Leon Trotsky

The New Course

Chapter 7
Planned Economy (1042)

December 1923

December 1923: In the present oral and written discussion, Order No.1042 has suddenly, for no apparent reason, attracted attention. Why? How? Without doubt, the majority of party members have forgotten the significance of this mysterious number. I shall explain. It is the order of the Commissariat of Transport, of May 22, 1920, on the repairing of locomotives. Since then, it would seem, much water has flowed under railroad and other bridges. It would seem that there are now many questions more urgent than whether we correctly or incorrectly organized the repairing of locomotives in 1920. There exist many more recent planning instructions in metallurgy, machine construction, and especially agricultural machinery. There exists the clear and precise resolution of the Twelfth Congress on the meaning and tasks of planned management. We have the recent experience of planned production for 1923. Why, then, is it precisely now that a plan dating back to the period of war communism has reappeared, like the deus ex machina, to use an expression of the Roman theater?

It has come forward because behind the machine there were stage directors for whom its appearance was necessary for the climax. Who are these stage directors and why did they suddenly find themselves in need of Order No.1042? It is entirely incomprehensible. You would have to believe that this order was found necessary by people in the toils of an irresistible concern for historical truth. Obviously, they too know that there are many other questions more important and more timely than the plan for repairing the rolling stock of the railroads, set up almost four years ago. But is it possible? Judge for yourselves! To go forward, to establish new plans, to be responsible for their correctness, for their success, without beginning by explaining to everyone, to every single, solitary person, that Order No.1042 was a false order, which neglected the factor of the peasantry, despised the tradition of the party, and led to the forming of a faction? At first sight, 1042 seems to be a simple order number. But if you delve into the matter more deeply, you will see that the number 1042 is no better than the apocalyptic number “666,” symbol of the ferocious beast. It is necessary to begin by smashing the head of the beast of the Apocalypse and then we shall be able to talk at leisure about other economic plans not yet covered by a four year old past.

To tell the truth, I had no desire at first to take up the time of my reader with Order No.1042. All the more so because the attacks directed at it boil down to subterfuges or to vague allusions aimed at showing that the people who use them know a lot more than they are saying, whereas in reality the poor creatures know nothing whatsoever. In this sense, the “accusations” against No.1042 do not differ greatly from the 1041 other accusations ... Quantity is presumably to substitute here for quality. The facts are unscrupulously misrepresented, the texts are distorted, proportions are scorned, and the whole is dumped into a heap without order or method. In order to get a clear idea of the differences of opinion and the mistakes of the past, it would be necessary to reconstitute exactly the situation of the time. Do we have the spare time for it? And, if so, is it worthwhile, after having neglected so many other essentially false hints and accusations, to react to the reappearance of Order No.1042?

Upon reflection, I told myself that it was necessary, for we have here a case, classic in its kind ... of light-mindedness and bad faith in an accusation. The affair of Order 1042 did not occur in the ideological sphere, but was a material affair, in the field of production, and consequently was measured in figures and weights. It is relatively simple and easy to gather reliable information about it, to report actual facts; also, the use of simple prudence would have guided those who concern themselves with the subject, for it is fairly easy to show them that they are talking about something they do not know and do not understand. And if it turns out from this concrete, precise example that the deus ex machina is only a frivolous buffoon, it will perhaps help a number of readers to understand the staging methods behind the other “accusations,” whose inanity is unfortunately much less verifiable than that of Order 1042.

I shall endeavor, in my exposition of the affair, not to confine myself to historical data and to link the question of Order 1042 to the problems of planned production and management. The concrete examples that I shall give will probably render the affair a little clearer.

