Preview

THE

CO-OPERATIVE MOVEMENT
IN

SOVIET RUSSIA

///

INTERNATIONAL LABOUR OFFICE

STUDIES

AND

REPORTS

Series H (Co-operation) No. 3

THE

CO-OPERATIVE MOVEMENT
IN

SOVIET RUSSIA
*

I. The Co-operative Movement during the Period of Communism.
II. The Transition to the New Economic Policy. III. Consumers' Cooperation under the New Economic Policy. IV. Recent Developments
in the Consumers' Co-operative Movement. Conclusion.

GENEVA
1925

PREFACE
In Russia co-operation is constantly under discussion. The
policy of the Government with respect to the movement is at present
very much to the fore, and is frequently discussed at congresses,
conferences of government institutions, and in the press and many
general or co-operative publications. Under the Soviet system the
movement now takes a prominent part in the organisation of exchange;
it influences both industrial and agricultural production, and consequently the conditions of work and standard of life of the working
classes. The co-operative movement in the Russia of today is therefore of direct interest in the study of labour problems.
The administrative and economic structure of the movement, its
place in the economic system of present-day Russia, the extent of
its influence on the supply of articles of prime necessity for the
working masses, its place in the social policy of the Government, and
its influence on the position of the working classes—all these are
questions closely connected with the study of economic and social
conditions in Russia today.

Before discussing the present situation, it is necessary to examine
the tendencies and results of government policy in matters of cooperation during the period of Communism. There can be no question that this policy has influenced the attitude adopted since 1921
and the situation as it is today. Moreover, during the period of
Communism the co-operative movement was radically transformed
under the influence of the Government's general policy, and a study
of the results of this experiment must certainly be of more than
historical interest.
,

— VI —

For these reasons a considerable part of this report consists of
an examination of co-operative policy and its effects during the first
period of the revolution. For this period the movement is considered
as a whole, with no distinction between its different branches.
In point of fact, they were all amalgamated and subjected
indiscriminately to the general home policy of the Soviets—economic,
financial, and social—in accordance with the fundamental conceptions
of the Communist programme.
Later, when the New Economic Policy was initiated and
developed, the Government was conversely compelled to specialise its
policy towards the different sections of the co-operative movement,
each of which progressed independently of the others under the
influence of special circumstances. For this reason it has been thought
more logical to examine each branch of the co-operative movement
separately for this second period. In this report consumers' societies
only are dealt with; other.co-operative institutions (agricultural,
artisan, and credit societies) will be discussed in a second report.

Co-operative literature in Soviet Russia is voluminous. A list
of the sources used will be found at the end of the volume. It has
been possible to consult all the co-operative literature published in
Russia, owing to the regular exchange of publications between the
International Labour Office and the Centrosoyus, and to the kindness
of the Centrosoyus library, which supplies the Office with all the
publications of co-operative institutions. This report is therefore
based both on co-operative literature and on general Soviet
publications.
The functions of the co-operative movement in the Soviet economic system have not yet been finally and clearly determined, and
consequently the Government has not yet been able to define its
future policy. On certain points, even, there have recently been
differences of opinion between some of the government institutions,
certain economic bodies, and various co-operators. On these contested
points it has been thought necessary to give not only the opinions

— VII —

of co-operators themselves, but also the different views expressed in
the general press, speeches and reports, and scientific

economic

literature.

The statistics supplied by the co-operative press must be used
with the same caution as was indicated in previous publications
on Russia. As it is impossible to check their accuracy, they have
been reproduced as they appear in the official, co-operative, or general
publications. The data are neither exact nor complete. There are
differences not only between the information in the co-operative press
and the official data of the Central Statistical Department, but also
among the figures quoted by the co-operative publications themselves,
so that frequently, in discussing one and the same question
information drawn from several sources has had to be given \

' The report covers the period up to the beginning oí 1925. Owing
to unforeseen difficulties of publication it has been delayed in the press.
3

CONTENTS
PART I
THE CO-OPERATIVE MOVEMENT DURING THE PERIOD
OF COMMUNISM
Page

CHAPTER I.

The Communist Theory of Co-operation

CHAPTER II. Co-operative Policy of the Soviets
The Policy of Compromise in 1918
Efforts of the Government to Control the Co-operative Movement
Conversion of the Co-operative Organisation into a State
Institution
Consumers' Co-operation
Other Branches of Co-operation
Craft Co-operation
Agricultural Co-operation
Credit Co-operation
Abolition of the Economic Independence of the Co-operative
Organisation in 1920
. . .
Credit Co-operation
Agricultural and Craft Co-operation
Amalgamation of the Co-operative System

16
16
23

CHAPTER III. Function of the Co-operative Organisation in the
General Economic System of the Soviets
State Regulation of Exchanges
Socialisation of Exchanges
CHAPTER IV. Effects of Communist Policy on the Co-operative
System
Numerical Expansion and Its Causes
Credit Co-operation
Agricultural Co-operation
Craft Co-operation
Consumers' Co-operation
Absorption oí the Co-operative »System by the State and its
Effects

31
31
36
36
38
42
42
43
44
45
48
48
51
55
55
56
56
61
62
by

— IX —
PART II
THE TRANSITION TO THE NEW ECONOMIC POLICY
CHAPTER I. State Capitalism and Co-operation
Abandonment of the Communist Policy
Function of the Co-operative Movement in the System
State Capitalism
Development of the New Co-operative Policy
CHAPTER II. The General Economic System, 1921-1924
Agriculture
Industry
Commerce and Credit
Price Changes
National Income and Consumption

Paee
79
79
of
83
87
89
90
92
94
99
104

PART III
CONSUMERS' CO-OPERATION UNDER THE NEW
POLICY

ECONOMIC

CHAPTER I. Reorganisation of the Consumers' Co-operative
Movement
: .
Decree of 7 April 1921
General Consumers' Co-operation
The Centrosoyus
Unions of Consumers' Societies
United Consumers' Societies (E.P.O.)
Voluntary Co-operative Societies (D.P.O.j
Industrial Consumers' Co-operation
Consumers' Co-operation among Transport Workers
Military Co-operative Societies
CHAPTER II. Economic Activity of the Consumers' Co-operative
System
r .
The Policy of Exchanges iu Kind
Decree of 7 April 1921
General Agreement of 25 May 1921
Failure of the Exchange Policy ; its Causes
Abandonment of the Policy of Exchanges in Kind . .
Restoration of Economic Independence ; Problems of Finance
Inadequacy of Money Credits
The Policy of Commodity Credits and Its Failure . . .
Competition with State Trading Bodies
Work of the Centrosoyus
Work of the Co-operative Unions
Consumers' Societies in the Towns
Industrial Co-operative Societies
Consumers' Societies in the Country
Industrial Activities of Consumers' Co-operative Organisations
3

113
113
114
114
116
117
118
120
125
127
132
132
132
134
136
144
146
149
152
153
158
172
181
193
ai2
221

_ x —
Page

CHAPTER III. Results of the Work of the Reconstructed Consumers Cooperative Movement
228
Economic Activities
228
Membership
234
Organisation and Grouping
245
CHAPTER IV. Function of the Consumers' Co-operative Movement in the Economic Life of Russia
252
Relation to Consumption
253
Sale of Products of Nationalised Industries
254
Growth of Private Trade
257
PART IV
RECENT DEVELOPMENTS IN THE CONSUMERS' CO-OPERATIVE
MOVEMENT
CHAPTER I.

Reforms in

1923 and

1924

Changes in Opinion on Co-operation
Restoration of Voluntary Membership
Drawbacks of Compulsory Membership
Movement in Favour of Voluntary Membership
Decree of 20 May 1924
Effects of Voluntary Membership
Reaction against Bad Commercial Organisation
High Prices
High Overhead Charges and the Remedies Contemplated . .
Credits and Assortment of Goods
Multiplicity of Grades in the Co-operative System . . .
CHAPTER II. Recent Co-operative Policy
The Expansion of Private Trade
Discussions on Economic Policy in the Communist Party . .
Decisions of the Directing Bodies of the Communist Party.
Political Officials of the Party
Central Committee of the Party
The Trade Unions
Thirteenth Communist Congress
Resolutions of the First Commercial Conference of the
Co-operative Movement
CHAPTER III. Effects of the 1924 Co-operative Policy
Relations between State Industries and the Co-operative
Organisation
Sale Prices and Overhead Charges
Present Position of the Co-operative Movement
Position of State Industry
Position of Private Capital in Trade
Revived Importance of Private Capital

269

269
271
371
273
280
281
2S4
284
290
292
296
302
302
304
308
308
309
310
311
314
316
316
320
321
324
326
330

CONCLUSION

335

SOURCES

357

PART I

THE COOPERATIVE MOVEMENT
DURING THE PERIOD OF COMMUNISM

CHAPTER 1

The Communist Theory of Co-operation

The policy of the Communist Government in regard to cooperation has been determined throughout by two factors — on the
one hand theory and dogma, embodying nothing less than a complete
communist theory of co-operation, and, on the other, political
considerations.
During the period of " complete Communism ", the measures
introduced by the Soviet Government to deal with the co-operative
movement were framed exclusively in accordance with these theoretical ideas and political necessities, which also influenced the
development of the co-operative movement itself during the Bolshevist
revolution. There is no doubt that before the introduction of the
Bolshevist régime the communist theory of co-operation had assumed
no precise and definite form. In fact, even as late as 1920, during
the congress of the Russian Communist Party it was admitted by one
of the most uncompromising advocates of the communist theory of
co-operation that " the Bolshevists had failed as yet to find a formula
for the new principles of co-operation " \
When the New Economic Policy (N. E. P.) was introduced, this
formula had not yet been finally determined. Endeavours had been
made, however, to work out a theoretical foundation for the Communists' policy towards the co-operative movement and, though
incomplete, this theory certainly underlay all the practical measures
adopted by the Communist Government up to 1921.

Deviaty Siezd Rossiiskoi Communisticheskoi Partii, 29 Marta —
4 Aprela 1920 : Stenografichesky otchot (Ninth Congress of the Russian
Communist Tarty, 29 Mar. to 4 Apr. 1920 : Verbatim Record), p. 258;
Report by Mescheriakov. Moscow, State Publishing Office.
4

Some knowledge of this theory is essential for a clear understanding of the policy of the Communist Government in matters of cooperation. According to the Bolshevist leaders the theory is based
upon the ideas expressed by Karl Marx.
In the resolution which he put forward at the congress of the
Geneva " international " in 1866, Marx maintained that co-operation
is nothing more than a means of transforming modern society which
is based on class antagonism. He contends that the real achievement
of the co-operative movement is to afford a practical demonstration
of the fact that the present system, based on the enslavement of
labour by capital and inevitably leading to the impoverishment of the
masses, can advantageously be replaced by a democratic system, the
free association of producers in the enjoyment of equal rights.
In Marx's opinion, co-operation alone will never succeed in
transforming capitalist society while it remains confined to a number
of small organisations set up by the efforts of groups of wage
earners. The institution of a sound and smooth-working system
under which free labour would be founded on co-operation among
all the factors in production would require profound transformations;
these could only be successfully achieved if the working classes
wrested power from the capitalists and landed proprietors.
In the " Manifesto of the International " (1864) Marx states that
the value of extensive social experiments, such as co-operation in
general or factories working on a co-operative system in particular,
should not be under-estimated. He adds that practical achievements,
not idle words, have clearly demonstrated already that production
on the large scale made possible by scientific discoveries can be carried on without exploitation of the workers by the possessing classes.
Economic considerations in no way require that the means of
production should be monopolised by the classes which exploit the
workers ; wage labour, no less than slave labour, is a temporary
phase, being, in fact, the lowest stage of social development ; it is
bound to be ousted by co-operative labour which will produce in a
spirit of freedom and joy.
In his book Capital (Vol. I l l ) , in the chapter on the function
of credit in the capitalist system of production, Marx advances similar
ideas, especially in regard to producers' co-operation. He writes that
co-operative factories, though necessarily subject to the defects of
the present system, nevertheless make inroads on the old capitalist
organisation.

The Russian Communists base their theory mainly upon a passage
in the " Manifesto of the International " which they consider as
expressing the kernel of Marx's views. In this passage it is stated
that, though theoretically and practically beneficial, co-operation
cannot arrest the development towards monopoly of private capitalism, which is advancing in geometric progression. It cannot bring
freedom to the masses nor even adequately alleviate their poverty
so long as it remains confined to a number of chance attempts made
by certain privileged workers. In order to free the labouring masses,
the co-operative movement must be organised on a national basis,
it must bring the whole resources of the country to bear. According to Marx, co-operation, if it is to free the masses, must extend
to the whole of the population and be supported by the state.
It is upon such considerations as these, selected from the
various writings of Marx, that the representatives of the Communist
Party in Russia attempted to found their theory of co-operation and
therefrom to construct a practical general policy. The first requirement of this theory was to determine the function and importance of
co-operation in the capitalist system and in a socialist organisation.
The standpoint adopted by the Communists is described below.
Co-operation is an outgrowth of capitalism. Capitalism, which
sanctions the unjust distribution of national income and allows a
handful of men to exploit the large majority of their fellows, has led
to utterly abnormal social and economic conditions ; in the matter
of distribution it has created downright anarchy. Such a state of
affairs must inevitably, and did in fact, give rise to co-operation.
Co-operation is a reaction against these conditions ; it enables
the large mass of workers to contend to some extent with the difficulties which they encounter. It makes its appearance first of all
among workers, and the shape it assumes is usually that of consumers' co-operation. The object in this case is to supply the worker
with articles of current consumption at low prices and of good quality,
the effect being indirectly to increase his wages.
Urban producers' co-operation is adopted by town workers, particularly craftsmen and kustari (homeworkers) as a means of contending with the capitalist employer who exploits wage labour.
Agricultural co-operation, the object of which is to market agricultural produce and to supply the peasants with the requisite implements and credits, should deliver the peasant from the grip of the
middleman and enable him to sell his produce at better rates ; it
3

— 4 —

should foster direct relations between the town and the country and
overthrow the artificial barriers separating them which have been
erected by the capitalist system.
Finally, credit co-operation, which is to assist the labouring
classes to secure credits on easier and more equitable terms, should
save them from the exorbitant demands of the capitalist credit
institutions.
Thus in all these spheres of the economic system the co-operative
movement assists workers, craftsmen, small manufacturers, and the
poorer peasants in their struggle against the unenviable conditions of
life and work imposed by capitalism. But co-operation, being a
movement of opposition to capitalism, is only a transitory form of
economic organisation. Its fate is bound up with that of capitalism ;
it arose and grew under the capitalist régime and will die with it.
Under the socialist régime, co-operation becomes superfluous ; if it
persists it has quite different functions to discharge.
Not only does the socialist organisation of society make the
exploitation of labour impossible, but it puts an end to the very
principle of wage labour. It makes the exploitation of small producers
by the large private capitalist impossible by abolishing private
capitalism. Thus socialism removes the raison d'être of the co-operative movement. Society, as organised on socialist principles, is a
community of free workers, and this is perfect co-operation in its
widest as in its literal sense. Socialist society makes the co-operative
movement in its present form superfluous, as society thus organised
itself embodies the fundamental idea of that movement. It absorbs
every form of existing co-operation inasmuch as it achieves the ends
which the various co-operative movements had in view.
As one of the authors of the communist theory of co-operation
asks :

What would be the raison d'être of credit co-operation under a socialist
system where money will no longer exist and loans will therefore no
longer be required ? Why have tenants' co-operation when all dwellings
will be the property of the community ? What will be the use of sale or
consumers' co-operatives when all goods are held in common by society?
What would consumers' societies do in that case? What advantages
could they afford their members ? None whatever ; for their members
will be able to obtain the same goods on the same terms from any other
distributive organisation. And what other attraction will induce citizens
to join co-operative societies when they derive no advantage therefrom ?
There can be1 no doubt but that co-operation will disappear with capitalist
exploitation.
1
MESCHERIAKOV : " Co-operation, Socialism, and the 'Dictatorship
of the Proletariat ", in Novia Idei v Co-operatsii (New Ideas on Co-operation), p. 19. Moscow, 1919-

I n the opinion of another representative of the Communist Party,
co-operation will lose all reason for existence the moment that all
economic and political power comes into the hands of the proletariat.
Under the capitalist and bourgeois system co-operation is of the
greatest economic and social value. Not only do the various types of
co-operative secure certain advantages for their members and even for
other persons, but they are waging war on capitalist forms of economic
organisation. It is true that the determining factor in this struggle is
the economic competition inherent in the capitalist system ; but side
by side with this struggle for existence the co-operative organisations
which unite the slaves of capital are fighting the capitalist system
itself . . .
In socialist society there is no room for competition. The
reign of competition and speculation is drawing to a close and is giving
way to organised economic action.
T h e economic function of agricultural co-operation also becomes
entirely different in a socialist system. Whereas, under the capitalist régime, the agricultural co-operative acts as an intermediary
between town and country, under the socialist régime it becomes
superfluous, seeing that the very need for an intermediary between
town and country disappears and that this function devolves upon
the state organisations administering the whole of society '.
I n 1918-IQ19 the leaders of the Communist P a r t y regarded the
Bolshevist revolution as inaugurating the era of socialism in Russia.
T h e dictatorship of the proletariat being an accomplished fact,
the power was in the workers' hands. Private property was abolished,
as were the division of society into separate classes and the exploitation of the working classes b y the private capitalist. I t had
therefore become possible and necessary to put communist theories
into practice in the field of co-operation, as in all others. It was not
t h o u g h t possible, however, to apply the whole Communist programme
in regard to co-operation at the outset. I n 1918 the Communist
leaders admitted that they had " not yet entered upon the socialist
phase. W e are passing t h r o u g h a transitional period, the period of
the dictatorship of the proletariat. W e are still fighting capitalism.
T h a t is why all • organisations which are necessary or useful in the
struggle are still in existence. T h e co-operative movement is among
the number " 2 .
T h e new period which was ushered in by the Bolshevist revolution

N. MiLiuTiN : " Agricultural Co-operation ", in Narodnoie Khoziaistvo (The National Economic System, organ of the Supreme Economic
Council), 1919, Nos. 9-10.
' MESCHERIAKOV : op.

cit.

— 6—
has two essential characteristics. I t was only the first step in the transition t o socialism, b u t capital was no longer dominant. I n these n e w
and sharply marked conditions, t h e task of t h e Soviet authorities in
dealing with co-operation a n d all other vestiges of t h e capitalist
régime was to make use of t h e old forms of organisation where they
might be of positive assistance in facilitating t h e organisation of a
socialist society. Lenin stated that :
The socialist state can only be built up as an organisation of communities of producers and consumers in which we shall take due account
of capacities for production and consumption, in which we shall economise
labour by constantly increasing individual productivity, etc. It will not
be possible to achieve this end unless we introduce strict and universal
supervision and control of production and reserves of wheat and other
products. From capitalism we have inherited organisations, the consumers' societies, which can help us in organising supervision and distribution '.
I n t h e view of an influential member
Mr. K h i n c h u k :

of t h e Centrosoyus,

The consumers' co-operative movement, which embraces millions of
proletarians and owns many shops and productive undertakings, is of
great importance to the masses, because it raises their standard of life
and introduces them to associated activity and the employment of improved capitalist methods ; when it seizes the reins of power, the proletariat will be able to utilise the co-operative movement in organising
the exchange and distribution of goods 2.
According to Bukharin a n d Preobrazhensky :
When all citizens of the Republic are members of co-operative societies, they will be in a position to control the state machinery of distribution from top to bottom. Through the participation of consumers
themselves in the system of distribution, the distributing bodies, instead
of remaining aloof from the masses, will be their own organisations.
This will undoubtedly facilitate the spread of the communist idea among
the masses and the creation of conscious and friendly discipline among
them. They will thus come to realise how the machinery of industry and
distribution works in a socialist society ' .
D u r i n g t h e transitional period t h e co-operative movement must
remain. Until t h e socialist system is in being t h e proletarian state

LENIN : " The Important Tasks of the Soviet Government ", first
published as an article in the Izvestia, 29 Apr. 1918. Cf. Sobranie Sochinenii. (Complete Works), Vol. XV. Moscow, State Publishing Office.
1922.

2
L. KHINCHUK : " Communism and Co-operation "; paper presented
to the first International Conference of Communist Co-operators, published in Novia ponti co-operatsii (The New Path of Co-operation), Vol. I.
Moscow, 1922.

» BUKHARIN and PREOBRAZHENSKY':

p. 326. Paris, 1923.

L'A.

B. C.

Communisme,

must m a k e use of the movement in its own interest and t h u s
facilitate the transition to the socialist system.
T h i s was the fundamental standpoint of the Communist Party
in 1918-1919 and found expression in the P a r t y ' s programme on cooperation.
T h e draft programme which Lenin laid before the Seventh
Congress included " compulsory organisation of t h e whole population
in communities of consumers and producers " 1. I n the programme
finally approved by the E i g h t h Congress (18-23 March 1919) this
idea was further developed and was subsequently to determine t h e
whole policy of the Soviet Government with regard to the co-operative movement. Passages from this programme 2 are given below.
Consumers'

Co-operation.

In the sphere of distribution of goods the Soviet authority at the
present time should substitute for trade a methodical system based on
a single government plan. The whole population must be organised in
a single system of consumers' communities in such a way that through
this strictly centralised distributive machinery a rapid, regular, and
economical distribution of necessities shall be secured as efficiently and
inexpensively as possible.
These consumers' communities and federations of communities must
be built up on the framework of the existing general and industrial cooperative societies, which are the most important consumers' organisations
and in the sphere of distribution represent the best legacy of capitalism.
The Russian Communist Party considers that from the point of view
of principle the soundest method is not to abolish the co-operative system
but to develop it on communist lines, and therefore holds that its policy
should be systematically carried out. All members of the Party should
work in the co-operative societies, direct them on communist lines with
the assistance of the trade union organisations, develop initiative and
discipline among the working population grouped in the co-operative
societies, link up the whole population with the societies, and finally
fuse all the co-operatives into a single society covering the whole of
Soviet Russia. Above all the proletariat must always exercise a dominant
influence on the other classes of workers, and measures suitable to each
case must be taken to transform the old capitalist co-operatives of the
petty bourgeois type into consumers' communities managed by proletarians and semi-proletarians.
Craft

Co-operation.

T h e passages in the Communist programme dealing with craft
co-operation follow the general policy adopted towards small craft

1
Sedmoi Siezd Russkoi Communisticheskoi
Partii : Stenografichesky
Otchot (Seventh Congress of the Russian Communist Party, 6-8 March
1918, Verbatim Record), p. 207. Moscow, State Publishing Office.
2
Cf. Programma i ustav R. K. P. (Programme and Rules of the
Russian Communist Party), pp. 13g et seq.
3

— 8 —
industry, which is to be extensively used. T h e state will give orders
for goods to craftsmen a n d small undertakings. Rural a n d smallscale industries must be included in the general scheme for supplying
the nation with raw materials and fuel, and the state is to give financial support t o small industries.
Single craftsmen, rural workshops, craft co-operatives, and small
undertakings must therefore group themselves in larger industrial and
producing units. Such groups must be encouraged by the grant of
economic privileges, which along with other measures should help to
check the tendency of craftsmen to become small employers, and pave
the way for a painless transition from these backward forms of production
to a more advanced type of large-scale power-using industry '.
T h e authors of " T h e A . B. C. of Communism ", commenting on
this programme, wrote :
Now that we can incorporate the craftsmen and kustari in the state
organisation of labour, all these associations can help to build up a
socialist society. We should count not on the devotion of the small
craftsmen to communism but on the conditions of the present time, which
force them to be on our side and not against us 2 .
Agricultural

Co-operation.

T h e Communist P a r t y thinks of agricultural co-operatives only
as unions of producers, either " artels " carrying on cultivation or
certain other agricultural work in common, or agricultural communities and free associations of farmers established in order to
cultivate a large estate in common.
T h e commentators on the Communist programme, who think that
" under the capitalist system the increase in large peasant holdings
implies the ruin of the small holder ", state that " under the socialist
system large holdings may be formed by the amalgamation of small
ones ".
T h e Communist Party, though it maintained co-operation in its
programme, wished to give it other forms better adapted to the new
conditions. T h e old co-operative movement was subjected to detailed
and pitiless criticism.
According to the Communists the outstanding characteristic of
the old movement was the sharp division into general and industrial
co-operation. T h e co-operative movement, it is true, arose among

BTTKHARIN and

Ibid.,

p . 130.

PREOBRAZHENSKY : op.

cit.,

278.

— g —
the working classes, for whom it represented an indirect increase in
wages, but the movement soon ceased to be an agent of the class
war. In the words of a communist theorist, " co-operators begin by
realising that the workers are exploited both as producers and as
consumers, but they are careful to add that every citizen without
distinction of class is a consumer. As the prosperity of consumers'
societies is in proportion to their membership, the co-operative
movement must be open to all classes " 1.
In order to strengthen their position and increase their turnover
as much as possible, the old co-operatives were much concerned with
the size of their membership. Gradually the consumers' movement
included representatives of the so-called bourgeoisie as well as
workers, and indeed was particularly anxious to secure such
members. The divergencies between the bourgeois and the workers
gradually became more acute. The interests of the workers, who
were at once consumers and producers, were entirely distinct,
particularly in connection with the improvement of labour conditions
—so much so that a distinct industrial or workers' co-operative
movement gradually and naturally grew up.
But what was necessary under the capitalist system became
superfluous in the new society. The object of the Soviet policy was
to destroy the capitalist classes, and the presence of both bourgeois
and proletarian members in the same co-operative system would be
an obstacle to this policy. The collaboration of these two elements
was superfluous in the socialist state, which represented the cooperation of workers, and workers alone. More than this, such
collaboration was dangerous in the struggle to establish a socialist
system, in which struggle the co-operative movement must also
share. The presence of bourgeois members in the co-operatives
would but make the struggle more difficult. Consequently the new
co-operative movement should only include the labouring masses of
the people.
The old co-operative movement was also distinguished by its
principles and theories, which were imbued with capitalist and petitbourgeois ideas. Its view of the transformation of society is described
by the author already cited as follows :
By organising consumers as such on a large scale, the co-operative
movement as it develops will oust first the retail shopkeeper, then the
1
J. STEPANOV : Potrebitelskaia obschestva i rabochy class (Consumers' Societies and the Working Classes), p. 15. Moscow, State Publishing Office, 1920.

wholesale merchant, and eventually the capitalist. It will gradually
replace the capitalist system of production by co-operative production
While the political parties and the trade unions fight towards their
goal, the co-operatives aim towards the same ideal progressively and
unobtrusively, without a struggle, by uniting the different and opposing
classes on the ground of their community of interest. No proletarian
revolution, no socialist coup d'état, and above all no dictatorship of the
proletariat, but organic absorption by socialism — this is the watchword
of the co-operator l .
T h e Communists declare that the old co-operation had n o t h i n g
in common with socialism or revolution. It was a purely petitbourgeois movement, which came to terms with capitalism a n d private
property. I t was not the negation of capitalism, but a form of
opposition to certain abuses of capitalism, to this or that aspect of
capitalist exploitation, but it maintained private property 2 .
T h o u g h the old co-operative methods made inroads on the
power of capital in certain minor branches of the economic system,
they were incapable of preventing the development of capital in the
important branches of industry, and this development was the determining factor in the conditions of the workers. T h e co-operative
movement helped to increase t h e purchasing power of large sections
of the working classes, but it could have no direct influence on the
position of these groups as producers ; still less could it transform
the capitalist system into a socialist organisation for production. T h e
co-operative movement does not abolish capitalist exploitation in
industry and does not even weaken it.
T h e co-operative movement, which arose in a capitalist society,
does not create new relations in the world of labour. It takes as its
starting-point the conditions created by capital, which is omnipotent
in modern society. T h e idea that co-operation could rescue any
considerable number of the workers from the domination of capital
is one of the illusions of the co-operative movement, an illusion as
hampering and dangerous as the other reformist illusions 3 .
If it is t o exist and develop under the capitalist system, t h e
co-operative movement is obliged to adopt the same methods as any
capitalist organisation. T h e work of a n y co-operative organisation
is judged first of all by the answer to the question — will any given
measure increase profits, and more especially will it increase the

STEPANOV : op.

cit.,

16.

Speech by Mescheriakov at the Ninth Congress of the Communist
Party. Cf. verbatim report, cited above.
» STEPANOV : op.

cit.,

30.

— II

—

dividend or refund on purchases? If the co-operatives can achieve
great success by adopting capitalist methods, attracting private
capital, or entering on speculative commercial operations, their
members can never resist the desire to increase profits.
The chief object of the co-operative movement under the capitalist system is to rescue the consumer from middlemen and
speculators and to distribute profits among all the associated
consumers. The consumers' movement achieves this object more or
less successfully, but it benefits only its own members, i.e. one
section of society.
Further, consumers' co-operation does not succeed in ousting
the retail shopkeeper and has no footing in wholesale trade, on which
it depends itself. Producers' co-operation plays an absolutely
insignificant part in national production, and capitalists have never
considered it a serious opponent. On the contrary, as they know they
are always strong enough to wring the neck of the co-operative
movement, they have let co-operative theorists pursue their dreams
of eliminating capitalism, and allowed the accountants of co-operative
societies to revel in the contemplation of profits snatched from the
small shopkeeper.
The organised co-operative movement had to adapt itself to the
capitalist system and occupy a given place in the distributive machinery of this system. The capitalists even benefited in some respects
by its existence, as the cost of maintaining their own distributive
machinery was reduced proportionately and they could thus invest
part of their commercial capital in industry.
By reducing the
number of retail shopkeepers and bringing the consumer nearer to the
capitalist producer, co-operation helped to increase the rapidity of
commercial transactions, and the " proletarian reserves ", some
members of which had hitherto managed to live by small shopkeeping, found themselves in an even more critical position x.
Agricultural co-operation only benefited the well-to-do peasants
and did little to make life easier for the poor peasant 2 .
The interests of the working classes demand that the co-operative
movement adopt an entirely different policy and direct its activities
along different lines. It is an idle dream to look for two distinct
personalities in the worker — one who, having nothing to sell but his

STEPANOV : op. cit., pp. 17, 19, 23, 27.
' BUKHARIN and PREOBRAZHENSKY : op. cit.,

324.

—

labour, can join a political party or a trade union, while the other,
as a consumer and solely as such, can join co-operative societies and
there act in common with the middle classes.
Owing to the development of capitalism the consumers' societies
tend to enrol only people who live on the product of their labour ;
they can only live by selling their labour. The expenditure of each is
limited by the amount of his wage. If the workers join the cooperative movement, they do so in order to improve the condition
of the working classes. For them the co-operative movement can
only be one aspect of the class war.
It is impossible any longer to support the old idea of a labour
movement divided into three distinct branches — political, industrial,
and co-operative. The independence and neutrality of the co-operative movement, etc. — these are mere sophisms to place the workers'
co-operative movement in bondage to capital and the middle classes,
and they are dangerous sophisms, for they distract the working
classes from their essential task, which is to fight capital in all its
forms.
According to Mr. Khinchuk, the Bolshevist revolution ushered
in a new era. There is no question now of the independence of the
co-operative movement. Even before this it could not really be
separated from the other branches of the labour movement. All the
more then, in these days of acute tension between the classes, when
the masses are demonstrating their greater revolutionary consciousness, when any economic struggle immediately becomes a political
dispute, the adherence of the workers to the co-operative movement
necessarily becomes part of the war on capitalism 1.
Independence was necessary so long as the co-operative movement was threatened by a power which was not proletarian, but according to Mescheriakov the workers' co-operative movement has nothing
to fear from a proletarian government. It becomes a weapon in the
hands of the ruling proletariat and therefore loses its independent
character, as the proletariat wishes above all to strengthen it. The
proletariat helps the co-operative movement in every possible way by
advances and subsidies, and entrusts the distribution of goods to it
instead of giving a free hand to private trade. In a socialist society
production and distribution should be organised not co-operatively

KHINCHUK : op.

cit.

13 —

but as state services. The members of society do not have to decide
if they will or will not join a given organisation \
At the third Congress of Industrial Co-operatives (in 1918) Lenin
said :
We support the theory that the whole of society should form a single
co-operative organisation for purposes both of supply and of distribution.
We all consider that the co-operative movement should be one of the
conquests of the Socialist Party. It is a difficult conquest, but it is the
guerdon of victory. Capitalism tried to divide the classes of the population ; this division must disappear once and for all, and society as a
whole must become one co-operative group.
There can be no question of
any independence for different groups 2.
It is impossible to be neutral or independent of parties. The
co-operative movement, like all other organisations of the proletariat,
must carry on the class war. It must not be afraid to mix in
politics.
These facts led to two conclusions : the abolition of voluntary
membership in co-operative societies and enrolment of all the
workers in these societies without any financial contribution. The
co-operative movement, whether dealing with production or distribution of goods, becomes a compulsory public service, as does any
economic activity on the part of members of a socialist society.
Obviously there can be no question of voluntary membership of the
co-operative movement, any more than a citizen has the right of
voluntary participation in the operations of the single workers' cooperative constituted by a socialist society. Hitherto the co-operative
movement only served the members who had voluntarily joined it.
It must now serve all the workers, and membership of the movement
becomes compulsory instead of voluntary, as only one of many social
obligations.
With the establishment of socialism the co-operative movement
becomes a cog in the economic machinery. It is embodied in the
economic system of the proletarian state, of which it becomes an
agent. The Communists, basing their views on those of Karl Marx,
hold that the co-operative movement should be financed by the socialist
state equally with all its other agents. The movement no longer needs
private capital, which in any case ceases to exist in a socialist society.
It is no longer dependent on its members' contributions and does not
aim at making profits for its members. The co-operative movement

1
2

MESCHERIAKOV : op. cit.
LENIN : op. cit., Vol. XV, p. 585.

— 14
should be maintained by the state like any commissariat or economic
department of the Soviet authorities.
Finally, the co-operative movement loses another of its old
functions, its educational work. Under the capitalist system this
was of considerable importance ; the movement endeavoured to
instruct the workers in matters differing from those included in the
education provided by the capitalist state. It aimed at imbuing
them with the co-operative spirit. Such work becomes superfluous
in a socialist state. For one thing, the new conditions brought about
by socialist organisation ipso facto change the mentality of the
masses ; for another, it is for the new state to re-educate and
instruct the masses.
To sum up, the Soviet Government, though considering it
theoretically logical to abolish the co-operative movement and absorb it into the new economic system in accordance with communist
theory, thought it more desirable to maintain the movement during
the transitional period, on the following conditions :
(i) The co-operative movement must become an economic agent
of the state, i.e. dependent entirely on the state.
(2) It must become a proletarian organisation for purposes of.
the class war.
(3) All the workers must be compelled to become members of
the movement.
Up to 1920 the Soviet policy with regard to the co-operative
movement followed these conditions, which were put into practice.
In considering this policy during the period of Communism, three
successive stages may be distinguished.
(1) The first stage coincides with the first year of the Soviet
Government's existence (1918). At first, under the influence of
political and economic conditions, the Government pursued a policy
of compromise. It left all branches of the co-operative movement
in existence and did not hamper their activity as independent
factors in economic life, but it took certain steps to place the
movement under the control of the Communist Party.
(2) The second stage in the co-operative policy of the Soviet
Government — in 1919 — is characterised by the nationalisation
or " sovietisation " of the co-operative movement. The movement was
entirely controlled and directed by the state, but its various branches
continued to exist.

— 15 —
(3) In 1920 — the period at which the Communist policy reached
its culmination — all forms of co-operation, in so far as they were
independent economic agents, were abolished owing to the complete
socialisation of production and exchange. The co-operative movement was transformed into an economic agent of the state and lost
all independence in organisation and trading. It became simply
a cog in the general economic machinery of the Soviets.
In the following pages each of these three stages in the cooperative policy of the Soviet Government will be considered in'turn.

CHAPTER II

Co-operative Policy of the Soviets

T H E POLICY OF COMPROMISE IN

1918

At the time of the Bolshevist revolution, the co-operative
movement in Russia was feeling the effects of the freedom which
the legislation of the Provisional Government had conferred upon
it. During the war and shortly before the revolution the co-operative movement had secured some toleration by the Government,
which recognised that the movement might be useful in provisioning the army and the civil population, but it only gained legal
recognition of its position and independence after the revolution of
March 1917. The legislation on co-operation enacted by the
Provisional Government may be briefly reviewed here.
The Act of 20 March 1917 repealed the old legislation under
which the establishment of any co-operative association had to be
authorised by the Government. From 20 March 1917 onwards all
restrictions on the formation of co-operative societies were withdrawn, except for certain statutory rules. For the first time cooperative societies were given by law a special place among the
various types of associations. The new Act placed the entire cooperative movement under one law, and laid down the procedure
to be followed in forming co-operative societies ; these must be
registered with the district courts. The Act also facilitated the
organisation of co-operative societies in unions, and of these unions
in federations. The unions might include co-operatives of different
types ; in other words, unions of mixed composition and objects
were permitted.
Co-operatives were allowed to undertake educational work in

— î7 —
addition to their economic activities. They and their unions might
also organise congresses at which questions affecting the co-operative
movement would be discussed. A Council of All-Russian Cooperative Congresses was set up and was given legal personality.
The co-operative movement was thus freed from the limitations
which had previously hampered it, and set to work to organise
itself on lines adapted to the conditions of the time. First of all it
had to mobilise its membership, to assist in the huge economic tasks
which the revolution had imposed on the country. The Provisional
Government appealed to the co-operatives to secure adequate
provisioning of the country, to establish a monopoly of cereals, and
to organise the distribution of necessities. The movement was thus
completely absorbed in organisation and the work of supply when
the Communist revolution occurred.
Immediately it was in being, the Soviet Government devoted
special attention to the co-operative movement. In pursuance of
the communist theory of co-operation it decided to transform the
co-operative movement at once and make it one of the economic
agents of the state in carrying out the socialist policy, the main
object of which was to socialise exchange and production.
According to the authors of " The A. B. C. of Communism "
the Soviet Government had two alternatives : it might either set
up its own distributive machinery,- or employ that set up by capitalism and press it into the service of socialism. The second alternative
was preferred. Although the Government set up bodies of its own
where necessary, especially during the initial period when capitalist
organisation was being destroyed, it decided to use the co-operative
movement for the distribution of goods 1 .
A month after the revolution, at the beginning of December 1917,
the Soviet Government drafted a Decree on " consumers' communities ". According to this draft the co-operative movement was
to be a government distributive organisation to which all workers and
peasants must belong, while the so-called bourgeois elements of the
population were excluded.
This draft Decree roused almost unanimous protests from cooperators. The reasons for their opposition were of three kinds :
reasons of principle, of practice, and political reasons.

BUKHARIN and

PREOBRAZHENSKY : op. cit.,

333.

— i8 —
The majority of co-operators did not agree with the Communist
view of co-operation. They refused to regard i± as an opportunist
movement based on petit-bourgeois ideas. The advent of socialism,
to their minds, in no way involved the disappearance of the cooperative movement. The transformation of the co-operatives into
consumers' communities to act as distributive agents of the state was
in absolute contradiction with the principles of the co-operative
leaders. They held that the existence of the co-operative movement
was entirely dependent on voluntary membership and gradual
penetration into the masses of the peasant population.
In addition to objections of principle, there were also practical
grounds for opposition.
During the war the co-operative movement had developed considerably, but this had not meant an improvement in its financial
position ; it was simply an inflation of administrative organisation,
Further, though the turnover of the movement had increased, this
affected the central organisation and not the local societies. The
movement was still comparatively undeveloped and weak in Russia,
and included a very small section of the population. It was thus
too weak to deal with the compulsory membership imposed by the
state and to discharge the obligation to supply the whole population
with objects of prime necessity.
The movement had not yet had time to take advantage of the
privileges conferred on it by the Provisional Government, and
remembered only too well the period in which the Government decided the extent to which it was to be allowed to develop. It had only
just escaped from its bondage and had hardly been able to enjoy the
freedom which it had helped to secure, and therefore refused to
accept the conditions now imposed, which it considered as fresh attacks on its liberty. No co-operator would admit that the movement
should be placed under the control of the state and depend directly on
the government.
Working-class co-operators in particular, having recently succeeded in separating from the general movement, considered that to
be amalgamated again in a single co-operative system and to act in
common with the peasants was a backward step from the position
which they had achieved on the eve of the Communist revolution.
Finally, the opposition of the co-operators also arose from political motives.
The Bolshevists, who regarded the co-operative movement as op-

— ig —
portunist, had for the most part never been members of it. The
movement was led by people who either belonged to no political
party, or were more or less in sympathy with the Menshevist Social
Democrats or the Socialist Revolutionaries. During the first part
of the revolution (March-November) the co-operative movement supported the Provisional Government ; several of its leaders were
members of the Government, and the movement had a considerable
influence on its policy.
The co-operators did not think that the Soviet Government would
be able to put into practice the principles of the Bolshevist revolution.
They foresaw a collapse of the Soviet policy, in which the co-operative
movement would be involved. Obviously, in the circumstances, the
old co-operative leaders refused to allow their organisation to be
subjected to the Communist Government.
A special Congress (the second) of Industrial Co-operatives was
held from 30 March to 4 April 1918 to discuss the draft Decree on
co-operation. The Congress demonstrated that practically the whole
of the industrial co-operative movement was opposed not only to the
co-operative policy initiated by the Soviets, but to the entire economic
policy of the Bolshevists. In opposing the idea of consumers' communities the Congress adopted a resolution stating that " the industrial
co-operative movement upheld the principle of the absolute independence of that movement ".
Nevertheless the Congress had to reckon with several new facts.
Many industrial co-operative organisations had certainly been impressed by the advent to power of the Communist Party. They felt
bound to respond to the appeal of the Soviet Government, which
requested the co-operative movement to assist in carrying out the
economic policy of the Government. They felt this all the more
necessary as the assistance asked of the co-operatives took the form of
work which was already familiar, the distribution of foodstuffs. For
those co-operative leaders who held these views, it was impossible
for the movement to stand aloof from the economic life of the
country without injuring the consumers to whom they were responsible.
In pursuance of these views a number of industrial co-operative
organisations, previous to the meeting of the Congress, had concluded
an agreement with the Supreme Economic Council regarding the
part to be taken by the co-operatives in the work of certain economic
departments of the Government.
3

• — 2 0 —^

In view of this the Congress decided that it was " possible to
come to some agreement with state departments with regard to the
regulation of the national economic system " and that the movement
should co-operate with the Soviet Government when this was necessary 1.

After some hesitation the Soviet Government had to give way
before the co-operators' objections. Instead of the proposed Decree
on " consumers' communities " it published a Decree on " consumers'
co-operative societies " on 12 April 1918. This is the first
legislative enactment of the Soviets concerning the co-operative
movement. The Government, which described this compromise as
anomalous, regarded it as temporary and expected that it would soon
have to be modified. The chief provisions of the Decree are summarised below 2 .
The consumers' societies were to supply the whole population
in their districts. In any one locality there might not be more than
two co-operatives, one general and one industrial.
Co-operative societies, like private shops, were required to accept the standards laid down by the central or local branches of the
Government (especially those of the Commissariat of Supply) for
the distribution of goods, etc. Representatives of the co-operative
movement were to assist the central and local branches of the Government in the control and nationalisation of private undertakings.
Proprietors and managers of private, commercial, and industrial
undertakings might not be members of the managing bodies of consumers' co-operatives.
The technical and economic departments of the Soviet administration should utilise the services of the co-operatives, under supervision, for the purchase, manufacture, and production of the goods
required. When the co-operatives were sufficiently supplied with
objects of prime necessity and the Government had succeeded in
introducing the system of wages in kind, the co-operatives were to
supply the workers with goods, on presentation of special vouchers
which would be issued to them.
1
MAKEROVA ': Istorichesky ocherk potrebitelskoi co-operatsii (Historical Survey of Consumers' Co-operation). Moscow, Centrosoyus, 1923.
2
Sbornik decretov i postanovlenii po co-operatsii (Collection of Decrees and Instructions on Co-operation). Moscow, All-Russian Council of
Co-operative Congresses, 1919.

21 —

The foregoing shows the items of its programme which the
Soviet Government had abandoned. There is no question of a single
co-operative organisation, as the distinction between general and
industrial co-operation is maintained. The Decree makes no mention
of compulsory membership or abolition of subscriptions, and it does
not exclude all members of the bourgeoisie, but simply the proprietors
of commercial or industrial undertakings. Moreover, the Decree did
not make the co-operative organisation a state distributive agent, but
left it independent, while authorising state departments to make use
of it when it was in a position to discharge the resultant obligations.
The Soviet Government had various reasons for agreeing to this
compromise. The first of these was the general political situation at
the time. In April 1918 the Communist Government was not yet any
too strong. It had had to yield before the united opposition of the
industrial co-operatives, which were of considerable importance at a
time when the whole economic system was in confusion owing to
the Bolshevist revolution. Further, it was impossible at that time
to give complete effect to the Soviet programme for general socialisation of exchange. There was no body technically capable of securing
regular distribution of goods throughout Russian territory if private
trade were abolished. In the circumstances it was essential to retain
the co-operative organisations without a radical transformation, all
the more because the provisioning of the towns was increasingly
endangered and it was of the utmost importance that the population
at large and the workers in particular should be supplied with food
and objects of prime necessity.
Finding itself unable to carry out one of the most important items
of its programme, the Soviet Government fully realised the great
difficulties, both economic and theoretical, which it would encounter
among those sections of the population which might be expected to
be most favourably inclined towards it.
The most whole-hearted supporter of a temporary concession to
the petite bourgeoisie in questions of co-operation, as in many others,
was Lenin. When describing the tasks before the Soviet Government
immediately after the Bolshevist revolution, Lenin cited the co-operative movement as one of the most characteristic cases where the
Government would be obliged to postpone the direct execution of its
programme. Dealing with the Decree of 12 April 1918, he wrote :
The recent Decree on consumers' co-operatives is a characteristic
event and illustrates the peculiar position and function of the Socialist
Soviet Republic at this time. This Decree constitutes an agreement with
3
5 *

— 22 —

the bourgeois co-operatives and the industrial co-operatives, which are
still imbued with bourgeois ideas.
L e n i n explained the n a t u r e of the compromise. N o t only did the
representatives of the co-operatives " take part in the discussion, but
their opinion won the day. T h e Sections of the Decree which met
with decisive opposition on their part have been abandoned. "
There was a further compromise in the fact that the Soviet Government abandoned the principle of admission to the co-operatives without
payment of fees (the only true proletarian principle), and the principle
that the whole population should be included in a single co-operative
organisation. Contrary to the socialist theory of the suppression of class,
we have allowed the existence of " working-class co-operatives ", which
nevertheless, from the point of view of class, whole-heartedly support the
interests of the bourgeoisie.
Finally, we yielded considerably on our proposal to exclude the
bourgeoisie entirely from the management of co-operatives, and the
exclusion now applies only to the proprietors of private commercial and
industrial undertakings.
H a v i n g frankly emphasised the peculiarities — which be describes as defects — of t h e Decree Lenin draws his general conclusions
regarding the policy of the Soviet Government during this period.
If the proletariat, as represented by the Soviet Government, could
have organised control, or even the beginnings of control, over production
and distribution throughout the country, it would have been unnecessary
to resort to this kind of compromise. We should have organised the
population through the supplies departments of the soviets in a single
co-operative, managed by the proletariat without the assistance of the
bourgeois co-operatives. We should have made short work of the purely
bourgeois principle which allows workers' and bourgeois co-operatives to
exist side by side. Our desire, on the contrary, is to amalgamate the
bourgeois societies with the workers' societies and to place the management of the whole in the hands of the workers, who would thus control
the consumption of wealth.
The conclusion of this agreement with the bourgeois co-operatives
clearly indicates the Soviet Government's tactics and methods of action
at the present time. By keeping a hand on the bourgeois sections of the
population, using them, and making special concessions to them, we
are creating a movement which progresses slowly, but none the less
surely. Our bases and lines of communication will thus be better secured
and the positions which we have captured will be strengthened.
The Soviets can (and should) measure their success in the socialist
reconstruction of society by clear, simple, and practical examples, as, for
instance, the number of communities (municipalities, small towns, town
districts) in which and the extent to which the co-operative organisation
is sufficiently developed to cover the whole population. 1
T h i s quotation shows that Lenin did not confine himself to
explaining w h y the Soviets had to consent to a compromise with the
co-operative movement. H e also shows how this compromise should
be used in the interests of communism. Concessions t o the bourgeoisie

LENIN : " The Important Tasks of
Sobranie Sochinenii, Vol, XV, pp. 207-308,

the

Soviet

Government ",

— 23 —

are to be used to bring the co-operative movement under the influence
and control of the Communist Party. This general principle has in
effect been the basis of the whole Soviet policy with regard to the
co-operative movement. The retreat before the bourgeois sections
of the population was shortly to' be followed by a counter-attack,
mainly for purely political reasons.
E F F O R T S OF T H E GOVERNMENT TO CONTROL T H E

CO-OPERATIVE

MOVEMENT

As it could neither abolish nor completely transform the cooperative movement, the Soviet Government made every effort to
control it very strictly. Throughout 1918 there was a campaign
against the general and industrial co-operatives, " which were then
in the hands of the Socialist Revolutionaries of the Right and the
Menshevists " 1.
The telegraphic circular issued by the Supreme Economic Council on 10 May 1918, immediately after the publication of the Decree
of 12 April, stated that " it is essential to place the co-operative
organisation under the control of the' soviets and to supervise their
books " 2 .
This general rule was confirmed by a resolution passed at the first
All-Russian Congress of Economic Councils on 25 May 1919 : " The
general supervision of the co-operative organisations should be carried
out by the local soviets, the regional economic councils, and the
Supreme Economic Council, but not by co-operative officials. " 3
In pursuance of these decisions the Government took a number
of administrative measures to organise its control over the co-operatives. Under the Acts of 20 March and 1 August 1917, as was shown
above, co-operative societies had to be registered with the district
courts. When these courts were abolished by the Bolshevists, the
registration was transferred to special committees of the economic
councils, or failing them the local soviets. Co-operative sections were
set up under the Supreme and local economic councils *.
The co-operative section of the Supreme Economic Council
consisted of two representatives of that Council, one each of the
1

Statement by Krestinsky to the Ninth Congress of the Communist
Party. Cf. verbatim record, cited above, p. 243.
2
Collection of Decrees and Instructions on Co-operation, cited above.
3
Narodnoie Khoziaistvo, June 1918, p. 21.
* Order and Instruction of 23 May 1918.
3

— 24

Commissariats of Finance and of Supply, and three representatives
of the co-operatives (one of the Centrosoyus, one of the industrial
co-operatives, and one of the other branches of the organisation).
In addition, the general secretary of this section was appointed by the
Supreme Economic Council. The co-operative sections of the local
economic councils consisted of two members of the council and one
representative of the local co-operative union.
The co-operative section of the Supreme Council had to collect
all information on the work and development of the co-operative
organisation, prepare draft Decrees, give its opinion on all Decrees
and Orders affecting the co-operatives, issue instructions on the administration of Decrees, and secure the enforcement of the Decree
of 12 April 1918. It had also to fix the periods within which cooperative societies must present their reports, and determine the
methods of control, supervision, and registration of the co-operative
organisations.
The local co-operative sections had to register co-operative societies,
define their sphere of action, keep up to date the statistics of existing
and newly-formed co-operatives, measure the development of the cooperative organisation by analysing the statistical data provided by the
monthly reports of consumers' societies, inspect the accounts of cooperatives, secure the enforcement of the Decree of 12 April 1018 and
the instructions of the co-operative section of the Supreme Economic
Council, make use of the co-operatives for provisioning the country,
and establish normal relations between the consumers' co-operatives
and state offices and departments.
In form the system of registration was the same as that instituted
by the Provisional Government, but the co-operative sections, when
considering applications for registration from new societies, had to
take their probable usefulness into account. Thus in effect the automatic registration instituted by the Provisional Government was
abolished and replaced by the system of previous authorisation.
At the same time the co-operative organisation was subjected to
strict control. The co-operative sections of the economic councils
could require co-operative organisations to submit annual reports,
together with their vouchers and books. The sections had to see that
the co-operatives kept strict account of taxed and rationed goods and
compel them to restrict their activities to their own district, within
this district to serve the whole population, and to place no obstacles
in the way of persons wishing to join the society. If a society did

— 25 —
flot furnish the documents required, or if it infringed its constitution
or the law, the local economic council could investigate and reorganise it '.
This system of control was rapidly extended. Apart from its
purely formal effects and from the right conferred on government
institutions to investigate societies, the co-operative movement itself
had to undergo important changes. In the first place co-operatives
formed before 29 May 1918 were compelled to register or re-register
within a month of the publication of the Decree, i.e. before 26
June 1918. Any society not registered within this period became
illicit.
The reason for this step was that between the abolition of the
district courts and the publication of the new rules for registration
(29 May) a large number of co-operative societies had been formed
and had not registered at all. These societies " were nothing but
capitalist societies and organisations for disguised speculation ".
The threat embodied in this Order did not give the results anticipated. The general policy of the Soviet Government was to persecute private financial, industrial, or commercial undertakings, and
this resulted in driving into the co-operative organisation the most
varied types of person, who sought in the co-operatives a refuge from
government repression, which was far more political than economic.
The Soviet Government then adopted another method with the
Decree of 29 November 1918, which was intended to " purge the
co-operatives of all rapacious or counter-revolutionary elements ".
Certain classes of persons were forbidden to take part in the management, vote for or be elected to co-operative bodies, including delegate
meetings. These classes were as follows':
(1) any person employing paid labour for purposes of gain ;
(2) any person whose income was not derived from his labour,
such as rentiers, employers, landlords ;
(3) any person who during the three preceding years had owned
a commercial undertaking or acted as a commercial agent or middleman ;
(4) any member of the regular or secular clergy, except those
who had already taken part in the co-operative movement ;
(5) any member of the old police or of the secret service.
1

Instruction of 16 June 1918.
3

— 26 —
In addition to taking steps to expel " non-proletarian " members
from the co-operatives, the Government desired to bring these organisations under the direct influence and control of the Communist
Party. With this in view it endeavoured first to get into its own
hands the management of the industrial co-operatives and through
this to control the other co-operative organisations, more especially
the centre of the whole movement, the Centrosoyus l .
At the third Congress of Industrial Co-operatives in December
1918, the Communists gained a majority which, though small 2 ,
enabled them to carry through resolutions in favour of the Soviet
Government's policy.
The Congress adopted a resolution censuring the old executive
— the Board — which was accused " of having pursued a policy
opposed to the interests of the proletariat and inconsistent with the
conditions of the world revolution and the struggle of the proletariat
against capital ". According to the resolution this policy was out
of touch with the political and industrial labour movements and was
determined in both the political and economic spheres by the petitbourgeois members of the general co-operative movement. Consequently the Board's policy was inconsistent with that of the
Soviet Government, took no account of the principle of the class war,
and did not help to work out the new forms of economic organisation.
In order to secure a predominant influence in the co-operatives
for the Communists, thè Congress considered it necessary :
(1) to induce all the workers' organisations and the trade unions
to take active steps to appoint a sufficient number of leaders
favourable to the Soviet Government as delegates to the executive
bodies of the co-operative movement, so that these delegates might
obtain control of the co-operatives ;
(2) to demand the immediate admission to the executive bodies of

1
" Centrosoyus " is the abbreviated name for the " Central Federation of Consumers' Co-operative Unions " — the central and supreme
body of the consumers' co-operative movement.
2
The total number of delegates at the congress was 208, of whom
87 advocated the independence of the co-operative movement and opposed
the Soviet Government. The majority — 121 delegates — consisted of
Communists and " sympathisers ". Cf. Riechi Lenina, Miliutina i Nogina na 3 Siezde rabochei co-operatsii (Speeches of Lenin, Miliutin, and
Nogin at the Third Congress of Industrial Co-operatives), p. 31. Moscow,
All-Russian Council of Industrial Co-operatives, 1919.

— 27 —

the Centrosoyus of representatives of the industrial co-operatives who
were supporters of the Soviet Government ; these representatives
should be sufficiently numerous to give the proletariat a dominant
influence and to give the industrial co-operatives a two-thirds majority;
(3) if the Centrosoyus refused to accede to these demands, to
instruct the Council of Industrial Co-operatives to attach all the
funds and members of the industrial co-operatives immediately to the
All-Russian economic headquarters of the industrial co-operatives and
withdraw them from the Centrosoyus.
These decisions were of considerable assistance to the policy of
the Government. Instead of compelling the co-operatives by Decree
to submit to the Communist Party, the Government could sow
dissension among the co-operators. The All-Russian economic headquarters of the industrial co-operatives, which the Congress decided
to establish, was to serve as an agent for the application of the
Soviets' co-operative policy.
At the end of January 191g the regular delegate conference of
the Centrosoyus was held. The representatives of the industrial cooperatives were in a minority, as they only formed one-quarter of
the total number of delegates. The ultimatum of the industrial cooperative congress was rejected ; the leaders of the Centrosoyus
offered the industrial co-operatives five of the thirteen seats ou the
Board. When the delegates of the industrial co-operatives had
left the hall as a protest, the remaining delegates elected the Centrosoyus Board, to which they appointed five representatives of the
industrial co-operatives, selected from the list submitted to them.
In these circumstances the last part of the resolution adopted by
the industrial co-operative congress was put into effect and the
economic headquarters Of the industrial co-operatives (" Centrosection ") was set up.
At first the Soviet Government hoped that thanks to its support
the Centrosection would grow very powerful and crush the Centrosoyus, the management of which was still in the hands of opponents
of the Communist Party. The Centrosection was given a subsidy
of 250 million roubles, a considerable sum at that time, and was asked
to act in close touch with the economic departments of the Government.
However, it was soon clear that it was very difficult to compete
with the Centrosoyus. This body controlled a fairly extensive
system of co-operatives, its members were most anxious that its com3

— 28 —

mereiai work should continue, and its leaders were experienced cooperators. In fact, state departments, such as the Commissariat of
Supply, were constantly obliged to appeal to the Centrosoyus. They
instructed it to assemble stocks of supplies and to distribute food to
the population. Such appeals increased thé economic importance and
influence of the Centrosoyus, a result which was manifestly opposed
to the objects of the Soviet Government.

Realising that it was impossible to destroy the Centrosoyus by
economic measures, the Communist Party decided (as Krestinsky
later explained) " to act as we acted towards the departments of the
old Government and the economic organisations of the manufacturers ", i.e. to take control of the headquarters of the consumers'
co-operatives — the Centrosoyus — by introducing into it a number
of supporters of the Soviet Government. These people were to take
charge of the co-operative movement and begin to reorganise it.
From the Centrosoyus they would exert their influence on co-operative theories and on the practical side would carry out adequate
local reorganisations to replace the influential co-operators 1.
In order to gain complete control of the Centrosoyus and the
co-operative movement in general, the Soviet Government adopted
two methods simultaneously, (i) By administrative Order it changed
the composition of the Centrosoyus Board, to which it appointed
persons who were approved by the Government. (2) It ordered a
reorganisation of the consumers' co-operatives, to bring them more
into conformity with the co-operative programme of the Communist
Party (Decree of 20 March 1910).
Realising that the old co-operators were irreconcilable and would
not voluntarily give up their control of the movement, the Communist Party thus abandoned the compromise represented by the Decree
of 12 April 1918, and resolved to carry out its programme in full.
This decision was influenced to some extent by the general
situation. The Communist Party had been in power for a year, and
the Soviet authorities felt that their position was more secure. They
had succeeded in obtaining a majority in the industrial co-operative
movement. They had already put into effect several items of the
1

Report by Krestinsky to the Ninth Congress of the Communist
Party. Cf. verbatim record, cited above, p. 244.

— 29 —
Communist programme in other branches of the economic system.
T h e principle of nationalisation had been applied in industry, commerce, finance, and transport. T h e Soviet policy was setting
strongly in the direction of socialisation, which was to be carried
through very shortly.
Politically t h e country was ruled by the Terror, a n d the Soviet
Government had declared war to the death on all its political
opponents. A t the same time the leaders of the Communist P a r t y
believed that an international social revolution was inevitable, in
view of the revolutions in Germany, Austria, and H u n g a r y , a n d of
the position of Germany on the Western F r o n t , which had saved the
Soviet Government from the consequences of the peace of BrestLitovsk.
I n the circumstances it seemed unnecessary to pay any attention
to the resistance of a handful of old co-operators, who, in the words
of Krestinsky, were " only specialists in co-operative theories which
were manifestly counter-revolutionary ".
T h i s attitude was illustrated at the industrial co-operative congress, both in the speeches of the three government representatives
(Lenin, Noguin, and Miliutin) and in the resolutions adopted. T o
quote from one of L e n i n ' s speeches :
At the present time the Soviet Government must consider coming
to an agreement with the co-operatives. In April (1918) we departed
from our programme and made concessions. Obviously a co-operative
organisation with class divisions should not exist in a country which is
abolishing the very idea of class, but circumstances compelled moderation.
Knowing that we were alone in the world, we were obliged to make
concessions. At the time of the peace of Brest-Litovsk, when we accepted
the severe consequences of that peace, we were told that there was no
hope of a world revolution . . .
A few months later the course of
events showed that there was no choice ; it was impossible to pursue a
middle course. When the German revolution broke out it was clear
that the whole world would be shaken by revolution ; that England,
France, and America would have to follow in our train.
I n these conditions Lenin t h o u g h t that :
There can be no question of independence for a party or organisation
when the axe is going to fall on capitalism. The great work of the cooperative movement must be one with the work of the Soviet Government.
The whole population, which is fighting for its liberty, must be strongly
united in a single organisation. Everyone must therefore submit to
the Soviet Government ; there must be an end to this illusion of independence, and that quickly. Whether it be one section of the population
or an organisation like the industrial co-operatives, only those who still
think of a return to the past can desire independence *.
1
Ricchi Lcnina, Miliutina
pp. 9 and 12.

i Nogino na 3 Siezde rabochy
3

co-opcratsii,

— 30 —

I n N o g u i n ' s opinion :
All the old basic forms must disappear completely. Now that the
triumph of the proletariat is secured we cannot but organise the consumers' community which embodies the whole of society. The industrial
co-operatives must be the advance guard in this action in the class war ;
they must help the workers to organise and strengthen the consumers'
communities '.
Miliutin in his speech produced two fundamental reasons for a
change of policy towards the co-operative movement.
In the war of the working classes against the imperialists, the cooperative movement cannot occupy an indeterminate, equivocal, or
" neutral " position. In the second place, during the present year (1918)
the social and economic foundations of Russia have been completely
transformed. The new economic forms are a fact, and the changes make
a considerable alteration in the very foundations of co-operation 2.
T h e ideas of these speakers re-appear in the resolutions of the
Congress.
In the period of the world revolution and the proletariat's war on
capital, the industrial co-operative movement as a proletarian organisation
must adapt its activities to the necessities of this war.
Social conditions are changed by the proletariat's seizure of power,
civil war is at its climax, and the battle has begun for the establishment
of the dictatorship of the proletariat. Industrial co-operation, which is
a class co-operative movement, cannot pursue its own " co-operative "
ends as distinct from those of the warring proletariat.
In consequence of the change in social conditions the industrial cooperatives, in agreement with the government supplies departments,
must use their organisation to provide the population with the necessary
consumption goods. The industrial co-operatives must be an integral
part of the Soviet administration. They must play the chief part in the
organisation of consumers' communities embracing the whole population.
The Congress considers that the development of all supply organisations, including the co-operatives, will lead to the amalgamation of
all these organisations in united consumers' communities. It considers
it necessary to appeal to all the industrial co-operatives to carry out this
programme 3 .

1
Ibid.; Nogin was then on the executive of the Supreme Economic
Council.
2
Ibid.; Miliutin was then on the executive of the Supreme Economic
Council.
s
Ibid., pp. 43 and 45.

— 31 —

CONVERSION OF THE CO-OPERATIVE ORGANISATION INTO
A STATE INSTITUTION

At the end of 1918, therefore, the Soviet Government, influenced
by events abroad and the development of the Communist policy
within the country, felt it possible to return to the policy which a
year earlier had seemed premature. It therefore published the
Decree of 20 March 1919 on " consumers' communities ", which according to Krestinsky was an essential reply to" the delegate conference of the Centrosoyus '. The title of the Decree was at first
" Decree on Consumers' Communities ". The word '* community ",
however, was in bad odour in the rural districts, and the title of the
Decree was therefore altered, " to avoid misunderstandings ", to
" Decree on Workers' and Peasants' Consumers' Societies " s .
The following paragraphs describe the changes made by the
new Decree in the organisation of the consumers' co-operative
movement. Consideration of the new work imposed on the movement will be deferred to the chapter describing the general work of
the co-operative movement during this period of Soviet policy.
Consumers'

Co-operation

Under the new Decree consumers' co-operatives in every town
and village were to be amalgamated in a single distributive body —
the consumers' community. In the towns and industrial centres,
the industrial co-operative (or failing it the general co-operative)
was to form the nucleus of the community. In the villages the rural
consumers' co-operatives were to form the nucleus.
In any locality all the inhabitants were to be members of the
consumers' community. Every citizen was bound to join the community and to register at one of the distributive centres. The right to
vote in elections and to be elected to the administrative and supervisory

1
2

Ninth Congress of the Communist Party, Verbatim Report, p. 24S.
Ibid., p. 339. The Decree was signed by the Council of Commissaries on 16 March 1919 and published in the Izvestia on 20 March. The
general tenor of the Decree was entirely confirmed by an Order of the
Central Executive Committee, but the word " community " was replaced
by " consumers' society " and the title of the Decree altered as above, ct.
M. MEBEL : Zakonodatelstvo Sovietski vlasti po co-operatsii (Co-operative Legislation of the Soviet Government). Moscow, Centrosoyus, 1922.
3

bodies of the consumers' community was restricted to citizens in
enjoyment of the franchise for elections to the soviets under the
constitution of the Russian Socialist Federative Soviet Republic
(R.S.F.S.R.) • There were to be no entrance fees or subscriptions.
The new Decree thus transformed the co-operative movement
into a compulsory organisation embracing the whole -working population of the Soviet Republic.
The unit of the consumers' co-operative organisation in both
towns and villages was the " united consumers' society " (E.P.O.) 1 ,
which was to amalgamate all existing co-operatives and food shops
belonging to the state or private persons. This society represented
the consumers' community. All the united consumers' societies were
to be grouped in provincial unions which were to be the co-operative
headquarters for each provincial government (gubernia). In addition
to the provincial unions, divisional sections might be set up, their
activities being limited to a division (uyezd).
These divisional
sections were semi-autonomous bodies attached to the provincial
unions. All provincial unions and divisional sections were attached
to the central body for the whole consumers' movement in Russia,
the Centrosoyus.
The Decree laid down that the co-operative movement was to be
the sole distributive agent of the Commissariat of Supply. It was
to be completely amalgamated with the government distributive
bodies, and work under the Commissariat of Supply.
The Decree, however, did not entirely deny the necessity of some
compromise with the old co-operative movement. Although all the
consumers' societies in a locality were to be united in a single
consumers' community, the industrial co-operative movement retained
its independence. The Centrosection was a separate division of the
Centrosoyus, so that the division of the co-operative organisation into
general and industrial societies was not entirely abolished. The
Decree also made no mention of any change in the composition of
the Centrosoyus Board. In order to co-ordinate the work of the
consumers' co-operatives and the Commissariat of Supply, the
Decree provided that the provincial supplies committees were to send
a delegate to the executives of the provincial co-operative unions.

1
In Russian : Edinoie Potrebitelskoie Obschestvo, whence the abbreviation E.P-O., used by the Soviet Press and co-operators.

— 33 —

The Decree did not touch on the political question of a Communist majority in the Centrosoyus Board, which was the chief
object of the Communist Party. At the beginning of April, therefore, the Soviet Government issued another Decree directing that the
Centrosoyus Board, consisting of 13 members, must include 7.
Communists — 3 government representatives and 4 delegates of the
industrial co-operatives. One delegate of the industrial co-operatives
was to have a veto.
The Communist Party thus obtained a majority of one, but this
was not sufficient to secure stable management, and the work of the
Centrosoyus was completely disorganised. On every question the
Board was divided into two practically equal parties. Any decision
which for some reason was inconsistent with the policy of the Communist Party aroused protests, and its execution was suspended. At
the same time it was impossible to secure any other decision from the
executive. The same position arose over the journal of the Centrosoyus, as the editorial staff could not agree on a single article.
The Council of Commissaries and the Central Committee of the
Communist Party found little support among the industrial co-operatives in their struggle to get control of the Centrosoyus. The representatives of the industrial co-operatives held to the resolution of the
Third Congress, which advocated the greatest possible measure of
independence for this branch of the movement in order to counterbalance the importance of the Centrosoyus. The All-Russian Council
of Industrial Co-operatives devoted all their efforts to increasing the
economic importance of their organisations and developing their
printed propaganda, independently of the Centrosoyus and in opposition to it. Such tactics were not in accordance with the political
aspirations and desires of the Communist Party, even though the
industrial co-operatives were acting in pursuance of the decisions of
the Third Congress and the Decree of 20 March 1919.
On 18 June a joint meeting of the political and organising committees of the Communist Party was held. It decided to constitute
a more definite Communist majority in the Centrosoyus Board,
and to put a stop to the antagonism between the two branches of the
co-operative movement by making the Centrosoyus the sole headquarters, in matters both of business and of theory, of the reorganised
movement. The Council of Industrial Co-operatives was to be obliged
to amalgamate its publicity and propaganda organisation with those
of the Centrosoyus. The Centrosection was provisionally to remain
as a subdivision of the Centrosoyus, but simply as a distributive body.
6
3

— 34 —

In obedience to the instructions of the Party, the Soviet Government at the beginning of July 1919 gave orders that the membership
of the 'Centrosoyus Board was to be increased to 16 by the introduction of three more Communists. Of the 16 members, 10 would
thus be Communists, which should give a definitely and permanently
Communist character to the Board. The representatives of the
Council of Industrial Co-operatives protested to the Central Committee of the Communist Party against these decisions. At its meeting
on 17 October, however, the Central Committee confirmed its previous decisions, and the Communists .at the head of the Council
of Industrial Co-operatives therefore had to accept them.
Krestinsky, in his report to the Party Congress in March 1920,
described the situation as follows :
Only at the end of 1919 did our Party realise that it was necessary to
have only one centralised co-operative organisation in which the Communist Party would have a predominant influence. By thus centralising
the co-operative movement in each district and provincial government
and throughout the country, the proletariat could exert a political influence on the peasants' co-operatives. The existence of independent
industrial co-operatives, on the other hand, would have placed the peasant
co-operatives under the influence of " populist " ' and other groups
which were even more reaction ar}' J.
Nevertheless, even this step did not secure a decisive influence
for the Communist members of the Centrosoyus Board, since the
old co-operators were in a position of undoubted superiority owing to
their practical experience of many years, their technical knowledge,
and their energetic efforts to defend the rights of the co-operative
movement. The new Communist members of the Board, on the
other hand, were not co-operative specialists. Much of their time
was taken up elsewhere, as they had other public duties devolving
on them owing to their position in the Communist Party.
The Central Committee of the Communist Party decided to take
even stronger measures to gain control of the Centrosoyus Board.
The ninth Party Congress in March 1920 adopted a resolution to the
effect that it was unnecessary to keep the old members of the
Board at their posfs.

1
Narodnìe socialisti. The People's Party was a moderate Socialist
Party occupying a position between the Socialist Revolutionaries on the
Left and the Constitutional Democrats on the Right.
a
Ninth Congress of the Communist Party, Verbatim Record, p. 246.

— 35 —

Their removal will cause no political danger. To the mass of the
members, especially the millions of new adherents who joined the movement after the Decree of 20 March 1919, the leaders who are semi
" populist " and semi-speculators are unknown and their fate is a matter
.of profound indifference. It is urgently necessary to alter the Centrosoyus Board by increasing the number of Communists and reducing
that of the old leaders to a minimum.
Clearly the Communist Party was afraid of getting rid entirely
of the responsible co-operative leaders, who were trained specialists.
On the other hand " these men form a compact phalanx among our
enemies, and are in close touch with the old President and leaders of
the Centrosoyus, whose will to them is law, to be conscientiously
obeyed. Your orders are carried out only through fear ", said
Krestinsky, who proposed " to break up this hostile centre and send
most of these precious specialists to the Commissariat of Supply or to
other economic departments of the soviets. "
The same procedure was to be adopted in the provincial offices,
which were said to be faithful to the old members of the Centrosoyus Board. " It was impossible and even dangerous to control
all these offices, and it was decided to dissolve them. "
To sum up, at the beginning of 1920 the consumers' co-operative
organisation underwent the following changes :
(1) The old consumers' societies, whether general or industrial,
were converted into united consumers' communities embracing all
the consumers' organisations.
(2) All workers were compelled to join the consumers' communities, without payment of fees.
(3) All so-called bourgeois were excluded from the consumers'
communities.
I4) The entire structure of the consumers' organisation was
remodelled.
(5) The consumers' communities were made government bodies
dependent on the Commissariat of Supply. All officials of these
communities became soviet officials.
(6) All the old leaders of the consumers' co-operatives were
turned out and replaced by Communists, both at the central headquarters and in the provinces.
3

- 3 6 Other Branches of Co-operation.
Up to the end of 1919 there had been little change in the
organisation of the agricultural co-operatives, the craft co-operatives
(promyslovaia co-operatsia), and the credit co-operatives.
The First Congress of Economic Councils in May 1918 had, it
is true, passed a resolution stating that " the process of absorbing
the co-operative organisations into the general organisation of the
soviet administration cannot be restricted to the consumers' cooperatives. It should also extend to credit, craft, and agricultural
co-operatives, co-operative dairies, etc. " Nevertheless the attention
of the Soviet Government was mainly devoted to the consumers'
co-operatives. For this there were several reasons. It was essential
for the whole policy of supplies that the consumers' societies should
be pressed into service. In proportion as the shortage of supplies
became more acute, and the Soviet Government increasingly adopted
the policy of " exchanges " and " state supplies ", it became ever
more necessary to make the co-operative movement a state distributive organisation. The conquest of the consumers' movement
was also of great political importance, as the Centrosoyus had
considerable economic and moral influence.
It was not essential to take special measures in respect of the
other branches of the movement — agricultural, craft, and credit
co-operatives — as the work of these organisations automatically
changed under the influence of the economic and financial policy
of the Soviet Government.
In theory these branches of the movement were still governed
by the Acts passed by the Provisional Government, to which the
Decrees of the Soviet Government frequently alluded. In reality,
however, they had to face steadily growing difficulties.
Craft Co-operation
At the outset the Soviet Government endeavoured to assist home
industry by supporting the craft co-operatives \
The local offices of the Government had been instructed to
give every possible assistance to. craftsmen and kustari (home
workers) in organising producers' associations and artels, by supplying the necessary materials (particularly wood), helping them
1

Decree of 26 April 1919 and Instruction of 7 August 1919 issued
under it.

— 37 —

to market .their products, granting them administrative facilities,
etc. All principal and central committees were to hand over to the
craftsmen's artels the materials which the nationalised factories
could not use.
Small undertakings (i.e. those using mechanical power and
employing not more than five wage earners, and those without
mechanical power employing not more than ten wage earners) and
those of kustari were not to be nationalised, municipalised, or
confiscated, except in unusual circumstances under a special decision
of the President of the Supreme Economic Council. Artels of kustari
and producers' artels were allowed to convey- and sell those of their
goods which were not taxed on the open market throughout the
country.
A special office was set up under the Supreme Economic Council to
deal with craft co-operatives. Corresponding local sections were established under the town and provincial economic councils. The office for craft co-operatives was to co-ordinate the work of the
principal and central committees and the local economic councils
in so far as it affected the co-operatives, small-scale industry, and.
home industries. It was also to draw up Decrees, circulars, and
instructions, and give its opinion on proposed Decrees affecting
craft co-operatives which were drafted by other departments or institutions. It was to assist the co-operatives in securing the necessary tools and raw materials, and in marketing their products. It
had to keep a list of the national and regional unions of craft cooperatives, and supervise the execution and enforcement of all
enactments affecting craft co-operatives. The office was managed
by a committee comprising four representatives of the Supreme
Economic Council and one representative each of the All-Russian
Councils of Craft Co-operatives, Agricultural Co-operatives, and
Credit Co-operatives 1.
As a result of the general policy of nationalisation in industry
and commerce, which became more and more radical in 1919, the
craft co-operatives reached a period of rapid and extensive development. There is no doubt that many undertakings sought protection
from nationalisation and municipalisation in the craft co-operatives,
and the Soviet Government took steps to put a stop to this.
1
Sobrante uzakonenii i rasporiazhenii rabochavo i krestianskavo pravitelstva (Collection of Acts and Decrees of the Workers' and Peasants'
Government), 1919, No. 34.

- 3 8 -

The Decree of 29 September 1919 stated that " recently organisations strongly resembling capitalist undertakings have registered
themselves under the title of producers' artels, co-operatives, producers' associations or unions, and all kinds of kustari organisations " l.
The Decree therefore prescribed that all craft co-operative
organisations must be re-registered, and that steps must be taken
to investigate their composition. Craft co-operatives might not
enrol as members persons who, during the preceding twenty years,
had been (a) managers or directors of joint-stock companies ; (6)
proprietors of undertakings employing more than 20 workers ; (c)
owners of more than 50 hectares of land or of buildings valued by
the fiscal authorities in 1916 at more than 10,000 roubles ; (d) officials of former Governments of a grade not lower than State
Councillor or officers above the rank of colonel.
These provisions were directed against the old " capitalist
entrepreneurs " and the higher officials of the old régime, whom
the Soviet Government suspected of having taken refuge in
producers' co-operatives and having thus benefited by the privileges
granted to co-operators.
In addition, no high soviet official occupying an important
position (" one involving great responsibility ") might belong to
a craft co-operative. The Government desired its officials to devote
themselves entirely to their public duties, and wished to prevent
personal relations between government departments and the cooperatives, which might have led to the grant of illicit privileges to
some societies.
All craft co-operatives whose membership included persons
belonging to the categories mentioned above must either be dissolved
within a month or submit to investigation of their objects and constitution. Persons who were forbidden by the Decree of 24 September to join craft co-operatives but nevertheless did so after the
issue of the Decree were liable to confiscation of their property and
to imprisonment with hard labour for not less than a year.
'Agricultural Co-operation.
Agricultural co-operatives for the production, purchase, and
sale of agricultural produce continued to exist as before. In

Ibid., 1919, No. 48.

