29 OCTOBER
Comrades! As I begin my report on the New Economic Policy, I must first make a qualification: I do not approach this topic in the way that many of those present may expect—or, to be more precise, I can only claim a small portion of this subject for myself. Naturally, the primary interest in this question lies in familiarizing ourselves with and assessing the latest laws and decrees issued by the Soviet authorities concerning the New Economic Policy. Such an interest would be all the more legitimate the greater the number of these decrees—and the more pressing the need to systematize, organize, and summarize them. And as far as I can judge from my observations within the Sovnarkom, this need is already keenly felt, indeed, very keenly felt. Likewise, it would be no less legitimate to seek out the facts and figures already available regarding the outcomes of the New Economic Policy. Of course, the number of such facts—confirmed and verified—is still quite limited; yet they do exist. And without a doubt, in order to gain a proper understanding of the New Economic Policy, it is absolutely essential to track these facts and endeavor to draw meaningful conclusions from them. But neither of these topics falls within my purview—and should you develop an interest in either, I am confident you will find suitable speakers to address them. My own focus, however, lies elsewhere: namely, the question of tactics—or, if one may put it this way, of revolutionary strategy— as we have applied it in response to the shift in our political orientation—and the task of evaluating the extent to which this policy aligns with our collective understanding of our objectives, on the one hand, and, on the other, the degree to which our current party knowledge and party consciousness have adapted to the exigencies of this New Economic Policy. It is precisely this specific question that I wish to devote my remarks entirely to.
First and foremost, I am concerned with the following: in what sense can we speak of the previous economic policy as having been mistaken when assessing our New Economic Policy? Is it accurate to characterize it as a mistake—and, if so, in what sense might such an assessment be deemed both useful and necessary?
This question, it seems to me, bears upon how well we in the Party currently agree among ourselves on the most fundamental issues underlying our present economic policy.
Should the Party’s attention now be directed exclusively toward the specific, discrete questions of this economic policy, or should that attention, at least from time to time, be turned to an evaluation of the broader conditions shaping this policy—and to the alignment of party consciousness, party interests, and party attention with these overarching conditions? I believe that at present, the situation is such that our New Economic Policy has not yet been fully clarified for the broad ranks of the Party, and that without a clear recognition of the errors inherent in the previous economic policy, we could not successfully carry out our work of laying the foundations and of definitively determining the direction of our New Economic Policy.
To clarify my point and to answer the question of in what sense—and in what ways—it is, in my view, both appropriate and necessary to speak of the errors of our previous economic policy, I propose to draw a comparison with one episode of the Russo-Japanese War, which, I believe, will help us to better grasp the rela-