Order 1042, concerning the repairing of locomotives and the methodical utilization toward this end of all the appropriate forces and resources of the railroad administration and the state, was worked out for a long time by the best specialists, who to this day occupy high posts in railroad management. The application of Order 1042 was actually begun in May-June, formally on July 1, 1920. The plan was the concern not only of the roundhouses of the railway lines but also of the corresponding plants of the Council of National Economy. We present below a comparative table, showing the realization of the plan, on the one hand by the railroad roundhouses, and on the other hand by the plants of the Council of National Economy. Our figures are a reproduction of the incontestable official data presented periodically to the Council of Labor and Defense by the Main Transportation Commission and signed by the representatives of the Commissariat of Transport and the Council of National Economy.

(Percentage of Realization of the Plan)
Plants of the Council 
of National Economy
July  135    40.5
August 131.6 74   
September 139.3 80   
October  130    51   
November 124.6 70   
December 120.8 66   
Totals  129.7 70   
January    95    36   
February   90    38   
March    98    26   
April  101
(Emshanov was Commissar of Transport in 1921)

Thus, thanks to the intensification of the work of the roundhouses of the Commissariat of Transport, it was possible beginning with October to increase by 28 percent the monthly norms of production. In spite of this increase, the execution of the plan in the second half of 1920 exceeded the established norm by 130 percent. During the first four months of 1921, the execution of the plan was a little below 100 percent. But following that, under Dzerzhinsky, matters lying outside the authority of the Commissariat of Transport interfered with the execution of the plan: on the one hand, the lack of material and of supplies for the repair work itself, and on the other hand, the extreme insufficiency of fuel, which made impossible the utilization even of the available locomotives. As a result, the Council of Labor and Defense decided, in an order of April 22, 1921, to reduce considerably, for the balance of 1921, the repair norms on locomotives established in plan 1042. For the last eight months of 1921, the work of the Commissariat of Transport represented 80 percent and that of the Council of National Economy 44 percent of the original plan. The results of the execution of Order 1042 in the first semester, the most critical one for transportation, are set forth in the following way in the theses of the Eighth Congress of Soviets, approved by the Political Bureau of the party’s Central Committee:

“The repair program has thus acquired a precise temporal character not only for the railroad roundhouses, but also for the plants of the Council of National Economy working for transportation. The repair program, established at the cost of considerable labor and approved by the Main Transportation Commission, was nevertheless carried out in very different proportions in the railroad roundhouses (Commissariat of Transport) and in the plants (Council of National Economy): while in the roundhouses, major and minor repairs, expressed in units of average repair, increased this year from 258 locomotives to more than 1,000, that is, four times, this representing 130 percent of the fixed monthly program, the plants of the Council of National Economy supplied material and spare parts only in the proportion of one-third of the program established by the Commissariat of Transport in agreement with the two departments of the Main Transportation Commission.”

But we see that after a certain time the execution of the norms set up by Order 1042 became impossible as a result of the shortage of raw materials and fuel. That is just what proves the order erroneous! I will say certain critics, who, by the way, have just learned this fact from reading these lines. They must be given the following answer: Order 1042 regulated the repairing of locomotives, but in no instance the production of metal and the mining of coal, which were regulated by other orders and other institutions. Order 1042 was not a universal economic plan, but only a transportation plan.

But was it not necessary, it will be asked, to harmonize it with the resources in fuel, in metals, etc.? Indisputably; and that is precisely why the Main Transportation Commission was created with the participation on a parity basis of representatives of the Commissariat of Transport and the Council of National Economy. The establishment of the plan took place according to the indications of the representatives of the Council of National Economy, who declared that they were in a position to supply such and such materials. Therefore, if there was an error in calculation, the fault is entirely upon the Council of National Economy

Perhaps, after all, that is what the critics meant to say? It is doubtful, very doubtful! The “critics” display the greatest solicitude for historical truth, but only on the condition that it sticks by them. Among these post facto critics there are, alas, some who bore the responsibility at the time for the stewardship of the Council of National Economy. In their criticisms, they simply made a mistake in address. That can happen. As extenuating circumstances, moreover, it should be pointed out that forecasts concerning the mining of coal, the production of metals, etc., were much more difficult to establish then than now. If the forecasts of the Commissariat of Transport on the repairing of locomotives were incomparably more exact than those of the Council of National Economy, the reason for it is, at least up to a certain point, that the administration of the railroads was more centralized and had greater experience. We readily acknowledge that. But that alters nothing in the fact that the error in evaluation was wholly attributable to the Council of National Economy.