— 39 —
F e b r u a r y i g i g a committee had been formed in the Commissariat
of Agriculture to supervise agricultural co-operatives \
I n March 1919 an Order was issued on the registration of agricultural co-operative societies, their federations a n d unions.
They
had to register with the co-operative sections of the economic councils, b u t their organisation was not altered.
O n e form of agricultural co-operation which was not merely
tolerated but encouraged by the Soviet G o v e r n m e n t was agricultural
artels and communities. T h e name " artel " was given to an association of workers wishing to cultivate a farm by their joint labour
and joint use of materials (livestock, implements, etc.) 2 . T h e
n a m e " community " was given to an association in which capital,
implements, livestock, everything else needed for cultivation, and
the produce of labour were owned as a whole by a group of farms 3 .
T h o u g h opposed on principle to agricultural co-operation for
credit, sale, and purchase, the Soviet Government, as soon as commerce and industry were nationalised, predicted a great future for t h e
agricultural artels and communities. T h e Communist P a r t y saw in
this type of co-operation (as was stated earlier) the germ of a
socialist society and the one means of organising the peasants on
socialist lines. Nevertheless the P a r t y was not unanimous on the
point. A section of it favoured the creation of large agricultural
u n d e r t a k i n g s owned by the state (soviet farms : sovkhoze),
which
could produce large quantities of cereals — " wheat factories ", to use
L a r i n ' s expression.
I n the opinion of Miliutin, the line of future development was
towards an extensive system of soviet farms managed by the economic departments of the state, and producing and working up
cereals and other agricultural produce.
This development, which may already be observed, will no doubt
attain gigantic proportions in the future. . . The soviet farms ought
to develop and improve the technique of production. They should be
agricultural nurseries and eventually centres of socialist culture — the
instruction, art, and education of the new man 4 .
T h i s opinion represented the views held at that time as to the
direction which agrarian development would inevitably follow.

Ibid., 1919, No. 9.
Standard constitution approved 20 November 1920.
3
Standard constitution approved 19 February 1919.
4
MILIUTIN : Socialism i selskoie khoziaistvo (Socialism and Agriculture), p . 91. Moscow, 1919.
3
2

— 40 —

There was also another point of view. Some people held that
before agriculture was completely socialised the peasants must be
taught to work not on an individualist but on a co-operative basis.
The creation of agricultural artels and communities was regarded as
the best means towards this end.
These two points of view have left their mark on all the
agrarian legislation of the Soviet Government during the period of
Communism.
Section 3 of the Decree of 19 February 1918 on the socialisation
of the land laid down that " the right to cultivate the land belongs
only to those who cultivate it by their own labour ", but allowed
exceptions to the rule.
Among their other functions the local branches of the Commissariat of Agriculture had to encourage the development of " collective economies " and farms cultivated collectively, at the expense
of farms run by individuals. It was thought that this would facilitate economy of labour and goods, and the transition to the socialist
economic system (Section n of the Decree). The creation of agricultural communities in the villages was regarded as a means of
combating " the limited outlook of the small producer ".
Section 3 of the Order of the Central Executive Committee on
" the socialist organisation of land tenure and methods of transition
to the socialist system in agriculture ", dated 14 February 1919,
states that :
It is necessary to replace the individual system of agricultural management by the collective system. This will lead to the total abolition of
the exploitation of men by their fellows, to the organisation of agriculture
on a socialist basis by employing the latest technical improvements and
following the progress of science. Thus it will be possible to foster the
socialist spirit among the masses and to unite the proletariat and the
landless peasants in the war on capital. Large soviet farms, communities,
collective tenure, and other forms of joint management are the best means
to this end. All forms of individual management must be regarded as
transitory and obsolete 1.
The outstanding feature of the soviet system of land tenure is
that it aims at the creation of " a united productive system supplying
the Soviet Republic with the largest possible quantity of goods at
the cost of the smallest amount of labour ".

1
Sbornlk decretov i postanovlenii po Narodnomu Commissariatu
Zemledelia içij-içzo (Decrees and Orders affecting the People's Commissariat of Agriculture, 1917-1920). Moscow, State Publishing Office, 1921.

— 41 —
All territories of the Russian Socialist Federative Soviet
Republic, by whomsoever they are at present cultivated, constitute
a state fund (Section i ) , and may be redistributed (Section 7 ) .
" T h i s agrarian fund is used first to form soviet farms and communities, t h e n for artels and co-operatives for joint cultivation, and
last for cultivators tilling the soil individually " (Section 8 ) .
Agricultural producers' communities are to receive " the fullest
support " of t h e Commissariat of Agriculture, whose policy should
be to discharge " the fundamental task of the Soviet Government
in agriculture, that is, to remodel the whole agricultural industry
by socialising means of production and proceeding to collective and
systematic cultivation " (Section 60 and 61).
A special division of the Decree (Part I X ) dealing with " assistance to agricultural producers' associations ", instructs the Commissariat of Agriculture and its branches " to give every assistance
to agricultural communities, associations, producers' societies, and
artels cultivating the land on the collectivist principle, and other
agricultural unions, by supplying them with seed, implements,
livestock and technical and agricultural facilities of all kinds ".
A special fund of one thousand million roubles was established
" for the rapid reorganisation of agriculture on a socialist basis ".
Agricultural communities were to receive subsidies and loans (free
of interest) from this fund.
I n effect, the foregoing is all the legislation on agricultural cooperation which existed at that time \
T h e r e w a s no unity or logical sequence in it. F o r example,
as was pointed out by one of the heads of the Commissariat of
Agriculture, t h e Decree of 1918 on the socialisation of land allowed
t h e system of individual tenure, while t h e Decree of 1910 on land
tenure gave n o definition of individual tenures. " Legislation went
to extremes of collectivism when it treated all forms of individual
cultivation as transitory and obsolete " 2 .
I n practice the creation of collective undertakings (agricultural
communities and artels) proceeded pari passu with the organisation

KONIUKOV : Collectionoie zemledelie
(Collectivist Agriculture),
Moscow, 1923. Also DUBROVSKY : Istoria Russkoi Revolutsii
(History
of the Russian Revolution\. Vol. I, Zemledelie (Agriculture); Moscow ;
ÏÇ23-

' M I E S S I A T S E V : Zemelnaia i selsko-khoziaistvennaia
politika v Rossii
(Agrarian and Agricultural Polie}' in Russia), p. 77. Moscow, 1922.
3

— 42 —

of soviet farms. This policy, during the period of complete Communism, was linked rather to the general agrarian policy of the
Soviet Government than to its co-operative policy.
Its actual
result was a certain extension of agricultural producers' cooperatives.
Credit Co-operation.
Credit co-operatives were subject to the same restrictions as
other branches of the movement. Under the Decree of io September iQi8, the continued existence or creation of credit institutions
was only allowed if the Commissariat of Finance gave its approval.
Thus the credit co-operatives from the outset were subject to a
system of licences.
The control, investigation, and supervision of the various
branches of the co-operative organisation were in the hands of a
great variety of institutions. They were under the supervision of
the Supreme Economic Council and the local economic councils, the
Commissariats of Supply, Agriculture, Finance, Commerce and
Industry, the local soviets, the Commissariat of State Control, the
committees of poor peasants " in the villages, and many more.
In loia the Communist policy of the Soviets became more and
more marked, and produced very great outward changes in the
economic life of the country. In the circumstances, there was from
the Soviet point of view no reason why any of the old forms of cooperation should continue to exist. At the beginning of 1920 the
Soviet Government thought that compromise was superfluous and
began to take more radical measures, so that the co-operative organisation ceased to exist as an independent agent in the economic
system.
ABOLITION OF T H E ECONOMIC INDEPENDENCE OF T H E
CO-OPERATIVE ORGANISATION IN

1920

The Decree of 20 March 1919 on consumers' communities really
involved the nationalisation or " sovietisation " of the co-operatives,
as the Communists put it. As was shown above, the Decree made
no specific mention of nationalisation, but in fact the general policy
of the Soviet Government for the socialisation of exchange made the
co-operatives a simple distributive organisation in the general Soviet
system.

— 43 —

In 1918 and 1919 the Soviet Government monopolised the trade
in practically all articles in current use. From November 1918 onwards the supply of food and objects of prime necessity to the
population was in the hands of the state. This measure was intended
to abolish private trade.
In the opinion of its authors, the legislation on co-operation in
reality abolished it " in so far as it was a special form of capitalist
association ". This legislation was to provide the basis for new
forms of co-operation more consistent with the economic and political conditions created by the dictatorship of the proletariat. They
might later form the nucleus for the organisation of supplies on a
communist basis.
Credit Co-operation.
Credit operations were made impossible by the nationalisation of
banks on 14 December 1917, the annulling of all bonds and shares,
and the liquidation of mutual credit associations on 10 October 1918.
But the final blow to credit co-operation was the nationalisation of
the People's Bank of Moscow, which was the financial centre of the
co-operative movement. The Decree of 2 December 1918 ordered the
amalgamation of this bank with the People's Bank of the Russian
Socialist Federative Soviet Republic (previously the State Bank).
The central board of the Moscow People's Bank and its provincial
branches were transformed into central and local co-operative sections
of the People's Bank of the R.S.F.S.R. These sections continued
to carry on banking operations to finance the purchase, sale, and
production by the co-operatives of food, objects of prime necessity,
raw agricultural products, agricultural machinery, and manures. In
general, the co-operative sections provided credits for co-operative
organisations.
The policy of compulsory exchange and state supplies, and in
general the whole policy of the Soviet Government, made the use of
money increasingly superfluous. At this time the Government was
endeavouring to " naturalise " exchange and abolish money, and in
these circumstances credit operations became impossible and credit
co-operation superfluous.
The Communist Party Congress in April 1920 realised that credit
co-operation proper had ceased to exist, as credit associations no
longer received deposits and did not apply for grants. The peasant
did not need money, as the state levied taxes in kind and itself supplied the population with necessities. The only function of the credit
3

— 44 —

co-operatives now was to act as intermediary in supplying agricultural implements to the peasants and delivering non-agricultural
products to the Soviet offices on behalf of the peasants.
The work of the credit co-operatives thus changed considerably
and became practically the same as that of the consumers' cooperatives in the system of compulsory exchange and state supplies.
Obviously, therefore, either the credit co-operatives or the consumers'
societies were unnecessary. A separate system of credit co-operatives
' had no raison d'être. The consumers' societies seemed better fitted to
do the work of transmitting the peasants' produce to the Commissariat
of Supply or the Supreme Economic Council. " The consumers'
co-operatives, including as they do the landless peasants and small
peasant farmers, are of more assistance in the Soviet policy of supplies
than the credit co-operatives, the members of which were largely
the well-to-do peasant farmers " 1.
At the beginning of 1920 it appeared possible to carry out the
amalgamation of the credit co-operatives and the consumers'
societies.
Agricultural and Craft Co-operation.
The agricultural and craft co-cperatives were in a different
position. The Communist Party was not unanimous on the question,
and there were vehement discussions at the Ninth Party Congress
in April 1920.
Some of the Communists, for whom Mescheriakov and Miliutin
were spokesmen, wished to abolish agricultural and craft co-operatives and make them economic departments of the executive committees of district (volost) or village soviets. To quote their statements on the subject :
If in agriculture the Communist Party is to set up socialist cereal
factories, either in the form of soviet farms or by linking up peasant.
holdings in communities and. artels, the old agricultural co-operatives
must disappear.
As regards craft co-operatives, they are inconsistent with the industrial policy of the soviets, the object of which is to socialise production
and create large industrial undertakings. The craft co-operatives, on the
other hand, are made up not of workers but of small employers imbued
with the principles of private property and petit-bourgeois ideas. Once
industry and commerce are nationalised and the whole population is
supplied by the state, craft co-operatives are out of place.
The Decree of 20 March 1919 had stipulated that all the population must belong to co-operatives. In the opinion of this section
1

Ninth Congress of the Communist Party, Verbatim Record, p. 258

— 45 —

of the Communist Party, the co-operative organisations must therefore be controlled by the state, which represented the whole population
and whose functions covered all aspects of the life of the population.
All kinds of co-operatives united in a single organisation should be
a branch of the soviet administration, in particular of the rural district
(volost) soviets.
Another section of opinion, represented by Krestinsky, admitted
that the co-operative organisation should be unified, but maintained
that co-operation should not be abolished in the sphere of agriculture
and home industries and that the Soviet Government ought to support it.
The majority of the Congress committee on co-operation held the
first of these views, but Lenin himself appeared at the plenary meeting of the Congress in order to oppose the resolution. He declared
that, if the policy advocated by Miliutin with regard to agricultural
and craft co-operatives were carried out, the result would be the
nationalisation of small peasant farms, which would be quite inconsistent with the peculiar conditions of Russian rural life. According
to Lenin, " if we subordinate the co-operatives completely to the
Soviet administration before the masses have had time to adapt themselves to communist organisation, we shall ruin the distributive
organisation which we need so badly to carry out the Soviet policy
of control and distribution of goods " 1.
The Congress was convinced by Lenin's arguments, and stipulated that no obstacle should be offered to " the initiative and
independent activity of the peasants who are organised or may wish
to organise in co-operative societies ".
It is important to note that on one principal question the
Congress was unanimous ; it decided that all branches of the cooperative organisation should be united into one.
The separate
existence of agricultural and craft co-operatives could not be tolerated.
These two branches of the movement must be linked up with the
Centrosoyus, of which they would form two sections, while credit
co-operatives were to be abolished.
Amalgamation

of the Co-operative

System.

The decisions of the Congress regarding agricultural and craft
co-operatives were put into effect by the Decree of 23 April 1920.
1

Ninth Congress of the Communist Party, Verbatim Record, pp. 343
et seq.
,

6 -

T h e Decree of 27 J a n u a r y 1920, however, had already ordered the
amalgamation and reorganisation of the co-operatives. T h e preamble
to this Decree ran as follows :
The co-operative organisations established by the great masses of the
labouring population themselves are the best technical organisation which
the state can use for the distribution and (in part) the preparation of
foodstuffs and other agricultural produce.
The existing organisations, however, have no common headquarters,
are often split up into different branches the respective functions of
which are not clearly defined, and their membership frequently represents the interests not of the workers but of their class enemies. Such
organisations cannot discharge the tasks which the workers' and peasants'
government is entitled to demand from them at this critical time.
In endeavouring to bring together in a single organisation ail
branches of co-operation, the Soviet Government follows the lines laid
down by the Decree of 20 March 1919 on consumers' co-operation.
I n conclusion, a brief survey may be given of the situation
created by the two Decrees x .
After the issue of these Decrees there was to be only one cooperative organisation. T h e agricultural and craft co-operatives
ceased to exist as independent bodies. T h e y were amalgamated with
the consumers' co-operatives, of which they formed special sections.
T h e credit co-operatives were abolished.
T h e i r assets and
liabilities, equipment, and staff were handed over to the consumers'
societies, which discharged such of their obligations as were consistent
w i t h the new system.
T h e Council of Industrial Co-operatives was abolished and its
functions handed over to the Centrosoyus 2 .
A co-operative section was set u p in the Commissariat of Supply to carry out the n e w regulations on co-operation.
T h e agricultural and craft co-operatives were r e o r g a n i s e d ' .
Their economic work was supervised by the local economic councils
and the branches of the Commissariat of Agriculture. T h e local
agricultural and craft societies might receive voluntary applications
for membership from the population within their district. Their object was to organise and increase the production of certain goods, to
supply their members with the means of production, and to deliver
their members' produce to the co-operative unions or state bodies.
T h e local societies in each district and provincial government and
t h r o u g h o u t the country were linked u p in special sections of the

1
Sobranie iizakonenii i rasporiazhenii, 1920, Nos. 6 and 30.
» Decree of 30 December 1919 ; Ibid., 1920, No. ó.
a
Decree of 23 April 1920 ; Ibid., 1920, No. 30.

— 47 —

corresponding organisations of the consumers' co-operatives. Each
branch of agriculture and of home industry had its own section.
Each section was entirely controlled by the competent Soviet
body — the Commissariats of Supply and of Agriculture, the
Supreme Economic Council, and their respective local offices. At
the head of each section was the executive of the union to which the
section belonged. This executive could annul general or administrative orders issued by the sections.
Finally, after all branches of the movement had been linked up
with the Centrosoyus, the All-Russian and provincial councils of cooperative congresses, which had been in existence since the time of
the Provisional Government, were wound up. Their functions were
handed over to the provincial councils of consumers' co-operatives
and to the Centrosoyus, to which the goods and capital of these
councils were also transferred 1.
The co-operative policy of the Soviet Government had reached
its goal at the end of 1920, when the whole co-operative organisation
was financed by the state. The Commissariat of Supply, on the
basis of estimates presented by the co-operatives, provided all the
funds required for the organisation of the Centrosoyus, the regional
and provincial unions, their sections, and the consumers' societies of
all kinds. These funds took " the form of subsidies supplied from
state funds ". The funds required for carrying out the operations
imposed on the co-operatives by the Commissariat of Supply (supply, production, distribution, etc.) were to be provided by the
departments concerned out of the sums allotted for this purpose in
the ordinary budget '.
Thus, during 1920, the co-operative programme of the Communist
Party was carried out. The co-operative movement ceased to have
any independent existence and became definitely a mere economic
agent of the soviets.
The subsequent chapter will describe the functions of the
" new " co-operative movement in the execution of the Communist
economic policy, the way in which these functions were discharged
in practice, and the effects on the movement itself of its new tasks.

1
a

Decree of 27 January 1920 ; Ibid., 1920, No. 6.
Decree of 13 December 1920 ; Ibid., 1920, No. 99.
3

CHAPTER III

Function of the Co-operative Organisation
in the General Economic System of the Soviets

STATE REGULATION OF EXCHANGES

The complete disorganisation of the economic system which followed the rise to power of the Communist Party immediately led to
the development of exchanges in kind, i.e. a system of barter. The
collapse of railway and water transport, the cessation of trade, the
rapid depreciation of the currency, the repression of private initiative
in commerce and industry, all made normal exchange practically
impossible. These circumstances hampered the execution of the
Communist programme, and the Soviet Government attempted to
replace direct exchange in kind by another system regulated and
controlled by the state. With this object a Decree was issued on
2 April 1918 on " the organisation of exchange in order to improve
the supply of cereals ". Under this Decree some of the goods of
prime necessity for the peasants were to be handed over to the Commissariat of Supply for purposes of exchange (these goods included
woollen materials, shoes, matches, soap, agricultural implements,
paraffin, various iron goods — nails, horse-shoes, etc. — glassware,
crockery, tobacco, salt, sugar, tea). The Commissariat regulated
and taxed the exchange of these goods against cereals and other
foodstuffs, which were to be delivered in accordance with the state
plans.
Cereals could only be exchanged for goods with the permission
of the Commissariat of Supply. The exchange had to be carried
out through the " poor peasants " and their regional and district
unions, which were to distribute the goods among the needy population. From the beginning of 1918 a " supplies dictatorship " was
established. The " supplies front " was considered the most

«- 49 —
important of all. The Central Council of Trade Unions was instructed
to form supplies battalions and platoons {prod-armia). A special tax
in kind was instituted which was really a forced levy of foodstuffs
on the peasants. The policy of supplies consisted almost entirely
of confiscation and requisition, but " supply corps " were not enough
to secure wheat. If foodstuffs were to be obtained from the villages,
goods to be offered in exchange were needed as well as machine guns.
With this in view, the Communist Government gradually set up
monopolies in nearly all goods in current consumption.
The organisation of the Commissariat of Supply was then
completed in the direction required by the new policy of commercial
exchange.
Production was still the affair of the Supreme Economic Council,
but distribution was the function of the Commissariat of Supply.
The Decree of 27 May 1918 instructed the Commissariat " to
concentrate in a single organisation the supply to the population of
objects of prime necessity and foodstuffs, to organise the distribution
of these goods, and to prepare the way for the nationalisation of commerce and industry ".
The local branches of the Commissariat (regional, provinciî.l,
and divisional supplies committees) were to provision the country in
accordance with the state plan of supply. The town supplies committees and the consumers' co-operatives were to distribute objects
of prime necessity among the population. A special office, the
" Glavproduct " (chief office for the distribution of goods), was set
up in the Commissariat to carry out the distribution of goods through
the consumers' co-operatives.
These first attempts to organise exchange were unsuccessful.
From 1 November 1917 to 1 August 1918 the supply organisations
could only collect a stock of 30 million poods of wheat. The total
value of goods distributed by the Commissariat of Supply was not
more than 1,762 million roubles, which was much below estimates \
Moreover, the system of exchange as organised during the first
half of 1918 did not put a stop to private trading or exchanges among
individuals. Frequently the goods distributed by the state were
delivered to people for whom they were not intended, while wheat

Vtoroi god borby s golodom (The Second Year of the Campaign
against Famine), abridged report on the work of the Commissariat of
Supply. Moscow, 1919.
7

— 50 —

a n d other foodstuffs were not delivered by the peasants to the state
supply offices.
I n A u g u s t 1918, therefore, the policy of the soviets was modified.
I t was decided that manufactured goods would only be delivered in
r e t u r n for foodstuffs. T h e principle laid down by the Decree of 810 A u g u s t 1Q18 was " not a box of matches, not a pair of shoes, not
a yard of calico — if there is not its equivalent in bread ' " . T h i s
Decree stipulated that " industrial products and, in general, all goods
which are not foodstuffs may only be exchanged against wheat and
other goods, such as hemp, flax, leather, etc. "
T h e Decree also dealt with the co-operative organisation and
assigned to it certain duties in connection with the system of
exchange 2 .
T h e co-operatives and supply centres were to collect the wheat
which the population was obliged to h a n d over. T h e value of the
wheat was fixed by the state. All wheat so delivered was handed
over to the state t h r o u g h the provincial supplies committees. T h e
co-operative societies were to present to their unions the receipts
for the wheat. On presentation of these receipts, and only then, the
co-operative unions could obtain objects of prime necessity which
they would then transmit to the consumers' societies. T h e amount of
goods received by the latter was strictly proportional to the quantities
of wheat they had collected (as certified by the receipts) and to the
n u m b e r of persons served by each society. T h e co-operatives paid
those w h o supplied the goods (co-operative unions or supplies committees) in k i n d and in cash (15 per cent, of the cost). T h e agricultural population paid for goods b o u g h t from the consumers'
societies in the same way.
T h e co-operative unions, acting as agents of the Commissariat of
Supply, were to receive credits in goods and in cash s . T h e cooperatives were required to notify the supplies offices of all reserves
of goods in their hands.
Later, under the Decree of 14 September 1918, the co-operatives
were compelled to distribute among the population, under the control
of the supplies offices, the materials, g a r m e n t s , etc. which they had
in their stores.
1
Cf. A. Y U R I E F : " The System of State Exchange ", in Narodnoie
Khoziaistvo, Nos. 11-12, 1919.
5
Proizvodstvo, utchot i raspredelenie productov narodnovo khoziaistva (The production, valuation, and distribution of the products of the
economic System); Sbomik decretov i postavovlenii, 1Q17-IQ20 (Series of
Decrees and Orders, 1917-1920). Moscow, 1921.
5
Until the issue of the Decree of 13 December 1920 mentioned above.

— 51 —

As this system developed, it increasingly led to a general system
of supplying the towns with food and industry with raw materials.
Forced levies of cereals and compulsory exchange became the only
possible form of exchange. The Soviet Government was gradually
led to carry out one of the chief items on its programme, the socialisation of exchanges.
SOCIALISATION OF EXCHANGES

The creation of various state monopolies had already considerably
restricted the freedom of exchange and the operations of the cooperatives in connection with the distribution of goods.
Free
exchange was declared illegal by the Decree of 21 November 1918 on
state organisation of supplies, which was " to replace private
trading "'.
The socialisation of exchanges involved the procedure described
below. The Commissariat of Supply—as represented by the
Glavproduct — had to collect adequate stocks of goods in common
use and domestic products. All products of the nationalised factories
attached to the Supreme Economic Council were to be handed over
(through the chief offices and departments of the Council) to the
Commissariat of Supply. Wholesale co-operative and state warehouses and stores and co-operative and soviet shops were established
to distribute goods. To regularise the circulation of goods of which
the production and sale had not yet been monopolised, the Glavproduct was to organise " centres " for the various groups of goods
and enlist the aid of the co-operatives.
The co-operatives paid the Glavproduct for the goods to be
distributed, and the Glavproduct settled accounts directly with the
factories or " centres " and the chief offices of the Supreme Economic
Council which delivered the goods.
The goods were conveyed to the Glavproduct and the cooperatives according to the " transport utilisation plans " drawn up
by the Utilisation Committee of the Supreme Economic Council.
These plans distinguished between goods for export, those intended
for industry, and those for distribution among the population.
The Decree instructed the provincial branches of the Commissariat of Supply to establish, before 1 January 1919, a network of
shops sufficient for the needs of the population, to provide for the
distribution of monopolised goods. All the shops of the consumers'
1

Collection of Laws, No. 83, 1918.
3

— 52 —
societies were to be included in this network. To obtain goods, every
citizen had to register at a given shop included in the system
controlled by the Commissariat.
In order to strengthen the connection between the Commissariat
of Supply and the consumers' co-operatives and to secure control
of the latter, the Commissariat of Supply was to appoint a representative to the executives of the Centrosoyus and the provincial cooperative unions. The executive of the Glavproduct could suspend
or annul any decisions of the Centrosoyus and regional unions affecting the distribution of goods if these decisions were inconsistent with
the plans in force.
The Decree on state supplies thus united the three chief branches
of the co-operative movement in the service of the Government. The
consumers' co-operatives became technical distributive agents of the
Commissariat of Supply. The agricultural co-operatives were, in
effect, also under the orders of the same Commissariat in its work of
securing supplies. The craft co-operatives became a branch of the
Glavproduct, which used them to secure supplies of non-monopolised
products. The co-operatives for the sale of agricultural raw materials (e.g. the Central Association of Flax Growers) were also
included in the system of supplies.
Within the general framework of the state plans, the co-operative
committee of the Commissariat of Supply drew up- programmes for
the various co-operative organisations covering the collection, production, transport, and distribution of foodstuffs and articles in current consumption. The Committee also laid down the conditions on
which the local supplies offices were to instruct the regional cooperative unions to carry out these operations.
As was stated above, the Decree of 21 November ordered the
creation before 1 January IQIQ of a huge network of retail shops, but
it was impossible to carry out this scheme in so short a period. The
co-operatives, which were opposed to the Soviet Government, were
very little help to the Commissariat of Supply. When the creation
of new state shops became manifestly impossible, the Soviet Government was obliged to appeal again to the co-operatives. With this in
view, the Decree of 20 March IQIQ on consumers' co-operative
societies was brought up to date and put into force. Eventually,
therefore, the function of the co-operatives was reduced to the
operations now to be described.
The Commissariat of Supply fixed the quantity of foodstuffs
to be collected from the peasants by the provincial supplies com-

— 53 —

mittee. The latter made a similar calculation for each division
(uyezd), and these again fixed the quantities for the districts (volost).
The co-operatives, as organisations placed under the orders of the
state bodies, received orders for the collection of cereals in certain
localities. All goods handed over to the co-operatives by the producers were sent to the branches of the Commissariat of Supply. Thus
the agricultural and craft co-operatives became suppliers to the
Commissariat of Supply, while the consumers' co-operatives received
a given quantity of manufactured goods to distribute among the population in return for the foodstuffs and raw materials delivered to the
state.
In the opinion of the Communist leaders, the supply of foodstuffs
and articles in current consumption was primarily the function of
the state, because the forced levy of foodstuffs aroused opposition
between the consumers (workers) and the producers (peasants). The
levy could succeed only if it were carried out by state departments,
which were the political organisations of the working classes. The
consumers' co-operatives were then — especially after the issue of
the Decree of 20 March 1919 — considered only " as one technical
aspect of the activities of the workers ; no power was delegated to
them by the Government, and they had no specifically class characteristics ". It was held that the work of the co-operatives should
be separated from that of the state organisations, so that they would
only carry out technical operations under the control of the state.
The policy of supplies, which was the basis of the economic policy
of the Soviets, and depended on the compulsory delivery of goods
(compulsory service) should be controlled solely by the economic
departments of the state, which might, if they saw fit, use the cooperative organisations as subordinate technical agents.
However, it was evident, even by the middle of 1918, that the
state organisations for supply and distribution were unable by themselves to discharge their functions. After putting the co-operatives
completely on one side, the Commissariat of Supply had eventually
to use them for operations of supply and distribution, and gave some
of them an actual monopoly.
In May 1919 the President of the Glavproduct wrote :
We started the system of supplies with the help of the co-operatives
because our own organisation was too weak (e.g. for the collection of
the products of home industries). Our offices were hardly ready for
this kind of work, while the special agencies set up temporarily were

— 54 —
also inefficient. In view of the prevailing economic conditions, the cooperatives, which are in touch with the masses of the petite bourgeoisie,
and are well fitted to achieve certain results, are an organisation essential to the system of supplies. Through them we can do something,
but only if the provincial supplies committees tighten their control of the
co-operatives *.
Thus in reality the co-operatives occupied a much more important
position than that originally assigned them by the Soviet Government. But this importance accrued to the co-operative organisation,
not as such, but as an economic agent of the state. Economically and
in organisation, the period of Communism had brought ruin and
.disorganisation to the co-operative system, as will be shown in the
following chapter.

Narodnoie Khoziaistvo, Nos. 11-12, 1919.

CHAPTER IV

Effects of Communist Policy on the
Cooperative System
NUMERICAL EXPANSION AND I T S CAUSES

It is now desirable to survey the results of co-operative activity
under the Communist regime.
The co-operative system, having become a mere government
agent, had no financial anxieties ; its expenses, like those of any
other government body, were borne by the state, and it could fall
back on state resources to an almost unlimited extent. Under the
orders of the Government it was very largely entrusted with the
provisioning of the country and distribution of food. At the same
time, its technical organisation was better than that of the state ;
and, strengthened as it was by the abolition of private trade, the
movement had, in theory at least, every opportunity of developing
to a very considerable extent. These were the positive factors
influencing co-operative activity.
Judged by outward appearances co-operative organisation had
developed very markedly, as may be seen from the following table ':
NUMBER OF CO-OPERATIVE UNIONS, 1914
Date

i
1
1
1
i
1

Jan.
Oct.
Oct.
Jan.
Jan.
Apr.

1914
1917
1918
1919
1920
1920

Consumers'

*
*
*
*
239

Ciart

8
*
*
15
26
—

Credit

TO
Mixed

Otnei3

Total

5
*
*
•
#

55
585
595
854
1,038
924

15
:i:

«
*
*
I98

1920

•

*
*
*
*
274

The sien * signifies „figures not available ".
1

Statistichesky Sboniik (Statistical Year Book), 1918-1920 ; Moscow,
1922. Sbomik statisticheskikh svedenii po S.S.S.R. (Statistics of the
U.S.S.R.), 1918-1923 ; Moscow, 1924.
3

- 5 6 The primary co-operative organisations were in a similar position.
According to official statistics, co-operative credit associations and
deposit and loan societies all gave evidence of increased activity at
the close of 1910, as will be seen from the following figures :
Date

Credit associations

i Jan. 1918
1 Jan. 1919
1 Sept. 1919

10,650
10,710
H|055

Deposit and loan societies

2,893
3,130
3.29*

The number of agricultural communities, associations, and artels
rose from 950 on 1 December 1918 to 12,784 on 1 January 1921.
Craft co-operative societies also had multiplied rapidly, as shown
below.
I
i
1
1

Date
J a n . 1919
J a n . 1920
Oct. 1920
Oct. 1921

Number of societies
780
1,723
4,467
6,650

But the numerical increase of co-operative societies was a mere
show, and there was no real expansion of co-operative activity.
Credit Co-operation
The numerical increase in credit co-operatives already referred to
was due to the fact that the nationalisation policy pursued by the
Government in financial affairs encouraged a large number of institutions to assume a co-operative character. From the beginning of
1920, however, following the promulgation of the Decree of 27 January, credit co-operation was abolished ; and the information given
below is therefore only historical interest.
Agricultural

Co-operation

The numerical increase of agricultural co-operative associations
was due to the creation of numerous agricultural artels. As previously mentioned, the development of these organisations was bound
up with the general agrarian policy of the Soviets and was accordingly encouraged in every possible way. The creation of agricultural
communities, which prior to the Revolution were non-existent and
which had to serve as landmarks for the collectivist policy of the
Soviets, also contributed to the development of agricultural cooperation. In 1920 the number of the old agricultural producers' cooperative societies was the same as in 1919 (1,446). But the same

— 57 —

remarks apply to this branch of the movement as to co-operative
credit. The number of co-operative institutions is only of theoretical
value as indicating the number of associations said to exist prior
to 1920. From this time onward, however, the organisation of cooperative agriculture was amalgamated with that of consumers'
co-operation, and became a mere subsidiary organ of the latter.
The agricultural co-operative movement, then, like the craft cooperatives was (to quote the 1021 report l of the Centrosoyus)
merely " a vast burial ground for co-operative records ".
The following figures illustrate the development of agricultural
artels, communities, and associations for collective cultivation during
the period of Communism \

Otchot Centrosoyusa za igzi god (1921 Report of the Centrosoyus).
Moscow, 1922.
3
Information as to the number of agricultural producers' co-operatives
varies considerably with the sources from which it is obtained ; e.g.
the Central Statistical Department (Statisticheski Sbornik, 1918-1920)
gives the following figures for 1920": 2,119 agricultural co-operative communities ; 8,586 artels ; 946 other collectivist organisations.
According to Koniukov (Collectionoie zemledelie ; Moscow, 1923)
there were at the end of 1921 : 3,120 communities ; 10,185 artels ; 2,514 associations.
According to Dubrovsky (Istoria Russkoi Revolutstii, Vol. I),
there were 3,401 artels on 1 November 1919, 7,510 on 1 September 1920,
and 11,440 on 1 September 1921, etc.
The figures quoted in the text are those given by the Commissariat
of Agriculture in its official organ Selskokhoziaistvennaia Zhizn (Agricultural Life), 23 Apr. 1923.
The total number of agricultural associations throughout Russia
(including the Ukraine) was estimated at 18,008 at the close of 1921
Cf. V. LozovY : Selskokhoziaistvennaia Cooperatsia i eia zadachy v
usloviakh novoi economicheskoi politiki (Agricultural Co-operation and
Its Function under the New Economic Policy), p. 158 ; Moscow, 1923.
3

— 58 —

NUMBER OF AGRICULTURAL COMMUNITIES, ASSOCIATIONS,
AND ARTELS IN SOVIET RUSSIA (EXCLUDING THE UKRAINE),
i g i 8 T O 1921

Date

i
1
1
1
1
1
1
1

Dec. 1918
S e p t . 1919
J a n . 1920
S e p t . 1920
J a n . 1921
M a r c h 1921
J u l y 1921
D e c . 1921

Communities Artels

Associations
for collective
cultivation

Total

Area under
Total
cultivation
membership
(dessiatins)

;-Sp;;.950
1,961
1,617
1,892
2,16e
2,114
2,236
3.040

3.606
3.828
7,722
9,155
11,136
11,427
10,490

622
804
886
1,469
1,357
1,416
2,039

950
6,189
6,249
10,500
12,784
14,607
15,0/9
15,569

—
399,990
700,464
820,053
966,145
940,599
1,061,403

410,000

S1J&3
717,545
1,211,190
r,275,725
I
,253,326
1,469,918

The explanation of the increase of agricultural artels, communities, and the various associations for joint cultivation of the land
lies not only in the general tendency of Soviet Government policy to
encourage and assist the development of collectivist organisations,
but also and more especially in general economic conditions and the
situation in the rural districts during the first two years after the
Communist revolution.
When the peasants first seized the estates which had belonged
to large landowners, they proceeded to divide and subdivide them
so drastically that peasant holdings became very small. The acute
food shortage in the towns led to an exodus en masse to the country.
Land was frequently held by workmen, domestic servants, and craftsmen who had returned to the villages ; and these had neither the
money, tools, nor cattle needed for farming purposes. They were
therefore obliged to associate themselves with other persons owning
the necessary capital, in order to utilise their land.
In view of the tendency of the Soviet agrarian policy, there was
only one course open to the newcomers, as also to the class of moderately well-to-do peasants who wished to save their property from
the general splitting up, namely, to form associations for collective
cultivation. Further, the peasants found themselves compelled,
owing to the general impoverishment and diminution of stocks of
agricultural equipment, to resort to co-operation as the only means
of re-establishing their farms. It may be remarked that the shortage

— 59 —

of live stock and equipment was the ruling motive which gave rise
to the creation of associations for collective cultivation. According
to Koniukov :
The lack of suitable land is one of the principal reasons for the
establishment of agricultural associations for collective cultivation. The
quantity of cultivable land may be increased by the following methods :
(i) by the • allocation of land from the state agricultural reserves to
members of the associations ; (2) by the collective organisation of improvements ; (3) by temporary allocation of unoccupied land. The
" middle-class " and " poor" peasants meet with disaster owing to the
lack of agricultural supplies. Collective cultivation, with such material
as is available, makes it possible to carry out the necessary work.
Specially difficult was the position in which numbers of discharged soldiers found themselves upon their return from the Front.
Their farms had in their absence fallen into an appalling condition,
and the general poverty in rural areas was such that they found it
impossible to get out of their difficulty unaided.
It often happened that the " poor " peasants came to some
arrangement with well-to-do peasant farmers, by which the
former were allowed to make use of equipment belonging to the latter, whose ownership remained unimpaired. Under cover of a collective enterprise some landed proprietors succeeded in retaining part
of their estates, their houses and stock. Usually they arranged for
the establishment of an association to which the members of their
family, their relatives, and their servants belonged 1.
Owing to the diverse factors by which they were brought into
existence the agricultural collective associations fulfilled only to a
very limited extent the expectations of the Communist Party and
the requirements of Soviet policy. These collective associations were
not remarkable either for the solidarity of their members or for any
new spirit ; nor did they in any sense represent a fresh type of
agricultural development. They were quite insignificant economically. The number of members and the amount of land held by them
has already been referred to ; the total membership represented no
more than one per cent, of the entire rural population and the whole
area cultivated by all of them was not more than one per cent, of
the total cultivable area held by the peasants.
Koniukov gives the following information regarding the various
forms of collective association at the end of 1921 ; it may be remarked that his figures do not wholly correspond with those of the
Commissariat of Agriculture already quoted.
1

KONIUKOV

: op. cit., pp. 63-67.
3

— 6o —
Aericultural

organisation

Communities
Artels
Associations

Membership

202,619
653,356
159,150

Area under cultivation
(dessiatins)

609,019
i,4"»25i
79.881

According to the above, the artels were most numerous. They
were, however, precisely the kind of organisation of which the Soviet
Government least approved, considering them the most typical form
of petit-bourgeois association and the nearest approach to pre-revolutionary co-operative enterprise, in which the artels played a not
inconsiderable part. The artels continued to follow the same methods
as before the revolution, and as the Soviet Government showed very
little interest in them they were able to develop in comparative
freedom. On the other hand, communities and other kinds of collectivist agricultural associations, to which the Soviet Government
devoted more attention, were for that very reason placed in a most
difficult position.
It has previously been remarked that the Soviet Government had
adopted no settled and consistent policy towards agricultural associations. Agricultural communities were always considered by the
Soviet Government, and more especially by the officials of the Commissariat of Agriculture, as part of the mechanism of a socialised
economic system and thus of the general state-controlled economic
system. For this reason the officials of the Commissariat of Agriculture considered it possible and necessary to subject these agricultural associations to severe centralised regulation and criticism. Not
only had the constitution of each association to be approved by the
competent state authorities (i.e. the offices of the Commissariat of
Agriculture), but similar restrictions were placed on everything that
they wished to undertake.
The local branches of the Commissariat of Agriculture thus acquired the right to intervene in all forms of economic activity. They
took part in the distribution of live stock and labour among the
various associations, and issued orders, such as that one association
was to supply a certain quantity of cattle, agricultural tools, etc. to
another.
The local branches of the Commissariat of Agriculture considered
that the property of collective associations belonged to the state, and
that they could dispose of it as they saw fit. The result was that the
associations, fearing for the safety of their property, saw no necessity either to extend their holdings or to accumulate wealth ; so

— 6i —

much so that members of the communities bagan to keep part of
their property outside the association.
The local authorities kept the staffs of collective associations
under constant supervision. Branches of the Commissariat of Agriculture, acting entirely upon their own initiative, compelled the
societies to admit new members ; or again, without consulting the
members, they would exclude certain persons and in some instances
even dissolved the association altogether. As in such circumstances
members' contributions to the common funds were not returned, the
branches of the Commissariat simply reduced numbers of persons, who
had up till then supported themselves solely by their labour, to the
level of the proletariat.
Sometimes communities or artels were compelled to remove from
one district to another. The branches of the Commissariat of Agriculture were, moreover, empowered to amalgamate several associations. Frequently they endeavoured to establish what were described
as " wheat factories ". The result was that, in place of agricultural
communities whose members were voluntarily associated for the purpose of working together in a spirit of unity, artificial groups, made
up of incongruous elements wholly unacquainted with each other and
in widely differing financial circumstances, were established by
force.
Thus, on the one hand, the collective associations were assured
that the state would provide for all their needs and for those of their
individual members. On the other, the officials of the Commissariat
of Agriculture, who considered collective associations as their own
property to be disposed of as they considered fit, gave them no
assistance ; on the contrary, by their various experiments they frequently hampered the development of such associations. This mode
of procedure had a most deleterious effect upon the initiative and
economic activity of the population in general.
In agriculture the co-operative movement lost all trace of spontaneity ; more than in any other field it was conducted entirely under
state supervision and had been stripped of all freedom of action 1.
Craft Co-operation
The numerical increase of craft co-operatives was due to several
new circumstances. The craft co-operatives and home workers'
1

For fuller information upon the results of the Soviet policy as
applied to agricultural associations, cf. KONIXJKOV : op. cit.
3

— 6? —
(kustari) associations had been neither nationalised nor municipalised.
Availing themselves of this privilege, a n u m b e r of small and mediumsized undertakings established themselves as co-operative associations.
A s , moreover, craft co-operatives were included in the general state
plan of supply and exchange, they received state credits and also had
a certain priority over private undertakings in the allocation of state
orders. I t therefore seemed very advantageous to establish craft cooperative associations.
Economic circumstances were not without their effect on the
development of craft co-operation. T h e complete disorganisation of
transport had disturbed the equilibrium of the home market. T h e
transport of commodities from one area to another was fraught with
difficulty, and each district was t h u s reduced to dependence upon the
resources of local industry. Commodities produced by home workers
were more in demand, and the scope of home industry was considerably enlarged. Competition from large-scale industry was to all
intents and purposes eliminated ; and small-scale manufacture, more
especially home industry, was accordingly placed in a very advantageous position.
Consumers'

Co-operation

T h e n u m b e r of consumers' co-operative societies, however, decreased from 51,199 at 1 September 1919 to 11,836 at 1 November
1920. T h i s was due to the fact that the organisation of the consumers'
co-operative movement in accordance with the Decree of 20 March 1919
had led to the amalgamation of n u m e r o u s co-operative organisations
into united consumers' societies with several retail shops.
T h e total membership gives b u t a vague idea of the position of
consumers' societies as a whole 1 :
Year

Membership

1916
1917
1918
1919

6,815,000
11,550,000
17,000,000
18,500,000

1
Cf. A. MERKULOV : " Consumers' Co-operation in Russia during
the War and the Revolution ", in Soyus Potrebiteley, 1922, Nos. 8-10.

- 6

An explanation of the position is given below.
Even during the war co-operative membership had shown a
marked tendency to increase. After the revolution of March 1917
the movement was freed from all restraint, and membership increased
so rapidly that the total for 1917 was almost double that for 1916. The
increase in membership following the Communist revolution was due
in the first place to the economic and political privileges gained by cooperators. Frequently membership of a co-operative association
meant protection from famine ; and co-operators were exempt from
all kinds of repressive measures, to which the Soviet Government
was particularly addicted at that time. Moreover, in 1918 and 1919
the Government initiated various measures with the object of. compelling all citizens to become members of co-operative associations.
Thus the extraordinary increase of membership during 1918 and 1919
was not in any sense due to a growth of the co-operative spirit among
the population or to any sudden outburst of sympathy for the movement. Nor did it arise from the initiative of the people themselves ;
it was wholly due to administrative and political pressure brought to
bear by the authorities. In 1920 the total of 18 million members was
said to be greatly exceeded, as the entire population was supposed to
be enrolled in the movement."' The number of members, therefore,
gave no indication of the progress of the movement, since everyone
was compelled to join it.
The study of co-operative economic activity may for present purposes be confined to the Centrosoyus. There are two reasons for this:
first, the information available on consumers' co-operation is the
most complete and systematic ; secondly, from the middle of 1919
consumers' co-operation began to absorb all other branches of cooperative activity, a process which received official sanction under
the Decree of 27 January 1920. As previously mentioned, this Decree
transformed both craft co-operation and agricultural co-operation into
branches of the Centrosoyus.
The economic working of the Centrosoyus during the period of
Communism may first be judged by the volume of its business, i.e.
its turnover. True, the figures given as representing the total
turnover must be accepted with reserve ; for, as the Centrosoyus

- 6

was called upon by degrees to take an ever-increasing part in the
work of supply, provisioning, and exchange (which was properly the
function of the Commissariat of Supply), its commercial operations
were gradually confined to the simple fulfilment of Soviet Government orders. The government campaign against the co-operative
movement in 1918 and 1919 had a serious effect upon the work of
the Centrosoyus, and its turnover fell rapidly. Moreover, private
commercial activity had been abolished and free exchange had almost entirely ceased ; nearly all commodities were rationed and
prices fixed by the state under the system of food cards. For the
Centrosoyus, then, free commercial expansion had become an impossibility.
In 1920, however, all other branches of the co-operative movement had been absorbed by the Centrosoyus ; and the latter had
become thé sole statutory commercial undertaking (since the
nationalisation both of commerce and of industry had made it the principal and in some cases the only state organ for supply and distribution of commodities). In these circumstances its turnover increased
considerably, as will be seen from the following figures \
Figures for 1921 are also given, although, as from 7 April 1921,
the New Economic Policy was applied to the co-operative movement.

1
The figures are calculated in paper roubles and in pre-war roubles
In calculating the figures of pre-war roubles the following factors have
been taken into account : (1) the proportion between the quantity of
rationed commodities and goods of which the Government had not fixed
the prices available on the market ; (2) the increase, from 1917 to 1921,
in the cost of commodities supplied or distributed by the Centrosoyus, as.
compared with pre-war prices. The percentage increase was 170 in
1916, 450 in 1917, 2,000 in 1918, 10,000 in 1919, 20,000 in 1920, and in
1921 it was 32,500 for goods whose prices were controlled and 1,000,000
for uncontrolled goods. Cf. FISCHHÄNDLER : " The Centrosoyus and Its
Relative Importance in the Commercial Life of the Country ", in Soyus
Potrebiteley, 1922, No. 10. Also Otchot Centrosoyusa za 1Ç20 i 1Ç21 godi
(Reports of the Centrosoyus for 1920 and 1921); Moscow, 1922.
If, on the other hand, the cost-of-living iudex number is taken as the
basis for calculating the depreciation of the rouble, the value of the prewar rouble in paper roubles was as follows :

Date

Paper roubles

1916

2.03

1917

6-73

1918

78.50

X919

716.00

1920

8.200.00

1921

74,500.00

_ 6 s -

However, the new principles were not actually put into force until
September 1921 ; and until then the working of the co-operative
movement underwent no change.
TURNOVER OF THE CENTROSOYUS, 1916 TO 192I
All offices

Head office

Pre-war roubles
(millions)
Year

I916
I917
191a
1919
I92O
1921

Paper roubles
(millions)

86.6
210.6

606.9
4,428.2
18,950.5
2,311,919.0

Centrosoyus
calculation

50.9
46.8
30-3
44.2
94-7
45-2

I.I..0.
calculation

Pre-war roubles
(millions)
Paper roubles
(millions)

42.7
31-3
7-7
6.2
2-3

52-5
132.7
3899
3.595- 1
7.95Ï-0

31.0

1,802,005.0

Centrosoyus
calculation

I.L.O.
calculation

30-9
29-5
19-5
25-9
39-8
38.1

25-8
19.7
4.9
5-0
0.9
24.0

As will be seen, the turnover of the Centrosoyus in 1919 (expressed in pre-war roubles) was below that of 1916 and of 1917. In 1920
the rouble had depreciated enormously, and the business of the
Centrosoyus expressed in pre-war roubles showed a considerable
decrease, even when compared with the figures for 1916. For 1921
there was a considerable increase, thanks to the partial restoration of
freedom of exchange and to the prominent part played by the Centrosoyus in the general provisioning system of the state.
During 1919 and 1920 the most noticeable phenomenon is the decreasing importance of the head office of the Centrosoyus in the
general work of the consumers' co-operatives. Its functions as an
organ of supply and distribution during that period were exercised
mainly through its local branches, which were used by the Commissariat of Supply wherever its own organisation failed. At headquarters, however, the Commissariat operated through its own
agencies.
In 1916 the head office of the Centrosoyus transacted 60 per cent.
of the whole amount of business done by that organisation, in 191S
the proportion was 64 per cent., in 1919 58 per cent., and in 1920
only 41 per cent. At the time of the transition to the New Economic
8

— 66 —
Policy in 1921, however, the head office of the Centrosoyus alone
was able to resume its commercial activity without delay, while its
local branches were ruined financially and disorganised. In 1921,
therefore, the head office effected 84 per cent, of the total commercial transactions of the Centrosoyus.
Another characteristic trait of the activity of the Centrosoyus
during the period under review is that the duty of provisioning government institutions was increasingly entrusted to it, to the detriment of the co-operative unions, as will be seen from the table below1.
PERCENTAGE DISTRIBUTION, BY CLASS OF BUYER, OF SALES
OF THE CENTROSOYUS, 1919 AND I92O
Buyers
Department of the
Centrosoyus

Co-operative
I919 |

unions
1920

Haberdashery
Ironmongery
Leather
Wooden ware (turner}',
etc.)
Manufactured goods
Tobacco and perfumer}'
Foodstuffs
Stationery

37
87
56

45
81
33

46
96
89
84
64

87
76
8.2
42

All departments

0.05

Government
1919

institutions
1920

Others
I919

1920

55
8
40

—
64

8
5
4

4
19
3

—
3
9

12
21

í
2

—
5

3
3-8
23

•

It is evident that commercial transactions with state institutions
increased relatively, and that business done with the co-operative
unions decreased correspondingly. This is explained by the fact that
in 1920, as mentioned above, the Centrosoyus was being extensively
employed by government departments (more especially the Commissariat of Supply) for the supply and distribution of commodities.
In 1919 there was a considerable decrease in the activity of the
17 industrial undertakings belonging to the Centrosoyus ; and this
became even more marked in 1920. In the summer of 1917, owing
to the war, and in 1918, thanks to the economic and political privi-

Statistichesky Sbornik, 1918-1920, Vol. I.

- 6

leges enjoyed by co-operative undertakings in view of the disorganised condition of industry in general, the 17 undertakings
referred to had expanded considerably. In 1919 and 1920, however,
owing to the general collapse of the economic system and to the
busybody supervision exercised by all state offices in accordance
with the general policy of the Soviet Government, the position of the
Centrosoyus industrial undertakings became worse and worse, as may
be seen "from the following table l :
OUTPUT OF CENTROSOYUS INDUSTRIAL UNDERTAKINGS,
I916 TO I92O
Pre-war roubles
Year

Paper roubles
Centrosoyus

I916
I917
I918
I9IV
I92O

4.675.Ï38
21,811,814
93,691,899
245,816,818
490.405,349

calculation !

2,750,081
4,847,069
4,684,595
2,458,168
2,452.028

I.L.O. calculation 2

2,303,023
3,240,982
I.193.527
343,319
59,660

1 Calculated solely by the increased cost of commodities dealt in by the Centrosoyus. Cf. footnote >, p. 64.
2 Allowing for the depreciation of the rouble measured by the cost-of-living index.
Cf. footnote », p. 64.

Taking into consideration the depreciation of the rouble during
the period 1918-1920, the output of the Centrosoyus industrial undertakings in 1920 was inconsiderable (Cf. column 3 of the table).
The financial position of the Centrosoyus during this period presents a similar dual character. The general balance sheets of the
Centrosoyus for the period 1916-1920, calculated in paper roubles,
appear to show an enormous increase in comparison with that of 1916 ;
for example, in 1920 the increase amounted to 122,400 per cent. In
pre-war roubles, however, the figures show a steady decrease.
The figures make it evident that the financial balance of the
Centrosoyus only reached the 1916 level, and was still considerably
below that of 1917, in 1921 — after the partial re-establishment of free

Otchot Cevtrosoyusa za 1Ç20 i 192/ godi,
3

_ 68 —
exchange. During the period of Communism the balance sheet
totals decreased rapidly, and that for 1920 was barely one-fourth of
that for 1917.
BALANCE SHEET TOTALS OF THE CENTROSOYUS, 1916 TO 1921
Pre-war roubles
Vear

Paper roubles
Centrosoyus
calculation

I916
1917
1918
I919
1920
1921

32,687,388
181,078,427
1,193,288,640
8,704,212,759
56,860,834,556
1
,250,258,000,000

16,300,000
36,200,000
59,700,000
87,000,000
50,000,000
20,900,000

I.I..O. calculation

l6,I02,l6l
26,608,978
15,261,133
12,156,721
6,918,721
16,670,106

That the financial position of the Centrosoyus became steadily
worse is also shown by the fluctuations in its capital \
CAPITAL OF T H E CENTROSOYUS, I916 TO I920
Share capital

Total capital
Year

1916
1917
1918
I919
192a

Million
paper
roubles
2.2
11.2
46.4
117.6
802.I

Million
pre-war
roubles
1-5
2-4
2-3
1.2
4.0

Per cent.
of
turnover

2.9
5- 1
7-5
2.7
4.2

Million
paper
roubles

1.8
10.2
40.5
103.9
104.9

Million
pre-war
roubles
I.I
2-3
2.0
1.0
0.5

Per cent.
of total
capital
81.8
91.0
87-2
89.1
13.0

The considerable increase in the Centrosoyus capital at the close
of 1920, despite the excessive depreciation of the rouble, does not
imply any improvement in the financial position of the co-operative
movement. As will be seen from the foregoing table, the capital of

1
Otchot Centrosoyusa za igzo i igzi godi. The figures in pre-war
roubles are calculated on the index of depreciation of the paper rouble previously referred to, in accordance with the figures given by the Centrosoyus. Cf. footnote l , p. 64.

- 6 g t h e Centrosoyus at that time was insignificant as compared with the
turnover. T h e total amount of share capital (i.e. capital subscribed
by the m e m b e r s ) , which had previously represented 80 or 90 per
cent., amounted in 1920 to less t h a n 13 per cent, of t h e total.
ABSORPTION OF T H E CO-OPERATIVE
AND I T S

SYSTEM

BY T H E

STATE

EFFECTS

T h e expansion which took place in the commercial operations
of the Centrosoyus was principally due, as stated earlier, to the fact
that this organisation was now the sole commercial undertaking in
the country and the principal distributive agent of the Commissariat
of Supply. I t s functional expansion, however, did not call for any
increase of capital. After the People's Bank at Moscow h a d been
nationalised and its functions, so far as the co-operative movement was
concerned, had been taken over by the State Bank, the latter found
it difficult if not impossible to finance the co-operatives. T h e inward flow of private capital became less and less, and at last ceased
altogether, as the co-operative system became increasingly dependent
upon the state and nationalisation extended further and further.
F r o m that time onward, as has previously been seen, the Centrosoyus
was financed by the Commissariat of Finance ; share capital virtually ceased to exist as from 1920, when subscriptions in respect of
membership of a co-operative society were no longer chargeable.
I n the 1919 and 1920 balance sheets of the Centrosoyus the figure
for " share capital " is the same ; the item does not appear at all in the
IQ2I balance sheet, as under the Decree of 13 December 1920 the
Centrosoyus was already being financed by the state and its accounts were included in the state budget. Independent financial
activity of any kind, then, had become impossible. T h e Centrosoyus
report for 1921 states t h a t :
Although the period during which the Centrosoyus has been financed
by the state is short, it must be acknowledged that this time of
absolute indifference to questions of expense has had very serious consequences. Our commercial organisations soon lost all sense of a healthy
financial situation and commercial profit, and the position was aggravated
by the fact that these organisations were no longer under the control
of the Centrosoyus, but under that of the various supply offices '.
T h e co-operative movement fared no better for being financed
b y t h e state ; the only reason for its being so financed was that the
commercial activities of t h e Centrosoyus were under the control of

Otchot Centrosoyusa

za 1021 god, p. 2.
3

6 *

— 70 —

the Commissariat of Supply. The method employed was as follows :
first of all a certain sum was allocated and credited to working capital
account as an advance upon working expenses. Grants were then
made for organisation expenses (wages, upkeep of premises, accountancy and bookkeeping, transport, etc.) and for all other costs incurred in the execution of state orders. During the first four months
of IQ2I the Commissariat of Supply granted 32,592 million roubles for
establishment costs and a further 52,000 million roubles during the
four following months. In addition, various state offices advanced
considerable sums of money to the co-operative organisations on
account of government orders ; all attempts to ascertain the exact
amount of these advances have been unsuccessful.
This method of conducting business operations had a most deleterious effect upon the co-operative movement. As mentioned above,
the leaders quickly lost all initiative and the movement was stripped
of all its own resources. There was no longer any need to consider
the price which had to be paid for any given goods, or the
expense incurred for organisation, management, etc. The organisation did not know the cost of the operations needful to obtain supplies, and maintained no proportion between rapidity of circulation
and the intrinsic value of goods, which remained untouched for
weeks or even months. An enquiry was made into the financial
position of the co-operative movement, and it was said that this carelessness arose from the fact that "as the co-operatives did nothing
but execute government orders the Government (as represented by
the Commissariat of Supply) took over all responsibility for the
financial side of the business. The movement could estimate its
expenditure but not its receipts " \
Although the co-operative movement could make use of state
funds to a very considerable extent — but precisely because of this
— it never had in hand the sums needed, and suffered from a chronic
deficit.
During the period of Communism the state's sole resource was
the printing press. It may be recalled that up to 1 July 1921 the
state had issued notes to a value of 2,347,000 million roubles. This
excessive inflation resulted in continual depreciation of the rouble
and a chronic shortage of money, from which the co-operative movement and all state undertakings suffered.

M. SCHIERMANN : " Financial Resources of the Co-operative Movement ", in Narodnoie Khoziaistvo, Oct. 1921.

— 71 —
State payments in respect of supply operations undertaken by
the co-operative organisation were not based upon any real calculation;
no precise figures have ever been obtained for the expense incurred
for transport, sorting, packing, warehousing, insurance, and distribution of state goods( whether undertaken by the Centrosoyus, by the
provincial unions, their local sections, the united consumers' societies,
or any of the voluntary groups formed among them.
On an average the co-operative organisations received a sum
equivalent to about one-fourth of their total turnover in respect of
such expenses. When, during the second half of 1921, an attempt
was made to ascertain the precise amount of such costs, it was found
that in 1920 the cost of organisation, management, etc. amounted for
all classes of consumers' co-operatives to 30 or 40 per cent, of turnover ; in 1921 the proportion was even higher. This shows that the
co-operative organisations received only a fraction of the amount
which they really needed ; and this chronic lack of funds prevented
the movement from carrying out successfully the various operations
with which it was entrusted.
Private commercial undertakings
profited by this state of affairs, as they had the necessary funds at
their disposal, and sold extensively upon a credit basis, which for
the co-operative organisations was impossible. Similarly, owing to
the lack of funds the co-operatives had great difficulty in obtaining
supplies ; there was no money in the villages, and the peasants would
only dispose of their products for cash. Very many co-operative
stores were obliged to close owing to lack of funds.
Initiative had thus died out entirely in all branches of co-operative economic activity. The report previously referred to touches
upon this aspect of the position :
" Extensive initiative, such as
was previously fostered by co-operative education, was no longer
called into play ".
All citizens, without exception, were required to become members of co-operative associations, so that the movement appeared to
be a national one. Nevertheless, as it was dependent economically,
financially, and administratively on state organs, which ruled the
whole organisation by Decree, centralising management and making
the system dependent upon the general policy of the Government,
the population had no opportunity for individual and independent
action.
The Decrees of 20 March 1919, 27 January and 19 April 1920
were intended to improve the organisation of co-operative associations
3

— 72 —

in general. As a matter of fact, since all branches of co-operation
were united in the Centrosoyus there was a great dispersion of energy,
a lack of cohesion among the various sections, financial disorganisation,
a slackening of the links between the head offices and the local
branches, and an extraordinary inflation of administrative machinery.
Moreover, co-operative work of all kinds was under the supervision of the state economic organs and was hampered in all directions by the centralisation and " red tape " of the offices concerned.
For example, if the " Glavproduct " issued a voucher for a certain
quantity of goods, this voucher had to be exchanged for those of
various " chief offices " of the Supreme Economic Council. The
exchange procedure in the hands of these offices was very lengthy.
Orders for the delivery of goods were only forwarded to the factories
concerned after interminable delays, and vouchers issued by any
of the principal offices were not covered either by available stocks
or by the possibility of manufacturing the goods mentioned therein.
Even if the goods were available, the factories might still be
unable to effect delivery. Whole months were required to put the
order through the books, and when the co-operatives wished to
deliver the goods to customers difficulties such as restriction in various
forms, suspension of railway traffic, etc. arose on all sides. Frequently it was impossible to forward the goods even when they had
been delivered by the factory. Means of transport were entirely out
of order ; the state authorities had not the necessary rolling stock
and were unable to procure it 1.
When the Centrosoyus endeavoured to undertake the operations
which the state departments were manifestly incapable of performing,
it came into collision with the busybody control of the state economic
organs. Initiative in any form was considered to be a symptom of
revolt against the Government or a grave violation of government
plans. The Centrosoyus, indeed, with all its central management of
unions and local associations, had, to use the expression of certain
publicists, degenerated into " a hundred-handed clerk " '.
All the work of the co-operative movement was effected in
accordance with instructions and orders issued by state economic
i Soyus Potrebiteley, 1923, No. 12 ; special number for the Jubilee
öf the
Centrosoyus.
3
RozovsKY : " New Dispute over the Co-operative Movement ", in
Narodnoie Khoziaistvo, 191g, Nos. 11-12, p. 191.
MAKEROVA^ Istorichesky ocherck potrebitelskoi co-operatsii (Brief
History of Consumers' Co-operation), p. 33. Moscow, 1923.

— 73 —

bodies. Control of food prices, the system of supplies, the plans for
supplies, state monopolies, etc. deprived the co-operative associations
of all freedom of action. The consumers' co-operatives received their
stocks from the Commissariat of Supply in accordance with a programme laid down beforehand ; when they proceeded to distribute
these commodities, this also had to be done in accordance with another programme laid down in advance. Craft co-operatives and
associations for co-operative sale were either transformed into mere
distribution centres, or provisioning was entrusted to them only
upon receipt of sale contracts duly signed. Thus they also lacked
freedom of action properly so called.
* At this time the Soviet Government's policy of supplies only
included extremely " urgent " measures of " a military character ".
The work of all economic bodies was accordingly subordinated to
the needs of the " dictatorship of supplies ", which imposed rigid
and strictly limited plans, resulting in excessive centralisation. Cooperative organisations had to comply unquestioningly with all orders
emanating from the central body. " The co-operative movement ",
says one writer, " has become a docile tool in the hands of the Commissariat of Supply ; and its own characteristics have been completely eliminated. " 1
Under these circumstances the concrete results of co-operative
activity were inevitably closely bound up with the general distribution
and provisioning policy of the Soviet Government. Transport was
completely disorganised, and the economic life of the country upset ;
direct exchange by ordinary methods had been abolished, and production of every sort was greatly reduced. These factors, together
with the influence of civil war and of the economic and political dictatorship, contributed to restrict the supply operations of the Soviet
Government in general and of the co-operative movement in particular to an almost unbelievable extent.
The following table shows the amount of cereals actually collected by the Commissariat of Supply and its agents, including cooperative organisations 2 :

MAKEROVA, op.-cit.

' Statistichesky Sbornik, 1918-1920, Vol. II.
3

— 74 —
CEREALS COLLECTED, 1916 to 1920
Quantity of cereals
Period
(1 August to 31 July)

I916-I917
I917-I918
I918-I9I9
I9I9-I92O

Thousands of poods

540,678
73.371
107,922
212,466

Per cent.
of 1916-1917 total

IOO

13-5
19.8
39-3

1
Quantity of supplies collected by the Imperial Minister of Agriculture in 1916 and
by the Minister of Supplies of the Provisional Government in 1917.

It may further be noted that the amount of wheat and fodder
actually forthcoming in 1918-1919 represented only 41 pel cent., and
in 1919-1920 only 66.5 per cent., of the amounts specified in the
general programme for those years.
The amount of meat to be collected by the Commissariat of Supply
and its services in 1918-1919 was, according to the programme laid
down, 1,316,000 poods monthly. During the period 1 January to
30 September, however, the total quantity received amounted to
1,083,442 poods. In the same year, only 50 per cent, of the specified
quantities of potatoes and other vegetables were forthcoming.
The deficiency of certain other commodities may be seen from
the following table :
SUPPLIES IN 1918-I919
Commodity

Quantity specified in
state programme

Quantity actually
delivered

9,200,000 poods
Fish
12,900,000 poods
2,900,000 "
Vegetable oils and fats 4,900,000 "
3,200,000 "
5,100,000 "
Sugar
l6,000,O00 "
32,000,000 "
Salt
223,000,000 a r s h i n s
500,000,000 a r s h i n s
Textiles
1,600,000 p a i r s
10,000,000 p a i r s
Boots
621 w a g o n l o a d s
2,717 w a g o n l o a d s
Eggs

State provisioning of the population at large was therefore quite
inadequate, and the functions of the co-operative movement, deprived as it was of all freedom, dwindled away to nothing.

— 75 —

The whole co-operative organisation, indeed, was dependent upon
the economic organs of the state ; and, as these had neither
the capacity nor the means of accomplishing any of their functions,
the co-operative movement had to suffer all sorts of restrictions and
its agents met with many difficulties in the course of their duties. The
part played by the movement in furnishing supplies to consumers
was greatly lessened. Under such conditions the economic activity
of the system, as, indeed, of almost all state organs, practically ceased
to exist except on paper ; strictly co-operative activity had completely disappeared. According to the official organ of the Centrosoyus :
The administrative organisation of the Centrosoyus was only partially
occupied, and had become rusty and blunted like an idle sword. The
connection between the various sections of the central administration,
which multiplied unceasingly, slackened little by little. A similar state
of affairs existed between the central and local offices, between the Centrosoyus and its provincial branches, which were better able to understand the working of the state supply sections than that1 of the cooperative union to which they themselves were attached.
Such was the position of the co-operative movement at the time
of the introduction by the Soviet Government of the New Economic
Policy. But, though the principal object of the new conditions was
to facilitate the working of the co-operative system, in effect they
merely hampered it still more. The disorganisation of the movement
from the end of 1917 to the beginning of 1921 was profound, and any
revival was of necessitv difficult and slow.

NATHANSON : " Twenty-five years' Commercial Activity of the Central Organisation of the Co-operative Movement (1898-1923)", in Soyus
Potrebiteley, 1923, No. 12.

PART II
THE TRANSITION
TO THE NEW ECONOMIC POLICY

CHAPTER I

State Capitalism and Co-operation

ABANDONMENT OF T H E COMMUNIST POLICY

Economic ruin reached its climax at the beginning of 1931.
The system of forced contributions, requisitioning and confiscation
of agricultural produce had brought disorganisation and disaster upon
the peasants. The area of land sown had been much reduced owing
to the abolition of free trade, as a consequence of which the peasants
refrained from producing anything in excess of their own requirements. Any surplus crops which might be harvested were carefully
concealed by the cultivator, so as to avoid requisition by the supply
corps. Cattle also were subject to requisition, and the peasants preferred to slaughter and eat them, only reserving such livestock as
was absolutely necessary for carrying on their farms. Even when
requisitioned goods were paid for on the spot, the currency depreciated so rapidly that the peasants were almost unable to purchase
manufactured goods.
As a result the towns were practically blockaded by the country
districts, and this gave rise to a continued and acute shortage of food
in urban districts. Workers quitted factories and workshops en
masse and returned to their villages.
In addition, the growing shortage of labour in the towns, lack of
raw materials, disrepair of machinery and tools, and the confused and
bureaucratic management of the nationalised industries by means of
numerous " central committees " (there were 60 of these) had resulted
in industrial chaos. Production had fallen considerably ; it was
no longer sufficient even to enable the peasants to maintain cultivation at a reasonable level. Finally, the disorganisation of all means of
transport completely suspended relations between one part of the
country and another.
3

— 8o —
A s has already been mentioned, freedom of exchange was abolished. T h e Commissariat of Supply had to replace private commerce, to organise compulsory exchanges, and to ensure state supplies;
its efficiency, however, left m u c h to be desired. T h i s was due to
several causes — first of all, to the lack of commodities owing to
reduced output, and the blockade of the towns by the country districts ; b u t also to the insufficient n u m b e r of local offices of the Commissariat, the duties of which were to collect stocks of commodities
and distribute food.
T h e food crisis on the one h a n d and the industrial crisis on t h e
other made it evident t h a t the economic system based upon compulsory exchange and state supply was unworkable. I n order to avoid a
catastrophe it became imperative to organise free exchange, and
above all to re-establish normal relations between town and country.
T h e first t h i n g to be done, therefore, was to allow the peasants to
dispose of their surplus crops as they chose and to obtain manufactured goods in exchange. T h i s entailed the abolition of the system
of forced levies of agricultural produce, and the re-establishment of
trade.
T h e tenth Congress of the Communist Party, held in March 1921,
recognised t h e necessity of allowing the peasants to revive the system of free exchange, in order to allay their discontent and obtain
the assistance required to avert famine.
Moreover, the world socialist revolution expected in 1918 now
seemed much further off t h a n had at first been supposed. Some of
the Communist leaders, Lenin in particular, realised that it was
absolutely necessary to retain certain forms of capitalist activity during
the period of transition to the new order. T h e idea of suddenly
establishing a socialist régime had thus to be abandoned, partly for
political reasons and partly t h r o u g h economic necessity. In t h e
course of an address to the Communist Congress on 15 March 1921..
Lenin said :
We know that only an understanding with the peasants can preserve
the social revolution in Russia, so long as revolution has not broken
out in other countries. . . Our resources are limited, but we must
satisfy the middle-class peasants. 1
Lenin, in fact, was of opinion that the agrarian revolution of

LENIN : Sobranie Sochinenii
p . 138.

(Complete Works), Vol. XVIII, Part I,

— 8i —
1917 h a d strengthened the position of t h e middle-class peasants, who
had thus become the predominant element in t h e villages.
There is more homogeneity among the peasants than formerly. The
land is divided more equally, whence the levelling of social conditions
in country districts. There is no longer the great gulf between the wellto-do peasant and the poor or landless peasant. Practically the only
class left in the country districts is the small peasant farmer, whom we
must help to re-establish his economic situation. A Communist who
thought it possible to change the economic basis of agriculture in three
years must have beeu a visionary. It is true, however, that we have
not a few of these visionaries among us. 1
According to Lenin, all attempts to organise agriculture upon
a collective basis had given but negative results ; " the men w h o
with the best intentions travelled from village to village to establish
communities and collective enterprises knew nothing of agriculture. . . T h e psychological transformation of t h e small farmer is
a matter of several generations. " 2
Denying that t h e agrarian crisis could be brought to an end by
collective organisation in agriculture, Lenin indicated the only t w o
methods of improving the situation of the small farmer, this being
a necessary condition for reviving agriculture.
The small holder must have some freedom in commercial transactions;
then he must be provided with the necessary goods 2 . . . If we could
obtain a modest stock of commodities, and keep them in the hands of the
Government, of the ruling proletariat, we should add economic power
to our political power.
T h e existence of such a stock would save the. small farmer, w h o
was in a very difficult situation through the war, from actual ruin
and from absolute inability to extend his cultivation.
If by the introduction of free trading the state could obtain a certain
quantity oi wheat in exchange lor manufactured products, and if this
quantity were sufficient to provide for urban and industrial needs, the
economic system would be re-established, although political authority
would be kept more and more firmly in the hands of the proletariat.
"What the peasant wants is proof that the worker who controls industry
is capable of organising exchange with the country districts. 3
L e n i n ' s report to the t e n t h Congress, although based upon a
previous decision by the Central Committee of the Communist Party,
gave rise to considerable confusion among the delegates. H i s closest

1
Ibid., p. 196. Speech on the tax in kind, addressed to a conference
of secretaries of Communist organisations, Moscow, 9 Apr. 1921.
' Ibid., p. 140.
s
Ibid., p. 196.

82 —

collaborators opposed the change which he desired to introduce into
the economic policy of the Soviets \
I n his reply Lenin found it necessary to place the problem on
a m u c h broader basis ; he stated specifically that it was necessary to
modify the old economic policy on account not only of the peculiar
position of the rural districts, but also of the general economic
situation of the country.
We could establish communism in a state where large-scale industry
predominated, or at least was highly developed, and where agriculture
was industrialised and carried on intensively. Where these conditions
are non-existent it is, economically speaking, impossible to make communism a reality.
Regarding the economic policy of 1921, Lenin considered t h a t
" the first t h i n g to be done is to increase the quantity of goods available. F a t i g u e , increasing poverty, and the weakening of the h u m a n
resources of the country, i.e. the workers and peasants, have reached
such a point that for the time being we must sacrifice all to t h e
fundamental idea of increasing at any cost the quantity of commodities for distribution. " 2
N o resolution was adopted by the Congress on the subject of
general economic policy. I t merely approved the proposal of the
Central Committee of the P a r t y to " replace the forced levies of foodstuffs, raw materials, and fodder " by a tax in kind, so as to ensure
systematic and undisturbed agricultural exploitation by allowing
cultivators greater freedom in the disposal of their goods, to consolidate the peasant system and increase its yield, and, finally, to
m a k e a definite distribution of t h e burdens on agriculture.
T h e resolution adopted by the Congress included a clause stipulating that any tax in kind imposed upon the peasants must be lighter
than the forced levy. T h e t a x was to be so calculated that the state
would be enabled to provide for the minimum requirements of the
army, of the town workers, and of the non-agricultural population in
general. T h e amount of the tax was to be reduced from time to
time, as and when the privisioning of transport and industry enabled

1
Lenin's principal opponents were Tsiurupa and Miliutin. As their
speeches are not reported in the verbatim record of the Congress, it is
only possible to deduce their tenor from Lenin's replies. Cf. 10 Siezd.
Rousskoi Communisticheskoi
Partii : Stenografischesky
Otchot (Tenth
Congress of the Communist Party, Verbatim Record), p. 170 ; Moscow,

1921.
a

Ibid.,

p . 172.

- S ì the Soviet Government to obtain agricultural produce by normal pro
cedure — that of exchanging it for manufactured products. Once
the tax in kind had been paid the peasant would be free to use all
cereals, agricultural produce, and raw materials remaining in his
possession to improve and extend cultivation, to increase his own
consumption, or to dispose of them in exchange for industrial products
or manufactured goods in general '.
This resolution was merely a copy of a Bill drafted by the Central Committee of the Communist Party and published on 21 March
1921 in the form of a Decree entitled : " Introduction of the tax in
kind in substitution for the forced levy upon foodstuffs and fodder. "2
Definite and limited though they were, the Decree of 21 March
and the resolution of the Congress opened up a much wider question,
the reorganisation of the whole economic policy of the Soviets. It will
be shown that this question was of very great interest to the cooperative movement.
FUNCTION OF T H E CO-OPERATIVE MOVEMENT
IN T H E SYSTEM OF STATE CAPITALISM

The authority thus given to the peasants to dispose freely of
all their surplus produce after due payment of the tax was equivalent
to a sudden change in the entire economic policy of the Soviet Government. It had manifestly become absolutely necessary to re-establish commercial and financial exchange ; but the question was by
what means and to what extent. To settle this question meant determining the general economic policy of the Soviet Government ; I,enin
outlined the position in his speech to the tenth Congress of the Communist Party, as well as in numerous articles, speeches, and reports
on the question.
He had already foreseen the principal objection, that the reestablishment of commerce would " inevitably involve the resurrection of the petite bourgeoisie and of capitalism . . . You will open the
way to the development of the bourgeoisie, of small industry, and
of capitalism." These were among the statements contained in written

1
2

Ibid., p. 176.
Sobranie uzakonenii i rasporiazhemi, 1921, No. 26.
3

- 8

questions handed to Lenin during the Congress 1 by several members
of the Communist P a r t y .
L e n i n , far from denying this probability, replied :
It is useless to blind oneself to it. . . Commercial freedom does
encourage the development of capitalism ; there is no getting away from
that, and those who maintain that the case is otherwise are merely
wasting their breath 2.
On the other hand, is it possible to re-establish commercial freedom
and capitalism for small agriculturists, up to a certain limit, without
destroying the foundation upon which the political power of the proletariat is based?. . . It is possible ; it is a question of degree.
T h e limit which might be fixed by the proletarian authority was
that of purely local trade, which for the peasants of any one place
was dependent on the local industry. Freedom of local trade was
inevitable " in a h u g e agricultural country, with poor means of communication, in vast territories where economic conditions are extremely difficult " \
Commercial freedom, provided only t h a t it were confined to local
needs, aroused no anxiety in the " Soviet Socialist Republic ", for
capitalism t h u s re-established would remain " under the control
and supervision of the state ".
By thus keeping in its own hands factories and workshops, railways and foreign trade, the Soviet authority establishes in the country
a system of state capitalism which has nothing to fear from the small
private capitalist enterprise which is the fruit of commercial freedom 4.
State capitalism, economically speaking, is a great improvement
upon the economic organisation of Soviet Russia in 1931 5 . It is a step
forward, compared with the situation resulting from the predominance
of small landowners' interests. The Soviet Government must therefore
encourage state capitalism, and endeavour to guide all the efforts of
contractors and private capitalists into this channel.
It would be a great triumph if by good fortune we should succeed
in establishing state capitalism among us within six months, and it
would guarantee that within a year the system would be firmly established and make the advent of socialism inevitable e .
T h u s , the renunciation of the old Communist policy was primarily a temporary concession to cope with unfavourable economic
conditions. Instead of establishing socialism immediately, an endeavour was being made to organise state capitalism, as a step towards
t h e desired end.

1
Tenth Congress of the Communist Party, Verbatim Record (cited
above), p. 171.
a
LENIN : Sobranie Sochinenii, Vol. XVIII, Part I, p. 197.
s
Ibid., p. 181.
4
Ibid., p . 216.
s Ibid., p. 202.
6
Ibid., pp. id and 208.

- 8

T h e new policy could only tolerate freedom of commerce within
certain narrow limits ; although the private merchant was allowed
to carry on retail trade, it was essential to state capitalism t h a t other
commercial machinery be set up to meet the needs of the workers'
and peasants' state. T h i s organisation was to include state commerce
and co-operative activity.
I t will b e seen t h a t t h e new policy from its inception w a s
directed, not towards the re-establishment of private capitalism, b u t
towards the creation of a system of state capitalism w i t h i n which
private commerce would be tolerated as a n exception, on condition
that its operations were limited to local trade.
T h e co-operative movement was considered as an integral part
of the system of state capitalism. Dealing with t h e t a x in kind,
Lenin wrote ' :
Co-operation is one aspect of state capitalism. . . Co-operation
among small producers inevitably leads to capitalistic relations among
the petit bourgeois, and encourages small capitalists by giving them the
larger share of the profits. . . To restore full liberty and rights to
the co-operative movement in Russia to-day would merely be to reestablish the liberty and rights of capitalism. Refusal to admit the
truth of this would be either stupid or criminal. However, in contradistinction to the position which arises under the regime of private
initiative and private capital, under the Soviet administration " cooperative capitalism " is only one form of state capitalism ; and, as
such, it is useful to us up to a certain point.
As soon as the t a x in kind leads to free trading in the surplus agricultural produce remaining after payment of the tax, we ' must endeavour to turn the resulting exchanges into the channels of co-operative
capitalism.
Co-operative capitalism resembles state capitalism in the sense that
it facilitates agreements between the state (in the present instance, the
Soviet Government) and the capitalists. Co-operation is more useful
and less dangerous than private commerce. . . also because it facilitates the organisation of millions of people, and thus of the entire
population. That is a very considerable step on the road that leads
from state capitalism to socialism.
Co-operative organisation being t h u s considered as one aspect of
state capitalism, the Central Committee of the Communist Party had
necessarily to give it a important place within the limited sphere of
partial commercial freedom.
T h e Decree of 21 March 1921 was based purely on the idea of
state capitalism as envisaged by the Communist P a r t y at t h a t time ;
it proclaimed t h e freedom of local trade, which could be carried on

1
This pamphlet was written in 1921, but was not published until
May 1922. Cf. LENIN : Sobranie Sochinenii, Vol. XVIII, Part I, p. 219.

