April 1, 2017

Stalin and the Making of the Political Economy of Socialism - Vijay Singh

Vijay Singh
The five discussions of Stalin with the Soviet economists which were held between 1941 and 1952 together with the essays in Economic Problems of Socialism in the USSR were directly instrumental in the laying of the theoretical foundations of the political economy of socialism. The section on the socialist mode of production in the Political Economy Textbook of August 1954 represented the culmination of this work.1 The gestation period of this manual extended over a period of more than twenty years. On the basis of the decision of the Central Committee of the CPSU(b) in April 1931 I.
Lapidus and K.V. Ostrovityanov were directed to follow up their political economy textbook2 with a second supplementary 36 page work which would be devoted to the 'Theory of the Soviet Economy' and could be utilised as a party textbook. In April 1936 the Central Committee further resolved to constitute a curriculam of political economy and to arrange for the drafting of a manual of political economy.3 Two further resolutions were adopted in April and July 1937 with regard to the textbook of political economy which, it was stressed, had to be based on that of the Short Course of A.A. Bogdanov which had been highly praised by Lenin.4

Following from these decisions several model manuals of political economy were written between 1938 and 1941. In 1938 the first model Political EconomyShort Course was prepared under the editorship of A. Leontyev and A. Stetsky. On his own copy and in his own hand Stalin added that it was 'approved by a Commission of the CC of the CPSU(b) for the benefit of Party and Komsomol schools and courses.' A note on the manuscript indicated that the first four sections of the volume had utilised the text by A.A. Bogdanov Short Course of Economic Science (Moscow, 1897). The structure of these early models may be gauged by scrutinising the contents pages of the first model. The section on the transition to the socialist formation was covered in four chapters and 28 pages which examined the transition period from capitalism to communism, socialist industrialisation and the collectivisation of agriculture. The socialist system of the people's economy was examined in six chapters and 36 pages with the following headings: socialist property; the elimination of the anarchy of production and the socialist planned economy; the end of the exploitation of man by man and socialist labour; the termination of the capitalist laws of the impoverishment of the proletariat and peasantry and the uninterrupted growth of the welfare of the working people; socialist reproduction in the USSR and the transition from socialism to the higher phase of communism.5

In 1939 the second expanded model of the textbook appeared under the editorship of A. Leontyev. The size of the model was enlarged from the 320 pages of the 1938 model to some 408 pages because of the more extensive treatment accorded to the section on the socialist mode of production. Leontyev edited two more models of the manual which appeared in April and December 1940. The sections on the socialist social formation were further extended so that the April, 1940 edition consisted of 472 pages. Stalin made a number of comments, corrections and reflections on the 1940 models and there is evidence to suggest that he continued his scrutiny of these two volumes after the war. Prior to the discussions of Stalin, Molotov, Voznesensky and the Soviet economists on 29th January 1941 at least four drafts of the Short Course of Political Economy had been produced. It is apparent from the comments of Stalin that the Central Committee did not accept the formulations of the text book on the sphere of operation of commodity-money relations and the activity of the law of value in the Soviet economy. The majority of the Soviet economists who participated in the economic discussion also dissented from the perceptions recorded in the manuals on these cardinal questions. In the light of the discussion the model textbook was re-modified. This is evident from the letter of G. Aleksandrov and A.Leontyev of the 15th of March, 1941 to Stalin which reported that the Short Course of Political Economy had been altered on the basis of the directives received from the CC of the CPSU(b) and enumerated the changes which had been made in the text of the manual. The war put paid to the publication of the political economy textbook. Nevertheless on the basis of the economic discussion A. Leontyev wrote the influential editorial article Some Questions of the Teaching of Political Economy which was published in the 7-8th number of the journal Under the Banner of Marxism in 1943.6

The efforts to produce the manual of political economy were resumed immediately after the close of the Second World War. Two models of the Short Course of Political Economy were prepared in 1946 and 1948 of 575 and 696 pages, respectively.7 These were the texts which were discussed by Stalin and the economists in the three meetings held on 22nd February, 24th April and 30th May, 1950. The subject-matter of discussion revolved around problems relating to pre-capitalist societies, the transition from slave society to feudalism, feudalism itself, the significance of machine production under capitalism and the question of pre-monopoly capitalism. The model Textbook of Political Economy produced in 19518 became the basis of the economic discussion of November of that year which assessed this draft and in which a large number of economists participated. Three documents were circulated after the discussion: Proposals for the Improvement of the Draft Textbook on Political Economy, Proposals for the Elimination of Mistakes and Inaccuracies and The Memorandum on Disputed Issues.