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tionship between different systems and approaches to politics in a revolution of the kind we are witnessing—a revolution unfolding in our midst. The example I have in mind is the capture of Port Arthur by the Japanese General Nogi. What particularly interests me about this example is that the taking of Port Arthur proceeded through two entirely distinct phases. The first was characterized by fierce assaults, all of which ended in failure and exacted an extraordinary toll in lives from the famed Japanese commander. The second phase involved a transition to an exceedingly arduous, painstakingly difficult, and slow siege of the fortress—carried out according to all the rules of military art—and after some time, it was precisely through this method that the task of capturing the fortress was ultimately accomplished. If we examine these facts, the question naturally arises: in what sense can we regard the Japanese general’s initial approach to the fortress of Port Arthur as a mistake? Were the storming attacks on the fortress misguided? And if they were indeed a mistake, under what conditions did the Japanese army need to acknowledge this error—and to what extent was it necessary to recognize this error in order to fulfill its mission properly?
Of course, at first glance, the answer to this question seems remarkably straightforward. If a series of storming assaults on Port Arthur proved fruitless—and this is a fact—if the casualties suffered by the attackers were extraordinarily high—and this too is an indisputable fact—then it becomes abundantly clear that the tactical error of launching direct, frontal assaults against the fortress of Port Arthur requires no further proof. Yet, on the other hand, it is not hard to see that when confronting a task fraught with so many unknowns—when it is difficult, without adequate practical experience, to determine with absolute certainty, or even with any reasonable degree of accuracy, which particular tactic might prove effective against a hostile fortress—it was impossible to arrive at such a determination without first putting into practice the true strength of the fortress itself— What, then, was the strength of its fortifications? What was the condition of its garrison? And so on. Without this information, even one of the greatest commanders—among whom General Nogi undoubtedly counted—would have been unable to determine the proper strategy for capturing the fortress. On the other hand, the goal and the conditions necessary for a successful conclusion to the entire war demanded the swiftest possible resolution of this task; at the same time, there was a strong likelihood that even substantial casualties, if they proved indispensable for storming the fortress, would nonetheless be more than offset by the gains achieved. Such an undertaking would free the Japanese army for operations on other fronts, bringing one of the most critical objectives to a close before the enemy—the Russian army—could transfer significant forces to distant theaters of war, better prepare those forces, and perhaps even reach a point where the Russian army would emerge many times stronger than the Japanese army.
If we examine the overall course of the military campaign and the conditions under which the Japanese army operated, we must conclude that these assaults on Port Arthur not only represented the supreme heroism of an army capable of enduring immense sacrifices, but also embodied the only feasible approach available in those circumstances—at the very outset of the campaign—which was both necessary and beneficial. For without testing its strength against the practical challenge of storming a fortress, without gauging the enemy’s resistance, there was no sound basis for embarking on a longer, more arduous struggle—one that, precisely because of its protracted nature, carried with it a host of other, equally perilous risks. From the standpoint of the campaign as a whole, we cannot help but regard the initial phase—marked by assaults and attacks—as both essential and advantageous, for, I repeat, without such experience the Japanese army could not have acquired a sufficient understanding of the concrete realities of combat. What was the state of that army when it reached the end of its period of fighting against the hostile fortress through storming? We had already lost thousands upon thousands—and we were about to lose yet more—

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If the fortress could not be taken by this means—such was the situation when some or even most of the troops began to conclude that the assault should be abandoned in favor of a siege. If a tactical error had been made, then that error had to be corrected; everything associated with it had to be recognized as an impediment to the very activities that required change: the assault had to be brought to a close, and the army had to shift to a siege, to a new disposition of forces, to a reallocation of material resources—let alone the specific tactics and maneuvers involved. What had come before had to be resolutely, precisely, and clearly acknowledged as a mistake—not to hinder the development of new strategies and tactics, nor the evolution of operations that now had to proceed along entirely different lines—and, as we know, these operations ultimately ended in complete success, albeit over a period far longer than had been anticipated.
I believe this example is well suited to illustrating the position our revolution found itself in when it set out to address its socialist tasks in the realm of economic construction. Two distinct periods stand out quite clearly in this regard. On the one hand, there was the period roughly spanning from early 1918 to the spring of 1921; and on the other, the period we have been in since the spring of 1921.
If you recall the official and unofficial pronouncements our Party made from late 1917 through early 1918, you will see that even then we held a clear understanding: the development of the revolution—and the unfolding of the struggle—might take either a relatively brief course or a long and arduous path. Yet when assessing the potential trajectory of that development, we proceeded, for the most part—I can scarcely remember any exceptions—on the basis of assumptions that were not always openly stated, but were always tacitly implied: namely, the assumption of an immediate transition to socialist construction. I deliberately reread what was written, for example, in March and April 1918, concerning the tasks of our revolution in the sphere of socialist construction *,

* See Collected Works, 5th ed., vol. 36, pp. 78–82, 165–208, 283–314. Ed.