— 86 —
either through the co-operatives or directly in open markets and
fairs (Section 8).
State commerce, however, was not to disappear, but was to be
extended and reorganised. The state was to constitute a permanent
reserve of agricultural machinery and implements and of articles of
prime necessity, either of home manufacture or imported. This
reserve (state fund) would be used as a medium of exchange in cases
where the peasants desired to hand over to the state the surplus which
remained in their possession after payment of the tax in kind
(Section 9). The state would provide for the indigent portion of the
population in accordance with special regulations (Section 10).
Thus from the outset the Soviet Government imposed upon the
co-operatives the duty of establishing commercial exchange, which
was again free. The co-operative movement itself, however, was to
be merely an auxiliary of the state commercial organisations which
were to carry out exchanges and supply the population.
At first the new policy did not result in any modification of the
economic organisation of the country and the state organisations
continued to operate as usual. The great innovation of the new
policy consisted in restoring to private individuals the right to dispose
freely of surplus produce. Its object being, however, to establish
state capitalism as opposed to private capitalisn^ the principal part
was to be played by the state commercial organisation and by the
co-operative movement—both integral factors in state capitalism.
During the period of Communism the consumers' co-operatives
had been considered only as distributive agents of the Commissariat
of Supply. At the time of the forced levy of agricultural produce
the work of the co-operative organisations in the sphere of supply
was limited to non-monopolised commodities or to products which the
Commissariat of Supply had difficulty in procuring. After the suppression of the forced levy and the re-establishment of free exchange
it was no longer necessary to restrict the commercial operations of the
consumers' co-operatives. The tenth Congress of the Communist
Party accordingly annulled the resolution of the preceding Congress
on co-operation and instructed the Central Committee to draft Orders
to " improve and extend the structure and working of the cooperatives in accordance with the programme of the Communist
Party, with the object of replacing the forced levy by the tax in
kind " \ It was in this way that the Decree of 7 April concerning
consumers' co-operation came to be drafted.
1

Tenth Congress of the Communist Party, Verbatim Record.

- 8

DEVELOPMENT OF T H E N E W CO-OPERATIVE POLICY

At first, both in Lenin's writings and speeches and at the Communist Congress, the only references were to consumers' co-operation.
It soon became manifest that for the re-establishment of local trade
the primary need was commodities. It was expected that the largescale nationalised industries would eventually be reorganised, but
that the time required for this would make it impossible to count upon
any prompt increase of production. Moreover, if all the nationalised
industries had had to take part in exchange it would have involved
a complete restoration of exchange throughout the country and in all
branches of the economic system. There could be no question of this
at the beginning of 1921.
Then it was necessary to satisfy those who desired manufactured
products in current use and the workers who needed foodstuffs and
articles of prime necessity. This necessitated the re-establishment
of local exchanges, which alone could meet these needs rapidly.
There was one means only of supplying the goods needed by the
consumers' co-operatives — the restoration of craft co-operation.
The Soviet Government had already touched upon this fact in
its circular of 17 May 1021. The Decree of 7 July 1021 improved the
conditions imposed upon this branch of the movement. It was desired to re-establish and facilitate local exchange by reviving both
the consumers' and the craft co-operatives and thus to improve the
position of the peasants and increase agricultural production. It was
also necessary, however, to re-establish agricultural co-operation,
closely bound up as it was with peasant life. Its functions were to
market peasant produce and to assist the peasants in purchasing
necessities. The Decree of T:6 August 1921 laid down the new conditions for this branch of the movement.
The re-introduction of free commerce led to the abandonment of
exchanges in kind and the revival of the use of money as a medium
of payment and exchange. (It will be recalled that the Soviet Government had endeavoured to abolish money during the period of Communism.) A financial system based upon money and trade therefore
reappeared and the co-operatives, no longer maintained by state
funds (as will be shown later), had to consider how to secure the
working capital required.
Prior to the revolution this difficulty had been solved by credit
co-operation, which played an important part in peasant life. The
revival of this form of co-operation became imperative, all the more
3

_ 88 —
so as the State Bank had been reopened in November 1921, and since
then several other banks and credit societies had been founded.
Credit co-operation was therefore re-established by the Decrees of
24 January and 20 February 1922, and the creation of the Consumers'
Co-operative Bank was authorised on 6 February 1922.
From the beginning of 1922 onwards the New Economic Policy
was extended to cover every branch of the co-operative movement and
all forms of co-operative activity. Each of these branches, consumers',
agricultural, craft, and credit co-operation, will be studied separately.
The first to be considered is consumers' co-operation, to which the
third part of this volume is devoted. But before passing to that
subject the reader will find a useful background for all subsequent
information in the short survey of general economic conditions given
in the following chapter.

CHAPTER II

The General Economic Situation, 19211924

The position of the co-operative movement, as one form of
economic activity, is closely connected with the general economic
situation, and that in two ways.
The co-operatives are first and foremost an organisation for
exchange and distribution. Their commercial activity depends in
the first place on the trade of the country, which in turn is conditioned by the volume of national production and of currencv in circulation. In the second place, it depends on the development of
co-operation and the extent to which it has penetrated the great
masses of the population. There is a close relation between the membership of the co-operatives and the standard of life of the masses.
If the economic and financial position of the co-operatives improves,
they are in a better position to supply the needs of the population,
but on the other hand an improvement in their position is conditional
on a rise in that standard of life.
The economic system in Russia has been subject, since 1921, to
successive economic crises, which have produced changes in the
material situation and the development of co-operative organisations.
During the period of Communism the co-operative organisations
disintegrated completely, and the movement was faced with a disorganised and ruined country. This could not fail to react on the
movement itself.
As the New Economic Policy was more extensively applied,
there was a revival in the various branches of the economic system,
while at the same time the position of the co-operatives and the
policy of the Government towards them changed. Each successive
crisis indicated the lack of economic stability in the country. The
New Economic Policy had therefore to be more extensively applied,
and new problems arose for the co-operatives.
3

— go —

It therefore seems desirable, before examining the position and
work of the various branches of co-operation after the abandonment
of the Communist policy, to give a brief description of the general
economic position in Russia. It is not intended to enter into details,
but simply to sketch in broad outline the economic conditions under
which the co-operative organisations in Soviet Russia are at present
working.
AGRICULTURE

The New Economic Policy was inaugurated at a time when
production, and especially agricultural production, was at a low ebb.
After 1921 there was some improvement — an increase in the area
under crops and in the quantity of livestock. In 1922 the total area
under crops was a little more than half the normal area before the
war and before the revolution.
In 1923 and 1924 there was a
marked advance, but even in the latter year the area under crops did
not exceed three-quarters of the pre-war area. The fall in the total
harvest and in the yield per hectare was even greater. During the
first years of the New Economic Policy there were two bad harvests,
in 1921 and 1924, and the average crop was not more than half the
normal pre-war crop, as may be seen from the following figures ' :
AREA UNDER CROPS AND CEREAL HARVEST, 1913, 1916, 1920 TO 1924
Gross yield of cereals

Total area under crops
Year
In million dessialins

I913
I9IÓ
1920
I92T
I922
I923
1924

(«)
88.3
82.4

(b)
91.6
86.4

63-5
61.9

73-2
68.4

51-7.
60.0
66.0

58.7
69.9
75-9

Index number (1913=100)

(«)
100
93-3
71.9
70.1
58.5
67.9
74-7

(b)
100
94.0
79-8
74.6
54-0
76.3
82.8

In million
poods

4,624
3,482
2,o82
1,689
2,211
2,802
2,564

Index

number

(1913=100;

100
71
42
36
47
60
55

: Selskoie khoziaistvo Rossii v 20om veke (Russian
Agriculture in the Twentieth Century); Moscow, 1923.
OGANOVSKY

KONDRATIEV and OGANOVSKY : Perspectivy rasvitia selskovo kho-

ziaistva S.S.S.R. (Agricultural Prospect in the U.S.S.R.); Moscow, 1924.
Prof. BOLDYR : DHa chevo nuzhen vivoz khleba za granitsu (The
Purpose of the Export of Wheat); Moscow, Centrosoyusj 1924.

— gì —
T h e r e was a similar decrease in the cultivation of " industrial
crops ". T h e greatest fall in t h e area sown a n d in t h e crop was in
1921-1022. I n 1922-1923 and 1923-1924 there was an appreciable
improvement, b u t even in these years t h e production of flax was
about one-quarter, that of h e m p two-thirds, that of tobacco one-third,
and that of sugar beet barely one-quarter of t h e pre-war crop *.
PRODUCTION OF INDUSTRIAL CROPS, I913, 1916, 1920 TO I924
Flax

Hemp

Tobacco

Sugar beet

Year
Area sown

Crop

Area sown

Crop

Area sown

Crop

Area sown

Crop

6-5

59°

2.7

55-0
44.O

Absolute figures *

1,250

IOÎ3
I916
1920
1921
1922
1923
1924

1,331

33-4
21.2

584
518

703

5-9

475

689

5-1

431

695
779

7.6
10.9
14.9

349

917

416
513

25.6
I3.2
10.0
10.0

55-3
61.0

15.0
19-3
19.0

3-0

0-3

613
180

2.6
6.1

0-3
0.4

185
169

2-5
9-2

34-7
34-6

3-7

227

3-1

319

13.2
15.0

4-3

I n d e x n ii m b e r s (1 3 1 3 = 1 0 0 )
!
1916
1930
I92I
1922
1923
1924

106

5'-

IIO.O

42.0

102

56
55
55
62

T-7

4.0

15
22

73
54

4.0

31
28

39
58
75
74

S-4
4-7
11.0
62.0
62.0

6.3
58.0
49.2

38
53

80.O
7.8
4-5
16.0
24.0
27.0

Àrea in thousand dcssiatins : crop in million poods.

[ATofp continued from p. ço.}
Na nOTjykh putiakh (The New W a y ) , Vol. V ; Moscow, 1924.
Economicheskoie Obozrenic (Economic Review), 1923, No. 11 ; 1924,
Nos. 11 and 23-24.
Economichesky Bullctcn (Economic Bulletin), 1924, Nos. 9-10.
The figures in the columns (a) are those of the Commissariat of Agriculture, those in the columns (b) those of the Central Statistical Department. Both series are given, in view of the marked divergence between
them.
1
Sbornik statisticheskikh
svedenii po S.S.S.R.
JQI8-IC2-¡ : Economicheskoie Obozrente, 1924, Nos. 3, 11 and 23-24. Economicheskaia
Zhizn
(Economic Ljfe), 15 Oct. 1924.
3

— 92 —
To complete the data on agricultural production some figures
are given on the amount of livestock in Russia from the time of the
Communist revolution (November 1917) to the end of 1923. Here,
too, there was a decrease similar to those noted in other branches of
agriculture. The most critical years were 1921 and 1922. In 1923
and 1924 there was a considerable improvement, but even then the
number of head of livestock was not more than four-fifths of the
normal figure before the revolution (1916), as the following figures
show \
LIVESTOCK IN RUSSIA, 1916, 1917, AND 192O TO I924
Year

1916
I917
I92O
I921
1922
r
923
1924

Horses

31-3
29.6
23-9
23.6
18.2
20.0
21.9

Cattle

Sheep
and goats

Number

(millions

50-3
47-4
37-4
38.1
31-8
38.5
46.6

80.5
78.0
45-9
45-5
40.0
56-7
66.5

Swine

19-3
20.5
14-5
!3-5
7.0
9-1
16.S

Total

183.9
176.3
122.8
120.7
97-3
124.3
152-9

Ind e x n u m b c:rs (1916= [OO)
I917
1920
I92I
I922
1923
1924

94-5
76.3
75-4
58.1
63-9
69.9

94.2
74-3
75-1
63.2
76.5
92.4

96.8
57-0
56.5
49.6
70.4
82.6

106.2
75-1
69.9
36.2
47.1
87.0

95-8
66.1
66.1
52.9
67.5
83.1

INDUSTRY

While this marked decrease in agricultural production hampered
the work of the co-operatives in delivering raw materials and supplying food to the working population, the fall in industrial pro1

Prof. A. E. LOSSITSKY : Sovremennoie sostoianie skotovodstva v
Rossii (The Present Stock-Raising Situation in Russia); Moscow, 1923.
OGANOVSKY : op. cit. Economicheskoie Obozrenie, 1924, Nos. 14 and
23-24.

— 93 —
duction from another side prevented t h e m from supplying the urban
and rural population with manufactured goods. T h e variations in
industrial production are shown below (in gold roubles on the basis
of prices in 1912) \
INDUSTRIAL PRODUCTION, 1912 AND 1920 TO I924
Large and mediumscale industry

Small-scale

industry

Total

Year
Million
eold

roubles

1912
1920
1921
1922

3.721
518
669

1923
1924

I.293

I.050
1.510

Index number

Million

Index number

Million

Index number

(1913 = 100)

gold roubles

(1913"= 100)

gold roubles

(1912=100)

100

4.417

100

13-9
18.O
28.4
34-8
40.5

730
193
260

26.4
35-4
56.S
68.5
94-5

415
500
690

711

929
I.471
1.793
2,200

100

15-9
24.9
39-5
48.1
49.8

A s these figures show, industrial production at the end of
1924 was less than half its pre-war volume. T h e output of largescale industry fell to about 40 per cent, of the pre-war figure. T h a t
6f small-scale industry fell m u c h less, and in 1924 was more t h a n
nine-tenths of the 1912 figure. Before the war the output of smallscale industry represented about one-sixth of total production, while
in 1924 the proportion was more than 30 per cent.
T h e table below shows the reduction in the supplies at the disposal of the co-operatives for providing the population with objects
of prime necessity. It also shows the improvement in production i n
1922 and 1923-1924.

1
These figures are approximate. The data given in various publications differ considerably, and the methods and scope of industrial
statistics are not yet clearly enough determined. The statistics of the
Central Statistical Department, of the Supreme Economic Council, and of
the " Gosplan " all give different figures. The Supreme Economic
Council estimates the output of large-scale state industries at 1,191 million chervonetz roubles in 1922-1923 and 1,534 million in 1923-1924.
(Cf. Torgovo-Promyshlennaia Gazeta (Journalof Commerce and Industry),
1 Oct. 1924, and Sbomik Statisticheskikh
svedenii pò S.S.S.R.).
The
figures used above are those of the Central Statistical Department, which
though not accepted by other institutions are the most complete.

— 94 —
INDUSTRIAI, PRODUCTION, IQI2 AND I92O TO I924
(For the index

numbers

1920

1913

the base is IQI3 = IOO)

I92I-I922

1922-1923

Industry

Million
poods

Coal
Naphtha
Iron ore
Cast iron
Siemens-Martin steel
Rolled steel
Cotton yarn
Cotton cloth '
Tobacco 2
Sugar
Salt
Paper
Matches 5
Oils

1,738
560
550
257

467
234
10
7

26.0
42.0
1.8
2-7

622
284
10.9
10.5

35.0
50.7
2.0
3.8

259
214
12
2,700
38.73I
87-5
102
11.9
3-7
•3

9-9
12
0,8
55
18,700
5-5

3.8
5-6
6.7
2.0
48.3
6.3

12
15
3
425

4.6
7.0
25.0
•5-7

2.1

.7.6

* Million arshins.

Index
number

Million
poods

Index
number

3
44-9
2
0.9
2

« Million units.

COMMERCE

AND

3-5
44.1
16.6
24-3
15-3

1923-1924

Index
number

Million
poods

Index
number

659
3'5
26
18.3

37.0
56.0
4-1
7.0

863
362
55
40.4

49-7
64.6
10.0
•5-7

35-9
27.9
5-1
818
•4,077
12.2
64.1
4.1
1.4
5-3

13.0
13,0
41.0
30.3
36.4
13-0
62.7
34.0
3-7
40.7

60.3
41.4
6.6
',"77
13,'4I
23.1
62.2
6-9
1.8
6. 4

23-3
19.0
55-0
43-5
33-7
26.5
60.7
57 0
48.6
49 2

Million
poods

Million cases.

CREDIT

Freedom of trade was proclaimed in April 1921, b u t for some
time internal commerce was limited to local retail trade. W h e n trade
began to develop a little state operations immediately took t h e first
place. I t was much later, from t h e middle of 1922 onwards, that
commerce became more general and co-operative and private trading
grew u p side by side with that of state bodies. D u r i n g t h e last two
years there h a s been a considerable development of trade ; it is clear
that t h e commercial operations of t h e co-operatives can only increase
in proportion to t h e general development of trade.
T h e r e are no complete statistics covering all branches of commerce, b u t some indication of t h e volume of commercial transactions
m a y b e obtained from t h e statistics of state trading * and of t h e sales
of eight central co-operative organisations 2 .
1
These figures refer to the sale of 95 state bodies which are regularly engaged in trade. Cf. Torgovo-Promyshlennaia
Gazeta, 1 Oct. 1924.
Russkaia promyshlennost
v 1Ç23 (Russian Industry in 1923) ; Moscow, 1924. Prof. M. E. PODTIAGIN : Narodnoie khoziaistvo
S.S.S.R.
evo dostizhenia i sostoianie v 1Q24 godu (The Economic System of the
U.S.S.R. in 1924); Moscow, 1924.
2
These organisations are the Centrosoyus, the co-operative section
for railwaymen and water transport workers, the military co-operatives,
the All-Russian Union of Craft Co-operatives, the Central Association of
Flax Growers, the Central Union of Potato Growers, the Selskosoyus
the Central Union of Woodworking Co-operatives. The Centrosoyus

— 95 * S A I . E S O F S T A T E S BODIES A N D E I G H T C O - O P E R A T I V E
1922 TO

ORGANISATIONS,

1924

State bodies
In terms
of current pricea

In terms
of pre-war prices

Co-operatives
(In terms of current prices)

Period
Million
chervonetz
roubles

Index
number

118.9
I4I.9
I69.I
256.3

100
120

Million
cnervonetz
roubles

Index
number

Million
chervonetz
roubles

Index
number

Per cent.
of state
sales

1922-I923

ist
2nd
3rd
4th

quarter
quarter
quarter
quarter

100
107

21.1
23.2

M3
217

8T.3
87.7
84.4
106.6

103
130

40.1

170
227
190

92.2
133-3
120.7

"3
J 04
148

75-7

100
109
190
361

23
29

257
323

26
26

17
16

1923-1924
ist quarter
2nd quarter
3rd quarter

201.3

263.2
225.0

53-8
68.1
43.2 '

> Figures for two months (April and May) only.

These figures show that the sales of state bodies in 1924 were
twice what they were at the end of 1922, measured in terms of current prices, though in terms of pre-war prices they increased by only
48 per cent. Even allowing for the rise in prices after October 1922,
therefore, there was a certain increase in trading operations. T h i s
applies equally to the co-operatives.
T h e last column of the table
shows that the sales of the co-operatives increased simultaneously,
and even slightly more rapidly than those of the state bodies.
T h e commercial operations of the co-operatives and state bodies
did not increase systematically or without interruption.
On the
contrary, they were liable to considerable fluctuations. D u r i n g the
fourth quarter of the year 1922-1923 they reached considerable
proportions as a result of the Fair of Nijny-Novgorod. T h e y fell
[¡Voie continued from p. 04.]
(including the military societies and those for railwaymen and water
transport workers) accounted for four-fifths of the total turnover at the
end of 1922, and three-fourths in the middle of 1924 (Cf. Soyus Potrebiteley, 1924, No. 7).

- 9 6 sharply at the end of 1923, when the market was absolutely stagnant,
and during the first five months of 1923-1924 they did not again reach
the level attained in the middle of 1923.
The development of the last two years notwithstanding, the volume of trade is still very much less than that of pre-war years. In
1900, thirteen years before the war, the total value of the internal
trade of Russia was 5,016 million pre-war roubles. In 1922-1923 it
was only 2,264 million pre-war roubles, or 45.4 per cent, of the prewar figure '.
Foreign trade did not begin to revive until 1921 and then the
revival was first noted in imports. The great famine which affected a
large part of the country made the import of foodstuffs for the faminestricken districts a necessity. Exports, which ordinarily consisted
mainly of cereals, were not yet possible. The export of wheat did
not really begin until 1923-1924. At this time, however, the Government had to limit imports in order to restore the balance of trade and
to balance its own budget. In 1923 and 1924, therefore, imports
again fell to the level of 1921.
The volume of foreign trade was very small. Imports only
represented 5.5 per cent, by weight and 15 per cent, by value of the
1913 figures, while exports amounted to 24.7 per cent, by weight
and 22.3 per cent, by value, as is shown by the following table 2 .

1
The decrease in internal trade must be much more marked if compared with the 1913 figures. There are no precise statistics for this year,
but some indication of the increase between 1900 and 1913 is given by
the increase in private incomes derived from trade, which was 75 per
cent, in this period (Cf. S. N. PROKOPOVICH : Opit ischislenìa narodnavo
dokhoda (An Attempt to Calculate the National Income), Vol. I, 1918 ;
and Economicheskoie Obozrenie, 1924, Nos. 8 and 17-18.
* Cf. FROLOV : Statistika vneshney torgovli Rossii v 1Q21-1Ç23 (Statistics of the Foreign Trade of Russia in 1921-1923); Moscow, 1923.
Narodnoie i gosudarstvennoie khoziaistvo S.S.S.R. v. IQ22-IÇ2$ g. (The
Economic System and State Economics in Russia, 1922-1923); Moscow,
Commissariat of Finance 1923. Economitcheskoie Obozrenie, 1924. Nos.
23-24.

— 97 —

FOREIGN TRADE OF RUSSIA, I 9 1 3 AND 1916 TO I 9 2 4

Imports
STear

Weight

Exports
Value

Absolute
Million
poods

ÏÇI3
1916
1917
1918
1919
1920
19211
1922 l
1922-1923
1923-1924

. 936-5
306.9
208.5
II.4
O.04
5-2
55-1
165.8
55-2
51-7

Weight

Value

figures

Million
roubles

Million
poods

Million
roubles

1,374-0
2,451-2
2,316.7

1,472.1
148.2

1,520.1

63-3

57-3
0.6
29-3
232.4

458-4
148
208

1.8

—
0.7
12.9

56.3
131.8

364-8

577-3
463-9
7-5
—
1.4
20.2
81.6
133
340

I n d e x n u m b e r s ( 1 9 1 ,5 = 1 0 0 )

1916
1917
1918
1919
1920
1921
1922
1922-1923
1923-1924

32.8
22.2
1.2
0.004
0.5

5-8
17-5

5-8
5-5

78-3
168.6
4.1
0.04
2.1
16.9
33-3
10.7

TO.O
4.2
0.12

—

30-5
0-4

—

O.O04
0.8

0.9
1-3

3-8

5-3
8-7

9.0
24.7

15- f

37-8

22.3

1 Including goods imported for the relief of the population in the famine areas.
In 1921 the weight of these goods was 3 million poods and their value 22.4 million
roubles. In 1922 the figures were 29.1 million poods and 184.5 million roubles.

1 0

8 -

Up to 1923 the distribution of exports by class of goods was
entirely different from that of pre-war days. Only in this year did
the export of foodstuffs take its pre-war place, as is shown below :
PERCENTAGE DISTRIBUTION OF RUSSIAN EXPORTS BY CLASS OF GOODS,

1913 AND I920-I924

Class of goods

Foodstuffs (total)
Cereals alone
Raw materials
Animals
Manufactured goods

19*3

I92O

1921

1931

47.8
44.2
51-3
0.4
0-5

39-0
38.6
61.0

4-5
0.4
95-4
0.1

19*3

1923-1924

1-3
0.4
98.4

43-5
40.8
56.2

46.2
39-4
53-6

0.3

0-3

0.2

The object of exporting wheat was to assist in raising the prices
of agricultural produce and to secure for the Government, failing
adequate foreign loans, the foreign bills which they required for
imports. At the end of 1924, however, a new wheat famine and the
excessive rise in the cost of living obliged the Government first to
limit and finally to prohibit the export of cereals.
Since the import of foodstuffs for the famine areas came to an end
the chief imports have been raw materials and fuel, which represent
at least 50 per cent, of the total. Articles of current consumption
form a very small proportion of imports.
Limited trade meant very limited credit operations. The State
Bank was only reopened on 13 November 1921, the Co-operative
Bank at the beginning of 1922, and the Industrial Bank at the end of
that year ; credit was not really restored in Soviet Russia until the
beginning of 1923. The trade operations of the co-operatives and
other industrial and commercial undertakings depend very largely
on their ability to obtain working capital. As the co-operatives were
no longer financed by the state but had to be self-supporting, they
could only obtain capital from credit institutions, and the extent to
which they could do this was dependent in turn on the general
development of credit operations in Russia. At the present time these
are still insignificant. They have by no means reached the pre-war
level, a fact which illustrates the extreme slowness with which capital is built up again.

— 99
The extent of credit operations may be illustrated by the
following figures, taken from the balance sheets of private credit
institutions \
Item

Discounts and loans
Capital
Deposit and current
accounts

i Jan. 1914

1 S e p t . 1934

(Million srold roubles)

(million chervonetz roubles)

4,125
1,047

373

3.231

- 214

108

P R I C E CHANGES

The limitation of trading operations resulting from the fall in
national production put the co-operatives in a difficult position, and
the very small volume of credit operations made it extremely difficult to obtain working capital. But a further very marked difficulty
which hampered the work of the co-operative organisations was the
continual depreciation of the rouble up to the beginning of 1924, the
rise in prices, and the absence of any relation between the prices of
different products, which is indicated by marked divergencies in the
index numbers.
As regards the depreciation of the rouble, it is enough to state
that, when the Soviet roubles were withdrawn and exchanged for a
new stable currency under the monetary reform of March 1924, the
value of one gold rouble was 50,000 million Soviet roubles. The
progressive depreciation of the Soviet rouble is shown by the following figures, which give the percentage appreciation of the gold
rouble in Soviet roubles at each date as compared with the preceding
date.
19»

1
1
1
1

January
April
July
October

1924

1923

100

678
200
28T

1
1
1
1

January
April
July
October

325
160
271

1 January
1 March

731
1,100

538

1
The figures for 1914 cover 47 private banks with their 60 branches,
932 mutual credit societies, and all the urban public banks (Cf. Statistichesky Sbornik, 1913-1917, Vol. II ; Moscow, 1922). Those for 1924 cover
four commercial banks, 10 urban banks, the All-Russian Co-operative
Bank, 57 mutual credit societies, and 29 agricultural credit societies.
i. e. all the credit institutions in operation in Soviet Russia. Cf. Appendix
to Viestnik Finansov (Financial Courier), 1924, No. 11.

100
These continual abrupt drops in the Soviet rouble, which in a
period of three months depreciated by 3, 5, 6, 7, and even 11 times
its value, made any calculation or systematic work absolutely impossible. Commerce inevitably became a matter of gambling and speculation. The only safeguard against bankruptcy was to exchange
money into goods immediately, as every day the currency lost a
little more of its value. Thus the co-operatives bought quantities of
goods, which frequently were not what they required, and it was
beyond their commercial capacity to deal with them. These purchases were not made to meet a demand, nor in view of the general
economic situation, but simply as a result of the enormous fiduciary
circulation.
State bank notes (chervonetz) in terms of a stable standard were
only issued from December 1922 onwards. To begin with the
issue was strictly limited, and they could only be used for large
payments, chiefly in wholesale trade.
The local co-operatives,
particularly the rural establishments, were quite unable to use them.
At the same time the purchasing power of the chervonetz fluctuated continually. Its nominal value was ten gold roubles, but its
real value in pre-war roubles varied as follows \
1923

1
1
1
1

January
April
July
October

19S4

10.70
8.70
6.88
6.39

1 January
1 April
1 July
1 October
1 December

5.92
5.53
5.91
6.09
5.95

The rise in prices of commodities made it difficult to dispose of
them, and crises became chronic among the co-operatives. The disproportion between the prices of different products (particularly the
difference between the index of prices of agricultural produce and
that of manufactured goods) upset the market and made co-operative
trade extremely difficult.
In 1921 and the first half of 1922 there were always differences
between the prices of cereals and those of industrial products, though
the relation varied. In the middle of 1921 cereal prices were very
high owing to the bad harvest. In the middle of 1922 they fell con-

Calculated from the index number of wholesale prices. Cf. Professor KATZENELENBAUM : " Problems of Currency Issue ", in Economichcskaia Zhizii, 9. Jan. 1925.

— IOI ~
siderably, which meant a relative increase in the cost of manufactured
goods, as is shown below. ,

VALUE OF GOODS IN POUNDS OF RYE FLOUR, I913 AND 192O TO I922

I92I
Commodity

1913

1920

(average)

1 Jan.

Sugar (lb.)
4-33
5.00
Soap (lb.)
Matches (box)
0-33
I.67
Paraffin (lb.)
Cotton cloth (arshin)
4-33
283.00
Shoes (pair)
Salt (lb.)
0-33

1 Jan.

1 May

1932

1 Oct.

1 Apr.

1 July

8.00
5-00 14.28
8.00
6.65 7-30
7.14
2.40
4.00
1.02
5-o6 5-9S
0.20
O.16
O.50
0.31
O.25
0.10
O.38
0.68
O.83
0.43
0-73
1-57
2.60
3-38
2.60
O.79
4.28
3-65
31.25 207.19 83-50 187.61 I59-03 277-37
0.92
2.86
1.10
0.48
2-39
0-54

Up to the end of September 1922 the prices of agricultural produce rose much more than those of manufactured goods. The index
number (1913 = 1) of prices of agricultural produce in August 1922
was 5,470,000, that of manufactured goods 4,040,000. On 11 September the figures were 5,160,000 and 5,150,000 respectively. After
September the prices of manufactured goods rose above those of agricultural produce. For a whole year, up to 1 October 1923, the difference between the two index numbers increased steadily. The
increase in prices as compared with 1 August 1922 is indicated by the
following figures.

1 0 i,

— 102 —
INDEX NUMBERS OF WHOLESALE PRICES, I022 TO 1924
(Base : 1 August iQ22 = i)
Date

General index

Agricultural products

Industrial

products

1922
i Oct.

1-3

l.I

1.6

3-3
6.7
13-3
I16.8

2-3
4-2
7.6
53-5

4-9
II.2
24.O
235-4

804.2
9,190.8

506.0
7.472.3

I.39I-5
13.994-2

1923
1
1
1
1

Jan.
Apr.
June
Oct.

1924
1 Jan.
1 Mar.

After the monetary reform the index numbers of wholesale
and retail prices, calculated in chervonetz roubles, were as follows :
INDEX NUMBERS OF WHOLESALE AND RETAIL PRICES, I924 AND I925
(Base : jçi3 = i)
Wholesale prices

Retail prices

Date
General
index
1924
1 Jan.
1 Apr.
1 July
1 Oct.
1925
1 Jan.
1 Feb.
1 Mar.

Industrial
products

Argicultural
products

General
index

Industrial
products

Argicultural
products

I.69
I.81
I.69
I.64

2.29
2.09
2.02
I.97

I.24
I.56
I.41
I.36

I.84
2.II
2.15
2.10

2.14
2.16
2.19
2.17

I-5I
2.01
2.09
2.01

I.72
I.78
I.83

I.94
1-93
I.90

1-53
1.64
1.76

2.09
2.12

2.10
2.07

2.06
2.10

T h e difference between the i n d e x numbers of prices of agricultural produce and those of industrial produce m a y be indicated as
follows .

— 103 —
INDEX NUMBERS OF RETAIL PRICES OF AGRICULTURAL AND
INDUSTRIAL PRODUCE AS PERCENTAGE OF GENERAL INDEX,
IQ22 TO 1925
Date

Agricultural produce

Industrial produce

1922

i Oct.

108

84
75
77
50

119
128
126
141

85
95
97
96

116
102
102
IO3

98
99

100

1923

t
1
1
1

Jan.
Apr.
July
Oct.

1
i
1
1

Jan.
Apr.
July
Oct.

1924

1925

1 Jan.
1 Feb.

Concurrently with this very marked difference between the prices
of agricultural produce and those of industrial produce, there was a
perpetual dullness of trade up to the beginning of 1924 and this naturally affected the trading operations of the co-operatives considerably.
Manufactured goods could no longer be marketed, as their prices had
risen and the continual fall in the price of agricultural produce still
further decreased the peasants' purchasing power. In October 1923
matters reached a crisis. It was obviously impossible to sell manufactured goods under such conditions. At the Fair of Nijny-Novgorod the consumers' co-operatives bought large stocks of goods,
hoping to sell them easily, but then followed the fall in the price of
agricultural produce, which brought all their hopes to nothing. State
commercial bodies and the co-operatives were in a position of acute
embarrassment ; the financial position of the co-operatives in particular was seriously shaken. At this moment the Soviet Government
initiated a policy of lowering prices in industry. Up to the end
of 1923 this policy was successful, and simultaneously with the reduction in price of manufactured goods there was a rise in agricultural prices, as a result of the compulsory exportation of cereals
and the bad harvest in 1934.
3

104 —

Nevertheless, the insignificant fall in prices of industrial products, and the whole economic policy which since the monetary
reform of March 1924 has aimed at forcing a general reduction in the
prices charged by state commercial bodies and the co-operatives,
have left the latter a very heavy deficit and have again put them
in an extremely difficult position.

NATIONAL INCOME AND CONSUMPTION

A prey to constant commercial and industrial crises, the cooperatives were further hampered by the fall in the purchasing
power of the population, which was obviously obliged to limit its
consumption. The figures given below show clearly to what a low
ebb consumption had sunk. The first table gives an estimate of the
national income \
NATIONAL INCOME IN RUSSIA, I913 AND I923-I924
(in gold roubles)
1933-1924

1913
Branch of t h e economic
system

Agriculture
Industry
Transport
Commerce
Building
and
works

Million
eold
roubles

6,359
2,56/
1,055
980

Per cent.
of total

540
21.7
8.9
8-3

public

Million
chervonetz
roubles

5,747
2,630
895

Per cent.
of total

Million
pre-war
roubles J

49-3
22.5
7.6
2I.O

4,257
1,065
510

1,557

Per cent.
of 1013

66.9
41.4
54-0
158

2,444
843

7-1
54

Total

n,S05

100

11,662

100

7,414

62.7

1 The figures in pre-war roubles are calculated from the index numbers of prices
(1913=1). The average index numbers for 1923-1924 are 1.35 for agricultural products
(Gosplan figures), 2.47 for industrial products (Supreme Economic Council figures).
For other branches of the economic system the Gosplan index number of wholesale
prices—1.57—is used.

PROKOPOVICH ": Opit ischisletiia narodnavo dokhoda, Vol. I, 191-8.
Economicheskaia Zhizit, 2<> Mar. 1935.

ios -

These figures do not cover incomes derived from transport and
commerce. In 1913 the total national income, including these two
divisions, was estimated at 18,000 million gold roubles. As commercial and transport operations in 1922-1923 amounted to not more than
40 per cent, of the normal pre-war figures, and represented only
about 15 per cent, of the total national income, it may fairly be
estimated that the total national income in 1923-1924 was not more
than half that of 1913.
The decrease in incomes derived from agriculture and industry
and the proportion between the income of the towns and rural districts are shown by the following table '.
INCOME FROM AGRICULTURE AND INDUSTRY, 1913 AND I 9 2 1 - I 9 2 4
1913

Million
gold
roubles

1921-1932

1933-1924

1922-1923

Million
Million
gold
gold
Per cent.
Per cent.
roubles
roubles
of 1913
of 1913
(>9«3
O913
prices)
prices)

Million
gold
roubles Per cent.
of 1913
prices)
(»913

Agriculture
Industry *

8,900
3.4IO

4,710
780

52-9
22.9

60O
III

6.74
3-26

6,450
1,460

72-5
42.8

Total

13,310

5.49O

44.6

7II

578

8,110

65-9

1 The figures for industry include incomes derived from small and home industries.

The national income per head of the population, which before
the war was 101.35 roubles, was 38.6 roubles in 1921, 45 roubles in
1922-1923 (1 October-30 September) 2 , and 68 roubles in 1923-1924.
The reduction in the income of the largest section of the urban
population — manual and non-manual workers — is well illustrated
by the following figures of average monthly wages 3 .
1
Cf. STRUMILIN : " The Purchasing Power of the Peasants ", in
Economicheskoie Obozrenie, 1924, Nos. 12 and 23-24, and Jan. 1925.
Narodnoie i Gosudarstvenoie Khoziaistvo S.S.S.R. v 1Q22-1Ç23 g. POD-

TIAGUIN : op. cit.

' Cf. S. N. PROKOPOVICH : Ocherki sovietskovo khoziaistva (The
Soviet Economic System); Berlin, 1923.
' Cf. PODTIAGTJIN :

op. cit.

STRUMILIN, in Na novykh

putiakh,

Vol. Ill, Industry ; Moscow, 1923. IBID.: Zarabotnaia plata i proizvoditêlsnost trooda v russkoi promyshlennosti (Wages and the Efficiency
3

— io6 —
AVERAGE MONTHLY WAGES, I913 AND I020 TO 1924
Date

In real roubles

1913
1920-1921
1921-1922
1922-1923 (whole year)
i s t quarter
2nd quarter
3rd quarter
4th quarter

25
3
7-3

1923-1924
i s t quarter
2nd quarter
3rd quarter
4th quarter

11.68

9.98
12.8
12.10
12.48

14.22
16.22
16.09
17.08

Index number (191}=100)

IOO
12

29.2

46.8
39-0
48.8
48.7
50.0

56.8
59-2
64.4
68.3

The fall in income resulting from decreased production (which
was discussed above) involved a reduction in the purchasing power
of the various classes of the population and a very great decrease in
consumption. This was accentuated by two factors whose influence
is felt in two different ways. The decrease in industrial production
made it impossible to meet the demand for objects of prime necessity.
In the first place, there was a periodical shortage of goods, while in
the second, with the greatly reduced purchasing power of the population, it was difficult to dispose of even this limited output, and
there were periodical crises of " over-production ".
The fall in industrial production and the improvement after the
introduction of the New Economic Policy are shown by the following figures indicating production per head of the population \

(Note continued from p. 10.5.)
of Labour in Russian Industry); Publications of the Economic Research
Committee, Vol. I ; Moscow, 1923. GROHMANN : " The Economic System of the U.S.S.R. ", in Viestnik Trooda (The Labour Messenger), 1924,
Nos. 5-6. Economichesky Bulletin, 1924, Nos. 9-10.
1
Produksia fabrichno-zavodskoi promyshlennosti za 1Q12, 1920, ig2¡
i iç22 (Industrial Production in 1912, 1920, 1921, and 1922). Publications
of the Central Statistical Department, Vol. X, No. 2, 1922.

— I07 —
OUTPUT PER HEAD OF THE POPULATION, IÇ-I2 AND IÇ20 TO IÇ22
(in gold
Goods

19x3

Consumption goods
Foodstuffs
Textiles
Oil
Shoes
Fuel
Production goods
Miscellaneous

18.21
9.21
6.77
0.88
0.35
2.28
1-57
9-73

31-79

Total

roubles)
1930

1921

193a

2.42
0.88
0.91
0.28
0.69
0.19
1-34

2-55
0.89
0.91
0.31
0.25
0.97
0.14
1-57

3-49
0.89
1.78
0.36
0.24
0.47

4-63

5-23

6.53

O.II

O.IO

1.46

I n t h e circumstances it is not surprising t h a t the consumers' cooperatives were n o more able to supply the population adequately
with necessities than were any other commercial organisations in
Soviet Russia.
A t the same time the population had to limit its demand owing
to the fall in its purchasing power. T h e agricultural population h a d
to restrict its consumption of manufactured goods, as is shown
below \
TOTAL CONSUMPTION OF THE RURAL POPULATION,
I913 AND I922-I923
1922-1933

1913

Commodities

Consumption goods
Materials
Machinery, etc.

Million gold
roubles

Per cent.
of production

1,837
174
143

50
12
25

Million gold
roubles

S96
76
40

Per cent.
of production

28
15
26

In 1923-1924 the national income was estimated at 8,500 million
pre-war roubles, of which 2,500 million went to the urban and 5,600
1

POPOV : Selskoie khoziaistvo
the Soviet Union). Moscow, 1924.

Soyusa
3

Respublic

(Agriculture in

— io8 —
million to the rural population. T h e urban population spent
1,200 million, or about one-half of its income, on manufactured goods.
I n 1923-1924 this was only 25 per cent, of the pre-war figures.
T h e rural population spent 500 million roubles on manufactured
goods, i.e. less than 10 per cent, of its income and hardly onequarter of what it spent before the war \
T h e total consumption per head of t h e rural population before
the w a r a n d since 1920 has been as follows (in gold roubles)*.
Before the war
1920-1921
1921-1922
1922-1923

21.31
3.41
4-94
7.72

T h u s at the end of 1923 t h e consumption of t h e rural population
was only one-third of its pre-war a m o u n t .
F i g u r e s comparing the average consumption per head of. the
population before and since t h e w a r are given below 3 .
CONSUMPTION PER HEAD OF NECESSITIES, 1913 AND 1922 TO 1924

Commodity

Oil
Salt
Cast iron
Steel
Sugar
Paper
Cotton cloth
Clogs
Matches
Tobacco

Unit

pood
pound
pood
pood
pound
pound
arshin
pair
box
unit

1913

0.379
28.06
1-7
1.79
19-3

6.6
17-3
0.178
21.6
313

1932-1933

0.116
14-93
0.15
0.27
3-2
1-7
5-3
0.038
10.4
120

1923-19241

0.147
30.15
0.24
0.4

6.4
2.4

6.8
0.052
13-2
147

iprovisional figures.
1
For the pre-war period cf. Prof. GRINEVETZKY :
Poslevoiennie
perspectivy russkoi promyshlennosti
(Post-War Prospects of Russian
Industry); Moscow, 1918. For the period 1923-1924 cf. the report of
Prof. LITOSHENKO to the Institute of Economic Research attached to the
Commissariat of Finance (Viestnik Finansov, July 1924).
s
A. KHRIASCHEVA : Statistika posevov i stepen eia tochnosti (Statistics of Area under Crops); Moscow, 1923. Cf. also Prof. LITOSHENKO
in Viestnik promyshlennosti, torgovli i transporta (Courrier of Commerce,
Industry, and Transport), 1923, No. 1 ; STRUMILIN : " T h e Limits of
Consumption of the Peasant Population ", in Economicheskoie
Obozrenie,
1924, No. 12.
s
Trood (Labour), 18 June 1924.

— 109 —

The foregoing data give some indication of the general economic
conditions under which the co-operative organisation has had to
work in recent years. It is essential that they should be borne in
mind if all the variations in the activities of the co-operatives and
the difficulties with which they have to cope are to be understood.
No further account of the general conditions here described will be
given subsequently, but reference will be made to this chapter at
any point where some knowledge of general conditions is necessary
to explain changes in the position of the co-operatives or in cooperative policy.

PART III

CONSUMERS' CO OPERATION
UNDER THE NEW ECONOMIC POLICY

CHAPTER I

Reorganisation of the Consumers'
Co-operative Movement

DECREE OF 7 A P R I L 19 2 I

Immediately after the suppression of the forced levy of foodstuffs, and the introduction of the tax in kind, which followed the
restoration of free local trade, the Decree of 7 April 1921 reorganising
the consumers' co-operative movement was promulgated.
This new legislative measure did not represent a complete break
with the past. The principle of compulsory membership of consumers'
co-operatives for all citizens remained in force (Section 1). As
before, only the united consumers' society was allowed in each
locality, and membership of more than one society was prohibited
(Section 2). Those who, in accordance with the Constitution of
the Russian Union of Socialist Soviet Republics, had not the right
to vote or be elected to public bodies were still excluded from any
share in the appointment of the management or auditing committeesof co-operative organisations (Section 10). Moreover, the compulsory federation of all united consumers' societies in provincial unions
under the direction of the Centrosoyus was maintained.
The Decree nevertheless introduced new provisions. It reestablished membership fees, which had been abolished, but left them
optional ; they could be paid either in money or in kind to primary
co-operative societies and unions of such societies. The most
important innovation consisted in allowing the formation of voluntary
co-operative societies (D.P.O.) 1 , which will be considered later.

In Russian Dobrovolnoye Potrebitelskoye Obsshestvo, whence the

abbreviation D.P.O.
The Co-operation
1 1

8
3

— 114 —
Although consumers' societies were empowered to appoint their own
directors and to draw up rules (Section io), the officers of the AllRussian Central Executive Council retained the right to appoint representatives on the boards of management of societies and unions, these
representatives to possess the same rights and powers as elected
members (Section 13). The Commissariat of Supply retained its
light of control over the working of the co-operatives only in respect
of state orders which co-operatives were compelled to execute (Section 14). The Government was compelled to use the co-operative
system for the restoration of commercial exchange, and therefore
made only a moderate use of its rights of control and investigation.
The Decree of 10 June 1921 carried the change still further by
abolishing preliminary investigation of co-operative societies and
empowering them to make what use they pleased of their own
resources and of any funds borrowed from state institutions and
organisations.
After the Commission on Home Trade had been set up under
the Council of Labour and Defence in November 1922, the cooperative system was placed under its control like other commercial
undertakings ; but this control was limited to the formal side of cooperative activity.
The organisation of the consumers' co-operative movement under
the Decree of 7 April, and the rules issued in accordance with it, is
described in the following pages.
GENERAL CONSUMERS' CO-OPERATION

The

Centrosoyus

The Central All-Russian Union of Consumers' Societies (Centrosoyus) 1 is at the head of the entire co-operative organisation. Its
duties are : (a) to federate all co-operative unions, consumers'
societies, and other co-operative organisations in conformity with
the Decrees in force, and to co-ordinate their common activities to
-promote the moral and material welfare of their members ; (b) to
organise the joint production and exchange of articles of prime
necessity and in current use on the principle of mutual aid and
support.
The economic functions of the Centrosoyus are : (a) to obtain
working capital for the use of its members, and, with that end in
1
The constitution of the Centrosoyus was registered by the Cooperative Section of the Supreme Economic Council on 16 December 1918.

view, to undertake the necessary credit operations ; (b) to assist cooperative unions and societies in the purchase of goods by organising
joint purchases, buying on its own account, or on commission ;
(c) to organise agricultural, industrial, and transport undertakings
to facilitate its work ; (d) to found societies and associations,
including joint-stock companies, as required by its work.
The Centrosoyus represents co-operative interests, and therefore (a) collects and publishes all available information on cooperation, (b) convenes congresses and conferences, (c) supports the
interests of the co-operative movement in relation to goverment or
public institutions.
In the domain of organisation the Centrosoyus may (a) give
instructions to unions and societies, (b) investigate their accounts,
rules, and membership, (c) assist them to organise and to recruit
their staffs. It may also deal with the education and instruction of
co-operators.
Membership of the Centrosoyus is open to (i) unions of societies
and groups of individuals representing not less than 10,000 persons ;
(2) single societies with a membership of not less than 10,000 ;
(3) unions and groups of mixed character. All members are required
to pay an entrance fee and to purchase one member's share.
Members must conform to all decisions of the Centrosoyus and must,
so far as possible, make all purchases and provide for their needs
in general through its intermediary. They must submit to it their
annual reports and accounts for audit purposes. They may withdraw
from the Centrosoyus ou six months' notice, but such notice may
only take effect at the close of a financial year.
The initial capital of the Centrosoyus is made up of members'
contributions together with a certain proportion of the annual profits ; the share capital is constituted by the members' share payments.
There is also a special capital obtained from deposits and loans.
The organisation is controlled by a delegates' meeting, acting
through a Board of Management and a Board of Directors. The
delegates' meeting, which consists of representatives of the Centrosoyus members, appoints the Board of Management and the
Board of Directors. It decides all questions of general policy.
The Board of Management consists of at least twenty members
representing the various regions, the industrial co-operatives, and the
transport workers' co-operatives. The activities of all departments
of the Centrosoyus are under its direction. The Board of Directors
consists of five members ; it manages the business of the Centrosoyus
and acts as its representative in relations with other bodies.
3

— ilo —
Unions of Consumers'

Societies

The second degree of co-operative organisation is represented,
according to the Decree of 7 April 1921, by the unions of consumers'
societies. These unions have to organise production and commercial
operations (sales and purchases), and assist their members to coordinate their activities for the more efficient discharge of their
functions \
All unions are members of the Centrosoyus, whose decisions and
regulations are binding upon them. All consumers' societies within
the area of a union automatically become members of it, and
co-operative associations other than consumers' societies are also
eligible for membership.
A union is empowered : (1) to purchase and sell goods and commodities, to stock raw materials and other goods for sale, and to
undertake business on commission ; (2) to establish, lease, or manage
undertakings ; (3) to organise transport of all kinds ; (4) to
organise mutual insurance for its members ; (5) to procure working
capital and supply it to its members ; (6) to organise and direct
the economic operations of its members ; (7) to organise the chain
of consumers' societies within its area ; (8) to provide educational
facilities for its members.
The funds of the union arc made up of initial, working, and
special capital. The initial capital consists of indivisible property in
existence when the union was established, with the addition of at
least 5 per cent, of annual net profits. The working capital is composed of members' shares, sums borrowed, deposits received and
so forth, and is utilised for the purpose of current commercial
operations.
The management of the union is in the hands of the delegates'
meeting, the board of management, and the board of directors.
The delegates' meeting is composed of representatives of the members of the union (at least one per society) and of the trade unions
of the area. The powers of the delegates' meeting and the board of
management are similar to those of the Centrosoyus within their
own area. The board of directors manages all the business of the
union, more particularly all commercial operations, e.g. purchases,
sales, formation of stocks, sale of raw materials and other goods.
1
Regulations approved by the Seventh Session of the Board of
Management of the Centrosoyus on 26 January 1923.

— U7 Each society affiliated to the union must purchase a certain
number of members' shares ; all members are jointly liable to the
extent determined by the delegates' meeting. Each member is
required (a) to conform to all decisions of the delegates' meeting and
of the board of directors and to obey all orders of the Centrosoyus ;
(b) to make all purchases, as far as possible, through the union ;
(c) to submit an annual report to the union. Any modification of
the regulations or scope of activity of the union or amalgamation
with or severance from other co-operative organisations has to be
approved by the members.

United Consumers' Societies

(E.P.O.)

The primary unit of the co-operative system is the united consumers'society (E.P.O.).
According to the standard constitution approved by the Centrosoyus, the united consumers' society has to undertake the following
tasks : (a) to supply the inhabitants of its district with all domestic
articles in current use, and provide for their needs and economic
activities by all means in its power, especially by opening credits ;
(6) to sell and work up raw materials and other goods produced by
its members, so as to obtain for them the highest possible profits ;
(c) to promote the welfare and education of its members.
In order to fulfil these tasks the united consumers' society is given
many powers.
On the commercial side it may (a) undertake commercial
operations through its stores and sale-shops ; (b) set up warehouses,
offices and agencies to collect the goods produced by the labour of
its members ; (c) organise the sale of such commodities ; (d) conduct
the purchase of machinery, tools, materials, and other goods needed
by members for their work ; (e) undertake transactions on commission for its members ; (/) set up and manage industrial undertakings ; (g) open credits and effect discount operations ; (h) open
branches in its district ; (i) fulfil orders from government departments, etc.
The social work of the society includes (a) the propagation of
co-operative ideas among the population ; the publishing and distribution of publications, organisation of special classes, lectures, libraries,
1 1 *

— iiS —
clubs and so forth ; (6) the organisation of cafés and refreshment
rooms for its members and homes for their children ; (c) the establishment of mutual benefit funds.
United consumers' societies are members of the union of consumers' societies in whose district they lie. The decisions of the
union, like those of the Centrosoyus, are binding upon the members.
All citizens residing within the district of a united society are ipso
facto members of it. Co-operative and pther organisations are also
eligible for membership.
Members of the society may, if they so desire, pay a subscription,
the amount of which shall be fixed by the general meeting. Subscribers and those of the members who are covered by the social
insurance system enjoy the following privileges : (a) a reduction in the
selling price of goods purchased by the society ; (b) a right of preemption upon all goods ; (c) sole right to purchase certain goods.
The funds of a united society are composed of initial capital,
working capital, and a special fund, constituted in the same way
as those of the Centrosoyus or the unions. Half the net profits must
be allocated to the initial capital account ; the remainder is divided
among subscribing members' dividends, the special capital account,
the special fund, and funds for education, propaganda, etc. provided
for by the rules.
The business of the society is managed by a delegates' meeting
and a board of directors. The delegates' meeting (or general meeting)
consists of representatives of the population of the district, of
the voluntary co-operative groups, of any other co-operative organisations established there, and of local trade union organisations.
The last-named are entitled to one-third of the total representation. The functions of the general meeting and board of directors of a united society are the same as" in the case of the Centrosoyus
or the unions.
Voluntary Co-operative Societies

(D.P.O.)

As was previously mentioned, one of the most important innovations of the Decree of 7 April was the restoration of the right to
organise voluntary co-operative societies (D.P.O. ). This measure
was dictated by the desire to revive co-operative activity among the
population. Under the Decree citizens resident in the same district,
following the same trade, or employed in the same undertaking,
might establish a voluntary co-operative society which must be affiliated to a united society and pursue the same objects. It was, then,

— 119 —

open to the population to form co-operative groups either by trades
or by districts. Evidently the former type was likely to develop
especially in industrial districts, and the latter group in rural areas.
A voluntary society may only do business with its own members.
Before beginning operations its regulations must be registered by
the board of directors of the united society to which it is affiliated ;
it must have not less than fifty members if its objects are exclusively
those of consumers' co-operation, and not less than ten members if
it has other objects. The board of directors of the united society
may decline to register the voluntary society if its regulations are
contrary to the provisions of legislation in force, or if the new society
simply reduplicates the work of the united society.
A voluntary society may accept as members any person not
under 18 years of age resident in the district or engaged in the trade
covered by the society. Membership is of course voluntary, and
members are also free to withdraw. Applications for membership and
resignations must be addressed to the board of directors. Each member must pay an entrance fee and purchase a share, which may be
paid for either in money or in kind.
A voluntary society's funds are made up of : (a) entrance fees,
members' shares, and payments or loans for special purposes ;
(b) profits on sales, etc. ; (c) loans and credits. The voluntary
society is managed by a delegates' meeting (or general meeting) and
a board of directors.
The voluntary society must act in close collaboration with the
united society to which it is affiliated, and is under the latter's control. The united society's board of directors may send a delegate
to the board of the voluntary society, such representative to have the
same rights and powers as the other members. The voluntary society
has to contribute towards the working capital of the united society up
to an amount not exceeding one-third of its own capital. The
directors of a voluntary society must inform the management of the
united society within three days of any changes in its organisation.
It must also inform the united society not later than the 15th of each
month of its membership and the transactions effected in the past
month. When purchasing goods a voluntary society must give
preference, other things being equal, to the united society. The
accounts of the voluntary society are supervised by the board of
directors of the united society to which it is affiliated or by some
superior co-operative body.
3

— 120 —
INDUSTRIAL CONSUMERS' CO-OPERATION

Another important innovation of the Decree of 7 April 1921
was the separation of the industrial co-operative system from the
general consumers' movement, the previous position of affairs (which
the Government had wished to abolish) being thus restored. This concession of autonomy to the industrial co-operatives was connected
with special measures taken by the Soviet Government to improve
the arrangements for provisioning the workers, which will be referred
to later. The effect of this change was the spontaneous creation
of numerous voluntary co-operatives among the industrial population.
The industrial consumers' societies were empowered to form
provincial unions, known as provincial committees of industrial cooperatives (Gubrabco-op). An" Industrial Co-operative Committee "
(Rabco-op) was set up within the Centrosoyus, but its name was
subsequently changed to " Central Committee of Industrial Co-operatives " (T s erab co-op). It was placed under the control of the Centrosoyus in respect of all questions of organisation, and of the All-Russian
Council of Trade Unions in matters relating to supplies. This double
subordination soon became excessively onerous. On 2 July 1921,
therefore, the All-Russian Council of Trade Unions decided that
operations relating to the supply funds and the actual work of
supplying the workers should be controlled solely by the Central
Committee and provincial committees of the industrial co-operatives.
Relations with the Centrosoyus were to be regulated by general
agreements *.
The Central Committee of Industrial Co-operatives thus became
an autonomous body attached to the Centrosoyus. Its duties were
as follows : (a) to administer the supply funds formed by the state
for furnishing supplies to the workers ; (b) to co-ordinate the work
of • all industrial co-operatives for the utilisation of these funds ;
(c) to assist industrial co-operatives in the discharge of their functions ; (d) to direct the work.of industrial co-operatives in general ;
(e) to represent industrial co-operative interests ; (/) to support
the workers' interests within the system of united consumers'
societies, etc.
In addition to the Central Committee's duties, the provincial
committees were to carry out all commercial and financial transactions entailed by their function of supplying the workers with
articles of prime necessity.
1
Otchot Centrosoyusa za IQ2¡ god. Sputnik cooperatora na 1Q22
god (Co-operator's Guide for 1922); Moscow, Centrosoyus.

—

121 —

The control of the industrial co-operatives was vested in : (i) the
industrial co-operative conferences—All-Russian, provincial, and
divisional ; (2) the industrial co-operative committees—All-Russian,
provincial, and divisional ; (3) the executive officers.
The industrial societies thus became independent of the general
consumers' movement. As the inefficiency of the state organisation
of exchanges in kind and supplies for the workers became more and
more evident, the industrial co-operatives were gradually compelled
to go beyond the sphere originally mapped out for them and take the
place of the general co-operatives as far as industrial workers were
concerned. This tendency was accentuated by the progressive modification of wage policy and the substitution of wages in cash for
wages in kind 1 . Industrial co-operatives no longer limited their
operations to the constitution of stocks for supplying the workers and
their distribution as a part of wages ; they had also to undertake
ordinary commercial transactions.
The first result of this change was a great increase in the number
of industrial co-operatives and competition with the general societies.
At the same time the industrial co-operative committees had to give
a lead in theory and policy.
There was soon a current of opinion in favour of dissociation
from the Centrosoyus. Misunderstandings between the general and
industrial co-operatives became frequent. Sometimes the provincial
unions of general co-operatives abused their monopoly of supplies
to the detriment of the industrial co-operatives ; at other times the
latter were too ready to disregard the general co-operatives 2 .
At headquarters as in the provinces the separation of the two
organisations and a return to the conditions existing prior to the
Revolution had been mooted several times. The Central Government
nevertheless continued to hold the opinion that the industrial classes
must occupy a predominant position in the general co-operative
system, and that for this reason complete severance was impossible.
This point of view was advanced in the third delegates' meeting of
the Centrosoyus in July 1922. The Central Committee and provincial committees of industrial co-operatives were once more deprived
of their partial independence and transformed into central and

Cf. INTERNATIONAL LABOUR OFFICE : Industrial Life in Soviet
Russia, ic¡7-ig23, Chapter II. Studies and Reports, Series B (Economic
Conditions), No. 14. Geneva, 1924.
2
Cf. MAKEROVA : op. cit., p. 36. Also Sputnik co-operatora na 1Ç22
god.

122 —

provincial sections of the Centrosoyus, intended simply to defend
the ideals and organisation of the industrial co-operatives.
The Decree providing for the Central Section for industrial
co-operation, approved by the Board of Directors of the Centrosoyus
on 24 July 1922, lays down that the Central Section is an economic
branch of the Centrosoyus established for the purpose of supplying
the needs of the industrial co-operative system. It is to centralise
the supply and demand of all industrial societies. It is to prepare
and submit to the Centrosoyus directors that part of the general
scheme of commercial transactions relating to the provisioning of
the working classes. All stocks of commodities and money belonging to industrial co-operatives are to be concentrated in the hands
of the Section. It has also to decide on measures to lighten the
financial burdens of industrial co-operatives and to improve means of
transport. The Central Section has in general to direct the commercial operations of the industrial co-operative system. As a rule such
operations are to be conducted through the Centrosoyus and local
consumers' organisations, precise orders being transmitted to these
bodies and contracts or agreements concluded with them. Neither the
Central Section nor the provincial sections are supposed to have
separate commercial organisations \
As time went on, this administrative and economic combination
of the two systems worked much less smoothly than had at first been
expected. The industrial co-operatives continued to extend, and
the policy of the Government and of the co-operative movement
showed a tendency to encourage this expansion with a view to improving the provisioning of the workers. The consumers' co-operative
system became disorganised.
The administrative position of the industrial co-operatives was
very indeterminate. In relation to the unions (the second degree
in organisation) they were considered as primary co-operatives, like
the united consumers' societies (where not infrequently the majority
of the members were industrial workers). Nevertheless, being
attached to the united societies, they ranked below them. Thus they
were simultaneously below and on a level with the united societies.
The united societies themselves were attached to the provincial
unions of united societies, but if they consisted exclusively of
voluntary industrial co-operatives they came within the industrial
1

Cf. DoLMATovSKY : Zakony 0 co-operatsii (Legislation on Co-operation); Moscow, 1924.

— 123 —

co-operative system and were under the control of the provincial
committees of industrial co-operatives.
This lack of harmony and unity in the consumers' co-operative
system was increasingly felt as the conditions introduced by the
New Economic Policy encouraged the expansion of the whole consumers' co-operative system, both industrial and general. A more
exact demarcation of general and industrial co-operation became
indispensable, more especially as the small voluntary societies, which
consisted at first, in certain localities, of only a few groups of
workers, were now spreading vigorously and seemed likely to end by
covering a considerable proportion of the workers in their districts.
It was this situation which gave rise to the creation of " centra]
industrial co-operatives " in large towns and industrial centres ; i.e.
industrial societies independent of the united societies again made their
appearance.
>
On 18 June 1923 the Centrosoyus approved standard regulations
for central industrial co-operative societies \ These regulations state
that the objects of such a society are : (a) to supply the working
population of the district with articles of prime necessity and in
current use, and by all means in its power (including the arranging
of credits) to supply their needs ; (b) to collect stocks of goods from
the factories of the district to provide advances on wages for the
workers ; (c) to promote the material and intellectual welfare of
their members.
The whole working population of a region may belong to the
central industrial co-operative, and entire organisations—such as
voluntary industrial societies, insurance funds, trade unions, clubs,
mutual benefit funds, etc.—may be affiliated thereto.
The right to vote or be elected to all organs of the central industrial co-operative societies is given to all holders of the political suffrage. The members of a central industrial co-operative may, if they
so desire, pay subscriptions ; in such case they enjoy the same privileges as subscribing members of united societies, mentioned above.
Unemployed trade unionists, or members in receipt of social insurance
benefit, are entitled to these privileges even if they do not pay their
subscriptions. A central industrial co-operative is a primary cooperative organisation and is a member of the union of consumers'
societies for the region in which it operates. All decisions both of
this union and of the Centrosoyus are binding upon it.

Cf. DOLMATOVSKY ; Op. Ctt.
3

— 124 —
In addition to the functions of a united society, described earlier,
a central industrial co-operative is empowered to perform the following tasks : (a) to purchase or procure by exchange and stock
commodities in current use, and to supply its members with the goods
they require for their homes ; (b) to furnish supplies systematically
to all its members ; (c) upon the request of state economic organs,
to dispose of stocks of commodities received from these bodies, either
on commission or in payment of wages.
The funds of the central industrial co-operative are constituted
similarly to those of the united societies. The society is managed by
the delegates' meeting and the board of directors. The delegates'
meeting consists of representatives (a) of the local population ;
(b) of voluntary societies and other co-operative organisations in the
district ; (c) of local trade union organisations, these to constitute
one-third of the total number of delegates. Meetings are held on
the premises of large undertakings and institutions for industrial
workers, and in the various towns for the rest of the population. In
all other respects central industrial co-operatives are organised on
much the same lines as the united consumers' societies.
The progress made by the central industrial co-operatives in
1924 made increasingly evident the need of setting up a special headquarters for industrial co-operation. The daily newspaper of the
Centrosoyus x states that the industrial co-operatives are sharply
distinguished from other co-operative societies both by the type of
goods in which they deal and by the constitution of their managing
bodies, not to mention other differences. It holds that the industrial
co-operatives should therefore have a separate headquarters to act as
intermediary between them and the Centrosoyus and provide the
necessary check on the decisions of the latter.
The " Central Industrial Section " (Tserabsectia) by its constitution of 1922 was not given legal personality, a distinct financial
organisation and capital, or separate commercial machinery. The
first All-Russian conference of industrial co-operatives held in March
1925 drew up a new constitution for this Section in order to improve
its position.
Under this new constitution the Central Industrial Section is
still attached to the Centrosoyus, but has all the rights of a distinct
legal person. It acts as the representative of the industrial cooperatives in relation to all the central departments, both political and

Co-operativny Pout (The Co-operative Way), No. 55, 21 Mar. 1925.

125

economie, of the Soviet Union, and to all co-operative organisations.
It is to manage all credits and advances to the workers made by the
industrial societies, to supply them with the necessary goods, etc.
The Section is to possess a separate initial capital, reserve capital and special capital. The initial capital is constituted by members' shares, by working capital in the form of goods received
from the state, and by commercial profits. A special chain of industrial co-operatives is set up to supply stocks of goods to the Central
Section. Workers belonging to these societies pay their member's
shares not to the Centrosoyus but to the Central Industrial Section.
The executive committee of the Section is to be chosen by the
delegates' meeting of the Centrosoyus from among candidates
nominated by the Central Council of Trade Unions *.
CONSUMERS' CO-OPERATION AMONG TRANSPORT

WORKERS

Apart from the general and industrial co-operatives described
above, there had been for some time in Russia a special system of consumers' societies for railwaymen and water transport workers. This,
too, was reorganised by the new legislation on co-operation.
Railwaymen's co-operative societies had existed long before the
war and the revolution ; they were, indeed, one of the earliest cooperative organisations in Russia. During the war the Government,
which desired that at all costs the railways should operate normally,
made arrangements for the provisioning of railway workers. The
difficulty met with obliged the railway managements to set up special
administrative services, which gradually took over the whole work
of supplying manual and non-manual railway employees.
Following the revolution of March 1917 these supply services
were transformed into supply committees — one for each railway
system or section of a system. The officials of a supply committee
were elected by the delegate congress of railwaymen. Thus the whole
organisation of supply was taken over by the railwaymen themselves.
All the committees were grouped under a central body known as the
Central Office of Supplies (Prodpoul) attached in the first instance
to the Ministry of Communications.
After the Bolshevist revolution in November 1917 the " Prodpout " was attached to the Commissariat of Supply and was respon1
Cf. the constitution of the Central Industrial Section, confirmed
by its executive committee on 15 February 1923. (Co-operativny Pout
16 and 17 Mar. 1923.)
3

— I2Ó —

sible for provisioning the railway workers and supplying them with
articles of prime necessity. Until the introduction of the New Economic Policy both the " Prodpout " and its local branches worked
under the same rules as the consumers' co-operatives, but unlike them
steadily gained ground, and the railwaymen were relatively in a
better position than other workers. Co-operative unions were to be
established in the more important railway centres, but their organisation took a long time ; when the Soviet Government in April 1921
adopted a new policy toward the co-operative movement this
organisation, which was still only in the air, was already obsolete.
By the Decree of 13 May 1921, which supplemented that of
7 April, the Council of Labour and Defence took the following
measures : (1) It authorised the creation of an organisation of railwaymen's consumers' societies. (2) I t conferred on these societies the
rights and duties given to united consumers' societies by the Decree of
7 April. (3) It ordered the establishment of a special department in the
Centrosoyus to be known as the " Central Supply Section for Transport Workers " (which later became the " Central Administration for
the Provisioning of Transport Workers " ) , with the abbreviated title
of " Transposection ". To replace the various societies, committees,
sections, and so forth which had previously existed, consumers'
societies for transport workers (T.P.O.) 1 were established for railway workers and for workers engaged in water transport. After this
reorganisation in 1921 and 1922, the organisation of co-operative
societies among transport workers was as described below.
The primary co-operative organisations are the transport workers'
consumers' societies on railways and inland waterways. These
societies have each a chain of sale-shops, but regional unions of
consumers' societies are allowed on inland waterway systems. The
field of operations of each society must coincide with an administrative division of the railway lines or inland waterways, and also with
that of the relevant transport workers' union. The powers and
duties of transport workers' co-operatives are similar to those of the
united societies 2 . A transport workers' co-operative society is empowered to purchase, exchange, and form stocks of agricultural or
industrial products and manufactured articles, either through its
own organisation or by means of agreements with government, cooperative, or private bodies.
1
In Russian 1 Transportnoyc potrebitelskoye Obsshestvo, whence
the 2abbreviation T.P.O.
DOLMATOVSKY : op. cit. Otchot Centrosoyusa za iç2i i 1922 godi.
Sputnik co-operatora na 1922 god.

— 127

Membership of a transport workers' co-operative is open to
(i) manual and non-manual workers on the railway or inland waterway system within the society's district, or in any auxiliary institution or undertaking ; (2) manual and non-manual workers employed by any one company or by the whole of one system, if the
society covers the whole of this ; (3) the families of such manual
and non-manual workers. Every transport worker living in the district of a transport workers' co-operative must register with the
nearest distribution agent, and thus automatically becomes a member
of the society. In order to provide effectively for the needs of their
members, the co-operatives are required to open branches or distribution centres under managers controlled by elected directors.
The secondary unit of the transport workers' co-operative system is the All-Russian Union of Transport Workers' Consumers'
Societies—the " Transposection ". All transport co-operatives must
be members of the " Transposection ", which itself is a separate
department of the Centrosoyus. Its objects and functions are
analogous to those of the " Centrosection " previously described.
The business of the " Transposection " is managed in the same
way as that of the Centrosoyus. There is an All-Russian delegates'
meeting representing the various transport workers' societies and
unions which are members of the " Transposection ". This meeting
acts through a board of management and a board of directors. The
board of management includes, besides directors elected by the
various societies, the officials of the central committee of the AllRussian Union of Transport Workers and managing officials of the
Centrosoyus. The board of directors similarly includes a representative of the central committee of the Transport Workers' Union and
one of the Centrosoyus.
The " Transposection ", in turn, is represented in the AllRussian delegates' meeting of the Centrosoyus and on its Board of
Directors. All transport workers' co-operatives which are members
of the " Transposection " thereby become members of the Centrosoyus,
whose orders, transmitted through the " Transposection ", are binding
upon them.
MILITARY CO-OPERATIVE SOCIETIES

Yet another type of consumers' society was dealt with in the new
legislation — the army co-operatives, which were revived from the
decay into which they had fallen. Military co-operative societies had
3

— 128 —
existed prior to the Revolution under the name of " officers' associations ". These developed very considerably, especially during
the war. During the first few months of the Bolshevist Revolution,
after the complete disintegration of the old Army and the disappearance of the old " corps of officers ", the officers' associations went
into voluntary liquidation. During the civil war and the period of
Communism, when the idea was to establish united consumers'
communities embracing the whole population, there could be no
separate military co-operatives. But after the introduction of the New
Economic Policy the soldiers too had to deal with their own provisioning.
The following is quoted from the Decree of 16 August 1921 :
With the object of enabling the Red Army to utilise its economic
strength to the full, and of furthering its participation in the general cooperative movement, the Council of Commissaries has decided to extend
the provisions of the Decree of 17 April 1921 to the Red Army, thus
empowering military units to form co-operative associations within the
united consumers' societies.
In the spring of 1922, therefore, the military co-operative
organisation, in accordance with the Decree of 16 August 1921, existed
in the following form :
(1) The primary societies were the voluntary consumers' co-operatives organised in the various army units, offices, and other
institutions.
(2) At the second stage were military co-operative sections
attached to the provincial and regional consumers' unions, in order
to co-ordinate the work of the voluntary societies.
(3) The third stage was represented by the military co-operative
sections attached to the regional offices of the Centrosoyus, to coordinate the work of the sections mentioned above.
(4) At the top of the ladder was the Department of Military Cooperation, in the Centrosoyus, the administrative and economic
headquarters of the military co-operatives throughout Russia.
The first congress of military co-operators, held in March 1922,
marked the beginning of closer collaboration among all military cooperative organisations. This Congress laid down the aims of the
military co-operatives as follows : (a) to improve the living conditions of soldiers and officers of the Red Army and of their families
by means of a provisioning system supplementary to the ordinary
supply of rations ; (b) to share in the organisation of the economic
life of the country ; (c) to train soldiers for organised economic life.

— 129 —
In May 1922 the military co-operative system was extended to
cover the police force 1 .
The military co-operatives, like other branches of the movement,
experienced a certain prosperity when the new policy was first
introduced. This was manifested by the hasty establishment of
organisations without method or solid basis, and by uncontrolled
participation in exchanges in kind. The inevitable result was still
further to aggravate the disorganisation of the home markets and of
the whole system of consumers' co-operation.
It was soon seen that the links provided between the military
societies and the provincial unions of consumers' societies were
merely illusory. The unions were indifferent if not hostile, while
the military societies took so great a part in general co-operative
work that they lost all interest in the economic life of the Red Army.
For this reason, the military co-operative congress held in June
1922 decided that reorganisation was essential, and Order dated 23
August 1922 laid down a scheme for the complete reconstruction of the
system.
The primary unit was the voluntary military consumers' society ;
such societies might be established on a territorial basis or by military units (division, garrison, squadron). Their aims and objects
are similar to those of the united societies.
Membership of a military society is open to : (a) all persons of
either sex aged not less than 18 years and serving in the army, the
navy, in any administrative service or institution of the army or
navy, in the police force or the political police within any provincial
government ; (6) all members of the family of any person mentioned above if resident with and dependent upon such person. Each
member must pay an entrance fee and purchase a share in the society.
The funds are made up in the same way as those of the united societies.
Business is managed by a general meeting and a board of
directors. The work of these bodies is governed by rules similar to
those for the united societies, or by special regulations laid down
by regional assemblies.
All the army corps headquarters of military co-operatives are
federated under the All-Russian Department of Military Co-operation, attached to the Centrosoyus. This Department controls the
whole military co-operative movement of the country. It performs
1

Otchot Centrosoyusa za 1Q22 god. DOLMATOVSKV : op. cit.

The Cooperation
1 2

— I30 —
its economic functions through its own administrative organisation,
either with the assistance of the Centrosoyus or under a contract
concluded with that body, or quite independently. A representative of the Department sits on the Board of Directors of the Centrosoyus, and is entitled to vote. The military co-operatives are also
represented at the delegates' meeting of the Centrosoyus.
The
Department is controlled by : (i) the All-Russian Congress of delegates from military co-operative organisations ; (2) a board of
directors ; (3) an executive committee.
The military co-operative system existed as above described until
the end of 1924. It was completely independent of the co-operative
movement in general and had only the most distant connection with
other institutions and especially other co-operative bodies. The
great mass of soldiers took no active part in it. It was, in short, a
purely bureaucratic institution in which the chief power was held
by the army authorities *. This lack of co-ordination with other
bodies was specially noticeable when the principle of voluntary
membership was extended to all co-operatives. Moreover, the military co-operative system more than any other branch of the movement relied, not on commercial operations or co-operative principles,
but on state supplies of money, food, or goods in general.
In 1924, when the consumers' co-operative movement gradually
threw off the shackles of the system of state supplies and began to
reorganise with a view to independent commercial operations, the
military co-operatives became a mere anachronism. The Revolutionary Army Council and the Centrosoyus decided to abolish them
and to amalgamate their organisation with the ordinary consumers'
co-operative system.
By the Decree of 4 August 1924 2 the co-operative system of the
Red Army was handed over to the consumers' co-operative movement, and primarily to the industrial co-operatives. Separate military
co-operatives were abolished. The army and navy co-operative shops
were to be either closed altogether or incorporated with the united
consumers' societies, with the central industrial co-operatives, or with
the co-operative unions, according to local conditions. Special committees were set up (a central committee attached to the Revolutionary
Army Council of the Republic and regional committees attached to the

1924.2

Co-operativnoye Dielo. (The Co-operative Cause), 12 and 29 Aug.

Cf. Co-operativnoye Dielo, 12 Aug. 1924, and the Centrosoyus circular, ibid., 22 Aug. 1924.

— I31 —
Revolutionary army corps councils) for the purpose of regulating the
co-operative movement in the army and navy and of instructing the
mobilised workers and peasants in the objects and methods óf cooperation. The committees should include representatives of the
administrative institutions of the army and navy. A representative
of the Centrosoyus sits on the central committee and a representative
of a co-operative union on each regional committee.
The principal tasks of these committees are as follows : (a) to
study and approve the proposals and reports of co-operative institutions which do business with members of the Red Army ; (b) to
plan out that part of the work of the consumers' co-operative system
which deals with supplies to military consumers in time of peace,
when called up for service, during demobilisation, during the transfer of troops, and in time of war.
Co-operative committees have been established in each military
unit with a view to improving the organisation of the co-operative.
service, and to encouraging soldiers to become active co-operators.
These committees consist of five persons elected by a general meeting
of members of the unit and one representative of the united consumers' society (or the central industrial society) of the region.
The abolition of the military co-operative system at the end of
1923 was the last stage in unifying and centralising the whole consumers' co-operative movement. The primary co-operative organisations are now all organised on the same principle, whether composed
of citizens, of industrial workers, of transport workers, or of soldiers.
The second degree in co-operative organisation is the regional
or provincial union, which groups all the societies of its area.
At the top of the whole system is the Centrosoyus, which
embraces not only the general societies, but also the industrial and
transport workers' branches, which are represented by departments
within it.
As will be seen from the account given in the preceding pages, the
transformation did not take place all at once ; it was carried out
by stages side by side with the growth of economic independence
for the co-operatives.

