South Urals industry in 20—30s of the XX century
Scientific research
Andrey Tikhomirov

© Andrey Tikhomirov, 2021

ISBN 978-5-0053-4612-4

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Introduction

Industrial development of the South Urals in the years of the new economic policy and pre-war five-year plans is a topic of topical importance for modern Russia. Regardless of political preferences, the problem of the country’s modernization and its accelerated transformation into an industrially developed power comes to the foreground. In this regard, the search for fundamental trends and regularities of domestic historical experience will help to better illuminate ways to solve modern economic problems.

The construction of the industrial foundation in Russia and the USSR lasted for many decades. The rapid development of industry, which began in Russia after the abolition of serfdom, continued under Soviet rule as an integral, organically interrelated process. In the late 20s – early 30s of the XX century, in connection with the transition to the planned nonproprietary economy, the country’s

leadership relied on theory of “leapfrogging” – an accelerated transition to a developed industrial society.

It was declared about the country’s transformation from agrarian-industrial to industrial-agrarian way of building factories and plants, especially enterprises of heavy industry. Huge funds and allocations were directed to the accelerated development of heavy industry enterprises. Millions of workers and peasants were sent to construction sites. The parallel collectivization – planting of the

kolkhoz system – contributed to the mass influx of workers.

Modernization of the late 20s – early 30s of the XX century in Russia objectively pursued the same goals as the reforms of 60—70s of the XIX century. It also had a “catching-up character”, so it had in many ways the same objectives. The problems of industrialization were set as a priority task for the development of the Soviet economy in the second half of the twenties. At the same time, its main goals were also defined:

the elimination of the country’s industrial underdevelopment;

to achieve economic independence;

to create an industrial base;

priority development of heavy industries.

These tasks were hampered by a lack of material and financial resources, resulting in the centralization of resource allocations. In 1927, Soviet economists began to develop the first five-year plan, which was to provide for the integrated development of the country’s regions and accelerate industrialization.

The transition to industrialization meant a new stage in the development of the entire country. The restoration of the national economy after the end of the civil war took place mainly at the old technical base. The problems of economic recovery were to be solved by a new economic policy introduced in 1921. The socialist industrialization of the country at that time had the main goal of creating the material and technical basis of industry on the basis of state control, development and strengthening of “socialist” production relations in the country, based on state ownership of the means of production. The Soviet power transformed industrialization into a tool for implementing the ideas of restructuring society. The South Urals occupied an important place in the process of industrialization as a raw material base of the country. These are deposits of chrome ore, magnesite, asbestos, copper, iron and nickel ores, salt, oil shale.

The tasks facing the South Urals’ industry were to develop and use new industrial deposits of copper, nickel, iron ores, ceramic raw materials, construction materials, and potash salts. Five years of the 30-s should have promoted accelerated formation of the industry of the region, the inhabitants of the region faced enormous tasks – to turn the agricultural area into an industrial region.

The purpose of scientific work is to illuminate theoretical bases and practical experience of development of the industry of Southern Ural Mountains in years of the new economic policy and pre-war five-years that can be useful for modernity.

Work tasks:

1. to form a holistic view of the South Urals industry development during the new economic policy years;

2. to consider the development of industry in the region during the first five years;

3. to draw main conclusions on the results of industrial development of the region.

Aims, methods, sources, terms of industrialization of the South Urals:

Objectives: to transform the region from an agrarian to an industrial one. industrial-agrarian, ensuring technical-economic independence, to strengthen the defense capabilities and improve the welfare of the people, a demonstration of the benefits of socialism;

Methods: State initiative supported by enthusiasm from below.

Command and administrative methods dominate – the systematic nature of industrialization;

Sources: domestic savings, loans, pumping out of the village, foreign trade income, cheap labour, worker enthusiasm, prison labour; the tight deadlines for industrialization and the concomitant pace of its implementation. High growth of industrial production.

Negative moments of industrialization which have appeared in Southern Ural: commodity hunger, ration cards (1928—1935), decrease in wages, shortage of highly skilled personnel, migration of the population and aggravation of housing problems, difficulties in adjustment of new manufacture, mass accidents and breakdowns – search for guilty, reprisals.