This error, which necessitated the reduction of the norms of the plan but did not cause the abolition of the plan itself, testifies neither directly nor indirectly against Order 1042, which essentially bore the character of an orientation and carried provisions for periodic alterations suggested by experience. The checking of a plan of production is one of the most important points in its realization. We have seen above that the production norms of Order 1042 were raised, beginning with October 1920, by 28 percent, because the productive capacity of the roundhouses of the Commissariat of Transport proved to be greater, thanks to the measures taken, than had been supposed. We have likewise seen that these norms were strongly reduced, beginning with May 1921, as a result of circumstances beyond the control of the said Commissariat. But the raising or lowering of these standards followed a definite plan, for which Order 1042 furnished the basis.

That is the maximum that can be demanded of an orientation plan. Naturally, the greatest significance was borne by the figures dealing with the first months, the first half year; the further figures had only theoretical significance. None of those who participated in the working out of the order thought at the time that its execution would last exactly four and a half years. When it proved possible to raise the norm, the theoretical period was reduced to three and a half years. The lack of materials caused the period to be prolonged again. But it remains nonetheless established that in the most critical period of the functioning of transportation (end of 1920, beginning of 1921) the order proved to be in conformity with reality, the repair of locomotives was effected according to a definite plan, was quadrupled, and the railroads averted the imminent catastrophe.

We do not know with what ideal plans our honorable critics compare Order 1042. It seems to us that it ought to be compared with the situation existing before its promulgation. In those days, locomotives were allocated to every factory that asked for them in order to provide itself with food products. It was a desperate measure that entailed the disorganization of transportation and a monstrous waste of the work needed for repairs. Order 1042 established unity and introduced into repair work the elements of rational organization of labor by assigning definite series of locomotives to definite plants, so that the repair of the stock no longer depended upon the diffused efforts of the working class as a whole but upon a more or less exact registration of the forces and resources of the transportation administration. Therein lies the importance in principle of Order 1042, regardless of the degree to which the figures of the plan coincide with the figures of its execution. But as we said above, in this respect too all went well.

Naturally, now that the facts are forgotten, anything that enters one’s mind can be said about plan 1042 in the hope that nobody will think of checking up on it and that, come what may, something will stick. But in those days, the affair was perfectly clear and incontestable. Dozens of testimonials may be cited. We will choose three of them, from different authors, but each one characteristic of its type.

On June 3, Pravda evaluated the situation in transportation as follows:

“... Now the functioning of transportation has, in certain respects, improved. Any observer, even a superficial one, can record that a certain, although elementary, order exists now but did not exist before. For the first time, a precise production plan was worked out, a definite task was assigned to the shops, the factories, and the roundhouses. This is the first time since the revolution that a complete and exact registration of all the production possibilities exists in reality and not merely on paper. In this respect, Order 1042, signed by Trotsky, represents a turn in our work in the field of transportation ...”

It may be objected that this testimony is only an anticipatory evaluation and that, being signed N.B., it was only the opinion of Bukharin. We do not contest that. Nevertheless, in this passage, Pravda recognized that a beginning had been made in introducing order into the repair of rolling stock.

But we shall report more authoritative testimony, based upon the experience of half a year. At the Eighth Congress of the Soviets, Lenin said:

“... You have already seen in the theses of Emshanov and Trotsky, among others, that in this field [transport restoration] we have a genuine plan worked out for several years. Order 1042 covers five years; in five years we can restore our transportation and reduce the number of locomotives damaged; and important fact the ninth thesis points out that we have already cut down on the schedule.

