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Report to the Seventeenth Party Congress on the Work of the Central Committee of the C.P.S.U.(B.)

Foundation and Concerning Questions of Leninism 

January 26, 1934
Works, Vol. 13

The Continuing Crisis of World Capitalism and the External Situation of the Soviet Union

Comrades, more than three years have passed since the Sixteenth Congress. That is not a very long period. But it has been fuller in content than any other period. I do not think that any period in the last decade has been so rich in events as this one.

In the economic sphere these years have been years of continuing world economic crisis. The crisis has affected not only industry, but also agriculture as a whole. The crisis has raged not only in the sphere of production and trade; it has also extended to the sphere of credit and money circulation, and has completely upset the established credit and currency relations among countries. While formerly people here and there still disputed whether there was a world economic crisis or not, now they no longer do so, for the existence of the crisis and its devastating effects are only too obvious. Now the controversy centres around another question: Is there a way out of the crisis or not; and if there is, then what is to be done?

In the political sphere these years have been years of further tension both in the relations between the capitalist countries and in the relations within them. Japan's war against China and the occupation of Manchuria, which have strained relations in the Far East; the victory of fascism in Germany and the triumph of the idea of revenge, which have strained relations in Europe; the withdrawal of Japan and Germany from the League of Nations, which has given a new impetus to the growth of armaments and to the preparations for an imperialist war; the defeat of fascism in Spain,2 which is one more indication that a revolutionary crisis is maturing and that fascism is far from being long-lived—such are the most important events of the period under review. It is not surprising that bourgeois pacifism is breathing its last and that the trend towards disarmament is openly and definitely giving way to a trend towards armament and rearmament.

Amid the surging waves of economic perturbations and military-political catastrophes, the U.S.S.R. stands out like a rock, continuing its work of socialist construction and its fight to preserve peace. Whereas in the capitalist countries the economic crisis is still raging, in the U.S.S.R. the advance continues both in industry and in agriculture. Whereas in the capitalist countries feverish preparations are in progress for a new war for a new redivision of the world and of spheres of influence, the U.S.S.R. is continuing its systematic and persistent struggle against the menace of war and for peace; and it cannot be said that the efforts of the U.S.S.R. in this direction have had no success.

Such is the general picture of the international situation at the present moment.

Let us pass to an examination of the principal data on the economic and political situation in the capitalist countries.

1. The Course of the Economic Crisis in the Capitalist Countries

The present economic crisis in the capitalist countries differs from all analogous crises, among other things, in that it is the longest and most protracted crisis. Formerly crises would come to an end in a year or two; the present crisis, however, is now in its fifth year, devastating the economy of the capitalist countries year after year and draining it of the fat accumulated in previous years. It is not surprising that this is the most severe of all the crises that have taken place.

How is this unprecedentedly protracted character of the present industrial crisis to be explained?

It is to be explained, first of all, by the fact that the industrial crisis has affected every capitalist country without exception, which has made it difficult for some countries to manoeuvre at the expense of others.

Secondly, it is to be explained by the fact that the industrial crisis has become interwoven with the agrarian crisis which has affected all the agrarian and semi-agrarian countries without exception, which could not but make the industrial crisis more complicated and more profound.

Thirdly, it is to be explained by the fact that the agrarian crisis has grown more acute in this period, and has affected all branches of agriculture, including livestock farming; that it has brought about a retrogression of agriculture, a reversion from machines to hand labour, a substitution of horses for tractors, a sharp reduction in the use of artificial fertilisers, and in some cases a complete abandonment of them—all of which has caused the industrial crisis to become still more protracted.

Fourthly, it is to be explained by the fact that the monopolist cartels which dominate industry strive to maintain high commodity prices, a circumstance which makes the crisis particularly painful and hinders the absorption of commodity stocks.

Lastly—and this is the chief thing—it is to be explained by the fact that the industrial crisis broke out in the conditions of the general crisis of capitalism, when capitalism no longer has, nor can have, either in the major countries or in the colonial and dependent countries, the strength and stability it had before the war and the October Revolution; when industry in the capitalist countries has acquired, as a heritage from the imperialist war, chronic under-capacity operation of plants and armies of millions of unemployed, of which it is no longer able to rid itself.

Such are the circumstances that have given rise to the extremely protracted character of the present industrial crisis.

It is these circumstances also that explain the fact that the crisis has not been confined to the sphere of production and trade, but has also affected the credit system, foreign exchange, the debt settlements, etc., and has broken down the traditionally established relations both between countries and between social groups in the various countries.

An important part was played by the fall in commodity prices. In spite of the resistance of the monopolist cartels, the fall in prices increased with elemental force, affecting primarily and mainly the commodities of the unorganised commodity owners—peasants, artisans, small capitalists—and only gradually and to a smaller degree those of the organised commodity owners—the capitalists united in cartels. The fall in prices made the position of debtors (manufacturers, artisans, peasants, etc.) intolerable, while, on the other hand, it placed creditors in an unprecedentedly privileged position. Such a situation was bound to lead, and actually did lead to the mass bankruptcy of firms and of individual capitalists. As a result, tens of thousands of joint-stock companies have failed in the United States, Germany, Britain and France during the past three years. The bankruptcy of joint-stock companies was followed by a depreciation of currency, which slightly alleviated the position of debtors. The depreciation of currency was followed by the non-payment of debts, both foreign and internal, legalised by the state. The collapse of such banks as the Darmstadt and Dresden banks in Germany and the Kreditanstalt in Austria, and of concerns like Kreuger's in Sweden, the Insull corporation in the United States, etc. is well known to all.