CHAPTER II

Economic Activity of the Consumers'
Co-operative System

T H E POLICY OF EXCHANGES IN K I N D

Decree of 7 April 1Q21
Although the consumers' co-operative system was, by the
Decree of 7 April 1921, empowered to undertake commercial
operations, it had to fulfil state orders and instructions as well.
Consumers' societies might purchase, sell, or exchange surplus agricultural produce and articles manufactured by craftsmen and kustari
(home workers). They might deal directly with the producers (agriculturists, craftsmen, or kustari) and with their co-operative unions
(Section 5 of the Decree). Regarding state transactions, Section 7
lays down that consumers' societies and their unions are : (1) to
stock the products of nationalised industry and of small home industries and exchange them for agricultural produce ; (2) to distribute
foodstuffs and articles in current use supplied by the state and manufactured in nationalised undertakings or imported from abroad.
The new policy adopted towards the co-operative system, then,
allowed the societies to take part freely in exchange (while continuing
to comply with state instructions) and in the provisioning of state
bodies, none of which operations were allowed by the Communist
policy.
However, the influence of the Communist regime was felt during
the whole of 1921. Soviet officials continued to regard the cooperative system as a technical auxiliary organisation of the Commissariat of Supply for the distribution of foodstuffs, and even as a part
of the state commercial organisation to be developed in accordance

— 133 —
with the principles of state capitalism. At first the efforts both of
the Soviet Government and of co-operators themselves were directed,
not so much towards the participation of the co-operative system in
the re-establishment of commerce as towards the execution of state
orders for supply and distribution. As a matter of fact, these tactics
were dictated by other circumstances.
Up to the end of 1921 it was almost impossible for the cooperative system to take part in ordinary commerce, as local exchange
was the only form permitted, and, as will be seen later, it was the
local co-operative bodies which were most completely disorganised
and bankrupt when the New Economic Policy was introduced. Cooperative sale-shops—which the co-operative press itself referred
to as " empty stores "—had no merchandise which could be exchanged for the products of small manufacturers. They had no
funds, and indeed most of them had been closed. At the same time
small producers had not yet had time to adapt themselves to the new
conditions, more especially as the state policy of supply remained in
operation.
In view of the economic position, the co-operatives were unable
to undertake any real commercial enterprise when the New Economic
Policy was launched, as it was impossible to guess what form free
commerce might take. Moreover, the main pre-occupation was to
keep the workers supplied with foodstuffs and articles of prime
necessity ; this was dealt with by the Decrees of 7 April 1921 on
" bonuses in kind " 1 . This system, which provided for the supply
of articles in current use to the workers in addition to their money
wages, was intended to increase individual efficiency. With this
object a special " fund for bonuses in kind " was created, and the
various undertakings contributed a fixed proportion of their products to this fund. The workers thus received either articles which
they needed for their own use or commodities which they could barter
on the market for those which they lacked.
'.
These " bonus funds " were held, and the wages in kind paid, by
the industrial co-operative unions. This work became of considerable
importance, as the provisioning of the workers was the main preoccupation of the Government. The workers, who had learned the

1
For a detailed explanation of these Decrees : cf. Industrial Life in
Soviet Russia, 7977-7923, Ch. II.

1 2 *

134

hard lessons of the period of Communism, wished to make the most
of their freedom and organised a large number of industrial cooperatives. These immediately entered the market, which was only
just beginning to revive, and rapidly grew in size and strength. As
has already been pointed out, the industrial co-operative system
had set up a separate commercial organisation, and its operations
now expanded to such an extent that the question of separating the
industrial co-operative movement from the general consumers' system, which had already been mooted, was now raised afresh. It
was only dropped when the Centrosoyus was compelled to amalgamate the whole consumers' co-operative movement. To begin with
at any rate, the consumers' societies, and especially the Centrosoyus,
based their work on that of the industrial co-operatives.

General Agreement

of 25 May iç2i

Freedom of exchange once re-established, the co-operative leaders
hoped to take a leading place on the home market, where the need of
goods was acute. Private trade had been practically destroyed, and
the co-operative movement (which during the period of Communism
had become the chief distributive organisation) was encouraged by
the Decree of 7 April. " It seemed ", a co-operator wrote later,
" a s if the door had hardly opened before it swung wide to the cooperative movement " 1.
The Centrosoyus, too confident in its own powers, tried to
monopolise the supply of foodstuffs and raw materials, in accordance
with the instructions of the Government, and the distribution of
articles in current use among the population. With this object the
Centrosoyus concluded what was known as the " General Agreement " with the Commissariat of Supply on 25 May 1921. Under
this agreement the whole business of provisioning the country in
agricultural produce and raw materials was entrusted to the Centrosoyus, which had in return to fulfil the following obligations :
(1) to complete the reserves of foodstuffs which the Commissariat of
Supply had not yet succeeded in collecting ; (2) to effect all provisioning for the following agricultural year. The reserve stocks

A. SHWETZOV : " Commerce under the New Conditions ", in Soyus
Potrebiteley, No. 7, 1922.

135

which the Centrosoyus had to collect by 25 August 1921 were as
follows, their total value being 66 million gold roubles :
poods

Wheat and fodder
Potatoes
Meat
Flax
Hay

32,000,000
2,250,000
863,000
980,000
about 2,000,000

After the 1921 harvest the Centrosoyus was to collect further
stocks for the whole of Russia (excluding Turkestan and the Ukraine)
to the value of 300 million gold roubles, as follows :

Wheat
Potatoes
Meat
Hay
O l e a g i n o u s seeds
Butter
Vegetables
Eggs

units

poods
150,000,000
17,000,000
8,000,000
30,000,000
10,000,000
1,500,000
12,000,000
300,000,000

What measures were to be taken by the Centrosoyus with a view
to the constitution of these stocks ?
Although the Decree of 21 March 1921 restored freedom of
exchange, the Soviet Government had not the slightest intention of
permitting complete freedom of trade. From the government point
of view, state capitalism necessitated, above all, the system of exchange in kind or " exchange of goods ", as it was called by the
Soviet press. For the purpose of such exchanges, the state had to
constitute stocks of articles in current use and other goods needed
by the peasants, and exchange them for the agricultural produce
and raw materials needed by the townspeople and industrial workers.
This process was intended to replace the forced levy on the peasants.
The Centrosoyus was to plan its work in accordance with this
programme. The agreement of 25 May 1921 laid down that the
Commissariat of Supply was to hand over to the co-operative system
without delay all stocks of exchangeable goods remaining in, or
which might subsequently come into, its possession. The Centrosoyus was to exchange one unit of manufactured produce for three
units of agricultural produce, calculated in rye value, in conformity
3
*

— 136 —
with the rules drawn up by the Commissariat of Supply. By this
agreement with the Commissariat of Supply, the co-operative system
became no longer a distributive agent of the state, but an independent contractor, as it were, negotiating on a footing of equality.
Failure of the Exchange Policy ; Its Causes
Nevertheless, the policy of exchanges in kind, the execution of
which the Soviet Government tried to impose upon the co-operative
system, ended in utter failure. The consumers' co-operative movement never succeeded in performing any of the tasks allotted to it
and was powerless to constitute the stores of commodities required
by the Government. The system of exchanges in kind was quite
useless for the purposes which the Government had in mind when
introducing state capitalism ; it seriously hampered the provisioning of the towns and industrial undertakings, and interrupted
the work of repairing the ruin caused by the Communist policy.
The meagre results of the provisioning operations undertaken by the
Centrosoyus on i November 1921 may be seen from the following
table 1 :
PROVISIONING OPERATIONS OF THE CENTROSOYUS,

Item

Programme laid down *

Programme carried out

poods
Cereals and fodder
Potatoes
Meat
Hay
Flax2

Butter a
Eggs

1921

182,000,000
39,250,000
8,863,000
32,000,000
980,000
1,500,000
300,000,000 u n i t s

poods
3.4".363
1,070,360

134,866
235.526
281,771

53.996
350,223 u n i t s

1 Supplementary supplies for 1930 and programme for 1931.
Supplementary supplies only.

Up to 1 January 1922 only about 35 per cent, of the quantities
laid down in the exchange programme had been secured. Especially
1
Cf. Sputnik co-operatora na 1Ç22 god. SCHIERMANN : "Present-day
Problems, of Consumers' Co-operation ", in Narodnoie Khoziaistvo, Nov.Dec. 1931.

— 137

as regards foodstuffs, the result of the exchange scheme was, according to the Soyus Potrebiteley, much inferior to that of the forced
levy of foodstuffs by the state. Like the Centrosoyus, the industrial co-operatives could only effect a small part of the exchanges
required for their own needs (bonuses in kind). On 13 May 1921
the Central Committee for industrial co-operative organisation had
received from the state goods to a total value of 4,036,740 gold
roubles. Up to 1 January 1922 exchanges had only been effected to
a total value of 1,385,829 gold roubles — scarcely 35 per cent, of the
total.
Thus, consumers' co-operatives failed utterly, although after the
transition to the New Economic Policy they were in a more favourable position. The prime cause of this is to be found in the general
economic situation of the country ; but some part of the blame must
also rest on the economic system and, in a measure, upon the cooperative organisation itself. The failure of the exchange system
had a considerable influence, not only upon the Soviet Government's
attitude towards the co-operative movement, but also upon its whole
economic policy. The causes of this failure may therefore be
examined in greater detail.
The co-operative system itself could take an active share
in exchanges only if stocks of commodities were provided by
the Commissariat of Supply in accordance with the agreement of
25 May 1921. This essential condition was, to all intents and purposes, never fulfilled. The Commissariat of Supply itself did not
really hold the stocks recorded in the registers of the various statistical services, and such stocks as existed did not include the goods
required by the peasants.
The distribution of these commodities to co-operative organisations was very badly organised. Means of transport were disorganised and consignments never arrived in time. Commodities of
some particular kind would be forwarded to a district which was
already amply provided with them. The Centrosoyus did not receive
the quantities which it should have done in accordance with the
agreement. " At a time when work was most intense ", says the
Centrosoyus report for 1921, " it became evident that the goods
held by the departments of the Commissariat of Supply could not be
forwarded to the Centrosoyus organs ". The provincial committees
of supply failed to notify the quantity of goods which could be
exchanged for the goods in their hands and delayed transport
operations.

8 -

One of the greatest obstacles was the bad organisation of the " chief
committees " (Glavki) which had to deliver the goods. These committees
took an interminable time to fill up vouchers for supplies (replacing the
previous requisition orders), and the quantities stated on the vouchers
did not in the least correspond with those actually in stock in the workshops and factories
The work was constantly being held up by delay in providing wagons,
or prohibitions and formalities of all kinds. It was often impossible to
secure vehicles for transport owing to the difficulties created by local
authorities, etc. '
Co-operative activity, already handicapped by the bureaucratic
methods of the Government, was further hampered by the hostility
of m a n y of t h e state economic organs. " H a v i n g taken upon itself
t h e stupendous responsibility of provisioning, the co-operative system
was obliged to accept such commodities as were handed over to it
by the supply offices, although quite half of t h e m were obviously
unsaleable at that time, if not utterly useless to agriculturists. "
N e i t h e r the Centrosoyus nor the Commissariat of Supply h a d yet
adapted itself to the m a r k e t , and simply distributed goods arithmetically a m o n g the various provincial governments.
The transfer of stocks was so badly organised that the accounts have
not yet 2 been settled, and some provincial unions have been allowed
to drift into abuses. During almost the whole period which has elapsed
(and even at the present time in some provincial localities), the organs
of the Commissariat of Supply never ceased to regard the co-operative
system as at their disposal 3 .
All co-operative and official publications mention these defects
in the fulfilment of the agreement between t h e Centrosoyus and t h e
Commissariat of Supply relative to the exchange of commodities.
According to t h e " Co-operators' Guide " for 1922 :
The stocks of goods were constituted without plan or method ;
commodities were despatched to any region without reference to the
needs of the market there. It constantly happened that a district already
well supplied with a certain article would receive further consignments
of it. It must be added that the stocks (which consisted for the most
part of things for which the peasants had no use) were distributed in
a most dilatory manner ; agricultural machinery, for example, did not
reach its destination until after the season for agricultural work was
over 4 .
T h e President of the Centrosoyus, Mr. K h i n c h u k , addressing
t h e N i n t h Congress of Soviets in December 1921, said : " W e have
1

Otchot Centrosoyusa za 1Q21 god, p . 41.
In 1922.
' IUMSKY-KUTUZOV : Crisis co-operatsn (The Co-operative Crisis),
p. 24 ; Moscow, Centrosoyus, 1922.
4
Sputnik co-operatora na igi2 god, p. 63.
2

— 139 —
never actually had the commodities needed ; and those available were
of such poor quality that it was impossible for us to compete in the
open market " \
There were twenty-five classes of goods intended for distribution by the co-operatives ; their total value at pre-war prices was estimated at 15.5 million gold roubles. In reality, however, the stocks at
the disposal of the Commissariat of Supply itself only amounted, at
pre-war value, to 4.2 million gold roubles, and of these the Centrosoyus received only four-fifths. In all, the Centrosoyus secured
barely 20 per cent, of the fund of goods allocated to it in the state
estimates 2 . The quantity of goods which it could place on the
markets was about half, and in some places only one-third or onefifth, of the quantities needed by the unions. The extent to which
the demand of the provincial co-operative unions had been met as
at 10 September 1921 is shown below 3 :
Per cent. of co-operatives
so supplied.

Goods received po- ceut.
of demand

50 — 75

3-6

.25 — 50

12.6

5 — 25

59-1
24-7

0 — 15

Stocks of commodities, then, were inadequate and the assortment
of goods left much to be desired, but the conditions under which the
co-operatives had to work made the execution of their task an
impossibility. After the period of Communism, the co-operative
organisation found itself burdened with a huge administrative machine.
which had grown enormously during the period of state regulation.
This machinery was designed for the automatic distribution of foodstuffs, and was quite incapable of initiative in independent commercial work 4 .
Of the old administrative organisation there remained only a
skeleton : the centres and depots—provincial unions and their
regional sections—and a network of distributive centres, i.e.
the consumers' societies. " Personal initiative and activity had

1
IX vserossiisky siedz sovietov (Report of the Ninth Congress of the
Soviets, 22-27 December 1921), p. 164 ; Moscow, 1923.
• Ibid.
3

MAKEROVA : op. cit., p. 34.

Ibid.
3

— 140 —
almost entirely disappeared from the primary co-operative organisations, as a result of universal government regulation, the lack of sound
economic bases, and the habit, which had become second nature, of
relying upon state subsidies. Owing to the lack of goods, which had
long since been appropriated by the state, the great majority of village
co-operative societies had been closed. The provincial unions and
their sections were transformed into executive organs of the local
organisations of the Commissariat of Supply for the storage and transport of foodstuffs 1.
Some co-operators extolled the development of the consumers' cooperative system. According to Mr. Khinchuk and the Centrosoyus
report for 1921, there were on 1 August 1921 about 25,000 cooperatives and nearly 51,000 distributive centres, 90 provincial unions
and 700 regional agencies 2.
This, however, as was pointed out by the writer just quoted,
" was only window-dressing ".
It would be a mistake to suppose that the whole system was actually
in operation. The inertia which had descended upon the organisation,
especially as regards agriculture, was shown when the system of
exchanges was in full operation ; enquiry reveals that only 14,200
primary co-operative organisations took part in the exchanges, that
societies theoretically owning several sale shops had, in reality, only
one ; and that, in general, the number of sale shops was rapidly
diminishing.
The following figures show the relation between the number
of societies and sale shops registered and those actually in operation
as at 1 January 1922 :

Societies
Sale shops

Registered

In operation

25,200
52,864

15.075
20,479

At this time the consumers' co-operative system did not possess
the organisation needed to undertake all the exchange operations,
especially under a monopoly.
General economic conditions, again, placed the co-operative
movement in a particularly difficult position. As previously mentioned, exchanges had to be effected on the basis of one unit of manu1

A. FISCHHÄNDLER : " Consumers' Co-operation ", in Narodnoie
Khoziaistvo Rossii za 1021-1922 zod (The Rnssian Economic System in
1921-1022),
o. 230. Moscow. Economicheskala Zhizn, 1923.
2
Cf. KHINCHUK : " The Co-operative Movement under the New
Economic Policy ", in Narodnoie Khoziaistvo, No. 1, 1924, p. 4

— 141 —
factured goods to three units of agricultural produce, in accordance
with the rules laid down by the Commissariat of Supply. This
essential condition robbed the co-operative organisation of all
liberty of action, rendering it powerless to adapt its operations to the
conditions of the local markets. The " equivalents committees " set
up at headquarters and in the provinces were the worst offenders,
according to Mr. Khinchuk, in depriving the commercial organisation,
which had to establish the reserve stocks, of all elasticity. The
result was that " we were unable to procure the stocks needed, which
we could have done if we had been free to act " 1.
The fixing of rigid proportions (" equivalents ") for exchanges
was extremely injurious to the co-operatives, not only because it
deprived them of all liberty of action, but also because the equivalents bore no relation to actual conditions. The state bodies had
fixed the ratio of i to 3, because of the inadequacy of the stocks
available. In the summer of 1921, however, the ratio between the
prices of agricultural produce and those of manufactured goods had
changed entirely. The Communist policy followed up to 1920 had
resulted in a great decrease of agricultural production, as the peasants
almost everywhere were driven to return to primitive systems of cultivation with a view to local exchanges in kind, and no longer sold
their produce in town markets. As a result, in 1921 and during the
first half of 1922 the prices of agricultural produce rose much more
rapidly than those of manufactured goods 2 . According to a writer
in the Soyus Potrebiteley :
The equivalent fixed by the Commissariat of Supply requires three
times as much agricultural produce and raw materials as of manufactured
goods. To judge by prices actually ruling upon the market this method
of calculation can only properly be applied to salt, which is a state
monopoly. For cotton goods, for example, the position is altogether
different ; in 1922 one arshin of calico was equivalent to 6 4 lb. of
rye flour or 4 — lb. of wheat ; in 1921 the equivalent had dropped to
3 lb. of rye flour or 2 lb. of wheat. In 1915, in exchange for one pood
of paraffin 80 lb. of rye flour or 6 lb. of wheat could be obtained ; in
1921 the equivalents were 24 or 18 lb. respectively. The Commissariat
of Supply bases its calculations of " equivalents " upon pre-war market
prices, although statistics show that values have changed enormously
since then s .
The rise in the price of agricultural produce which began in
1921 became even more marked in the course of that year and during
1
2
3

IX vserossiisky siezd sovietov, p.-162.
Cf. the price statistics given in Part II, Chapter II.
SCHIERMANN : op.

cit.

— 142 —
t h e first six m o n t h s of 1922, on account of t h e famine. I t was hoped,
b y means of the exchange policy, to obtain bread from the r u r a l
districts in exchange for manufactured goods ; b u t at this time the
rural districts themselves lacked bread. I t goes without saying t h a t
the peasant who was ready to surrender his house or cattle for a pood
of wheat, w h o himself was fleeing from the famine-stricken districts
and would go to the ends of t h e earth for bread, would have n o t h i n g
to do with t h e exchanges.
A writer in the Pravda

stated t h a t :

The traders would barter a scythe for one pood of wheat, while the
co-operatives asked two poods, in accordance with their instructions.
Larges quantities of goods were offered to the peasants when they had
no wheat to offer in exchange and were compelled, willy nilly, to refuse
them. Private traders sold on credit. During the four months that the
exchange system was in operation its results were practically nil, which
proved that the co-operatives were unable to compete with private
traders 1 .
Small traders, shopkeepers, and craftsmen (said a writer in Economicheskaia Zhizn) had found their way into the villages, and this was
all the easier because their only real competitor, the co-operative system,
was already bound hand and foot. Thus private trade, discountenanced
as it was, very scattered for commercial purposes, and with smaller stocks
than the co-operatives, nevertheless beat them all along the line in 1921.
I n the Provincial Government of Ufa, according to the Pravda,
the exchange operations were a complete fiasco on account of the
poor assortment of goods offered ; neither the co-operatives nor the
state organs had any knowledge of the m a r k e t and they found
themselves in competition w i t h private traders already installed w h o
were well acquainted with the needs of the population 2 .
T h e Vice-President of t h e Centrosoyus, Mr. Schwetzov, considered that even hawkers (mieshechniki)
h a d an advantage over t h e
co-operatives t h a n k s to the exchange system.
While the co-operatives were struggling to get rid of certain goods,
the hawker would hasten to exchange similar goods for other commodities
needed by the peasants in the district. The hawker had everything—nails,
glass, soap, scythes—while the co-operatives merely bewailed their lot.
This procedure certainly enabled dealers to get possession of surplus

1
2

Pravda (Truth), No. 193, 1921.
Ibid.,

N o . 217, 1921.

H3 —

agricultural produce at ridiculously low prices, much less than the fixed
equivalent of i to 3 1 .
T h e official guide of t h e Centrosoyus also bears witness to the
fact that the enterprising small retailer, once in the market, quickly
found his level and took a considerable part in local trade. Private
traders and organisations had rushed into the productive regions as
soon as freedom of trade was restored, and being unhampered by
rigid " equivalents " they disorganised the markets and c u t the
ground from beneath t h e co-operatives. " I t is evident ", says the
publication previously quoted, " t h a t at a time w h e n t h e m a x i m u m of
elasticity, skill, and initiative was needed to capture the market, a
poor assortment of goods a n d a system of rigid a n d intangible equivalents were very poor weapons " 2 .
A striking example of the success of private traders and dealers
is offered by the Provincial Government of T u m e n e , t h o u g h the
situation there was b y no means exceptional. T h e co-operatives
could secure only 7,500 poods of wheat, while the hawkers obtained
possession of 500,000 poods. Some light is thrown on the position
by the fact that private trade h a d never come wholly to a standstill
during the period of Communism, although it was contraband and
clandestine. D u r i n g this period t h e private trader perforce acquired
such remarkable flexibility and capacity for adaptation that when
trade again became legal t h e co-operative system, painfully rebuilding
its organisation under new conditions, was confronted by a private
commercial organisation fully prepared and adaptable.
»
Describing the situation, Mr. Ilimsky-Kutuzov wrote 3 :
Such were the circumstances under which the co-operative system
had to be reorganised. It had no resources and was saddled with
stupendous tasks in the supply programme. It was rent by controversy
among its leaders, burdened by the monopolies entrusted to it, and
opposed by " capitalist intermediaries ". Hampered by its monopolies,
which it could not handle, the co-operative system was unequal to its
supplies work, and attracted censure from all quarters.
According to another writer :
If the consumers' co-operative system had at least really controlled
commerce many of its faults would undoubtedly have been overlooked,
and it would not have been in its present ridiculous position. The
system of " equivalents " deprived the co-operatives of all initiative in
practical matters, and rendered the stocks of the industrial co-operatives
valueless. From the very first some eo-operatives were a failure.
A hungry man who had scraped together his last remaining possessions
1
3
s

Soyus Potrebiteley, Nos. 16-17, 1921.
Sputnik co-operatora na 1922 god.
IUMSKY-KUTUZOV : op. cit.,

pp. 15-17.
3

— 144 —
would have to listen to long harangues on the compulsory equivalent,
while the private dealer was ready to exchange manufactured goods for
wheat and vice versa. Obviously this kind of thing did not bring money
iuto the co-operatives. Instead of attracting
the consumer it scared him
off in the direction of the private trader l .
Abandonment

of the Policy of Exchanges in Kind

As may be gathered, co-operators and the Soviet press (whether
co-operative or general), both during and after the trial of the
exchange policy, admitted the utter failure of the co-operative movement. This failure, which was due to the inefficiency of the movement, unfavourable economic conditions, lack of organisation, and,
finally, to the predominance of private capital on the markets, had
very serious results.
In the first place, by letting private trade get the upper hand,
from the very beginning of the new policy it struck a blow at the
co-operative system from which it has not yet recovered. " The
period of exchanges in kind with the system of compulsory equivalents ", wrote Mr. Shwetzov in 1922, " was perhaps the worst
ordeal through which the co-operative organisation has had to
pass ; at any rate it is still suffering from the effects of it ". It
will be shown that this statement is borne out by the present situation. In the second place, the rapid expansion of private commercial activity demonstrated the utter futility of the policy of exchanges.
The private trader had no need of exchanges in kind ; in the majority
of cases he demanded money for his goods, and with that money he
purchased foodstuffs elsewhere. The peasant was thus enabled to
purchase at his convenience the commodities with which the cooperatives were unable to supply him.
The Soviet Government had wished to re-establish only local
exchange and exchange in kind, but the system which gradually
took root was that of exchange upon a money basis, and this inevitably went beyond the bounds of local trade. Money began to
play an increasingly important part in exchange operations, which
thus developed into ordinary purchase and sale. Co-operators
realised this. " It is time ", said Mr. Shwetzov, " to define exchanges
with greater precision. Would it not be simpler to call them sale
and purchase ? If so, exchanges solely in kind must be abolished. "
1
A. SHWETZOV : " Commerce under the New Conditions ", in Soyus
Fotrebitelcy, No. 7, 1922.

— 145 —
The second delegates' meeting of the Centrosoyus, which took
place in July 1921, decided to revise the scale of equivalents (1 to 3)
and to deviate from the strict rule of exchanges in kind, in the
direction of ordinary commercial sale and purchase operations upon a
money basis. A co-operator explains this decision as follows :
We cannot close our eyes to the fact that, under present conditions,
the only kind of organisation which can hope to succeed in forming stocks
of foodstuffs must be flexible, easily adaptable to fluctuations in market
prices, and take into account supplies of and demand for each commodity.
We cannot now rely on the co-operatives to regulate the market and dictate
its conditions. The enterprising small trader is to be found everywhere;
he has gained a footing in the most remote parts of Russia. While the
co-operative organisation was collecting its forces, while regulations,
instructions, and the like were being drafted, markets and fairs have
sprung up everywhere, without exception, and traders and dealers have
done thousands of roubles' worth of business. The co-operatives have
to meet the competition of private traders who daily increase in strength
and numbers. Already the peasants are comparing the prices of the cooperatives with those of the open market. If we keep to the fixed
" equivalent ", that is to say, fixed prices, we run the risk of losing
all touch with the market, and being unable to supply the state with
even the smallest proportion of the goods it expects iroin us '.
Under these conditions it became manifestly impossible to reserve
a privileged position on the markets for the co-operatives. There
was a growing conviction that the " General Agreement " between the
Centrosoyus and the Commissariat of Supply had been " a capital
error "—not only on the part of the co-operative movement, which
had assumed a task beyond its strength, but also on the part of the
Commissariat of Supply, which had relied on the co-operatives
alone for all supplies. The heads of the Commissariat now made
tentative suggestions that it would be desirable to " free the state
from the co-operative system ", a view in which the co-operatives
themselves heartily concurred. The Centrosoyus had to abandon its
monopolies and conclude a new agreement with the Government.
This agreement was embodied in the Decree of 26 October 1921 on
" the utilisation of the co-operative system by state bodies for purposes of exchange and supply " 2 .
This Decree created a new situation both for the co-operative
movement and for commerce in general. It gave the Centrosoyus
and provincial unions only a few advantages over other organisations
1
KRAMAROV : " Why is Exchange Impossible? " in Economicheskaia
Zhizn, No. 178, 1921.
2
Collection of Laws, 1921, No. 72.

3
The Co-operation
1 3

— 146 —
dealing with supplies. State bodies were to apply first to the Centrosoyus (or to a provincial union where one Provincial Government
only was concerned) when supply contracts were to be placed.
Should the co-operative organisation decline the conditions proposed
by the state organ the latter might apply to some other organisation.
Exchanges between one state organ and another were to be effected
without the aid of the Centrosoyus ; and, on the other hand, the Centrosoyus was liberated from the shackles placed upon it by the previous agreement. Orders given by state organs might be of two
kinds : (a) fixed orders, i.e. for the supply of a fixed quantity of
certain commodities, at fixed prices, to be delivered within a fixed
period ; and (b) orders on commission, no price being stated.
The most important innovation, however, was the power given
to the Centrosoyus to dispose with absolute freedom of the stocks
of goods formed by state organs. These it might realise as it liked,
fixing the prices itself and selecting the districts in which it would
dispose of such commodities (Sections 6 and 8). The ratios or
" equivalents " of exchange as well as the prices of commodities
(agricultural produce and manufactured goods) and the kind of
goods to be stocked, were all to be decided by voluntary agreement
between the parties and in accordance with average market prices
(Section 7).
With the abolition of " fixed equivalents " the compulsory form
of exchange disappeared. The Decree, in authorising the consumers'
co-operatives to dispose freely of stocks of commodities, expressly
stated that they might exchange them for other goods, sell them
for cash, or combine both methods. The system of exchanges in
kind having failed from the start (as Lenin put it, " the weapon of
exchange was wrested from the hands of the Soviet authorities " ) ,
the consumers' co-operative movement tried a system of mixed exchanges during the last few months of 1921, and from 1922 onward
it reverted to ordinary trade on the basis of payment in cash.
This transition to a fresh system was bound up with another
question of still greater importance to the consumers' movement.
RESTORATION OF ECONOMIC INDEPENDENCE ;
PROBLEMS OF FINANCE

As the rigid system of exchanges in kind had been abandoned
for that of purchase and sale at market prices, the co-operative

147 —

organisation had to be given a certain independence in order to secure
the funds which the state had been unable to provide. The same was
true of state industry and commerce, so much so that the Soviet
Government was obliged to go even further with the New Economic
Policy. By the Decrees of g, 12, and 16 August and of 27 October
1921, nationalised industry was re-organised on a so-called " commercial basis " ; and certain classes of undertakings were struck off the
list of those supplied by the state \
The same principles had already been applied to the co-operative system by the Decree of 26 July 1921 concerning working capital
and co-operative capital, the old Decree of 13 December 1920 being
repealed 2 . The new Decree laid down that co-operative organisations were to effect their operations " on their own account and at
their own risk ". It was further stated that their funds might be
drawn from the following sources (Section 2) :
(a) members' entrance fees, payments made on shares, and
advances made by members ;
(6) loans made by voluntary co-operative associations, other cooperative institutions and their members ;
(c) deposits and loans received from private persons or organisations ;
(d) profits acquired from the difference between purchase and
sale prices ;
(e) advances received from government institutions in fulfilment
of contracts ;
(/) commissions received for the execution of state orders ;
(g) credit operations ;
(/i) state subsidies for transactions of national economic importance.
Co-operative organisations were allowed to pay interest upon sums
placed at their disposal, and to require their members to provide
guarantees on terms laid down by the rules of each society (Section 3). The co-operative system might receive long or short term
loans from the co-operative section of the Commissariat of Finance and
1

For detailed information on the subject of these reforms, cf. INTER: Organisation of Industry and Labour Conditions in Soviet Russia, Part I. Studies and Reports, Series B (Economic
Conditions), No. 11. Geneva, July 1922.
' Collection of Laws, 1921, No. 53.
3
NATIONAL LABOUR OFFICE

— H8 —
from its local organs (Section 4). These loans could be used for
provisioning or productive operations in accordance with contracts
concluded with the state, or for independent transactions of national
economic importance (Section 5). The co-operative system was to
receive a commission from the Commissariat of Supply when it distributed goods gratuitously for the state. Where such distribution
was not free, the co-operative system might make a certain profit
upon the sale of goods for the state (Section 13).
The Commissariat of Finance had a special fund which the cooperatives might use for purposes of their business (Section 11).
Moreover, the Decree of 26 October 1921, which supplemented the
previous ones, left in their hands all the commodities which they
had succeeded in collecting prior to the issue of the Decree of 20 March
1919. Goods taken from these stocks by state bodies had to be
refunded.
The Decrees of 7 April and 4 July 1921 had empowered the
co-operatives to organise industrial undertakings and to recover
possession of those which for any reason had been taken from them
before 1921. The Decree of 26 October further ordered that " all
enterprises and undertakings, whether nationalised or municipalised,
together with all raw materials acquired at the expense of the cooperatives to be found therein, " were to be returned to the cooperative organisation (Section 14).
A supplementary instruction issued with reference to this Decree *
stated that all state organs in charge of nationalised or municipalised undertakings previously belonging to co-operatives were
ordered to restore them to the original proprietors within a fortnight
after the co-operative organisations interested had lodged their claim.
The co-operatives were required to reimburse the expenses incurred
by the state organs for repairs, etc. ; raw materials and manufactured articles stocked or produced by the undertakings after their
nationalisation were not to be handed over to the co-operatives when
the undertakings themselves were restored. Nevertheless, if fuel,
raw materials, etc. were handed over to the co-operatives, the latter
must pay for them at prices to be fixed in accordance with those
ruling on the market.

Instruction of 17 May 1922, drafted by the Supreme Economic
Council (Collection of Laws, No. 39, 10 July 1922).

— H9 —
Finally, the Decree of 17 November 19221 restored to the cooperatives all their nationalised or municipalised shops and depots
and prohibited subsequent nationalisation thereof.
Inadequacy of Money Credits
As from 1 September 1921 the consumers' co-operatives recommenced working on their own account, and they only became
really independent on that date. But the Decree of 26 November
1921 did not entirely rob the movement of its hopes of becoming
the principal provisioning organisation on the market and of occupying a privileged position. It undertook extensive provisioning
and distribution operations which were beyond its administrative
capacities and out of all proportion to its resources. As a writer at
that period expressed it, the co-operatives' method of using the rights
conferred upon them by the Decree " brought them not victory
but defeat ".
The movement entered upon its independent commercial existence, it must be remembered, without any working capital whatever ; it was, according to Mr. Shwetzov, " absolutely beggared " 2 .
It started empty-handed, as the stocks remaining from the period of
Communism were negligible. On 1 January 1919 the Centrosoyus
held stocks to a total value of 16 million gold roubles ; on 1 September 1921 its total stocks were only 3.6 million gold roubles, of
which 2,017,000 was actually in its possession ; the remainder was
to be handed over to it by the Commissariat of Supply in accordance
with the Decree of 26 October.
The position of the provincial unions was still worse. In 1919
they possessed stocks and property to a total value of about 61,700
gold roubles ; in 1921 the total had dropped to 30,000 gold roubles 3 .
The Decree of 26 October instructed state bodies to restore to the
co-operatives all stocks which had belonged to them before 20 March
1919. These instructions were very slowly carried out, and were
of very little benefit to the co-operatives. Very frequently the goods
in question were no longer in the sale shops, or, if they did exist,
were in such a condition that they had no market value. The trans1
2

Collection of Laws, No. 65, 1922.

SHWETZOV : op.
3
Cf. KHINCHUK

cit.

: Centrosoyus- v usloviakh novoi economieheskoi
politiki (The Centrosoyus under the New Economic Policy), p. 8. Moscow, 1923.
1 3 *

- 150

fer of the goods involved numberless formalities, waybills, vouchers,
calculations, explanatory notes, and such multiplicity of detail that
by the middle of 1922 the transfers were still incomplete ; goods lay
untouched for months at a time \
The state grants were very small. The co-operative sections of
the Commissariat of Finance, whose duty it was to finance the movement, were not organised for the purpose. They existed in only
seven provincial governments, and, as they had no direct share in
production and only a slight interest in co-operation, they were hardly
likely to supply large sums of money. In addition, multitudinous
formalities were attached to the grant of state loans, and this hindered
rapid distribution of credits 2 . The increase in the total credits
granted by the Commissariat of Finance to the Centrosoyus in 1921
is shown below (the figures being cumulative) s .
CREDITS GRANTED BY THE COMMISSARIAT OF FINANCE
TO THE CENTROSOYUS, IÇ2I
Date

i
1
1
1
1
1

July
August
September
October
November
December

Million
Soviet roubles

12,030
12,130
22,132

39.915
70,085
I43,I08

Pre-war roubles

140,070
157.058
289,685
487,362
733,863
1,037.014

Thus, between 1 September 1921, when the Centrosoyus recommenced work with its own resources, and 1 December of the same
year the Commissariat of Finance had only granted it about 700,000
pre-war roubles — a negligible sum compared with what was
required. When the State Bank was opened, on 16 November 1921,
it took over the work of granting credits to the co-operatives from
1
Otchot Centrosoyusa za iç2i god, p. 3 ; also KHINCHTJK'S report to
the Ninth Congress of the Soviets, and his article : " The Co-operative
System under the New Economic Conditions ", in Narodnoie Khoziaistvo,
No. si, 1922.
SCHIERMANN : " Co-operative Finance ", in Narodnoie Khoziaistvo,
Oct.3 1921.
Otchot Centrosoyusa za 1021 god, p. 79. The figures in pre-war
roubles are calculated in accordance with the index numbers of the
Labour Statistics Department for 1921.

151

the co-operative sections of the Commissariat of Finance, but the
credits which it granted were insignificant also ; during the last
two months of 1921 the credits obtained by the Centrosoyus from
the State Bank amounted to barely 360,000 million Soviet roubles,
equivalent at most to between three and four million pre-war roubles.
The lack of credit was the principal obstacle to the activity of
the Centrosoyus. By the end of 1921 it was clear that the Centrosoyus could not obtain sufficient capital by its own efforts, i.e. from
entrance fees, subscriptions, advances from purchasers, and additional
payments by members. Besides, the subscriptions, which had
been abolished until the middle of 1921, came in very slowly, both
because of the general poverty and because the period of Communism
had demoralised co-operators along with the rest of the population.
Even before the war the Centrosoyus transacted much of its business on a credit basis. At the period now under consideration
credit was more than ever necessary ; but the state organisations in
general, and the State Bank in particular, themselves had not sufficient funds. The State Bank devoted its efforts mainly to financing
state industrial and commercial institutions and neglected the cooperatives, as will be seen from the following figures * :
CREDITS GRANTED BY T H E STATE BANK UP TO I OCTOBER 1922

Undertakings

Number
of credits
granted

Amount
Million
Soviet roubles

State
Co-operative
Private

54
18
6

4.205
788
2.9

Total

4,996

Per cent.
of total

84.I
15-8
0.1

100.0

Thus, out of credits opened by the State Bank in one year, only
about 16 per cent, were granted to co-operative organisations. Moreover, the conditions on which loans were made were by no means easy ;
1
Taken from the " Report on the First Year's Working of the State
Bank ". Moscow, 1922.

152 —

50 per cent, of the amounts lent must be repaid in foreign currency,
and the interest charged was so excessive (sometimes as much as 30
per cent, per month) as to swallow up the entire amount borrowed.
The great majority of the co-operatives could get no credit, and the
central organisations received requests for credit from all quarters—
more especially from the local societies, which had even greater
difficulty in obtaining credit than the provincial co-operative unions.
The third plenary delegates' meeting of the Centrosoyus, held
at the end of 1921, came to the conclusion that it was necessary to
create a financial centre for the consumers' co-operative movement ;
and as a result the establishment of a Consumers' Co-operative
Bank * was ordered by the Decree of 6 February 1922.
The development of credit institutions in general and of credit
co-operatives in particular was at first very slow, owing to the specially
difficult conditions prevailing in Soviet Russia. The institutions
were hard put to it to obtain sufficient capital to supply the needs
of the population.
." Prior to the period of Communism the Centrosoyus could obtain
large credits from all commercial and industrial houses ", stated a
resolution passed by the second delegates' meeting of the Centrosoyus, " but at the present time it cannot get credit anywhere.
Nationalised industrial undertakings and trusts will only consent to sell
goods to the Centrosoyus on condition that it pays a deposit in
advance. "
The Policy of Commodity

Credits and Its Failure

In view of the manifold disadvantages of such a position, the
Centrosoyus induced the Council of labour and Defence to instruct
the Supreme Economic Council, by the Decree of 31 May 1921,
to open a commodity credit for the Centrosoyus to a value of 10 million gold roubles. This credit was intended, in the first place, to
finance the Centrosoyus operations to secure supplies of agricultural
produce ; and to assist in marketing the products of the nationalised
industries through the co-operative system. Relying upon the new
Decree the Centrosoyus, on 13 June, entered into an agreement with
the Supreme Economic Council as to the conditions on which commodities would be supplied on credit.
1
The working of the Co-operative Bank and of other co-operative
credit institutions will be explained later in the part dealing with credit
co-operation.

153

But this attempt was as unsuccessful as its predecessors. The
Centrosoyus had to obtain the goods from sixty different trusts ; it
had therefore to negotiate with a large number of institutions, and
conclude separate agreements with each of them as to the quality,
price, and date of delivery of the goods, all of which took a very
long time. Moreover, the execution of the agreement signed on
13 June dragged on indefinitely. The state undertakings adopted an
attitude of passive resistance to the decision of the Council of Labour
and Defence ; and it was only after numerous reminders and the
issue of several Decrees that some of them could be prevailed upon
to fulfil their obligations.
The Centrosoyus succeeded in concluding agreements with only
five metal trusts out of eleven ; and even then the agreement with
the " Yugostal " Trust was cancelled owing to non-delivery of goods.
Some trusts were prohibited from concluding such agreements by the
local economic councils, which ignored the Decree of the Supreme
Economic Council. Others refused of their own initiative to negotiate.
Moreover, many of the trusts had not the goods needed by the
co-operatives. Instead of the commodities essential for agriculture
some of them could only offer military field equipment, boats,
materials for narrow-gauge railways, repaired railway trucks, etc. 1
Finally, the Centrosoyus had to give up the idea of using all the
credits promised ; 1.6 million roubles were thus abandoned. Even
where an agreement was signed, the goods were not all delivered.
Altogether, of the 10 million gold roubles which were to serve the
Centrosoyus as a basis for operations, only 5 or 6 million were of real
use.
This agreement with the Supreme Economic Council represented
the last effort of the Centrosoyus to utilise commodity credit.
Little by little, as credit was re-established and the network of credit
institutions gradually developed, the co-operative movement reverted
to the ordinary system of bank credit and trade ou a money basis.
COMPETITION W I T H STATE TRADING BODIES

As soon as the co-operative system began commercial transactions
on its own account, it was met by the competition of state organisations.

Soyus Potrebiteley, Nos. 10 and 11, 1922.
3

¿_ 154

The commercial policy of the Soviet Government was based on
the principle of " state capitalism ", and was influenced by the position of nationalised industry and state commerce, which itself was
dependent upon general economic conditions. Freedom of commerce
in the eyes of the Soviet authorities ought to extend only to small
commercial operations, the only ones which might be undertaken by
private capitalists. All wholesale operations were to remain in the
hands of the state, and the Soviet Government intended to control
and regulate commerce in general. For this double purpose it set
up special organisations.
In order to facilitate the supply of the necessary materials and
machinery to nationalised industries, a Central Commercial Service
was created on 21 December 1921 and attached to the Supreme
Economic Council.
This Service had : (a) to act as intermediary between the various
organs of nationalised industry ; (b) to purchase on the open market
commodities needed by state industries ; (c) to act as a link between
nationalised industry and the great mass of consumers by making
wholesale deliveries to the co-operatives and to private undertakings.
It had to conform to the production programme of the Supreme
Economic Council and to supplement the work of the nationalised
industries by its commercial activities. It was, moreover, required to
obtain information as to the materials needed by state industry, and to
establish stocks thereof ; to plan its commercial activity in such a way
as to facilitate the execution of the production programme ; and
to arrange for the conclusion of profitable contracts between the
various organs and undertakings of the Supreme Economic Council.
Under section 4 of the Regulations of 21 December 1921, the Central Commercial Service enjoyed, other-things being equal, preferential treatment over co-operative societies, private undertakings, and
private individuals.
The Service included seven sections, dealing with the following
matters : (a) transactions on commission ; (b) textile products ;
(c) chemicals and hardware ; (d) foodstuffs and fodder ; (e) metallurgical products ; (/) wood ; (g) leather and rubber. It had
agents with full power of attorney in the provinces ; these
agents might be either private individuals or the commercial departments of industrial trusts and syndicates \

' Spravochnik po torgovlie (Commercial Year Book), Vol. I. Moscow,
Central Commercial Service of the Supreme Economic Council, 1922.

155

In addition to the Central Commercial Service, there were a large
number of commercial sections, which as a rule were joint-stock
companies, either, purely state undertakings or of a mixed character,
including private capitalists. These sections were attached either to
state institutions or to state trusts in nationalised industries.
The main duties of the commercial departments of the trusts
were to centralise purchases, to market their produce either at home
or abroad, to obtain from the villages raw materials and agricultural
produce needed for their work, and to supply the population with
products of good quality and at moderate prices. When it was
decided to place state institutions and nationalised industries on a
" commercial basis ", and when, at the close of 1921, the state ceased
to supply nationalised undertakings, the trusts of nationalised industries were obliged to take prompt steps to dispose of their products
so as to obtain funds for production and for supplying their workers.
When the New Economic Policy was introduced, the various
state institutions and enterprises had exhausted the whole of their
financial resources and most of their material reserves. The restoration of the open market made commercial work most important
and a large number of commercial bodies were created ; some were
set up by the central Government (" Gostorg " ) , others by provincial
governments (" Gubtorg " ) . Most of these offices suddenly appeared
and drew up their own regulations without the knowledge of the
Supreme Economic Council.
" In general, our experience has not enabled us to decide upon
the best type of state commercial organ ", says an official publication
of the Council of Labour and Defence. " Most of the existing regulations contain nothing but commonplaces and generalities which
give state undertakings nothing to go on, either financially or
administratively. " 1
Soon there was no institution, commissariat, or trust which had not
set up its own commercial service and endeavoured to do business 3.
All these services were in competition with each other, each demanded
a monopoly for its own products on the home market, and each had
1

Cf. Na novykh putiakh (The New Way); a collection of articles
on the results of the New Economic Policy. Vol. I. Commerce, p. 399.
Moscow,
Council of Labour and Defence, 1923.
1
Not only had the Commissariat of Supply five, and the Supreme
Economic Council nine, commercial services, but such institutions as the
Commissariats of Public Health, Education, and Agriculture also set
up such services.
3

— 156 —
its own commercial policy. Such procedure inevitably disorganised
the market and reacted injuriously upon industry.
Influenced by these conditions, some of the trusts came to the
conclusion that it would be necessary to regulate their activities by
agreement, and united to form syndicates. The number of these
increased rapidly. Formerly each institution wanted its own commercial service ; now there was a mania for syndicates. But the
syndicates, though endeavouring to put a stop to competition among
the trusts composing them, soon began to compete among themselves ;
and each of them demanded a monopoly of the home market.
In order to regulate and control trade, a Commission on Home
Trade (" Comvnutrog ") was set up on 9 May 1922, attached to the
Council of Labour and Defence 1. At first this Commission was only
given general powers of supervision ; the actual regulation of trade
in the provinces was entrusted to the provincial and regional economic conferences. Each administration and institution actually
engaged in commercial transactions retained the right to regulate the
working of commercial undertakings attached to it.
Later, by a Decree of 6 October 1922, the Commission on Home
Trade was instructed to regulate prices and to compile a list of
commodities, the prices of which could not be raised by state undertakings on delivery at the depots. The Commission's rulings on prices
were binding on all state undertakings and institutions 2 . The powers
of the Commission in connection with the co-operative movement were
limited to seeing that co-operatives worked in conformity with the
objects laid down in their rules, in Decrees, or in contracts 3 .
The new commercial legislation was intended to facilitate the
commercial operations of state undertakings. As the state gradually
ceased to furnish these undertakings with supplies, they were
obliged to rely more and more upon commerce alone for their working capital, which was of vital importance to them. They thus
came to regard as a mortal enemy every competitor they met in the
hunt for capital — and the co-operative system was one of these.
Moreover, during the first few months of the new policy, while the
co-operative system was adapting itself to the altered conditions
1
Collection of Laws, No. 34, 1922.
'3 Cf. Izvestia, 13 Oct. 1922.
Circular of the Commission on Home Trade dated 24 May 1923 :
Zakony 0 torgovlie (Commercial Legislation); collection of Decrees compiled by DMITRIEVSKY ; Moscow, 1923.

— 157. —
and was still hampered by the policy of exchanges in kind, private
trade expanded much more quickly. It was of the greatest assistance to nationalised industry in marketing its products, and served
as a link between nationalised industry and the consumers. Obviously,
therefore, state commercial and industrial undertakings preferred
to work with private traders rather than with the co-operative system.
For state industry the years 1921 and 1922 were a period of
" demolition ", of compulsory sale of almost all their reserves. Thus
the co-operative movement, far from being able to count for assistance upon nationalised industry, realised that it was a most dangerous competitor. The Centrosoyus report describes the situation as
follows :
The state trusts tried to sell their products directly on the open
market, and would only sell to the co-operatives at higher prices.
" Trustified industry " was unwilling to work with the co-operative
movement. Some of the principal committees1 and trusts would only
consent to deliver their goods in exchange for cereals and other foodstuffs ; others demanded large sums in advance ; others, again, absolutely refused to dispose of their products through the co-operative
mouvement. As the principal committees extended their commercial
operations, it became possible to purchase large quantities of commodities
from them. But here again the Centrosoyus met with very great difficulties. Many of the trusts employed their own selling agents, who
naturally wished to sell at the highest possible figure, and were by no
means prepared to offer easy terms to the Centrosoyus or the local cooperatives.
On the other hand, the state trusts
large wholesale merchants, who both
supplied them with goods. The part
system in the scheme of state commerce
seen from the following table :

were in close relations with
bought their products and
played by the co-operative
was insignificant, as may be

Bodies which controlled each nationalised industry.
3

1 5 8 -

PERCENTAGE OF BUSINESS DONE BY ORGANISATIONS OF THE SUPREME
ECONOMIC COUNCIL WITH VARIOUS CONTRACTING PARTIES,
1922 AND I923
J922

1923

Month

January
February
March
April
May
June
July
August
September
October
November
December

State
organs

Private
traders

Co-operatives

State
oreans

56,6
71.2
66.2
69.7
59-2
57-9
52-9
65-3
61.8
66.1
71.8
78.1

20.8
18.7
26.4
22.9
36.8
36.8
38.4
29-5
30.0
28.8
19.9
15-4

22.6
IO.I

70.I
76.4
81.O
78.6
82.2
66.3
71-3
66.7
76.2

7-4
7-4
4.0
5-3
8.7
5-2
8.2
5-6
7-3
6-5

Private
1 traders

17.2
7-9
12.3
14-3
12.2
15.6
II-5
12.4
9.8

Co-operatives

6.5
11.8
5-4
5-5
4.9
9-3
11.9
I5-I
10.3

1
Russkaia promyshle-nnost v tçaz sodii (Russian Industry in 1922).
Economicheskoie
Obozrenie, 1923 and 1923.
For 1923 the figures given for state organs include mixed societies and joint-stock
companies, as with few exceptions these are really state bodies.
The Soviet statistics for 1923 irfclude a heading « miscellaneous bodies », which takes
from s t o 7 per cent, of the total. This might be included under « private traders B.

W O R K OF T H E CENTROSOYUS

A s it could not count on a n y support from state industry, t h e
co-operative organisation h a d to seek other means of obtaining funds.
F r o m 1922 onwards t h e Centrosoyus tried t o g e t rid of exchanges
in kind and t h e distribution of goods for t h e state, in order to devote
itself to its own commercial transactions. T h e following table,
covering t h e first eight m o n t h s of 1922, indicates t h e progress m a d e
in this respect x .

Na novykh

putiakh,

Vol. I.

— 159 —
DISTRIBUTION OF BUSINESS DONE BY THE CENTROSOYUS, 1922

Amount

January
February
March
April
May
June
July
August

Goods delivered to
co-operative Month
organisations

Goods delivered to
state bodies under
agreement with the
Commissariat of Supply

Pre war
roubles

Per cent.
of total

Pre-war
roubles

Per cent.
of total

321,883
424,927
646,466
543.938
526,497
906,561
I.024.399

1,427,208
I.378.254
458.719
I97.Ï37
116,706
60,395
124,049
99.229

81.5
76-5
41-5
26.6
18.2
6.2

I,IOI,68l

18.5
23-5
58.5
73-4
81.8
93-8
89.1
91.6

5,946,252

58.7

3,860,747

Total
(pre-war
roubles)

10.9

1,749.091
1,803,181
1.105,185
741.075
643.203
966,956
1,148,448

8.4

1,200,910

41-3

9,806,999

Total
In their commercial operations the co-operatives succumbed to
the desire to realise, to sell at any price, which at that time was
characteristic of all trade. They had to take market conditions into
consideration and looked for large deals, the co-operative spirit being
sacrificed to high profits.
The Centrosoyus was more guilty of this than any other cooperative organisation. It plunged into commercial ventures, disregarding its members, the provincial unions, and practically forgot
the primary societies. Its attitude drove first the unions and then all
the societies to follow a similar policy.
On 1 January 1922 the Centrosoyus possessed 8 million gold
roubles to meet outstanding debts of 2 millions and provide working
capital. Before the revolution it had ten times as much. During
1922 practically no members' subscriptions were paid. The campaign
for payment of members' shares only began in the summer of 1922,
after the third session of the Centrosoyus, and had little effect before
September of that year. From September to the end of December
22 unions paid their shares ; but the total sum received was only
20,000 gold roubles.
The credits of the Centrosoyus in the books of the State Bank
on 1 January 1923 amounted to 11.5 million gold roubles, half of
3

— i6o —
which was intended to finance foreign trade operations. Over and
above this amount the Centrosoyus obtained from nationalised industry
(to be precise, from the Supreme Economic Council and from the
principal committee of the textile industry) loans amounting to
11.4 million gold roubles \
The credits granted by the banks in 1923 were as follows 2 :
Date

1
1
1
1

January
April
July
October

Chervonetz roubles

8,615,560
19,707,781
24,510,130
39,624,330

At the beginning of 1923, the borrowed capital of the Centrosoyus was equivalent to 80 per cent, of its own capital. By the end
of that year its borrowed capital had risen to three times its own
capital. In the old Centrosoyus the proportion was more than nine
to one.
By 1 January 1924 the Centrosoyus had received credits from
the Commissariat of Finance amounting to 17,011,000 roubles, from
the State Bank 25,173,000, together with 12,551,000 from other
sources.
In accordance with the Decree issued by the Council of Labour
and Defence on 8 December 1923, the Centrosoyus was to reimburse
rapidly all these amounts with the exception of those received from
the Commissariat of Finance. During 1924 repayments brought the
rest of the debt down to the following figures :
Date

i April
1 July
1 October

Roubles

40,846,000
30,382,000
10,969,000

On 1 October 1924, therefore, the Centrosoyus still owed 28 million roubles in respect of debts contracted prior to 1924 (17,011,000
roubles to the Commissariat of Finance, and 10,969,000 to other
debtors). But in the meantime new debts had been contracted,
amounting to a total of 51,474,826 roubles ; and by 1 January 1925 the
total had risen to 57,941,086 3 .
1
3
3

Otchot Centrosoyusa za 1Q22 god.
Soyus Potrebiteley, No. 2, 1925.
Co-operativny Pout, Nos. 55 and 57, 1925.

— i6i —

The provincial and regional unions affiliated to the Centrosoyus
were now in such a difficult financial position that, had the Centrosoyus limited itself to commercial transactions with them, its operations would have been extremely restricted. It would evidently be
a very long time before the co-operative societies and their unions
could become strong enough for this situation to improve. The
Centrosoyus, however, having become accustomed during the period of
Communism to large and important transactions of all kinds, hoped
to avail itself of the privileged position conferred upon it by the
Decree of 26 October 1921 to undertake lucrative operations. The
actual results of its efforts are shown below.

COMMERCIAL OPERATIONS OK THE CENTROSOYUS HEAD OFFICE,
1921 TO 1924

Period

ist
2nd
3rd
4th

1921-1923

1922-1923

(pre-war
roubles)

1933-1924

Chervonetz
roubles

quarter
quarter
quarter
quarter

3,064,680
11,295,205
5,456,425
9,966,856

17,080,000
14,930,000
16,904,000
25,912,000

44,554,000
43,844,000
41,011,000

Total
for the year

29,783,166

74,826,000

176,823,000 J
168,000,000 *
190,000,000 4
194,500,000 5
155,000,000 6

47,4i5,ooo

Gold
roubles *

28,840,000
23,252,000
20,960,000
28,662,000

101,714,000
97,109,000
109,000,000
112,000,000
89,000,000

2
3
4
5
6

1 At exchange rates ruiing on the open market at Moscow.
Figures given in Otchot Centrosoyusa za ¡Q23-1Q24 sod. Moscow, 1925.
3
Figures given by Mr. KHINCHUK in an article in the International
Co-operative
Bulletin, No. 1, Jan. 1925.
4
Figures given by Mr. FISCHHÄNDLER, in the Economicheskoie
Obozrenie, Nos. 23-24,
1924.
5
Figures given in the report submitted by Mr. KHINCHUK to the 39th delegates'
meeting of the Centrosoyus in March 1925 ; cf. Co-oPerativny Pout, 18 March 1925.
6
Figures given in the Economichesky
Bulleten, Nos. 9-10, 1924.
2

The Co-operation

1 k

— IÓ2 —
According to the Statistical Department of the Centrosoyus the
turnover of the Centrosoyus varied in 1922-1923 and 1923-1924 as
follows * :
Million chervonetz roubles
Year

First half-year

1922-1923
1923-1924

Second half-year

43
95

Total

106
95

149
190

The turnover of the Centrosoyus in 1922-1923 appears to have
been two and a half times that of the preceding year ; while in 19231924 it increased by a further 20 per cent, according to the Economichesky Bulleten and 34.1 per cent, according to the Centrosoyus
report.
The commercial operations of the Centrosoyus may be classified
under three main headings : sale to the. population of goods manufactured by nationalised industrial undertakings ; sale of raw materials
to industrial undertakings and abroad ; and sale of agricultural
produce obtained from the peasants. The figures for each of these
classes in 1922, 1923, and 1924 were as follows 2 .
SALES MADE BY THE CENTROSOYUS, I922 TO 1924
1922-1923

192 a

1923-1924

Goods
Thousand
gold
roubles

Manufactured goods
Raw materials
Agricultural produce
Total

25,989
15.731
12,628

54,349

Percent.
of total

48.5
28.3
23.2

100

Thousand
chervonetz
roubles

104,770
29,8l6
32,830
158,416

Per cent.
of total

66.1
18.8
I5-*
100

Thousand
chervonetz
roubles

80,986
23,845
71,992
176,823

Per cent,
of total.

45-4
14-5
40.7

100

Since the raw materials mentioned generally came from agricultural undertakings, it will be seen that in 1922 the Centrosoyus
did rather more business for agriculture than for industry. At this
1

Cf. Economicheskoie Obozrenie, Nos. 23-24, and Soyus Potrebiteley,
No. 3n , 1924.
Ótchot Centrosoyusa za IQ22 god. Potrebitelskaia Co-operatsia
S.S.S.R. v 1Q23-1Ç24 godu (Consumers' Co-operation in the Soviet Union
in 1923-1924); Moscow, Centrosoyus, 1925.

— IÓ3 —
time state industry.had scarcely begun to revive. There was practically nothing to sell in the home markets ; and it was difficult for the
co-operatives to secure the products of nationalised industries, either
because there were such small quantities available, or because, as
previously mentioned, industrial undertakings preferred to market
their products with the assistance of private traders or through their
own agents, rather than through the co-operatives.
In 1923, however, the Centrosoyus concentrated all its efforts on
selling the products of nationalised industry, and relegated agricultural produce to the background. This change was due to the
fact that in 1023 the state industries were more ready to use the
Centrosoyus for the sale of their products, but continued to ignore it
when purchasmg raw materials and foodstuffs. At the same time
the agricultural co-operatives were developing rapidly and did their
business through the Selskosoyus. The Centrosoyus therefore sold its
raw materials and agricultural produce in foreign markets rather than
to industrial undertakings and in the towns. In 1924 agricultural
produce again occupied a more important place in the commercial
operations of the Centrosoyus, owing to the improvement in the
agricultural position in 1923.
Foreign trade, however, was the source on which the Centrosoyus chiefly relied for working capital. With this object in view,
and in conformity with a Decree issued by the Council of Labour
and Defence on 2 December 1921, the Centrosoyus entered on commercial transactions with national co-operative organisations in other
countries. It was also authorised to open commercial offices in
frontier localities. As, however, foreign trade was still a state monopoly, all the foreign transactions of the Centrosoyus were subject
to the control of the Commissariat of Foreign Trade. On 14 February 1922 the Centrosoyus concluded an agreement with the Commissariat, which allowed the Centrosoyus to establish commercial
agencies abroad.
Until the end of 1922 the part to be played by the Centrosoyus
in foreign trade was but vaguely defined. There were several reasons
for this : first, the right of the Commissariat itself to monopolise
foreign trade had never been clearly defined, and was still being
discussed by the Soviet leaders ; in addition, the old Centrosoyus
agencies in foreign countries were unwilling to recognise the new
Centrosoyus and adopted a hostile attitude towards it.
3

— IÔ4 —
The Decree of 16 October 1922, while confirming the Commissariat's monopoly of foreign trade, also confirmed the right of the
Centrosoyus to undertake independent commercial operations in
foreign countries.
Moreover, by a previous agreement of 21 August 1922 between
the Centrosoyus and the Commissariat of Foreign Trade, the
Centrosoyus was authorised to transact business direct with the
various foreign co-operative organisations through its owii agents and
offices abroad, with the proviso that the Centrosoyus must arrive at
an understanding with the Commissariat of Foreign Trade prior
to entering upon such operations \
The Decree of 12 April 1923 strengthened the monopoly of
foreign trade, and the individual rights of state undertakings in this
respect were restricted. Only a few organisations enumerated in a
list established by the Council of Labour and Defence retained their
power to do foreign business ; and the Centrosoyus was among them 3 .
In 1922 the Centrosoyus succeeded in coming to an agreement
with the representatives of the old Centrosoyus abroad ; as a result
the Centrosoyus took over goods valued at about ¿200,000 sterling 3 .
The third delegates' meeting of the Centrosoyus, held in July
1922, recommended that foreign transactions be encouraged to the
greatest possible extent. These operations were almost wholly concerned with raw materials.
The value of raw materials exported by co-operative organisations in 1922 is shown below :
Roubles

Exported by the Centrosoyus :
Second quarter
Third quarter
Fourth quarter
Total
Exported by other co-operative bodies
Grand total

2,868,072
4.390,970
6,504,926
13,764,968
4,000,000

17,764,968

The total given above represents about 30 per cent, of all Russian
exports during that period.
1

Zakony 0 torgovlie, Vol. III.
Decree of 15 April 1923. Collection of Laws, No. 32, 1923.
Cf. L. KHINCHUK : Centrosoyus v usloviakh novoi economicheskoi
politiki, Moscow, 1922, p. 40.
2
s

i65

In 1923 the Centrosoyus was required to take part in the export
of wheat, but it exported only about 1,620,000 poods, a very small
quantity compared with the total wheat exports. The total exports
of the Centrosoyus in the course of that year amounted to 23,797,770
roubles ; of this 63.3 per cent, were raw materials, 30 per cent.
wheat, and 5 per cent, other agricultural produce.
During 1923-1924 the export business of the Centrosoyus expanded, as will be seen from the following figures * :
Thousand chervonetz roubles

ist quarter
2nd quarter
3rd quarter
4th quarter

13,627
10,974
9,310
8,041

Total

4i>952

The total for the year represents 12.3 per cent, of all Russian
exports for that period. The wheat exported by the Centrosoyus
represented 35.8 per cent, of its total exports, and 10 per cent, of the
total export of wheat.
Altogether, during 1922 exports constituted 28 per cent, of the
entire business of the Centrosoyus, in 1923 only 11.3 per cent, of the
total, and during the first six months of 1924 24 per cent.
Another branch of Centrosoyus commercial activity was that of
forming stocks of wheat for state organisations. In 1922 the Centrosoyus desired to constitute stocks of wheat and fodder to a total value
of 12 1 / 2 million roubles, but it lacked the funds needed for the
purpose. In order to obtain produce from the villages it was, as has
already been said, essential to offer the peasants the commodities they
really needed in exchange. With this object in view, the Centrosoyus
asked the Supreme Economic Council for a commodity credit of
10 million gold roubles, but from July to December 1922, the Supreme
Economic Council delivered goods amounting to only 101,132 roubles.
As a rule, the goods arrived too late—when the wheat provisioning
season had already begun—and the provincial unions, lacking such
goods, were unable to procure the necessary quantities of wheat.
The total value of the wheat stocks to be constituted was estimated
1
Soyus Potrebiteley, No. 11, 1924. The Centrosoyus report for 19231924 gives the total value of exports in that year as 42,279,000 chervonetz
roubles.

1 <• *

i66 —

at 11.4 million gold roubles. The Centrosoyus had undertaken to
cover 25 per cent, of the unions' expenditure, but it had only 772,558
gold roubles' worth of commodities at its disposal, whereas it needed
2,840,650 gold roubles' worth.
In order to obtain credits from the State Bank in 1922 the Centrosoyus had to sell to the Bank the stocks of wheat which it had
formed ; even then it only succeeded by October in obtaining two
advances for a total amount of 377,000 gold roubles. The State Bank
then suspended the allocation of credits during a period of one month,
owing to lack of funds. Moreover, the Centrosoyus was obliged to
hand over to the Supreme Economic Council all the wheat which
it had purchased with the commodity credit provided by the Council,
and upon conditions which the Centrosoyus described as " usurious ".
The Centrosoyus had finally to limit its wheat estimates to 5 million
poods ; and even then it only succeeded in obtaining 3.7 million poods
by 1 January 1923 1.
In the course of the provisioning season of 1922-1923 the Centrosoyus succeded in constituting a stock of 7 million poods of wheat
and fodder. Three-quarters of this was obtained by means of commodity credits, which covered about 80 per cent, of the advances made
by the Centrosoyus to the provincial unions.
During the economic year 1923-1924 the Centrosoyus was instructed
to form a stock of 50 million poods of wheat, half of which (25 million) was intended for export. Much difficulty was experienced in
the execution of this order, as the Centrosoyus had only 6 million
roubles at its disposal, together with a credit of 25 million roubles
•from the Commissariat of Finance '.
The wheat provisioning and export operations have been wholly
profitless to the Centrosoyus. It is true that by these transactions it
secured a certain amount of working capital ; but in order to meet
its engagements it had to sacrifice all its duties as a central organisation towards the local co-operatives. Passing from one commercial
1
5

Otchot Centrosoyusa za 1Q22 god.
The credits granted by the State Bank are extremely unprofitable
as the rates of interest are very high (10 per cent, and more). The credits
of the Commissariat of Finance are given in wheat loan bonds, which
results in very serious loss to the Centrosoyus (Soyus Potrebiteley, Nos.
1-2, 1924-)

According to the most recent information received, the Centrosoyus
has succeeded in forming a stock of 37 million roubles' worth, almost
exclusively with the help of tbe unions and primary societies. Cf. Potrebitelskaia Co-operatsia S.S.S.R. v 1Ç23-1Q24 godu (Consumers' Cooperation in the Soviet Union, 1923-1924), p. 20.

— 167 —
operation to another, the Centrosoyus rapidly became a purely commercial business and ceased to be the real centre of the consumers'
co-operative movement. Its transactions were of a scope and character quite beyond the powers of the local co-operative organisations.
The first result of this was a slackening of the bonds between
the Centrosoyus and the local co-operatives, as the latter received a
minimum of support, which fell very far short of their needs. On
the other hand the Centrosoyus, which could no longer depend upon
the local co-operatives, was exposed to the full shock of the trade
slump in the autumn of 1923.
As a buyer, the Centrosoyus had to deal chiefly with the nationalised industrial undertakings and state commercial bodies ; as a
seller, its chief customers were the co-operative organisations, although
it also did a considerable business with other customers. The following table gives a summary of the position 1.
PERCENTAGE DISTRIBUTION OF PURCHASES AND SALES OF
CENTROSOYUS, IQ22 TO 1924
Purchases

Sales

Contracting parties
1922

Co-operative organisations
State organs
Private individuals
Foreign clients

1923-1923

1923-1924

1922

16.5
78.2
3-2
2.1

40-3
45-0
4.0
10.7

55-0
17.0
2-5
25.0

14.6
72.4
12.7
O.3

I 1922-1923

1923-1924

65-5

54-8

16.2
3-1
15-2

15.0
3-3
26.9

It must not be overlooked that in 1923-1924 nearly 11 per cent.
of the sales of the Centrosoyus were negotiated with its branches and
agencies. The latter made 61 per cent, of their purchases from cooperative organisations, 14.6 per cent, from state bodies, and 19.0 per
cent from private traders 2 . Up to the present time, only two-thirds
of the commercial operations of the Centrosoyus have been transacted
with consumers' co-operatives.
:
The figures for 1922 are taken from the article by A. FISCHHÄNDLER
in Narodnoie Khoziaistvo Rossii za 1Q21-1Q22 god ; those for 1923 from
the Soyus Potrebiteley, Nos. 1-3, 1924 ; and those for 1924 from Otchot
Centrosoyusa za 1Ç23-1Q24 god.
- Otchot Centrosoyusa za 1Ç23-IÇ24 god.

— i68 —
In the autumn of 1922 the delegates' meeting of the Centrosoyus
passed a resolution emphasising that it was " absolutely essential to
concentrate in the Centrosoyus all the relations of the consumers'
co-operative movement with the large syndicated industries of the
state ". But this principle was never put into practice, for the
Centrosoyus only attended to its own commercial transactions, completely neglecting the interests of the co-operative movement. In
collecting the funds which it needed, the Centrosoyus ignored the
financial interests of the co-operative unions and consumers' societies.
Following the period of chaotic commercial activity which lasted
from the end of 1921 to the middle of 1922, and led to serious dislocation of the whole consumers' co-operative system, co-operators
realised that things could not go on as they were. The delegates'
meeting of the Centrosoyus, held in July 1922, expressed the opinion
that the essential defect in the methods of the Centrosoyus was its
failure to serve the co-operative organisations adequately or regularly.
This was held to be due not solely to lack of goods and credit or the
disorganisation of transport, but partly to the rigidity of the cooperative organisation itself, the lack of contact between the centre
and the circumference of the system, and the marked tendency to put
trade before all else.
After this July meeting, all co-operative congresses and delegates' meetings, especially those of Centrosoyus, remarked upon this
anomaly. In 1922 the co-operative press observed " an utter lack
of discipline in the activity of the co-operative movement ". It was
prophesied that " unless the consumers' co-operative movement could
be cured of this mania for trade for its own sake it ran thé risk of
disappearing from the organised economic life of the country and
degenerating into a mere traders' association ".
When the co-operators saw " the futility of their efforts to capture the market ", they realised the truth of "the capitalist axiom that
the volume of trade is determined by the volume of goods and money
available ". The Soviet press pointed out that no exhaustive
examination was necessary to show that, if the co-operative system had
achieved any success, it was wholly due to the privileged economic
position given to it, and not in the least to the efficiency of its commercial organisation ; in any case the results achieved could not conceal the many defects of its work J .
1

Economicheskaia Zhizn, 1 October 1922.

— 169 —
The heads of the Centrosoyus affirmed, on the contrary, that
the consumers' co-operative movement, having gained experience, was
about to enter upon a very far-reaching policy which would enable
it to monopolise the operations of provisioning and distribution. The
Centrosoyus, they said, ought now to put its magnificent schemes
into practical effect l. Nevertheless, the Centrosoyus continued to
devote its energies to commercial transactions during the whole of
1923. It endeavoured to expand them as much as possible in order
to capture the home market, but it failed to take into account the
economic and financial weakness of the co-operative organisations
affiliated to it.
This over-estimate of the capacities of the consumers' cooperative movement was thrown into relief on the occasion of the
Nijny-Novgorod Fair, held in the autumn of 1923. The Centrosoyus
was the largest buyer, its intention being to re-sell all the goods purchased through the consumers' societies. The competition of other
buyers sent prices up, and at these high rates the Centrosoyus entered
into several long-term contracts binding it for several months to come
and obliging it to purchase new stocks of goods. During the last
quarter of 1922-1923 the Centrosoyus made purchases amounting to
56 million chervonetz roubles, an increase of 50 per cent, over the
preceding nine months (October 1922 to June 1923).
On 1 October 1923 the debit balance of the head office of the
Centrosoyus amounted to more than 100 million chervonetz roubles,
including bills for 35 millions, to which was added bills for a further
12 million signed at the Nijny-Novgorod Fair. At this time the
entire stocks of the Centrosoyus were worth only 36 million chervonetz roubles, and it was impossible to get rid of these goods, partly
on account of the general poverty of the population (especially the
peasants') and partly because of the hierh retail prices placed on the
goods, which were far beyond the purchasing power of the majority
of the people. It became clear that the Centrosoyus had made plans
on much too vast a scale. Most of the goods purchased remained in
its warehouses.
At the same time the co-operative unions and consumers' societies,
finding that they could not get rid of their stocks, were unable
to fulfil their obligations toward the Centrosoyus. Their efforts were
wholly directed towards meeting their debts to the State trusts and
1

Soyus Potrebiteley, July 1922.
3

170 —

banks, whose demands were insistent. The Centrosoyus had to
liquidate the debts of the co-operative societies to state undertakings.
This absorbed practically the whole of its working capital ; its financial positioii was jeopardised, and the whole co-operative system was
shaken by a crisis which showed the danger of the Centrosoyus
extending its operations without the support of the primary co-operatives.
According to M. Khinchuk " the crisis of 1923 placed co-opera' tives in a particularly serious position. The difficulty first arose
among the primary organisations, and then spread to the unions and
national co-operative centres. The whole system was involved and
was trapped between high prices and the population's low purchasing power". Mr. Khinchuk is of opinion that the real cause of the
crisis were (a) the reduction of the population's purchasing power ;
(b) the inadequacy of the working capital of the co-operatives ;
(c) the general lack of credit ; (d) the irrational organisation of the
co-operative commercial departments 1 .
It must be admitted that the Centrosoyus was by no means free
to act on its own initiative. The bodies which controlled the economic system had expected that the autumn of 1923 would be an extremely favourable time for selling goods. Influenced by this optimistic forcecast and in anticipation of the harvest and annual supply of
agricultural produce and raw materials, the whole of the consumers'
co-operatives took in large stocks. Provincial unions and other cooperative organisations received goods both from the Centrosoyus
and from the trusts and syndicates of nationalised industries with
which they had established direct relations.
The heads of state industrial undertakings insisted that the Centrosoyus should increase its purchases in order to bring industrial
products within the reach of the consumer ; at the same time, the
co-operative unions and societies increased their orders in expectation of increased business—which was absolutely necessary to
consolidate their own position. As a result, during 1923 the Centrosoyus expanded its commercial operations, as one writer stated, even
more wildly than other co-operative bodies, which themselves were
speculating rashly 2 .

Soyus Potrebiteley, Nos. 13-14, 1Q23.
A. FISCHHÄNDLER : " Lessons of the Crisis ", in Soyus Potrebiteley,
Nos. 13-14, 1923.
a

171

The co-operators themselves admit that the crisis was aggravated
by lack of method and the purely commercial character of co-operative
policy, which only aimed at multiplying transactions without considering existing conditions. They pointed out : (i) that their programmes included quite inconsistent transactions ; (2) that these
programmes were drawn up solely with the idea of expanding
commercial operations, without consideration either of the powers of
the primary co-operatives or of the purchasing power of the population ; (3) that co-operators were ignorant of the special market
conditions in respect of certain commodities, and failed to realise that
the co-operatives could not compete with small manufacturers and
home industry ; (4) that the co-operatives, making no allowance
for inevitable delay in the circulation of goods, had accepted credit
upon prohibitive terms with the sole object of increasing their working capital ; (5) that the plans laid down did not provide for the
expansion of the co-operative organisation \
The Centrosoyus, like all the co-operatives, desired to increase
its working capital, but on the other hand was compelled to discharge
state orders and instructions and knew nothing of the real needs of
the consumers ; it therefore gave its almost undivided attention to
export and provisioning transactions for the Government. When,
in the autumn of 1923, it decided to do more for the great mass of
co-operators, it found that the latter, having long since lost the habit
of providing for their needs through the co-operatives, could not as
a rule be reached through their societies ; thus, when the Centrosoyus tried to use them in extending its business it plunged into
continual difficulties.
" If the entire co-operative organisation ", says the writer just
quoted, " had united in seeking a sound basis of action and operated
on it in the light of actual facts ; if its plan had been based — at
least partially — upon prevailing conditions ; if, in short, it had
tried to organise a rational system of supply, the shocks and dangers
which followed vague and unsystematic action would at least have
been less dangerous ". The autumn crisis of 1923 was the result,
first, of the mistaken policy of the Centrosoyus, but even more of the
defective organisation and extreme weakness of the whole co-operative system.

Ibid.
3

— 172 —
Such being the work of the central body, the outer branches of
the co-operative system, i.e. the unions and primary societies, will
be examined in the following pages.

W O R K OF THE CO-OPERATIVE UNIONS

By allowing itself to be drawn into purely commercial operations,
the Centrosoyus had destroyed the balance between its own work
and that of its affiliated co-operatives, but, worse than this, it encouraged the co-operative unions and consumers' societies to follow
its example. The co-operative movement had emerged from the
Communist period denuded of financial and economic resources ;
the following figures show, for example, the financial position of
88 provincial unions as at 1 January 1922 1 :
Assets

Million cold roubles

Merchandise and materials
Miscellaneous property
Capital
Members' subscriptions outsanding
Sums owing by third parties

18
10
17.5
6.8
17.3

The average assets of a union at various dates in 1922 was
as follows :
1923

Goods and materials

Goods owned by the
union
Goods supplied by the
state for exchanges
in kind
Others

Total

1 January
(cold roubles)

1 April
(cold roubles)

I59.93S

144,798

322,968
148,369

7.765

631,275

—

1 July
(gold roubles)
130,023

—

130,023

By 1 July 1922 the state stocks of commodities intended for exchanges in kind were completely exhausted ; and the value of commodities in stock now amounted on an average to only 130,000 gold
roubles per union. The average monthly sales of a provincial union
or regional section in 1922 varied as follows 2 :
1
2

Soyus Potrebiteley, No. 10, 1922.
Ezhegodnik Centrosoyusa za IQ22, Vol. II, p. 58.

— 173 —

AVERAGE MONTHLY SALES OF UNIONS AND REGIONAL SECTIONS, IÇ22
Union
Quarter

First
Second
Third
Fourth

Total
(«old
roubles)

Regional
Per inhabitant
(gold
kopecks)

6
5
8
5

84,223
72,408
115,029
71,803

Total
(gold
roubles)

10,859
10,040
14,200
10,100

section
Per inhabitant
(«old
kopecks)

8
7
9.8
7

The total sales of all the provincial unions, as given in another
source, only amounted to 88.4 million gold roubles for the whole of
the year 1922, i.e. an average of 74 kopecks per inhabitant ; that
of all the regional sections amounted to 77.2 million gold
roubles or 65 kopecks per inhabitant \ In view of their small turnover, credit was of the utmost importance for the provincial unions,
and regional sections. A solution of the question was only attempted
in the second half of 1922, thanks to the Centrosoyus and to
the creation of the Consumers' Co-operative Bank. About the middle
of 1922 the Centrosoyus granted credits to its members, either by way
of advances for the creation of stocks or in goods, to an amount of
5,785,000 roubles. The Consumers' Co-operative Bank, during its
first six months' working (February to July 1922), made 96 advances amounting in all to 22,770,000 million Soviet roubles, i.e.
1,034,000 gold roubles (at the rate of exchange on 1 August 1922).
As a rule no single loan exceeded 133,000 million Soviet roubles or
60,670 gold roubles.
During 1922 the capital of the co-operative unions increased
considerably owing to the expansion of their operations and to their
participation in the economic life of the country. The following table
shows the distribution of capital as at 1 January 1923 2.

FISCHHÄNDLER : op.

Narodnoie Khoziaistvo

cit.

Rossii za 1Q21-1Q22 god.
3

— 174

CAPITAI, OF CO-OPERATIVE UNIONS AS AT I JANUARY I 9 2 3

(in gold roubles)

Classification

Initial capital
Share capital
Goods
Miscellaneous property
Loans, deposits, etc.