The basic directions of economic activity in Southern Urals: the accelerated rates of development of the enterprises of group “A” (manufacture of means of manufacture), the main problem – creation of the second coal-metallurgical base in the east (the Ural-Kuznetsk industrial complex), creation of new industries, struggle for mastering of new technics, development of power base, preparation

of qualified labour force and ITR.

The end of the civil war created the necessary conditions for the immediate start of “socialist” construction, but to begin construction in early 1921 was even harder than in early 1918. During the Civil War, Russia’s already backward economy was thrown back decades. Only the small peasant farms that prevailed in the country at the time could provide food for the starving population of the cities and raw materials for the destroyed industry. Therefore, under the new economic policy, the Soviet authorities had to use private capital to produce the necessary industrial goods more quickly. The transition to new economic policy thus, from the point of view of Soviet historians, meant a temporary resumption of capitalist production in small industrial and artisanal enterprises producing consumer goods. As a result, a number of small enterprises were denationalized, and private individuals were allowed to rent public enterprises. Capitalists were only allowed to produce a number of consumer goods, i.e. in very necessary, but not decisive, sectors of production. And the decisive industries, according to Soviet economists, the command heights in the economy – large industry, land, banks, transport, foreign trade – were to remain in the hands of the Soviet state.

“Russia later countries of Western Europe embarked on the path of industrial development in the late XIX and early XX centuries. By the time of the October socialist revolution, it remained an agrarian country with a predominance of precapitalist small commodity production of peasants and craftsmen (about 90% of the total working population). This meant that there were no material conditions for direct and direct transition to socialism. Aware of and considering this fact, in 1921 Lenin proposed a new economic policy, namely: to direct the inevitable development of small commodity and capitalist production in the direction of state capitalism of a special kind, with a public sector leading role in industry and under the control of the state of workers and in their interests through intermediary links (cooperation of small producers, equivalent to the exchange of goods between town and village, the use of the market and commodity-money relations). This was the only possible and scientifically sound way of moving towards socialism.

But the intensification of class struggle within the country and the growing threat of new intervention by the capitalist environment in the late 1920s raised the question of accelerating the transition to socialism and boosting industrialization (creation of heavy industry as the basis of the country’s defense capability). In 1931 it was decided to accelerate the transition to socialism and to force industrialization (creation of a heavy industry as the basis of the country’s defense capacity). Stalin harshly formulated the choice: “We are -150 years behind the capitalist West. We have to go this way in 10 years. Either we will do it, for we are in doubt”. This conclusion turned out to be prophetic and was confirmed in 1941”.

The problems of industrial production development were actively covered. Theoretical discussions in the mid-20s centred on the questions of how to carry out industrialization (should we start with light industry, i.e. should we go for “chintz industrialization”), where to get sources for huge investments in heavy industry?

Economists of Marxist-Leninist direction saw in socialist industrialization practical realization of requirements of the law of preferential growth of production means of production. Such ideas were substantiated by S.Strumilin. He analyzed the rate of capital accumulation in the industry of pre-revolutionary Russia and compared it with the Soviet time. From such analysis, he concluded that the country had all the prerequisites for accelerated industrialization and for exceeding the previously known growth rates.

F.E. Dzerzhinsky, S. Ordzhonikidze, V.I. Mezhlauk, V.V. Mezhlauk actively defended the Bolshevik concept of socialist industrialization. Kuibyshev, A.I. Rykov.

They were opposed by economists, who at that time were known as “bourgeois” (B. Brutskus, L. Litoshenko, L. Yurovsky, etc.). B. Brutskus, L. Litoshenko insisted on the inadmissibility of redistribution of national income in favor of industry. L. Yurovsky proposed to achieve a balanced market by restraining capital construction. (Bukharin N.I., Preobrazhensky E.A. Ways of Development: Discussions of the 20s. – L.: Lenizdat, 1990. Lenin V.I. Draft resolution on the report on electrification // Op. cit. – _. 42. – _. 196, Trotsky’s

Archive. – M.: Terra Publishing Centre, 1990. – T. 3,4.

