According to Marxist doctrine, the state is nothing more than the servant of the class that owns the means of production; it has no interests of its own. This belief showed remarkable ignorance of political history since there exists a great deal of evidence that, from the time of the pharaohs, state officials looked after themselves and formed an interest group in many instances more influential than the propertied class. Lenin was appalled by the rapid growth of the Soviet bureaucracy, which his own policies had necessitated. For as the Communist Party, through the state, took charge of the entire organized life of the country, nationalizing large and small industries, retail and wholesale trade, transport and services, educational and other institutions, the officialdom that replaced the private owners and their managers expanded by leaps and bounds. Suffice it to say that the organization in charge of the country's industry, the Supreme Council of the National Economy, employed in 1921 nearly one quarter of a million officials, and this at a time when industrial productivity had dropped to below one-fifth of its 1913 level. By 1928, the party and state bureaucracy came to number 4 million.
The great majority of those who had joined the ranks of Soviet functionaries—many of them holdovers from the old regime—did so because a government job assured them a modicum of security and livelihood. Before long they came to constitute a caste that placed its collective interests above not only those of the population at large but those of the Communist cause that they nominally served.
The first to realize the potential uses of the Soviet bureaucracy as an instrument for shoring up his personal position in the party was Joseph Stalin. A semieducated Georgian who in his youth had dropped out of religious seminary and joined the Bolsheviks, he had gained Lenin's confidence by his devotion to him as well as by displaying outstanding administrative talents. Unlike Trotsky and the other communist leaders, such as Lev Kamenev and Grigorii Zinoviev, Stalin never questioned Lenin's judgment; and while they wrote pamphlets and delivered speeches, he quietly supervised the burgeoning army of functionaries. Lenin advanced him ahead of his more intellectual associates and in 1922 had him appointed the party's general secretary, which gave Stalin control of the party's cadres.
From the outset, Stalin used his office to promote communists who owed him personal loyalty and on whom he could rely in the struggle for party leadership likely to break out before long because of Lenin's failing health. It is he who created the institution of the nomenklatura: registers of communist officials eligible for important executive appointments and rewarded with such privileges as access to special food stores, hospitals, resorts, and even tailors and cemeteries. The policy of creating a privileged elite sustained the communist regime for the next seventy years by ensconcing an administrative class with a vital interest in the regime's survival. But, by the same token, it ensured that the communist ideal of social equality would remain an empty slogan.
No less galling were the Bolsheviks' disappointments with managing the economy. Socialist literature had assured them that capitalism, driven by profit, was inherently much less efficient than an economy monopolized by the state. They believed that the bigger an enterprise, the better it functioned. They further believed that it was possible to run an economy without resort to money.
All these assumptions turned out to be wrong. Attempts to impose a central plan on the national economy proved futile. Mismanagement of factories, first by workers and then by Communist functionaries who replaced them, drastically lowered productivity. The effort, enforced by the Cheka, to stop private trade also failed in its purpose, as producers and middlemen found ways to circumvent it; the free market, which the Communists saw as the quintessence of capitalism and which they were determined to liquidate, did not vanish but shifted underground. Before long the shadow economy outstripped the official Soviet one. The hyperinflation that the government deliberately launched by flooding the country with banknotes did achieve its aim of destroying savings: by 1923, prices in the Soviet Union had increased 100 million times over those of 1927. But the abandonment of money made it impossible to keep a proper budget or calculate transactions between Soviet enterprises.
The net result of such amateurish management, aggravated by the civil war, was a catastrophic drop of all productive indices. Overall large-scale industrial production in 1920 was 18 percent of what it had been in 1913; the output of coal dropped to 27 percent and iron to 2.4 percent. The number of employed industrial workers in 1921 was less than one-half of what it had been in 1918; their living standard fell to one-third of its prewar level. A Communist specialist described what happened to the Soviet economy between 1917 and 1920 as a calamity 'unparalleled in the history of mankind.'
When confronted with such failures, Lenin's instinct was to resort to the firing squad.