said above.
It represented a not altogether unreasonable reaction against the earlier tyranny of the so called upper class. What was wanted was to give due emphasis to the new way, and this led to the catch word 'Dictatorship of the Proletariat,’ driving home the protest against the old.
But not only the so-called intellectuals, meaning chiefly the upper class, but also capital was marked down. It was held that capital, which should of course be saved up work, exerts an immoral effect by giving its possessors advantages which are unfair and harmful to the community...
The attack was aimed at the money system, which was a means of amassing capital, and which, by its payment of interest, makes it possible for parasites to exist without working. Money ought preferably to be abolished - they overlooked the important fact that the economic life of the community, during thousands of years' development, has been based on money as the necessary medium of exchange.
Now it was thought that this basis could be torn away with a single wrench, and that a return could be made to the primitive state when money was unknown. The attack was also aimed at the right of ownership itself. By the ownership of property, and still more by hiring it out, a man could live without working. All property, houses, woods, land, mines, etc., were therefore nationalised. Free trade was also to be abolished... the shops were closed... The necessaries of life would be distributed by the State.
On the whole it must be said that the Communist theories professed by the revolutionary Bolsheviks of 1917 have pre-eminently had negative results: the dissolution of the old army, the disturbance of social conditions, etc., etc...
Not only could the clumsy machinery thus created not satisfy the consumers' most necessary requirements, except in an extremely inadequate way, but it was solely by the help of the old stocks of all sorts which existed that this could be done at all for a short time...
From first to last it was a vast experiment made on the whole Russian population. It might seem that as regards especially the Russian peasant population, forming the great majority of the Russian people, the Communist idea was not unfamiliar, since the land in the Russian village (the mir) belongs, according to ancient custom, to the village, not to individual peasants.
All the same, it soon appeared that the whole system was impracticable, and that the experiment could not possibly succeed. In the domain of agriculture, which is, of course, the decisive and all dominating means of livelihood in Russia, Communism was in reality never tried. The few experiments made with Communist agriculture came completely to grief.
The houses in the towns, having no owners interested in keeping them in repair, quickly fell into dilapidation; industry, without owners or specially interested directors, declined disastrously, and so on. And, meanwhile, the State's employees increased to veritable armies, who had to be supported by the State. The whole thing threatened to collapse.
Soon the leaders themselves saw that it would not work, and the 'new economic policy' (the well known N.E.P.) was inaugurated in the spring of 1921, for the simple reason that there were no longer means in the country to keep the Communist experiment going.
They recognised - as it was said - that the community was not yet ripe for the Communist form of administration, and they were compelled to return, more or less, to capitalist methods.
It was the just demands of the agricultural labourers (and not the efforts of the old bourgeoisie) which occasioned the mighty movement for denationalisation and for a normal economic structure, which will be the salvation of Russia.
In reality, it was the peasants who suffered most under the regime which was suffocating the Russian nation. Forced to give up to the State his whole crop, except what was considered strictly necessary to support himself and his family, he had a right, according to Communist principles, to obtain the articles of clothing he required, and to enjoy gratis all the advantages and services of the State.
But as he really got nothing, or hardly anything, he demanded more and more loudly that he should have the right to dispose of the produce of his labour himself, after paying the taxes and other dues.
To give the peasant the right to sell, though it be only part of his produce - would not that open a dangerous breach in the Communistic edifice? I am convinced that it is not so much the socialising of production, as the turning of the whole machinery of distribution into a State institution, that is the hall mark of true Communism.
The end of it was that requisitioning of the peasants' produce was given up, and instead a tax in kind was imposed, consisting mainly of corn; and for the rest the peasant was given the right to sell his produce as he liked within the country.
The immediate result of this alteration was, of course, that the home trade had to be liberated, first the retail trade, and then the general economic intercourse, which is so important that it led to the creation of the whole financial organisation which I shall describe later.
This was all the more significant, since the Soviet Government had tried, in accordance with Communist principles, completely to suppress the money system, as mentioned above.
The resuscitation of trade brought with it a circulation and distribution of goods which was certainly rather modest when we think of the statistics from before the war, but which was otherwise quite remarkable. Meanwhile, the Government found it continually more difficult to cover the deficit on the State's production.
While it was seen that the moment was approaching when transport and industry and the State's machinery for distribution would have used up all the supplies and emptied the State treasury, an attempt was made to escape bankruptcy by taking advantage of this new stream of life.
While they continued to be the State's official purveyors, supplying the needs of the people, the productive undertakings and public services had themselves to obtain part of what they needed by accepting payment from the public who received the advantages of their work.
The railways, tramways, water transport, and electric services organised themselves (or tried to organise themselves) on a commercial basis; the factories were grouped in trusts, and sold their products through Co-operative Societies and private stores, in order themselves and at their own expense to arrange for the supply and utilisation of raw-stuffs.
Under the Communist regime a factory got its raw materials from the State; it did not pay its workmen, as they received their 'pajok' (Government ration of food), and cards which gave them access to the Government stores to procure such clothes, boots, etc. as they had a right to. On the other hand, the factory had to hand over its whole production to the State.
Since the introduction of the 'new economic policy' everything has to be paid for.