Stromilin S.G. Statistics and Economics. – Moscow: Science, 1979. – _. 28. His own. Problems of Economics of Labour. – Moscow: Science, 1982.

Dzerzhinsky F.E. Selected works. – T. 2. – M.: Politizdat, 1977, S. Ordzhonikidze. Articles and speeches. – T. 2. – 1926—1937: Politizdat, 1977,

Ordzhonikidze S. Articles and Speeches – T. – M.: Gospolitizdat, 1957, Mezhlauk V.I. Cheapening of construction – decisive link in the construction program of 1936.-M.: PartizdatskKVKShchb), 1935, Kuibyshev V.V. Selected works.-M.: Gospolitizdat, 1958, A.I. Rykov Selected works.-M.: Economics, 1990).

We do not tend to stick the label of “bourgeoisness” to economists L. Yurovsky and L. Litoshenko. Their proposed concept of painless and gradual progressive development of the country now looks much more attractive than the one according to which it was developed. However, our theoretical calculations allow us to conclude that this best concept of development did not sufficiently take into account the time factor. History has devoted too little time to industrialization.

Nikolai Dmitrievich Kondratyev – the biggest economist and theorist of that time – took his own position. Without opposing the course of industrialization, Kondratyev, in fact, was against the disproportionate development of major industries, as he saw it as a basis for possible future economic crises. He objected to the high growth rates and savings rates adopted, believing them to be unjustified.

N.I. Bukharin proposed to develop our industry on the basis of increasing the technical level, however, in strict compliance with both the market capacity and the financial capacity of the state. He advocated rapid but balanced growth of the heavy industry with other industries.

With many comparative shortcomings in the struggle of ideas won the plan of transformation, which was proposed by most of the country’s leadership, headed by Stalin. This plan took into account the factor of limited time.

The main mistake of Stalin’s critics is an attempt to prove their ignorance of the economic laws of development. That was a clear distortion of the truth. On the contrary, he stressed: “At our enterprises are relevant issues such as the question of economic calculation and profitability, the question of cost, the question of prices, etc. Therefore, our enterprises cannot and should not do without the law of cost”. (Yurovsky L. Modern problems of monetary policy. – _., 1926. – _. 54,

Kondratyev N.D. Problems of economic dynamics. – Moscow: Economics, 1989, Kun M. Bukharin: his friends and enemies. – Moscow: Republic, 1992, Stalin I.V. Economic Problems of Socialism in the USSR. – Moscow: Gosolitizdat, 1952. – 20).

South Ural industry in the new economic policy years

In the beginning of 20th years of XX century the first concrete step in revival of economy of Southern Ural Mountains has been made. In March 1921 the X Congress of the RCP (b) took place, which took a course on a new economic policy, and by the decree from May 17 on abolition of nationalization of small enterprises each citizen was given the right to be engaged in trade, to organize small industrial enterprises with the number of workers not more than 10—15 people. The revival and development of the market and the monetary system were declared to be the main principles of the New economic policy, while in the industrial sector the transition to commercial settlement, overcoming the wage equalization, the development of cooperative and other non-state enterprises.

The first and main measure of the new economic policy was to replace food politics with a food tax, initially set at about 20% of the net product of peasant labor (i.e., requiring almost twice as much bread as food politics), and then reducing to 10% of the crop and less and took the form of money. The peasant could sell the remaining products after the prolongation of the tax at his discretion – either to the state or on the free market.

Radical transformations have taken place in industry. Senior managements were abolished, and instead trusts were created – associations of homogeneous or interrelated enterprises, which gained full economic and financial independence, up to the right to issue long-term bonded loans.

In the 1923 decree of the Central Executive Committee and the Council of People’s Commissars the following was written down: trusts – state industrial enterprises, to which the state grants independence in the production of their operations, according to the charter approved for each of them, and which operate on the basis of commercial calculation to extract profits.

Syndicates began to emerge – voluntary trust associations on the basis of cooperation, engaged in sales, supply, lending, foreign trade operations. The board of syndicates was elected at a meeting of trust representatives, and each trust could delegate most or less of its supply and sales to the syndicate.

