The War of the World: History's Age of Hatred (36 page)

Figure 6.1
Output and prices: cumulative changes, 1929-1932

shared between ‘labor, capital and the consumer’. Hoover also backed an increase in the numerous tariffs that had long protected American producers of food, textiles and other basic products from foreign competition. Unfortunately, none of this sufficed to counter the plunge in economic confidence. On the contrary, the policy made matters worse. By refusing to relax monetary policy, the Federal Reserve failed disastrously to avert waves of bank closures in 1930 and 1931, actually raising its discount rate in October 1931; the attempt to run a balanced budget meanwhile prevented any kind of counter-cyclical fiscal stimulus; and the protectionist Smoot-Hawley trade bill enacted in June 1930, though it did not radically increase tariff rates, nevertheless dealt a blow to financial confidence. The German economy had to swallow an equally lethal policy brew of interest rate hikes, tax increases, spending cuts and protection.

There were without question structural imbalances in the global economy that condemned traditional policy responses to failure. The downward pressure on prices of commodities and manufactures was a matter of international supply and demand more than policy. The war had burdened America’s principal trading partners with hard-currency debts – reparations in the case of Germany – which they could only service by exporting to the United States or to one another. The increased power of trade unions had made labour markets more rigid than before the war, so that falls in prices and profits did not translate into lower wages but into factory closures and unemployment.
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In his inaugural address on March 4, 1933 Hoover’s successor Franklin Roosevelt offered a better diagnosis when he identified ‘fear itself – nameless, unreasoning, unjustified terror’ – as the root cause of the Depression. Expectations of investors had taken a severe battering; it would be years before their spirits recovered. Yet the measures Roosevelt proposed on becoming president proved little more effectual than Hoover’s. Roosevelt wanted to raise agricultural prices and to cut government spending, an unpromising combination at the best of times; the majority of his schemes merely tended to increase the power of the federal government by demanding stricter
supervision on banks, national planning for public utilities and centralized control over relief efforts. The resulting jobs for bureaucrats made only a modest dent in the unemployment numbers. The policy changes that made the most difference were ones generally forced on governments. In 1931 more than forty countries had been on the gold standard; by 1937 virtually none were. Both the United Kingdom and then the United States, the two anchors of the international monetary system, were forced to float their currencies, allowing their central banks to focus on lowering domestic interest rates without worrying about how changes in their gold reserves or capital flows would affect the exchange rate. At the same time, government deficits rose, as a result of increased public spending and collapsing revenues; this happened well in advance of the breakthrough in economic theory represented by Keynes’s
General Theory of Employment, Interest and Money
(1936), though only two countries ran deficits sufficiently large to provide an economic stimulus.

Currency devaluations stimulated recovery in two ways: allowing nominal interest rates to fall and, so long as people began to anticipate less deflation and perhaps even inflation, reducing real interest rates and real wages. Employing people began to look as if it might become profitable again – though the rate of recovery was not closely correlated to movements in real wages, suggesting that other inhibitions were at work, especially in the United States. Unfortunately the paroxysm of protectionism that by now had swept the world, persuading even the British to abandon free trade, meant that looser monetary and fiscal policies could do little to stimulate trade. Globalization was over; flows of goods were constrained by import duties, flows of capital by exchange controls and other devices, flows of labour by new restrictions on immigration. Indeed, Keynes came to believe that economic recovery could be sustained only in a more or less closed economy that aimed at autarky. As he remarked casually in the preface to the German edition of his book, ‘The theory of output as a whole… is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of
laissez-faire
.’

Keynes’s choice of word was revealing. Although the term owed its
origins to Italian fascism,
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the first truly totalitarian regime had been in existence for more than a decade when the Depression struck. By crippling the American colossus for a decade and laying waste to its trading partners and debtors, the economic crisis seemed to vindicate the Soviet model. For, if Marxism-Leninism stood for anything, it was the prediction that capitalism would collapse under the weight of its own contradictions. Now it seemed to be doing precisely that. Understandably, the more the American dream turned to night mare, the more people were attracted to the Russian alternative of a planned economy – insulated from the vagaries of the market, yet capable of feats of construction every bit as awesome as the skyscrapers of New York or the mass-produced cars of Henry Ford. All the totalitarian state asked in return was complete control of every aspect of life. Only in your dreams were you free from its intrusion, and even there the omnipresent demigod figure of the Leader was liable to intrude. The justification for this abolition of individual freedom was equality: from each according to his abilities, to each according to his needs, as the slogan put it. The aim was not just rapid industrialization; it was the ‘liquidation’ of the bourgeoisie and other property-owning classes.