and I became convinced that such an assumption indeed lay at the heart of our thinking.
It was precisely during this period that a crucial task—indeed, a prerequisite task, politically speaking—had already been resolved: the task of seizing power and establishing a Soviet system of government in place of the old bourgeois-parliamentary order. Then came the task of withdrawing from the imperialist war—a withdrawal, as we know, that entailed extraordinarily heavy costs and the conclusion of the Brest-Litovsk Treaty, an agreement that was not only deeply humiliating but also imposed nearly impossible conditions. After the signing of that peace treaty, the period from March to summer 1918 seemed to mark the moment when military objectives had been accomplished. Later events would show that this was not the case: in March 1918, having settled the question of the imperialist war, we had merely begun to approach the onset of the Civil War, which, beginning in the summer of 1918 and spurred by the Czechoslovak Legion uprising, grew ever more imminent. Back then, in March or April 1918, when we spoke of our tasks, we already contrasted the methods of gradual transition with approaches that relied on a mode of struggle primarily oriented toward the expropriation of expropriators—methods that had characterized the first months of the revolution, namely the final months of 1917 and the early months of 1918. Even then, we were forced to acknowledge that our work in organizing accounting and control had lagged far behind our efforts—and our actual activities—in the realm of expropriating the expropriators. This meant that we had expropriated far more than we had managed to account for, to monitor, to regulate, and so forth—and thus the focus shifted from the task of expropriation, of dismantling the power of exploiters and expropriators, to the task of organizing accounting and control—toward the rather prosaic, so to speak, economic tasks of direct construction. And so, in a number of respects, we were compelled to move backward. For instance, in March and April 1918, the question arose of remunerating specialists according to rates that corresponded not to socialist relations, but to bourgeois relations—that is, to rates that…

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not in relation to the difficulty of the work or to particularly arduous working conditions, but rather in relation to bourgeois habits and to the conditions of bourgeois society. This kind of exceptionally high, in bourgeois terms “high,” remuneration for specialists was not originally part of the Soviet government’s plan—and did not even align with a number of decrees issued at the end of 1917. Yet in early 1918, our Party issued clear directives stating that, in this regard, we must take a step backward and recognize a certain “compromise” (I use the term that was current at the time). By a resolution of the VTsIK dated April 29, 1918, it was deemed necessary to implement this change in the overall wage system—95.
We viewed our construction and economic work, which we had then brought to the forefront, from a single perspective. At that time, it was assumed that we could make an immediate transition to socialism without first going through a transitional period designed to adapt the old economy to a socialist economic order. We believed that by establishing state-owned production and state-controlled distribution, we would thereby directly enter into a new economic system of production and distribution, one fundamentally different from the previous one. We envisioned that the two systems—the system of state-owned production and distribution and the system of private trade and distribution—would engage in a struggle under conditions such that we would build up state-owned production and distribution, gradually wresting it away from the hostile system. We stated that our task was no longer so much the expropriation of expropriators as the accounting, control, enhancement of labor productivity, and strengthening of discipline. We spoke along these lines in March and April 1918—but we did not at all address the question of how our economy would relate to the market, to commerce. When, in the course of the debate with comrades who denied the legitimacy of the Treaty of Brest-Litovsk, we raised, for example, in the spring of 1918, the question of state capitalism, it was framed not as a return to state capitalism, but rather as a way to ease our position and bring the realization of our socialist objectives closer—if only we had state capitalism in Russia as the dominant economic system. I would like to draw your particular attention to this point, because I believe it is essential for understanding what constituted the shift in our economic policy and how we ought to evaluate that shift.
Let me offer an example that can more concretely and vividly illustrate the conditions under which our struggle unfolded. Recently, while in Moscow, I had the opportunity to examine a private “Announcements Sheet” 96. After three years of our previous economic policy, this “Announcements Sheet” struck one as something utterly unusual, completely new, almost strange. Yet, from the standpoint of the general principles underlying our economic policy, there is nothing particularly odd about it. If we recall—even just this small but quite characteristic example—we can see how the struggle developed, what its tasks were, and what methods were employed throughout our revolution. One of the very first decrees issued at the end of 1917 was the decree on state monopoly over advertisements. What did this decree signify? It meant that the proletariat, having seized state power, intended to move toward new socio‑economic relations as gradually as possible—not by abolishing private printing, but by subjecting it to a certain degree of state oversight and guiding it into the channel of state capitalism. The decree establishing a state monopoly on advertisements thus presupposed that private‑enterprise newspapers would continue to exist as a common phenomenon; that an economic policy requiring private announcements would remain in place; that the institution of private property would endure—and that a whole host of private enterprises would still need advertising and announcements. Such was the nature of the decree on the monopolization of private advertisements, and it could only be conceived in this way. There are similar provisions in the decrees concerning banking, but to avoid complicating the example, I will refrain from discussing them here.