Naturally, these phenomena, which shook the foundations of the credit system, were bound to be followed, and actually were followed, by the cessation of payments on credits and foreign loans, the cessation of payments on inter-Allied debts the cessation of export of capital, a further decline in foreign trade, a further decline in the export of commodities, an intensification of the struggle for foreign markets, trade war between countries, and— dumping. Yes, comrades, dumping. I am not referring to the alleged Soviet dumping, about which only very recently certain honourable members of honourable parliaments in Europe and America were shouting themselves hoarse. I am referring to the real dumping that is now being practised by almost all "civilised" states, and about which these gallant and honourable members of parliaments maintain a prudent silence.

Naturally, also, these destructive phenomena accompanying the industrial crisis, which took place outside the sphere of production, could not but in their turn influence the course of the industrial crisis, aggravating it and complicating the situation still further.

Such is the general picture of the course of the industrial crisis.

Here are a few figures, taken from official data, that illustrate the course of the industrial crisis during the period under review.

Volume of Industrial Output
(Per cent of 1929)

As you see, this table speaks for itself.

While industry in the principal capitalist countries declined from year to year, compared with 1929, and began to recover somewhat only in 1933—although still far from reaching the level of 1929—industry in the U.S.S.R. grew from year to year, experiencing an uninterrupted rise.

While industry in the principal capitalist countries at the end of 1933 shows on the average a reduction of 25 per cent and more in volume of output compared with 1929, industrial output in the U.S.S.R. has more than doubled during this period, i.e., it has increased more than 100 per cent. (Applause.)

Judging by this table, it may seem that of these four capitalist countries Britain is in the most favourable position. But that is not quite true. If we compare industry in these countries with its pre-war level we get a somewhat different picture.

Here is the corresponding table :
Volume of Industrial Output
(Per cent of pre-war level)

As you see, industry in Britain and Germany has not yet reached the pre-war level, while the United States and France have exceeded it by several per cent, and the U.S.S.R. has raised, increased its industrial output during this period by more than 290 per cent over the prewar level. (Applause.)

But there is still another conclusion to be drawn from these tables.

While industry in the principal capitalist countries declined steadily after 1930, and particularly after 1931, and reached its lowest point in 1932, in 1933 it began to recover and pick up somewhat. If we take the monthly returns for 1932 and 1933 we find still further confirmation of this conclusion; for they show that, despite fluctuations of output in the course of 1933, industry in these countries revealed no tendency to fall to the lowest point reached in the summer of 1932.

What does this mean?

It means that, apparently, industry in the principal capitalist countries had already reached the lowest point of decline and did not return to it in the course of 1933.

Some people are inclined to ascribe this phenomenon exclusively to the influence of artificial factors, such as the war-inflation boom. There can be no doubt that the war-inflation boom plays no small part in it. This is particularly true in regard to Japan, where this artificial factor is the principal and decisive force stimulating a certain revival in some industries, mainly war industries. But it would be a gross mistake to explain everything by the war-inflation boom. Such an explanation would be incorrect, if only for the reason that the changes in industry which I have described are observed, not in separate and chance areas, but in all, or nearly all, the industrial countries, including the countries with a stable currency. Apparently, in addition to the war-inflation boom, the internal economic forces of capitalism are also operating here.

Capitalism has succeeded in somewhat alleviating the position of industry at the expense of the workers, by heightening their exploitation through increased intensity of labour; at the expense of the farmers, by pursuing a policy of paying the lowest prices for the products of their labour, for foodstuffs and, partly, raw materials; and at the expense of the peasants in the colonies and economically weak countries, by still further forcing down prices for the products of their labour, principally for raw materials, and also for foodstuffs.

Does this mean that we are witnessing a transition from a crisis to an ordinary depression, to be followed by a new upswing and flourishing of industry? No, it does not. At any rate, at the present time there is no evidence, direct or indirect, to indicate the approach of an upswing of industry in the capitalist countries. More than that, judging by all things, there can be no such evidence, at least in the near future. There can be no such evidence, because all the unfavourable conditions which prevent industry in the capitalist countries from making any considerable advance continue to operate. I have in mind the continuing general crisis of capitalism, in the circumstances of which the economic crisis is proceeding; the chronic under-capacity operation of the enterprises; chronic mass unemployment; the interweaving of the industrial crisis with an agricultural crisis; the absence of tendencies towards a more or less serious renewal of fixed capital, which usually heralds the approach of a boom, etc., etc.

Evidently, what we are witnessing is a transition from the lowest point of decline of industry, from the lowest point of the industrial crisis, to a depression—not an ordinary depression, but a depression of a special kind, which does not lead to a new upswing and flourishing of industry, but which, on the other hand, does not force industry back to the lowest point of decline.

2. The Growing Tension in the Political Situation in the Capitalist Countries
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