Sales of finished goods, purchase of raw materials and equipment were made in the full-fledged market, through wholesale trade channels. Trade and industrial enterprises started to appear in the South Urals.

In industry and other sectors, monetary remuneration of labor was restored, wage rates were introduced to exclude equalization, and restrictions were removed to increase wages as output grew. Labor armies were abolished, mandatory labor duty and basic restrictions on changing jobs were abolished.

The labor organization was built on the principles of material incentives that replaced the non-economic coercion of “military communism”.

In the South Urals industry and trade, the private sector emerged: some stateowned enterprises were denationalized, others were leased out; it was allowed to establish their own industrial enterprises for individuals with no more than 20 employees (this “ceiling” was later raised). Among the factories leased by the private sector were those with 200—300 employees, while in total the private sector accounted for up to a quarter of the industrial output during the new economic policy period. Cooperation of all forms and kinds was rapidly developing.

During World War I, the regional industry lived off state subsidies. In the period of post-war reconstruction, in the conditions of new economic policy could not go on like this.

The society needed an industry providing expanded reproduction. It was necessary to remove the enterprises from the state dependence and to transfer them to the self-support account. By the Decree of 9.VIII.1921 the Council of People’s Commissars proclaimed the transfer of industry of the country to the self-account.

In the first years of the new economic policy, the entire industry of the South Urals could not be taken into account. The light industry, working on the market, switched to the self-account right after the introduction of the new economic policy, and the heavy industry was transferred to the new conditions of management gradually. The Soviet planning system was strengthened. At provincial and regional executive committees were created planning commissions, and in all economic addicts and departments – special planning bodies.

It was necessary to restore the industry on the basis of old equipment. It took the heroic efforts of the workers. Many human resources workers returned to production. The labor discipline had been strengthened. The working class showed a lot of persistence and ingenuity in the struggle for the restoration and profitability of plants and factories.

Production meetings of workers in the South Urals (Orenburg, Chelyabinsk, and Orsk), attended by representatives of trade unions and administration, played a major role in the recovery. The meetings addressed specific issues of improving production.

Workers in the South Urals have ensured a high rate of industrial growth. The specialization of production started during the New economic policy years were of great importance for the development of mechanical engineering. Many factories introduced serial production instead of the single production that was typical for the old Russian machine building industry. The most important economic problem was the rapid restoration of mineral fuel production. The civil war undermined the Krai’s economy, and the South Urals’ rap began with the almost complete collapse of industry. For example, out of 69 enterprises of the Orenburg Region in 1921 41, i.e. about 60%, were inactive. According to the data provided by the Promburo, the labor force availability was on the average 41%. The number of workers from 1917 to 1921 decreased at the plant “Orel” from 860 to 200 people, in railway workshops – from 3000 to 1.5 thousand 6.

The catastrophic shortage of workers, which arose in 1921 as a result of the disbandment of the labour force and the return of refugees to their homes, was compounded by very poor discipline at work. Labour productivity in industry in the South Urals was low.

Truancy was common, most often forced. People stood in bread queues during working hours or went to the village hoping to buy or exchange food.

In the first years of the Soviet power a number of valuable productions were launched in the South Urals: cold rolling of steel bands of hoop iron, steel ropes, solid drawn pipes, enameled tableware, the production of braids and steel tools was expanded. Since 1923 the production of dynamical iron has been resumed.

There was a reorganization of large and medium industry. The state controlled only vital and profitable enterprises with manpower, raw materials and fuel.

Small industry began to be denationalized. The situation of workers at enterprises remained difficult. Difficulties of this period were multiplied by the fact that hunger was rampant in the region.

“As a result of hunger and diseases, the population of the Orenburg Province decreased by 115142 people from 1921 to 1922. There was a decrease in the rural population, but the urban population increased due to the inflow of 7736 people from the village”.

The first unemployed appear, unemployment has spread to the printing, clothing and food industries.