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What, then, was the fate of the decree on the monopolization of private advertisements, issued in the very first weeks of Soviet power? Its fate was such that it was soon completely swept aside. Looking back now at the unfolding of the struggle—and at the conditions under which it had been waged ever since—it is almost comical, in light of today’s realities, to recall just how naive we were when, in late 1917, we dared to speak of introducing a state monopoly over private advertisements. What private advertisements could there possibly be in a period of desperate struggle! The enemy—the capitalist world—responded to this decree of Soviet power by intensifying the struggle and driving it to its utmost tension, right to the very end. The decree assumed that Soviet power, the dictatorship of the proletariat, was so firmly established that no other economic order could possibly exist; that the necessity of submitting to it would be so self-evident for the vast majority of private entrepreneurs and individual proprietors that they would accept the struggle on the very terrain we, as the state authority, had set it upon. “You,” we said, “will still have private publications; you will still have private enterprise; you will still enjoy the freedom of advertisement necessary to serve these enterprises—only a state tax will be levied upon them, only their concentration in the hands of the state will be mandated. The system of private advertisements itself will not only not be destroyed; on the contrary, you will be granted certain advantages, always tied to the proper centralization of information dissemination.” But in reality, we found ourselves compelled to wage the struggle not on this very field at all. The enemy—the class of capitalists—met this decree of state power with a complete denial of all state authority. There could be no question of advertisements whatsoever, because everything that remained of the bourgeois-capitalist order in our social structure was already directing all its forces toward the struggle for the very foundations of power. To us, who had proposed to the capitalists: “Submit to state regulation, submit to state authority, and instead of the total destruction of conditions corresponding to old interests, old habits, and the prevailing outlooks of the population, you will achieve a gradual transformation of all this through state regulation”—to us, the very question of our own existence was put to the test. The tactic adopted by the class of capitalists consisted in driving us into a struggle that was both desperate and merciless, forcing us to dismantle the old relations to an extent far greater than we had anticipated.
From the decree on the monopolization of private advertisements, nothing came of it—it remained nothing more than an empty piece of paper. Life itself—namely, the resistance of the capitalist class—compelled our state authority to shift the entire struggle onto an entirely different plane—not to those trivial, almost laughably petty matters we had naively concerned ourselves with in late 1917, but to the fundamental question: to be or not to be—to crush the sabotage of the entire serving class, to defeat the White Guard army that had received support from the bourgeoisie of the entire world.
This particular episode involving the decree on advertisements, it seems to me, offers valuable insights into the broader question of whether the old tactics were mistaken—or not. Of course, when we assess these events in light of subsequent historical development, we cannot help but see that our decree was naïve and, in a certain sense, flawed. Yet at the same time, there was something correct about it: the state authority—the proletariat—had attempted to make the transition to new social relations with the greatest possible adaptation to the existing relations of the time, seeking to proceed as gradually as possible and without undue rupture. The enemy, however—the class of the bourgeoisie—deployed every conceivable tactic to push us toward the most extreme manifestation of desperate struggle. From the enemy’s strategic perspective, was this the right approach? Certainly it was the right approach, for how could the bourgeoisie suddenly submit to a wholly new, hitherto unprecedented proletarian power without first testing its strength in direct confrontation? “Excuse me, esteemed gentlemen,” the bourgeoisie replied to us—

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“Let us not talk at all about advertisements—but rather about whether we might yet find Wrangel, Kolchak, Denikin, and whether the international bourgeoisie will lend them aid in settling a question that has nothing to do with whether you will have a state bank or not.” On the subject of the State Bank, we had written quite enough in late 1917—just as we had on the matter of advertisements—only to find that all our writings amounted, in the end, to little more than scribbled paper.
The bourgeoisie responded to us with a strategy that was, from the standpoint of its own interests, perfectly sound: “First, we will fight over the fundamental question: are you even a state authority, or is this merely an illusion? And of course, this question will be settled not by decrees, but by war, by force—and this will likely be a war not only between us, the capitalists expelled from Russia, but between all those who have a stake in the capitalist order. And if it turns out that the rest of the world is sufficiently interested, then the international bourgeoisie will support us, the Russian capitalists.” In acting in this way, the bourgeoisie was, from the standpoint of defending its own interests, acting rightly. With even the slightest hope of resolving the fundamental question through the most powerful means—war—it could neither afford nor ought to have agreed to the partial concessions that Soviet power offered in the interest of a more gradual transition to the new order. “No transition—and no new order whatsoever!” That was the bourgeoisie’s response.
And this is why the course of events unfolded as we now see it. On one hand, there was the victory of the proletarian state, achieved with a degree of combativeness unparalleled throughout the entire period of 1917 and 1918, amid an extraordinary surge of popular enthusiasm; on the other hand, there was the attempt at economic policy pursued by Soviet power—originally designed for a series of gradual changes, for a more cautious transition to the new order—which, among other things, was reflected in the small example I have mentioned. Instead, what it received in response was a blow from the enemy camp…

