The Revolution Betrayed - Chapter 4: Stalin’s Illusion of Stability

In The Revolution Betrayed, particularly in Chapter 4, Trotsky examines how Stalin’s bureaucratic distortions of socialism undermined both agricultural and industrial development. A key example of this is the regime's attempt to artificially fix economic relations through state-imposed price controls during the collectivization of agriculture.

Fixed prices were introduced alongside forced collectivization as part of Stalin’s attempt to stabilize the economy and combat inflation. However, by setting the prices of agricultural goods far below their real value, the Soviet state stripped farmers of any material incentive to increase production. Without the prospect of higher returns, there was no motivation for peasants to expand output or invest additional labour and resources into cultivation. Instead of boosting the rural economy to support rapid industrialization, production stagnated or even declined.

This situation was compounded by the state's policy of grain requisitioning: vast amounts of grain were forcibly taken from the peasantry for export with little or no compensation. These exports were designed to finance the purchase of industrial machinery from abroad — vital for Stalin’s program of "catching up and overtaking" the capitalist powers. Yet, the cost was borne entirely by the Soviet working masses, particularly the peasantry, through domestic shortages and famine.

While fixed prices kept nominal prices stable, they did not eliminate the real effects of inflation. As agricultural and consumer goods became scarcer, rationing had to be introduced to manage distribution. The fixed prices thus concealed rather than prevented inflation — what Trotsky and later economists might call "hidden inflation". More rubles were printed to fund industrial investment, but with fewer goods in circulation, the rubles themselves became effectively devalued, not through rising official prices, but through queues, scarcity, and reduced access to essentials. The bureaucracy’s claim that inflation was unique to capitalism was exposed as a self-serving fiction.

Trotsky understood that during the transitional period from capitalism to socialism, money must still serve as a measure of value — especially in a situation where production is not yet qualitatively abundant. Under democratic workers’ control, money would reflect real economic relations and help stabilize trade and distribution. Instead, Stalin’s fixed pricing system ruptured the link between value and price, severing production from real social needs and introducing chaos beneath the surface appearance of stability.

In a normal market economy, high demand typically leads to higher prices, which in turn encourages greater supply — a basic mechanism for balancing shortages and surpluses. In the Soviet system, however, price rigidity artificially blocked this adjustment. With no mechanism to reward increased production, and with bureaucratic planning replacing workers' and peasants' initiative, economic growth based on qualitative improvement became impossible.

While in capitalist economies moderate inflation can, at times, ease wage adjustments (e.g., raising productive workers' wages while freezing others to create real wage shifts without nominal cuts), Stalin’s system eliminated even this flexibility. Wage and price structures became statistical rather than economic, obscuring real imbalances and freezing inefficiencies into the structure of the planned economy.

Thus, Stalin created a statistical illusion of stability while presiding over a growing economic dislocation. Far from eliminating the contradictions of capitalism, bureaucratic command planning exacerbated them in a concealed form — one in which shortages, social tension, and inefficiency accumulated until they later exploded into open crisis.

Trotsky’s critique shows that socialism cannot be built by decree. Economic life must be consciously and democratically planned, linking incentives to real social needs, allowing money and prices to act as transitional instruments, and ultimately subordinating them to collective human development — not to the blind dictates of an unaccountable bureaucracy