Total

Provincial
and regional
unions

Regional
sections

Total

31,746,974
353.450
19.793.686
7.454.773
12,937,087

11,483,000
2.25°.500
5.874.500
15.718,500

43.219.974
353.450
32,024,186
13.329.273
28,655,587

72.285,970

45.326,500

117,582,470

Share capital (composed of payments on members' shares) represented only a small proportion of the total capital held by the cooperative unions. Their initial capital was only 36 or 37 per cent.
of the total ; and the amount of loans, deposits, and so forth only
23 per cent, (or two-thirds of the initial capital).
During the first nine months of 1923 the Centrosoyus opened
credits totalling 30.5 million gold roubles. In 1923 the operations of
the provincial unions expanded slightly, the average monthly sales
per union being as follows 1 :
Quarter

First
Second
Third
Fourth

Provincial unions
(chervonetz roubles)

Regional sections
(chervonetz roubles)

86,OO0
100,000
131,000

15,000
17,000
—

270,000

47,000

Since the figures for 1923 are in chervonetz roubles (not in gold
roubles as for 1922) and the chervonetz had depreciated considerably
in terms of the gold rouble, it will be seen that the 1923 sales were
only very slightly higher than those for 1922. Nevertheless, it should
be remarked that the figures for various unions differ considerably.
1
Cf. Economicheskoie Obozrenie, Nos. 23-24, 1924. In April 1923
the share capital of 12 large unions amounted to 659,570 chervonetz
roubles and that of 32 smaller unions to 218,182 chervonetz roubles. Cf.
Potrebitelskaia co-operatsia v IQ23-1Q24 godu.

— 175

Side by side with unions which do a large business — such as the
Kuban, Donetz and Yenisei Unions — there are others whose transactions are very limited. In general, one-third of the unions inspected
in 1923-1924 had a monthly turnover of from 100,000 to 200,000 roubles
and one-fourth from 50,000 to 100,000 roubles.
During 1923 the co-operative unions obtained considerable sums
both from the Centrosoyus and from the banks ; in addition, during
the financial year 1923-1924 the Centrosoyus advanced commodity
credits to the unions for the following sums l :
Quarter

Thousand
chervonetz roubles

First
Second
Third
Fourth

5.343
7.326
6,092
7.324

In 1922-1923 and 1923-1924 the gross operations of the whole
co-operative system expanded as follows 2 :
1922-1923

Thousand
chervonetz roubles

First half-year
Second half-year
Total

1923-1924

Thousand
chervonetz roubles

53
113
166

186.7
278.3
465.0

It must not be overlooked that the total figure of 500 millions
given for 1923-1924 includes transactions effected by the regional
unions which during the second half of the year replaced the regional
offices of the Centrosoyus. These latter, in 1922-1923, had effected
commercial operations for a total amount of 80 million roubles ; this
figure should therefore be added to the total operations for 1922-1923
if they are to be compared with those for 1923-1924. It will then
be seen that from 1922-1923 to 1923-1924 the total co-operative turnover increased by 100 per cent.
The average (gross) amount of business done by any one union
in 1923-1924 increased very little. During the first quarter the
average amounted to 152,000 roubles ; this rose during the second
1
2

Soyus Potrebiteley, No. 2, 1925.
Potrebitelskaia co-operatsia v 1Ç23-1Q24 godu, p. 48.
3

— 176 —
quarter to 164,000, and during the third quarter to about 200,000
roubles. The average per inhabitant was 19 gold kopecks in the
first quarter and 35 in the fourth.
The financial situation of co-operative unions improved very
little in 1924. Combining the balance sheets of the regional unions,
their capital varied as follows between 1 January and r October 1924 x :
CAPITAL OF CO-OPERATIVE UNIONS, 1924
1 January 1924
Class of capital

Thousand
chervonetz
roubles

Initial capital
Share capital
Goods
Miscellaneous property
Loans, deposits, etc.

69,872
4,334
102,379
23.177 '
135.583

Total

Per cent.
of total

20.9
I.I

3O.7
6.9
40.4

100.0

335.345

1 October 1934
Thousand
chervonetz
roubles

Per cent.
of total

76,97s
9.650 a
"9.343
22,870 *
2i7. I °5
445.946

17-3
2.2

26.7
SI
48.7
100.0

1
Real estate and securities.
2 Total share capital plus securities.
3
Real estate, not securities.

The figures given show that the share capital represented barely
one per cent, of the resources of the co-operatives in 1924. The
greater part of their working capital was borrowed. According to
other estimates, on 1 October 1924 the capital owned and borrowed
by the co-operatives was as follows 2 :
Total capital
(Thousand
chervonetz roubles)

Capital owned by the
co-operatives
Borrowed capital
Total
1
2

Capital invested in
commercial operations
(Thousand
chervonetz roubles)

217

302

269

Co-operativny Pout, 15 March 1925.
Soyus Potrebiteley, No. 4, 1925.

—m—
Thus, in 1924, almost the whole of the co-operative unions' commercial transactions were effected with borrowed capital. Under
these conditions, one of the chief preoccupations of the unions was
naturally to obtain funds at any cost.
For lack of funds, the co-operative unions rushed into commerce
as the Centrosoyus had done. In the race for customers the unions
competed not only with the Centrosoyus but with their own members.
As the Centrosoyus could not meet their demands for credit and
goods, the unions ended by setting up agencies of their own at
Moscow, instead of leaving the Centrosoyus to represent them.
On 1 January 1922, out of 102 provincial unions and united
societies affiliated to the Centrosoyus, 54 unions had representatives in
Moscow ; in other words, more than half the Centrosoyus members
considered direct representation at Moscow a necessity. The duties
of these representatives were very varied. Those of the weakest
unions, being unable to operate on the market, spent their time in
seeking credits and in keeping their unions informed of market conditions. But the majority of these agents did real commercial business, purchasing the goods needed by their unions and selling those
produced in their respective areas. The following figures show the
percentage distribution of their business at the end of 1922 1 .
Contracting party

Centrosoyus
Other co-operative
organisations
State bodies
Individuals and private
commercial houses

Purchases

Sale*

53.6

14.4

4.5
25.6

31.3
9.0

16.3

45.3

As will be seen, more than half the total business was done outside the Centrosoyus. At first, when the central organisations were
still weak and had not yet been able to restore the links broken
during the period of Communism, these agents had to represent the
interests of their unions and help to restore closer relations with the
centre. The situation, however, soon changed completely. According to the official organ of the Centrosoyus :
The representatives of the unions, far from helping to co-ordinate
the work, disorganised it, since they worked outside the Centrosoyus, and
brought discord and speculative fever into the internal relations of the
1

Otchot Centrosoyusa

The Co-operation

1 S

za 1Q22 god.
,

i78

co-operative movement. At times of financial crisis these representatives
sold their goods to private traders, thus increasing the already enormous
number of middlemen who made their living from these operations, and
forcing up prices artificially, of which the provinces were immediately
informed \
T h e Centrosoyus Board of Directors m a n y times emphasised the
fact t h a t such proceedings could not be tolerated. T h e report of the
Board for October 1922 states :
Our commercial practice is based upon too great a variety of methods.
Our knowledge of the market comes to us by accident. The work of
the central and local co-operative organisations is not yet closely
enough related ; there is no co-operative discipline. The policy of
trade for its own sake has acquired a predominance which has completely upset the commercial organisation of the consumers' co-operative
movement as it should be.
If the operations of the Centrosoyus are compared with those of its
members, it will be seen that much labour is lost in small transactions,
and that a great deal of business is done by the members apart from the
Centrosoyus. Striking examples of this are given by the work of the
offices and agents of the provincial unions at Moscow, the very slight
commercial relations of these bodies with the large consumers' organisations ; and, finally, the almost total lack of influence of the central
organisations, even in the largest towns.
T h e same lack of discipline was to be observed in the commercial
transactions with foreign markets, where many organisations tried
to do independent export a n d import business 2 .
A b o u t this time the Centrosoyus passed a resolution laying down
t h a t the fundamental object of the commercial operations of regional
centres a n d provincial unions was to provide for the needs of cooperators in their respective areas t h r o u g h the Centrosoyus branches in
other regions and t h r o u g h other provincial unions, and that n o action
affecting the central organisations m i g h t be u n d e r t a k e n without their
knowledge. T h e various co-operative organisations nevertheless continued to operate on their own account.
T h e r e was little if any improvement in 1923. I t was found, by
investigation of the work done b y the Moscow agencies of 18 unions
affiliated to the Centrosoyus, t h a t only 65 per cent, of the transactions which they did went t h r o u g h t h e Centrosoyus, and t h a t on an
average 26 per cent, of the total operations were effected direct with
state u n d e r t a k i n g s or private traders. I n certain cases t h e proportion
was m u c h higher, as will be seen from t h e examples given below 3 .

1
2
9

Co-op erativnoie Dielo, 9 Oct. 1922.
Ibid., Nos. ig and 20, 1922.
Soyus Potrebiteley, Nos. 1-2, 1923.

— 179 —
Union •

Percentage

Kostroma
31
Orlov
36
Kursk
28.7
Penza
46.3
Perm
36.6
Ekaterinburg (Central Industrial Co-operative)
38
Turkestan (Regional Union)
82
Kharkov (Consumers' Society)
45.4
Vologda
50.8
The unions showed a lack of co-operative discipline, not
only towards their central organisation but also towards thenown members.
Provincial unions and regional sections did
retail business themselves, and opened large and small shops
in localities where consumers' societies were already in existence.
The Provincial Union of Ivanovo-Voznessensk, for example,
organised the sales of manufactured products at Vologda and
in the various districts of the provincial government. In the provincial government of Kiev, there was very keen competition between
the consumers' societies and the shops of the co-operative unions.
The provincial unions did not consider in the least whether their
work was in accordance with co-operative principles. The Centrosoyus neglected them, and they in turn came to regard it merely as
a commercial competitor which menaced their own success.
The unions had lost the habit of working for a commercial profit
(said the Vice-President of the Centrosoyus), and they were thus incapable of supporting the Centrosoyus. On the contrary it frequently
happened that the unions, having lost any idea of co-operative discipline,
received funds from the Centrosoyus for the discharge of definite obligations and then omitted to make any distinction between their own
capital and the funds thus entrusted to them. As they had no separate
organisation and the link between them and the consumers' societies was
very slight, the unions continually appropriated for commercial operations
funds which had been entrusted to them for other purposes *.
This tendency to extend commercial operations at any cost led
to the growth of " co-operative imperialism "—encroachment by
one organisation upon the domain of another. The effect of this
" imperialism " was that the unions lost the habit of co-operative
work and subsequently that the bonds between the co-operative organisations and the great mass of consumers were still further slackened.
In order to keep their place on the market the co-operatives at last
renounced all co-operative principles. There was no longer any difíerence
1

Ibid.,

No.

10,

1923.

— i8o —
between co-operative methods and those of the state industrial and
commercial organisations in their relations with the consumer. The
watchword — previously unknown in co-operative circles — that " the
end justifies the means " was now accepted by them, and all eSorts
were directed towards the sole object of preserving the co-operative
organisation and its management l .
Our co-operative system underwent profound changes in 1923, but it
still has the same characteristic defect, a kind of co-operative imperialism
which consists in extending the retail trade of the unions and arousing
competition between the unions and their own members. Moreover, the
bonds between the unions and the primary organisations are very weak 2.
T h e following information indicates t h e w a y in which t h e unions
served their members. I n 1922 the total transactions of the provincial unions amounted to 88.4 million gold roubles ; of this nearly
50 per cent. (44.3 millions) represented business done w i t h regional
sections, only 12 per cent. (10.4 millions) business done with the consumers' societies of the region, 10 per cent. (8.3 millions) transactions
w i t h state organs, and transactions direct w i t h the population 25.5
per cent. (25.3 million).
I n 1922-1923 t h e percentage distribution of the operations of
provincial and regional unions was as follows 3 :
Customers

Purchases

Centrosoyus
Members of provincial unions
Other co-operative organisations
State organs
Sections and agents of the unions
Private individuals

13-5
16.8
26.1

—
13-6

Sales

—
5I.I
IO.9
9-5
14.6
139

T h u s in 1922-1923 transactions with private traders represented
nearly 14 per cent, of the total, while sales to the unions' own members d u r i n g t h e same period were barely half of t h e total. T h e total
business of all co-operative unions amounted to 159 million gold
roubles ; 15 per cent, of the total sales, a m o u n t i n g to 23 million gold
roubles, were m a d e by sale shops belonging to the u n i o n s .

Cf. SCHIERMANN : " Economic Activities of the Consumers' Cooperative Movement ", in Economicheskaia Zhizn, 15 July 1922.
3
Cf. A. FISCHHÄNDLER : " Consumers' Co-operation in 1922-1923 ",
in Economicheskaia Zhizn, 2 Feb. 1924.
The situation remained much the same in 1924. The reports submitted to the thirteenth Congress of the Communist Party, held in May
1924, and the resolution passed by that Congress bear witness to the
same condition of affairs.
5
Soyus Potrebiteley, No. 3, 1924.

— i8i —

In 1923-1924 the sales and purchases effected by co-operative
unions were distributed as follows 1 :

Customers

Centrosoyus •
Members of the unions
Other co-operative organisations
State organs
Private individuals
Sale shops belonging to the unions
Agencies and branches

Purchases
Per cent.

Sale.*
Per cent.

24.O

—
37-8

8.8
—
41.8
8-3
—
17.I

10.2

8-5
9-3
15-4
r8.8

At the present time the co-operative unions are still giving their
members very unsatisfactory service and are themselves being treated
in similar fashion by the Centrosoyus. Economic and financial
impotence, inadequate organisation, cut-throat competition with state
and private traders, and, worst of all, among its own members—such
is the position of the Russian co-operation organisation to-day. The
unions give no support either to the Centrosoyus or to their own
members.
CONSUMERS' SOCIETIES IN T H E TOWNS *

During the whole period covered by this chapter, the primary
co-operative organisations were perpetually undergoing transformation. First of all came the establishment of industrial co-operatives
distinct from the general consumers' co-operatives. These were at
first voluntary groups, but later combined to form central industrial
co-operatives which in certain districts replaced the united consumers' societies. The latter were constantly being changed from
united to voluntary societies and vice versa. Under these circumstances the operations of consumers' societies at various periods can
only be approximately compared.

Potrebitelskaia co-operatsia v 1Ç23-1Ç24 godu, pp. 51 and 53.
Neither the press nor co-operative publications have up to 1925
made any clear distinction between general consumers' co-operatives and
the industrial co-operatives. The information published frequently refers
to urban co-operatives in general ; and, on the other hand, the actual
composition of general or industrial consumers' societies is not always
in accordance with their title. The position of the industrial co-operative
movement in particular will be dealt with under a separate heading.
2

1 5 *

— l82 —
At the close of 1921 primary organisations were still influenced
by the policy of exchanges in kind on behalf of the state. As
has been seen, they had expanded considerably but only superficially ;
and at the beginning of 1922, when trade on ordinary lines was restored, the operations of consumers' societies diminished rapidly and
their capital was reduced almost to nothing. The financial position
of urban consumers' societies at 1, January 1922 is shown by the
following figures 1 :
FINANCES OF URBAN CONSUMERS' SOCIETIES AT I JANUARY I922
(in gold roubles)

Society

United consumers' societies of provincial
capitals
Societies
iu
other
towns with several
sale shops
Societies in. divisional
capitals with one sale
shop
Industrial
co-operatives with several
sale shops
Industrial
co-operatives with one sale
shop
Voluntary industrial
co-operatives
Other voluntary groups

The principal resources of the consumers' societies at the beginning of 1922 were the remains of the old stocks collected by the state
for purposes of exchanges in kind. During 1922 there was no sensible improvement in the financial and economic position of the
1

Ezhegodnik

Centrosoyusa za IQ22 god, Vol. II.

- i 8

primary co-operatives. The commercial activities of consumers'
societies as a whole certainly expanded ; but the primary societies were
often mere skeletons, and their transactions insignificant. Moreover.
the urgent need of working capital, and the lack of support from
the unions and national organisations compelled the consumers'
societies, both in towns and villages, to follow the example of the
higher organisations and rush into trade at any price.
In view of the continual changes in the organisation of consumers' societies, the figures for the operations of primary co-operatives
during 1922 are not fully comparable. The average monthly turnover per inhabitant in the capital cities (i.e. by the united societies
of Moscow and Petrograd) was go gold kopecks ; in provincial capitals it was 30 kopecks, and in divisional capitals 20 kopecks. In the
voluntary consumers' societies the monthly sales per member averaged, in the capital cities, 3 gold roubles ; and in other towns, 2.90
roubles.
The fact that the transactions of various consumers' societies
increased is shown by the following table 1.

Ibid., p. 134.
3

— 184 —
AVERAGE MONTHLY TURNOVER OF URBAN CONSUMERS' SOCIETIES, IQ22
(in gold

roubles)

ist quarter

4th luarter

Organisation
Per
society

United societies of the
683,091
capital cities
United
societies
of
19.776
provincial capitals
Consumers'
societies
with several
sale
shops
4.654
Consumers'
societies
with one sale shop
960
only
Industrial
co-operatives with several
4.362
sale shops
Industrial
co-operatives with one sale
shop only
1,258
Voluntary societies in
the capital cities
3.598
Voluntary societies in
other towns
1,114
Voluntary
industrial
1,892
societies

Per
inhabitant 1

Per
inhabitant J

Per society

O.67

1,193,290

O.83

O.24

27,030

O.40

0.51

—

O.II

—

,—

0.21

15.310

O.80

0.22

—

1-95

12,499

5-°3

2.40

—

3.10

8,251 2 -i,5oo

2.85 a - 2 . 6 i 3

' In the case of voluntary societies, per member.
2 Societies with several sale shops.
» Societies with one sale shop only.

On i J a n u a r y 1923 the financial position of consumers' societies
in the towns was as follows :
Gold roubles

Initial capital owned by the societies
Share capital
Goods
Miscellaneous property

17,832,100
2,504,244
24,879.279
12,245,312

A s will be seen, t h e share capital is insignificant and goods are
the most important item. T h e following table shows in detail the

i85

composition of the capital of various co-operatives as at i January
1923 :
FINANCIAL RESOURCES OF PRIMARY CO-OPERATIVE SOCIETIES,
I JANUARY 1923 *

Initial capital
Organisations
Gold
roubles

Share capital

Per
Per
cent. Gold cent, oí
of 1 oubles total
total

Reni estate a n
other property

Goods
Gold
roubles

Pe,
cent.
of
total

Gold
roubles

Pe.
cent
of
tota

Moscow Consumers'
11,231,702 49-7
0.01 9,360,540 41.7 1,944,063 8.6
3,906
Co-operatives with several
sale shops
O.Ç2 11,364,374 54-5 4,966,738 23-4
(a) In provincial capitals 4.513.684 21.5 110,544
686,012 17.9
(Ö) In other towns . .
0.99 2,435.564 63-3
665,840 17-3 38,212
Consumers' societies in
other towns with one
sale shop only . . .
802,459 48.7
373-352 22.6 "36.703
333.704 20.2
7-1
Industrial co-operatives :
( a ) With several sale
shops
. . . .
951,102 18.1 62,212
t.i
363,384 6.9 3,878.156 73-8
(b) With one sale shop
2.6
436,644 39-1
96,410 8.6 30,167
552,958 49.4
Voluntary co-operatives
( a ) General
. . . .
19,500 100
(b) Industrial
. . . .
103,000 too

Total
Gold
roubles

Per
cent.

32,540,211

100

2o,955.34<3,825,628

100
100

1,646,218 too
5.254.854

100

1,116,169

100

'9,500

1 Soyus Potrebiteley, No. 7, 1923.

As will be seen from the table, the share capital (made up of
members' payments) formed not more than 7 or 8 per cent, of the
total capital in urban consumers' societies, and between 1 and 3 per
cent, in industrial co-operatives. Even so large a society as that
of Moscow had hardly any share capital. The initial capital of all
the societies together did not exceed one-fifth of the total ; the resources of these societies consisted mainly of stocks of goods.
The working capital was as a rule very small ; credit was therefore of the greatest importance both for the societies and for the
unions, but it was very difficult to obtain, especially for the primary
societies, since, being furthest removed from the Co-operative Bank,
they were unable to make use of this financial centre as did the
provincial and regional unions.
The Centrosoyus took no direct part in the business of the
primary co-operatives ; in principle, this duty was left to the various
unions. The voluntary and united societies could receive goods
(for cash or on credit) only through the intermediary of their regional
unions. This centralisation of the credit system (especially commodity
credits) militated against the financial restoration of the primary
co-operatives. Credit and goods allotted by the centre were often
3

i86 —

stopped on their way to the primary societies by the provincial unions,
which themselves urgently needed assistance. What actually reached
the primary society was only a fraction of the original consignment,
and frequently consisted of commodities for which there was no
demand among the population.
The primary societies, deprived of all support from the central
organisation and wholly neglected by their unions, had to operate
under extremely difficult conditions. Their resources were practically non-existent and the chance of procuring others was very remote.
Under these circumstances there could be no question of expansion,
even on a very small scale.
The abnormal relations of the co-operative unions and the primary societies resulted in the complete disruption of the ties between them ; and an ever-widening rift appeared, as between the
Centrosoyus and its members \
From the end of 1922 there was a slight increase in the business
done by consumers' societies in the towns, as shown below.
. AVERAGE MONTHLY TURNOVER OF A SOCIETY

(in chervonetz
In provincial
capitals

roubles)

In divisional
capitals

Per
inhabitant

Per
member

IQ22

4th quarter

29,50O

5.400

O.38

I.47

37.300
43,500
83,900
100,000

6,800
8,000
15.300
36,000

O.48
O.56
I.08

2.10
2.24
2.42

~~*

—

1923

ist quarter
2nd quarter
3rd quarter
4th quarter

1
Excluding the figures for united societies in Petrograd, Moscow, Rostov-on-Don,
Kharkov, and Kiev. Soyus Potrebttetey, Nos. 3 and 5, 1934.

During the first nine months of 1923 the average turnover of
societies in provincial capitals amounted to 164,700,000 chervonetz

Cf. ISLANKIN: " More Attention to tlie Primary Co-operative Organisations ", in Soyus Potrebiteley, Nos. 1-2, 1924.

i 8

roubles, and of societies in divisional capitals to 30,100 roubles. These
averages, however, do not give an accurate idea of the position. Of
the consumers' societies in provincial capitals 60 per cent, had a.turnover of 50,000 chervonetz roubles or less, and of those in divisional
capitals 60 per cent, had one of less than 10,000 roubles.
During the last three months of 1923 the position scarcely changed.
Some of the co-operatives expanded, and the proportion of
societies with a turnover of less than 50,000 roubles (in provincial
capitals) or 10,000 roubles (in divisional capitals) fell to 28 per cent.
in both cases.
The consumers' co-operatives in the Moscow region are in a
special position ; both their financial resources and their commercial
transactions are more extensive. Nevertheless, even they have not
progressed as might have been expected. During the first six months
of 1923 the average turnover of these co-operatives was as follows
(in chervonetz roubles) x :
Per society

Manual workers' societies
Non-manual workers' societies

10,984,000
15,474,000

Per member

5.73
4.86

During this period the average monthly purchases per member
amounted to 4.84 roubles.
The position during 1924 showed little improvement, as will be
seen from the following figures taken from balance sheets of the general
and industrial co-operatives.

' Cf. Soyus Potrebiteley, Nos. 13-14, J923.
3

— i88 BALANCE SHEET OF CONSUMERS' SOCIETIES IN MOSCOW, 1924

i January 1924
Customers

Assets
Cash
Goods
Property
Sundry debtors
Various
Total

Liabilities
Share capital
Other capital
Sundry creditors
Various

Total

Chervonetz
roubles
|

Per cent.
of total

1 April 1934
Chervonetz
roubles

Per cent.
of total

543.40O
4.477,400
429,000
2,090,900
23,000

7.2
59-2
5-7
27.6
0.3

520,100
5.O59.20O
482,500
3,320,200
64,900

5-5
53-5

7,563.700

100.0

9,446,900

100.0

578,300
1,254,200
5,710,400
20,8O0

7.6
16.6
75-5
0.3

590,100
1,264,500
7,509,100
85,000

7.563.700

100.0

9,446,800

5-1
35-1
0.7

6.3
13.2

79.6
0.9

100.0

The commercial policy of the urban consumers' societies shows
the same defects as that of the co-operative organisation in general.
Their continual lack of working capital compelled the societies to
accept goods delivered to them by their unions or by state organs,
but in general these consignments consisted of articles for which there
was no demand. There was a constant shortage of articles of prime
necessity and a perpetual surplus of luxuries. The co-operators,
seeing that none of the commodities which they needed could be
supplied by the consumers' societies, left the latter to their own
devices. The societies, being compelled to seek another class of
buyers, became gradually transformed into " universal providers "
(large department stores), where anything could be obtained except
the commodities which the great mass of consumers needed. According to the Co-operativnoie Dielo :
The present commercial policy of the co-operative movement is
characterised by its " universality ". You may enter any co-operative
establishment, whether it be the little shop of a small co-operative union

— i8o —
or the great store of a huge organisation, and you will find everywhere
the same ambition to furnish all classes of goods to all classes of customer.
You will find everything in stock — textile goods, boots, crockery, furniture, perfumery, haberdashery, confectionery ; if anything is wanting,
it is, as a rule, some article of prime necessity. In the fine show cases
are silks, expensive clothing, dainty footwear, cakes, pastry, and even
ikons \
A further defect is the entire lack of coherence and of mutual
understanding among the co-operatives in their m a r k e t transactions.
T h e desire to c a p t u r e the m a r k e t a n d to increase w o r k i n g capital
leads to acute competition among the various societies in the towns
as elsewhere. T h i s competition increases overhead costs, sends u p
prices, and disorganises the various groups of consumers.
It is no secret that all classes of co-operatives, fearing extinction,
aré now dealing in the same kind of goods—articles of current consumption. The lack of special commodities and the depreciation of the rouble
compel them to deal in any class of goods that may be available, and
finally to give up normal co-operative methods altogether. A violent
struggle is now in progress among the various societies, to the intense
satisfaction of the private trader 2.
W i t h such a commercial policy there could evidently be no real
tie between the central a n d local co-operative bodies or between the
societies and their members. T h e chief commercial operations of
the general and industrial consumers' co-operatives in the towns
still consist in trading with state economic organs and private capitalists ; three-quarters of their purchases come under this heading.
T h e majority of sales are made, not to members of the societies, b u t
to the general public.
T h e following table gives the average percentage distribution of
purchases and sales among u r b a n consumers' societies for the economic year 1922-1923, a n d for the first half of 1923-1924, t h r o u g h o u t t h e
Soviet U n i o n 3 :

Co-operativnoie Dielo, 30 Oct. 1922.
Ibid., 28 Jan. 1923.
3
Soyus Potrebiteley, No. 3, 1924. Potrebitelskaia
1923-/924 godu.
1

co-operatsia

ico —

AVBRAGB PERCENTAGE DISTRIBUTION OF PURCHASES AND SALES
IN URBAN CONSUMERS' SOCIETIES
General and industrial
consumers' societies in
provincial capital:,

Customers

/
/

Consumers' societies in
divisional capitals and
industrial centres

(A) Economic Year 1Ç22-1 923
Purchases
Centroso)'us
Unions
State organs
Private organisations
and individuals

4.4
33-0
29-1 /

10.2
15-0

47.0 ;

62.1

74-8
27.8 \

33-0 )

Sales
1

General public
j
Members
j
Co-operative organisa-1
tions
State organs
¡
j

56.3
27.0 )
>
9.7 )
7.0

48.9
38.9 i
36.7

46.O

,.s
5.1

(B) First Half of Economic Year 1Ç23-1Q24
Purchases
Centrosoyus
Unions
State organs
Private organisations
and individuals

10.13
31.1

48.8
19.8

)
|
)

5-9
32-8
35-3 /
68.6

61.3
26.0

Sales
Members
Voluntary societies
State organs
Other buyers

39- 6
5-7 /

46.7
11.6 1

6-7
35-0 )

53-3

12.5 >
42.2 )

60.4

A similar characteristic situation is to be found in Moscow, where
both the Centrosoyus and one of the largest provincial unions have
their offices l .
1

Cf. Economicheskoie Stroitelstvo (Economic Reconstruction), No.

5» 1924-

— ici
PERCENTAGE DISTRIBUTION OF PURCHASES OF PRIMARY
CO-OPERATIVE ORGANISATIONS IN MOSCOW, 1923
Suppliers
Quarter
Co-operative
organisations

First
Second
Third
Fourth

Private
individuals

42.3
45-3

24-9
251
28.3
26.0

38.6
34-9
29.4
¡29-°

41.0

3Ó.I

32-9

36-5
40.0

Average for the year

State organs

I n 1923-1924 the activities of urban consumers' societies considerably increased as a result of the decisions taken in May 1924 b y
the thirteenth Congress of the Communist P a r t y , which modified the
Soviet G o v e r n m e n t ' s policy towards the co-operative movement ;
they will be dealt with later on. A considerable a m o u n t of capital
was allotted to the co-operative organisation. I n 1923-1924 the Centrosoyus was able to open commodity credits for co-operative societies
as follows 1 :
Thousand
Quarter
ctaervonetz roubles
First
1,871
Second
2,351
Third
3,634
Fourth
3,506
T h e total gross operations of urban primary societies (including
industrial co-operatives) in 1922-1923 and 1923-1924 was as follows 2 :
Million ehervonetz roubles
1923-1923

ist half-year
2nd half-year

92
156
248

Total

1923-1924

235
414
649

1
For information relating to general and industrial co-operatives
together, cf. Soyus Potrebiteley, No. 2, 1925.
3
Cf. Economicheskoie Obozrenie, Nos. 23-24, 1924. Soyus
Potrebiteley,
No. 11, 1924.
Potrebitelskaia Co-operatsia v 1Ç23-1Ç24 godu, p . 37.

102

The average amount of business per society in different regions
varied during 1924 as follows 1 :
Chervonetz roubles
January 1924
June 1924

Region

North-West
Central Industrial
Donetz Basin
Ural

32.400
70,100
74,000
19,400

66,500
130,900
120,900
28,000

A certain expansion among consumers' societies was also observed during 1924. The number of societies doing very little business
diminished, while those operating on a larger scale increased, as
will be seen from the following figures :
DISTRIBUTION BY TURNOVER OF 151 GENERAL AND INDUSTRIAL
CO-OPERATIVES,

Average

monthly turnover
per society
Ichervonetz roubles)

50,000 a n d u n d e r
51,000 t o 100,000
101,000 t o 200,000
310,000 t o 300,000
301,000 t o 500,000
A b o v e 500,000

Total

1924

January 1924
Per cent.
of total

Number of
societies

46
25

June 1924

(

70.2

25-1

(

4
3

151

100

Per cent.
of total

Number of
societies

25
34
36
21
16

139

(

42-4

41.O

;

16.6

100

The financial position of urban consumers' societies in 1924 was
still characterised by the same features as in 1923. Their working
capital still consisted principally of borrowed money, while the total
share capital was very small.
Thanks to the new policy towards the co-operative movement
adopted by the Communist Party in 1924, however, the commercial
transactions of the co-operatives with state organs increased very
considerably, a matter which will be dealt with later.

Ibid.

— 193 —
INDUSTRIAL CO-OPERATIVE SOCIETIES

Industrial co-operatives are in the same unenviable position as
the general consumers' societies. In an earlier chapter the origins
of the industrial co-operative movement were described ; it began
with the voluntary societies, which expanded greatly under the influence of various circumstances, such as the food shortage which
began in 1921 and lasted throughout 1922, shortage of goods,
financial weakness of the united societies, and mistrust of the cooperative movement engendered among the workers by the doctrines
of " complete Communism ". Like the general consumers' societies,
the industrial co-operatives, anxious to obtain working capital in
order to maintain their increased activity, launched out into purely
commercial transactions ; they thus became large selling agencies
which handled all sorts of commodities without reference to the
actual needs of their members ; moreover, they competed keenly
among themselves.
After the withdrawal of " complete Communism ", the industrial
co-operatives tried to regain their previous prosperity, but the results of the preceding period still crippled them and have continued
to do so. To begin with, badly organised as they were, they could
not dispose of the stocks of commodities supplied by the state for the
purpose of exchanges iu kind in a manner advantageous to the
workers. The establishment of stocks and the sale of goods with a
view to obtaining working capital could only be carried out very
slowly ; the commissions charged by the central organisations were
very high, consignments were irregularly delivered, thefts of commodities in transit were of frequent occurrence, and so forth. Thus
the industrial co-operatives were short of working capital from the
very first \
As the workers' purchasing power was very restricted and it
was urgently necessary to increase working capital as quickly as
possible, in view of the instability of the currency, the leaders of the
industrial co-operative movement decided that they must follow a
policy of " initial accumulation of capital ", i.e. invest practically all
their available resources in purely commercial operations which in no
way met the ordinary consumer's needs, but if successful would supply
the necessary funds 2 .
1
Report submitted to a conference of the All-Russian Central Council
of Trade
Unions. Cf. Co-operativnoie Dielo, 18 June 1922.
3
Cf. T. OKHOTNIKOV : " The Commercial Policy of the Industrial
Co-operative Movement ", in Soyus Potrebiteley, No. 14, 1922.
3

The Co-operation
t 6

— 194 —

The general disorder, however, brought with it a multiplication
of diverse and inefficient co-operative unions, and a consequent dissipation of effort. The economic and financial resources of the industrial co-operatives, inadequate as they were, were wasted. There
was no link between the various groups, nor between those groups
and the market. Unsound commercial habits thus spread very
quickly.
Such resources as the industrial co-operatives had were made up
of the remnants of the state funds allotted to them when they started,
and these, during the utter anarchy which characterised the period of
re-organisation, were dispersed among all the societies, even the
smallest ones. Later, when the small unions expanded, these funds
could rarely be used. As a rule they were composed of practically
unusable articles or plant, such as repair shops with worn-out machinery, small soap works, cartage undertakings with useless vehicles,
etc. The accounts of the primary societies therefore usually showed
a deficit, and when the Central Industrial Co-operative Section
(Tserabco-op), which was set up later, took over its members' old
debts it was very heavily burdened.
In addition, the workers received such low wages that they
could not pay their subscriptions regularly or in full. Being unable
to secure capital of their own, the great majority of industrial cooperatives were accordingly obliged to conduct their business exclusively with borrowed money.
As the official organ of the Centrosoyus points out, the necessity
of extensive borrowing sent overhead costs up to an exorbitant figure ;
the societies directed their utmost efforts to the sale of commodities
offering a high profit. They were transformed into large department
stores, and credits were accepted at such high rates that not only
the profit on excessive prices, but also the capital sum itself, was
frequently absorbed 1.
At the close of 1922, a scheme for supplying the workers in
17 industrial regions was drawn up, a sum of 19,000 million Soviet
roubles being required to carry it in into effect. But the Central
Industrial Co-operative Section had only 240 millions available ;
it failed to obtain the needed credit, and the scheme had to be
abandoned 2 .

1
2

Ibid.
Soyvs Potrebiteley, Nos. 17-18, Dec. 1922.

— 195 —
The financial situation of the industrial co-operatives is illustrated by the following figures taken from the balance sheets of certain organisations 1 :

FINANCIAL POSITION OF INDUSTRIAL CO-OPERATIVES, I JANUARY IQ23

Orsanisation

Grozny central industrial .co-operative
Biezhetsk central industrial co-operative
Briansk united society
Izhevsk central industrial co-operative
Alchevsk central industrial co-operative
Kulebiaki united society
Tver united society
Yaroslav united society
Donetz Central Industrial Co-operative

Total assets
(chervonetz
roubles)

Percentage
of borrowed
capital

Percentage
owned by
society

96.7

3.379.309

3-3

310,307
182,020

27-9
6.8

342.559

29-3

84.8

383,177

1.6

98.4

97.843
618,969
668,700

6.8
22.0
17.1

93-2
78.0
82.9

7,428,389

14.6

85-4

72.1

93-2

" These figures ", says the Soyus Potrebiteley, " indicate an
abnormal situation. The industrial co-operative movement sets out to
capture the market unarmed, i.e. without capital. It has to borrow at
very high rates, and its operations are greatly hampered thereby. '"
The following figures indicate the general composition of the
capital of industrial co-operatives 2.

Ibid.,
Ibid.,

N o . 5 , M a y 1924.
N o . 8, 1924.

— 196 —
DISTRIBUTION OF CAPITAI, IN INDUSTRIAL CO-OPERATIVES,
I JANUARY 1923

(in gold roubles)

Organisation

Industrial
co-operatives w i t h
several
sale s h o p s
Industrial
co-operat i v e s w i t h o n e sale
shop only
Voluntary
industrial
co-operatives

Initial
capital

Share
capital

Goods

Real estate
and other
property

951.102

62,212

363,384

3,878,156

96,420

30,617

552.958

436,644

2,103,000

The following figures show the average capital (in gold roubles)
per member of manual and non-manual societies at Moscow in January
and July 1923.
1 January 1923
Initial
Share
capital
capital

a n u a l w o r k e r s ' societies
on-manual
workers'
societies

1 July 1933
Initial
Share
capital
capital

3-69

1-43

4.22

2.07

2.28

1.29

4.27

1-75

The average turnover of a manual workers' co-operative during
the first half of 1923 was 10,934,000 gold roubles and that of a nonmanual workers' society 15,474,000 gold roubles. The average turnover per member was 5.72 and 4.86 gold roubles respectively in the
two cases \
The increase in the turnover of the Central Industrial Section
(Tserabsectia) during the economic year 1922-1923 is shown below 2 :

1
1

Ibid., Nos. 13-14, 1923.
Ibid., Nos. 1-2, 1924.

— 197 —
Chervonetz roubles

Quarter

First
Second
Third
Fourth

464.715
1,749,760
5,105,500
8,265,390
Total

15,585,365

including :
General commercial business
Inter-co-operative business

14,710,884
874,481

In 1924 the amount of initial capital was still very small compared
with the turnover. During that year the economic importance of the
industrial co-operative movement increased considerably. In its financial position, however, there was no improvement, and its operations
continued to be in utter disagreement with co-operative principles.
The following table shows the increase of commercial transactions * :
AVERAGE TURNOVER OF INDUSTRIAI« CO-OPERATIVES, 1924
(in chervonetz roubles)

Per society

Per sale shop

Per member

Region

Jan.
Donetz Basin
Ural
North-West
Central Industrial
Others

June

74,000 120,900
19,400 28,000
32,400 66,500
70,100 130,900
164,000

Jan.

June

8,100
7,200
9,400
11,900
9,500

9,60O
7,400
8,200
16,500
12,100

Jan.
19.9
13-9
9-7
22.2
24.0

June
29.2
17-3
12.8
37-1
35-3

According to the region, the average turnover per society rose by
44-105 per cent, and the average per member by 25-67 per cent. On
the other hand, the capital — more especially share capital — increased
much more slowly.
At the beginning of 1924 the average value of a member's share
was 1.90 roubles. In the course of the year it rose by 40 per cent.
1
Rabochaia Co-operatsia v 1Ç24 godu (Industrial Co-operatives in
1924J, pp. 33-34- Moscow, Tserabsectia, 1924.

1 6 *

— i98 —
to 2.66 roubles. However, in about 40 per cent, of the societies
covered, a member's share did not exceed 2 roubles. " It is evident ",
stated the official report of the Central Industrial Section, " that the
industrial co-operative movement cannot develop a normal economic
activity while the members' shares remain so small. The average
share is still far below the five roubles fixed by the Decree of 20 May
1924. " *
MEMBERSHIP, SHARE CAPITAL, AND AVERAGE MEMBER'S SHARE
IN INDUSTRIAI, CO-OPERATIVES, SECOND HALF OF 1924 *

Industry

Number of
affiliated
workers

Total
share
capital

Textiles
Metal working
Mining
Chemical
Others
Total and average
' Rabochaia

Average
amount of
member's
share

198,556
233,492
175.172
24,210
937,559

roubles
386,250
642,362
651,293
86,910
2,406,968

roubles
I.94
2-75
3-71
3-58
2.56

1,568,989

4,173,783

2.66

Co-operatsia v 1914 goiu,

p. 24.

Under these circumstances, share capital continued to be of trifling
importance in the general finances of the industrial co-operatives.
The following figures, taken from the books of the societies, illustrate this 2 :

Co-operativny Pout, 15 March 1925. Soyus Potrebiteley, No. 3, 1925.

— 199 —
CAPITAL OWNED AND BORROWED BY INDUSTRIAL CO-OPERATIVES, 1924
1 January 1934
Class of

capital

Owned by the society:
Share capital

1 October 1934

Per cent.
of total

Thousand
roubles

Per cent.
of total

3,288

3-8

7,382

3-9

Total

22,396

I5.8

39,373

21.0

Borrowed

64,432

74.2

148,220

79.O

86,828

100.0

187,593

100.0

Total

T h e difficult financial position of the industrial co-operative movem e n t and its stunted g r o w t h are not solely due to t h e low purchasing
power of the population. A s has already been indicated, the industrial co-operatives h a d long been obliged to pay bonuses in k i n d to
stimulate efficiency in nationalised undertakings which could not
pay adequate wages. W h e n the p a y m e n t of wages in money was
reintroduced, the industrial co-operatives were supposed to supply
the workers with the commodities they required, so t h a t they need not
purchase from private traders. But after three years they had not
yet achieved this object — partly on account of the opposition of the
state economic organs, and partly b y reason of their own inertia.
A t the close of 1922 the Centrosoyus organ observed :
The industrial co-operative organisation fulfils its task — that of
supplying its members with foodstuffs and objects of prime necessity
at moderate nrices — verv inadeanatelv. As waees in 1Hnd a r e gra-luallv
replaced by money wages, co-operative purchases steadily fall and reach
ridi>" 1 0"slv small nronortions. A worker st>ends from so to 100 soviet
roubles a month at the co-operative, and 99 per cent, of his wage goes
into the pocket of the private trader ».
The great mass of the Workers still buy in private shops. The
workers' wives make most of their purchases at the co-operative sale
shot», but the worker himself, as soon as he receives his pav, nurchases
boots, clothing, etc. on the open market, where there is a better choice
of goods and prices are lower 2 .
1
Soyus Potrebiteiey, No. 14, 1922.
- Co-operativnoie Dielo, 19 Aug. 1923.

— 200 —

I n 1923 the situation improved slightly, and the workers' purchases in the co-operative shops increased. A t Moscow, for example,
the sales rose as follows during 1923 1 :
SALES OF INDUSTRIAL CO-OPERATIVES IN MOSCOW, I923
Total sales
(thousand chervoneti

Sales to members

roubles)

Quarter
To
industrial
co-operatives

T o other
co-operatives

Total

Monthlyaverage
per
society

Total
(thousand
chen'onetz
roubles)

Per cent
of total
sales

Monthly
average
member
chei vo netz
roubles)

First
Second
Third
Fourth

5. 1 39
5.285
5.889
7,288

3.283
3,626
3.738
5.397

8,422
8,911
9,627
12,685

19.9
29.0
33.8
44-2

5.593
6,007
6,296
7,702

66.4
68.2
65.4
60.8

6.21
7.I7
8.29
IO.60

Total

23,601

16,044

39.645

31-7

25.598

64.5

7-53

Despite t h e progress m a d e in 1923, not more t h a n 35.3 per cent.
of the workers' wages passed t h r o u g h t h e hands of the industrial cooperatives 2 . T h r o u g h o u t 1924 t h e y continued to operate on similarly
restricted lines, their total sales in that year being distributed as
follows 2 :
PERCENTAGE DISTRIBUTION, BY CUSTOMERS, OF SALES OF INDUSTRIAL
CO-OPERATIVES, JANUARY AND JUNE I924
January 1924

J u n e 19J4

Retail trade

Retail trade
Region
With co- With the
operative public
members

Donetz Basin
Ural
North-West
Central Industrial
Others
1

68.8
31.6
67.7
48.3
38.8

28.7
39-2
32.3
42.7
20.6

Wholesale
trade

2-5
29.2
9.0
40.6

With coWith the
operative
public
members

75-2
• 39-5
83.0
40.0
59-1

22.8
42.O
I7.0
46.5
3I.8

Wholesale
trade

2.0
I7.6
13-5
9.1

Economicheskoie Stroitelstvo, No. 5, 1924.
Cf. N. VoROBiEV : " The Workers' Purchases at Co-operative Stores
in Moscow ", in Trood, 30 April 1924.
* Rabochaia Co-operatsia v 1924 godu, p . 42.
2

— 201 —

Commenting on the situation, the All-Russian Central Council
of Trade Unions stated that " the co-operative organisation is not
fully discharging its duties to-day, any more than it was before ",
adding that the position in which the co-operative organisation is
placed renders this impossible. The first duty of the co-operatives,
according to the Council, is to supply articles in current consumption :
such articles must meet the needs and desires of the consumer and
must be of good quality. Manifestly, the operations of the industrial
co-operatives do not accord with this programme. The failure of the
co-operative movement is attributed by the Trade Union Council to
excessively high prices, exaggerated multiplication of officials,
and a lack of adaptability to the needs of the industrial consumer.
Influenced as it is by the open market, the co-operative system is
only too prone to abandon co-operative principles \
"With but few exceptions, our co-operative movement only succeeds
in attracting from io to 15 per cent, of the worker's wages ; from 85
to 90 per cent., therefore, still finds its way to the private trader. The
goods offered in co-operative sale shops are frequently dearer than on the
open market ; moreover, the private trader also attracts the worker by
offering him eredit in advance on his wages, while the co-operatives
will only sell for cash. The co-operatives frequently display extensive
stocks of absolutely useless commodities, while articles 2 of current consumption can be obtained only from the private trader .
An enquiry into the work of the industrial co-operatives
carried out in March 1924 among the trade unions in the city of Moscow showed that the workers were dissatisfied accusing the co-operatives of treating customers as enemies. According to the woodworkers' union, the heads of the industrial co-operatives work for
purely commercial ends, to the detriment of the consumer. There are
no links between the management and the members, and the co-operative shops are not situated in working-class districts. The union of
chemical workers states that it is impossible to obtain potatoes,
cabbages, meat, or in many cases even bread, from the industrial
co-operatives. Their goods generally come from private undertakings, and are frequently of inferior quality. The watermen's
union, again, complains that the co-operatives sometimes sell above
the official prices 3 .

1
2
3

Trood, 3 Feb. 1924.
Ibid., 17 Feb. 1924.
Ibid., 29 Mar. 1924.
3

— 302 —

In a report prepared for the sixth Congress of Trade Unions, it
is.stated that the industrial co-operatives have not yet got out of the
habit of transacting business in the open market with the sole object
of making profits ; and that the purchase of raw materials for the
purely speculative purpose of re-selling them at a higher price still
represents a considerable proportion of their activities. On the other
hand, the needs of consumers (more especially the workers) are
completely neglected ; and the choice of goods offered for sale
always leaves much to be desired. About 70 per cent, of the sales
effected relate to textile materials and other manufactured products 1 .
The Co-operativnoie Dielo, referring to the expansion of the
industrial co-operative movement, stated recently :
The industrial co-operative movement has suffered from many evils.
Many of the members exist only on paper. The periodical reports issued
are extremely vague — indeed, so vague that the controlling bodies of the
system had no precise information about the affiliated societies. The
administrative machinery had grown enormously ; there were hundreds
of officials, motor cars, drivers, luxurious carriages, etc. Such accounts
as were available were based ou purely imaginary data, and the books
and accounts were always at least three months •— if not more — in
arrear. There were many more " slight defects " in the organisation,
all of which combined to alienate the consumer — above all, the worker 2.
Briefly, a swollen administrative organisation, excessive overhead charges, inability to gain the confidence of the worker, a poor
selection of goods, unchecked profit-seeking, excessive centralisation
of commercial activity, apathy towards the primary organisations,
and the lack of touch with the central bodies — such, in the opinion
of the Trade Union Council, are the characteristics of the industrial
co-operative movement at the present time 3 . Under such circumstances it could scarcely be expected to fulfil the task entrusted to it
—that of supplying the workers, in exchange for their low wages,
with the necessary articles of current consumption.

Despite its manifest inefficiency, the industrial co-operative movement, acting in concert with the nationalised industries, did its utmost to compel the worker to obtain his supplies through the cooperative sale shops. These efforts were of course fruitless, their

Ibid.,

20 A p r i l 1Q24.

Co-operativnoie Dielo, 4 July 1924.
' Trood, 23 April 1924.

«03 —

only effect being to render the worker's position even more difficult
and to prepare the way for the triumph of the private trader.
The inadequacy of wages (calculated as they were at extremely
low rates and for a long time paid in Soviet roubles, which depreciated continually) made it impossible for the workers to obtain even
the bare necessities of life. Under pressure from the trade unions,
the industrial co-operatives had to allow " individual credits " to
their members ; but this was done on too small a scale and too
irregularly to benefit the worker much. The credits were granted on
anything but easy terms ; the worker was often deprived of all
freedom of purchase and usually could only buy small quantities of
foodstuffs. For any larger purchases he would be compelled, in view
of the high prices ruling, to pledge as much as two or three months'
wages in advance.
In 1923 " individual credits " were introduced in various regions.
In the city and Provincial Government of Moscow, the Union of
Consumers' Societies issued these credits. Local committees, composed of representatives of the co-operatives and of works and office
committees, arranged the distribution in such a way that subsequent
repayment of the advances would not call for deduction of more than
35 per cent, from wages. As a rule, credits were granted for a
period of four months. The workers could choose the articles they
wished to obtain on credit. The necessary funds were obtained from
the Co-operative Union of Moscow, the State Bank, the Co-operative
Bank, the Moscow Soviet, and the Industrial Bank. These institutions together advanced a total of 1,200,000 chervonetz roubles, i.e.
about 36 per cent, of the amount needed.
The total number of workers who received " individual credits "
was 83,089, and the amount of such credits totalled 3,604,000 real
roubles. The commodities sold on credit may be classified as follows : x
Class of goods

Manufactured goods
Clothing (ready-made)
Boots (leather)
Other goods
Total

Spring 1923
Per cent.

Autumn 1923
Per cent.

36.0
30.0
17.6
16.4

37-7
25.6
20.8
^5-9

100

Trood, 3 April 1924.
3

100

— 204 —
Similar efforts were made in the Donetz Basin to assist the miners,
b u t were even less successful. A total of 6,416 workers employed in
the m i n i n g industry — 13 per cent, of the total membership of industrial co-operatives—received credits a m o u n t i n g to only 250,415 chervonetz roubles, or about 39 roubles per worker 2 .
T h e following figures demonstrate the extent of individual credits granted to workers by co-operatives in 1924 2 .
INDIVIDUAL CREDITS AS PERCENTAGE OF TOTAL SALES IN 1924

Society

Bezhetsk C.I.C »
Kolchugino U.C.S. 2
Sorniovo U.C.S.
Kulebaki U.C.S.
Stalino C.I.C.
Kovrov U.C.S.
Pavlovo U.C.S.
Melenki C.I.C.
" Skorokhod " Society
" Bolshevik " Society
(Leningrad)
Almaze C.I.C.
Kuvchino U.C.S.
Gus-Khrustal C.I.C.

October-March

1924

May-July

38.4
53-5
16.1
23.0
17.4
84-3
28.1
36.1
21.9

42.I
63-5
46.I
50.4
42.3
39-3
37-3
60.1
46.5

7-7
9-7
75-4
58.7

29-3
80.4
65.2
45-1

1934 -

1
C I . C = C e n t r a l Industrial Co-operative.
2 U.C.S. = United Consumers' Society.

T h e Central Industrial Section (Tserabsectia)
that :

states in its report

The industrial co-operative movement has dissipated its capital
in small individual credits, but cannot either renew or increase them
without the assistance of the state economic organs. The participation
of these bodies in the system of individual credits is of prime importance.
In practice, the industrial co-operatives not only lack the assistance of
the managing bodies of the nationalised industries, but their work has
been constantly held up by delavs (sometimes lasting several months)
in the repayment of credits, although the industrial undertakings had
already deducted the necessary amounts from their workers' wages.
In many districts the co-operatives had to advance the whole amount
of the workers' wages, by way of individual credits, on behalf of the
1
2

Ibid., 23 April 1924.
Rabochaia Co-operatsia v 1Q24 godu, p. 69.

— 205 —

economie organs, and there was so much delay over subsequent repayment that the co-operatives could not even meet the bills of their own
suppliers '.
The Central Trade Union Council and the co-operatives intended to enable the workers to purchase necessities on credit up to the
amount of one week's wages. The state undertakings, however,
diverted the system from its original purpose aud treated it as a
method of balancing their delay in paying wages. Delay of this
kind occurred throughout nationalised industry, more especially in the
large-scale industries, and continued until the currency reform in
March 1924. It was not uncommon for wages to be weeks or even
months in arrears, and as they were always paid in Soviet roubles,
which depreciated from day to day, every delay meant that the worker
lost part of the wages due to him. When wages were calculated and
paid in chervonetz roubles, the worker no longer lost so much, but
as a chervonetz note (equal to 10 gold roubles) represented more
than the amount of a week's wage, the employment of the new
currency presented considerable difficulty. Moreover, shortly after
the currency reform wages again fell into arrears in consequence of
the acute monetary crisis, due more especially to the lack of small
change among the nationalised industries.
In order to enable the workers to obtain necessities notwithstanding the irregular payment of wages, the managements of the state
industries introduced a system of credit coupons which the workers
might tender to industrial co-operatives in payment for goods. The
undertakings subsequently refunded the amounts of these coupons
direct to the co-operatives. Thenceforward the worker was obliged
to make immediate purchases up to the whole amount of his coupon,
i.e. his wages, which was frequently most inconvenient. Moreover,
the system carried with it the implication that each industrial cooperative was in- a position to supply everything that the worker
might need.
In a circular letter addressed to trade unions the All-Russian Trade
Union Council requested the managements of undertakings and cooperatives not to conclude agreements for the provisioning of workers
by means of the credit coupon system unless the co-operatives were
able to supply the needs of the workers completely and adequately 2 .

1
3

Ibid., p. 70.
Trood, 3 Feb. 1924.
3

— 206 —
Despite these instructions, however, numerous agreements of this
kind were concluded and the workers thereby placed in a very difficult position.
For example, the Donetz Union of. industrial co-operatives received a credit of 6 million gold roubles with the obligation of supplying the miners with all necessities which they might require ; but
it only succeeded in attracting between 25 and 30 per cent, of the
workers' wages, the remainder finding its way to the shops of private
traders. The following, written by the Kharkov correspondent of
the Economitcheskaia Zhizn, is illustrative of the manner in which
the co-operatives fulfilled their duties in this respect :
White bread and flour are rarely to be found. Commodities absolutely
useless to the workers are displayed in the shops, while articles of current
consumption are invariably lacking. The coupons of the mines administration of the Donetz are willingly accepted by the workers in payment
of their wages ; but as, on the other hand, the co-operatives have none
of the goods needed by the workers in stock, and, moreover, the usual
discount is not allowed when wages coupons are tendered in payment,
the coupons naturally find their way to the open market, where they
are freely accepted. The Donetz co-operatives are not yet equal to their
work K
In the Ural industrial districts the workers receive their wages
in coupons issued by the co-operatives. The trusts to which the
Ural industrial undertakings are attached execute bills of exchange
to the order of the Ural section of the Centrosoyus in payment for the
goods provided by the co-operatives. Upoii presentation of these
bills the Centrosoyus supplies the co-operatives with the required
goods, and subsequently discounts the bills through the banks.
These transactions on paper, which are reminiscent of the period
of Communism, restrict the worker's liberty and complicate his life.
It thus happens that the workers purchase things which they do not
need, for, they argue, " it is better to have something one does not
want than a scrap of paper " ; and the co-operatives have not the
money to purchase goods where they are cheapest. As previously,
there are long queues waiting at the doors of the co-operative sale
shops, everyone hoping to make the best bargain with his coupons.
Once more the workers are obliged to buy, not what they want, but
what they can get. The sellers mock at their protests : " Even if
they do not want it ", they say, " they will buy just the same, since

Economicheskaia Zhizn, 30- Jan. 1924.

— 207 —

they cannot get rid of their coupons elsewhere ".
benefit of this system goes to the private trader '.

In effect, any

The Soyus Potrebiteley says that the industrial co-operative
movement is impeded in its work not by its erroneous policy and defective organisation alone ; other branches of the movement are no better.
But the policy of the state economic organs, which should open commodity credits for supplying the workers and have always failed to
fulfil their obligations, is also responsible. In many places the state
undertakings insist upon provisioning their workers themselves,
through " truck shops " like those of the old regime.
Small scattered co-operatives endeavour to form unions in order
to gain strength ; but all such attempts meet with opposition from
the economic organs, which wish to maintain their truck system, and
accordingly refuse the credit asked for by co-operative associations.
The economic organs regard industrial co-operatives as useful auxiliaries when the payment of wages becomes difficult, but otherwise
have no consideration for them. Frequently, moreover, the industrial
undertakings themselves deliver goods to the workers on credit, thus
entering into direct competition with the co-operatives, which are
powerless to meet it. In places where the truck system has been
abolished at the instance of trade union organisations or of the industrial co-operatives, some undertakings have introduced payment of
wages in kind, and require the co-operatives to distribute them, thus
converting them into mere distributive bodies. These methods cause
discontent among the workers, who throw the whole blame upon the
industrial co-operatives z .
1
Cf. " Industrial Co-operation in the Ural ", in Economicheskaia
Zhizn, 2 July 1924. This publication quotes the following characteristic
anecdote :
A worker enters a private shop and sees a pair of boots hanging
on the wall.
" Very nice boots ! If only I had money
. . . "
" Well, try the co-operative. "
" I have been there, but they have nothing but hunting boots ; and
they are no use to me."
" Of course not. You really want that pair? "
" I do, but . . . "
" Then go to the co-operative and buy calico with your coupon ;
bring it to me, and I will let you have the boots."
Needless to say, the boots are worth from 20 to 30 per cent, less
than the length of calico taken in exchange.
2
Soyus Potrebiteley, No. 5, 1924.

— 208 —

The same difficulties arise in the purchase of goods. As is
natural, each industrial co-operative applies for goods in the first
instance to its immediate central organisation. But the central
organisation often sells at higher prices than the trusts and industrial
syndicates, from which the private trader buys direct. The cooperatives cannot apply direct to these trusts, as they make specially
difficult conditions for the co-operatives and offer a very poor choice
of goods l .
The thirteenth Congress of the Communist Party, held in May
1924, after having discussed the relations between industry in general
and the industrial co-operatives, passed a resolution requesting the
state industrial organisations to assist the co-operatives. The resolution, however, failed to bring about any change in the position.
When the industrial co-operatives applied to the textile syndicate, it
imposed such severe terms that, had they been accepted, the cooperatives would have imperilled their financial situation, already precarious, by running still further into debt 2 .
The allocation of money credits to the co-operatives is also very
badly organised. The credit institutions of Soviet Russia conduct
their transactions solely on a " commercial basis ", and will give
credits only to solvent institutions. They consider the financial
position of the industrial co-operatives to be so precarious that they
cannot make loans of any size 3 .
Nevertheless, in the spring of 1924, the industrial co-operatives
made a real effort to obtain the commodities which they lacked. It
was estimated that goods to a total value of 12 million gold roubles
were required to provide for the needs of their 800,000 members,
scattered over the most important industrial districts. A guarantee
was given that these goods would be handed over to the Central Industrial Section by the departments in charge of Russian economic
affairs during the period May-August 1924. In view of this arrangement, the industrial co-operatives undertook to grant individual
credits, relying on the sums to be reimbursed by the nationalised
industries. In June, however, it became evident that the latter were
not discharging their obligations. At Nijni-Novgorod the nationalised
industries owed the industrial co-operatives a sum of 700,000
roubles ; in the Briansk region 700,000 roubles ; at Bezhetzk 250,000

1
Trood, 8 May 1924.
' Ibid., 22 June 1924.
' Ibid., 13 June 1924.

— 209 ~~
roubles ; at T u l a , an amount greater t h a n the total wages for an
entire m o n t h ; in the Donetz Basin an a m o u n t equal to more than
half the m o n t h l y wages bill ; while in the Ural and K u b a n regions
there were similar large amounts outstanding.
Where industry has piled up debts to the co-operative societies, the
latter have sunk all their own funds, and even a great deal of money
which did not belong to them, in individual credits to the workers. They
have handed over all sorts of commodities against bills of exchange drawn
by industrial undertakings ; and these bills they are unable to discount
anywhere. Thus they have to restrict their operations, for they cannot
make fresh purchases. The result is widespread stagnation, discouragement among the leaders, and an attitude of mistrust towards the
extensive propaganda schemes '.
T h e amounts owing by state industrial undertakings to certain
industrial co-operatives at the beginning of 1925 were as follows 2 :

DEBTS OF STATE UNDERTAKINGS TO INDUSTRIAL CO-OPERATIVES, 1925
Sums owed by undertakings
for goods delivered to
workers

Monthly
Societies

33 co-operatives supplying workers in
state undertakings

9 industrial co-operatives
3 in the Ural metal
industry
3 in the Donetz metal
industry
3 in coal mining
Total and average

sales
(thousand
roubles)

(thousand
roubles)

2,700

2,667

539

595

110

840
554

969
378

115

1.993

i,942

100.5

Per cent.
of sales

1
ILIMSKV-KUTUSOV : " Words and Deeds " (addressed to the AllRussian Central Council of Trade Unions), in Economicheskaia
Zhizn,
4 June 1924.
2
Cf. N. VOROBIEV : " Industry's Debt to the Industrial Co-operatives ", in Co-operati'jny Povt, 11 March 1925.

The Co-operation
1 7

— 210 —

The figures given above show that the amounts owing by state
industrial undertakings to co-operative societies iu respect of goods
supplied on credit to the workers employed in those undertakings
frequently exceeded the total monthly turnover of the societies concerned. Under such circumstances the financial position of the latter
was of course deplorable ; in fact, they became permanent creditors
of the state undertakings, since they paid the wages bills of the undertakings. A resolution passed by the Conference of Industrial Cooperatives of the Soviet Union, which took place in March 1925, stated
that :
Relations of the kind between industry and the industrial co-operative
movement destroy the very basis of the movement. It can remain
solvent only in so far as the industrial undertakings meet their obligations, and it is thus reduced to the position of an auxiliary service of
industry. The relationship between it and its members is abnormal,
and has led to its being regarded as a mere distributive organ under
state control 1.
This tendency of industrial undertakings to degrade the industrial
co-operatives to the rank of subordinate agents has been extremely
injurious, both to the co-operatives and to the workers. The latter
show a marked antipathy to any form of payment by means of credit
vouchers, coupons, or cheques. Frequently — as, for example, in the
textile industry — the worker is compelled to exchange his coupon at
the co-operative stores for a length of material, which he must then
sell on the open market. In other cases, if the worker buys freely on
credit, the undertaking retains part of his wages. In point of fact,
wages are almost always paid in kind. Thus, in November 1923, in
263 undertakings inspected, 38.7 per cent, of total wages on an average
were paid in kind (in some cases as much as 68.7 per cent.), while
8.4 per cent, of wages on an average (in some cases 37.8 per cent.),
were paid in commodity coupons 2 .
The existence of this state of affairs is confirmed by a resolution
passed in March 1925 at the Industrial Co-operative Conference
referred to above, as follows :
During the past year (1923-1924) the relations between the industrial
co-operative movement and large-scale industry have been characterised
by the fact that the greater part of wages has been paid to the workers
by the co-operatives in the form of foodstuffs. "Wages were thus prin1

Co-operativny Po-ut, 12 March 1925.
2 POLLACK : " Monetary Reform and the Worker's Budget ",
Economicheskoie Obozrenie, No. 8, 1924.

— 211 —
cipally paid in kind. The industrial undertakings paid their debt to
the co-operatives in bills of exchange which were subsequently discounted
by the banks up to the total amount of credits allotted to the co-operatives.
During the last twelve months the industrial co-operatives have by this
means paid from 70 to 80 per cent, of the worker's wages in kind, and
only the remaining 20 to 30 per cent, was paid in money by the industrial
undertakings themselves '.
The need for exchanging the coupons received usually has f he
effect of forcing the worker to deal with a co-operative store ; and his
participation, instead of being voluntary, thus becomes, in effect,
compulsory.
This policy is also lamentable from the point of view of the industrial co-operative movement itself. It compels the industrial cooperatives to assume duties which are beyond their powers, thus completing the wreck of their finances. Moreover, they are by this means
more and more closely bound up with state industry, which deprives
them of independence, reducing them to the level of mere distribution
agents — a state of affairs which by devious ways brings them back
to the conditions prevailing in the period of complete Communism.
Compelled as it is to increase its turnover to the greatest possible
extent in order to perform its task of provisioning, the industrial cooperative movement endeavours to obtain commodity credits to an
amount considerably in excess of its own capital, and these are much
too heavy a burden for it. The entire working of the system is based
upon these commodity credits, which are regarded in Soviet Russia as
the magic wand by means of which the population can be re-animated
and economic progress once more set in motion.

To sum up, the working of the industrial co-operative movement
is exclusively directed to supplying the workers. The nationalised
industries (themselves quite incapable of paying the full amount of
wages due) have shifted this burden on to the shoulders of the cooperatives, and in the very nature of things this makes it impossible for
the co-operatives to accumulate share capital. The funds of the industrial co-operatives, then, do not accrue from active and conscious
participation of the workers, but are obtained by devices which are
inconsistent with the scope and character of the movement.
1

Co-operativny Pout, 12 March 1925.
3

— 212 —
CONSUMERS' SOCIETIES IN T H E COUNTRY

Consumers' societies are still at a much less advanced stage of
development in the villages than in the towns. So long as they were
provisioned by the state supply funds they had a certain amount of
working capital in the form of goods which could be distributed among
the population, and made to serve as a medium for commercial transactions. When state provisioning came to an end, the rural societies'
business decreased greatly. They were less able than the town
societies to raise fresh capital, whether in money or in goods. The
following table shows the fluctuations in the turnover of rural
societies from the end of 1921 to the end of 1922 \

AVERAGE MONTHLY TURNOVER OF RURAL CO-OPERATIVES,

1921 TO 1922
(in pre-war roubles)
Per society

(

Societies
with
one shop

Societies

111

reriod

Per inha&itant

Societies
with
one shop

1921

Fourth quarter

I.587

394

0.12

0.10

¿IC
554

224

0.04
0.081
0.15
0.054

0.05

1922

First quarter
Second quarter
Third quarter
Fourth quarter

1,061

553

244
437
258

0.063
o.n
0.056

These figures show clearly the abrupt decline in business which
followed the cessation of state provisioning.
During 1922 there was no increase of business, one important
reason for this being the inadequacy of the funds at the disposal of
the rural societies. Thus, 011 1 January 1923 the average capital of
a rural society in Russia (in gold roubles) was divided as follows 2 :
1

Narodnoie khoziaistvo Rossii za 1027-/022 god.
2 Ezhegodnik Centrosoyusa za jçss, Vol. II.

— 213 —
Societies with
several shops

Goods
Miscellaneous propertyInitial capital
Share capital
Loans and advances

Societies with
one shop

I.302
1,466
334
45
114

532
1,314
164
108
57

In the Ukraine, a rural society with one shop held on an average
goods to the value of 551 roubles, property to the value of 25 roubles,
and capital to the amount of 361 roubles. In Siberia the average assets
of a society with several shops included goods to the value of 1,012
roubles, property worth 108 roubles, and a capital of 170 roubles,
barely 17 roubles being accounted for by members' contributions.
In 1922 the activities of the rural societies were modest to a
degree. More than six thousand societies which were inspected on
1 January 1023 can be classified by their average turnover as follows 1 :
DISTRIBUTION OK SOCIETIES BY TURNOVER, 1923
Societies
Average monthly turnover
(gold roubles)

I-50
50-IOO
20O-300
100-20O
300-1,000
1,000-2,000
2,000-5,000
5,000-10,000

Number

Per cent.
of total

694
800
I,2l8
750
1,803
866
118
14
4

II.O
12.7
19.4
II.9
37-1
13-8
1.8
0.2
0.06

Over 10,000
6,267

100

Total

The average turnover per society of those given in this list was
372 gold roubles, but in 55 per cent, of them the turnover was less
than 300 roubles.
1

Soyus Potrebiteley,

No. 3, March 1924.

— 214 ~
Working on such a small scale, rural societies were unable to
increase their working or general capital to any appreciable extent,
and the credits obtained from the unions and national organisations
were absolutely trifling. Rural societies laboured under the same
disadvantages as the urban and industrial co-operatives, but to an
even greater extent.
At the beginning of 1923 the financial position of the rural
societies was no better than in 1922. On 1 January 1923 the average
assets of a society 1 included goods to the value of 727 gold roubles,
an initial capital of 207 roubles, and share capital to the value of 92
gold roubles.
From the beginning of 1923 onwards, business improved somewhat among rural societies, as the population was beginning to
recover from the destitution brought about by the 1921 famine, and
its purchasing power increased somewhat.
The Centrosoyus statistics show a marked increase in the turnover of the societies, but they cannot be taken as a fair indication
of the position, as the organisation of the rural societies was
largely overhauled in the course of the year. The disadvantages of
societies having several sale shops were realised ; some societies were
greatly enlarged, while others — more particularly the smaller and
less active societies — were wound up. A better idea of the position
can be gained from the figures of turnover per inhabitant, and these
indicate but a slight improvement in business, as is shown by the
following table 2 .
TURNOVER OF RURAL CO-OPERATIVES, I922-I923
(in chervonetz roubles)
Per society

Per inhabitant

Period
Russia

First quarter
Second quarter
Third quarter
Fourth quarter

372
748
649
883

Ukraine

Russia

Ukraine

448
459

O.05

O.I2
0.12
0.15
O.16

612

658

O.IO
0.08
O.IO

1
These figures are calculated from the number of societies in
existence on 1 January 1023 (21,302) and the total capital held by rural
societies at that date. Cf. Ezhegodnik Centrosoyusa za 1Q22 and Soyus
Potrebiteley, No. 5, 1924.
3
Soyus Potrebiteley, No. 3, 1924.

— 215 —
The defects to be found throughout the whole co-operative organisation reacted on the rural societies. The urban societies and provincial unions were too busily engaged in hunting capital and purchasers to consider the rural societies' interests. The credits opened
by the central organisations were intercepted by the provincial unions ;
they rarely reached even the urban societies, and never reached the
rural societies at all.
The retail shops opened by the unions and urban societies were
in constant competition with the rural societies. Nothing was done
to delimit their respective spheres of work or to act on a common
commercial policy.
If the work of the urban societies was hampered by the poor
assortment of their goods, that of the rural societies was even more so.
Owing to the poverty of the peasants and their reduced purchasing
power, the system of societies with several shops, which was very
common at first among rural societies, became wholly unsuited to
conditions, for it meant scattered resources, an increased staff, and
swollen overhead charges, and it made no appeal whatever to the
peasants. Its only effect was to add to the cost of goods and to
enhance the stagnation of exchange. In fact, such shops often did no
real business.
The official organ of the Centrosoyus thought that the ground
was not favourable to this system of rural societies with several shops,
for the greater dispersion of activity thereby involved demanded
greater cohesion among the members than they possessed, owing to
" country habits, the absence of community life, and the exclusive
pursuit of individual aims " 1 . For this reason the majority of the
rural societies were converted into single-shop societies.
Notwithstanding certain successes in 1923 due to reorganisation,
the consumers' co-operative movement in the villages was still too
weak both economically and financially ; it was not in sufficiently
close touch with the masses and with other co-operative organisations ; management occupied an unduly large place in the organisation, and the system was too rigid. For all these reasons it was
impossible to compete with private dealers.
Not only were the rural societies incapable of ousting these dealers
from the villages, but they were obliged at times to make use of them

Soyus Potrebiteley, Nos. 13-14, 1924.
3

— 2l6 —
in order to carry on their business. This can be seen from the following table which shows the importance of the various customers of
a rural society \

PERCENTAGE DISTRIBUTION OF BUSINESS IN A RURAL SOCIETY,
I922 TO 1924
Sales

Purchases

Customers

Centrosoyus
Co-operative union
Other co-operative organisations
State organs
Private individuals
Local population
Others
Total

1923-

19*3

1924

Customers

11.4
1.0

1.6 Local population
53-7 Co-operative organisa-l
tions
!
I
7-5 State organs
1
13-7 Private individuals

37-8

I3-I

0.7
49.1

1922-

1923-

1923

1924

90.0

87-5

10.0

94
2.4
0.7

9-3
1.1

100.0

Total

100.0

Although the rural societies sold nine-tenths of their goods to
the rural population, they supplied only a very small proportion of
the demand, as will be shown later. In 1924 rural societies supplied
even the peasants with only 20 or 30 per cent, of their requirements,
and the peasants had to buy the remaining 70 or 80 per cent, from
private dealers.
In 1924, however, the sales of the rural societies greatly increased,
as can be seen from the following figures (in chervonetz roubles) 2 :

1924.2

Soyus Potrebiteley, No. 3, 1924.

Economicheskaia Zhizn, 2 Feb.

Soyus Potrebiteley, No. n , 1924. See also KHINCHUK : " The Real
Position of Co-operation in Russia ", in the International Co-operative
Bulletin, Jan. 1925.

— 217 —
I93J-I023

First half-year
Second half-year
Total

i*î3-i9»4

62
77
139

148
*84
332 l

1 This total is approximate, as the data for the second half-year include the turnover
of certain regional unions.

There was also — even in 1923 — an increase in the size of the
societies. The number of small societies with a turnover of less than
50 roubles decreased, while the proportion of larger societies increased 1.
PERCENTAGE DISTRIBUTION OF SOCIETIES BY TURNOVER,
1923 AND 1924
Turnover

1 January 1924

1 January 1923

(chervonetz roubles)

Up to 50
51 to 500

13-3
67.1
17.1
2.4

¿Ol t o 2 , 0 0 0
2,001 t o 10,000
O v e r 10,000

1.2

55-7
33-5
7-3
0.3

0.1

These figures show nevertheless that nearly 60 per cent, of the
societies had a turnover of less than 500 roubles. The increase in
turnover in 1924 had little effect in improving the financial position
of the societies, which is illustrated by the following figures 2 :
1 January 1924

1 October 1924

Class of capital
Per cent.
of total

Chervonetz
roubles

Per cent.
of total

2,766,811

3-9

8,723,035

6.3

30,890,439
40,313,989

43-4
56.6

56,253,758
81,468,62c

40.S
59-2

71,204,428

100.0

137,722,378

100.0

Chervonet?.
roubles

Owned by the society:
Shares
Total
Borrowed
Total capital
1

•

Economicheskoie Obozrenie, Nos. 23-24, 1924, p. 143. Also Votrebitelskaia Co-operatsia v 1^23-1^24 godu, p. 30.
2
Co-operativny Pout, 15 and 18 March 1925.
3

— 2l8 —
Although the share capital increased by 6 million chervonetz
roubles, the rural societies could only invest a strictly limited amount
in their own business, for the major part of members' new contributions was devoted to the acquisition of real estate and other property,
the value of which rose from 4.6 to 17.6 millions. The rural societies'
turnover increased by 203 per cent, during 1924, whereas their own
capital increased by only 80 per cent.

Apart from financial difficulties, the rural societies were also
suffering in 1924 from many other defects which bear witness to the
degeneration of consumers' co-operation in the villages. The information obtained from investigations carried out by the co-operative
press in particular and the Soviet press generally indicates these
defects, which are summarised below 1.
The rural co-operatives are short of the goods which the peasants
need, thus resembling the urban societies in their dealings with the
town dwellers. The peasants are unable either to satisfy their personal needs or to procure goods essential for their agricultural work in
the rural societies' shops. The shortage of metal and textile goods is
particularly acute, and the price of these articles is so high as to be
well-nigh prohibitive for the peasants.
" In many cases the shops of the most outlying rural societies
contain luxury clothing, high-heeled shoes, costly textiles, luxurious footwear, costly wines, handbags, fine linen and more of the
like, but sugar, soap, leather, nails, or other indispensable commodities would be sought in vain " 2 .
The high-class goods are intended mainly for the local authorities
and notabilities, who wish to have a department store within reach,
but the peasants can procure barely 30 per cent, of their requirements
from the co-operative 3 .
As a rule individual credits are not officially allowed in the
villages, but they are granted to certain privileged members, such
as members of the management board—the " responsible officers "—
all the local Soviet officials, such as the chairman of the local executive
committee, the chief of police, the secretaries of the Communist
1

Torgovo-Promyshlennaia Gazeta, 13 Feb. 1925. " The Daily Life
of the Co-operative Movement ", in Co-operativny Pout, 17 Feb. 1925,
and 2" The Diseases of Primary Co-operatives ", Ibid., 28 Feb. 1925.
Co-operativny Pout, »8 Feb. 1925.
' Ibid., 4 April 1925.

— 219 —
nuclei, and all friends of the local authorities and of the management 1.
Every society gives these people credit for hundreds and thousands of
roubles, which they take months to pay.
The great evil which undermines the rural societies at the present time is bad financial management, falsification of accounts,
thefts, and abuses of all kinds, " which have now become chronic
and have grown into a veritable menace " \
In a small rural
society with a turnover of 800 to 1,000 roubles per month, wastage
through thefts, negligence, errors, etc. amounted to several hundred
roubles per quarter. One small provincial union, for instance,
recorded 76 thefts and other losses amounting to 22,000 roubles
during 1924 ; several societies affiliated to this union are even on the
verge of bankruptcy for this reason.
There is no sense of responsibility, witness the wholesale squandering of the funds by the directors and the numberless irregularities
of which they are guilty. All the local societies send representatives
to the regional and provincial unions to buy the goods they require.
" Not one, but two or three representatives make the journey
. . . . Instead of staying at the posting inns, they go to the
hotels, where a room costs 5 roubles. . . . They soon acquire
a taste for town pleasures. On their arrival they have a drink " to
recuperate from the fatigue of the journey ", then they turn to cards
and finish up in unbridled debauchery.
" To cover up their misdeeds they " get into touch " with private
capital, fake documents, invent tales of brigands or stolen pocket
books ; they claim " travelling expenses " at the rate of 8 or 10
roubles per day. In a word, our co-operative merchants revive the
ways of the old-time dealers, and sometimes behave even worse. " a
Finally, the bureaucratic methods which have corrupted the town
co-operatives are also a serious evil among the rural societies. The
local soviet, communist, and other organisations make considerable
use of " administrative pressure ". The local executive committees
issue arbitrary instructions for the amalgamation of various societies
with other groups, or for their separation. They compel the cooperative societies to shoulder the expenses of local organisations of
all kinds. Regardless of the economic position of the co-operatives,
1
2

Ibid., 28 Feb. 1925.
" The Diseases of Primary Co-operatives ", in Co-operativny Pout,
28 Feb. 1925.
3

— 220 —

the nueler of the Communist Party and of the Communist Youth
Associations frequently demand that some member of their organisation be given a salaried appointment in the co-operative establisments,
and there is no appeal against such dembands.
The irregular re-election of managers and members of the
auditing committee, summary dismissals, secret accusations, the
removal of elected delegates without the consent or even the knowledge of the members — all these things foster the spirit of lawlessness
which reigns in the movement \
The fact that government officials are in many cases imposed as
chairmen of the boards of management, etc. has deplorable consequences.
According to the Economicheskaia Zhizn the election of directors
is practically automatic. The members to be nominated as candidates are selected beforehand, their acceptance is ensured, and their
election follows as a matter of course. The individuals so elected are
often entirely unknown to the population, with which they in turn are
wholly unacquainted. Too often they are passing strangers merely
making " a round of the country " ; they have no time to acquaint
themselves with the customs and needs of the population before they
disappear again. The country people look upon them as saviours
specially sent from headquarters and expect miracles from them, but
the local co-operators stand aside and privately criticise the manner
in which the newcomers discharge their duties. Sometimes the
peasants have the impression that sheer favouritism has been at
work, that a position had to be found for someone and that as nothing
better offered the said " someone " was appointed to a post in the cooperative organisation.
It need scarcely be said that these " emissaries from headquarters " too often prove utterly incapable and ignorant of their work.
It also happens that a higher organisation is too ready to " supply "
the primary societies with co-operators and among these undesirable
characters creep in. The idea of co-operation is thereby discredited
among the population ; local co-operative organisation is rotten to
its very foundations and only by untiring efforts can it be restored to
a sound footing. These " emissaries from headquarters " feel that
they are accountable in a much greater measure to those who got
them elected than to those who actually elected them, i.e. the members of the co-operatives. The situation is confused, the relations
1

Ibid.