We resolved to wage a relentless struggle to determine whether Soviet power, as a state, could endure within the framework of international economic relations. This question could be settled only through war—and that war, in turn, was extraordinarily fierce, akin to a civil war. The more arduous the struggle became, the less room there was for cautious, incremental transitions. In this logic of struggle, I argued, the bourgeoisie was acting rightly from its own perspective. But what could we say? “Gentlemen capitalists, you will not frighten us. We shall defeat you in this sphere as well—indeed, we shall defeat you once again, after having already vanquished you on the political front, together with your Constituent Assembly.” There was no other course open to us. Any alternative approach would have amounted to a complete surrender of our positions.
Recall the conditions under which our struggle unfolded, and you will understand the nature of this seemingly erratic and haphazard shift: why, drawing upon universal enthusiasm and secure political dominance, we were able to disperse the Constituent Assembly with relative ease; why, at the same time, we were compelled to adopt a series of measures aimed at a gradual, cautious transition toward economic transformation; and why, finally, the logic of struggle—and the resistance mounted by the bourgeoisie—forced us to resort to the most extreme, the most desperate, the most unrelenting tactics of civil war, which laid Russia waste for three long years.
By the spring of 1921, it had become clear that we had failed in our attempt to advance, by “storming” methods—by the swiftest, most direct, most immediate means—toward socialist foundations of production and distribution. The political climate of spring 1921 revealed to us that, in a number of economic matters, it was inevitable to retreat to the positions of state capitalism, to move from “storming” to “siege.”
If such a shift provokes complaints, tears, despondency, or indignation in some, then we must say: defeat is not nearly as dangerous as the fear of acknowledging one’s defeat—the fear of drawing all necessary conclusions from that acknowledgment. Struggle

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Military struggle is far simpler than the struggle between socialism and capitalism, and we defeated Kolchak and Co. precisely because we were not afraid to admit our defeats, not afraid to learn from their lessons, to revise again and again what had been left unfinished or done poorly.
The same principle must guide us in the far more complex and demanding struggle of socialist economics against capitalist economics: do not be afraid to acknowledge defeat. Learn from the experience of defeat. Redo what has been done poorly—more carefully, more cautiously, more systematically. If we were to assume that admitting defeat leads, like a surrender of positions, to despondency and a weakening of our fighting spirit, then we would have to conclude that such revolutionaries are utterly worthless.
But I hope that, when it comes to the Bolsheviks—hardened by three years of civil war—no one will be able to make such a claim, except perhaps in isolated cases. Our strength has always lain, and will continue to lie, in our ability to assess even the gravest defeats with absolute clarity, learning from those experiences what must be changed in our activities. That is why we must speak plainly. This is not only of theoretical importance but also of practical significance: we cannot hope to solve our problems with new methods today if yesterday’s experience has not opened our eyes to the inadequacy of old approaches.
The task of transitioning to the New Economic Policy lies precisely in this: after the experience of direct socialist construction under conditions of unprecedented hardship—under the strains of civil war, under circumstances in which the bourgeoisie imposed upon us the forms of a bitter, relentless struggle—it became clear to us in the spring of 1921 that what lay ahead was not direct socialist construction, but rather a retreat, in numerous areas of the economy, toward state capitalism; not a storming assault, but a long, arduous, and unpleasant task of prolonged siege, accompanied by a series of strategic withdrawals. This is what is required if we are to approach the resolution of the economic question—that is, if we are to ensure an economic transition toward the foundations of socialism.

