In the years from 1922 to 1924 our general industrial revival was mainly driven by light industry. This year [1925], predominance is beginning to shift to the branches of industry that produce means of production. However, the latter are still recovering on the basis of utilizing the old fixed capital. During the coming economic year, when the fixed capital inherited from the bourgeoisie will be 100 percent utilized, we will begin extensive operations to renew the fixed capital. In total, the State Planning Commission has allocated 880,000,000 rubles for capital expenditures in industry (including electrification); 236,000,000 rubles for transportation; 365,000,000 rubles for housing and other construction; 300,000,000 rubles for agriculture, for a total of over 1,800,000,000 rubles. This sum includes over 900,000,000 rubles of new investments, i.e., from the new accumulations of the whole economy. This plan, which is still only tentative and has by no means been fully verified, will bring about a major shift in the distribution of the country's material resources. Up to now, we have been working on existing fixed capital, only partially replenishing it. In the future, we will have to create new fixed capital. This is the main difference between the coming economic period and the one that is coming to an end.

From the point of view of an individual economic manager, say, the director of a trust, it may seem that the pace of development depends on the credit provided by banks. “Give me so many millions and I’ll put up a new roof, install new machinery, increase output tenfold, halve production costs, and match European quality.” How many times have we heard this phrase! But the point is that financing is by no means the primary factor. The pace of economic development is determined by the material conditions of the production process itself. This is aptly pointed out in the explanatory note from the State Planning Committee. “The universal limit,” it says, “of the possible rate of national economic development—the limit that determines all specific limiting (restrictive) factors—must be recognized as the amount of national accumulation in its material form, i.e., the totality of newly produced goods that remain after covering the needs of simple reproduction and thus constitute the material basis for expanded reproduction and reconstruction.”

Bank-notes, shares, bonds, promissory notes, and other “securities” have no significance in themselves for the volume and pace of economic development; they are only auxiliary tools for calculating and distributing material values. Of course, from a private capitalist and, in general, private economic point of view, these securities have an independent significance of their own, for they ensure their owners a certain amount of material wealth. But from the standpoint of the national economy, which in our conditions closely coincides with the state economy, paper values in themselves add nothing to the volume of material products that serve as a basis for expanding production. It is therefore necessary to proceed from this real basis. The allocation of funds through the budget, through banks, through economic recovery loans, through the industrial fund, etc., is only a method of distributing the corresponding material products among different branches of the economy.

In the pre-war years, our industry grew by an average of six to seven percent per year. The coefficient, we must admit, is quite high. It seems entirely insignificant, however, when we compare it with the coefficients of the present day, when industry is expanding at the rate of 40 or 50 percent annually. However, it would be a gross mistake to simply compare these growth rates. Before the war, the expansion of industry was based primarily on the construction of new factories. At the present time, expansion relies to a much larger degree on the utilization of old factories and old equipment. Hence the exceptional pace of growth. Naturally, therefore, once the process of recovery is complete, the coefficient of growth will be considerably reduced. This circumstance is of exceptional importance, since it determines, to a great extent, our position in the capitalist world. The struggle for our socialist “place under the sun” must inevitably become a struggle for the highest possible coefficient of industrial growth. However, the basis, and at the same time, the “limit” of this growth is the available mass of material values.

But if this is the case; if the recovery process essentially recreates the old relationships between agriculture and industry; between the domestic and foreign markets (export of grain and raw materials, import of machinery and manufactured goods), does this not mean that it will also recreate the pre-war growth rate, and that we will have to come down from the current 40-50 percent to the pre-war 6 percent in a year or two? Of course, there is no definitive answer to this question at present. Nevertheless, we can say with confidence that, with a socialist state, nationalized industry, and strengthening regulation of key economic processes, including exports and imports, we can maintain a growth rate that far exceeds both our pre-war coefficient and the average capitalist coefficient even after reaching the pre-war level.

What are our advantages? We have already named them.

First, we have no or almost no parasitic classes. Actual accumulation before the war was not 6 percent, but at least twice as much. But only half of the accumulated funds were used for production. The other half was squandered in a predatory and parasitic manner. Thus, the abolition of the monarchy, the bureaucracy, the nobility and the bourgeoisie, alone, given other necessary conditions, ensures an increase in the growth rate from 6 percent to 12 percent, or, say, at least to 9 or 10 percent.

Second, the elimination of private capitalist barriers enables the economic state to mobilize the necessary resources in the necessary economic sector at any given moment with all the necessary freedom. The unproductive overhead costs of economic parallelism, competition, etc., have been greatly reduced and will continue to decrease in the future. It is only thanks to these conditions that we have achieved such rapid growth in recent years without foreign assistance. In the future, the planned distribution of forces and resources alone will give us, to a far greater extent than before, the opportunity to obtain higher production results than capitalist society, while expending the same resources.

Third, the introduction of planned production techniques (standardization, specialization of factories, their combination into a single production organism), which we have only just begun, promises a significant and, moreover, ever-increasing increase in the production coefficient in the near future.

Fourth, capitalist society lives and develops through periodic cycles of prosperity and crises, which in the post-war era have taken on the character of painful spasms. It is true that our economy is not free from crises either. Moreover, as we will show later, our growing connection with the world market is a possible source of crises in our own economy. Nevertheless, the growth of planned foresight and regulation can and must greatly mitigate the crisis stages of our development and thereby ensure significant additional accumulation.

Such are the four advantages which have already significantly proven their effectiveness in our development in recent years. Their significance will not diminish but, on the contrary, will increase dramatically with the completion of the recovery period. Taken together, if used correctly, they will make it possible to increase the coefficient of our industrial growth in the coming years, not only doubling, but trebling the pre-war 6 percent, and perhaps even more.

This, however, does not exhaust the question. The advantages of a socialist economy which we have enumerated will have an impact not only on domestic economic processes; they will also be greatly strengthened by the possibilities opened up by the world market. Above, we have discussed the latter mainly from the standpoint of the economic dangers posed by it. The capitalist market, however, does not only pose dangers for us; it also opens up immense opportunities. We are gaining ever wider access to the highest achievements of scientific technology and its most complex products. Thus, the world market, by drawing the socialist economy within its orbit, creates new dangers, it also opens up powerful means of counteracting these dangers for a socialist state that properly regulates its turnover. By making proper use of the world market, we can greatly accelerate the process of changing the comparative coefficients to the advantage of socialism.

Of course, we will move forward cautiously, carefully measuring the bottom, since this is the first time a socialist ship has sailed this river. But all the facts indicate that the farther we go, the channel will become deeper and wider.