— 221 —

of the various members of the co-operative movement are ill-defined,
and there is absolutely no close and constant touch between the cooperatives and the masses, an essential condition of efficient cooperation 1 .
" The peasant sees himself debarred from any active share in the
conduct of affairs ; he resents this and eyes the co-operative movement with distrust, regarding it as a government institution in which
state officials cultivate the bureaucratic spirit. " 2
The organ of the Centrosoyus comes to the conclusion, in short,
that the rural societies suffer from all the defects of the rural
administration of the Soviet authorities.
INDUSTRIAL ACTIVITIES OF CONSUMERS'

CO-OPERATIVE

ORGANISATIONS

Consumers' co-operatives have never done much manufacturing
and do not do so now. Before the introduction of the New Economic
Policy nationalisation and municipalisation of undertakings belonging
to co-operatives had been prohibited, it is true, but this rule was by
no means strictly observed, especially in the provinces, and in the
second place, owing to the disastrous economic position of the
country co-operative industrial undertakings were ruined along with
the others.
As early as 1920 the report of the President of the Centrosoyus
stated that : " we shall not succeed in developing our business and
in accumulating funds until we extend our productive and industrial
work. Not only must we draw supplies from the rural population, but
from it we must also buy raw materials and semi-finished articles
which we shall must work up and sell to our members and to the
rural population. " 3 A resolution passed in July 1921 at the second
delegates' meeting of the Centrosoyus acknowledged the need of
" bringing the industrial activities of the co-operative movement into
the general scheme of the economic system and especially of national
industry ; of inducing the co-operative undertakings to undertake
the complete process of manufacture from raw materials ". This
resolution also stated that in principle " industrial production should

1
" The Owner and Organiser of the Co-operative System " ; leading
article
in Economicheskaia Zhizn, 24 Jan. 1925.
a
Co-operativny Pont, 17 Feb. 1925.
3
Sputnik Co-operatora na 1Q22 god, p. 68.

— 222 —

be regarded as an essential part of the general work of the co-operative movement and that unwavering attention, untiring efforts, and
ample means must be devoted to it " x.
But all this came to nought. Up till April 1921 the Supreme
Economic Council still controlled the greater number of undertakings
belonging to the primary societies and their unions. The Centrosoyus
alone retained control of a few undertakings, though they were
operated with the greatest difficulty.
After the introduction of the New Economic Policy the Government issued a number of Decrees laying down that the industrial
undertakings which belonged to consumers' co-operatives before their
nationalisation or municipalisation should be handed back to those
organisations 2 . These restitutions were not effected without considerable delays and enormous difficulties. More than once the
central authorities were compelled to publish circulars and instructions insisting on the restoration of their undertakings to co-operative
societies 3 . The state undertakings showed the greatest reluctance
to restore the property of the co-operative societies, and the local
economic administrative bodies were for ever temporising in order to
delay denationalisation or demunicipalisation.
But for the co-operative societies themselves restitution did not
put an end to their difficulties. The undertakings reverted to them
without a scrap of fuel or raw material, and the co-operatives themselves possessed neither fuel nor raw material nor money. The
consequence was that up to October 1921, in spite of the transition to
the New Economic Policy, the industrial undertakings of the Centrosoyus were operated with such supplies of raw material and fuel as
the central committees of industry could place at their disposal 4 .
The consumers' societies did not really acquire anything like
full control of their undertakings until after the publication of the
Decree of 23 August 1921, which left them entirely to their own
resources. But for some considerable time after that date the cooperative movement did not take advantage of the freedom thus conferred on it, as it did not possess the funds required to operate the
undertakings.
1
3

Ibid.
Order issued by the Supreme Economic Council on 17 May 1922
to give effect to instructions concerning the return of industrial undertakings to consumers' co-operative organisations.
" Decree of the Council of People's Commissaries, dated 21 August
1922. Order of the Council of Labour and Defence, dated 20 July 1923.
4
Otchot Centrosoyusa za 1Ç20 i 1Q21 godi, pp. 88-92.

223

According to an enquiry made by the Centrosoyus on 15
October 1921, 42 provincial unions and 200 consumers' societies owned
1,064 undertakings employing 16,173 workers. At that same date the
whole movement owned about 2,000 undertakings employing 25,000
workers. The greater number of these undertakings were idle ; they
remained in working order, but they had no working capital. The
rouble was steadily depreciating, taxes were extremely high, and it
was impossible to buy fuel or to undertake the necessary repairs. In
these circumstances many "undertakings had to be closed down or
even completely wound up \
During 1922 the co-operative organisation encountered the same
difficulties in regaining possession of its former industrial undertakings. Of 36 recorded applications for restitution filed "by cooperative organisations of the first, second, or third degree, only 7 were
granted ; other applications met with either a refusal or no reply at
all.
On 15 April 1921, of 972 industrial undertakings 281 were owned
by the co-operative movement and 255 were held on lease ; no details
are given for the remaining 436. These 972 establishments were
distributed among 59 provincial unions, 137 sections, and 210 societies ; 731 which were operating employed 8,378 manual and other
workers ; 241 were closed. At the same date all branches of the
co-operative movement together controlled -2,500 undertakings employing 20,000 workers 2 . The following figures show how small
these undertakings were.
Average number of
workers per undertaking
I9ai
1922

Organisations owning
undertakings

Provincial unions
Regional sections
United societies

25
13
14.7

22
8.3
6.3

T h e following tables show t h e variations during the first year of
the N e w Economic Policy in the n u m b e r of undertakings and their
industrial classification.

1
2

Ezhegodnik Centrosoyusa za IQ22 godu, Part II, p. 176.
Otchot Centrosoyusa za 1922 god, pp. 100 and 106.
3

— 224 —
UNDERTAKING?. ATTACHED TO THIRTEEN

PROVINCIAL .UNIONS,

I 9 2 I AND 1922

Provincial government

Yaroslav
Tver
Perm
Penza
Samara
Voronezh
Kursk
Tambov
Arkhangelsk
Cherepovets
Olonets
Vitebsk
Kostroma

1 April 1921

1 October 1921

1 April 1922

Total

5
5
3
8
—

5
4
5

7
5
6
—
6
9

7
4

1
1
2

2
1

4
5
10

4
5
1

7
4

1
1
2

DISTRIBUTION BY INDUSTRY OF UNDERTAKINGS ATTACHED TO
CONSUMERS' CO-OPERATIVE ORGANISATIONS, 1921 AND 1922

I April 1921

1 April 1932

Industry
Number

Foodstufls
Animal products
Wood
Textile
Ceramic
Metal
Chemical
Paper
Printing
Electrical
Quarries, fisheries, etc.

Per cent.
of total

454
158

42.7
14.8

122
100
101

12-5

74
27
7
17
4
1,064

9-4
9.4
7.0
2-5
0.7
1.6
0.4

100

Number

337
138
77
13
64
56
19
3
13
6
5
731

Per cent.
of totnl

46.1
18.6
IO.5
1.9
8.8
7-7
2.6
0.4
1.9
0.8
0.7

100

— 225 —
These few figures will show that the industrial work of the consumers' co-operatives consisted mainly of the preparation of foodstuffs. This is explained not only by the primary aim of consumers'
co-operation, but even more by the fact that this type of undertaking
was the easiest to restart, needed less capital, and offered the best
prospects of sale and profit.
At the beginning of 1923 the position of the industrial undertakings run by consumers' co-operatives had improved little if at all.
They were still hampered by the methods of supply adopted by the
state, they were not working to anything like full capacity, and their
output was only from 10 to 15 per cent, of the normal. In many of
them stoppages of work took up 90 per cent, of working time, and the
number of undertakings completely closed down was very large.
At present the industrial activities of the unions and societies are
still very irregular. They are scattered, and tend first in one direction and then in another, as finances allow. Production is quite
unsystematic and spasmodic. At the same time there is no cooperative union which has not a factory of some kind. The manufactures of consumers' co-operatives include not only mills, bakeries,
repair shops, and soap factories, but all kinds of small industries, such
as tanning, boot and shoemaking, furriery, fishing, etc. ; yet there is
no sort of general plan.
These industrial undertakings account for a very small share of
the aggregate turnover of the co-operative movement. In 1918
industrial production accounted for 15.27 per cent, of the Centrosoyus
turnover. In 1919 the proportion fell to 5.5 per cent., in 1920 to
2.6, and in 1921 to 1.97. From 1921 onwards the percentage rose ;
in 1922 it was 3.5 (representing a turnover of 2,810,905 gold roubles)
and in 1922-1923 it rose to 7.7. In the first nine months of 19231924 production rose to 18,907,000 chervonetz roubles, or 8.2 per
cent, of the turnover and 14.5 per cent, of total sales \
As soon as the* New Economic Policy was introduced, the Decree
of 5 July 1921 authorised co-operative organisations to lease nationalised industrial undertakings, giving them special privileges, among
others priority over other lessees. In practice, however, the cooperative movement was unable to take advantage of these privileges
1

Soyus Potrebiteley, Nos. 5 and 12, 1921, Nos. 1-2 1924.
bitelskaia co-operatsia v 7925-/92^ godu.

Potre-

3
The Co-operation
1 B

— 226 —
as it had not the necessary funds to start work in these establishments,
which were in a thoroughly dilapidated condition. Furthermore,
the government economic organisations, which also needed capital
and were anxious to rid themselves of burdensome concerns, preferred
to deal with private individuals, who offered better terms x .
At the beginning of 1923 only 37 per cent, of the lessees of
nationalised undertakings were co-operatives, 14 per cent, being artels,
and only 23 per cent, consumers' co-operatives 2 . At the end of
1923, according to the urban census for the whole of Russia, cooperative organisations controlled only 3 per cent, of the total number
of industrial undertakings and employed only 4.4 per cent, of the
aggregate industrial population ; the average number of workers in
a co-operative industrial undertaking was not more than 17.
The following table shows the distribution by industry of undertakings owned by co-operatives and the number of workers employed 3 :
DISTRIBUTION OF CO-OPERATIVE UNDERTAKINGS AND EMPLOYEES,
BY INDUSTRY, 1923

Industry

Building materials
Mining
Metals
Wood
Chemicals
Foodstufís
Leather
Textiles
Clothing
Printing
Paper
Average

Co-operative
undertakings
per cent, of
total in the
industry

Workers employed
Per cent, of
total in the
industry

Per
undertaking

3-7
2.7

2.1
0.1

2.2

2.8
4.2

7-5

4.9

10.2

12.9
8.0

1-7
1.8
19.0
1.4
1.7
1.6
1.4

0.2

5-9

5-1

7-1
6.0
3-0

1.8
24.0
26.0

3.0

4.0

17.0

2-5

4-5
2.4
0.9

5-6

Otchot Centrosoyusa za 1Ç22 god.
Economicheskoie Obozrenie, No. 2, 1923.
' Statistickesky Bulleten, No. 80, 15 Nov. 1923. Of the total number
of undertakings, 7.2 per cent, were held by the state and 89.8 per cent.
by private individuals. Of the total number of workers 82.4 per cent.
were employed by the state and 13.2 per cent, by private employers.
2

— 327 —

During the first half of 1923-1924 co-operative organisations held
on lease 242 undertakings, employing 11,665 workers, which produced
goods to a gross value of 18.8 million chervonetz roubles. In addition, during the same period they owned 290 undertakings employing
14,040 workers which produced goods to the gross value of 27.6 million
chervonetz roubles. They thus controlled 53.3 per cent, of all
undertakings in small-scale industry, employed 10 per cent, of the
workers, and produced 44 per cent, of the gross output of smallscale industry *.
On 1 May 1924, out of 3,306 undertakings held on long lease
which were inspected, 755 or 23 per cent, were run by co-operative
organisations. The industrial distribution of these undertakings was
as follows 2 :
UNDERTAKINGS LEASED BY CO-OPERATIVES, 1924
Undertakings
Industry
Number

Metal
Textiles
Leather
Wood
Paper
Printing
Chemicals
Building materials
Foodstuffs
Miscellaneous
Total

59
28
118
71
1
I

47
71

356
3
755

Per cent, of
all leased
undertakings

I9.4
II.1
20.7
21.1
3-7
0.6
20.6
23.8
31-7
16.0

23-0

Considering that these figures include undertakings leased not
only by consumers' but by all types of co-operative organisations,
it is clear that the industrial activities of the consumers' co-operative
movement are still very limited.

1
2

Soyus Potrebiteley, No. 3, 1925, p. 71.
Ibid., p, 70.
,

CHAPTER III

Results of the Work of the Reconstructed Consumers'
Co-operative Movement

ECONOMIC ACTIVITIES

The general results of the working of the consumers' co-operatives may now be summarised \
The statistical section of the Centrosoyus draws a distinction
between " gross " and " net " commercial operations. " Gross "
operations, in Russian co-operative statistics, include those of the
whole co-operative system, i.e. all transactions between one cooperative union and another or between co-operative unions and consumers' societies, as well as sales made to the general public. " Net "
transactions cover the transfer of goods from superior co-operative
organisations to their respective dependent organs, but counted only
once. Between the Centrosoyus and the provincial unions two
kinds of transaction take place : the Centrosoyus supplies the necessary goods to its members, while the unions, in their turn, collect
the stocks of commodities which the Centrosoyus needs for its own
business ; the unions also supply goods to their own members and
branches.
1

It is difficult to compare the results in 1922, 1923, and 1924. The
statistical service of the Centrosoyus was badly organised in 1922, and
could give no information whatever for the primary co-operatives or
even for the provincial unions. Moreover, the figures for 1922 are given
in gold roubles while those for the economic years 1922-1923 and 1923-1924
are in chervonetz roubles. Again, different methods of calculation are used
by various authorities on co-operation and by the Centrosoyus statisticians ; while the depreciation of the Soviet rouble and the instability of
the chervonetz rouble make accuracy of statistical calculation almost
impossible. The information given must therefore be considered as
approximate only, but it nevertheless presents a fairly correct idea of the
present position of the consumers' co-operative movement.

— 229

—

The whole amount of goods transferred from one co-operative
organisation to another makes up the total of " gross " transactions.
It is evident that the same goods may be counted more than once by
this method ; for example, once when the Centrosoyus supplies the
goods to one of its members and again when this member transfers
them to one of its own affiliated societies. Goods thus handled twice
should, of course, be excluded from statistics of " net " transactions.
For purposes of " net " transactions, a distinction must be made
between (a) wholesale operations proper, carried on by the Centrosoyus and its branches, by the provincial unions, and by the two most
important local organisations, i.e. the Moscow Provincial Union of
Consumers' Societies and the United Consumers' Society of Petrograd ; (b) retail trade proper, carried on by the urban and rural
co-operative societies, including the industrial societies, transport
workers' societies, and military societies.
The following table gives the total gross operations of the entire
co-operative system in 1922, 1922-1923, and 1923-1924 1.
1

For 1921-1922, cf. article by A. FISCHHÄNDLER in Narodnoie khoziaistvo Rossii za 1Ç21-IQ22 god. (The Russian Economic System in 19211922); and Otchot Centrosoyusa za 1Q22 god. For 1922-1923 and 1923-1924
cf. articles by the same author in Economichcskoie Obozrenje, Nos. 23-24,
1924, also in Soyus Potrebiteley, No. n , 1924 ; article by M. KHINCHUK
in the International Co-operative Bulletin, Jan. 1925 ; and the official
publication of the Centrosoyus : Potrebitelskaia co-operatsia v 1Q23-1Q24
godu.
As already mentioned, the statistics for 1922-1923 and 1923-1924 are
given in chervonetz roubles. According to the index numbers of retail
prices constructed by the Institute of Economic Research, the average
value of the chervonetz in 1922-1923 was 7.04 pre-war roubles and in
1923-1924 4.95. In order to facilitate comparison, the equivalents in
gold roubles of figures given in chervonetz roubles are also stated. This
comparison was only possible, however, for 1922-1923 and 1923-1924, as
the basis of calculation for 1922 is quite different.
The figure for the operations of the Centrosoyus for 1923-1924 quoted
in the table corresponds to that given in the Bulletin of the Institute of
Economic Research, Nos. 9-10, 1924. According to Soyus Potrebiteley
(Nos. 1-3, 1924) the figures for 1922-1923 are as follows :
Million
Million
chervonet 7. roubles pre-war roubles
389.1
205.0
I59.3
»S.I
238.3
167.7
134-7
94-1

Oijfanisatiuns
Centrosoyus
Unions
Urban and industrial societies
Rural societies
Total

831.4

578.9

The figures given by Fischhändler and Khinchuk do not entirely
agree. Those quoted in the test are taken from Potrebitelskaia co-operatsia "ti 1Q23-IQ24 godìi.
1 8 *

— 2$0

—

GROSS OPERATIONS OF THE CO-OPERATIVE SYSTEM 1922 TO 1 9 2 4
igsa
Million
sold

Organisation

1922-1933

Million

Million
Million
Million Per cent, of
pre-war chervonetj pre-war
roubles
roubles
roubles

roubles chervonetz
roubles

Centrosoyus and its
branches
66.5
Provincial unions and
Centrosoyus agencies
—
Provincial and regional unions, regional
offices and branches 165.6
Urban and industrial
societies
127.7
Rural societies
87.9

Total

447-7

1933-1^4

224

157-5

53-5

166

117
174
98

348
139

853

600

164

Ï04

183

465.1

230.2

I96

649-1
409.1

32I.3
202.5

185
206

2,050.8

1,015.1

169

331-5
196

The foregoing table shows that the gross operations of the entire
co-operative system in 1923-1924 increased by 69 per cent, as compared with the previous year. While the operations of the Centrosoyus increased by 4 per cent., those of the unions doubled. The
reason for this is that in 1923-1924 the operations of the former
branches of the Centrosoyus are included with those of the unions.
Gross operations of the urban and industrial societies and those of
the rural societies doubled.
Net wholesale operations amounted in 1922 to 160.3 million prewar roubles, in 1922-1923 to 85.5 million chervonetz roubles
(60.2 million pre-war roubles), a drop of more than half, and in 19231924 to 274 million chervonetz roubles (135.6 million pre-war roubles),
more than double the figure for the preceding year. Net retail
operations increased as shown below x .
Year
1922
1922-I923
1923-1924

Percentage increase
from 1922-1923 to
1923-1924
1

Million pre-war
roubles
269.3
305.O
544-0

Million chervonetz
roubles

*53

434
1,100

For the figures in chervonetz roubles for 1922-1923 and 1923-1924
cf. article by Mr. KHINCHTJK mentioned above ; the figure given in Soyus
Potrebiteley (1924, Nos. 1-3) for 1922-1923 is 418.5 million chervonetz
roubles.

231

Direct sales to the public may be classified as follows :
LOCAL SALES TO THH PUBLIC, I921-1922 AND 1922-1923
1932-1922

Consumers

Urban and
industrial
population :
(1) Manual and nonrnanual workers, etc.
Sales by consumers'
societies
Sales by large stores

Total
(2) Railwaymen
(3) Military

Total
Rural population :
(ij
Sales by consumers' societies
(2) Sales by central
provisioning and exchange depots

Total

I922-I923

Million
pre-war
gold roubles

Million
chervonetz
roubles

—

140.9
16.5

193-8
32.7

137.2

157-4

20.0
12.0

20.6
14.5

28.3
20.0

159-3

192.5

264.8

95-a

131-0

16.7

22.7

in.9

153-7

Million
gold roubles

—

110.1

316.5

These figures show that retail trade only expanded in the towns
and industrial centres, remaining stationary in the villages. The
general development of the net commercial operations between the
markets and all parts of the co-operative system in 1922-1923 was as
follows.:

— ?3 2 —
NET COMMERCIAL OPERATIONS OF THE CO-OPERATIVE SYSTEM,
1922-1923
Saks

Purchases

Million Percent.
chervo- of total
netz
purroubles chases

Seller

202.7
State offices
Home market (including private under160.5
takings)
Foreign markets
5-4

368.6

Total

Buyer

Million
chervo- Per cent.
of total
ne«
sales
roubles

36.1
State offices
Population (retailsales) 418.6
Private undertakings 18.1
20.0
30.4 Foreign customers
14.6 Co-operative
organisations
2-5

7-3
S4.6
3-6
4.0

Total

100.0

495-3

0-5

100.0

According to Mr. K h i n c h u k , the percentage distribution, by
sellers, of the total purchases of all co-operative organisations in
1923-1924 was as follows :
Seller

Per cent, of total
purchases

State offices
Mixed societies
Co-operatives
Private individuals

52-1

2.9
30.I
14.9

T h e w o r k i n g of the co-operative system in 1922 and in 1922-1923
m a y also be compared by the distribution of its sales \

Sales to urban population :
Total
Per head
Sales to rural population :
Total
Per head
Per average family
1

Economicheskaia

1922

1922-1923

(gold roubles)

(sold roubles)

159,200,000

202,6oO.O

6.8 5

9.08

110,100,000
1.09

111,800,000
1.01

4.40

4-58

Zhizw, 2 Feb. 1924.

— 233 —

In order to give a comprehensive idea of the position, the foregoing information should be supplemented by figures for certain particular regions and for the most important co-operative organisations'.
For example, in 1923 the sales of the consumers' societies of the
town of Moscow totalled 40 million chervonetz roubles, and those
for the provincial government of Moscow 23 million gold roubles.
The total sales of consumers' co-operative organisations in the town
and provincial government of Moscow amounted to 80 million gold
roubles 2.
In 1923-1924 the wholesale operations of the Moscow Union of
Consumers' Societies were as follows 3 :

Quarter

First
Second
Third
Fourth
Total

Tuo usand chervonetz
roubles

Thousand pre*war
roubles

12.963
16,924
25.309
29,136

9.I95
13.872
11,776
16,940

84,332

51,783

The total sales effected in 1923 by the central co-operative organisation of the Ukraine (Vucospilka) amounted to 19 million chervonetz roubles. The turnover of the central industrial co-operative
organisation of the Ukraine was 3 million, and that of the rural consumers' societies 34 million, chervonetz roubles.
In Siberia supply operations undertaken by primary co-operative
societies in 1923 amounted to 10.3 million chervonetz roubles, and
their sales to 18.3 million. In the south-eastern region the total sales
effected by consumers' co-operative organisations in 1923 amounted
to 37 million chervonetz roubles, of which 8.7 millions were paid to
the United Consumers' Society at Rostov-on-Don and Nakhichevan '.
To complete the general survey, the following figures may be
quoted relating to the formation of stocks of raw materials by the
Centrosoyus in 1921-1922, 1922-1923, and 1923-1924 5.
1
Figures for 1923-1924 are available only for the Moscow region.
For the other areas mentioned only the 1923 figures are given.
2
Economicheskoie
Stroitelstvo
(Economic Reconstruction), 1924,

No. 35.
Ibid., Nos. 7-8, and Co-operativny Pout, 17 Mar. 1925.
* Economicheskaia Zhizn, 5 and 6 July 1924.
5
For 1921-1922, cf. Soyus Potrebiteley, No. 14, 1922 ; for 1922-1923,
ibid., No. 2, 1924 ; for 1923-1924, ibid., No. 11, 1924.
3

— 334 —
STOCKS OF RAW MATERIALS COLLECTED BY THE CENTROSOYUS,
1921 TO 1924

Commodity

Flax and tow
Hemp
Rags
Fur (pelts)
Horsehair
Hog bristles
Wool
Raw hides
Down
Silk (cocoons)
Medicinal herbs

Oct. 1921-Sept. 1922 Oct. 1922-Sept. 1923 Oct. 1923-Sept. 1924

poods

631,948
154,920
303,956
977,619
13.971
7,062
26,921
381,696

801,696
213,816
505.571
4.638,317
22,639
7.381

457,000
437,000
629,000
2,262,000

—
—

—

108,700

600,346
15,009
17,000
2,000

—
—
12,600

"
MEMBERSHIP

It is almost impossible to estimate with any degree of precision
the development of the co-operative system and the fluctuations in
membership. Such calculations are rendered particularly difficult
by the fact that there were two distinct periods in the development
of consumers' co-operation under the Soviet regime — the period
of Communism and that of the New Economic Policy. Moreover, even during the period of the New Economic Policy, the whole
organisation of the co-operative movement underwent profound
changes, sometimes by way of restriction and sometimes by way of
expansion, quite apart from minor alterations and re-arrangements.
Further, the official statistics sometimes take into account only
those consumers' societies which were actually in operation, and at
others include all societies whose names appear on the register, even
those which were not in operation. Up to the middle of 1922 the
figures include all societies established in conformity with the Act
of 20 March 1919 for the compulsory establishment of consumers'
societies, as well as the voluntary societies operating on totally different principles. From 1924 onward, when the whole system of consumers' co-operation was reorganised on the principle of voluntary
membership, the statistics refer to voluntary societies only. The
introduction of the voluntary principle is so recent that it is impossible as yet to estimate how far this principle has contributed to

— 335

the abolition or maintenance of the societies previously organised
compulsorily.
Finally, the statistics kept by the central organisations are not
remarkable for their accuracy ; the data given below must therefore
be considered merely as approximate estimates illustrative of the
expansion of the movement.
When the period of Communism came to an end, the consumers'
co-operative movement was completely disorganised. In rural
districts the consumers' societies were bankrupt, and many of them had
closed down. In the towns also a large number of societies had
ceased operations 1. The fluctuation in the numbers both of societies
and of their sale shops may be seen from the following table a :
CONSUMERS' SOCIETIES AND SALE SHOPS IN 1922
Societies

Sale shops

Date

i January 1922
Russia
Ukraine

Total

1 October 1922
Russia
Ukraine

Total

1 January 1923
Russia
Ukraine

Total

Registered

In operation

Registered

In operation

2I,66l
3.559

12,879
2,200

44,964
7,900

17,869
3.160

25,220

15.079

52.864

20,479

18,340
4,883

15.035
3.680

28,926
7.051

27.330
4.540

33.223

18,715

35.977

28,170

16,950
5.544

14,357
4.753

25.711
6,653

23,O06
6,683

32,494

19,100

32,364

29.689

1
Cf. MAKEROVA : op. cit.; and FISCHHÄNDLER's article in Narodnoye2 Khoziaistvo Rossii za ¡Q21-1Q22 god.
Ezhegodnik Centrosoyusa za 1022, Vol. II. The statistics of shops
in operation on 1 January 1923 are more or less theoretical.
3

— 236 —
During 1922 the number of societies registered decreased by
2,726 (i.e. 10.8 per cent.) and that of shops registered by 38 per cent.,
while the number of societies in operation increased by 4,049 (26.9
per cent.) and that of shops by 9,210 (44 per cent.).
At the beginning of the year the number of societies in operation
represented only 60 per cent, of those officially registered. At the
close of the same year the proportion had increased to 86 per cent.,
while the number of co-operative sale shops actually in operation
was 90 per cent, of the number registered.
The figures quoted include also about 7,000 industrial co-operative organisations, about 5,000 voluntary societies, 332 railwaymen's
societies, and 180 military societies *. The reduction in the number
of sale shops is due chiefly to the liquidation of a number of multiplestore societies which had existed only on paper and had been found
by experience to be superfluous. The united societies and provincial
unions could not do more than the old supply committees ; their
economic working was for that reason somewhat impeded at a time
when they should have been adapting themselves to the changing
conditions of the market. In view of this, a complete reorganisation
of the primary co-operative societies was undertaken during 1922 ;
and the united societies were reorganised in accordance with economic
needs, the most successful being selected to remain.
The result of this reorganisation was a considerable curtailment
of the co-operative system ; an idea of this may be formed from the
figures for the town of Moscow. During the period 1 January 1922
to 1 January 1923 the number of consumers' societies decreased from
427 to 185, but on the other hand the number of members and consumers rose from 456,750 to 626,389 2.
The changes in the number of societies and of the customers
supplied by them may be seen from the following figures, which
relate to the year 1922:

1
2

Soyus Potrebitcley, No. 7, 1923.
Ibid., No. 4, 1923.

— 237 —
NUMBER OF CONSUMERS' SOCIETIES AND THEIR CUSTOMERS IN 1.922

i January 1922
Class of society

1 January 1933

Customers

Number
of
societies

Per ceni
of total

Number

Number
of
societies

Customers
Number

1 Per cent.
j of total

Industrial societies
Non-manual workers'
societies
Students' societies
Various

210

198,250

43-4

I03

303,240

56.4

170

213,250

294.297
38,852

36.9
6.7

44-5
8.6
3-5

39.250
6,0O0

Total

427

457.75°

185

626,389

100

The societies and their customers in the provincial government
of Moscow were distributed as follows on i January 1923 1 :
DISTRIBUTION OF SOCIETIES AND THEIR CUSTOMERS IN T H E
PROVINCIAL GOVERNMENT OF MOSCOW

Class

Urban united societies
Rural united societies
Rural voluntary societies
Industrial societies

Total

Number of
organisations

17
T

Active
membership

Total number
of consumers

26,920
126,482

193.230

57,888

118

21,069

138,449

63.407
215.054

312,920

747.390

407

During the first half of 1923 primary co-operative organisations
underwent even more drastic transformation. Large numbers of
them were wound up, and industrial co-operation was reorganised
on the basis of voluntary membership. At the same time the old
voluntary societies were absorbed by new organisations, such as the
central industrial co-operatives. The various societies were grouped
1

Soyus Potrebiteley, Sept.-Oct. 1923.
3

a38

in regional unions. Existing organisations were enlarged and the
small societies (which only existed on paper) were liquidated. The
figures for 31 urban co-operative unions appear below :
CO-OPERATIVE ASSOCIATIONS AND SALB SHOPS AFFILIATED TO
31 URBAN CO-OPERATIVE UNIONS, I 9 2 3

1 January 1933

1 July 1933

Type of society

Societies

United societies
General voluntary societies
Industrial
voluntary
societies
Central industrial cooperatives (new type)

Total

Sale
shops

Societies

Sale
shops

Percentage
increase (+) or
decrease (—)
in July

Societies

Sale
shops

252

534

222

538

- I I .9

+O.7

255

242

142

182

-44.O

-24-0

462

556

300

453

-35-0

-18.0

159

169

180

279

+ 130

+65.0

1,128

1,501

844

1,470

-25.0

' - ja.o

The liquidation of rural societies and their sale shops was carried
very much further :
NUMBER OF RURAL SOCIETIES AND SALE SHOPS, 1923

1 January 1933

1 July 1933

Type of society

United societies
Voluntar}' societies
Total

Societies

Sale
shops

Societies

Sale
shops

6,749
771

9.Ï57
698

5.356
448

7,008
450

7.520

9,928

5.804

7.458

Percentage
decrease ( - )
in July

Societies

Sale
shops

:—20.6

-23-5
- 4 I . 9 -35-5

-22.8

-24.9

— 339 —
Voluntary societies also came within the scope of the general reorganisation ; and the number of registered societies and sale shops
decreased by 8.5 per cent, and 22 per cent, respectively. The number
of societies and sale shops actually in operation, however, increased
by 13 per cent, and 14 per cent, respectively, as may be seen from
the following table :
NUMBER OF VOLUNTARY SOCIETIES AND SALE SHOPS IN I923
1 January 1933

Registered

Societies
Sale shops

6,935
9.055

In
operation

5.4OI
7.275

1 July 1933

Percentage
Registered
closed
down

22.1

5.651

19.7

7,101

Percentage
down
closed

In
operation

4,681
6,191

17-3
12.9

The total number of consumers' societies and sale shops throughout the whole of Russia varied during 1923 as follows :
TOTAL NUMBER OF CONSUMERS' SOCIETIES AND SALE SHOPS
THROUGHOUT RUSSIA, I923
Consumers' societies

Sale shops

Date
Registered

In operation

Registered

In operation

i January 1923

22,494

19,110

32,364

29,689

1 July 1923

¡31,092

30,122

30,347

29,437

During the second half of 1923 there was a slight increase in the
number of rural societies, and a certain decrease in the number of
urban societies, The economic crisis in the autumn of 1923 reacted
upon the co-operative movement and gave rise to a further reorganisation and reduction in the number of societies, due to the amalgamation of small associations with larger ones.
3

— 240 —

During the first half of the new economic year ( i October 1923
to 1 April 1924) the number of urban societies continued to diminish.
I n the first quarter about 70 societies were suppressed, and in the
second about a h u n d r e d .
T h e information available regarding the position of consumers'
societies and their saleshops during the whole period 1 January 1922
to 1 January 1925 is tabulated below 1 :

TOTAL NUMBER OF CONSUMERS' SOCIETIES AND SALE SHOPS,
I JANUARY 1922 TO I JANUARY I925
Number of societies

Number oi sale shops

Date
Registered

In operation

Registered

In operation

25,220

15.079
18,715

52,864
35.977

20,479
28,170

19,110
20,112
19.085

32,364
30,347

29,689
29.437
25.490

1922

i January
1 October
1923
1 January
1 July
1 October
1924
1 January
1 April
1 July
1 October
1925
1 January

23.223
22,494
21,092

—
—

19.974
21,078
2I,l86
22,480
24.516

—

28,003
29,402
31.573
34.919
40,176

1
Information for the period prior to 1924 is taken from Soyus Potrebiteley, No. 5, May 1924 ; and subsequent data from the report of the
Centrosoyus, presented to the 39th Session of its Board in March 1925
(cf. Potrebitelskaia Co-operatsia v 1Ç23-1Ç24 godu). As from 1 October
1923 official co-operative statistics cease to make any distinction betweeji
registered societies and societies actually in operation. It is difficult
to ascertain how far the figures are exact, as they differ according to the
source from which they are taken. Thus, the following figures are given
in the Soyns Potrebiteley, No. 5, 1924 :

Date
1 September 1923
1 November 1923
1 January 3924

Societies
16,386

g Sale shops

15.062

22,931
22,639

>7."33

25.303

There is thus a difference, for 1 January 1924, of 2,041 societies and
2.700 sale shops between the two sets of figures.

— 241

If t h e figures for 1925 are correct, t h e n u m b e r s of societies a n d
sale shops registered have decreased, since 1 J a n u a r y 1922, b y 2.7 and
20.4 respectively, while the n u m b e r s in operation rose by 62 and 96
per cent., respectively.
R u r a l societies represent 93 per cent, and urban societies 7 per
cent, of the total number of consumers' societies. Of the sale shops,
77 per cent, belong to rural societies and 23 per cent, to urban and
industrial societies.
T h e associations a n d their sale shops m a y be classified as follows :

CLASSIFICATION OF SOCIETIES AND SALE SHOPS, 1923 TO 1925,

Urban and industrial
societies

Rural societies

Date
Number of
societies

Number of
sale shops

Number of
societies

Number of
sale shops

1923

I Oct.
1924
i Jan.
1 April
1 July
1 Oct.
1925
1 Jan.

1,897

3,2l6

17,188

22,908

1,825
1,708
1,686
1,560

3.456
4.315
6,213

18,205
19.370
19,500
20,920

24.547
25,087
251360
27,909

22,274

31.574

7,010

1,608
9,142

I n April 1925 there were, on an average, two sale shops officially
registered in each district (volost) ; and each sale shop served, on an
a v e r a g e / 4 , 5 0 0 inhabitants.
T h e Central Statistical Department gives quite different figures,
as follows 1 :

Bulletin CS.Ou.
(Bulletin of the Central Statistical Department), 1924, Nos. 87 and 93, and 1925, No. 98. The Statistical Department considers the statistics of the central co-operative organisations
very inaccurate, since the co-operative unions are not even able to give
precise figures for the rnembershipM>f the primary co-operatives (cf. Bulleten, No. 95, 5 Jan. 1925.)
3
The Co-operation
16
1 S

— 242 —
NUMBER OF UNITED AND VOLUNTARY CO-OPERATIVE SOCIETIES,
I 9 2 2 TO 1924

Index number
Date

Number

(1 J a n . 1922 = 100)

1922

i Jan.
1 April
1 July
1 Oct.
1923
1 Jan.
1 April
1 Oct.

28,115
26,264
25,308
25.215

IOO

93-4
90.0

89.7
86.5
73-5

24,315
20,66o
17,423

61.9

16,800
20,733

59-8
73-7

1924

1 April
1 Oct.

The same Department gives the following figures for the different types of societies on 1 August 1924.

— 243 —
TYPES OF CO-OPERATIVE SOCIETIES
Number of societies

Type of society

United a n d voluntary
societies
Urban (general)
Industrial
Transport workers'
Students'
Military
Rural
Combined
Various
Unclassified

686
841

Total
S p e c i a l societies
R e s t a u r a n t s , cafés,
clubs, etc.
Laundries,
hairdressers, etc.
Electricity supply
societies
Various

106

4.0
5-0
0.5

J7
86
14,373
163
134
341

0.6
85-7
0.9
0.9
2.0

16,747

99-7

—

0.1

16
5
19

Total

—

Grand total
T h e following

Per cent, of total

0-3

16,800
figures

100

give some idea of t h e total

membership

of co-operative societies, a l t h o u g h their accuracy c a n n o t be g u a r a n teed

TOTAL MEMBERSHIP OF CO-OPERATIVE SOCIETIES, 1923 TO I925
Type of Society
Date

Total
Rural

1923
i January
1 October
1924
1 January
1 April
1 July
1 October
1925
1 January

Urban

J Transport
workers

Military

2,297.032

2,599.244

1,000,000

369,133

4,936,255

3,019,869
3.202,473
3,204,247

1,000,000
1,000,000
452,3!7
548,547

369,138
369,13s
253,502

6,265,414
6,940,853
7,277,761
6,770,682

2,55 .846
2,706,150
2,860,616
3,001,207

3,523.156
7,072,910

3,175,231
3.809.335

1
Potrebitelskaia
biteley, May 1925.

co-operatsia v 1Q23-1Q24 godu,
3

p . 88.

Soyus

Potre-

— 244 —

In arriving at their estimates, official statisticians assume that
the return to voluntary membership resulted in the complete elimination of the fictitious societies which were once so numerous. It has
already been shown, however, that a large number of consumers
registered as " voluntary members " had never paid their membership
fees. In any case, even if all the registered members had paid thensubscriptions regularly, their number, like that of the societies, had
decreased since the Bolshevist revolution 1 :

1913

Number of societies
Membership

E n d of

First half of

1917

1924

10,500
25,000
3,500,000 11,500,000

20,128
7,000,000

The total membership doubled from 1913 to 1 January 1924. On
the other hand, if the figures for 1924 are compared with those for
1917 (on the eve of the Bolshevist revolution), it will be seen that
the number of societies decreased by 20 per cent, and the membership
by 64 per cent.
It should be pointed out, however, that these figures
published by the central co-operative organisation are not accepted
by the Central Statistical Department. In its own calculations
the Department has only counted as members persons who have
actually paid part at least of their membership fee. Members enrolled
under the Decrees of 20 March 1919 and 7 April 1921 instituting
compulsory membership are not counted 2 .
According to the Department's figures, the total membership of
consumers' co-operatives on 1 April 1924 was 4,696,379, of whom
1,905,115 (42.2 per cent.) belonged to rural societies, and 2,791,264
(57.8 per cent.) to urban societies.
The total population served by consumers' co-operatives (i.e. the
number of members plus their families) is estimated at about 22 millions, as follows :

For information relating to the years 1913-1917, cf. article by
in Soyus Potrebiteley, 1922, Nos. 8-10.
2
The figures of the Central Statistical Department themselves cannot
be regarded as accurate. The Department did not obtain complete membership figures from the co-operative unions and was therefore obliged
in some cases to calculate the membership of industrial societies by
taking the average number of members per society from which figures
had been secured and then multiplying this average by the total number
of societies.
MERKULOV

345

Towns
Country
Total

Number of person»
(thousands)

Per cent, of total
population

12.053
9,801
21,854

44-4
8.5
16.7

The figures for the urban population are held to be grossly
overestimated. The Bulletin of the Central Statistical Department
states that with the present methods of recruiting members workers
in factories and offices are automatically enrolled in the co-operatives.
Thus several members of one family may be members of consumers'
societies, while in the co-operative statistics each member is taken
to represent an entire family. The inaccuracy of the figures is
shown by the fact that the number of town dwellers given as members of co-operatives in certain provincial governments is larger than
the entire urban population in these governments \ The average
membership of a co-operative society throughout Russia is 1,298 for
urban societies, 14 for rural societies, and 3 for all societies altogether. The figures for different regions vary as shown below :

AVERAGE MEMBERSHIP OF CO-OPERATIVE SOCIETIES, BY REGION
Urban
societies

Region

Central industrial
Central agricultural
Volga
South East
Ukraine
Siberia

Rural
societies

1.477
972
1.234
1,660
81
2,128

102

128
199
497
106
164

All
societies

396
207
324
601
li
293
i

ORGANISATION AND GROUPING

The grouping of consumers' societies into local secondary organisations was considerably modified more than once. At the begin-

Cf. Bulleten C.S.Ou., No. 95, 5 Jan. 1935.

— 246 —
ning of 1922 there were 90 provincial unions with about 700 regional
branches ; by the middle of the same year the Centrosoyus comprised
98 unions with 738 branches l. The need for economy led in 1922 to
the reduction of certain branches to the status of simple offices, and
even, in some cases, to their suppression. Moreover, the organisation
of new economic regions, and a certain. development of economic
autonomy on the part of the federated republics and independent provinces, gave rise to the creation of local national unions, e.g. the
Regional Union of Chuvash, the Regional Union of Marinsk, the
Union of the Tartar Republic, etc.
At the beginning of 1923 the independent provinces had already
7 co-operative unions which were really provincial unions, differing
only in the fact that they were on a national basis. There were also
11 unions in the federated republics. Measures were then taken for
the creation of 8 regional unions, as follows : Ural (5 provincial
'unions); North-West (7 unions); South-East (8 unions); Siberia
(9 branches); Kirghiz Republic (5 provincial unions); Transcaucasia
(4 unions); Turkestan (6 unions); Far Eastern Republic (7 unions) 2 .
The centre of the co-operative movement in the Ukraine was the
Vucospilka (Ukrainian Union of Consumers' Societies), which had
branches at Kiev and Odessa.
On 1 January 1923 the co-operative system was made up as
follows 3 :
Organisations

Number

Centrosoyus
1
Its branches, offices and agencies
120
Co-operative headquarters of federated republics
3
Regional and provincial unions
87
Divisional branches thereof
502
Divisional unions in the Ukraine
48
Local offices of military co-operative associations
10
In 1924 a further reorganisation was effected. Practically all
the local offices and branches of the Centrosoyus were closed and
their place was taken by the regional unions. Apart from the
Ukraine, where the Vucospilka had already taken over such local
branches, those of the North-Western and South-Eastern regions,
1

Soyus Potrebiteley, Nos. 17 and 18, 1924.

Cf. MAKEROVA : op.

cit.

Cf. Economicheskoie Obozrenie, Nos. 17 and 18, 1924, and Cooperativnoie Dielo, 24 Sept. 1924.

— 247 —

Siberia, and the Ural were replaced by the regional unions. Many
provincial unions were reorganised as divisional unions (as had previously been done in the Ukraine only) and were thus better fitted to
meet local demand. The autonomous branches, which had steadily
decreased in number, were entirely wound up.
The position in 1923-1924 was as follows :

Organisation

Centrosoyus
Its subsidiary offices
Large regional unions
National and regional
unions
Provincial unions
Divisional unions
Regional self-governing branches

Total
1
3

1 October 1923

I April, 1934

1 August 1934

16
3

6
2

6
6

26
87
48

23
46
91

23
23
195

502 *

683

As at 1 January 1933.
Exclusive of regional self-governing

169 2

254 2

branches.

Nevertheless, the reorganisation of the movement cannot yet
be considered as complete. Under the influence of further reforms
now being undertaken and of changes in economic conditions, there
can be no doubt that the whole system of consumers' co-operation
will still have to undergo many transformations.
In order to complete the survey of the expansion of the consumers' co-operative movement, its position in certain important
districts may be considered.
Ukraine
On 1 January 1919 the primary co-operatives included 12,408
rural societies, 1,035 urban societies, 391 industrial societies (of which
150 were in the Donetz basin), and 47 railwaymen's co-operatives.
These societies were grouped in 171 provincial unions and 10 urban
unions ; and these, in turn, were federated in 7 regional unions,
forming the third degree of the organisation. Twenty-five per cent.
3.

— 248 —

of the provincial unions were not working. In 1919 the number of
provincial unions decreased by 122 and that of the urban unions by 5.
During the period of Communism the number of primary co-operative
organisations fell to 4,500, and of these one-third were subsequently
closed.
At the beginning of 1921 the societies actually working comprised 3,000 united consumers' societies ; in 1922 the total increased
to 4,000, plus 350 voluntary societies. The iatter, however, fell
to 160 by the end of that year. In the same year the provincial unions
and their branches were reorganised in 46 divisional unions, the only
provincial union retained as such being that of the industrial cooperatives of the Donetz district. On 1 January 1924 there were
291 industrial and urban societies and 4,122 rural societies, 45 unions,
8 transport workers' societies and 13 military societies. The whole
system was grouped under the Central Pan-Ukrainian Union of Consumers' Societies, the " Vucospilka ", which had special sections
for industrial co-operatives, transport workers' societies, and military
societies.
Up to 1 January 1924 the whole population officially formed the
membership of the Ukrainian co-operative system, but of active
members there were only 800,000 agriculturalists, 500,000 trade unionists, and 150,000 soldiers, i.e. 12 to 14 per cent, of the peasant
population and 50 per cent, of the trade union membership. On 1
January 1924 there were 43 industrial co-operatives with 445 sale shops
in the Donetz basin. The membership of industrial co-operatives
on 1 January 1924 was 160,000, representing 60 per cent, of the total
number of manual and non-manual workers. By 1 May 1924 the
total had risen to 175,000, equivalent to 65 per cent, of all manual
and non-manual workers \
Central Industrial

Region

The number and distribution of primary co-operatives in this
region 2 at various dates is shown below. No figures are available
for the provincial government of Nijny-Novgorod and Riazan, while
figures for the Moscow provincial government are given separately
later.
1
Cf. Soyus Potrebiteley, Nos. 6 and 7, 1924 ; Ezhegodnik Centrosoyuza
sa JÇ23 ; and Economicheskaia Zhizn, 6 July 1924.
s
The central industrial region includes 11 provincial governments,
i.e. Moscow, Vladimir, Ivanovo-Voznessensk, Kalouga, Kostroma, NijnyNovgorod, Rybinsk, Riazan, Tver, Tula, Yaroslavl.

— 249 —
NUMBER OF PRIMARY CONSUMERS' SOCIETIES

M VO IO

1933 i Jan.
1933 1 Jan.
1924 1 Jan.
1 Mar.

Total number

Date

Urban and
industrial
societies

Rural
societies

378
257
295
173

2,706
I.843
I,3l6
2,100

The total membership at the beginning of 1924 was 1,057,000,
of whom 726,202 were industrial workers and town dwellers and
316,779 peasants.
In the city and provincial government of Moscow the number of
primary co-operative societies varied during 1923 as follows :
i January 1923

1 January 1924

Area
Number of
societies

City of Moscow
Provincial Government
of Moscow
Total

Number of
sale shops

Number of
' societies

187

363

423

363

820

610

458

1,183

The number of active members was as follows :
Area

City of Moscow
Provincial Government
of Moscow

Total

1 November 1923

1 January 1924

252.349

254>65I

253,016

268,420

505,365

523,071

— 250 —
Almost all the primary co-operative societies of the provincial
government of Moscow (including the city) are federated in the Moscow Union of Consumers' Societies. On i April 1924 this union
comprised 510 societies with a total membership of 395,487 industrial
workers ; 82 of the societies with a membership of 245,719 were in
the city of Moscow and the remaining 428 in the provincial government. The union had also 63,270 peasant members \
Siberia
When the new policy first came into operation (on 1 January
1922), the consumers' co-operative system in Siberia consisted of
1,063 rural co-operative societies. The number of rural societies
increased from 1922 to 1924 as shown below 2 :
RURAL CO-OPERATIVE SOCIETIES IN SIBERIA, 1923 TO 1924
1 January 1923

Number of societies
Number of sale shops
Membership
Membership expressed
as a percentage of
the
whole
rural
population
Average number of
farms or estates per
society
Average number of
localities per society

1 January 1924

1 March

59,000

1,291
2,082
l8l,000

237,000

4-9

15-4

19.7

—

1.025

847

14.1

II.7

I.173

1.999

1924

1,416

2,198

The position of the co-operative movement in other regions about
the middle of 1924 was as follows :
North-West region : Membership of the consumers' co-operative
system totalled about 400,000, or 14.3 per cent, of the total number
of peasants and trade unionists.
The United Consumers' Society of Petrograd had a total membership of 250,000.
1
Soyus Potrebiteley, Nos. 6-7, 1924 ; Economicheskoie Stroitelstvo,
No. 5, 1924 ; and Economicheskaia Zhizn, 5 July 1924.
' Economicheskaia Zhizn, 6 July 1924.

25I

—

South-East region : On i June 1924 there were 749 rural societies
and 34 urban industrial societies.
The United Consumers' Society of Rostov-on-Don and Nakhichevan had a total membership of 21,859.
In the Tartar Republic there were 227 united consumers' societies, of which 126 were actually in operation on 1 January 1924.
The Centrosoyus for White Russia had a peasant membership
of 100,195 and an industrial membership of 36,000, including 16 per
cent, of the families and 59 per cent, of the trade unionists in the
district l.

Economicheskaia Zhizn, 5 July 1924.
3

CHAPTER IV

Function of the Consumers' Co-operative Movement
in the Economic Life of Russia

The object of consumers' co-operation in Russia, as elsewhere,
is to supply the population with the manufactured goods and agricultural produce which it needs. Such is the fundamental task of
consumers' co-operation, but in Soviet Russia the movement has
additional duties, being regarded as a distributive organ for all sorts
of products. I t is one of the main channels for the disposal of goods
produced by nationalised industries. The system of state capitalism
is based upon both the state economic system and the co-operative
system. According to the Soviet policy, the co-operatives as well
as the state commercial organisations must be used for distributing
the products of nationalised industries. Consumers' co-operation is
regarded as one of the most indispensable and important parts of the
system of state capitalism.
Moreover, co-operation in Soviet Russia was to be used to oust
private commerce and private capital ; and, as has already been
pointed out, this is the Soviet Government's own object. Cooperative activity, therefore, has to be carefully encouraged and the
state must foster the movement in all directions, so that, with state
commerce in the van, the co-operative movement may take the second
place in wholesale trade at home and the leading place in retail trade.
In order to grasp the economic function of the consumers'
co-operatives in Soviet Russia it is necessary, in the first place, to
ascertain how far the co-operative movement satisfies the needs of
the population ; then, how far it distributes the products of nationalised industries ; and, finally, how far it has succeeded in ousting
and replacing private commerce. It will thus be possible to decide

— 253 —
whether the Soviet policy in regard to consumers' co-operation has
been successful.
RELATION TO CONSUMPTION

Consumption is much lower in Soviet Russia than before the war
owing to the decreased purchasing power of the population. The
reasons for this decrease have already been considered. Low as is
the present demand, only a small part of it is met by the co-operatives.
In 1922 the purchasing power of the rural population was estimated
at 600 million gold roubles and that of the urban manual and nonmanual workers at 800 million. In that year the sales of the consumers' co-operatives to the peasant population amounted to 100 million gold roubles, or less than one-sixth of the total consumption,
while those to the industrial population of the towns amounted to
106 million gold roubles or between 16 and 17 per cent, of the total
consumption \
During the economic year 1922-1923 the commercial activity of
the consumers' co-operatives undoubtedly expanded, but still met
only a small proportion of the population's needs.
In 1922-1923 the value of the products of nationalised industries
consumed by the rural population amounted to 814 million real
roubles 2 . (Other estimates place the total at 700 million 3 .) It is
evident that the consumption of such commodities by the rural population increased by at least 100 per cent, during that year. But
the rural co-operatives supplied only a very small proportion of this
total—from 13 to 16 per cent., equivalent to about n o million roubles.
No figures are available regarding consumption by the urban
population in 1922-1923. It is known, however, that its total consumption of manufactured products amounted to 800 million roubles 4 .
During that year manufactured products represented seven-tenths of
the total goods sold by the co-operatives to the urban population. As
the total sales made by the co-operatives amounted to 202 millions,
it follows that they supplied only 17 or 18 per cent, of the manufactured goods consumed by the urban population.
1
The data given regarding sales by the rural and urban co-operative
associations relate to the year 1922, while data previously quoted relate
to the economic year 1921-1922. (Cf. Soyus Potrebiteley, May and June
1923O
a
STRUMILIN : " The Capacity of the Peasant Market ", in Economicheskoie Obozrenie, No. 1, 1924.
3
Economicheskoie Obozrenie, No. 12, 1924.
4 Ibid.

— 254 —

In 1922-1923 the consumers' co-operatives played practically the
same part as in 1921-1922, when they were given more freedom of
action and had to adapt themselves to the conditions of the open
market. Co-operative transactions show an increase in absolute
figures, but the population's consumption for the same period increased much more rapidly. The market was able to supply the
increased demand, but the co-operative movement had no great hand
in it. To quote the words of a journalist : " in 1922-1923 the market
took two steps forward where the co-operative movement took only
one " K
SALE

OF PRODUCTS OF NATIONALISED INDUSTRIES

The fact that the co-operative system was unable to satisfy more
than a small proportion of the demand for manufactured goods is in
itself a proof that it was not equal to the task which had been
assigned to it. The insignificant share taken by the movement in
marketing the products of nationalised industries is further confirmed
by statistics of sales of such commodities. It has already been seen
that the co-operative system stands at the bottom of the list of buyers
from state industries. The state commercial bodies set up to sell the
. products of nationalised industries preferred to dispose of them either
to other state bodies (trusts and syndicates) or to private undertakings
and individuals.
The commercial policy of state industry has always placed the
co-operatives at a disadvantage. The desire of the state trusts to
create commercial organs for purposes of wholesale and retail trading, and the endeavours of the Soviet Government to link up the
co-operative system with the state monopoly of trade greatly curtailed
the share of the co-operative movement in the distribution of the
products of nationalised industries.
In 1922-1923 only 13 per cent, of the total output marketed by
state undertakings was distributed to consumers through co-operative
societies. Even if the scope of enquiry be limited to those commodities
actually dealt in by the co-operatives, not more than 15 or 16 per
cent, of the products of nationalised industries are distributed by
co-operatives. The proportion of certain classes of goods taken by

A. FISCHHÄNDLER, in Economicheskaia Zhizn, 2 Feb. 1924.

—

55 —

the co-operatives was as follows : leather, 12 per cent.; rubber shoes,
14 per cent. ; textiles, 20 per cent. ; oil, 20 per cent. ; glass and
pottery, 22 per cent. x
The net output of nationalised industries in 1922-1923 was estimated at 1,293 million gold roubles, while the sales of the co-operatives to the whole population, both urban and rural, were only onefifth of this amount, from 200 to 250 million gold roubles.
The following figures further illustrate the small share taken
by the co-operatives in the commercial operations of state trading
bodies 2 .
SHARE TAKEN BY CO-OPERATIVES IN COMMERCIAL OPERATIONS OF
STATE BODIES, 1922-I923
Branch of industry

Textiles
Chemicals
Building materials
Wood
Woodworking
Fuel
Mining
Metals
Leather
Foodstuffs
Paper
Various

Percentage of turnover

Percentage of sales

«•5
6.0
22.2
2-5
6.9
4-7
5-7
12.2
10.8
5-2
4.6

20.0
II.O
38.2
5-7
5-7
1.6
13-8
9-7
25-9
24.8
8.8
5-1

9.0

16.0

1.0

General average

The total business done on commercial exchanges in 1922-1923
only amounted to 1,910 million roubles, and the share of co-operatives in this figure was only 164 million roubles, or about 8.6 per cent.
of the total. In 1923-1924 the total business done on commercial
exchanges amounted to 3,017.5 million chervonetz roubles. The
co-operatives' share of this was only about 750 million roubles, or
1
2

Soyus Potrebiteley, No. 3, T924.
Ibid., Nos. 1-2, 1924.
3

— 256 —
25 per cent. T h e proportion of business done by co-operatives on
t h e Moscow exchange and provincial exchanges is shown below ' :

PERCENTAGE OF TOTAL OPERATIONS ON COMMERCIAI, EXCHANGES
DONE BY CO-OPERATIVES, IQ22 TO I924
1922-1923

Exchange

Business
on exchange

Purchases

Sales

1923-1924

Business
outside
exchange
Purchases

Sales

Purchases

Sales

Moscow

14.O

1-7

IO.5

3^2

16.9

3-7

Provinces *

16.2

3-9

II.2

3-8

29.7

13.0

Business
outside
exchange

Business
on exchange

Purchases

Sales

3°-5

6.9

In J922-1923 there were 48 provincial exchanges, and 70 in 1923-1924.

T h e proportion of the sales of state syndicates and trusts taken
by the consumers' co-operatives in 1923-1924 was as follows :
Syndicate

Textile
Cotton
Wool
Flax
Leather
Naphtha
Salt

Percentage

49
16
10

6
27-5
33
64

State offices in the metal industry sold 4 per cent, of their products to co-operatives in the first quarter of 1923-1924 and 8 per cent.
in the third quarter. T h e sugar trust sold 49 per cent, of its goods
to co-operatives in the first quarter and 72 per cent, in the fourth
quarter.
T h e progress of the co-operative movement in 1923-1924 as compared with 1922-1923 was due to the new co-operative policy adopted

Economicheskoie Obozrenie, 1925, No. 3. Èconomichesky
1924, Nos. 9-10. Soyvs Potrebiteley, 1924, No. 12.

Bulleteii,

— 257 —

by the Soviet Government in the middle of 1924 owing to the inefficiency of the co-operatives in 1922-1923. Yet the figures given above
show that even in the latter year the co-operatives did not purchase
a very large proportion of the products of nationalised industries,
that their commercial operations affected state industry very little,
and covered only a very small part of the market. There is no doubt
that the co-operatives were defeated in competition with the economic
organisations of the state. It will now be shown that they were no
more successful in competing with private capital and private trade.

GROWTH OF P R I V A T E T R A D E

The period subsequent to the introduction of the New Economic
Policy was eminently favourable to the development of private trading. As soon as the open market was re-established, the population
rushed to buy the commodities of which it had been deprived during
the whole period of Communism, and private trade, now officially
permitted, could expand considerably. The reorganisation of state
commercial enterprise upon a profit-making basis was only beginning ;
such undertakings had to be adapted to the new situation and to the
conditions of supply and demand on the open market. The nationalised industries, which during the period of Communism had been
stripped of all resources, had to seek these on the open market; the
one object was to sell as much as possible. Private trade alone was
able to supply the raw materials needed and to dispose of the finished
products.
The co-operative movement was not a dangerous competitor, as it
also had emerged from the period of Communism practically bankrupt
and completely disorganised. It was of no assistance to industry,
as it could not adapt itself to freedom of trade. But this was
not the only reason for the weakness of the co-operatives as compared with private traders. It had been placed in a very
unfavourable position by the Soviet Government policy. The financing of the movement from the state budget ; the policy of exchange
in kind with compulsory ratios of exchange ; the contracts
(a) with the Commissariat of Supply for the distribution of articles
of current consumption among the population and (ò) with the
Supreme Economic Council for the delivery of products of nationalised
industry to the co-operative societies ; unsuccessful efforts to capture
3
The Co-operation

2 0

1 7

_ 258

the market with quite inadequate resources : all these helped to keep
the consumers' co-operatives under the thumb of the state and utterly
devoid of initiative. From the end of 1922 onwards, it is true, the
co-operatives had begun to shake off the yoke, but by this time the
position they hoped to fill on the open market was already occupied
by the private capitalist.
Throughout 1923 the co-operative movement made strenuous
efforts to oust the private trader, but the effects of the period of
Communism were still being felt ; the internal organisation of the
co-operative system, its commercial methods, its financial position, and
the inadequacy of its organisations and agents made it impossible to
gain the ascendancy over private commerce.
During 1923 private trade not only maintained its position, but
still further encroached on co-operative business and in some cases
even on that of the state. The first triumph of private initiative was
in the villages, where it was represented by stalls, open-air markets,
hawking, and so forth. Next, there was a considerable expansion
of private trading in the towns, though this for a time was limited
to retail business. During 1923, however, private capital made its
way into wholesale trade, and by 1924 had gained a footing, both in
villages and towns, in retail and wholesale trade.
Statistical information is given subsequently on the respective
share of the state, the co-operatives, and private persons in the trade
of the country. These data are obtained from the first systematic
census of commercial establishments taken by the Central Statistical
Department at the close of 1923 1 .
The following table gives the number of commercial undertakings
(shops), their turnover, and the number of persons employed by
them in 1922-1923 :

1
These data appeared in Bulleten C.S.Ou., 1924, No. 83, as well
as in an article by N. VOROBIEV : " The State of Commerce in the Soviet
Union in 1922-1923 ", in Viestmk promyshlennosti, torgovli i transporta,
1924, No. 4-

— 259 —
TURNOVER AND EMPLOYEES OF COMMERCIAL UNDERTAKINGS,
1922-I923

Number of
undertakings

Number of
persons employed

Turnover

Class of undertaking
Absolute Per cent.
figures of total

State
Co-operative
Private

",915
27,678
420,366

459,959

2.6
6.1
91-3

100

Absolute Per cent. Absolute Per cent.
figures
of total figures
of total

22.6
11.6
65.8

576,089
294,298
1,667,565

12,537,952

504,429

100

14.6
14.2
71.2

74.328
7L749
358,352

100

The preponderance of private commerce is also stressed by the
table below, which relates to the second half of 1923 and covers the
various regions of the Soviet Union :
DISTRIBUTION OF COMMERCIAL UNDERTAKINGS, SECOND HALF OF 1923
State

Co-operative

Private

Total

Region
Number

Per cent.
of total

Number

Per cent.
of total

Number

5.977

7-3

71,562

88.1

81,307

1.6 3.744
2.0 1.353
1-7 1.651
3-5 2,094
3-1 1,996

7.2
3-6
7.0
9-5
9-5

47,250
35,554
21,441
i8,977
18,274

91.2
94.4
91-3
87.0
874

5I.84I
37,664
23,504
21,847
20,933

In some regions the percentage of co-operative societies is
the average, but everywhere private undertakings constitute
tenths .of the total. Nevertheless, the proportion of private
varies as between the towns and country districts. In the
3

4.6

8 8 8 8 8

3,768
847
757
412
776
663

93-8 136,996

H H H H

4.8 128,443

6,615

I.4

1,938

Percent
of total

Ukraine
Central indus. trial region
Central agricult u r a l region
Volga
West
Siberia
Ural

Per cent. Number
of total

above
ninetrade
towns

— 2Ó0 —

94 P e r cent, of the commercial undertakings are owned by private
capital, and these are seventeen times as numerous as state and cooperative organisations together. The volume of co-operative trade
is less than that of state commerce in the urban districts ; in the
villages, it is true, 15 per cent, of the commercial undertakings are
co-operative, but there also private capital owns four-fifths of the
total.
DISTRIBUTION OF COMMERCIAL UNDERTAKINGS IN TOWNS
AND VILLAGES, FOURTH QUARTER I 9 2 3

Towns

Villages

Class of undertakings
Number

State
Co-operative
Private

10,675
9.380
314.354

Total

334,409

Per cent.
of total

3-2

2.6
94.2

100

Number

1,240
18,298
I06,0I2

I25.55O

Per cent.
of total

0.9

14.6
84-5

100

Nevertheless, the information available gives no precise idea
of the share of co-operative organisations in the country's trade,
which varies according as wholesale or retail trade is in question.
It was intended from the beginning that the state should take
the most important part in wholesale trade ; indeed, the commercial
machinery of the state was created with that object in view. Small
retail trading, e.g. selling at open-air stalls, markets, hawking, etc.
was to be undertaken by private traders, especially in the villages ;
the co-operatives, according to the general Soviet plan, were to take
charge of retail trade and wholesale supplies to retailers, principally
in the towns.
In order to form an estimate of the actual position it will be
necessary to tabulate commercial undertakings under their respective
classes (state, co-operative, or private) and as officially classified for
purposes of the commercial tax. There are five of these groups :
I and I I cover open-air trading, I I I retail trade, IV small wholesale
trade, V wholesale trade proper. The following table gives the number and percentage of undertakings in each group.

— 2ÓI

COMMERCIAL UNDERTAKINGS IN RUSSIA BY CLASS AND GROUP,
FOURTH QUARTER I 9 2 3

Class of undertaking

State

1,446

P e r c e n t a g e of total i n
the group
P e r c e n t a g e of t o t a l
i n t h e class
Co-operative

P e r c e n t a g e of t o t a l
in the group
P e r c e n t a g e of t o t a l
i n t h e class
Private

Groups
I and II Group III
(open
(retail)
air)

P e r c e n t a g e of t o t a l
in the group
P e r c e n t a g e of t o t a l
in t h e class
Total
P e r c e n t a g e of t o t a l
in the group
P e r c e n t a g e of t o t a l
i n t h e class
]

4.425

Group IV
(small
wholesale)

Group V
(wholesale)

3.494

2,458

0.4

3-4

18.7

37-6

12.2

37-4

29.6

20.7

1,826

22,663

4.460

1,158

O.58

17.4

23-9

17.8

6.1

75-2

14.8

3-9

310,280

102,666

10,697

2,916

99.02

79.1

57-4

44.6

72.0

24-5

2-5
18,651

0.7

313.552

129,754

100

66.8

27-7

100

4.1

Total

11,823

2-5
IOO
30,107
6.2
IOO

426,559
9X3
IOO

6,532

468,489

100

IOO

1.4

100

It will be seen that the co-operatives in no case take the first
place. On the contrary, the percentage of co-operative commercial undertakings is negligible everywhere. Even in retail trade and
wholesale furnishing of supplies to retailers—where the co-operatives
should by right come first — the private trader is far ahead. In
wholesale trade the co-operatives are outstripped by the state commercial bodies and even more by private undertakings, which are
ahead of the state bodies also.
In the towns state undertakings dominate the wholesale trade,
but retailing is almost entirely in the hands of private enterprise.

2 0 *

—

2(¡2 —

COMMERCIAL UNDERTAKINGS IN T H E TOWNS, BY GROUP AND CLASS,
FOURTH QUARTER

1923

Co-operative

State

Total

Private

Group of undertaking
Number Per cent. Number Per cent.
of total
Of total

I and II
III
IV
V

3.924
I.952
860

3-3
28.0
41.8

6,390
1,228
466

5-3
17.6
22.6

Per cent.
of total

Number

I53.427
108,079

100
91.4

Ï53.427
"8,393

3.795
730

54-4
35-6

6,975
2,056

Per cent.
of total

100
100
100
100

In the towns, only in wholesale trade can the state commercial
undertakings and co-operatives together rival private trade, which
is far ahead of the co-operatives alone. In all other classes of business private enterprise preponderates.
A clearer understanding of the position of the co-operatives may
be gained from the turnover of each group of commercial undertakings
and the number of persons employed by them.
TURNOVER

OF VARIOUS CLASSES OF UNDERTAKINGS,
JULY-SEPTEMBER

State
undertakings

Group

Total

Private
undertakings

Total

ChervonChervonChervonChervonPer cent.
etz
Per cent.
etz
etz
Per cent.
per cent.
etz
roubles of total
roubles of total roubles
of total
of total roubles
(millions)
(millions)
(millions)
(millions)

27-3
52.O
92.9

172.1

6.6

41.9

38.9
77-4

14-3
9-8

25.9 !

66.0

10.2
IO.7

83.2

8.1

339-6
67.3
17.4

9.9

424-3

64.2

50-4
14-5

00 SO M

III
IV
V

Co-operative
undertakings

1923

IOO
100
IOO

662.5

IOO

It will be seen that the turnover of the co-operatives is very small
even in retail trade. The following table shows the number of persons employed by commercial undertakings :

— 263 —
EMPLOYEES OF VARIOUS CLASSES OF UNDERTAKINGS,
LAST QUARTER 1923
State
undertakings

Co-operative
undertakings

Private
undertakings

Tola!

Group

Number

Per cent.
of total Number

III
IV
V

39.410
24.365
20.553

7.0
45-6
60.4

47.229
15.154
9.366

II-3
28.3
27-5

340,421
13.857
4.074

81.7
26.I

Total

74,328

14.7

71.749

14.2

358,352

71-3 504.429

12.1

417,060
53.376
33.993

Per cent.
of total

100
100
100

IOO

fiere again private enterprise stands first. It is characteristic
of co-operative organisation that the size of the staffs is out of all
proportion to the commercial operations undertaken. While the
wholesale transactions of the co-operatives represent only 10 per cent.
of the total, they employ 28 per cent, of the total staffs engaged in
wholesale trade. They certainly employ a larger number than private
undertakings, although the latter do a much larger business. The
turnover of the co-operatives bears no proportion either to the number
of undertakings or to that of persons employed, and this in itself is
evidence of the bad organisation of the co-operative movement.
The importance of private enterprise in the villages may be seen
from the following figures for the second half of 1922-1923 * :

Torgovo Promyshlennaya Gazeta, 17 April 1924.
3

— 2Ó4 —
COMMERCIAL UNDERTAKINGS IN THE VILLAGES, BY GROUP AND CLASS,
SECOND HALF OF 1922-I923
State undertakings

Total
Number

I
II
III
IV
V

Total

78
941
266
123

1,408

Per cent.
of total

0.01

Co-operative
undertakings
Number

71
1,091

Per cent.
of total

Private undertaking!.

Number

16,345
573
90

41-7
25-5

1.1

18,170

14.3

Number 1 Percent.
1

27,686
54.760
21,963
1,407
509

99-75
97-9
55-9
62.7
70.6

27,757
55.929
39^49
2,246
722

100
100
100
100
100

106,325

84.6

125,903

100

O.25
1-9

2-3
11.8
17.0

Per cent,
of total

Total

12.4

1
T h e Commissary for H o m e T r a d e , Mr. Lezhava, was of opinion
that in some branches of trade private enterprise had almost a monopoly in 1923 *. I n Moscow and Petrograd nearly 90 per cent, of t h e
trade in meat, cattle, etc. is in private hands. Between 50 and 60
per cent, of the entire business done in manufactured and rubber
articles must be credited to private initiative, which practically
dominates the grain market.
Soviet
of opinion
h a d been
speeech to

leaders, both economists and politicans, are unanimously
that at the beginning of 1924 the co-operative movement
defeated by private enterprise. Mr. Sokolovsky, in his
the Conference of Industrial Offices in January 1924, said :

It is obvious that private capital has had. a brilliant success during
the last year. Twelve months ago 5 or 6 per cent, of wholesale trade was
done by private firm's ; the proportion is now 15 per cent. Retail trade
is a source of wealth to the private capitalist. There has already been
a good deal of friction among state, co-operative, and private undertakings. Although the existence of state wholesale trade in our country
is a necessary concomitant of state capitalism and nationalised industry
— which represents a large commercial capital in the hands of the Government — private initiative is beginning to amass sufficient capital
from retail trade to gain a footing in Wholesale business *.

1
LEZHAVA : Vwutrenniaya torgovlia v 1Ç23 godu
1923), pp. 12 and 16. Moscow, 1924.
2
Torgovo-Promyshlevnaia
Gazeta, 10 Jan. 1924.

(Home Trade it)

— 2Ó5 —
T h e same phenomenon was referred to b y M r . Smilga a t t h e
meeting of t h e Council of Representatives of Commerce, I n d u s t r y
and T r a n s p o r t in F e b r u a r y 1924 :
Two years ago the few timid commercial and small industrial ventures made by private undertakings were in no sense dangerous to the
economic organisation of the Soviets. That is not true now. We are
faced by private capital as a great economic power, and we must reckon
with it. In retail trade, in trade with the great peasant masses, private
capital is predominant. . . On the one hand we have the peasant
system, on the other the state economic system — and, in addition, the
new bourgeoisie.
Mr. Smilga feared that
with t h e country districts,
been completely inefficient,
and our principal consumer
are constantly increasing "

private initiative would monopolise trade
" for t h e co-operative system h a s hitherto
a n d this raises a barrier between ourselves
— t h e open m a r k e t — t h e needs of which
\

I n a speech at t h e last Congress of Commercial E x c h a n g e s , held
in April 1924, Mr. Lezhava, Commissary for H o m e T r a d e , said :
The most remarkable phenomenon of recent times is the expansion
of private trade, which now dominates the home market, especially in
articles of current consumption and textile products. It is also gaining
a monopoly of the wholesale supply of commodities to private retailers,
who transact practically the whole retail business of the Soviet Union.
Moreover, although the statistics for 1922-1923 indicate an increase in the
economic strength of co-operatives of all kinds (increase in turnover
and balance-sheet totals), the crisis which occurred in the autumn of 1923
clearly showed how slight was this improvement in comparison with
the position of the co-operative movement in general 2 .
N o good purpose would be served b y further discussion of t h e
work done b y t h e co-operatives and t h e expansion of private t r a d e 3 .

Ibid., 26 Feb. 1924.
Ibid., 16 April 1924.
8
Among the voluminous literature on the subject the following may
be cited :
2

Articles by KRUMIN, KAKTYN, and KRZHYZHANOVSKY in

Economi-

chcskoie Obozrenie, 1923, No. 12.
LARIN : articles in Torgovo-Promyshlenuaya
Gazeta and Trood,
1 Jan. 1924. Id.: Novaya torgovaya politika posle 12 siezda partii (The
New Commercial Policy after t h e Thirteenth Congress of the Communist
Party); Moscow, Centrosoyus, 1924.
PREOBRAZHENSKY : Economicheskie krisissi pri N.E.P.E. (Economic
Crises under the New Economic Policy) ; a lecture given to the Socialist
Academy and published at Moscow in 1924.
LEZHAVA : Vnutrenniaya torgovlia v 1923 godu.
Riechy 0 co-operatsii (Speeches on Co-operatiou) ; reprint of speeches
made by Kalinin, Kuibishev, Kamenev, and Andreev ; Moscow,
Centrosoyus.
3

— 266 —

Much has already been written on the subject, articles constantly
appear in the pages of periodicals and reviews, and the matter may be
said to constitute a permanent item on the agenda of congresses and
conferences. In particular, it was seriously discussed and voted on at
the thirteenth Congress of the Communist Party, to which further
reference will be made later. It was this matter which gave rise to
the so-called " opposition " within the Communist Party.
Leaders of the co-operative movement and administrators of
Soviet institutions have been compelled to examine the causes of this
expansion of private trade, and their enquiries led to the introduction,
in 1923 and 1924, of many economic and administrative reforms which
will be dealt with in the following chapter.

PART IV

RECENT DEVELOPMENTS IN THE
CONSUMERS' CO-OPERATIVE MOVEMENT

CHAPTER I

Reforms in 1923 and 1924

CHANGES IN OPINION ON CO-OPERATION

By the middle of 1923 it was already clear that the position of the
co-operative movement in general and consumers' societies in particular had become extremely difficult. Their position was aggravated,
not merely by financial difficulties and unsuccessful trading ventures,
but more especially by the defective organisation of the co-operative
system and its lack of touch with the great mass of the population.
A further obstacle, which has repeatedly been pointed out in the
course of this report, arose out of the indifference — to use no stronger
term — of the government economic institutions towards the cooperatives. It was this attitude which led to the publication of
Lenin's articles on co-operation, which he wrote in January 1923,
and which provided a starting-point for several changes in administration and even in principles.
In one of his articles Lenin reiterates the view which he had
previously advanced in his 1919 and 1921 articles on state capitalism,
that co-operation is merely part and parcel of such a system. He
repeats that " in a capitalist state the co-operative movement is a
collective capitalist organisation ", and that " under our system cooperative undertakings differ from private undertakings by reason of
their collective character ; they do not differ from socialist undertakings organised on an agrarian basis but commanding means of production owned by the state, that is to say, by the working class " \

Soyu's Potrebiteley, No. 7, June 1923.
3

— 2fO —

Lenin emphasises that " in discussing co-operation we are apt to
pay too little attention to this fact ", and it is constantly forgotten
that, owing to the special characteristics of the Soviet system, cooperation acquires special importance as it " coincides in many respects with Socialism ". Starting from this point Lenin unfolds his
argument. He considers that " once the power has passed into the
hands of the working class, which controls all the means of production ", there remains but one thing, which is to " organise the
population on a co-operative basis ; for, once the development of
co-operation among the population has reached its furthest limit,
socialism is an accomplished fact ". What is required under the New
Economic Policy is " the utmost possible development of co-operation
among the Russian people, for we can now reconcile the interests of
private trade with government control, and so make private traders
work for the general benefit — a problem which socialists were
formerly unable to solve ".
By saying this, and more particularly by showing that success in
the field of co-operation is closely bound up with the advent of
socialism, Lenin pursued two practical aims, which were the object
of the two articles quoted.
The first object was to show that the part played by co-operation had been under-estimated. " We rather despise co-operation and
overlook its full importance, not merely as a principle, but also in
consideration of the fact that the transition from the old system to
the new must, so far as possible, be made simple and practicable for
the peasantry. "
" We went too far in the New Economic Policy — not in the
matter of extending freedom to private trade and industry, but in
overlooking co-operation and its tremendous importance."
The primary aim of this article was thus to point out the errors
in the policy of the government and economic institutions in regard
to the co-operative movement, whose importance they failed to
recognise, and of whose interests they were ignorant. Lenin advocated practical measures to place the co-operative system on a political footing which would guarantee it certain privileges, especially
economic privileges (credits, priority over other institutions, even
government institutions, for financial support by the state).
The second object of this article was to show the need of enrolling
the great masses of the population in the co-operative system, and to
organise its commercial transactions on practical lines. In Lenin's

— 271 —
view the only thing needed to achieve socialism was to show the
masses the advantages of co-operation, when they would draw the
inevitable conclusions, and to train co-operators to be efficient and
honest tradesmen. The first aim of the revolution was the conquest
of political power, etc. Now all efforts should be directed towards
organising peaceful and civilising work — a task which requires a
long period.
Although Lenin's articles advanced nothing new, the arguments
which he put forward were the subject of constant discussion in the
co-operative organisations, and of a whole series of articles in the cooperative and general press ; finally, these articles gave the initial
impulse towards a change in the whole Soviet policy in the matter
of consumers' co-operation. This change operated in three directions.
In the first place, the very basis of the co-operative movement, i.e.
the system of membership, had to be changed. In the second place,
the economic policy and the methods of the movement needed radical
improvement. But all reforms in that direction were also bound up
with a change in the policy of the state organisations towards the
movement.
The struggle for these reforms occupied the whole of 1923 and
1924. The measures to revive co-operation were only taken when
the weak points of its organisation had become clear to all.
RESTORATION OF VOLUNTARY MEMBERSHIP

Drawbacks of Compulsory

Membership

The Decree of 7 April 1921, which marked the first application
of the New Economic Policy with regard to co-operation, upheld the
principle of compulsory membership of consumers' societies, as
already pointed out. This principle, which was retained up to the
end of 1923, was admitted, even by co-operators themselves, to be
one of the factors which hampered the development of the movement.
In the first place, the majority of the people could see no difference
between this system and that in force during the period of complete
Communism ; they took part in the co-operative movement, not so
much from a desire to do so, as by enactment and in a sense automatically. The strongest evidence that the system was unpopular is to
be found in the fact that the majority of people took no interest in
the movement and would not pay subscriptions (which were re-introduced by the Decree of 7 April 1921, though declared optional) to
3

— 272 —

the co-operative organisations to which they were compelled to
belong. The peasants especially regarded such compulsory membership as a kind of obligation to register at a given distributing
centre from which the state was to supply the population as before ;
the only distinction which they made was that whereas these supplies
were formerly free, or were obtained by compulsory exchange in
kind, now they had to be paid for.
The consumers' societies' stores held very ill-assorted and scanty
stocks, especially in the villages ; they were unable to satisfy the
most elementary needs of the population, even in articles in current
use. In the circumstances membership of consumerò' societies was
obviously regarded as a mere formality from which neither advantages
nor obligations could accrue. In fact, there were no regular relations
between the societies and their active members (not to mention the
rest of the population). Although month by month the official
statistics published high membership figures, the real number was
much lower. There were societies with only one active member,
or not even one.
The public looked upon the consumers' society, not as its own
property, but as an ordinary commercial undertaking. As a cooperator wrote recently :
During the period of complete Communism, we turned the co-operative
system into a universal organisation, embracing the whole population,
but possessing no capital of its own, engaging in no commercial transactions and affording no individual advantages to its members. Gradually,
as the New Economic Policy was developed, the co-operative movement
became a commercial organisation, which strove to strengthen its position,
not by securing the organised support of the population, but by laying
hands on large quantities of goods, by increasing its assets, and seeking
profits at all costs.
This author considers that, as the co-operative movement does
not possess the same facilities for organisation as the private commercial undertakings with which it has to compete, it should enjoy
either special advantages and privileges conferred by the state or
some other favours not extended to the private trader. But cooperative activities should not, in the author's view, remain permanently based upon such privileges, as they lead to waste in the distribution of goods—a thing to be avoided at all costs. Such privileges, are only justifiable as a means of consolidating a position
already gained in the struggle with private commerce ; otherwise the
game is not worth the candle '.
1
J, POPOV : " The Basis of the Communist Policy and Co-operation ",
in Soyus Potrebiteley, No. 5, Oct. 1924.