“When big plans worked out for several years appear, skeptics frequently come forward to say: ‘What good is making forecasts for years in advance? If we can fulfill our present tasks, we shall be doing well.’ Comrades, we must learn to link the two things.

“You cannot work with any serious chance of success without having a plan set up for a prolonged period of time. What proves the necessity of such a plan is the incontestable improvement in the functioning of transportation. I wish to draw your attention to the ninth thesis where it says that the schedule for restoring transport would be four and a half years, but that has already been cut down because we are doing better than the scheduled norms; the schedule has already been set at three and a half years. That is how the work must be done in the other branches of economy ...”

Finally, one year after the publication of Order 1042, we read in the order of Dzerzhinsky, Foundations of the Future Work of the Commissariat of Transport, dated May 27, 1921:

“Whereas the reduction of the norms of Orders 1042 and 1157, which were the brilliant first experience in planned economy, is temporary and produced by the fuel crisis we are undergoing ... it is proper to take the necessary measures for the maintenance and restoration of the tool stock and the shops “

Thus, after an experience of a year and the forced reduction of the norms for repair work, the new director (after Emshanov) of the railroads recognized that Order 1042 was “the brilliant first experience in planned economy.” I strongly doubt that it will now be possible to twist history long after the fact, even if only that history which relates to the repair of rolling stock. However, at the present moment, several persons are zealously engaged in precisely this type of “repair,” trying to twist yesterday’s history and adapt it to the “needs” of the hour. Nevertheless, I do not believe that this repair work (also carried out according to a “plan”!) has any social utility or that in the long run it will yield any tangible results. Marx, it is true, called the revolution the locomotive of history ... But while it is possible to patch up the locomotives of the railroads, the same cannot be done to the locomotive of history, particularly not after the fact. In plain language, such attempts at repairing history are called falsifications. As we have seen, the Main Transportation Commission partially and gropingly realized a harmony of related branches of economy, a job which now represents, on a much bigger and more systematic scale, the task of the State Planning Commission (Gosplan). The example we adduced shows at the same time wherein consist the tasks and the difficulties of planned economy.

No branch of industry, big or small, nor any enterprise at all, can rationally distribute its resources and forces without having a plan of orientation before it. At the same time, all these partial plans are relative, depend upon each other, and condition each other. This reciprocal dependency must necessarily serve as the fundamental criterion in the working out of the plans and then in their realization, that is, in their periodic verification on the basis of results obtained.

It is cheap and easy to poke fun at plans set up for many years which subsequently prove to be soap bubbles. There have been many such plans, and it is not necessary to say that economic fantasies have no place in the economy. But in order to reach the point of setting up rational plans, it is unfortunately necessary to begin with primitive and rough plans, just as it was necessary to begin with the hatchet and the stone before getting to the steel knife.

It is worth noting that to this day many persons have puerile ideas on the question of planned economy: “We do not need,” they say, “numerous [?!] plans; we have an electrification plan, let’s carry it out!” Such reasoning denotes a complete lack of understanding of the very ABCs of the question. The orientation plan of electrification is entirely subordinate to the orientation plans of the fundamental branches of industry, transportation, finance, and finally agriculture. All these partial plans must first be harmonized with each other on the basis of the data we have at our disposal about our economic resources and possibilities.

It is such a concerted general plan, an annual plan for example (comprising the annual fractions of particular plans for three years, for five years, etc., and representing only working hypotheses), that can and should form the basis in practice on which the directing organ assures the realization of the plan, and that introduces into it the necessary modifications in the very course of this realization. Such leadership, employing all the necessary flexibility and freedom of movement, does not degenerate (that is, should not degenerate) into a series of improvisations, inasmuch as it will base itself upon a logical general conception of the whole course of the economic process and, while introducing the necessary modifications into it, will be imbued with the endeavor to perfect the economic plan and concretize it in conformity with material conditions and resources.