Today, I cannot delve into the figures, the outcomes, or the facts that demonstrate what this policy of returning to state capitalism has brought us. Let me offer just one small example. You know that one of the principal centers of our economy is the Donets Basin. You know that we possess there the largest former capitalist enterprises—enterprises that stood on par with capitalist firms in Western Europe. You also know that our initial task there was to restore the major industrial enterprises: with a relatively small workforce, it was easier for us to begin rebuilding Donets industry. But what do we see there now, after the spring shift in policy? We observe the opposite—especially the remarkably successful development of production in small peasant-owned mines, which have begun to be leased out. We witness the emergence of state-capitalist relations. The peasant mines are operating well, delivering to the state, in the form of lease payments, roughly 30% of the coal they extract. The recovery of production in the Donbas demonstrates a general, substantial improvement compared to the catastrophic situation of last summer—and in this improvement, the enhanced performance of small mines, operated under the principles of state capitalism, plays a significant role. I cannot here undertake a detailed analysis of all relevant data, but you can still clearly see, through this example, the tangible practical results of the policy shift: the revitalization of economic life—which we need at all costs—and the increase in productivity, which we likewise require at all costs—all of this has already begun to materialize through a partial return to the system of state capitalism. The extent to which we succeed in applying this policy going forward will determine how fruitful our subsequent results will be.
Now I return to developing my central argument. This spring’s transition to the New Economic Policy—this retreat to new methods, to new approaches—

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to the methods of state capitalism—had it proven sufficient for us to halt our retreat and begin preparing for an offensive? No, it had not yet been sufficient. And here’s why. If we return to the comparison I mentioned at the outset (the distinction between storming a fortress and laying siege in wartime), we have not yet completed the new redeployment of troops, the reallocation of material resources, and so on—in short, we have not yet finished preparing for the next series of operations, which, in light of our newly adopted strategy and tactics, must now proceed along entirely different lines. If we are now undergoing a transition to state capitalism, the question arises: should we strive to ensure that the methods of economic activity that once served our previous economic policies no longer hinder us today? It goes without saying—and our experience has borne this out—that we must indeed achieve this goal. Back in the spring, we declared that we would not shy away from returning to state capitalism, and we framed our tasks precisely in terms of fostering commodity exchange. A whole series of decrees and resolutions, countless articles, every single piece of propaganda, all of our legislation since the spring of 1921 had been geared toward revitalizing commodity exchange. What, then, did this concept entail? What, if one may put it that way, was the envisioned blueprint for construction underlying this very notion? The plan was, more or less along socialist lines, to exchange industrial products for agricultural products across the entire country—and through this commodity exchange, to restore large-scale industry as the sole foundation of socialist organization. But what actually came to pass? As you all know only too well from practical experience, and as is evident throughout our press, commodity exchange collapsed: it collapsed in the sense that it degenerated into mere buying and selling. And now we are compelled to acknowledge this—if we do not wish to bury our heads in the sand, if we do not want to pretend that we cannot see our own defeat, if we are not afraid to look danger squarely in the face. We must recognize that our retreat has proven insufficient; that we must undertake an additional retreat, another step backward—as we move from state capitalism to the establishment of state regulation over buying and selling and monetary circulation. Commodity exchange came to nothing; the private market proved stronger than we were, and instead of commodity exchange, we ended up with ordinary buying and selling, mere trade.
Make the effort to adapt to it—otherwise, the forces of buying and selling, of monetary circulation, will overwhelm you!
This is why we find ourselves in the position of people who are still forced to retreat, in order to finally launch an offensive at some point down the line. This is why, at this very moment, the realization that our former economic policies were misguided must be universally acknowledged among us. We must understand this clearly, so that we can fully grasp where the crux of the current situation lies, and what makes the particular transition before us so unique. External tasks do not presently present themselves to us as urgent matters—not military tasks, either. What confronts us above all are economic challenges, and we must bear in mind that the immediate transition cannot be a direct leap toward socialist construction.
We had not yet managed to master our economic affairs even after three years. Given the degree of devastation, poverty, and cultural backwardness that we faced, it was simply impossible to resolve this task within such a brief span of time. Yet the “storm,” in general, was not without consequence—or without purpose.
Now we find ourselves in circumstances that require us to retreat once again—not only back to state capitalism, but also to state regulation of trade and monetary circulation. Only by following this path—indeed, a path that will take far longer than we had anticipated—can we restore economic life. We must reestablish a proper system of economic relations, revive small peasant holdings, and lift large-scale industry back onto its own shoulders. Without this, we will never emerge from the crisis. There is no other way forward; and yet, awareness of the necessity of this economic policy remains, in our midst, far from fully clear. When, for example, we speak…