— 273 —

As the same writer said, the co-operative movement was too eager
to erect a vast and all-embracing system, but forgot the corner stone,
the consumer, who often failed to understand the working of the organisation, and had no great liking for it.
We have organised and reorganised co-operators too often and
high-handedly, reducing them to an inert mass, and expounding
abstract theories as if they were infallible dogmas. It is therefore
surprising that this mass
should have lost all sympathy, energy,
practically all interest 1 .

too
our
not
and

But what was worse, as the official organ of the Centrosoyus
admitted, every connecting link between the co-operative organisation
and the co-operators completely disappeared.
The upshot of this policy is that the majority of workers only go to
the co-operative stores to see if they are cheaper than the private shops.
It is clear, moreover, that many co-operative leaders are partly responsible for the continuance of this state of affairs because they lost touch
with the
great mass of the members and completely disregarded their
needs 2.
Movement in Favour of Voluntary

Membership

The bad effects of compulsory registration of the whole population in co-operative societies began to be felt in 1921 (when the cooperative system was being reorganised), but co-operators did not
refer the failure to its causes ; they tried to find other remedies for
the situation. They tried to " interest the consumer from an
economic point of view ". With this end in view, they introduced
" special advances " which certain members might make to the society
for a definite purpose ; bonuses were given to the most active and
energetic members in the shape of special privileges which were to
be withheld from members who did not actively support their society.
The idea among co-operators at that time was that the economic
strength of the co-operative organisation should rest, not upon
universal compulsory membership, but upon the advantages which
this or that group might derive from participation.
This axiom was accepted, according to the statements of a cooperator, even by the advocates of compulsory membership, who
agreed that the shareholders were entitled to be served first. The
introduction of the system of "-special advances " was to draw the
attention of certain groups of the population to the economic activities
1
2

POPOV : " Our Present Task "; ibid., No. 8, 1923.
Co-operativnoie Dielo, 2 Dec. 1923.

3
The Co-operation

2 1

— 274 —

of the co-operative movement by enabling them to buy and sell
certain goods which non-contributing members could not \ The
Co-operativnoie Dielo considered an organic bond between the population and its particular co-operative society to be indispensable.
This bond must be provided by the payments of the population :
shares, deposits, or loans. To interest the workers and poor peasants
in co-operation, they must be given facilities for payment of shares
and other obligations 2 .
All these attempts failed. In the first place, the aim of the
co-operatives in launching the scheme of " special advances " and in
granting various privileges to active members was not so much to
awaken co-operative activity among the masses as to procure muchneeded working capital. Raising funds was the main concern of the
co-operative movement during 1923 ; deposits, loans, and advances
were simply intended for this purpose. All this fostered among cooperators that ultra-commercial spirit which had already converted the
co-operative movement into an ordinary business organisation and
exposed its leaders to the charge of being profiteers who had abandoned every co-operative principle.
It must be pointed out that, apart from any indifference, the
members had good reasons for not paying up their shares ; as a
whole they were poverty-stricken. This being so, the co-operative
movement could hardly look to credits, loans, and advances from the
population as a means of obtaining sufficient sums to extend its
operations widely and thereby develop the special facilities for active
members.
Desirous of extending their business activities, consumers'
societies did not confine their attention to full members. Since the
co-operative system theoretically embraced the whole population,
the consumers' society sold to the public at large. With the principle
of compulsory membership, it was very difficult to distinguish between active and passive members ; had the societies been obliged to
confine themselves to the former their activities would have been very
materially curtailed. Clearly then, so long as the principle of compulsory membership remained in force, and so long as the Soviet Government continued to regard the co-operative system as an organisation for

1
2

Soyus Potrebiteley, No. 10, 1922.
Co-operativnoie Dielo, 15 July 1923.

— 275 —

marketing the products of nationalised industries, the attempts made
in 1922 and during the first half of 1923 to base the existence of
co-operative societies exclusively on the active members were doomed
to failure. But the principle of voluntary membership was still
opposed by some co-operators, who regarded it as inconsistent with the
fundamental principles of the New Economic Policy. The misgivings on this head are expressed in the Soyus Potrebiteley.
The principle of voluntary membership advocated by many of our
comrades will deliver the co-operative movement, especially in the villages, into the hands of the strongest economic groups, will drive it in
the direction of private interests, and will divert it from the line of
policy followed by the Soviet State. Instead of subserving the aim of
the state to make means of production common property, the co-operative
system will become an organisation concerned to protect its private
interests, and ready to oppose
the state when it attempts to regulate
production and exchange x.
Nevertheless, the principle of voluntary membership gradually
asserted itself, owing to the success of the voluntary societies set up
under the Decree of 27 April 1921. At first voluntary societies were
created only among the working classes, as already shown. They
had no very definite plan or principles, but great elasticity. As the
Co-operativnoie Dielo says :
Every undertaking and every institution was determined to have
its own co-operative society, however small. Once registered, such a
society, even the most insignificant, organised a foraging expedition.
Stocks of goods were hastily thrown together, and payments on shares
were speedily collected. The societies' representatives were elected and
given instructions as to the line to follow, and the expedition set out *.
Such proceedings were a sign, first, of reaction against the centralisation of the period of Communism, and, secondly, of the urgent
need of supplying goods of all kinds to a population which had been
deprived of them during the preceding period.
The same official organ of the Centrosoyus states that 99 per
cent, of the directors of these voluntary societies were in no way
alive to the part which their societies should play. The voluntary
societies were regarded more or less as temporary committees for the
purchase of goods. No one contemplated real co-operative work.
It will be evident that co-operative circles were somewhat at a loss,
in the circumstances, to know what to think of these societies ; were
they a temporary safety-valve for the energies of the active and ill1

OKHOTNIKOV : "What are we heading for? " in Soyus Potrebiteley, No. 10, 1922.
2
Co-operativnoie Dielo, 30 Oct. 1922.
3

— 276 —
served co-operators, or was this the first step towards voluntary
membership? It was the fundamental idea of voluntary membership which carried the voluntary societies through the wùole of this
period, when the co-operative system was subjected to continual reorganisations and government experiments. It enabled them to
emerge from that period with greater financial resources and a
larger membership than the other co-operative societies.
By degrees, although the principle of compulsion was officialy
maintained, the idea of voluntary membership spread abroad in the
co-operative movement and took root. When the success of the
voluntary societies became patent, the official organ of the Centrosoyus had to admit that " for the present voluntary societies are
necessary to the co-operative movement. They must even be regarded
as the only primary organisations upon which united societies can
be founded. " It was also realised that the voluntary societies were
the centres of attraction for the mass of consumers who were anxious
to co-operate actively \
It was recognised that in the towns a co-operative society must
include voluntary societies, if it was to rest on a sound basis and have
any prospects of development. Similarly, in the country, the only
enterprising and sound societies were those which combined such
voluntary co-operatives 2 .
The President of the Centrosoyus,
Mr. Khinchuk, was obliged to admit that :
At a time when the old co-operative system has broken down, we
are witnessing throughout the consumers' movement a process of the
highest importance for the future of co-operation : the rise and development of voluntary societies. This process, which is essentially a healthy
one, notwithstanding certain tendencies towards " trade for its own
sake ", combines and organises the enterprise of consumers within the
co-operative movement ; it has achieved good economic results from
the start3 and has given renewed vigour to the co-operative movement in
general .
In the towns the principle of voluntary membership prevailed
in practice, and co-operators accepted it as a conclusion to their
theoretical discussions. In the country, however, the principle of
compulsory membership and the compulsory organisation of united
societies is still in force, though it is nothing more than a principle.
1

Ibid., 17 Aug. 1922.
Soyus Potrebiteley, No. io, 1922.
* Ibid., Nos. 17-18 Dec. 1922. Cf. also article by KONKO : " Free
Membership of Co-operative Societies "; ibid., No. 9, 1923. "Experience
has shown ", wrote Khinchuk at the end of 1923, " that the voluntary
societies are vigorous and enterprising " (Economicheskaia Zhizn, 14
Dec. 1923).
2

- m—
It is precisely in the rural districts that there are the greatest
number of consumers' societies, and the general position of consumers' co-operation depends, in the last resort, upon the peasants.
It was, moreover, in the villages that the agricultural and craft cooperatives were first organised. The principle of compulsory membership was not and could not be applied to them, and the absence
of compulsion immediately produced beneficial effects in this sphere.
In opposition to an opinion quoted earlier, the Soyus Potrehiteley had
to admit that " the methods of organisation applied to agricultural
and craft co-operatives — even where they consisted solely of rich
peasants — had been very useful in developing initiative among the
peasants ".
The development of private capital in the villages, where go per
cent, of the trade was in its hands, had shown that the rural cooperative societies were incapable of supplying the consumer. The
rigidity which the co-operative system inherited from the preceding
period stood in the way of its development. Rural co-operatives had
to be reorganised on the basis of voluntary membership ; formerly,
indeed, co-operators feared that such a step might " deliver the rural
co-operatives into the hands of the rich peasants and drive away the
great mass of workers ". But these same co-operators in the
meanwhile had reached the point of fearing that, after the changes
in the social life of the peasants, the rich peasants (Kulak) might
easily secure control of the co-operative movement if the principle of
compulsory membership were maintained 1 . Yet it had to be admitted
that :
In view of the dearth of goods and the destitution of the entire
working population nothing could be done to interest them in the cooperative or any other organisation. Although the tendency of the
consumers' co-operative movement must always be towards including
the greatest possible proportion of the population, i.e. of the consumers,
it would be preferable to abandon
the execution of this maximum
programme for the time being a.
The items of the Communist programme referring to co-operation were acknowledged to be impossible of application, for the
present at least. In fact, it was stated that " the development of
consumers' co-operation under present economic conditions and under
1

Cf. TIKHOMIROV : " Towards a New Line of Advance ", in Soyus
Potrehiteley, No. 9, 1923.
2
Cf. IUMSKY-KUTUZOV : " Overcoming the Crisis "; ibid.

— 3?8 —

the New Economic Policy is only possible if compulsory enrolment
of all citizens as members of consumers' societies, as instituted by the
Decree of 7 April 1921, is abolished '.
- Moreover, as Mr. Tikhomirov pointed out at the thirty-eighth
delegates' meeting of the Centrosoyus in November 1923, the consumers' societies set up under the Decree of 20 March 1919 were
disappearing one after the other. " The idea of voluntary membership grew up exclusively inside the consumers' co-operatives " 2 .
The development was so rapid that the leaders of the co-operative
movement had to contemplate bringing it under their control and
guiding it along suitable lines without further delay. Later
Mr. Khinchuk said- : " It must be confessed that this transition (to
the principle of voluntary membership) should have taken place
sooner. We could then more readily have undertaken a reorganisation of that kind and should have been in a stronger position to face
the economic crisis. " 3 At the ninth meeting of the Centrosoyus
Board in September and, subsequently, at the thirty-eighth (Jubilee)
delegates' meeting of the Centrosoyus in November 1923, " the
organisation and stengthening of the work of members of consumers'
co-operative organisations " (to quote the agenda) was seriously
discussed.
Mr. Tikhomirov, the rapporteur, laid stress on the need for a
larger active membership ; once the principle of voluntary membership had been restored, co-operatives would only obtain credits in
proportion to the numbers of their members. He thought that, to
provide for the equitable transfer of property and capital and to
bring the whole of the population into the co-operative organisation,
it was essential to fix the minimum number of voluntary members
required for the existence of a consumers' society as a legal entity.
The Centrosoyus Board was of opinion that " it was essential
for the development of consumers' co-operation . . . to pass from
the principle of compulsory registration to that of voluntary
membership, and to call the earnest attention of all co-operators —
especially the instructors — to the serious nature of this decision."
The Board fixed the minimum membership of a consumers' society as
follows ; it must include 15 per cent, of the farms in rural districts or
3
2
8

Ibid., Nos. 13-14, Dec. 1923.
Co-operativnoie Dielo, 18 Nov. 1923.
Economicheskaia Zhizn, 14 Dec. 1923.

279

25 per cent, of the trade unionists in urban societies. Finally, the
payment of shares was made compulsory *.
The new change in the Communist Government's tactics in dealing with the co-operative movement was keenly discussed in the
Press and in all the institutions and organisations concerned, until
the trade slump of the autumn of 1923, which also affected the cooperative movement, came to hasten the reorganisation of the whole
system. As already pointed out, this crisis revealed the disparity
between the business activities of the central co-operative organisations and those of the consumers' societies.
Owing to the weakness of these societies, the population had
grown accustomed to satisfying its needs from sources outside the
co-operative organisations. While the central organisations were
extending their operations, reckoning on a similar development in
the primary co-operatives through which they could reach the
consumer, the consumer came to shun the co-operative movement
entirely. Mr. Khinchuk notes that latterly, at the end of 1923, " the
lack of funds has compelled the rural societies to curtail and" at times
even to suspend their operations " 2.
The 1923 crisis threw into sharp relief all the defects of organisation in the consumers' movement. According to Mr. Khinchuk :
This crisis proved conclusively that the fate of the co-operative
system is determined by the primary organisations and not by the central
organisation. The point upon which attention should be focussed is
the point of direct contact with the consumer — for there alone can the
work of the co-operative movement be tested. The value of the cooperative movement to the state and its industry and to the societies themselves will grow in proportion as the organisation is more truly cooperative ; in other words, as it represents the actual collaboration of
the active population, strives to rouse
and use this active element, and
serves the interests of the masses 3.
In the light of these considerations, the Centrosoyus drafted a
new Decree on consumers' co-operation to replace that of 7 April
1921 and submitted it for approval to the Council of Commissaries.
For some considerable time it was not approved. But on 28 December 1923 the Central Executive Committee and the Council of Commissaries issued an Order which laid down (1) that the compulsory
1

Co-operativnoie Dielo, No. 40, 30 Sept., and No. 47, 18 Nov. 1923.
Economicheskaia Zhlzn, 14 Dec. 1923.
L. KHINXHDK : " The Transition ", in Co-operativnoie Dielo,
23 May 1924.
2
3

— 28o —
registration of citizens in the united consumers' societies was
abolished ; (2) that membership of co-operative societies should
henceforth be voluntary and could be resigned \ T h i s measure was
generally approved in the co-operative movement and in all Soviet
circles. M r . K h i n c h u k wrote :
The introduction of the principle of non-compulsory membership will
encourage the energetic people in the villages to take part in the reorganisation and future work of the united societies, and the activity of
the members of consumers' societies will thus increase. Their money will
be attracted into the co-operative funds in the form of payments on
shares, " special advances ", or loans. This will enable the societies
to work strenuously for the benefit of the consumer and thereby extend
the commercial operations of the co-operative system. The activity of
consumers' societies is largely dependent upon the inducements there
may be for the members to invest their money in the concern and benefit
from its work : lower prices than private shops, discounts, and dividends.
The personal interests of the members are of especial importance, for
every gain in that respect stimulates renewed confidence and activity
and induces members to invest larger sums in their co-operative society.
The first task of the consumers' co-operative movement at the present
moment is to develop and strengthen the network of primary co-operatives
on the basis of voluntary membership. In this manner we shall be able
to consolidate the whole co-operative system and improve the general
position of the co-operative movement 2 .
These remarks are quoted to show the revolution in the thought
and tactics of Communist co-operators which occurred between 1921
and 1923.
Decree of 20 May 1Q24
T h e new Decree which laid down t h e general lines for the reorganisation and new work of the consumers' co-operatives was not
published until 20 May 1924. I t s main provisions are summarised
below s .
T h e Decree of 7 April 1921 was rescinded. T h e right to found
consumers' societies is confined to citizens of t h e Soviet Union w h o
possess electoral rights under the Soviet Constitution. All such
citizens are free to join or to resign from a co-operative society.
Citizens can only become a member of a consumers' society at their
own express wish. T h e y m a y leave such society at will. T h e y m a y
also be expelled in accordance with the regulations (Section 2 of
t h e Decree). Consumers' societies are entitled to sell to the public
1

Izvestia, 30 Dec. 1923.
L. KHINCHUK : " The Principle of Voluntary Membership in Consumers' Co-operation ", in Economicheskaia Zhizn, 14 Dec. 1923.
* Collection of Decrees on Economic Matters for May 1924. In addition, cf. the explanation of the Decree in Soyus Potrebiteley, Nos. 1314, 1923, and No. 6, 1924, and also in Economicheskaia Zhizn, 5 Dec.
1923.
2

— 28l —
(Section 4). The new Decree lays down that the purchase of shares
is compulsory and not optional, as under the Decree of 7 April 1921.
To facilitate the entry of poor citizens, the entrance fee was
fixed at 50 gold kopecks and the amount of the shares at 5 gold
roubles. Once the entrance fee was paid a citizen became a member
of the co-operative society. The share might be paid up in
instalments (Section 7) 1 . There is no limit to the number of shares
held by one member, but no special privileges accrue to the holder
of several shares (Noil to Section 7). The transfer of shares is prohibited (Section 8). A society may not be registered unless it has
at least thirty members ; in certain places this minimum may be
raised (Section 8).
There is no control of the grouping of consumers' societ:es into
regional, provincial, and district unions. The authority of the Centrosoyus is required only for the constitution of regional unions (Section 12) 2. Thus the principle of voluntary membership was applied
throughout the whole range of the co-operative system. The societies' regulations were to be registered in accordance with the laws
of the Federal Republics and had to conform to the standard regulations approved by the Council of Commissaries of the Soviet Union.
Otherwise the organisation and activity of co-operative societies are
subject to no special restriction.
Effects of Voluntary

Membership

Immediately the Central Executive Committee published its Order
of 2S December 1923, a campaign was started in favour of voluntary
membership. Full and systematic information as to the results of
this campaign are not yet available, but the co-operative press bears
witness to its success.
" As we anticipated," says Mr. Tikhomiroff, " the principle of
free membership made a strong appeal to the public and brought
back its attention to the co-operative movement. This enabled us
to reorganise our work and to take up the struggle with private
1

The draft Decree prepared by the Centrosoyus laid down that mere
payment of the entrance fee conferred no rights on a member. He would
not acquire his rights until he had paid up his share (either cash down
or by instalments). The new Decree disregarded this suggestion of the
Centrosoyus.
3
The Centrosoyus draft provided for compulsory grouping of cooperative organisations. The Decree contains no clause to that effect.
3

282 —

trade. " Mr. Tikhomiroff noted that by 15 April 1924 56 per cent.
of all the consumers' societies affiliated to 58 inspected unions had
been reorganised on the new lines \
The Co-operativnoie Dielo estimated that, out of 8,863 urban
and rural consumers' societies affiliate'd to 87 provincial and district
unions, 5,814 (65 per cent.) were reorganised by 15 April 1924. By
this time 45 unions had been completely reorganised on the basis
of voluntary membership ; 31 unions followed suit on 15 June, and
the remaining 7 on 1 August.
*
The whole campaign of reorganisation was to be completed by
1 October 1924. In certain unions the reorganisation was speedily
carried out, as can be seen from the following data 2 :

PERCENTAGE OF SOCIETIES REORGANISED IN JULY 1924 IN CERTAIN
CO-OPERATIVE UNIONS
Union

Briansk
Smolensk
Orel

Percentage

Union

Percentage

68
66

Tula
Regional Union of the
Don
Yaroslavl 1

43
95

Beginning of June.

1
2

Soyus Potrebiteley, No. 5, May 1924.
Co-operativnoie Dielo, 17 June 1024, and Economicheskaia Zhiztt,
8 June- and 5 and 6 July 1924.

2»3

PERCENTAGB OF TRADE UNION MEMBERS IN T H E CO-OPERATIVE
MOVEMENT AT THE END OF 1924 '

Provincial government

Kostroma
Izhevsk
Donetz Basin
Ekaterinburg
Perm
Tver
Ivanovo-Voznesseusk
Klinzi
Vishni-Volochek
Yaroslav
Minsk
Rostov-on-Don
Ekaterinoslav

Percentage

100

99-7
67.8
87.8
81.8
80.8
77.6
74-8
85-3
58.2
65.1
63-5
35-9

Provincial government

Briansk
Ni j ni-Novgorod
Pensa
Tula
Ural
Sormovo
Vixa
Bezhitsa
Leningrad (Petrograd)
Odessa
Moscow
Saratov

Percentage

49.6
43-2
65-5
58.3
75-3
75- 2
36.9
86.8
59-8
71.8
50.6
59-2

LIT-"

1 Rabochaia Co-operatsia v 1024 god« (The Workers' Co-operative Movement in 1924),
p. 23 ; Moscow, Centrosection, 1924.

These figures — the co-operators admit it themselves — do not
necessarily indicate improvement and development of the co-operative
organisation, though there is no doubt that the return to voluntary
membership was very favourably received by the population ; this
fact is confirmed from the most varied sources.
I t is equally
certain that wherever the population took an active part in the
movement it expressed a desire to continue on the voluntary basis.
But such statements were too slender a basis for statistics of active
members.
As a rule, reorganisation was carried out as follows : a general
meeting of the society founded under the Decree of 7 April 1921 or
that of 20 March 1919 declared the society dissolved ; the chairman
then closed the meeting and invited those who wished to do so to join
the new society voluntarily. The meeting of voluntary members
was then opened.
The Co-operativnoie Dielo states, however, that " information
received is quickly showing that effective co-operation is often replaced
by a fictitious kind of co-operation, the society's position remaining
wholly unchanged ". A genera] meeting of trade unionists or of
members of the Communist Party would pass a resolution inviting
3

— 284 —

all present to join a co-operative society. In some cases, even, the
members were registered forthwith. This resolution was quickly
forgotten, first and foremost by the new co-operative society and
subsequently by all those who agreed to join it. Rarely have the
managers of the societies proved capable of seizing the psychological moment to enrol new members and secure payment of shares '.
It is still too early to judge how far the new system differs from the
old and to what extent the principle of voluntary membership has
been instrumental in attracting new active members.
The official co-operative press emphasised the inadequacy of the
results achieved and stated that as a result societies were obliged to
neglect their main purpose and to limit their efforts to trading and
middlemen's operations in order to increase their capital 2 .
The material results of the new reorganisation clearly show at
all events that, notwithstanding the importance of the restoration of
voluntary membership, this reform alone was not enough to put the
movement on a sound footing and restore it to its place in the economic system. The whole organisation of the co-operative system
and all its work have been closely criticised and examined. Thus
the essential defects of the system could be detected, and the necessary reforms planned.
REACTION AGAINST BAD COMMERCIAL ORGANISATION

High Prices
The trade slump in the autumn of 1923 was due to the marked
disparity between the very high prices of articles of prime necessity
and the greatly reduced purchasing power of the population. The
reason for such a high level of prices was sought by numbers of
government institutions and committees of enquiry. These enquiries
showed that the rise in prices was due to the enormous overhead
charges in the manufacture of industrial products. The cause of this
high level of production costs in turn was to be found in the economic
conditions of Russia and, more especially, in the position of the
large-scale industries. The enquiries also showed that these unduly
high costs of production were further increased artificially while
commodities were on their way from the producer to the consumer ;
1
2

Co-operativnoie Dielo, 31 July 1924.
Ibid., 13 June 1924. In Chapter III attention was called to the
inadequate share capital of co-operative organisations of all kinds, due
to the fact that members' payments on shares were trifling in amount.

- 2 8

the difference between cost of production and wholesale prices and
between the latter and retail prices became quite inordinate.
The following table shows the differences in ig23 between
average retail and wholesale prices in various branches of trade x .
PERCENTAGE INCREASE OF AVERAGE RETAII, PRICES OVER AVERAGE
WHOLESALE PRICES, 1923
State trade
Goods

First
six
months

Agricultural
Products
Rye flour
Wheat flour
Buckwheat flour
Millet flour
Butter

7
42
IC
16
8

II. Industrial Food
Products
Herrings
Lump sugar
Soft sugar "

Co-operative trade

Third
quarter

First
six
months

Third
quarter

Open market
First
six
months

Third
quarter

JT.

6
7
28
9

48
43
46
45

—
8
15

31
9

Tea

Salt

18
28

50
35
15
9
30

—
15
19
—
—

23
15

29
—

—
37
23

24
29
35

24
—
7
13
28
27

—
—
44
43
37

III. Manufactured
Goods
Matches
Paraffin
Soap
Nails
Cotton cloth
• Thread

24
32
8
—
32
19

17
24
33

12
22
21

57
46
36

18
50
49
27
29

—
26
21

—

—
22
21

27
43

These differences between wholesale and retail prices, which
were sometimes enormous, gave rise to an enquiry into their causes.
These investigations revealed numerous defects in commercial methods
in general and those of the co-operative movement in particular ; and
the latter were in some cases the more serious.
1

Economicheskoie Obozrenie, 1923, No. 11.
3

— 286 —
T h i s inordinate increase in the price of goods during their progress t h r o u g h the chain of co-operative organisations was due to a
large n u m b e r of reasons, which will be discussed later ; b u t the
most serious fact was t h a t the increase in prices was often greater in
the co-operative movement t h a n in private trade. T h e following
table shows t h e percentage increase in prices at each stage of the
co-operative organisation \
AVERAGE PRICES IN THE CO-OPERATIVE ORGANISATION PER CENT.
OF CENTROSOYUS PRICES ( = IOo), 1923 TO 1924
Retail prices
Date
(ist of month)

Wholesale
prices,
provincial
and divisional
unions

United
societies
in large
towns

United
societies
in small
towns

Rural
societies

1923

September
October

112
119

120
13 1

121
I33

141

120
128
II9
118
lió
lió

136
142
132
130
126
126

147
157
140
144
148
134

159
167
163
156
163
I5Ï

1924

January
February
March
April
May
June

T h e increase in price of some goods was very much greater, as
shown below (Centrosoyus prices = 100):

Goods

Divisional united societies
and central industrial
co-operatives

Cotton cloth

182

Thread
Clogs
Nails
Matches
.Sugar

"5
100
146
129
158

Rural societies

243
169
161
177
159
222

These statistics are based on the average prices in 15 provincial
governments of 14 classes of goods : cotton cloth, thread, top boots
clogs, cast iron, iron, nails, glass, paraffin, matches, soap, common
(Continued on foi lowing page.)

— 287 —

More detailed local enquiries showed that the increase in prices
began even in the industrial undertakings, while the increase as the
goods passed down the chain of co-operative organisations was often
much greater than appeared from general enquiries. For instance,
an enquiry into the work of ten united societies and a few unions
(some of the largest) in the south-east and Donetz Basin produced the
following facts 1 :
One arshin of cotton cloth, the cost price of which was 18 kopecks, was sold for 88 kopecks by the consumers' societies. After
the campaign to reduce prices, this figure fell to 42 kopecks. In the
first case the increase in price was 388 per cent., and in the second
133 per cent. Of this 133 per cent., 56 per cent, was added by the
trust, 11 per cent, by the Centrosoyus, 28 per cent, by the provincial
union, and 35 per cent, by the united society. The cost of production of a case of matches was 3.58 roubles while in September 1923 its
sale price in a united society was 22 roubles. The increase was made
up as follows :
Addition by the industrial syndicate
Duty (excise)
Addition by the Don
Regional Co-operative Union
Addition by the united
society
Total

Roubles

rercenta^e

3.42
6.66

95
185

5.33

148

3.00
18.42

83
511

The increase in the price of nails was still greater. Although
the Don Regional Union has its own nail factory, where the cost of
production was 4.80 roubles, the sale price of nails in the societies
affiliated to the Don Union was 35 roubles. The Union itself added
191 per cent, to this cost price, the Stavropol Provincial Union added
a further 100 per cent., the regional section of this Union another
3.5 per cent., and the rural society 206 per cent.; the total increase
being 500.5 per cent.

(Continued from previous page.)
tobacco, sugar, and salt. Cf. Soyiis Potrebiteley, Nos. 13 and 14, 1923,
and " Consumers' Co-operation in the Soviet Union in 1923-1924 (first,
second and third quarters) ", Appendix to Soyus Potrebiteley, No. 9,
1924,1 P- 79Cf. DEUTSCHMANN : Co-operatsia v derevnie kak ona yest (Rural
Co-operation as it is). Rostov-on-Don, 1924.
3

— 288 —

Similar conditions were found in the Ukraine. Prices were increased by the primary co-operative organisations as well as by the
central wholesale organisations. For instance, the Central Union of
Consumers' Societies in the Ukraine, the " Vucospilka ", added 39 per
cent, to the price of articles of prime necessity, though overhead
charges were not more than 11.9 per cent. The net profit of this
increase was thus 27 per cent. The following figures illustrate the
increase in the prices :
COST OF CLOTHING AND FOOTWEAR IN THE UKRAINE IN TERMS
OF WHEAT 1

Article

Cost price

poods

Shirt (cotton)
Working- coat
Winter overcoat
Lined jacket
Blouse and skirt
Winter blouse
Top boots (pair)

7-30
47.00
52-30
72.10
13.20
26.00

55-20

Increase
by the
divisional
union

Increase
by the
rural
society

Sale price
to
consumers

poods
1.22
9.I6
10.22

poods

poods
II.6

14.18
2.28
5.08
II.04

1-34
11.11
12.26
17.18
3.10
6.10
I3-I3

67.27
75-38
104.06
19.18

37-iS
79-37

1
Allowing only for cost of materials ; cost of labour is not included. (Cf. Economicheskaia Zhizn, n Nov. 1923.)

The natural consequence of such commercial methods in the
co-operative system was that the consumer, and especially the peasant,
could not procure articles of prime necessity. In the article which
has been quoted, the Economicheskaia Zhizn makes the following
calculation : if a peasant family consumes yearly 4 cotton shirts,
1 man's suit, 1 skirt, 1 blouse, and 2 pairs of boots, its expenditure
would be equal to 29,123 poods of wheat, i.e. the yield of 5 dessiatins with a good harvest. " Our peasants ", writes the Economicheskaia Zhizn, " are not strong enough to carry 80-pood boots and
4-poods shirts."
In the co-operatives of the South-East the position was similar.
Before the war the peasants had to give from 6 to 7 lb. of wheat for
an arshin of cotton cloth ; he was now obliged to give 1 pood 11 lb.
(i.e. 51 lb.) if he bought an arshin of cotton cloth from a co-opera-

— 289 —
tive society. For a pood of nails, which before the revolution cost
3 [ lb. of wheat, he now paid 60 poods. A suit would cost him
47 4- poods and women's shoes 24 -\ poods of wheat, more than
the yield of a dessiatin. 1 "
For the peasants such prices for articles of prime necessity became prohibitive. The result was that industry failed to sell its
products and that the co-operative movement found itself in a very
difficult position.
When it was realised that the co-operatives could not assist in
marketing the products of nationalised industries, a series of discussions took place regarding the need for a co-operative system in the
Soviet State. Mr. Kritzmann, for instance, considered that to achieve
its purpose, which he held to be that of fighting private capital, the
co-operative organisation must not merely include a large proportion
oí the population (instead of 10 per cent, of the rural population as
at present) but must also be really efficient. Co-operators must
clearly understand that to sell above market prices is not co-operation
but speculation and a disgrace to the movement. Co-operators, he
said, should know that the workers' state has no reason to prefer
co-operative to state trading, although preferring either of these to
private trade. Of these two organisations (co-operative and state
trading) the workers' state will favour that which sells cheaper and
offers the quicker means of achieving the essential aim of the revolution — namely, an improved standard of living among the masses 2.
With this threat hanging over it the co-operative movement's
very existence was at stake. Co-operators proceeded to a careful
analysis of the causes of the increase in the price of articles in current
consumption and the failure to sell, and they took steps to improve
the position. This question, which was of special moment to the
Soviet authorities and press — especially since the end of 1923 — was
the subject of many articles, books, etc., and there were considerable
differences of opinion between co-operators and the managers of the
nationalised industries. This discussion — which is by no means
finished yet — has been instrumental in bringing to light the main
defects of the co-operative system upon which both parties are agreed *.
1

Cf. DEUTSCHMANN : op. cit., p. 16.

L. KRITZMANN : " The Problem Raised by the Present Crisis ", in
Soyus
Potrebiteley, Nos. 13-14, 1923.
3
The defects in the co-operative organisation are set forth in Andreev's report to the thirteenth Congress of the Coininunist Party (May
1924.) Several of these have already been mentioned. Only those which
relate to the commercial policy of the movement will be considered here,
3
The Co-operation

2 2

— 290 —
High Overhead Charges and the Remedies

Contemplated

Overhead charges are very heavy throughout the co-operative
system, not merely in the Centrosoyus and the co-operation unions,
but even more in the primary and secondary organisations. In the
rural societies overhead charges account on an average for more than
40 per cent, of the turnover, and in the urban societies for 70 per cent.
In the unions these charges amount to 25 per cent, on an average,
while in some unions — certain divisional unions in the Ukraine, for
instance — the figure reaches 60 per cent. l In the United Society
for the South-East, overhead charges amount to 40-50 per cent, of
the turnover (7-12 per cent, before the Revolution). In the offices,
agencies, section, etc., this figure varies between 10 and 60 per cent.,
and between 15 and 41 per cent, in the provincial unions 2 . The
following figures show the distribution of costs in the primary cooperative organisations :
Per cent

Management expenses
Travelling expenses
Taxes and duties
Expenditure on propaganda and education
Carriage of goods

52-82
3-7
3-7
I-IO
0.9-5

On the average 60 per cent, of the total expenditure is swallowed
up in management expenses. Certain of the unions had an average
of four officials per affiliated society. In comparison with preRevolutionary figures, costs in wholesale trade have increased by
nearly 300 per cent, and in the retail trade by 250-300 per cent. In
1913 the Centrosoyus had one employee for every 30,417 roubles of
turnover and in 1922 one for every 12,864 roubles 3 .
The co-operative movement had inherited from the period of
complete Communism an unduly large number of employees and a
very rigid organisation. When the weight of this administrative organisation became oppressive the staff was greatly reduced. Thus, the

1
Prof. VoBLYi : " Overhead Charges in Primary Co-operative Organisations ", in Torgovo-Proviyshlennaia Gazeta, 1 Mar. 1924.
2

DEUTSCHMANN : op. cit., p. 28 et seq.
FISCHHÄNDLER : " Overhead Charges

in State and Co-operative
Trading ", in Na novykh putiakh, Vol. IV, p. 619.

— 291 —
number of manual and non-manual workers in the central offices of
the Centrosoyus was reduced as follows a :
Date

i
1
1
1

October 1923
January 1924
April 1924
July 1924

Non-manual workers Manual workers
1,004
298
200
943

816
762

Total
1,302
I.I43

972
896

156
I34

The average turnover per employee in the central offices of the
Centrosoyus varied as follows in 1924 :

Quarter

Average number of
employees

Average turnover per
employee (in chervonetz
roubles)

First
Second
Third

2,888
2,501
2,260

5,207
5,677
6,187

The proportion of costs of organisation proper fell from 5.9 to
4,8 per cent, of the turnover during the period January to June 1924.
Unfortunately the case of the Centrosoyus cannot be regarded
as typical. In some co-operative unions the number of employees
fell (by 1,120 in 21 unions, and by 924 in 15 others), but it rose in
others (by 362 in the Moscow Union, 132 in the Orlov Union, 117 in
the Samara Union, and 81 in the Donetz Union). In the urban
united societies and the central industrial co-operatives the staff was
increased by 15 per cent, during 1923 2.
On the whole, as may be seen, costs of organisations remained
very high :
Date

Percentage

overhead

charges

1923
October
10.8
November
9.8
December
7.5
1924
January
7.8
February
7.3
March
7.6
There are even cases where the percentage is as much as 15.
1
" Consumers' Co-operation in tie Soviet Union in 1923-1924 ", supplement to Soyus Potrebiteley, Aug.-Sept. 1924.
2
Soyus Potrebiteley, Sept.-Oct. 1923.

— 202 —

" Notwithstanding some decrease in organisation expenses ",
states the Centrosoyus report for the first three quarters of 1923-1924,
" these charges remain very high and explain the average percentage
increase (10.4) in overhead charges. Further economies are absolutely essential " \
Credits and Assortment of Goods
Reference has already been made to the deplorable financial
position of the primary co-operatives and most of the secondary
organisations. The consumers' societies, which emerged utterly
penniless from the period of Communism, were unable to carry on
business without obtaining credits. At first these credits were obtained (as already mentioned) by contract with the Supreme Economic
Council, the large trusts, and the principal state economic organisations. When money credits were reinstituted, the co-operatives
could apply to the credit institutions, especially the Co-operative
Bank.
It has already been seen, however, that only the central cooperative organisations could obtain credits. The Centrosoyus, situated at the centre of the financial market, made the most extensive
use of credits and could thus increase its capital. Part of these
credits were passed on to the provincial unions by the Centrosoyus,
but the urban and rural consumers' societies received little, if anything. The system of commodity credits granted by the trusts and
syndicates of the nationalised industries was revived, but the state
industries exacted very unfavourable terms from the primary cooperatives respecting both repayment of credits and the assortment
of goods. The state syndicates and trusts, holding stocks of goods
which they could not readily sell, required the co-operative movement
to accept as credits in goods a large proportion of goods which were
hardly saleable. The trade of the consumers' societies was inevitably
much hampered thereby.
A provincial union which receives a commodity credit through
the Centrosoyus in Moscow is obliged to accept the goods sent.
Unsaleable goods are pledged with the State Bank, which advances
credits against such goods, and the union endeavours to make do

Ibid., Aug.-Sept. 1924.

— 293 —
with these credits. But this method of procedure is rarely successful,
as banks hesitate to accept goods when they know full well that there
will be difficulty in marketing them.
Lack of funds greatly impedes the work of the co-operatives.
Not finding the requisite articles in the consumers' society's stores,
the peasants buy from private dealers. The assortment of goods has
become a question of vital concern to the co-operative movement,
but it remains unsolved as yet.
An enquiry in the provinces undertaken by the Commercial
Telegraphic Agency led to the conclusion that " the great weakness
of the co-operative movement lies in its inability to capture the
market. It often happens that the goods required by the peasants
are not to be found in the co-operative stores, or else that the assortment of such goods is poor. " 1
The difficult position of the primary co-operative organisations is
primarily due to the system of commodity credits, which deprives rural
societies of freedom of action and compels them to accept goods which
are difficult to sell. The system is such as to oblige these rural societies
to buy from their respective unions whether the prices are acceptable
to the consumers or not. This explains the parallel existence
of more
expensive and of cheaper and better-organised co-operatives 2.
During the whole of 1924 the question of the selection of goods
needed in the co-operative movement was the subject of lively discussion, but this question still remained unsettled at the beginning
of 1925. An enquiry carried out by the Economicheskaia Zhizn '
and the discussions of the special committee appointed to seek a solution by the Supreme Economic Council show not merely that the
selection of goods offered to the co-operatives by the state industries
is unsuited to the needs of the societies and of the population generally,
but that this selection is often imposed as the sine quâ non of any
transaction. The trusts and syndicates of the state industries do not
always consider the needs of the population in their production, and
being unable to dispose of certain goods they compel the co-operatives
to accept a certain quantity of these among the goods delivered to
them. According to the Centrosoyus this procedure is followed by the
trusts both openly and by underhand methods. The trusts deliver
their goods regardless of requirements, and in such a manner as to
• Economicheskaia Zhizn, i^ Feb. 1024.
s

DEUTSCHMÄNN : op. cit., Introduction.

Economicheskaia Zhizn, 6, 7, 8, io, 11, 14, 15 and 17 Feb. 1925.

2 2 *

— 294 —
simplify production. Textiles, for instance, are chosen without consideration for the consumers' tastes. The assortment of goods is automatically determined beforehand, no attention being paid to the wishes
of the population or to seasonal requirements.
This failure to adapt industrial production to the needs of the
market is further aggravated by the defective organisation of the
commercial machinery, which is unable to dispose of the goods received, and the commercial operations of the co-operative movement
are inevitably impeded. Capital remains locked up in goods and this
helps to increase financial difficulties.
The general commercial operations of the movement have no
doubt been considerably extended, but this development does not
mean genuine prosperity, as it is not supported by sufficient capital.
The following table gives a few characteristic figures which refer
to the first half of 1923-1924.
TURNOVER AND WORKING CAPITAL OF CO-OPERATIVES, FIRST HATvF
OF 1923-1924
Total turnover

Working capital

Million roubles

Million roubles
Societies
Beginning End of
of half-year half-year

Urban and industrial
societies
Rural societies
Provincial and
regional unions

Percentage
increase

Beginning End of
of half-year half-year

Percentage
increase

92
62

261

184

182

148

140

204
77

200

277

203

240

11.8

The position remained unchanged during the second half of
1924 '.
Whereas the aggregate turnover of all the co-operative organisations reached 1,600 million roubles in the year 1923-1924, the working
capital actually owned by them did not exceed 100 million roubles 2.
1
2

Ibid., 25 Jan. 1925. Special issue devoted to consumers' co-operation.
Jbid., 18 Feb. 1925. Papers of the Supreme Economic Council.

— 295 —
The following figures show the proportion of borrowed capital
in the funds of the co-operative movement in 1924 '.
CAPITAL OF CO-OPERATIVE SOCIETIES, 1924

.Borrowed capital
Societies

Central industrial and
united societies
Regional unions
Provincial unions
Transport workers' societies

Capital belonging
to the organisation
(thousand roubles)

Thousand

roubles Per cent, of total

39.544
32.158
13.235

13.202
6,130

2,831

9.898

3.846

These figures confirm the statement already made that in cooperative organisations of the second and third degree the proportion
of the society's own capital to total capital is higher than in the
primary co-operatives. It is the latter which are in the most difficult
financial position. For this reason they encounter the greatest obstacles and are at a marked disadvantage in competing with private
trade, which is better equipped and more adaptable to the market.
Yet the strength of the co-operative movement in general depends
in the long run on the success of the primary societies.
Finally, it may be pointed out that the population, and especially
the local authorities, look upon the co-operative movement as an
undertaking which obtains its profits by questionably legal means,
and they feel justified in taxing them or holding them up to ransom
to the utmost possible extent. To the management costs of the cooperatives, which are already excessive, innumerable minor expenses
are often added as an extra burden on their already unbalanced
budget. According to the Economicheskaia Zhizn 2 :
Cases occur in which the co-operative organisations are called upon
to finance undertakings with which they are in no way connected, even
when they are manifestly unequal to the task.
1
Soyus Potrebiteley, No. 1, 1925, p. 57.
' Economicheskaia Zhizn, 24 Jan. 1925.

— 296 —
For example, a union, in spite of its deficit and debts, provides funds
for repairing a barracks, another is compelled to make arrangements
at its own expense for the wedding of a soldier and a washerwoman with
the full ceremonial of civil marriage, etc. . . . An appeal to the cooperative is at all times considered to be one of the best and simplest
methods of meeting local needs.
Multiplicity

of Grades in the Co-operative

Systevi

One of the g r e a t difficulties of co-operative trading is the m a n n e r
in which goods h a v e to pass t h r o u g h a large n u m b e r of successive
stages in the co-operative network, thus raising prices unnecessarily.
A n author already quoted

states t h a t :

Overhead expenses are still further increased by the intricate interrelation of the various parts of the co-operative system. This is a legacy
from the period of Communism. These survivals have been eliminated
in urban centres, but still hamper the relations between the regional
and provincial unions and the rural societies.
The confusion which reigns in the organisation has the most mischievous efiect on the development of the movement and stops the selection
of the most efficient co-operatives by a process of healthy competition.
T h i s confusion has m a n y repercussions.
T h e unions often
monopolise the r i g h t to give credits to the affiliated societies ; consequently the societies are compelled to carry out their work with
meticulous care in accordance with instructions received from above,
b u t none the less at their own risk.
Threatened with the loss of all credits, they are compelled to carry
out the most preposterous and bureaucratic orders received from the
higher authorities. United societies which adopt an independent attitude, by buying goods from other organisations, for instance, are treated
less favourably than others ; organisations on parallel lines are set up
within their district, the business of granting them credits is left to
the banks, their managers are replaced by administrative order, etc.
T h e primary co-operative organisations strive in every w a y to
establish direct relations with state industry without passing t h r o u g h
the official co-operative channels ; but they are prevented b y the
organisations higher u p in the scale, which make every effort to
ensure that goods shall pass t h r o u g h all the successive stages —
Centrosoyus, local union, its branch or office, distributing centre,
consumers' society. T h e effect of this in some cases is to cause one
consignment of goods to m a k e the same journey several times over.

DEUTSCHMANN : op.

cit.,

39.

297 —

This method (the compulsory passing of goods through the official channels) was keenly criticised and led to a violent controversy
between the managers of nationalised industries and certain critics
of co-operation on the one hand and co-operators on the other ; the
latter finally prevailed.
In the opinion of Larin, the Centrosoyus, the regional offices,
the provincial unions, and their agencies are becoming extremely
costly and useless excrescences. All that part of the co-operative
commercial machinery which links up the Centrosoyus with the
provincial unions could easily be abolished with nothing but benefit
to the consumers' organisations, as the latter would then be able to
procure manufactured goods at cheaper rates. Larin considers that
the true function of the Centrosoyus is to act as the thinking centre
of the movement. He contends that the tendency to centralise the
trade of the consumers' societies is simply blind imitation of bourgeois Europe. Where the co-operative system is designed to contend
with private capital such measures are necessary ; but in Soviet
Russia, where the state controls the co-operative organisation, where
this organisation is less a weapon against private capital than an
instrument for carrying out government orders, and where there is
state commercial machinery, there is no need to imitate the policy
of bourgeois Europe.
Larin proposes that the middleman's work of the Centrosoyus
and the provincial unions should be abolished. Primary co-operatives and their urban and divisional unions should be allowed to
negotiate directly with the state trusts, syndicates, and their local
branches. The state should open credits not for the Centrosoyus and
the provincial unions but for the primary co-operative organisations.
Provincial unions, their Moscow agencies, and the regional offices
of the Centrosoyus should be abolished \
At the time of its publication Larin's opinion was shared by
numbers of "practical economists" (khoziaistvenniki), who repeatedly
pressed, at the end of 1923 and the beginning of 1924 (at the Conference of Industrial Offices, Conference of Commercial Exchanges,
etc.), for a reduction in the number of intermediare links in the
machinery of co-operative trade.
1
LARIN : " How to Overcome the Crisis ", in Pravda, 18, 19, 21, and
29 Oct. 1923 and 26 Feb. 1924.

— 298

A report adopted by the Supreme Economic Council on 29 October 1923 recommended, among other remedies for the commercial
crisis, " that the number of intermediate stages in the co-operative
trade organisation be reduced and that state industries be allowed to
trade directly with the primary co-operatives " \
Co-operators were opposed to this idea, which was calculated to
detract from the importance of the Centrosoyus and the large unions
in co-operative trade. They claimed that many goods did not pass
down the whole chain of co-operative organisations on their way
from the producer to the consumer. According to the Centrosoyus
reports 2 , all goods sold through the agency of the co-operative retail
stores could be classed as follows, according to the number of different
hands through which they passed before reaching the consumer :

Number of intermediate
stages

1
2
3
4
5

Quantity of goods
(million gold roubles)
1933
1933-1923

158
41
25
32.5
-

168
67
91
51
18

Mr. Khinchuk, president of the Centrosoyus, estimated that in
the first quarter of 1923 the provincial unions made 30 per cent, of
their purchases from the Centrosoyus and 30 per cent, from state
organisations ; the large consumers' societies made 13 per cent, of
their purchases from the Centrosoyus and 40 per cent, from the
state organisations. Mr. Khinchuk gave an assurance that cooperative societies were in no way bound to pass their goods through
the whole series of co-operative organisations. Only goods of some
importance to the state were to pass through the centre ".
Co-operators pointed out, on the other hand, that one of the aims
of the whole consumers' system was to systematise and centralise
buying, and so lend unity to its work. They also drew attention to
the fact that the economists and certain members of the Communist

Economicheskaia Zhizn, 31 Oct. 1923. Soyns Potrebiteley, Nos. 1314, 1923a
Soyus Potrebiteley, No. 7, 1924. Otchot Centrosoyusa za ÎÇ22 god,
and Report on the work of the Centroso3?us during the first three quarters
of 1923-1924.
a
L. KHINCHUK : " State Industry and Co-operation ", in Pravda,
24 and 25 Oct. 1923.

— 299 —
Party, carried away by their attacks on the clumsiness and rigidity
of the co-operative organisation, were advocating measures which
would inevitably lead to the institution of state retail trading ; if an
attempt of this kind were to succeed competition would be keener
than ever, and the co-operative movement would find itself in even
greater difficulties, unless there should be a return to the old system
of passing goods through numerous intermediate stages. If the small
shops (private, state, or co-operative) were allowed to buy directly
from industry, it would in the long run be necessary to combine the
orders of the small co-operatives and to set up societies for wholesale
purchase ; this would mean reverting to the local unions and the
whole of the work would have to be begun afresh.
Sound though these arguments appeared, the co-operators were
obliged to make concessions to the directors of state industries and
commerce, for they had to admit themselves that lack of organisation
in buying unduly hampered the work of the co-operative system.
" The urban societies and industrial co-operatives have bought
goods to the value of many tens of millions of roubles directly from
the producers, 31 state syndicates ", wrote the Co-operativnoie Dielo,
and it argued that such action was justifiable when economies could
be effected on carriage or travelling and when the responsible union
was unable to supply the required articles. At the same time, if the
consumers' societies were led to take this course, the reason — as
was shown by the crisis during the autumn of 1923 — was "the defects
in the co-operative system, the inefficiency of its commercial machinery, and its ignorance of trade requirements ".
For all that, co-operators did not repudiate the principle of cooperative trade. The Co-operativnoie Dielo wrote : " We are convinced that co-operatives will not be able to manage without unions
and combined purchases. The state industries would, we know,
sooner deal with a union and sell large consignments than engage
in petty transactions with individual consumers' societies. But, to
be logical and practical, we must not build on enthusiasm and dazzling schemes ; we must take commercial efficiency into our reckoning. "
The Centrosoyus organ agreed that " each co-operative
organisation should be free to make its purchases where it saw fit ",
provided that " at the centre as in the provinces ", co-operatives
bought directly from the state organisations, whenever possible \
1

A. FISCHHÄNDLER : " Freedom oí Purchase in the Co-operative
Movement ", in Co-operativnoie Dielo, 16 Feb. 1924.
3

— 30O —

This line was taken with a definite purpose in view. Those cooperators who still held to the principle of combined purchase hoped
that, left to themselves, the consumers' societies would soon realise
the disadvantages of the new system. There would then be a return
to the practice of combined purchases, not by order of the higher
organisations, but under the pressure of the primary societies' economic needs. In this way the best unions would come to the fore by
a kind of process of automatic selection.
At the moment we are inefficient business men. But when every
co-operative has realised that it is more profitable to buy in common with
other societies, and that a union is necessary for this purpose, the system
of buying through the unions will return to favour. That system will
then be no longer a burden, but an advantage for all, both consumers and
producers '.
One of the main defects of the co-operative system was what has
been called " trade for thrade's sake ". The Thirteenth Congress of the
Communist Party rightly pointed out that the Centrosoyus was little
concerned to organise primary societies and to assist them in consolidating their position. Its one and only object was trade, so much
so that it strove to buy all the necessary goods for the whole network
of co-operative organisations. It tried to become the supplier for
the whole population 2. The Report of the Thirteenth Communist
Congress states that :
When the Central Committee of the Communist Party asked the
Centrosoyus for its report, the Centrosoyus submitted a printed report
and asked the Communist Party to explain whether it should supply the
whole of the population or only the members of the co-operative movement. It had obviously not occurred to the Centrosoyus that its first
and chief task was to satisfy the requirements of its members.
Quite recently the Centrosoyus bought 2,000 different kinds of
goods including wood, cloths, silk, porcelain dinner services, broomsticks, cushions, wines, perfumery, bricks, etc., etc. Subsequently
the number of different articles to be bought was reduced to 1,400,
but that figure is sufficiently high to show that the Centrosoyus still
endeavours to supply the whole population and thus inevitably
neglects co-operative members.
In the circumstances it is not surprising that not merely the
general population, but members of the Communist Party, look upon

1
3

Ibid.
Andreev's report to the Thirteenth Communist Congress, Pravda,
30 May 1924.

—

3OÏ

—

the co-operative organisation as a purely commercial concern and
criticise it severely.
These criticisms compelled the Centrosoyus to improve its
methods. Its goods were divided into three classes : (i) goods bought
and sold by the Centrosoyus for its own account ; (2) goods bought
or sold on commission by the Centrosoyus acting as intermediary ;
(3) goods in which the Centrosoyus was no longer to deal. The lastnamed group included 500 different items (machinery, instruments,
tools, wood and wood-work, high-class textiles, certain drapers' goods,
etc. ). It was decided that work should be concentrated on the most
important classes of goods, which were divided into 30 groups. It
must be. added, however, that although the Centrosoyus consented to
curtail its operations in this manner it did not do so willingly, but
because the terms exacted by the state industries for the sale of goods
" on commission " (even such goods as soap, salt, and paraffin) were
highly unprofitable 1.
Thus, at the beginning of 1924 the need for reorganising the
business methods of the consumers' co-operatives was already felt.
It was obvious on the other hand that such reorganisation was closely
dependent on a modification of the Soviet Government's policy towards
co-operation generally. This reorganisation was also bound up with
the solution of a further problem which arose at the beginning of
1924, namely, the struggle with private capital. This struggle, which
was embarked on during the middle of the year, led to considerable
changes on the home market and especially in the position of the
consumers' societies.

Potrebiteiskaia Co-operatsia v 1Q23-IÇ24 goav, p. 19.
3

CHAPTER I I

Recent Co-operative Policy

T H E EXPANSION OF PRIVATE T R A D E

At the beginning of 1924 it came to be realised that private
traders were progressively supplanting both the state and co-operative trading bodies, and their success was seen to be mainly due to
the attitude adopted towards them by the state bodies themselves.
Several investigations revealed that these bodies, impelled by
their own financial position and by the complex factors influencing
the market, often encouraged the private trader to the detriment of
co-operative organisations and even other state trading bodies. The
power and success of private trade were largely due to the peculiar
relations between the various state bodies, which made it possible,
for example, for a private merchant to buy goods from one state
organisation and resell them to another or to a co-operative society *.
The private merchant could offer cash when required, and the
state trusts therefore reserved their best selection of goods for him,
so that " the state industries themselves helped the private traders
to secure from the trusts the articles most in demand with the consumer " ; of their own initiative the trusts went to meet them
halfway. As the organ of the Supreme Economic Council put it,
" not only did the private trader try to get the best selection of
goods, but the state bodies did their utmost to give it to him ". The
commercial organisations of the state and the co-operatives, on the
other hand, could only get an inadequate selection, which made it
very difficult to compete with the private trader 2. One of the
1
2

Na novykh putiakh, Vol. I.
Torgovo-Promyshlennaia Gazeta, 6 April 1924.

— 303 —

weaknesses of the co-operatives being that they did not know how
to secure a suitable range of goods, the policy adopted by the state
bodies had disastrous effects.
Private traders were also in a favoured position for the grant
of credits. It was discovered by an enquiry conducted by the
factory inspectorate that the banks were more ready to grant credit
to private traders than co-operatives. The current accounts of
private traders in all the banks showed overdrafts. State bodies
could only secure credit in proportion to their deposits, but private
traders received advances from the capital of the State Bank, i.e.
indirectly from the state itself. In addition to opening credits
directly for private traders, the banks discounted bills transferred
by private traders to state bodies, which was an indirect way of
giving credit to the former l . It was also found that the paper of
private traders was much more rarely contested than that of cooperatives, and advances on bills were much more freely made to
them.
The following table indicates the relative volume of purchases
on cash and on credit by the three main forms of trading enterprise a .
PERCENTAGE

DISTRIBUTION

OF PURCHASES

ON CASH AND CREDIT

BY STATE, CO-OPERATIVE, AND PRIVATE TRADERS, 1923 AND I 9 2 4

Co-operative

State

Private

Month
Cash

Credit

Cash

50
47
40
36
33

50
53
60
64
67

17
II
19
24
18

72
79
73

Cash

Credit

83
89
81
76
82

51
48
6l
48
45

49
52
39
52
55

79
86
85

47
42
49

53
58
5»

Credit

1923
August
September
October
November
December
1924
January
February
March

2
2

14
15

Ibid., 4 June 1924.
Soyus Potrebiteley, No. 7, July 1924.
3

— 304 —
Obviously the state trusts, etc., being in financial embarrassment, preferred to deal with private traders rather than with cooperatives, which made a larger proportion of their purchases on
credit. Thus from October 1923 to March 1924 the Oil Syndicate
sold 19.4 per cent, of its total stock of 7.5 million poods to state
bodies, 31.2 to co-operatives, and 49.4 to private firms. The Building Materials Syndicate sold 50 per cent, of its stock to co-operatives, 20 per cent, to state bodies, and 30 per cent, to private firms.
The large share taken by the private trader is accounted for by the
faot that they paid half the price down in cash, while the co-operatives paid only a quarter \
DISCUSSIONS ON ECONOMIC POLICY IN T H E COMMUNIST PARTY

From the middle of 1924 onwards, politicians were no longer
content to note the success of private capitalists in commerce, but
began to seek means of checking it. They continued to point out
the defects of the consumers' co-operative movement, but also began
to criticise the general policy of the state organisations. Soviet cooperators pointed out that the state bodies were helping private
capitalists to secure a footing and gain ground, while they did their
best to put the co-operatives in an unfavourable position. The
scope of the discussion rapidly extended until the value of the whole
New Economic Policy came to be disputed. Profound differences
of opinion appeared between different sections of the community
and among the Communists themselves.
One group, consisting of a section of the Communist Party, for
which Larin was spokesman, considered that the crisis which occurred in the autumn of 1923 " must inevitably lead to a re-casting of
the system set up by the New Economic Policy " 2.
Since the introduction of the New Policy, he said, commercial
relations had grown up without method, to such an extent that at
present the state had to recapture the market from, private capital.
For this purpose it must reform its own commercial bodies and
those of the co-operative movement in order to control private trade
through them. In the first place the state commercial bodies must
supply the chief needs of the population more adequately and econo1

Ibid., No. 7, 1924.
LARIN : " The Way out of the Crisis ", in Pravda, 18 Oct. 1923.
As Lariu was the chief exponent of the opinions summarised above,
reference is chiefly made to his articles.
2

— 3°5

mically. Further, the bourgeoisie must be prevented from absorbing and spending for its own benefit so large a proportion of the
national income. Thirdly, the worker must be saved from the
necessity of applying to the private trader, and the bourgeoisie must
be ousted from its function as intermediary between the towns and
country districts.
The first step was to dislodge private merchants from the
wholesale trade, for which purpose it was necessary :
(i) to establish direct relations between the state wholesale
bodies and the private retailers, if any ;
(2) to prohibit state bodies from delivering goods to private
middlemen working on commission, with the exception of village
retailers who undertook not to sell the goods below a given price ;
(3) to increase wholesale purchases by state bodies in the
branches of trade which had most fallen into the hands of private
firms ;
(4) to restrict the issue of bank credit to private wholesalers
and forbid trusts to give guarantees indirectly for such wholesalers ;
(5) to grant special facilities for payment and the right of preemption on the best selection of goods to state and co-operative
traders ;
(6) to forbid private traders to set up joint-stock companies or
to join commercial companies set up by the state ;
(7) to exert further pressure by taxation on private wholesalers.
In order to put a stop to the unfortunate ventures of the various
trusts, which might counteract the effect of the foregoing measures,
it was further necessary for the Supreme Economic Council itself to
organise the sale of its products down to and including the retailer,
while the Commissariat of Home Trade would regulate all commercial business.
The exponents of this policy considered that, although these
measures related more directly to state trade, they should also affect
the co-operative system. The state wholesale departments should
reach the consumer either through the state retailing bodies or through
the primary co-operatives. Private retailers should only be used
where there was no co-operative or state shop. With regard to the
co-operative system itself a number of administrative measures were
advocated, these having been described in the preceding chapter 1.

LARIN : " Our Commercial Policy ", in Torgovo-Promyshlennaia
Gazeta, 17 April 1924.
3
The Co operation
2 3

3o6 —
In effect, the proposals of Larin and his supporters amounted to
restricting the scope of the New Economic Policy and, as it were,
retreating. There were others, however, who wished to give effect
to a new commercial theory. According to the leaders of this second
group, the economic depressions from which Soviet Russia suffered
were due to the discordance between the socialist system represented
by the large-scale nationalised industries (under the system of state
capitalism) and the petit bourgeois system on which 18 million
peasant farms were still based. The two systems did not develop
with equal rapidity and did not unite, although they came into contact in one sphere — the commercial market.
" Commerce ", said I<enin, " is the link which we, the state
authorities, the Communist Party, must grasp with all our strength
amidst these historic events while we are striving by continued effort
to build the socialist edifice. If we hold fast this link we shall soon
have the whole chain in our hands. " 1 As those who approved
Lenin's statements admitted, this was the very link which had slipped
from the hands of the Communist Party. The economic system was
still weak. The purchasing power of the peasants was negligible and
out of all proportion to the expansion of industry. In order to
market industrial products, therefore, the first step was to organise
trade. If this were not done, town and country would soon lose all
touch, and when this touch was lost the Soviet Government would
be imperilled, since it would have failed to prove to the peasants its
ability to supply them with the necessities of life as successfully as
the old system of bourgeois capitalism.
The problem was thus twofold. It was not enough merely to
oust the private trader ; the Soviet Government itself must learn to
trade. For this purpose it was certainly necessary, as the first group
stated, to systematise state trade, but it was even more essential to
reform the consumers' co-operative system.
It has previously been pointed out that Lenin's articles, published
in the middle of 1923, had induced the Soviet leaders and the Communist Party to modify their policy towards the co-operative movement, to devote more attention to it than in the past, and to take
steps to reform it. But it was also stated that up to the middle of
1924 the state economic bodies had in no way changed their attitude
to the co-operative organisations. In political circles, where the

Report by KAMENEV to the Thirteenth Congress of the Communist
Party, 6 May 1924 (Pravda, 30 May 1924).

— 307 —
co-operative movement was recognised to be an essential tool for
checking private trade and restoring relations between town and
country, t h e ideas of I<enin on t h e function a n d importance of cooperation in the Soviet system were naturally recalled. Speaking at
the Thirteenth Congress of the Communist P a r t y , Mr. Preobrazhensky
said :
I f we want to defeat private capital we must radically reorganise
the co-operative movement. At present it is controlled neither from
below — which robs it of any public value — nor from above, as a result
of which it is even more inefficient than the state commercial undertakings. The improvement of this state of affairs is the fundamental
problem before us. Lenin stated it in all its ramifications ; our Party
must examine it in full '.
A t the same Congress Mr. Andreev, reporting on co-operative
matters, spoke as follows :
This Congress ought to regard the co-operative movement first and
foremost as the regulator of peasant production and the apostle of
socialism in the country. Now that we have succeeded in reviving our
industries somewhat, ought we not to foster the co-operative spirit among
the population? Propaganda alone will not secure the peasant's adherence to socialism. He must be led to it gradually by a long process in
which the- peasant system will be reconstructed on a co-operative
basis. . .
When the New Economic Policy was first introduced, when the state
had no commercial organisations and the co-operative system was little
developed, private capital was a useful intermediary for bringing the
state industries into touch with the peasant system, but to-day this
intermediary work has become dangerous, for it has made possible the
reconstitution of commercial capital, and this is the first step to the
reconstruction of industrial capital. We cannot ignore this danger. In
the struggle to capture the market from the private traders, the cooperative system must obviously take the decisive part 2 .
T h e " economists " (i.e. t h e heads of t h e economic organisations) also took part in the discussion, and criticised the co-operative
organisation most severely. I n their view this organisation was in
an indeterminate position. I t had tried to gain a footing both in
wholesale and in retail trade, b u t had failed t o do so in either \
I t s attempts to do wholesale business had handicapped it. As the
state itself possessed industrial and commercial organisations, it
would be much more reasonable to concentrate the wholesale trade

Pravda, 28 May 1924.
Ibid., 30 May 1924.
3
Report to the Industrial Congress in January 1924 ; Torgovo-Promyshlennaia Gazeta, 12 Jan. 1924.
3
2

— 308

in the hands of the state bodies, i.e. the syndicates and provincial
commercial exchanges, than to leave it to co-operative bodies, which
should strictly be concerned with retail trade. The President of the
Textile Syndicate, Mr. Nogin, in a series of articles entitled " Down
with the Middlemen ", vehemently urged that the co-operative movement must be deprived of its wholesale business. Although admitting that the co-operatives had excellent prospects in the future, the
" economists " held that it was impossible to hand over all trade to
them at that time. As Mr. Khinchuk said, these arguments betrayed
" anti-co-operative sentiments, the reaction from disappointed hopes,
which are shared by many sections of the public ".
Co-operators themselves were in favour of a change of policy
towards the movement. Though disagreeing with those who thought
the movement incapable of conducting wholesale trade, they realised
that if the movement presented a united front with state industry and
trade in face of private capital, it would put an end to the more or
less hostile policy of the state bodies, to which co-operators chiefly
attributed the success of private trade. They hoped that the change
of policy would make it possible to check the competition of private
traders, which was an ever-growing handicap to the co-operatives.
On the first introduction of the New Economic Policy, co-operators had hoped that by securing a monopoly of exchange and state
orders the movement could capture the home market. In 1924 they
believed that, recognised as " the most favoured organisation ", it
might escape from its embarrassments, restore its financial stability,
and secure a predominant place in the economie system.
DECISIONS OF T H E DIRECTING BODIES OF THE COMMUNIST PARTY

Political Officials of the Party
These heated discussions on the future of the economic policy
lasted until the middle of 1924, and indicated more or less clearly
the lines on which the proposed reforms should be conducted. The
discussion passed through several phases. The problem was first
examined by the political officials of the Central Committee of the
Communist Party, who on 24 December 1923 arrived at a decision
the main features of which are summarised below \
1

Torgovo-Promyshlennaia Gazeta, 28 Dec. 1923.

— 3°9 —
The adoption of the New Economic Policy has rendered the
organisation of trade a matter of primary importance, since trade
constitutes the link between nationalised industry and the peasant
market. Any extension of the co-operative movement and the
state trade organisation is beneficial to the socialist system,
but, on the other hand, any weakening of these organisations
means a strengthening of private trade and the expansion of
bourgeois capitalism. The most important task of the Communist
Party in the economic sphere is to support the co-operative movement and state trading organisations and to discourage private trade,
though making use of the latter through the former.
The cooperative organisation should be used to oust private capital. The
practical reform needed, therefore, is to re-organise the co-operative
movement, improve its commercial machinery, and regulate the
wholesale prices of articles of prime necessity with a view to subsequent control of retail prices.
The decision of the political officials was approved by the Central Committee of the Party and received with enthusiasm by all
opponents of the New Economic Policy. Advocates of revision of
this Policy learned that direct relations were to be restored between
state industry and wholesale trade on the one side and the primary
co-operative organisations on the other, that credits to private traders
were to be cut off, and that prices were to be controlled in order to
abolish the profits which the private middleman secured from the
wide margin between wholesale and retail prices. Learning this,
and seeing the administrative and political reprisals against private
capital which were in contemplation, they felt justified in maintaining
that their views had been adopted by the Communist Party and had
formed the basis of its resolution.
Central Committee of the Party
In matters affecting the co-operative movement there were no
fundamental differences between the resolution of the political officials, the decision of the Central Committee, and the views of the
Thirteenth Congress of the Communist Party. For present purposes, therefore, it will be enough to describe the views of the Congress, which gave final form to the resolutions of the political officials
and the Central Committee. Some reference, however, should first
be made to the resolution of the Central Committee, for it aroused
a violent controversy among some of the Communists and trade
2 3 *

— 310 —

unionists and, if it has not been eventually modified by the Party
Congress, it would have indirectly affected the co-operative movement.
The Central Committee recommended the establishment of a
Commissariat of Home Trade " on the one hand to assist the state
commercial organisations and the co-operative movement to capture
the market and oust private capital, on the wholesale market first
of all, and, on the other hand, to organise close supervision of the
activities of private capitalists ".
Embodying the substance of Larin's proposals, the Central
Committee's resolution further recommended that measures of state
regulation and economic pressure should be supplemented by a
general campaign against private trade. To this end it requested the
labour organisations (trade unions, factory committees, co-operatives,
etc.) to boycott for a given period firms which refused to lower
their prices, increased them, or supplied goods of poor quality. It
also recommended that Section 137 of the Penal Code should be
invoked for the prosecution of private traders who tried to force
prices up illicitly.
The Trade Unions
The decision of the Central Committee involved radical measures
to abolish private trade and to concentrate all retail operations in the
hands of the co-operative movement and the state commercial organisations. This aroused many protests, the loudest of which came
from the trade unions. Their official journal wrote as follows :
When the co-operatives only supply a quarter of the workers' needs,
when they are inefficient in trade and fail to consider the needs of their
customers, when they are unable to treat purchasers politely, to reduce
their overhead charges and get rid of their useless expenditure, does
anyone think that they will amend their ways for the sole reason that
the workers are obliged to make all their purchases at the co-operative
shop? . . . Where we have hitherto failed to capture the market,
private trade is discharging functions of public utility.
Through the impetus which private commerce gives to trade in
the country " it is an essential condition for monetary stabilisation
and the general expansion of the economic system ". Even though
it is sometimes conspicuous for speculation and rapacity, " none the
less it is, at the present time, not merely tolerable but indispensable . . . We must not saw off the branch on which we sit. '"

Trood, 19 April 1924.

** 3 " —
Thirteenth

Communist

Congress.

T h e s e protests from the trade unions gave rise to further controversy 1 . T h e " economists " were most concerned to know, w h e t h e r
t h e decision of the Central Committee involved replacing private
trade by state trade, or whether state commercial bodies were only
to be set u p w h e r e there was n o other commercial organisation.
Some of t h e m t h o u g h t t h a t the conditions on which private
capital m i g h t be made of service should be defined, and maintained
t h a t these conditions should be such as to m a k e it possible t o s u p p l a n t
t h e private wholesaler everywhere 2 .
Others t h o u g h t t h a t " t h e defeat of private capital should not be
allowed to prejudice the m a r k e t ' s capacity.of absorption, commercial
operations, and monetary circulation ", t h a t though they did not
wish to beat a retreat it was only necessary to prevent further expansion of private capital and to t u r n state and co-operative capital
into branches of trade which had hitherto been neglected b y
everyone 3 .
According to K a m e n e v :
Commercial skill at the present time consists in supplanting private
trade without prejudicing commercial operations. . . If we waste
our resources in the campaign against private capital by selling our
goods under cost price and then turn to the state and say " Charity,
please, trade has ruined us ", we shall soon have exhausted our reserves.
We must take a steadily increasing- part in trade, but for this purpose
• the replacement of private capital by state and co-operative capital must
be progressive 4 .
Eventually t h e views of t h e " economists " and the trade unions
won the day. T h e T h i r t e e n t h P a r t y Congress stated t h a t :
The market cannot be captured by purely administrative measures ;
it is better to strengthen the position of the state and co-operative trading
bodies by placing at their disposal the goods needed by the mass of the
population and by co-ordinating their work. We must not employ, in
1
The decisions of the Central Committee were most vehemently
defended by Larin in his article, " The Defenders of Private Trade ",
in Pravda, 13 May 1924. " The articles in Trood ", he wrote, " indicate
the spread of bourgeois influence among the proletariat, or rather among
a class which has entered the service of the proletariat and should be
rooted out and expelled for ever ".
2
Cf. " More Light ", in Economicheskaia Zhizn, 28 May 1924.
3
KAKTYN : " The Struggle Against Private Capital in Commerce ",
in Economicheskaia Zhizn, Nos. 189, 191 and 192, 1924.
4
Reports to the Thirteenth Congress of the Communist Party,
Pravda, 30 May 1924.
3

-> 3 1 2 —
order to defeat private capital, measures which might reduce or disturb
home trade, for these would have a bad effect on the economic progress
of the Soviet Union 1.
Commenting on the position, the journal of the Supreme Economic Council wrote :
The Congress resolutely rejected the caprices of some comrades, who
wished at a stroke of the pen to abolish private wholesale trade by forbidding anyone to deal with private wholesalers and by cutting off their
credits. . . The prudence of the Congress in the matter of private
wholesale trade affords one more reason for the hot-heads who already
foresaw the end of the New Economic Policy to moderate their enthusiasm. . . The transition from the New Economic Policy to the
socialist system will necessarily be long and difficult. Great efforts are
still needed from the working class and its Party before it will be possible to say we are reaching the end of the New Economic Policy 2.
The party is fully aware that the New Economic Policy is a very
far-reaching3 idea which it will take decades, if not more, to put fully
into effect .
Having refused to abolish private trade completely, the
Communist Party decided to adopt certain measures to limit the
share of private capital in trade. The Congress approved the
establishment of a Commissariat of Home Trade, the chief function of
which would be " to supervise regularly the relations between private
capitalists and the economic bodies in the sphere of private trade,
to render these relations systematic and favourable to the state, and
to suppress all attempts by private capital, whether overt or otherwise, to injure the trade and industry of the state or the co-operative
movement (for example, by securing special facilities for credit and
payment, or privileges in the choice of goods, etc.) ".
The Congress also advocated two further practical steps :
(i) maintenance of the policy of lowering prices and reducing the
margin between wholesale and retail prices ; (2) the provision of
credit on specially easy terms to state trading bodies and co-operatives. Thus the commercial policy laid down by the Congress directly
affected the co-operative movement. The decisions of the Congress
also included a passage dealing with the co-operative movement,
laying down the following principles 4 :
(1) The co-operative organisation and its commercial and financial operations were to be decentralised. The primary societies
1

Pravda, 1 June 1924.
Torgovo-Promyshlennaia Gazeta, 3 June 1924.
* Economicheskaia Zhizn, 1 June 1924.
4
Pravda, 3 June 1924.
1

- - 313

were to be given the fullest possible measure of independence as the sole means of arousing the co-operative spirit among
the masses. The central organisations were no longer to be under
an obligation to buy all kinds of goods for all co-operative organisations attached to them.
Instead of merely serving as intermediaries between the primary
societies and the economic and commercial organs of the state, they
should actually direct the co-operative organisation.
(2) The principle of voluntary membership was to be carried
fully into practice as rapidly as possible.
(3) After reducing its staff and its overhead charges, the cooperative organisation should be able to sell below average market
prices, thus giving a kind of indirect bonus to its members.
(4) The co-operative movement should give up the idea of
supplying the entire population and concentrate on the needs of its
members. It should therefore cease to stock goods which were not
bought by the majority of its members (such as luxury goods). It
was only to sell articles needed in the households of workers and
peasants.
(5) Initiative was to be fostered. Efforts were to be made to
interest the consumer in the success of the movement. On the other
hand, there must be an end of the bureaucratic spirit and indifference
to the customer which characterised the period when the co-operative
movement was simply an organisation for distributing foodstuffs and
articles of prime necessity. Co-operative employees were to be
selected with care, and the most efficient should receive bonuses.
(6) Competitions should be held between co-operative societies.
(7) With a view to increasing their membership, consumers'
societies should frequently report on their work to their members.
(8) Working and peasant women should be attracted into the
movement, and given a place in the managing and supervising bodies.
(9) The directing bodies of the co-operative movement should
pay special attention to training and selecting good instructors and
distributing propaganda literature on co-operation.
In addition to these general recommendations " for strengthening
and reforming the co-operative movement ", the resolution of the
Congress laid down the following priniciples for the relations between
the co-operative movement and the state :
(10) The state should assist the co-operative organisations
especially the primary societies, by giving them special privileges,
3

— 314 ~
among others, in matters of bank credit. The state industries, acting
through their economic bodies, trusts and syndicates, should give
priority to co-operatives over other consumers, both by reserving for
them the best selection of goods and by granting credit on easy terms.
Retail trade should become the exclusive province of the cooperative movement as it develops. State trade should be concentrated chiefly on wholesale operations. The co-operative movement
should conclude agreements with state industries through the " Gosplau " for the supply of articles of prime necessity which are consumed in large quantities. The economic bodies should not compel
co-operatives to accept any kind of goods.
The decisions of the Congress may be briefly summed up as
follows : (i) They aim at reviving co-operation and increasing trade.
(2) They recognise that the co-operative movement, in the words
of the official organ of the Centrosoyus, is " a powerful economic
organisation which should be used for the general good ". (3) They
advocate decentralisation and systematic organisation of the commercial operations of the co-operative movement. (4) They lay
down that state and co-operative trade should present a united front
tò private capital. (5) They grant the co-operative movement the
" most favoured organisation clause " in its relations with the industrial and commercial organisations of the state \
Resolutions of the First Commercial Conference
of the Co-operative Movement
As already pointed out, long before the Thirteenth Communist
Congress arrived at these decisions, the leaders of the co-operative
movement had agreed to decentralise purchases, and allowed the cooperative societies to deal directly with the state industries. This
brought producers and consumers into closer touch and decreased the
number of middlemen, and thus should make it possible to reduce
overhead charges and therefore selling prices. But if this measure
were to have its full effect the relations between the state industries
and the co-operatives had to be radically changed, for, as has been
pointed out, hitherto they had been anything but friendly. This
was the chief subject considered by the first Commercial Conference
of the Russian co-operative movement held in July 1924 after the
Thirteenth Communist Congress.
1

A. SHVETZOV : " The Co-operative Movement and the Decisions
of the Thirteenth Congress of the Communist Party ", in Soyus PotrebU
teley, June 1024.