Stalin circulated his responses to the economic discussions to the participants in the form of his Remarks on Economic Questions Connected with the November 1951 Discussion, dated 1st February, 1952, which later was incorporated into Economic Problems of Socialism in the USSR. The intervention of Stalin, arguably, represented a definitive resolution on the basis of classical Marxist political economy of the theoretical problems and controversies which had dogged discussion in the USSR in the preceding decades with respect to the sphere of commodity production and the operation of the law of value under socialism. A fortnight later the final discussion between Stalin and the economists took place on 15th February 1952. This amplified upon and further clarified these questions as well as the significance of the commune in the transition from socialism to communism. The remaining portions of Economic Problems were written later in the same year and dealt with problems which came to light after the November, 1951 discussion: the Reply to Comrade Alexander Notkin (21st April, 1952), Concerning the Errors of Comrade L.D. Yaroshenko (22nd May, 1952), and the Reply to Comrades A.V. Sanina and V.G. Venzher (29th September, 1952). Economic Problems of Socialism in the USSR was published immediately prior to the 19th Congress of the CPSU(b) which was held in the beginning of October, 1952. The clash of opinions on the 1951 model manual and the publication of Stalin's last major work on political economy necessitated further profound modifications in the text of the political economy manual.

Under the circumstances the CPSU(b) Politburo intervened to reconstitute the authors' collective responsible for the model manual of political economy. In 1952 D.T. Shepilov was summoned by Stalin to a discussion on this matter which lasted for 2 hours and twenty minutes. Stalin considered that a textbook of quality was required by the scientific cadre of the Soviet Union which was engaged in important economic tasks as well as for the French and Italian Communists. He voiced dissatisfaction with the variants of the manual which had been drafted by L. Leontyev and gave a detailed critique of particular sections of the book. Shepilov later recalled that on the question of the primary accumulation in the birth of capitalism Stalin subjected L.Leontyev to criticism for not even caring to utilise the term 'industrial period of capitalism' as Marx had done in Chapter XXIV of the first volume of Capital and Lenin in The Development of Capitalism in Russia. Shepilov was requested to devote himself wholly to the drafting of the manual and to head the new authors' collective, comprised of K.V.Ostrovityanov, L.A. Leontyev, L.M. Gatovsky, A.I. Pashkov and the philosopher P.F. Yudin, which was to finalise the textbook within one year. Decades later Shepilov reminisced that Stalin had carefully scrutinised the materials prepared for the textbook and passed 'captious' comments.9 After the 19th Congress of the CPSU a Commission for the Improvement of the Textbook of Political Economy was established which was required to prepare the new model textbook for the press by 20th March, 1953. The Textbook of Political Economy in the event was published in August 1954. It may be noted that many of the themes which had been outlined by Stalin in Economic Problems, notably the necessity of gradually introducing products-exchange between socialist industry and the collective farms as part of the projected gradual transition to communism, and which the above mentioned commission had resolved to include in the new model textbook, were absent in the textbook as published in 1954. The new turn to 'market socialism' which is evident immediately after the death of Stalin was reflected in the first edition of August, 1954 as well as in the second edition of 1955 which was also published in an English translation. But these modifications were not extensive so that the basic structure of the understanding of the political economy of socialism was unaffected. Only after the transformations of the Soviet economy of 1957-58 in line with the introduction of 'market socialism' were the manuals of political economy subjected to a radical overhauling as is evident in the Third Editions of 195810 and 1959.11 Parallel changes and critiques founded also on an acceptance of the economic policies and theories of 'market socialism' were made in the people's democracies of the west and east.12