“The desire to increase productivity pushed the economic authorities to switch to piece-work forms of wages. At the plant ‘Orley’ in the transition to pieceworking labor productivity exceeded the norm by 30%. When the liquidation commission from December 15, 1924 banned it, increasing the norm of production, productivity fell by 30%. Leatherworkers and printers were the first to switch to the division”.

The region’s industry is rapidly developing. The process of restoration and expansion of plants is underway. At the beginning of the 20s the process of restoration of the destroyed plants and factories in Orenburg province is going on: “By 1925, out of 180 enterprises 132 were operating. Proletarian personnel who left the city in the hungry year 1921 returned to industry. 94% of workers

worked at state enterprises. In all branches, except for flour milling, there was an increase in the number of workers. By the end of 1925, 35054 people were employed in the province together with temporary workers against 26130 in 1922”.

The restoration of the national economy in the South Urals was mainly completed in 1925—1926. By the volume of industrial output, the number of employed workers reached the level of 1913, although the full restoration lasted until the end of the 20s. The share of the public sector was 72.6%.

In 1925, 84% of workers were employed in the public sector of the Orenburg Region, 6% in cooperative organizations and 10% in private enterprises. But since 1926 the tendency to increase the share of the public sector at the expense of others has been clearly seen. As for the private industry, the requirements and sanctions have become more and more stringent.

The economic competition of these sectors is replaced by volitional decisions of state bodies. As a result of this policy, in 1927 94% of all workers worked at state enterprises. In the cooperative and private industry, the remaining 6% accounted for 15.5% of output, which allows us to conclude that this sector of the economy is more productive”.

During this period a number of new productions are emerging in the South Urals. If iron production did not reach the pre-war level, production of special grades of steel and products, wire, a significant amount of tin plate, and roofing were becoming increasingly important. The quantity and quality of market assortment – tin plates, axes, braids, nails, etc. – is increasing. But the rate of transfer of industry to the production of quality metal products was found to be insufficient.

In December 1926 the first Urals Congress of open-hearth production workers was held, the spiritual father of which was V. E. Grum-Grzhimailo. Prominent statesmen, scientists and engineers of plants of the South, the Centre, the Urals were present at the Congress as guests and delegates. The decisions of the Congress had a huge impact on the development of steelmaking throughout the country. The resolution on the reporting report noted the need to develop the Urals industry in terms of quality – production of high quality products.

This dictated the development of smelting not only pure pig iron, but also highquality iron and steel. Therefore the nearest tasks of the Southern Urals were:

development of production of dynamical and transformer iron, installation of production of solid drawn pipes for responsible purpose, acceleration of organization of special steel production in Zlatoust, expansion of open-hearth production, organization of production of steel rolled wire. It was noted that the development of the production of quality products in the South Urals is a natural and correct way to revive the Urals metallurgy and guarantee its further development.

January 14, 1927 was issued a resolution of the SNK (Council of People’s Commissars) of the RSFSR on the report of the regional executive committee.

The resolution instructed the All-Union National Economy Council (SNK) – the State Planning Commission of the RSFSR – to pay special attention to the expansion of wood-coal fuel production and the development of high-quality metal products in the Urals, as well as the production of tool steel and highquality metal products.

The interests of the revival and growth of agriculture and the development of trade between town and village have led to the recovery of light industry in the South Urals earlier than heavy industry. The reconstruction of mines, factories, power plants and other enterprises was much harder.

The biggest investments were directed by the state to electrification – the energy base of the whole economy. During the recovery period, new enterprises were created only in the power industry and electrical industry.

In 1921 – 1926 the program-minimum of the GOELRO plan was fulfilled: restoration and unification by high-voltage lines, electric bushing-up of old power plants. The construction of new powerful district power plants in the South Urals was also launched.

In order to switch to self-accounting, three most important issues should have been resolved: the concentration of industrial production, changes in industrial management and in tariff policy.

The concentration of industry in the South Urals was carried out between 1921 and 1924. It was unusual, and meant not creating new powerful enterprises, but concentrating production on those factories and plants that were provided with raw material, material and financial resources. Only these enterprises were included in the state economic plan and fully or partially supplied by the state.

All other enterprises were either conserved, leased, conceded, or liquidated.