— 315

The Conference emphasised that the state industries were ignorant both of the structure and nature of the co-operative system and
of the financial position of consumers' societies. It showed how
this ignorance hampered the marketing of industrial products through
the co-operatives. The Conference further pointed out that the
expansion of the movement was hampered by credit difficulties and
the fact that industrial undertakings compelled co-operatives to accept
goods which were hardly saleable. The handicap was all the greater
as the trusts and syndicates held aloof from the co-operative unions
on all matters concerning trade and the state of the market.
The Conference also discussed the inadequacy of the credit
granted by state industries and its faulty distribution, and the
reduction in the credits available for co-operative unions owing to
the decentralisation of the credit system and of banking operations.
Finally, it adopted a number of recommendations for improving
relations between the movement and the commercial and industrial
organisations of the state 1 .
(i) The commercial transactions of trusts and syndicates should
not be centralised beyond a certain point. Branches of these bodies
should be allowed to supply goods directly to the large co-operative
societies in their district, while other societies should receive their
goods through their union.
(2) The state industries should do away with certain defects
which handicap their trade with co-operatives, i.e. severe credit
terms, compulsion for the co-operatives to accept any goods offered
by the trusts, general inadequacy of the supply of goods to copera tives.
(3) The decentralisation of bank credit should not involve any
reduction in the amount of credit available for the consumers' cooperative movement. The terms on which credit was granted should
be improved, especially for the primary societies.
(4) The co-operatives should buy directly from the trusts without
going through the syndicates. The relation between state industries
and co-operatives should be governed by agreements protecting the
primary societies in matters of price, selection of goods, and conditions
of payment.
1

Resolution of the Commercial Conference of the Consumers' Cooperative Movement ; cf. Appendix to Doklad k 12 sessii Sovieta Centrosoyusa (Report to the Twelfth Meeting of the Centrosoyus Board),
p. 217 ; Moscow, 1924.
3

CHAPTER I I I

Effects of the 1924 Co-operative Policy
RELATIONS BETWEEN S T A T E INDUSTRIES AND T H E
CO-OPERATIVE

ORGANISATION

In spite of the decisions described above, it was the unanimous
opinion of the co-operative press that the relations between the state
industries and co-operative organisations continued to be abnormal.
Although the co-operatives actually decentralised their trading, the
attacks of the state industries became yet more violent 1 . The state
economic bodies set up many new branches, and enlarged those already
in existence, for the purpose of entering into direct relation with
the primary co-operatives and supplanting the co-operative unions
altogether. The effects of this policy were more especially marked
in the textile trade. The Centrosoyus became much less important,
and direct transactions between the industry and consumers' societies
increased substantially, as will appear from the following figures 2.
TRANSACTIONS OF THE TEXTILE TRUSTS AND SYNDICATES, 1923-1924

All transactions with
co-operatives

Transactions with the
Centrosoyus direct

I923-I924

Million
roubles

First quarter
Second "
Third
Fourth "
1
2

18.3
52-6
63.0
?

Amount
(million
roubles)

8.2
8.0
6.1
4-3

Per cent, of
total value

44.8
15.2
9.6
?

Co-operativnoie Dielo, No. 56, 1924.
Cf. " State industries and the Co-operative Movement " in Cooperativnoie Dielo, 29 Sept. 1924 ; LOBACHEV : " Co-operative Trading
in Manufactured Goods ", ibid., 26 Sept. 1924.

— 317 —
The share of the Centrosoyus in the textile trade was thus
reduced to insignificant proportions. Whether this was of advantage
to the industry, the co-operatives, and consumers, will have to be
examined.
In actual fact the state industry has hardly any direct touch with
the consumer. Most textile goods are distributed by the Textile
Syndicate, which has taken the place of the Centrosoyus as an intermediary between the producer and the primary co-operatives. The
extent to which the Textile Syndicate has increased in importance
is indicated by the following figures x :
PERCENTAGE DISTRIBUTION OF TRANSACTIONS OF THE

TEXTILE

INDUSTRY W I T H CO-OPERATIVES, I 9 2 3 - I Q 2 4

Period

Transactions with trusts

Transactions with the
syndicate

75-5
74.2
72.4
51.0

24-5
25-8
27.6
49.O

44.8
34-5

55-2
65-5

1923
First
Third
Second
Fourth

quarter
„
„
„

1924
First quarter
Fourth
,,

The co-operatives, having broken their trading relations with
the Centrosoyus, were faced by a new middleman, the Syndicate of
the Textile Trusts, before which their state of disorganisation rendered them powerless. The result was a shortage of textile goods
in the co-operative shops, since the greater part were accumulated
in the warehouses of the Syndicate, or halfway between the Syndicate
and its branches. The selection of goods became worse than ever,
for now that the primary co-operatives only obtained their textiles
directly from the industry, the latter was exposed to the temptation
1

Zhizn,

A. Lariu : " Co-operation in the Textile Trade ", in Economicheskaia
22 O c t . 1924.

3l8

of turning over to it all its less saleable goods. . Credits conditions
became more unfavourable than ever. The delays in payment allowed
for marketing the goods were fixed without reference to the financial
position of the co-operatives \
At the same time the state trading bodies, which were quite
ignorant of the co-operative system and the whole financial position
of the consumers' societies, experienced many difficulties in trying
to do without the co-operative unions, and relying only on their own
newly-created institutions to guarantee the solvency of the primary
co-operatives.
As already explained, the co-operative organisation had from the
outset insisted on the need of general agreements with the state industries to protect the interests of the primary societies. The industries in question, however, preferred to deal directly with the primary
organisations, and refused to enter into such general agreements.
The Textile Syndicate was not alone in following this policy, which
was adopted also by others, such as the Building Materials Syndicate,
the Naphtha Syndicate, and the Salt Syndicate '. In brief, the syndicates and trusts used the new co-operative policy solely in their
own commercial interests. As the Chairman of the Centrosoyus
stated at the meeting of the Board held on 29 September 1924 :
A great efíort was needed to prevent the trusts and syndicates from
misinterpreting- the decisions of the Communist Party (concerning the
decentralisation of co-operative trading). The state economic bodies
considered that these decisions gave them the right altogether to ignore
the co-operative unions and central organisations, and to organise a
sort of commercial blockade of the Centrosoyus 3,
Thus the co-operative policy of 1924 failed to secure a united
front of the state trading and co-operative organisations. On the
contrary, the relations between these two institutions became more
and more stained. According to the Co-operativnoie Dielo :
The state industries take too simple a view of the situation. They
have only one idea, to sell as much and on as good terms as possible.
For them the co-operatives are merely agents, commercial organisations
belonging to them, and serving only to market the goods handed over
by the industries. The rest may go hang. They quite forget that the
function of the co-operative movement is to build up a socialist system.
Moreover, even if the state industries are friendly towards the cooperatives, they are still ignorant of the peculiar structure of the
1
2
3

Co-operativnoie Dielo, 29 Sept. 1924.
Ibid., 3 Oct. 1924 ; Economicheskaia Zhizn, 31 Oct. 1924.
Co-operativnoie Dielo, 3 Oct. 1924.

— 319 —
co-operative organisation, since they more or less boycott the unions,
which they consider entirely useless institutions. The co-operatives may
no longer act as middlemen. As for general agreements, the state industries will have none of them, for they prefer to deal directly with weak
and isolated co-operative societies. It is not easy for the latter to keep
up the unequal fight *.
Some papers, such as the Economicheskaia Zhizn, while drawing
attention to certain exaggerations in the complaints of the co-operatives, admitted that " the policy of decentralisation had been carried
too far. Many state bodies had adopted a policy tending to destroy
the whole co-operative organisation and reduce to a minimum the
guiding influence of the central co-operative bodies on the consumers'
societies 2 . "
The same paper emphasised that " the financial and industrial
organisations are all possessed with the idea of establishing direct
relations with the primary co-operatives ". This " dangerous and
harmful " policy would mean an excessive subdivision of credits,
inevitable if the whole national economic system is to be based on
direct relations between state industries and trade and 25,000 cooperative societies. Such procedure, far from improving and simplifying economic transactions, had led to a critical situation, in which
the few achievements of the co-operatives were being endangered.
The representatives of the state economic bodies themselves
frankly stated their view.
If the state industries are to work ou a sound basis, they must not
link up with the co-operatives on purely theoretical and political grounds.
The trusts and syndicates can certainly not abolish their trading organisations, even if they may use the co-operatives for retail trade, since
they must keep in direct touch with the market in order to follow all
fluctuations and instruct the co-operatives accordingly.
The state economic bodies expressed doubts of the solvency of
the co-operatives, and considered it preferable to entrust them with
sales on commission. The state industrial undertakings must know
how their products were being disposed of, how their trading agents
were working, whether the goods reached the consumer in time, and
what prices were charged. This explained why the undertakings,
iu so far as their capital was invested in co-operative transactions,
wished to keep a check on the working of the co-operatives \

1
N. M. TORESHELIDZE : " The Relations between the State Industries and the Co-operatives ", in Coperativnoie Dielo, 12 Sept. 1924.
2
Economicheskaia Zhizn, 10 Oct. 1924.
3
DANISHEVSKY : " The State Industries and the Co-operatives ",
Torgovo-Promyshlennaia Gazeta, 7 Oct. 1924.

— 320 —
SALE PRICES AND OVERHEAD CHARGES

As far as may be judged from the index numbers of sale prices,
the discrepancy between wholesale and retail prices was only slightly
reduced. The average fluctuations for Russia as a whole are given in
the following table 1 :
INDEX NUMBERS OF WHOLESALE AND RETAIL PRICES
IN RUSSIA, 1924 TO 1925
(Base :

Date

IÇIS~IOO)

Wholesale
Prices

Retail
Prices

Difference
per cent, of
wholesale
index number

1924
i
1
1
1
1
1
1
1
1
1
1
1

January
February
March
April
May
June
July
August
September
October
November
December

^5
181
171
161
175
165
169
!75
123
164
163
168

180
201
203
208
202
210
215
229
223
210
207
210

9
11
19
29
15
27
27
30
28
2S
27
25

172
178

209
212

27
19

1925
1 January
1 February

According to a statement made by the President of the Supreme
Economic Council and the Commissary for Inspection, the difference
between a minimum budget calculated on retail prices and that calculated on wholesale prices was 36 per cent, before the war ; on
1 August 1924 it was 77 per cent. 2 The President of the Supreme
1
Torgovo-Promyshlennaia Gazeta, 7 Oct. 1924. See also the speeches
of Khinchuk
and Danishevsky in Soyus Potrebiteley, No. 10, 1924.
1
Economicheskaia Zhizn, 24 Oct. 1924.

— 321 —
Economie Council considered that this difference between retail and
wholesale prices, instead of being reduced, even tended to increase
in 1924. On 1 April 1924 an enquiry conducted in about a hundred
urban centres showed a difference of 31 per cent. By 1 October the
figure had risen to 43 per cent. On the same dates the corresponding
figures for salt were n o and 122 per cent., for refined sugar 12.7
and 15 per cent., and for ordinary tobacco 38.5 and 46.8 per cent.
He ascribed this fact to the inability of the co-operatives to capture
the whole market \
Thus the co-operative policy followed in 1924 led, not to a fall,
but on the contrary to a rise in the overhead charges of the cooperatives. According to one writer, the too simple interpretation of
the terms " primary co-operative " and " direct relations ", " h a d
meant, a more rapid increase of trading institutions than of trading
transactions. This over-expansion of administrative organisation and
overhead charges was due to the fact that the co-operative societies
tried to enter the central market, while the industries were creating
a whole network of agencies, branches, and local offices. The cooperative unions and their offices, often empty, worked side by side
with these organisations '. " A representative of the Commissariat
of Foreign Trade even held that " the direct relations established
between the co-operatives and the state bodies had led, not to a
reduction, but to an increase in overhead charges 3. "
Present Position of the Co-operative

Movement

The position of the co-operative organisation was not improved
by the new policy advocated by the Thirteenth Communist Congress.
The consumers' societies were empowered to make independent purchases and they started all kinds of commercial operations. The
primary co-operative organisations tried as much as the various
government bodies to keep out the co-operative unions, and this
tendency, produced by the shortage of capital and aggravated by
the decentralisation of the credit system, carried the " trading mania "
to extremes. The Economicheskaia Zhizn ascribes this frenzy of

1
Report submitted to the Conference of the Organisations of the
Supreme
Economic Council. Cf. Economicheskaia Zhizn, 4 Dec. 1924.
5
A. SHVETZOV. " The Co-operative Front ", in Economicheskaia
Zhizn, 18 Oct. 1924.
3
Torgovo-promyshlennaia Gazeta, 9 Oct. 1924.

3
The Co-operation
2 4

— 322 —

speculation to the desire of the consumers' societies to obtain a capital
fund, however small \ The trouble also affected the secondary
organisations, which were no longer able to meet their obligations 2 .
Speculation in textiles in particular attracted many consumers'
societies, which started needless buying, simply in the hope of reselling at a profit. According to the statements of one of its managers,
the Spinning Trust frequently found that the goods ordered by provincial co-operative organisations were immediately resold at Moscow itself instead of being sent to their destination. It also happened
that representatives of small co-operative organisations had goods
addressed to themselves direct, without consulting their managements,
and the latter, on hearing of the transaction from the Trust, maintained that they had no knowledge of such purchases '.
The co-operative organisations continued to extend their activities, but without preparation or the caution needed in view of their
weak finances. The credit problem was made even more acute by
these developments. On i July 1924, the debts of co-operative
societies were as follows 4 :
Million roubles

Consumers' societies
Co-operative unions
Total

142.7
107
249.7

On 1 October the total debts amounted to 342 million roubles,
of which 100 million roubles represented credits in cash and 242 million roubles goods delivered on credit by state industries.
While the co-operative organisations extended their operations
by means of the credits and advances obtained from the state and
nationalised industries, their own funds increased only very slightly.
The total working capital of the organisations, consisting of their
own funds and the credits obtained, amounted to 480 million roubles
on 1 January 1924. The funds actually owned by them were only
140 million roubles on 1 January and 170 million roubles on 1 July
— an increase of only 30 million. The relative importance of share
capital in the co-operative organisation was insignificant, according
1

Economicheskaia Zhizn, 10 Oct. 1924.
Ibid., 23 Oct. 1924.
* Torgovo-Promyshlcnnaia Gazeta, 2 Dec. 1924.
4
Co-operativnoie Dielo, 21 Nov. 1924.
3

— 323 —
to Mr. K h i n c h u k \ T h e new methods of working led to a considerable increase in the stocks of goods, which increased more rapidly
t h a n t h e turnover and out of all proportion to it.
According to t h e organ of the state industries 2 :
Now that the co-operatives are able to obtain goods from the nationalised industries on comparatively favourable terms, they have filled
up their warehouses with all kinds of commodities in an absolutely
unreasonable way, chiefly with the object of increasing the number of
their customers and ousting private trade, and they have started selling
costly articles of limited consumption.
T h i s was also the opinion of Mr. K h i n c h u k , President of the
Centrosoyus.
The increase in the number of active co-operators was much slower
than that in turnover, and the increase in capital, again, very much
slower than that in debts. The inevitable effect of carrying out the
orders given to the co-operative organisations to capture the market,
combine with the peasant, drive out the private trader, etc., was a
fictitious expansion of the co-operative movement, an artificial increase
in transactions and the number of shops 3.
A t a sitting of the All-Russian Central Executive Committee,
Mr. Iyezhava, Commissary of H o m e T r a d e , speaking of t h e second
half of 1924, said that the scope of co-operative operations was being
extended without reference to the real functions of co-operation in
the market or the solvency of the organisations. T h e funds of t h e
consumers' societies in towns were insignificant, and they worked
mainly with money borrowed from the banks and state industry.
Societies could be found whose own funds did not even a m o u n t to
four per cent, of their turnover.
T h e choice of goods stocked was as unreasonable as before. A s
the Economicheskaia
Zhizn wrote :
It is really time to make it clear that it is quite useless for a rural
co-operative society to imitate a " Mur and Merilise " 4 and fill its
shelves with expensive haberdashery, perfumery, costly china, pastry,
footwear of the kind only bought by town dwellers, etc., that is to say,
articles which are naturally difficult to sell. The co-operatives fill their
shops with goods which it is difficult to dispose of and thereby slow
down the turnover of their capital, whereas the private traders flourish
because, instead of keeping in stock goods for which there is little
demand, thinking to turn their shops into universal stores, they prefer
to sell the things which the peasants really need 5.
1

Ibid., 2 Dec. 1924.
Torgovo-Promyshlennaia
Gazeta, 2 Dec. 1924.
8
L. KHINCHUK : " Stand-to and Inspection on the Co-operative
Front "; in Co-operativnoie Dielo, 2 Dec. 1924.
* A large Moscow store which was closed down at the time of the
Bolshevist revolution.
5
Economicheskaia Zhizn, 19 Nov. 1924.
3
3

— 324 —

The above will have shown that in November 1924, several
months after the new commercial and co-operative policy was inaugurated, the position of the co-operative organisation and its
methods were still the same as in 1922 and 1923. The scope of the
organisation having been extended at the cost of increased indebtedness, without placing its activities on a sounder basis, its finances soon
reached an impasse. Many co-operatives were obliged to suspend
payment ; the number of protested bills increased. The credits on
which all co-operative activity during the whole of the last half-year
was based were coming to an end, creditors were suing for repayment
of their loans, and the very leaders of the movement admitted that
it was on the brink of the abyss and faced with catastrophe 1.
Not one of the problems facing consumers' societies at the beginning of 1924, the solution of which was thought essential if the efficiency of the movement and of the state industries was to be increased,
had been settled by the end of the year. On the contrary, the financial position of the co-operatives was worse, their commercial methods
were less satisfactory than before, " trade for its own sake " was more
than ever the rule. Until then, speculation had been the peculiar
disease of the central organisations and the unions, now it had invaded
even the primary co-operatives. The co-operative movement was
directing all its attention to capturing the market ; the interests of
members were now only a secondary consideration.
The " cooperation " of members was no longer considered the end, reason, and
condition of existence of the co-operatives. The unions had given
up their principal task of grouping, directing, and financially supporting the consumers' societies, which were left to the mercy of
state industry and private capital. It was generally agreed that the
new commercial policy in force as from 1924 had complicated the
difficulties of the co-operative movement.
Position of State

Industry

One of the objects of the new commercial policy inaugurated
by the Thirteenth Congress of the Communist Party was to facilitate
the sale of the products of state industries and thereby to improve
their situation. By bringing the factory and the consumer together,
the Communist Party sought to bring down overhead charges and
1
P. KOMISSAROV : " Who is to Blame ", in Co-operativnoie Dielo,
25 Nov. 1924.

— 3*5 —
thus to reduce prices and increase commercial activity with a view
to enlarging the working capital of industry. In actual fact the new
policy led to precisely opposite results.
Reference has already been made to the rise in general expenses
and the growing discrepancy between wholesale and retail prices
which followed the introduction of new methods in an ill-prepared
market. Such conditions obviously could not have a favourable
influence on the sale of the products of nationalised industry, for once
such products had been handed over to the co-operative organisations
and stored, their sale met with the obstacles already explained.
Thus, while official statistics recorded a monthly increase in industrial production and in the sales of the state industries, while there
was in fact a large demand for goods throughout the country, at the
same time the population were still without the chief manufactured
goods, since a large proportion of the articles sold by the industrial
trusts and syndicates were held up in the warehouses of the state
trading undertakings and co-operative societies and did riot reach
the consumer.
Actually, the disposal of manufactured goods was no more rapid.
The state industries handed over to the co-operatives large quantities
of goods on credit, thus reducing their own working capital. The
co-operatives, being unable to dispose of these goods as rapidly as
had been expected, could not pay the industrial undertakings, so
that the latter were in an even more difficult financial situation than
before.
Taken as a whole, the effort made to increase the sales of state
industry meant that its working capital was immobilised even more
than before, thus hampering future operations. The shops of the
state industries and co-operative societies never had much capital.
Since the part played by private capital in trade was restricted, the
need, for working capital has become more urgent than ever. According to certain statistics, the amount of private capital which was,
withdrawn from wholesale trade and should have been replaced by
state and co-operative capital was 400 million roubles.
As Mr. Rykov said in November 1924 to the sixth Congress of
Trade Unions :
The working capital of industry is still insignificant. If the undertakings are required to invest such capital in the co-operative organisations, there will be a general fall in output and delays in the payment
oí wages. . . .
To require industry to open long-term credits in
goods to the co-operatives — credits which are often not repaid regularly
2 4

— 326 —
or in full — is tantamount to depriving industry of essential working
capital and hampering its development. Since industry has at best
inadequate capital, any investment of it outside would rob it of the
power of development *.
Position

of Private

Capital in

Trade

T h e new commercial policy decreed by the thirteenth Communist Congress was directed mainly against private capital for the
purpose of driving it out of trade in general and wholesale trade in
particular. W h e t h e r this object was achieved may be judged in
p a r t from the following information on the changes in the distribution
of trading undertakings, t a k e n from t h e co-operative press 2 .
CLASSIFICATION OE COMMERCIAL UNDERTAKINGS,

ist half 1924-1925

and half 1923-1924
Commercial

1923 TO 1925

undertakings
Number

State
Co-operative
Private

II,7l6
44,284
249,290

Total

305.290

Percentage

3-8
14-5
81.7

100

Number

12,795
44,517
190,359

247,701

Percentage

5-2
18.O
76.8

100

T h e figures for turnover are as follows :

Year

State

I922-I923
I923-I924

36.3
37.5

Commercial
Undertaking
Co-operative

12.7
17.7

Private

51.0
44.8

T h e turnover of private traders in provincial towns and villages
has undergone the following changes :
1

Torgovo-Promyshlennaia
Gazeta, 16 Nov. 1924.
The figures are obtained from statistics of trading licences to open
a shop. Obviously these statistics are only a very approximate indication of the real situation, for since May 1924, i.e. since the new commercial policy was adopted, many private traders have refrained from taking
out a licence and have continued their business in other forms. It is
estimated that 250,000 privately owned shops were liquitated in 1924 as
a result of the new policy towards private capital. Cf. Soyus
Potrebiteley,
Nos. 6 and 7-8, 1925.
1

— 327 —

TURNOVER OF PRIVATE TRADE, I923 TO I925

Year

Million
roubles

Index

Year

number

I923-I924

ist quarter
2nd
3rd

Million
roubles

Index
number

82.5

107

93-6
99-3

122
129

I923-I924

77
100

4th quarter

100
130
110

1924-1925

ist
2nd

quarter

The general view was that private capital had held its own in
trade. Although in many cases an attempt might be made to conceal it in some, form or other, there could be no question that it
continued to play an important part in home trade. According to
the Torgovo-Proniyshlennaia Gazeta, the statistics of private trade
would even indicate an increase in the importance of private capital,
and a much more rapid one than the growth of co-operative trading.
Thus in 1924 the Moscow consumers' co-operatives made I I . I per
cent, of their purchases from private traders. For foodstuffs the
proportion was 42.3 per cent. I n August 1924 the sales of private
traders to co-operatives amounted in value to 371,000 roubles ; in
September the figure rose to 907,000 roubles. The journal in question continues : " In the too sudden displacement of the centre of
gravity to the co-operative organisation a support essential for equilibrium has been forgotten, and naturally a substitute is sought in
the private trader, who knows better than anyone how to adapt
himself to new conditions. " 1
The co-operatives and the trading organisations of the state
re-sold their goods to private traders, both wholesale and retail, often
giving them all the facilities of payment and discounts which they
themselves were granted by the trusts and syndicates precisely to
enable them to continue to fight against private capital 2 . The state
industries were driven to make use of private traders, since the co-

1
A. SULAIEV : " Private Capital in Co-operative Trade ", in TorgovoProniyshlennaia Gazeta, 21 Nov. 1924.
2
Economicheskaia Zhizn, 26 Nov. 1924.

32S

operatives were unable to take their place as agents for disposing of
the products of nationalised industry. Moreover, the state obtained
more favourable terms from the private trader. The representatives
of the state trusts maintained that :
The greatest caution must be exercised in trading with the primary
co-operative organisations. The risks are very great because the other
parties to the transaction are an unknown quantity. Their solvency
and commercial ability are unknown, and there are only their own
statements to judge by, for the information supplied by the Credit Office
is often so vague that it cannot even be called a proper reply '.
Frequent statements from the provinces appeared in the daily
press showing that the chief customers of state industries were private
traders.
The wants of the private trader are carefully attended to by the
state so that he has time to despatch his goods, sell them and return for
fresh purchases, while the unfortunate co-operatives have to wait weeks
for their turn -.
The Petrograd Oil Trust allowed private traders a 6 per cent.
discount on the prices charged to the co-operatives. The Sugar
Trust sold its groceries at 9.95 roubles the pood to private traders and
10.05 roubles to co-operatives. Similar methods were adopted by the
Tobacco and Match Trust and others. The private trader also obtained credits on better terms and was given greater facilities for
payment, etc. 3
The representatives of the state industries explained such action
by the fact that the private trader was more solvent than the cooperatives and that protested or lapsed bills of exchange were much
less frequent in private than in co-operative trade. Moreover, the
private trader paid cash for most of his purchases, whereas the cooperative paid only 30 to 40 per cent, in cash, and sometimes nothing
at all. The Sugar Trust, for instance, had to deliver 80 per cent, of
its orders from co-operatives on credit, the Leather Syndicate So to
90 per cent., the Textile Syndicate .50 to 60 per cent., " while transactions with private traders were nearly always settled in cash or at
most involved very little credit ".4

1
2
3
4

Torgovo-Promyshlenvaia Gazeta, 2 Dec. T924.
Ibid., 10 Dec. 1924.
Co-op erativnoie Dielo, Nos. io, 11, and 29, 1924.
Economicheskaia Zhizn, 26 Nov. 1924.

— 329 —
Mr. Rykov, in the report already quoted, stated that he knew
co-operators who asked for and obtained credits while giving absolutely no guarantee of solvency . . . other than Lenin's brochure
on co-operation ; but this brochure could not be said to be an article
of commerce. The co-operatives demanded that industry should
consider them its commercial agents, and should deliver all goods on
credit as and when required. This could not be allowed. " l
Thus, since the new commercial policy was introduced, the state
industries, far from doing without the private trader, continued to
make use of his services and even more than formerly, while the
co-operatives, in spite of their protests against such proceedings,
acted in precisely the same way. By force of circumstances the consumers' societies and their unions had increased their transactions
with private traders. In other words, their actions were precisely
the opposite of what was intended by the new co-operative policy.
Many consumers' societies, on being given left to themselves,
bought large quantities of goods from state industries at the special
prices fixed exclusively for the state trading and the co-operative
organisation, and re-sold them to private traders. This practice
spread so much that it led to the issue of a circular by the Centrosoyus 2.
According to the managers of the Syndicate of Textile Trusts,
which of all state institutions transacts most regular business with
the co-operatives, the latter, with a view to constituting working
capital, " frequently act as middlemen between state industries and
private traders, charging a commission of 20 to 30 per cent. Special
co-operatives have been created to supply private traders with manufactured goods. " 3
The official organ of the Supreme Economic Council considered
that direct relations between co-operatives and the population were
far from established. In their trading the co-operatives were unable
to do without the private trader, whether in obtaining their supplies
or in sales. The consequence was a more or less marked revival of
private wholesale trade \

Torgovo-Promyshlennaia Gazeta, 16 Nov. 1924.
Economicheskaia Zhizn, 19 July and 10 Oct. 1924.
Torgovo-Promyshlennaia Gazeta, 2 Dec. 1924.
* Ibid., 21 Nov. 1924.
3
2
3

— 330 —
Revived Importance of Private Capital
The new commercial policy has, therefore, meant an aggravation
of the already very critical situation in the state trading and industrial
organisations and the co-operative movement. In state industry, the
crisis chiefly took the form of an acute shortage of capital which
hampered the growth of production, put a stop to necessary repairs
and improvements, and made it impossible to reduce general expenses,
pay wages regularly, and dispose of the goods manufactured. In
the state trading undertakings, the difficulties met with were the
slowing down of short-term transactions, the shortage of working
capital, and the accumulation of large stocks of goods in the cooperatives. In the latter, the crisis gave increased vigour to the
spirit of speculation, the passion for " trade for its own sake ", the
hunt for profits. Co-operative organisations in the true sense of the
term were still lacking. On the other hand the debts of the cooperatives increased, and their available working capital fell more
and more below requirements.
Under such unfavourable conditions the Soviet press, and in
particular the co-operative press, demanded a further change in cooperative policy. The reform advocated may be summed up as
follows : the co-operative organisation should be financed by the
people and should therefore return to co-operative methods '.
Mr. Rykov, arguing that the co-operatives were too weak for
help to be expected from them in developing commercial and industrial activity, maintained that
They should pay more attention to their own business and not always
appeal to the state industries for credits. They should themselves procure the capital they need from the public, instead of counting only
on public funds. Under present conditions it is impossible to dispense
entirely with private capital in trade. It must be used as long as this
is of advantage to industry 2.
Commenting on this statement, the official organ of the Supreme
Economic Council wrote :
In our desire to establish sound and direct relations with the worker
and peasant consumer, and to drive out private capital from commerce
as soon as possible, we have placed a burden on the co-operative organisation under which it is giving way, and which, to speak quite impartially, it is not in a position to support 3.
1
2
s

Economicheskaia Zhizn, 15 Nov. 1924.
Torgovo-Promyshle/nnaia Cazeta, T6 Nov. 1924.
Ibid.,

21 N o v , 1924.

— 33 1 —
Co-operators themselves now admit that the "co-operative organisation has been compelled to work in the direction assigned to it
and not in accordance with its own powers ". They allege that the
state organs " have used administrative measures to compel the cooperatives to direct their efforts, not to meeting their members' needs,
but solely to capturing the market " \ Yet they emphatically assert
that the co-operatives can " cure their own complaints ". If they
have hitherto failed to carry out their duties, the fault lies with the
state industries who have not adopted a sufficiently favourable attitude towards them.
Although co-operators themselves do not advocate a radical
change in commercial policy, the opinions which find expression in
the press and at various congresses and conferences are quite different. It is generally held that the new commercial policy was a
mistake, that it was introduced prematurely, has had a bad effect
on the nation's industry, and should be revised. Since both the
state trading undertakings and the co-operatives have proved unequal
to their task, it is felt that the chief change needed is the restoration
to private capital of the place it formerly held in trade.
As the organ of the Supreme Economic Council wrote :
The changes in commercial policy have been too sudden, and trade
has been driven into the narrow and blocked-up channels of the cooperative organisation. "Without being precipitate, we must yet aim at
a wider and sounder system of trading, allowing a place to the other
intermediary agents in the commercial sphere, and making use of them.
The problem should be attacked more rationally, practically and thoughtfully '.
Among the leaders of Soviet Russia it has been recognised that
the attempt to do without the capital of private organisations in home
trade has met with failure, to be explained by the absence of other
capital and other trading organisations capable of doing the same
work.
When six months ago the order was given to turn out the private
trader, we did not understand what the practical realisation of this programme would cost. We had not estimated our available capital. . .
This is being done only now, after much delay. We must have an exact
account, of the private capital which has already evaded state regulatiou
(and this has not reduced its power to hurt us), and make the best
possible use of it, avoiding all over-estimation of the power of state
capital. Any kind of administrative exaggeration (in the matter of
1

P. KOMISSAROV : " Who is to Blame? " in Co-operativnoie Dielo,
25 Nov. 1924.
a
Torgovo-Promyshlennaia Gazeta, 21 Nov. 1924.
3

— 332 —

regulating private capital) should be avoided. Industry should be in a
position to make greater use of private
capital, which can dispose' of its
goods more rapidly than we can J.
Mr. Rykov considered that the attack on the private trader had
often been conducted unsystematically and by purely administrative
means. In his view, competition with private traders having proved
a failure, it would be clumsy not to make use of the resources they
offered.
At a conference of the local institutions of the Supreme Economic Council held in November 1924, a resolution was adopted to the
effect that industry should be able to make much more use of private
capital than heretofore. Several speakers explained that it was not
only necessary to restore to the private capitalist his position in home
trade, but also to take steps to remove the unfavourable conditions
from which he suffered, especially those arising out of the financial
and fiscal policy pursued so far. Other speakers showed that it
would be better to deal with private traders who complied with the
law than to allow a more or less illegal capitalist system to spring
up.
Finally, certain members of the conference demanded that
the whole policy of figthing private capital should be recast, with
special reference to foreign trade.
The whole question of commercial and co-operative policy was
again brought up for discussion at the plenary session of the Central
Committee of the Communist Party in January 1925. The reports
submitted, the subsequent discussion, and the controversy in the
Soviet press all covered the same question, whether the decisions of
the thirteenth Communist Congress were to be profoundly modified.
The general view, to judge from the volume of literature recently
published on the subject of co-operation, was that, in spite of the
considerable successes of the co-operatives in 1924, they were not in
a position altogether to take the place of private traders, and that
the existence of the latter would have to be tolerated if the loss of
markets which had proved so disturbing at the beginning of 1925 was
to be avoided and not aggravated.
Although the majority of the Central Committee of the Communist Party finally decided in favour, not of modifying, but of interpreting more reasonably the decisions of the thirteenth Communist
Congress, and in particular expressed their disapproval of the abuse
1

Economicheskaia Zhizn, 22 Nov. 1924.

I T I

of administrative measures, the policy followed since the beginning
of 1925 has differed from that of the autumn of 1924 in several
respects.
It is generally admitted that the hope that, once the co-operatives
were freed from certain obstacles, they would be in a position to
undertake all retail trade was much exaggerated. It is agreed that.
the organisations are accumulating working capital at too slow a rate,
and that in general it is useless to expect to collect sufficient funds
by contributions and members' shares, since the resources of the
workers and peasants are too limited..
During the first few months of 1925 the whole position of state
and co-operative trading organisations, resulting from the new commercial policy followed since May 1924, was under discussion. At
the end of March and the beginning of April several conferences were
held at which the foundations for further change were laid.
At a conference held in Moscow on 30 March 1925, private traders were admitted for the first time. It was decided to allow them
more favourable terms than in the past in order to facilitate their
taking part in home trade. Mr. Smilga, in a report to the Conference, stated that the commercial policy on which the thirteenth
Congress had decided had led to a considerable setback in private
trade, which had had an unfavourable effect on trading in general,
as well as on the state industries. Such a situation could not be
accepted, and commercial policy would again have to be changed.
This change, it was held, should take the form of extending the rights
and privileges of private traders. Mr. Smilga also emphasised the
importance of placing private traders on the same footing as the
co-operatives and state trading organisations in matters of bank
credit. He further held that the taxes at present imposed on private
traders should be reduced. They had already led to the closing of
250,000 private shops, thus heavily reducing the number of taxpayers.
Finally, the private trader should be given security for his trade, his
property, and his person \
This question of improving home trade was also discussed by the
Council for Labour and Defence (representatives of local organisations
being present) and by a congress of state trading organisations in
April 1925.

Ibid., 1 April 1925
3

— 334

Mr. Dzerzhinsky, Chairman of the Supreme Economic Council,
submitted- reports to the meetings of these two bodies drawing
attention to the impossibility of excluding private traders from the
retail market. He maintained that the co-operatives " were not at
present in a position to compete with the small retail trader, nor was
it in any way part of their functions to become universal organisations and oust all their competitors ". They therefore had " to
arrange that some commercial transactions should be carried out
through the medium of private traders ".
At both meetings the work of the co-operatives was severely
criticised. It was once again pointed out that they should constitute
their working capital solely out of members' shares and the deposits
and loans made by members, and that they should keep their
trading within the limits defined by the resources thus acquired
and the profits they made.
Nevertheless, the Council for Labour
and Defence decided to help the co-operatives to meet their present
extreme financial difficulties by including in the national budget
for the second half of 1924-1925 a special subsidy of 4 million roubles
to increase the working capital of consumers' co-operatives. The
Council also decided to grant private traders the rights and privileges
referred to in Mr. Smilga's report \
Thus, by the beginning of 1925, barely a year after the new
commercial policy was introduced, it, and more particularly the
new policy applied to the co-operative movement, were subjected
to far-reaching changes, necessitated by economic developments.

Ibid., 2, 3 and 5 April 1925.

CONCLUSION
Taken as a whole, the history of consumers' co-operation in
Russia, since the Bolshevist revolution, has been an unbroken succession of far-reaching changes affecting alike the organisation of
the movement, its working methods, and its national economic functions. To begin with, the period of complete Communism overthrew the very foundations of the co-operative organisation. At
that time there were two sides to the policy of the Soviet Government.
It aimed first at organising economic conditions on a collectivist
basis, excluding all private initiative, and therefore the very possibility of a widespread co-operative movement among the population.
Secondly, having abolished private trade, and possessing only weak
and badly-organised administrative machinery, it sought in the cooperatives a means of carrying out the scheme of state provisioning.
This policy threw the movement into disorder and confusion.
The number of organisations increased and the membership rose
until in theory it included the whole population. But at the same
time the co-operatives changed in character ; instead of being created
by the initiative of the people, they became " consumers' communities ", set up by the state, which every member of the population was
bound to join. These bodies, instead of trying to bring down the
prices of articles of current consumption by co-operation among the
mass of consumers, were expected to subserve the financial and economic policy of the Communist State, which provided their funds.
Members' shares were abolished, and state funds took the place of
share capital. The abolition of private trade meant the disappearance of rebates and dividends. In order that the co-operatives might
carry out the part assigned to them by Communist policy, the different'forms of societies were brought together into a single administrative organisation. As, at the same time, the state reserved to
itself all credit operations and reduced the activities of private industry to the minimum, the credit co-operatives were in actual fact
abolished, and producers' co-operatives disappeared almost entirely.
3

— 33 6 —
The work of the co-operatives also underwent a radical change.
Since freedom of exchange was abolished, the societies could no
longer engage in commercial transactions. They confined themselves
to provisioning the public and distributing articles of necessity in
accordance with the instructions of the authorities.
This excessive centralisation and bureaucratisation reacted on
the movement, as in all other economic fields : industrial and agricultural production fell to a very low level ; the nation as a whole
consumed more than it produced ; the system of state provisioning
which took the place of free exchange did not work well ; transport was disorganised ; all forecasts were made impossible by the
depreciation of the currency and the rise in prices, which nullified
the exchange schedules drawn up by the authorities ; rural production reverted more and more to the domestic and primitive type ;
exchanges between the towns and the country could only be effected
under the threat of armed force ; the home market was disorganised.
Under such conditions the co-operative movement was unable to
carry out its duty of acting as a centre of supply and distribution.
Moreover, the new tasks assigned to the movement paid no
regard to the membership of the societies or the funds available.
The lack of goods and funds prevented most local organisations from
engaging in any kind of economic activity. Thus, in spite of a
considerable general growth in activity — by no means signifying
progress in the movement, since the organisations had become simply
cogs in the administrative machine without individual initiatives —
the co-operative movement could not be a complete substitute for
private trade. It was incapable either of supplying the population
with articles of prime necessity or of counteracting the spreading
depression which was imperilling the economic system.
In view of the heavy reduction in the quantity of goods available
and the impossibility of a reasonable distribution of the few stocks of
old goods still in hand, the Government- at last decided to restore
freedom of exchange and to allow the peasants to dispose of their
produce as they chose.

This right-about-turn, which took place in March 1921, marked
the inauguration of what has been called the New Economic Policy.
Its object was to introduce a system of " state capitalism ". At first
there was little change in the work of the co-operatives, but new

— 337 —
conditions were imposed on the movement to which it adapted itself
only after going through several crises.
Under the new system the co-operative organisation was to be
one of the three pillars of state capitalism, the other two being the
system of concessions and the leasing of small nationalised undertakings. The co-operatives and state commerce together were to be
the organs of exchange. Private trade was to be allowed only locally,
i.e. it was limited to villages and small towns and confined to small
retail trade.
At first, therefore, the new policy maintained the privileges of
the movement. The societies for their part considered that they
should be responsible for all home trade transactions authorised by
the new policy. As soon as exchanges in kind were introduced in
1921, they made every effort to obtain a monopoly. But here
they met with a succession of setbacks due to defective organisation and general economic conditions. To undertake all commercial transactions, the societies needed the most improved commercial
machinery. During the period of Communism, however, they had
lost all initiative, and having become mere cogs in the state machine
they were now accustomed simply to carry out orders. When suddenly thrust into the new conditions, under which transactions were
no longer effected by threat of armed force, but by virtue of agreements between the parties, they were unable to adapt themselves
with sufficient rapidity. They were still dependent on the state,
from which alone they could obtain the necessary goods, and in their
commercial transactions they continued simply to carry out the orders
given them.
In addition, the Communist period had left the movement totally
ruined and disorganised. The only body which survived was the
Centrosoyus ; but the position of this institution was quite different
from what it was before the revolution. It had been created as the
outcome of a long process of co-operative propaganda among the
people. It was on the popular initiative that a limited network of
consumers' societies had first been formed. This had been followed
by the grouping of such societies in unions responsible for coordinating the work of the primary organisations. I^ater it had become
clear that a supreme central body was possible and necessary to act
as a link between all the consumers' co-operative institutions, but for
this very reason it existed only to serve the movement as a whole.
In 1921, on the other hand, when the co-operatives were ambitiously
3
The Cooperation

2 5

0*2

338

proposing to undertake all commercial transactions, the central body
alone was still in a position to work, but could no longer find a basis
for its operations. The secondary and primary organisations had
virtually disappeared, for the unions had almost ceased to exist and
the consumers' societies, if not simply paper institutions, had suspended all their work, or carried on without members, resources, or
goods of their own. In the absence of the network for which it had
been created, the centre might be said to be working in the void.
The Decree of 7 April 1921 in no way modified the principles on
which the co-operative organisation was based during the period of
Communism. Every member of the population was therefore still
ipso facto a member of a consumers' society. At the same time, the
payment of members' shares remained optional, so that there was
no possibility of a real co-operative movement springing up in the
country. The co-operatives themselves were by no means anxious to
undertake the long and difficult task of reconstruction. They were
jealous of the part assigned to them under the new policy and eager
to play it, and to become as soon as possible the principal factor in
the restored system of exchanges.
This policy merely led to
continued failure, especially as general economic conditions raised
enormous obstacles.
When the new policy was first introduced and only exchanges in
kind had as yet been restored, the co-operatives suffered from the
shortage of goods which prevailed throughout the country. If, as
they desired, they were to undertake all exchanges in kind between
the towns and the country, they should have been able to draw on
immense quantities of goods to offer in exchange. At that date,
however, there was a great scarcity of industrial products in particular, which was felt all the more as foodstuffs, and particularly
agricultural produce, were extremely dear.
Freedom of exchange, which had first been limited to local
transactions, gradually spread to other branches of trade, and the
restoration of the market led to the re-introduction of money as the
principal means of exchange. At this stage the co-operatives felt the
need of capital in order to take part in such free transactions. But
the question was where the capital was to be found. If the people
were to supply it, members' shares must be reintroduced or, in other
words, the principle of compulsory membership must be given up
once again. It was impossible to raise capital by the sale of goods,
since the stocks of most of the primary societies were reduced to almost

— 339 —
nothing. The only alternative, therefore, was to obtain credits, but
at that time credit as such hardly existed; the State Bank was not reopened until November 1921, the Co-operative Bank was not founded
until February 1922. Credit could be obtained only in kind,
in the form of goods advanced to the co-operatives by the nationalised
industries, i.e. by their central authority, the Supreme Economie
Council.
These credits in kind granted to the Centrosoyus, however, produced only a very slight improvement in the financial situation.
Only a limited number of the state economic authorities had the goods
needed by the co-operatives, for the stocks of the nationalised industries had been exhausted during the period of Communism. Frequently these authorities did not wish to part with the goods to the
co-operatives, or else the goods they handed over were unsuitable
both in quality and in kind. The Soviet Government ordered that
undertakings formerly belonging to the co-operatives which had been
nationalised but remained closed were to be restored to them as
well as the stocks which had been confiscated ; but the societies
derived little advantage from this, for in order to set the undertakings going again, they needed capital, and as for the stocks of
goods, in the rare cases in which they had been left intact, the local
authorities passively and even actively resisted restitution.
At the same time the state ceased to finance the co-operatives,
so that their only way of obtaining working capital was to apply to
the banks, which were beginning to reopen. During the whole of
1922 and the first half of 1923 the societies continually demanded
fresh credits, which were granted by the banks either in cash or in
kind. Since their activity, and especially that of the Centrosoyus,
was based only on credit, they were compelled to extend their commercial transactions in order to increase as much as possible the rapidity of circulation of the capital advanced to them.
Neither the
Centrosoyus nor the provincial unions, however, could increase the
rapidity of their transactions if they confined their work to the members of the societies for this would have necessitated a welldeveloped network of primary organisations. The only possibility,
therefore, was to extend the circle of their customers and purveyors as
much as possible. In consequence during this period the co-operative organisations neglected nearly all their obligations towards their
members. " Trade for its own sake " was the motto subsequently
ascribed by the co-operative press to the movement at that time.
3

— 340 —

This tendency was accentuated by the unfavourable general
conditions under which the societies worked. The continual depreciation of the currency demanded a rapid conversion of money into
goods and vice versa. Very soon the rapidity of these operations
became the sole end in view, and no further interest was taken in the
kind of goods bought and sold. The co-operatives traded in any kind
of goods, regardless of the wishes and demands of the masses they
served, their only object being to increase their working capital.
Thus, like all other commercial activities at that date, those of the
consumers' societies became definitely speculative in character. This
was the period of " primitive accumulation of capital ", in which the
central organisation, the co-operative unions, and the consumers'
societies vied with each other.
But the co-operatives were not alone in the market. The same
need of accumulating reserves governed the actions of many state
undertakings whose supplies had been cut off when the New Economic Policy was inaugurated. These undertakings had to obtain
capital for their work, and the only means of doing so was to take
an active part in market operations. They, in turn, engaged in
trade, and for this purpose disposed of their only remaining reserves,
and even of a large proportion of their raw materials. This was
the period described later by the Soviet press as that of " demolition " (razbazarivanie).
To crown all, the Government itself, in
its anxiety to hasten the establishment of state capitalism, organised
and encouraged in every way its own commercial institutions, which
were connected with the nationalised industrial trusts, and for the
same motives as those inspiring the co-operatives actively developed
their transactions.
The trading fever became general, but the capacities of the home
market were still very limited, and the purchasing power of the large
masses of the population remained extremely low. Neither peasants
nor town dwellers were in a position to extricate themselves from the
ruin and distress in which they had been plunged by the Communist
policy. This circumstance added to the frenzy of the competition
between all the organisations engaging in home trade. The cooperatives did not escape. They suffered more, particularly from the
competition of the commercial institutions of the state industries,
for they met with increasing difficulty in obtaining the necessary
goods from such industries. These industries, in their chase after
buyers and sellers, turned for preference to the private trader, who

— 341 —
was not so financially weak as the co-operatives, was in closer touch
with the public, and was better able to market the goods.
The co-operatives themselves acted in the same way. They,
too, were solely concerned to find the buyer and seller with whom
they could drive the most profitable bargain, and therefore gave up
limiting their work to the narrow circle of their members. The state
bodies they regarded merely as competitors, and by no means scorned
to deal with private middlemen.
In this atmosphere of competition, speculation, and profithunting, the co-operative movement could by no means be described
as one founded on the initiative of the masses of the population. It was
only one form of commercial enterprise. Since it was unable to
reorganise and consolidate its foundations, it acted on the lines and
adopted the methods which permeated the whole economic activity
of Soviet Russia with speculation from the inauguration of the New
Economic Policy until the autumn of 1923. During this period the
principles of co-operative trade, the relations between the societies
of different grades, in particular between the central and local
organisations, were all violated and overturned \

Towards the end of 1923 there was an acute commercial crisis,
due to the disproportion between the frenzied trading of all organisations and institutions and' the extremely low purchasing power of
the consumer. The co-operative movement was severely hit, but at
the same time light was thrown on the mistakes which had been made.
The desire to increase co-operative trading had entirely upset the
balance between the work of the Centrosoyus and the more important unions and that of the primary societies, owing to the total
neglect of the local societies by the central organisations. According to the report of the Centrosoyus for 1923 J ':
The enormous growth in turnover had a bad effect on the business
prospects and the financial situation of the Centrosoyus. This institution, carried away by the grandiose task imposed on it for revolutionary
ends, made the mistake of not taking the actual position of the market
into account. It underestimated the growing difficulty in disposing of
goods, and failed to understand how much it had lost touch with the
local co-operatives.

' Cf. MAKEROVA : op. cit., p. 25.
2

Otchot Centrosoyusa za 1Ç23 god, p. 4.

2 5 *

— 342 —

The crisis reached in the autumn of 1923 showed that if the
Centrosoyus was to succeed in its mission it would have to be able
to rely on the co-operative unions, which in turn must be based on
the consumers' societies. These, however, could not be set up again
unless the principles introduced in the movement during the period
of Communism were given up. By the end of 1923 it became clear
that the compulsory and purely formal participation of the whole
population in the co-operative movement was one of the main reasons
for the weakness of the whole system. Taught by recent experience,
co-operators maintained that the organisation would have to keep
within its means, and that the amount of such means must depend
on the number of societies really in being and their financial resources.
No society could be said really to exist unless it consisted of a certain
number of real and not imaginary members actually taking part in
the business of the society. This was the lesson of the crisis. The
only remedy was to restore voluntary membership and the compulsory
payment of members' shares.
This reform, sanctioned in the Decree of 20 May 1924, had
already begun to be put into operation in January of that year. At the
same time various other measures had been introduced which :
(1) again divided up the co-operative movement into consumers',
agricultural, craft, and credit societies ; (2) abolished the system
of state maintenance of the co-operatives ; and (3) abolished the
supervision of the constitution and work of the societies. The Decree
thus embodied a return to the principles on which the Russian cooperative movement had grown up before the Bolshevist revolution.
It wiped out the last traces of Communist policy.
Yet this restoration of the old principles was not enough ; the
crisis reached in 1923 had brought out other defects in the co-operative organisation. The period of Communism had bequeathed to the
movement an overgrown administrative machine, which swallowed
up most of its funds and made the whole system bureaucratic. The
weak commercial organisation of the societies and their inability to
adapt themselves to conditions on the open market led to an increase
in overhead charges and an unsuitable selection of goods. All this
drove up prices, and frequently placed the goods offered for sale by
the co-operatives beyond the reach of most of the population, especially the peasants. When these defects were realised, an attempt
was made to remedy them by bringing down overhead charges,
cutting down administrative staff, reducing sale prices, reorganising

— 343 —
the shops on a more systematic basis, and introducing a certain
measure of discipline instead of the anarchy which had reigned
supreme throughout the movement.
Finally, general economic conditions, which had formerly been
so unfavourable, appeared at the beginning of 1924 to offer better
prospects for the reconstruction of the co-operative organisation.
This was the date of the currency reform, which undoubtedly had a
useful effect on economic conditions as a whole, and therefore on the
work of the co-operatives.
These various salutary reforms at first created a spirit of optimism
among the co-operatives. They hoped that the restoration of voluntary membership and members' shares would rapidly set up the
finances of the societies.
But, in point of fact, the consumers'
societies had neither a chance nor the time for putting the reforms
into operation. All they could hope was that reorganisation would
enable them to extend their activities. Already at the beginning
of 1924 the Communist Party proceeded to revise the economic policy
of the Government, a revision which was described by some as a
Communist reaction against the New Economic Policy. The cause
of the reaction was the fear created by the growing importance of
private capital in national trade, a growth which had become obvious
by the end of 1923.

One of the first effects of restoring freedom of local exchanges in
1921 was to bring into the open many travelling traders (mieshochnik)
and agents, who had carried on their business in secret during the
period of communism. The failure of the policy of exchanges in
kind, due to the fact that the co-operatives were unable to cover the
whole market, had allowed private traders to gain a footing, first in
the country, and then gradually in the towns. This development
was further promoted by the restoration of cash transactions in 1922.
By that time private traders too had been seized by the fever for
" the primitive accumulation of capital ", but they had succeeded
better and more quickly than the co-operatives in adapting themselves
to the conditions of the market and its fluctuations. The composition
of this merchant class, it is true, was not the same as before the
revolution, but there was no change in its trading methods or relations
with the consumer. Very soon private trade was found necessary not
only by consumers, who urgently needed articles of prime necessity,
3

344-

but also by the nationalised industries, which wanted better agents
for the disposal of their goods. The private trader could turn over
his capital more rapidly and act in closer contact with the state
industries and consumers, so that he often proved a useful customer to
the banks, which began to grant him credit. Moreover, his direct
relations with the peasants meant that he was often used as an agent
for selling rural produce. In certain districts the private trader
began to play an' important part in handicraft production by supplying the workers in the country with the raw materials needed and
undertaking to sell their products in the towns. The influence thus
gained by private traders in various branches of economic activity,
the growth of their power, the fact that capital in cash was beginning to be held by certain small groups and private persons : all
these factors appeared to threaten not only the system of state capitalism, but even the Soviet regime in general. This was the danger
stressed by the Communist press.
After tlie thirteenth Communist Congress in May 1924 the campaign against private capital became part of the Soviet economic
programme. Towards the middle of 1923 two articles by Lenin
had been published, describing the function of the co-operative movement in preparing for socialism. H e specially stressed the need of
making the development of co-operation the starting point for Soviet
economic policy and of placing the movement in the possible financial
and administrative position.
Under the influence of these articles it was decided in 1924 to
make the co-operative organisation the chief factor in fighting the
private trader. In order that the ousting of the private trader might
not injure the state industries by reducing the market for goods, the
co-operatives were to undertake all transactions between these industries and the consumer. This meant that the spirit of competition
and hostility between the co-operatives and the state industries would
have to be abolished, and that they would have to establish what the
Communists called " a united front" against the'private trader.
The united front was to be shown by the grant of larger credits to
the co-operatives, both in cash and in goods. They were to receive
all the articles needed by the consumers, and were also to be granted
important fiscal and administrative facilities. Private traders, on the
contrary, were to be refused all or nearly all credits, and their activities were to be hampered in every possible way.
The intention of the Communist leaders to make the co-operatives
their principal weapon in the war on private trade led them to con-

— 345 —

sider how to make this weapon as effective as possible.
The
methods and organisation of the societies were carefully examined and
keenly criticised ; many improvements were advocated. Above all
it was held essential to have less centralisation in the trade in industrial products, and to establish direct relations between the state industries and the primary consumers' societies. It was further recommended that the prices charged by the co-operatives should be
brought down, the administrative staffs reduced, and, finally, that an
active campaign should be conducted to promote widespread participation in the movement by the masses. Although the establishment of direct relations between the state institutions and the primary
co-operatives was contrary to the fundamental principles of cooperative organisation and involved certain dangers, especially for the
consumers' societies, the movement accepted the condition in return
for *he special position it was offered in every field of economic
activity.
Thus, just when the consumers' societies were barely beginning
to get over the violent crisis of the autumn of 1923 and to reorganise
their work on new principles by reducing it to the limits of their
capacity, they found themselves driven to resume the heavy task
which had been theirs from 1921 to 1923, and which had been admitted
as one of the main reasons for their weakness.
Once more they
were to aim at capturing the whole market and undertaking all trading transactions, with the financial and administrative support of the
Government.

Consideration of the results of this policy gives an opportunity
for making a general survey of the situation of the consumers'
societies at the beginning of 1925.
The net transactions of the societies in 1923-1924 as compared
with the previous year are shown in the following table 1 :

Potrebitelskaia co-opcratsia S.S.S.R. v. 1Q23-1Q24 godìi, p. 62, 1925. '
3

— 346 —
NET TRANSACTIONS OF ALL CO-OPERATIVE SOCIETIES, IÇ22 TO IO24

(In thousands of chervonetz

roubles)
1933-1924

Type of organisation

I0J2-I023

Amount

Retail Trade
Provincial unions
Urban and industrial
societies
Rural societies
Soldiers' and railwaymen's societies
Total
Wholesale Trade
General total

Per cent, of
' 1922-1923

48,175

71.524

148.4

202,28O
I35.389

578,389
358,002

285.9
264.4

48,276

102,104

211.5

434,120

1,110,019

255-7

85,450

273.779

320.3

519.570

I.383.798

266.3

The membership of the rural co-operatives rose in 1923-1924 from
3,019,869 to 3.523.151- The average monthly transactions of a rural
society rose from 1,330 roubles to 2,330 roubles, and the monthly
turnover per member from 8.0 roubles to 13.80 roubles. The membership of the urban co-operatives increased from 2,551,846 to
3,001,207, the average monthly transactions per society from 55,000
roubles to 136,000 roubles, and the monthly turnover per member
from 38.1 roubles to 70.7 roubles. During the year the number of
rural societies rose from 18,205 to 20,920, and the number of urban
societies fell from 1,709 to 1,560.
Although at first sight these figures suggest a very marked increase, the results for 1923-1924 can hardly be considered good. In
the general opinion of the Soviet press and even of some co-operators
the progress of the consumers' societies was more apparent than real.
The increase in commercial transactions had no sound foundation,
for it was quite inconsistent with the real capacities of the societies
and in no way the result of growth in the general movement. This
conclusion was drawn from the following facts, illustrating the position of the co-operatives at the end of 1924.

347 —

The rise in the turnover figures was due not to closer relations
with the members of the co-operatives, but chiefly to transactions
with persons or institutions outside the movement. The relative
importance of sales by primary societies to their members is shown
by the following figures * :
SALES TO MEMBERS PER CENT. OF TOTAL SALES, 1923-1924
Period

Rural societies Urban societies

Industrial

i s t quarter
2nd
3rd
»
4th

29.8
29.O
29.9

45-2
47-7
44.O

33-D

50.I

48.6
42-5
48.2
57-3

Average for the year

30.4

46.9

49.9

societies

The smallness of these percentages shows clearly that in 19231924, as before, the consumers' societies neglected the principal aim
they had adopted at the end of 1923 — that of attracting the large
masses of the people and getting members to pay up their shares.
Affiliation to a society was still purely a matter of form, and the
number of real members who had actually paid their shares bore no
relation to the nominal membership recorded in official statistics.
Under such conditions the work of the co-operatives could not fail to
be a matter of chance.
This work altogether upset the balance between the volume of
transactions and the amount of capital owned by the societies. The
membership of the rural societies rose during 1924 by 16 per cent.
only, while the turnover increased from 24 million roubles to 42 million, an increase of 76 per cent., and the balance sheet totals from
71 million to 137 million, an increase of 93 per cent. In the urban
societies the turnover increased 105 per cent, (from 91.7 million
roubles to 200 million roubles) and the balance sheet totals 116 per
cent, (from 86.8 million to 187.6 million), while the membership
rose by only 17 per cent. The share capital of the rural societies

Potrebitelskaia co-operatsia S.S.S.R. v 1Ç23-1Ç24 godu, p. 84.
3

348

represented only 6 per cent, of the total balance sheet, and that of
the urban societies only 4 per cent. * The official publication of the
Centrosoyus was, therefore, fully justified in making the following
statement in its summary of the results of the period under consideration.
" Although there has been an improvement in the payment of
members' shares, it must be recognised that the capital of the societies
does not yet constitute a sufficiently stable basis for extending the
commercial transactions of the co-operatives. " 2
The co-operatives' own resources being inadequate, they could
not increase their trading without the material, and especially the
administrative, help of the state. According to Mr. Fischhändler,
the growing business of the co-operatives was due solely to the policy
of " co-operative protectionism " adopted by the state "\ The official
organ of the Centrosoyus admitted that the experience of 1923-1924
had shown that the progress of the co-operative movement was based
on state resources rather than on those of co-operators 4.
The result of this policy of co-operative protectionism was that
the defects already described, against which action had been taken
as far back as 1923, instead of disappearing became even worse.
As the co-operative movement was required to seize the trade of the
country and to supplant the private trader, a large number of consumers' societies were again formed, but in the absence of real
members they lacked even the funds to pay their employees 5. The
number of primary consumers' societies rose from 16,795 on 1 April
to 20,733 on 1 October 1924 ".
The increase in business with persons and organisations outside
the movement compelled the societies to trade in all kinds of goods,
regardless of the needs of their members, especially in the villages.
The movement thus continued to suffer from the principal defect
which had hampered its activity in 1922-1923, i.e. the bad selection
1
2

Ibid. '
Mesto potrebitelskoi co-operatsii 11 système sovietskavo khoziaist-va
i eia ochererednie zadachi na 1Q24-1Ç25 khoziaistvenny god (The Functions of Consumers' Co-operation in the Soviet Economic »System and its
Tasks in 1924-1925), p. 57. Moscow, Centrosoyus, 1925.
3
Soyus Potrebiteley, No. n , 1924, p. 37.
4
Mesto potrebitelskoi co-operatsii (op. cit.), p. 40.
ä
Ibid., p. 51.
6
Bulleten C.S.O.U. (Central Statistical Department), No. q8.
1 May T925.

— 349 —
of goods. " Trade for its own sake " revived the old methods, which
were directly opposed to the principles of co-operation. The various
co-operative organisations again engaged in frenzied competition
among themselves ; speculation, lack of discipline, and disorganisation prevailed everywhere ; the demoralisation of the central authorities was shown in frequent thefts and innumerable cases of misappropriation and embezzlement.
The necessary measures were not taken to cut down the cost of
production and reduce overhead charges. According to the official
organ of the Centrosoyus, although the co-operatives were expected
to drive private capital out of wholesale trade, no attempt had been
made to increase their economic superiority over their competitors.
All that was done was to cease supplying them with the goods produced by the state industries. The Commissariat of Finance estimated
that in 1923-1924 the co-operatives received goods to the value of
1,008 million roubles and sold them for 1,500 million, making a gross
profit of about 500 million. But "of this enormous sum the cooperatives actually retained only a trifling proportion, owing to the
very high level of their overhead charges " 1 .
Moreover, the policy of reducing prices adopted by the Commissariat of Home Trade, with a view to abolishing private trade,
inflicted heavy losses on the co-operative movement. The resulting
deficit was estimated at 32 million roubles, only 6 million of which
were covered by the state.
In spite of their efforts and the privileges granted by the state,
the co-operatives were by no means able to capture the whole market.
The commercial operations of the consumers' co-operative movement in 1923-1924 amounted in value, as mentioned earlier, to
1,384 million chervonetz roubles and the retail trade of consumers'
societies to 1,038 millions, i.e. 30.7 and 23 per cent, respectively of
the value of total consumption. Total consumption in 1923-1924 was
valued at 4,500 million chervonetz roubles for the whole population,
2,947 million for the urban and 2,003 million for the rural population.
Only 27 per cent, of the goods consumed by the urban population was
supplied by co-operatives, while for the rural population the proportion
was only 17.7 per cent. Of the total industrial products consumed

1
Report of the Commissariat of Finance to the Council of Labour
and Finance ; Eccniomicheskaia Zhizn, 2 April 1925.

350 —
in the first half of 1923-1924 the co-operatives are estimated to have
supplied 20 per cent. '.
The following figures show the extent to which the co-operatives
îarketed the products of state industries during 1923-1924 and the
rst half of 1924-1925 2 .
1st h a l f
1923-1924

1924-1925

Commodity

Per cent.

Textiles
Metal goods
Leather
Petroleum •
Building materials
Sugar
Salt
Fats and oils
Chemicals

34-7
27.O
32-4
33-7
49.0
49.0
61.3
19-3
16.5

50-5
9.2
41-3
44-3
48.5
59-0

28.5

'20.0

General average
Thus

1924-1925

the

consumers '

co-operatives

71.0
18.0
20.0

sold

more than one-fifth of the whole produce of the state industries.
The extent to which they took part in exchange business is illustrated
by the figures of 16 per cent, in 1923-1924 and 20.4 per cent, in 19241925 for the Moscow Exchange and 30.1 per cent, and 36 per cent.
for the 70 provincial exchanges.
By the end of 1924 the new co-operative policy had produced a
fresh financial crisis, which affected the whole of industry. The excessive increase in the turnover of the co-operatives was incompatible
with their financial weakness. State assistance in the form of
bank credits was equivalent to a return to the system of state provisioning. The periods for which the credits were granted did not
correspond to the velocity of circulation of the goods. The
extension of the co-operative organisation swallowed up the greater
1

Cf. " The Balance Sheet of the Economic System of the U.S.S.R.
in 1923-1924 ", in Economiche s kaia Zhizn, 29 March 1925. Also "The
Consumers' Co-operative Movement and the Sale of Industrial Products
to the Population " ; documents submitted by the Centrosoyus to the
Commissariat for Home Trade for purposes of a report to the Council
of Labour and Defence, on 9 Sept. 1925 ; in Co-operativny Pout, 9 Sept.
1925.
For data as to the share of the co-operatives in the distribution of
industrial
products in 1921-1922 and 1922-1923, see Part III, Ch. IV.
2
Potrebitelskaia co-operatsia v 1Ç23-1Q24 godu, p. 102. Soyus Potrebiteley, Nos. 7-8, 1925.
» Ibid., p. 104. Soyus Potrebiteley, Nos. 7-8, 1925.

— 351

part of the available capital, and the resulting difficulties were more
serious than ever before. The critical situation was most clearly
illustrated by the many protested co-operative bills and failures to
pay '. Moreover, the return to the system of state provisioning
imposed a heavy burden on the state, and deprived' the nationalised
industries of a large proportion of the capital which might have been
placed at their disposal by the credit institutions.
Finally, by refusing to use private capital for developing trade,
and requiring the consumers' co-operatives to undertake this duty,
the state compelled the nationalised industries not only to do without
part of the available credits, but even to use their own very inadequate capital to finance the trading operations of the co-operatives.
According to Mr. Fischhändler's estimates, if the co-operatives were
to be able in 1924-1925 to take an important part in marketing the
products of the state industries, the state would have had to supply
them with fresh capital up to 200 million roubles, a sum of which
the industries would thus have been deprived.

The deplorable results of the 1924 experiment were studied by
the Communist and co-operative authorities. A number of special
enquiries were opened to examine the causes, and finally the fundamental conclusion was reached that the considerable growth in the
trade of the consumers' co-operatives during 1923-1924 had been
purely fictitious, being based neither on progress of the co-operative
movement in the country as a whole, nor on better organisation or
improved working methods. It was recognised " that very little
compensation for the economic sacrifices made to develop the cooperative system was to be found in the advantages to be derived
from concentrating the material and economic forces and reserves
of the people in the co-operative movement " 2 .
The view therefore gradually gained ground that the co-operatives should aim at intensive rather than extensive development.
" An increase in turnover is less important to the movement than to
strike deeper roots in the population. It must aim not at absorbing
the whole market, but at serving its own members properly. " 3

1
2

Ibid.

in Soyus Potrebiteley, No. 11, 1924, p. 37.
* Mesto potrebitelskoi co-operatsii, p. 44.
FISCHHÄNDLER,

— 352

The same official organ of the Centrosoyus admitted that in future,
if the masses were to be attracted into the movement, an effort must be
made not to increase the purely formal membership, but to strengthen
the relations with existing paying members, and make genuine
partners of the workers who had so far considered the co-operatives
simply from the point of view of buying goods '.
In examining the policy to be followed in 1924-1925, Mr. Fischhändler maintained that the co-operatives could not continue the
course followed in the previous year. He considered them unequal
to the task of marketing the growing volume of goods produced by
the state industries. " If the co-operatives continue to extend their
business they will be building on sand. The idea of ousting the
private trader altogether, which was in force last year, and of replacing him by the consumers' co-operatives, has little in common
with true socialism, and involves considerable risks, which are clearly
illustrated by the present state of the home market and of the cooperative movement itself."

In view of the very unsatisfactory position of the co-operative
movement and the whole economic system at the end of 1924, the
causes of which were subjected to careful examination in the press,
the Government decided at the beginning of 1925 to revise its commercial policy yet again. Once it was realised that the co-operatives
could not speedily replace private traders and that the absence of
private trade involved the state industries in serious difficulties, the
only possible solution was to allow the private trader freedom to
take part in the business of the country by abolishing all the administrative and economic restrictions introduced to fetter his activities.
This fresh change was of course followed by protests from the
co-operatives. While recognising the negative results of the policy
of " co-operative protectionism ", they nevertheless continued to
maintain that under the Soviet system, and especially since the introduction of the New Economic Policy, the co-operative movement
should play a foremost part in general economic activity.
Since the state itself cannot cover the whole market, nor will it allow
the private trader to become a commercial agent between town and
country, it must necessarily continue to develop and support the cooperatives, if it proposes to overcome the difficulties of distribution 2.
1
2

Ibid., p. 51.
Ibid., p. 6.

— 353 —
The measures by which the state is endeavouring systematically to
regulate economic conditions cannot be carried out unless they are based
on a well-developed and flexible co-operative organisation which on the
one hand represents the interests of organised consumers, and on the
other is closely bound by economic and political links to the whole of
the Soviet system, so that it may withstand the competition of private
trade which is opposed to the said system 1 .
The aims of the co-operative movement and the place it occupies
in the Soviet system must be upheld, but this is impossible unless the
privileges and credits hitherto granted out of state resources are continued without restriction. More than this, if in future the progress of
the consumers' co-operatives is to be based mainly on the funds obtained
from members, there is still no reason why the state should refuse increased credits if it can possibly grant them 2 .
T h e daily paper of the Centrosoyus maintained that the experiment of allowing private trade to develop h a d proved unfortunate,
and that in any case it was impossible to expect any substantial g r o w t h
in such trade in the immediate future. Therefore, it argued, a commercial policy based on private capital offered no specially good
prospects for business, so t h a t t h e main task of the Government was
to establish suitable relations between the co-operative movement
and the state industries s .
T h i s was the point of view of co-operators ; it will be seen that
there has been no change during the last two or three years. But this
view was not shared by the representatives of the state economic
institutions. According to the organ of the Supreme Economic
Council, the unhealthy and dizzy growth of the co-operative organisation had merely strengthened its opponents.
T h e r e were two
opinions among the latter ; some were prepared to engage in a n
open fight with the co-operatives, others preferred to fight the movement underground by destroying its unity. Both groups, however,
were agreed in maintaining t h a t any increase in t h e number of cooperatives must be based on the actual situation.
It will no doubt be difficult for the co-operatives to accumulate funds
of their own, but these difficulties cannot but increase if the societies
continue to extend without method, and to dispose of the goods they
hold, and finally if they persist in not consolidating their organisation
steadily and graduali}-. The desire to cover the whole area of the state
at a single blow, to conquer several important positions at once, is
largely responsible for the fact that hitherto the co-operatives have been
unable to establish themselves firmly even in the positions suited to
their true resources and prospects ".
1

Ibid., p . 7.
Ibid., pp. 8 and 9.
3
Co-operativny Pout, 21 May 1925.
* VLADIMIROV : " The Co-operatives yet Again "
myshlennaia Gazeta, 30 May 1925.
2

2 6

Torgovo-Pro-

— 354 —
I t was under these conditions that the Soviet authorities again
changed their commercial policy in May 1925. T h e fourteenth General
Congress of the Communist Party, and subsequently the Soviet
F e d e r a l Congress, adopted resolutions recommending t h a t economic
policy should be directed towards developing relations with private
traders and g r a n t i n g privileges to more well-to-do peasants. Accordi n g to t h e organ of the Council of L a b o u r a n d Defence these resolutions denote the tendency towards " official regulation of private
capitalism and private capital " . '
A compromise between t h e standpoints of the co-operatives and
the economic authorities was reached. T h e resolution of the fourteenth Congress of the Communist P a r t y began by pointing out that,
" u n d e r the system of free trade and of the supremacy of t h e small
producer in the country, the co-operatives should constitute the principal link between the state economic authorities and the small rural
producer. T h r o u g h t h e m the state m a y acquire the most facilities
for supervising and regulating small farming and trade throughout
the country. " 2
B u t the resolution went on to state that :
Co-operative trade and state trade are not in a position to cope satisfactorily with the growth in business, so that a considerable place is open
to the private trader. "While taking this fact into account, the Party
must yet by every means in its power prevent the change of policy from
being interpreted as a change in the attitude of the Party and the Soviet
authorities towards the co-operative movement. The functions assigned
to private traders do not reduce but on the contrary extend the prospects
for co-operatives, especially the consumers' societies. It is therefore
essential that more attention be paid than hitherto to the requirements
of the co-operatives, and that they should be given strong support by
the Party and the state.
The co-operatives for their part must take all the necessary measures
to overcome their own difficulties, which are mainly due to their inability
to adapt their activities to their resources, the instability of their forms
of organisation, the inelasticity of their institutions, the high prices of
their goods, etc. The quality of their work is at present the most important factor. Their future progress will depend on the way in which they
solve the problem at present before them.
T h e resolution, after enumerating the principal problems to be
settled by the co-operatives, made the following suggestions for t h e
lines on which they were to work : " A t the present time the first
requisite is an improvement in the efficiency of the co-operative
movement, a. reform of the system, more intensive work, more active

1
2

Economicheskaia Zhizn, 24 Ma)' 1925.
Ibid., 2 June 1925.

— 355 —
participation of the members in the work, and the improvement of
the financial and economic situation of the societies."
The necessary improvements were defined as follows :
(a) The selection of goods stocked by the co-operatives must
correspond to the requirements of the population.
(b) The co-operatives must in no case work at a loss, and they
must give every security for the repayment of the credits granted
them.
(c) The overhead charges, still too high, must be reduced.
(d) The staffs of the primary societies must be reduced to the
minimum.
(e) The elected authorities must report to their electors, to
whom they are directly responsible for their actions.
(/) The motto of the movement must be " Co-operators to be
served first ".
(g) The co-operative unions must cease to ignore each other.
(h) Unreasonable resort to credit must be opposed.
(i) Recourse must be had to the resources of members, to contributions, and the payments of those concerned for the constitution of
co-operative capital.
It will be observed that these improvements, which the fourteenth Party Congress accepted in May 1925 as vitally necessary,
were on exactly the same lines as those suggested a year earlier by
the thirteenth Congress. The rest of the resolution involved no
change in the policy of the Government with respect to co-operation.
It recognised that :
As before, the consumers' co-operatives remain the principal element
in the system of distribution. The state industries must use them in
the first place to market their goods, and resort to private traders only
if the co-operatives are unable to meet their requirements. Similarly
the co-operatives should enjoy more favourable conditions of credit and
discount than private traders.
Finally the resolution affirmed yet again that " the co-operatives
could not increase their trading capital out of their own resources ",
in view of the growing demands of the market, and that it was consequently essential to increase the initial and working capital of the
primary societies by granting them long-term credits out of the
national budget.
Examination of these resolutions will be enough to prove that
so far the problems facing the co-operative movement have not yet
2 6*
3

356 —

been finally solved. The growth of the movement still depends on
the financial and administrative privileges which may be granted by
the state. The co-operatives still enjoy preferential rights under the
system of state capitalism. The principles and forms of their organisation and the extent of their work are still defined by the state. In
reality they have no independent existence ; they are still considered,
not as associations of consumers, but as economic institutions serving
the general economic policy of the Communist Party.
Consumers' co-operatives in Soviet Russia thus still possess the
special characteristics which so strikingly distinguish them from cooperative societies in other countries. There cannot be said to be a
free co-operative movement sprung from the initiative of the masses.
But it is clear that in the struggle between the theories of the Communist Party and actual economic conditions economic realities are
steadily forcing a return to the principles which underlie the cooperative movement in other countries.

SOURCES
Below is given a list of the principal Russian publications on cooperation and other subjects which have been used in the preparation
of this report.
I.

L I T E R A T U R E ON CO-OPERATION

General
BUKHARIN. Programma communistov
Programme). Moscow. .

(bolshevikov)

(The Communist

BUKHARIN and PREOBRAZHENSKY. L'A .B.C. du communisme.

ILIMSKY-KUTUZOV. Crisis
co-operatsii
Moscow, Centrosoyus, 1922.
LARIN.

(The

Paris, 1923.

Co-operative

Crisis).

Novaya torgovaya politika posle 13 siezda partii (The New Commercial Policy after the Thirteenth Congress of the Communist
Party). Moscow, Centrosoyus, 1924.

LENIN.
—

Sobranie Sochinenii (Complete Works). Vols. XV and XVIII
(Part I ) . Moscow, State Publishing Office.
O co-operatsii (On Co-operation). Moscow, 1923.

MESHCHERIAKOV. Co-operatsia v Sovietskoi
Rossii (Co-operation in
Soviet Russia). Moscow, State Publishing Office, 1922 ; new
edition, 1924.
Novye ideiv co-operatsii (New Ideas on Co-operation). Series of articles.
Moscow, Centrosoyus, 1919.
Novye puti co-operatsii
(Co-operation on New Lines). Vol. I, Communism and Co-operation. Moscow, Communist International,
1922.

Programma i ustav R.K.P. s dokladami Lenina i BukUarina na vossmom
siezde partii (Programme and Rules of the Russian Communist
Party, with the reports of Lenin and Bukharin to the Eighth
Party Congress). Moscow.
Riechy Lenina, Miliutina i Nogina na tretiem siezde rabochy co-operatsii
(Speeches of Lenin, Miliutin, and Nogin at the Third Congress
of Industrial Co-operatives). Moscow, 1919.
Siezd russkoi communisticheskoi partii
(Congress of the Russian Communist Party, Verbatim Records). The Seventh, Eighth, and
Ninth Congresses. Moscow, State Publishing Office.
3

- 3 5 8 STEPANOV, J. Potrebitelnie obshestva ì rabochy class (Consumers' So• cieties and the Working Class). Moscow, State Publishing
Office, 1920.
Vserossisky siezd sovietov
(All-Russian Congress of Soviets). Reports
of the Seventh, Eighth, Ninth, and Tenth Congresses. Moscow, 1918, 1921, 1922.
Legislation

and

Regulations

DoLMATOVSKY. Zakony co-operatsii
(Legislation on Co-operation).
Moscow, " Right and Life " Publishing Office, 1924.
MEBEL.

Zakonodatelstvo sovietskoi vlasti po co-operatsii
(Co-operative
Legislation of the Soviet Government). Moscow, All-Russian
Central Council of Trade Unions, 1922.
Normalny ustav edinovo potrebitelskovo obshestva
(Standard Rules for
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3

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