Every undertaking must have its own budget, and its income and expenditure must balance; for the Soviet Government has come to the end of its gold reserves and cannot contribute to other economic organisations than those which are absolutely indispensable for the life of the State. Those undertakings which show a deficit run the risk of being hired out to private owners, given under a concession to foreigners, or simply closed…
Chapter 12 Conclusion
In the foregoing chapters of this book I have endeavoured to portray the economic conditions of the country as objectively as possible. In order correctly to judge of the part which the Russian factor may play in restoring the equilibrium of Europe, one should avoid, on the one hand, underestimating its importance, while on the other hand one should equally avoid nourishing any illusions in regard to the present productivity and purchasing power of this vast land, occupying half of Europe and a large part of Asia.
I am convinced that the resumption of normal relations between Russia and other countries is imperatively necessary for the prosperity of both. But it would be most unfortunate were the new economic connections to be based upon a misconception of the real condition of Russia’s trade, industry and agriculture, transport and finance.
I have pointed out the unfortunate measures and mistakes of the Soviet administration in a way which has perhaps surprised those who know the interest and sympathy with which I have followed the Russian Government’s efforts to resuscitate this vast, unhappy country. On each occasion that the repatriation of war prisoners and the relief of the sufferers by famine have taken me to Russia, I have been received with a confidence and cordiality which have moved me greatly. This seemed to me to be one reason the more why I should say quite plainly what I thought of the situation, in the conviction that this frankness was alike in the interests of Russia and of Europe.
On my journeys in Russia and Siberia before the war I was struck by the riches of these enormous regions, by the important part they already played in the economy of Europe, and by their vast possibilities of development.
When I undertook the duties of High Commissioner for the repatriation of war prisoners, at the insistence of the League of Nations, and assumed the direction of the European famine relief, in accordance with the proposal made at the Geneva Conference in August, 1921, I was not only influenced by the humanitarian aspect of this work, which would restore approximately half a million persons to their homes, and which would make it possible to save several million people from a cruel death…
The impression produced on me by my study... is that this great country has been suffering from a great sickness, from which it is only just beginning to recover. Before 1914 the social life of Russia was not sound, and one cannot regard the regime of the Tsars as a normal form of Government. But the Great War quickly made the national malady worse. The revolutions in 1917, the foreign wars, and the civil wars between 1918 and 1921 marked the crisis, followed by convalescence, which, however, was greatly retarded by the famine which devastated the most fertile regions of the Volga and Southern Ukraine.
I am convinced that Europe and the whole world will gain by hastening and facilitating this convalescence. I believe that even without help from abroad the Russian Government is able, though very slowly, to improve the country’s position, if the harvest is normal for the next few years. During several years Russia has vegetated, as it were; she will be obliged, so far as I can see, to reduce her industry still further, and will find great difficulty in coping with the deficit on it. By exercising great economy she will be able, I think, little by little to collect the necessary capital for restoring the country’s prosperity.
But this process would be greatly accelerated, much to the benefit of Europe and Russia herself, if foreign industry and trade would co-operate in this work of reconstruction by giving on credit the machinery and products without which Russia’s production cannot be increased.
The grave position of international finance obviously prevents foreign capital from giving Russia advances without security and en bloc. The money might even, perhaps, be used in ways which did not really increase the country’s capacity for production, and the population’s consequent ability to pay the money back and to buy. Moreover, the money might help to strengthen the nationalising and centralising tendency, and this would counteract the movement in the direction of free trading and economic independence which was initiated by N.E.P. (New Economic Policy).
On the contrary, credit given to undertakings and special societies whose prospects and capacity for development had first been carefully investigated, would greatly improve the position of considerable sections of the population, and would open up possibilities which would interest foreign industries, while at the same time it would favour a general development...
I am not blind to the extent to which such a resumption of permanent economic relations is made difficult by the old Russian debt, which the Soviet Government has hitherto failed to acknowledge. [No loans to Russia dating from before the Revolution were honoured - indeed, there was no way the Communists could repay the loans]. I hope an understanding will be reached as soon as possible on this delicate question, which certainly forms the greatest difficulty in the way of Russia obtaining Government credit... By restoring Russia’s capacity to produce, one would give the country back its capacity to pay... the chief difficulty to be overcome is the lack of confidence felt by foreign countries in regard to Russia, and the procrastination of the clumsy bureaucratic machinery by which the Soviet administration does its work.
The experience now being gained by my famine relief organisation will possibly help to restore foreign confidence in the feasibility and interest of participating in the work of Russian reconstruction. In order to help the peasants in the famine districts, who are destitute of live stock and agricultural equipment, to recommence cultivating their land, we are establishing two model stations for agricultural reconstruction, one in Russia and one in Ukraine. Being furnished with a score of tractors (most of which are already on the way to Russia), repair outfits, and necessary implements, and in addition with a certain amount of working capital, each of these stations will be capable of farming a considerable extent of country. Under the direction of a foreign agricultural expert sent to Russia for the purpose, these stations will be run on an entirely commercial basis; the peasants and co-operative peasant societies are to pay in corn, after the next harvest, for the work which is done for them... Detailed reports... will be published...
At the same time we shall give such aid as may be possible of a medical and sanitary kind, and to the universities and schools...
What we really feel is that it is not enough temporarily to snatch the starving populations of the Volga valley and Southern Ukraine out of the jaws of death; one must not desert them before providing them with the means to till their soil, and to manage by themselves. True humanity does not give merely temporary aid to stop the disease for a season, but seeks to help the patient right through, and does not give him up until he has regained his health and is able to resume his ordinary life. In order to carry out this programme of help for the population in the Russian famine districts considerable funds are necessary. We ourselves have not got them, unfortunately, but we are trying, by means of a concrete example, to show the way which we believe to be the right one.