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Rish: Before us lies the task of transforming the state into a wholesale trader—or, more precisely, of learning how to engage in wholesale trade. This is a commercial, a trading task—and to some, it may seem extraordinarily strange, even profoundly alarming. “If, they say, the Communists have come to the point where they are now placing commercial, ordinary, simplest, most commonplace, even the most trivial trading tasks at the forefront, then what, pray tell, is left of communism? Should we not, in light of this, sink into utter despair and declare: ‘Well then, all is lost!’” Such sentiments, I believe, can be observed all around us—and they are exceedingly dangerous. For if these sentiments were to gain widespread traction, they would only serve to cloud the vision of many, making it ever more difficult to grasp our immediate tasks with clear, sober understanding. To conceal from ourselves, from the working class, from the masses, the fact that, both in the spring of 1921 and again in the autumn and winter of 1921–1922, we are still engaged in retreat within the economic sphere—this would mean condemning ourselves to complete unconsciousness; it would mean lacking the courage to face the situation as it truly is. Under such conditions, work and struggle would become utterly impossible.
If an army, having realized that it is incapable of storming a fortress, were to insist that it refuses to withdraw from its old positions, refuses to occupy new ones, refuses to adopt new methods for solving the problem—such an army would rightly be called one that has learned how to advance but has failed to learn, under certain harsh conditions, how to adapt and retreat. No war in world history has ever been won through nothing but unbroken, victorious offensives—and when such wars do occur, they are always exceptions. And this is true even when we speak of ordinary wars. But when the fate of an entire class is at stake, when the question is whether socialism or capitalism will prevail—what rational grounds could there possibly be for supposing that a people, undertaking this task for the very first time, could immediately discover the single, correct, infallible method? What grounds could there be for such a presumption? None whatsoever!

Experience tells us otherwise. Not a single one of the tasks we have faced has failed to demand that we return to them again and again. After suffering defeat, we must take up the task once more, start over from scratch, and carefully examine how we might approach the solution—not necessarily the absolutely correct solution, but at least a satisfactory one. That is how we have worked, and that is how we must continue to work. If, given the prospects that lie before us, we lack unity within our ranks, that would be the most sorrowful sign that a deeply perilous spirit of despondency has taken root in the Party. On the contrary, if we are not afraid to speak the bitter truth—even the harsh, heavy truth—directly and without evasion, we will surely, without fail, learn how to overcome every difficulty, no matter how formidable.
We must ground ourselves in the existing capitalist relations. Shall we shrink back from this task? Or shall we claim that it is not a communist task? To do so would mean failing to understand the nature of revolutionary struggle—not just the character of that struggle, but its most intense form, bound up with the most radical transformations from which we can never turn away.
Let me now draw some conclusions.
I will touch upon a question that occupies many minds. If, in the autumn and winter of 1921, we are once again retreating, then when, exactly, will these retreats come to an end? We hear this question—sometimes directly, sometimes less explicitly—far too often. Yet this question reminds me of a similar query raised during the Brest-Litovsk period. When we concluded the Treaty of Brest-Litovsk, we were asked: “If you have conceded this and that to German imperialism, then when will these concessions finally come to an end? And where is the guarantee that these concessions will indeed cease? Moreover, by making these concessions, are you not actually increasing the dangers inherent in your position?” Of course, we do increase the risks we face—but we must never forget the fundamental laws of war. The very essence of war is danger. On the battlefield, there is not a single moment when one is not surrounded by peril. And what, then, is the dictatorship of the proletariat? It is, in essence, a war—and a war far more fierce…

