Lenin’s economic policy
Among the first to describe the Russian economy under the Bolshevik government as "state capitalism", was Lenin himself in 1918. By this term he meant state control of capitalist-owned industries. He had been impressed by the system of industrial control which the German government had built up during the war. If the Kaiser and the Prussian Junkers could control capitalist industry for their purposes why, thought Lenin, could not the Bolshevik Party control capitalist industry for the benefit of the workers and poor peasants of Russia?
After seizing power in November 1917 the Bolsheviks did not go on to nationalise all industry; they merely exercised state control over it. In some instances this brought them into conflict with workers who under the syndicalist slogan of "workers' control" had taken over the factories in which they worked. A number of Bolsheviks denounced as "state capitalism" the policy of subjecting these factories to state control and to speed-up, one-man management and factory discipline.
Lenin's reaction was extraordinarily honest. He admitted that his government was pursuing a policy of state capitalism, but argued:
“State capitalism would be a step forward as compared with the present state of affairs in our Soviet Republic.” (Left-Wing' Childishness and the Petty-Bourgeois Mentality)
In admitting this he was admitting that Russia lacked the large-scale production on which alone Socialism can be based.
The civil war and foreign intervention forced the Bolsheviks to take a number of emergency measures — like nationalising factories whose owners had fled, requisitioning grain from the peasants, causing inflation by an over-issue of paper currency. Some Bolsheviks regarded these as measures to set up a moneyless economy in Russia, but this was absurd. As soon as the Civil War was over in 1921 they were abandoned and Lenin again advocated a policy of state capitalism. The New Economic Policy (NEP), introduced that year, was described as a policy of developing capitalism in Russia under the control of the Bolshevik government.
In calling their policy "state capitalism" the Bolsheviks were being unusually honest. But this was not to be expected to last in view of the political advantages to be gained from using the word "socialist". Lenin himself often used this word merely for its propaganda effect even though he knew that strictly speaking he was not using it properly. Stalin took over this opportunist technique and used it to great effect.
After Lenin died in 1924, a struggle for power developed between the Bolshevik leaders, Stalin, Trotsky, Zinoviev and Kamenev, with all of them claiming to be true "Leninists". One side-issue in their arguments was the nature of state-owned industry in Russia. Zinoviev and Kamenev said it was "state capitalist". Stalin denied this; it was, he said, the "socialist sector". Trotsky's position (like Lenin's—who was quoted by both sides) was ambiguous; he strongly rejected the term "state capitalist" and really agreed with Stalin's description. He departed from Stalin when the latter went on to develop his view into a theory of "socialism in one country". This was still a policy of state capitalism for Russia but this time fraudulently labelled "socialist".
After the overthrow of the Tsar in March 1917 capitalism had to develop in Russia in one form or another. That it took the form of state capitalism under a brutal one-party dictatorship was the result of the Bolsheviks' seizing power in November on Lenin's programme of State Capitalism for Russia.