Yet, as George Orwell would later observe, on the Soviet ‘Animal Farm’ some animals turned out to be more equal than others. It did not take long for a ‘new class’ (as the dissident Yugoslav Milovan Djilas later called it) to spring up, composed of the elite functionaries of the totalitarian state. Their control over every aspect of economic life and their freedom from any kind of independent scrutiny or popular accountability made it easy to justify and pay for a whole range of Party privileges; the
nomenklatura
were also in position to enrich themselves unofficially through peculation and corruption. There was another catch. The planned economy had an insatiable appetite not only for
workers but also for raw materials. These the Soviet Union had inherited in copious quantities from the Tsarist Empire. But other countries that adopted the totalitarian model were less well endowed. In Germany and Japan, the planned economy set a very different political tempo from the swinging syncopation of the jazz age. By the mid-1930s people there were no longer dancing; they were marching.

In the summer of 1931, in his seventy-fifth year, the playwright George Bernard Shaw paid a nine-day visit to the Soviet Union. What he saw – or thought he saw – was a workers’ paradise under construction. Among the sites he inspected was that of the projected Moscow– Volga Canal. The canal was intended to link the Soviet capital with the Volga River, not only to facilitate river traffic but also to supplement the rapidly expanding city’s water supply. In stark contrast to the dole queues of the West, the site would soon be swarming with workers. Here was a symbol of the apparently realizable dream of state socialism, and Western visitors like Shaw reacted ecstatically. They had seen the future, and – compared with an apparently defunct capitalist system – it seemed to work.

One of a motley tour party organized by Nancy and Waldorf Astor (among the other tourists was Philip Kerr, Marquis of Lothian), Shaw set off in his customary ironical mood, but soon succumbed to his Soviet hosts’ calculated flattery. Granted an audience with Stalin himself, Shaw was ‘disarm[ed]… by a smile in which there is no malice but also no credulity… [He] would pass… for a romantically dark eyed Georgian chieftain’. In an impromptu speech in Leningrad, Shaw declared enthusiastically: ‘If this great communistic experiment spreads over the whole world, we shall have a new era in history… If the future is the future as Lenin foresaw it, then we may all smile and look forward to the future without fear.’ ‘Were I only 18 years of age,’ he told journalists on his way back to England, ‘I would settle in Moscow tomorrow.’ In his hastily written book
The Rationalization of Russia
(1931), Shaw went still further: ‘Stalin has delivered the goods to an extent that seemed impossible ten years ago,’ he
rhapsodized. ‘Jesus Christ has come down to earth. He is no longer an idol. People are gaining some sort of idea of what would happen if He lived now.’ For once, Shaw’s irony was unintended.

‘Socialism in one country’ was Stalin’s solution to the problem that had repeatedly divided the leadership of the Bolshevik Party since Lenin’s death in 1924. How could the revolutionary regime achieve the industrialization of Russia’s backward rural economy without the resources of the more developed West? Trotsky had seen world revolution as the only answer. When that failed to materialize, other Bolshevik leaders, notably Nikolai Bukharin, were inclined to conclude that rapid industrialization was no longer an option. The pace would have to be slow. Stalin, ruthlessly positioning himself to be Lenin’s successor – suppressing Lenin’s deathbed warning against him – rode roughshod over these rarefied debates. Rapid industrialization, he insisted,
was
possible within the borders of the Soviet Union. All that was needed was a plan, and the iron willpower that had won the civil war. What Stalin meant by ‘socialism in one country’ was a new revolution – an economic revolution that he, the self-styled ‘man of steel’, would lead. Under the first Five-Year Plan, Soviet output was to be increased by a fifth. Managers were encouraged to ‘over-fulfil their quotas’; workers were exhorted to work superhumanly long shifts in imitation of the heroic miner and shock worker (
udarnik
) Aleksei Stakhanov.