Such concentration made it possible to obtain surplus product from a certain part of industry.

The South Urals had great difficulties with food, there was a lack of industrial goods. Gradually, factories and factories were engaged in a persistent struggle to increase productivity, to save fuel, to use equipment better, and trade was developing. New economic policy has intensified the work of public and private enterprises, and industrial recovery has been rapid. A movement has begun at

enterprises for a voluntary increase in production rates. Workers made a commitment to work more, without additional pay. Strike brigades and groups of exemplary work were created, where high discipline and productivity were displayed.

Simultaneously with the quantitative growth of the working class, its activity and creative energy increased. By the end of the recovery period, labor productivity in the Orenburg Province reached 75% of the prewar level. On their own initiative, workers increased their production rates. In the railway workshops of E. S. Egorov, V. N. Kotov, F. I. Proshkin, I. E. Korzhemanov and others were performing a shift and a half or two standards. The ranks of inventors were growing. Railwayman FP Kazantsev invented a cast-iron body of air distributor to a new system of railway brakes.

New economis policy was aimed, first of all, at getting the region out of the deep social and economic crisis, restoring the economy and raising the national welfare. In order to achieve these goals during the new economic policy, the most important means were used, such as:

– to restore the equivalent exchange between town and village;

– introduction of commercial settlement in the sphere of industry and trade;

– creation of a hard currency and a developed credit and banking system;

– Wide use of various methods to stimulate workers and peasants.

More broadly, new economic policy was understood as the path to socialism through state capitalism while maintaining the firm and monopolistic political power of the Bolshevik Party. At the same time, the state apparatus was thought of as a tool to keep commodity-money relations within certain limits.

In 1926, 3.5 times more coal was extracted in the mines of the South Urals than in 1913. During the New economic policy period, a radical reform of industrial management was carried out. The scheme of management of the industry has acquired such kind: The Supreme Council of National Economy (VSNKh) – syndicate – trust.

Being relieved of the operational management of the enterprises, the All-Union Agricultural Exhibition began to develop only plans for the development of industry as a whole, to monitor their implementation, to conduct a single technical policy.

Syndicates (self-accounting trade unions of trusts created on shares) carried out functions of sales of production, by means of orders regulated work of trusts.

The main production unit of steel (until the end of 30-s) self-supporting associations – trusts. They were given the rights of planning, distribution of funds, personnel placement. The trusts were fully responsible for the break-even performance of their enterprises (the decree of April 10, 1923 established that the state treasury was not responsible for the debts of the trusts).

In the end it meant that from a passive object of management from above the state enterprise turned into an active subject of social and economic policy.

The logical consequence of the denaturalization of economic relations in the South Urals was the restoration of commodity and monetary and financial credit subsystems. As a result of the 1922—1924 monetary reform, the transition to hard currency was made. The work of banks was resumed. By placing production activities of the trusts under strict control, banks stimulated more efficient work.

Prombank introduced the procedure for granting long-term loans to trusts for new construction on a competitive basis.

The granting of significant economic independence to the trusts was organically connected, further, with the development of planned initiatives in the national economy. Thus, in 1921 the central planning body of the country (Gosplan) was created. In this case, the new economic policy did not change the single state economic plan and did not go out of its scope, and changed the approach to its implementation.

In other words, the problem of combining plan and commodity-money relations, plan and market, development of state, cooperative (industrial cooperation) and handicraft industry became important in the South Urals.

However, it should be stressed that the process described in the South Urals was far from being unequivocal. Democratic methods of economic management (when one of the most important regulators of economic development is the market) contributed to the economic progress of the country. But at the same time, the gradual assertion of the Stalinist regime (with its command and control system) steadily led to the growing alienation of workers from property and power, to a decrease in the motivation for productive labor, and to an increase in contradictions in economic and social relations.

With the assumption of local trade turnover, the permitting of private business activities, and the restoration of the market throughout the country, a link between town and village was ensured. A crucial role in this success was also played by the transfer of state enterprises to commercial settlements.