Such is the most general pattern of planning in state economy. But the existence of the market extraordinarily complicates its realization. In the peripheral regions, state economy allies itself or at least tries to ally itself with petty peasant economy.

The direct organ of the smychka is the trade in products of light, and partly of medium industry, and it is only indirectly, partially, or subsequently, that heavy industry, directly serving the state (army, transportation, state industry), comes into play. Peasant economy is not governed by a plan, it is conditioned by the market, which develops spontaneously. The state can and should act upon it, push it forward, but it is still absolutely incapable of channeling it according to a single plan. Many years will still be needed before that point is reached (probably thanks above all to electrification).

For the next period, which is what interests us practically, we shall have a planned state economy, allying itself more and more with the peasant market and, as a result, adapting itself to the latter in the course of its growth. Although this market develops spontaneously, it does not follow at all that state industry should adapt itself to it spontaneously. On the contrary, our success in economic organization will depend in large part upon the degree to which we succeed, by means of an exact knowledge of market conditions and correct economic forecasts, in harmonizing state industry with agriculture according to a definite plan. A certain amount of competition between different state factories or between trusts changes nothing in the fact that the state is the owner of all nationalized industry and that as owner, administrator, and manager, it looks upon its property as a unit with relation to the peasant market.

Obviously, it is impossible to get an exact advance estimate of the peasant market, as it is of the world market with which our link will tighten principally through the export of grain and raw materials. Errors of evaluation are inevitable, if only because of the variability of the harvest, etc. These errors will manifest themselves through the market in the form of partial and even general scarcity of products, convulsions, and crises. Nevertheless, it is clear that these crises will be less acute and prolonged, the more seriously planned economy pervades all the branches of state economy, constantly uniting them among themselves. If the doctrine of the Brentanists (followers of the German economist Lujo Brentano) and the Bernsteinists, according to which the domination of the capitalist trusts “regulates” the market by making commercial-industrial crises impossible, was radically false, it is entirely correct when applied to the workers’ state considered as a trust of trusts and bank of banks. Put differently, the extension or reduction of the scope of the crisis will be the clearest and most infallible barometer in our economy of the successes of state economy in comparison with the movement of private capital. In the struggle of state industry for the domination of the market, planned economy is our principal weapon. Without it, nationalization itself would become an obstacle to economic development, and private capital would inevitably undermine the foundations of socialism.

By state economy we mean of course transportation, foreign and domestic trade, and finance, in addition to industry. This whole "combine" in its totality as well as in its parts adapts itself to the peasant market and to the individual peasant as a taxpayer. But this adaptation has as its fundamental aim to raise, consolidate, and develop state industry as the keystone of the dictatorship of the proletariat and the basis of socialism. It is radically false to think that it is possible to develop and perfect certain parts of this “combine” in isolation: be it transportation or finances or anything else. Their progress and retrogression are in close interdependence. That is the source of the immense importance in principle of Gosplan, whose role it is so hard to make understood among us.

Gosplan must coordinate, i.e., systematically unite and direct, all the fundamental factors of the state economy and bring them into correct relationship with the national economy, that is, primarily with the peasant economy. Its principal concern must be the development of state (socialist) industry. It is precisely in this sense that I said that within the state combine, the “dictatorship” must be in the hands not of finance but of industry. Naturally, the word “dictatorship” as I have pointed out has here a very restricted and very conditional character: it is counterpoised to the “dictatorship” which was claimed by finance. In other words, not only foreign trade but also the restoration of a stable currency must be rigorously subordinated to the interests of state industry. It goes without saying that this is in no way directed against the smychka, that is, against correct relationships between the state combine as a whole and the peasant economy. On the contrary, it is only in this way that we will gradually succeed in transferring this smychka from the realm of mere rhetoric to the realm of economic reality. To say that by posing the question this way the peasantry is “neglected,” or that a sweep is sought for state industry such as does not correspond to the condition of the national economy as a whole, is sheer absurdity and does not become more convincing with repetition.