Ostensibly, the aim was to strengthen the Soviet Union, to make it the economic, and hence the military, equal of the ‘imperialist’ powers still ranged against it. Yet Stalin always saw the strategic benefits of industrialization as secondary to the social transformation it implied. By forcing a huge transfer of manpower and resources from the countryside into the cities, he aimed to enlarge at a stroke the Soviet proletariat on which the Revolution was supposedly based. He succeeded: between 1928 and 1939 the urban labour force trebled in size. How precisely this was achieved was something Stalin’s star-struck Western admirers preferred to ignore. Even as the working class was artificially bloated in size, around four million people were ‘disfranchised’ because they had been ‘class enemies’ before the Revolution. ‘Non-toilers’ found themselves ousted from their jobs, from schools and hospitals, from the system of food rationing, even from their
homes. In Stalin’s eyes, all surviving elements of the pre-revolutionary society – former capitalists, nobles, merchants, officials, priests and kulaks – remained a real threat ‘with all their class sympathies, antipathies, traditions, habits, opinions, world views and so on’. They had to be unmasked and expelled from the Soviet body politic. Only in late 1935, after years of denunciations, disfranchisements and all the attendant deprivations, did Stalin seem to signal an end to the campaign against the offspring of ‘class aliens’ – but only to turn public attention to a new category of ‘enemies of the people’.

It is sometimes still said that Stalin’s crimes were ‘necessary’ to modernize an antiquated country. That was precisely how he justified the costs of collectivization to Churchill. But the human cost was out of all proportion to the gains in economic efficiency. And this was by no means accidental. The Dnipropetrovsk Party Secretary Mendal M. Khataevich made it clear to his party subordinates that the policy of collectivization of agriculture was only superficially an attempt to improve Soviet agriculture. Its true goal was the destruction of the class enemy – to be precise, ‘the liquidation of the kulaks as a class’:

Your loyalty to the Party and to Comrade Stalin will be tested and measured by your work in the villages. There is no room for weakness. This is no job for the squeamish. You’ll need strong stomachs and an iron will. The Party will accept no excuses for failure.

Predictably, the consequence of the systematic annihilation of any farmer suspected of being a kulak was not economic growth but one of the greatest man-made famines in history. As Party functionaries descended on the countryside with orders to abolish private property and ‘liquidate’ anyone who had accumulated more than the average amount of capital, there was chaos. Who exactly was a kulak?
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Those
who had been better-off before the Revolution or those who had done well since? What exactly did it mean to ‘exploit’ other peasants? Lending them money when they were short of cash? Rather than see their cattle and pigs confiscated, many peasants preferred to slaughter and eat them, so that by 1935 total Soviet livestock was reduced to half of its 1929 level. But the brief orgy of eating was followed by a protracted, agonizing starvation. Without animal fertilizers, crop yields plummeted – grain output in 1932 was down by a fifth compared with 1930. Grain seizures to feed Russia’s cities left entire villages with literally nothing to eat. Starving people ate cats, dogs, field mice, birds, tree bark and even horse manure. Some went into the fields and ate half-ripe ears of corn. There were even cases of cannibalism. As in 1920–21, typhus followed hard on the heels of dearth. Perhaps as many as eleven million people died in what was a wholly unnatural and unnecessary disaster. In addition, almost 400,000 households, or close to two million people, were deported as ‘special exiles’ to Siberia and Central Asia. Many of those who resisted collectivization were shot on the spot; perhaps as many as 3.5 million victims of ‘dekulakization’ subsequently died in labour camps. It was a crime the regime did its utmost to conceal from the world, confining foreign journalists to Moscow and restoring the Tsarist passport system to prevent famine victims fleeing to the cities for relief.
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Even the 1937 census was suppressed because it revealed a total population of just 156 million, when natural increase would have increased it to 186 million. Only a handful of Western reporters – notably Gareth Jones of the
Daily Express
, Malcolm Muggeridge of the
Manchester Guardian
, Pierre Berland of
Le Temps
and William Cham-berlin of the
Christian Science Monitor
– had the guts to publish accurate reports about the famine. The bulk of the press corps in Moscow, notably Walter Duranty of the
New York Times
,
†
knowingly connived
at the cover-up for fear of jeopardizing their access to the
nomenklatura
.