The wide introduction of economic calculation was hindered by a number of reasons: lack of fixed and circulating assets, economically trained personnel, lack of developed supply and sales staff, long unprofitability of enterprises in the revived heavy industry, etc.

Many of these transferred businesses in the South Urals were practically unable to operate on a self-financing and payback basis. As a result, state enterprises began to be united into trusts. More often than not, enterprises producing homogeneous products or dissimilar but technologically connected with each other were united. The trusts were fully responsible for the organization of production and sales, performance of annual tasks and quality of products.

It was the trust, especially in the mid-20s, that was a legal entity and a subject of independent property rights. Enterprises that were part of it, the rights of legal entity, industrial, commercial and financial independence did not have. As the main industrial self-accounting unit, the trust existed for about 9 years.

If at the beginning of the new economic policy trusts are autonomous and operatively independent units of “socialist” sector of production, then since 1927 they have been turning into economic agents of the state, performing planned tasks. Potential possibilities of trusts as participants of market relations were not used also due to a number of other objective reasons. In particular, due to their underdeveloped logistics and sales system, they could not become either a fullfledged seller or a buyer in the market.

Having realized the insoluble problem of material support and sale of finished products by their own efforts, the trusts on their own initiative began to create such economic organizations as syndicates. Syndicate forms of state industry organization in the South Urals emerged in March 1921 – January 1923.

Syndicates were associations of voluntary type, which built their relations with the trusts on contractual commercial grounds.

Syndicate capital was formed by bank loans, government loans, mutual funds from trusts and share issues. The main functions of syndicates were to assist their trust shareholders in selling finished products and providing them with materials, semi-finished products, raw materials and fuel. The activities of syndicates were built on a commercial basis (i.e., they were paid for). Their employees were interested in making a profit.

In the very first years of their existence in the South Urals neither trusts nor syndicates were able to cope with the task of organizing an increasingly large trade turnover (especially in terms of territory). There were no competent state bodies which would be engaged at due level in studying of the nascent market, an account of demand and supply, effective regulation of commodity streams within cities, counties, provinces (oblasts), republics, the country as a whole.

Occurrence, development and liquidation of the syndicate form of wholesale and exchange trade is explained by changes in the position and role of the state trade system in the country’s economy. They functioned until the state wholesale and wholesale and retail trade strengthened. The paradox is that they themselves contributed to it to the maximum extent possible.

Cooperation has played a bigger role in the implementation of the new economic policy in the South Urals aimed at establishing commodity and market links between town and village than state trade.

At the beginning of the new economic policy, all the main types of cooperation (consumer, agricultural, handicrafts) were merged into one consumer cooperative, because they were engaged in the same thing – preparation and distribution of products.

The consumer cooperative society became an integral part of the state overlapping distribution apparatus. Deprived of any initiative and independence within it, it slowly agonized. In an environment of increasing commodity hunger, many cooperatives were ceasing their activities. In order to revive the cooperation, various activities were developed and implemented.

The cooperation was given greater opportunities to participate in procurement and sales operations, it was given the opportunity to participate in procurement and sales operations on the basis of leases, nationalized enterprises were transferred to it on the basis of leases, credit operations of cooperative institutions were supported with the help of state loans, etc. However, the reality was that cooperative associations had to rely on their own resources, the shareholders’ funds.

In 1929, construction began in the South Urals, in the Chelyabinsk region of Magnitogorsk Metallurgical Plant, which was part of a new coal-metallurgical base in the east – the Urals-Kuzbass. Magnitogorsk combine – a complex enterprise with a complete metallurgical cycle. Construction of the plant is carried out at a rapid pace. On May 15, 1931 operation of mine began, and on January 31, 1932 the first blast furnace was blown out.

The newspaper “Smychka” for January 1930 writes: “From the conference on the study of productive forces of the Sredne Volga region, the Orenburg district was part of the Sredne Volga region at the time with the center in Samara,” … Run on the map of the Sredne Volga…Recently, just a few years ago, in the sleepy steppes and gloomy ledges of the Orenburg Okrug mountains, there appeared people with strange instruments, drilling machines, drilling the obese body of the earth, extracting its insides. And in them found the wealth of the region.

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