The following words from my report to the Twelfth Congress best show what upsurge was expected from industry in the next period and who were the ones that demanded such an upsurge:

“I said that we have been working at a loss. That is not only my personal assessment. It is shared by official economic administrators. I urge you to take the pamphlet by Khalatov, On Wages, which has just appeared for the congress. It contains a preface by Rykov which says: ‘At the beginning of this third year of our New Economic Policy, it must be recognized that the successes obtained in the two preceding years are still insufficient, that we have not even succeeded in halting fully the decline in fixed capital and circulating capital, to say nothing of a transition to an accumulation and augmentation of the productive forces of the republic. During this third year, we must reach the point where the principal branches of our industry and transportation yield a profit.’

“Thus Rykov records that during this year our fixed capital and our circulating capital have continued to decline. ‘This third year,’ he says, ‘we must reach the point where the principal branches of our industry and transportation yield a profit.’ I readily associate myself with this desire of Rykov; but I do not share his optimistic hope in the results of our work during this third year. I do not believe that the fundamental branches of our industry can already bring in a profit during the third year and I consider that it will be fine if we first of all figure our losses better during the third year of the NEP than we did during the second, and if we can prove that during the third year our losses in the most important branches of industry, transportation, fuel, and metallurgy will be lower than during the second. What is important, above all, is to establish the tendency of development and to assist its unfolding. If our losses diminish and industry progresses, we shall have won the day, we shall reach victory, that is, profit. But the curve must develop in our favor.”

Thus it is absurd to assert that the question boils down to the tempo of the development and is almost determined ... by “temperament.” In reality, it is a question of the direction of the development. But it is very hard to discuss with people who bring every new, precise, concrete question back to a more general question that has already been resolved a long time ago. We must concretize the general formulas, and that is the point of a large part of our discussion: we must pass from the general formula of setting up the smychka, to the more concrete problem of the “scissors” (Twelfth Congress), from the problem of the “scissors” to the effective planned regulation of the economic factors determining prices (Thirteenth Congress). There, to employ the Old Bolshevik terminology, is the struggle against economic “tailendism.” Without success in this ideological struggle, there can be no economic successes whatsoever.

The repair of rolling stock was not, in 1920, a constituent part of a total economic plan, for at that time, despite the tower of Babel erected by bureaucratic “Centers,” there was no question as yet of such a plan. The lever of planning was applied to transportation, that is, to the branch of economy which was then most imperiled and which threatened to collapse completely. That is precisely how we posed the question at the time. “In the conditions in which the entire Soviet economy now finds itself,” we wrote in the theses for the Eighth Congress of Soviets, “when the working out and application of a single plan has not yet gone beyond empirical agreements of the most closely related parts of this future plan, it was absolutely impossible for the railroad administration to construct its plan of repair and management on the basis of data from a single economic plan which first had to be worked out.” Improved, thanks to the repair plan, transportation ceased being a minus and in turn collided with other minuses: metallurgy, grain, coal. By the same token, plan 1042 posed in its development the question of a general economic plan. The NEP modified the conditions in which this question was posed and consequently the methods of solving it. But the question itself remained in all its acuteness. That is attested to by the repeated decisions on the need of making Gosplan the general staff of the Soviet economy.

But we shall return to this in detail, for economic tasks demand an independent, concrete examination.

The historical facts I have just adduced show, I hope, that our critics raked up Order 1042 in vain. The fate of this order proves exactly the opposite of what they wanted to prove. Inasmuch as we already know their methods, we expect to hear them declaim aloud: What good does it do to bring up old questions and examine an order published four years ago! It is terribly hard to satisfy people who are determined at all costs to do a repair job on yesterday’s history. But we do not intend to satisfy them. We have confidence in the readers who are not interested in fixing up history but who endeavor to discover the truth, to turn it into an assimilated part of their experience, and, basing themselves upon it to build further.

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Last updated on: 4.1.2007