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a war that is longer and more relentless than any conflict the world has ever known. Here, danger lurks in every step we take.
The situation created by our New Economic Policy—namely, the proliferation of small commercial enterprises, the leasing of state-owned enterprises, and the like—is, in essence, a development of capitalist relations. To fail to recognize this would mean completely losing one’s bearings. It goes without saying that the intensification of capitalist relations itself constitutes an increase in danger. But can you point me to a single path in the revolution, to a single stage or tactic, where there is no inherent risk? The disappearance of danger would signify the end of the war and the cessation of the dictatorship of the proletariat—a prospect, of course, that none of us dares to dream of at this very moment. Every step taken under the New Economic Policy entails a host of dangers. When, in the spring, we declared that we were replacing requisitioning with a tax in kind, that we were decreeing freedom of trade for the surplus remaining after the tax in kind was collected, we were thereby granting freedom to the forces of capitalism. To remain unaware of this would mean utterly losing sight of the fundamental economic relationships—and depriving ourselves of the ability to orient ourselves and to act with due clarity and precision. Of course, the methods of struggle have changed—and with them, the conditions of danger have also shifted. When the question of Soviet power arose, when the Constituent Assembly was dissolved, the danger came from the realm of politics. That danger proved to be negligible. But when the era of civil war arrived—fueled by capitalists from around the globe—the danger became military in nature, and it was far more menacing. And when we altered our economic policy, the danger grew even greater, because economics, consisting as it does of countless mundane, everyday details to which we usually become accustomed and which we tend to overlook, demands of us a heightened degree of attention and sustained effort—and it brings into sharp relief the imperative to master the proper techniques for navigating its complexities. The resurgence of capitalism, the rise of the bourgeoisie, the expansion of bourgeois relations beyond the sphere of commerce and the like—these are precisely the dangers inherent in our current economic construction, in our gradual, incremental approach to solving a task far more difficult than those that preceded it. There must be no room for even the slightest misapprehension here.
We must understand that the specific conditions we face today call for state regulation of trade and monetary circulation—and it is precisely in these areas that we must prove ourselves. The contradictions within our economic reality are now more numerous than they were before the advent of the New Economic Policy: partial, modest improvements in the economic standing of certain segments of the population, of just a few; while, on the other hand, there exists a profound imbalance between economic resources and the pressing needs of others—of the vast majority. The number of contradictions has grown. And it is only natural that, while we are undergoing a radical transformation, we cannot simply leap out of these contradictions all at once.
In closing, I would like to underscore three central themes of my report. First: the overarching question—what sense should we assign to the recognition that our Party’s economic policy in the period preceding the New Economic Policy was, in fact, mistaken? By drawing on the analogy of warfare, I sought to illustrate the necessity of shifting from assault to siege—how the initial phase of assault is inevitable, yet how crucial it is to recognize the significance of new methods of struggle after the failure of the assault.
Next: the first lesson—and the first stage, defined by the spring of 1921—was the development of state capitalism along a new path. In this regard, there have been some notable successes, but also unprecedented contradictions. We have yet to fully master this domain.
And third: following the retreat we were compelled to undertake in the spring of 1921—from socialist construction toward state capitalism—we now see that the regulation of trade and monetary circulation has come to the fore. Though the realm of commerce may seem distant from communism, it is precisely in this sphere that we are confronted with a unique challenge. Only by resolving this challenge can we move closer to addressing—

VII MOSCOW PROVINCIAL PARTY CONFERENCE
the most urgent of economic needs—and only then can we secure the possibility of restoring large-scale industry through a process that is longer in duration, yet more durable—and now, for us, the only feasible path forward.
This, then, is the primary insight we must keep firmly in mind when considering the New Economic Policy. As we address the questions raised by this policy, we must clearly discern the fundamental lines of development—so that we may make sense of the apparent chaos we currently observe in economic relations, where, alongside the dismantling of the old, we encounter the still-fragile shoots of the new; where we often find that our existing practices no longer align with the new conditions. With the goal of increasing productive forces and restoring large-scale industry—as the sole foundation of a socialist society—we must act in such a way as to approach this task with the right mindset and to see it through, come what may.