While an over-all evaluation of these conversations is outside the purview of this introductory note it is, however, proper to strike a note of caution on the formulations presented on the law of value in socialist society during the course of the discussion of January, 1941. These bear the hallmarks of the early discussions in the USSR on the political economy of socialism when the subject itself was in statu nascendi. Stalin held advanced positions over the theoretical views expressed in the early years of Soviet power to the effect that political economy ceased to exist as a science under conditions of socialism. Such views known as the 'limited interpretation of political economy' had been propagated by 'western marxists' such as Hilferding and Rosa Luxemburg and in the Soviet Union they had been adopted by Bukharin. Lenin had vigorously challenged these conceptions. A corollary of the views of the Bukharin school was that commodity-money relations ceased to exist in the socialist economy. In the discussion of January, 1941 it is apparent that Stalin defended the Leninist position that the science of political economy was applicable to non-capitalist societies. (This also implied that the subject-matter of political economy embraced the study of colonial societies). Stalin, moreover, reasoned that value relations continued to exert their influence in socialist society. It is important to note that Stalin's understanding underwent considerable development so that it is the views expressed in Economic Problems of Socialism in the USSR which must be considered as his mature opinion.

Stalin's ruminations in January 1941 are centred upon and a critique of the formulations of L.A. Leontyev on the operation of the law of value in the USSR. The theoretical chasm dividing the two may be illumined by juxtaposing Stalin's arguments to those of Leontyev as expressed in the model Political Economy Short Course of April 1940. Leontyev gave the line of reasoning that in capitalist society production was decided by the law of value which made itself felt through the fluctuation of prices so that through this spontaneously the market production of particular commodities would then rise and fall. The situation in socialist society was different as planning determined the distribution of labour and the means of production in the economy, and not just production but also commodity circulation.

Leontyev then argued, and this was a major point of controversy, that in the socialist economy, 'there was no place for the law of value'.13 The state established prices which were not dependent on the fluctuations of the market but were determined by the cost of production of the products as well as the tasks of economic construction which were orientated towards the necessity of continually improving the material welfare of the working masses. The second point of dispute in the draft of the political economy textbook was the emphasis placed by Leontyev on the assertion of Lenin in May, 1921 to the effect that the product of socialist enterprises 'are not commodities in the politico-economic sense' and that 'at any rate, they are not only commodities, they are no longer commodities, they are ceasing to be commodities'.14 Under the higher phase of communism products would be distributed by need whilst under socialism products were sold for money, they had prices.

We may now comprehend the sharp reaction of Stalin and the majority of the Soviet economists in the Commission to these formulations. By stating that there was no place for the law of value in Socialism, Leontyev placed himself four square on the Hilferding-Bukharin position that the operation of the law of value ended under socialism. A more complex position obtains with the -- partial --citing, of the views of Lenin of May, 1921 on the non-commodity character of the product of the socialist enterprises. Lenin argued in the following manner:

'First the state cannot carry on any economic development unless the army and the urban workers have regular and adequate supplies of food; the exchange of commodities must become the principal means of collecting foodstuffs. Secondly, commodity exchange is a test of the relationship between industry and agriculture and the foundation of all our work to create a fairly well regulated monetary system. All economic councils all economic bodies must now concentrate on commodity exchange (which also includes the exchange of manufactured goods, for the manufactured goods made by socialist factories and exchanged for the foodstuffs produced by the peasants are not commodities in the politico-economic sense of the word; at any rate, they are not only commodities they are no longer commodities, they are ceasing to be commodities).'15



Lenin's views of May 1921 were coloured, first, by the understanding that the system of war communism had to be replaced by commodity exchange and freedom of trade between town and country which implied the appearance of capitalists, and capitalist relationships under overall state control and accountancy.16 And, second, by the survivals of the spirit of war communism by which it was considered possible to have a direct transition to communism in which the goods produced by socialist industry were to be exchanged, through the system of products-exchange without the medium of money relations, with small-scale agriculture. Even when Lenin in May, 1921 spoke of commodity exchange it was still products-exchange that he had in mind. The further onset of the New Economic Policy saw the end of the endeavours to implement a system of products-exchange. In Economic Problems of Socialism in the USSR Stalin referred to the latter-day views of Lenin which stressed the necessity of 'an economic bond between town and country, between industry and agriculture, commodity production (exchange through purchase and sale) should be preserved for a certain period, it being the form of economic tie, with the town which is alone acceptable to the peasants'.17As late as 1934 Stalin had been compelled to point out in his Report to the 17th Congress of the CPSU(b) that the views of some functionaries to the effect that 'the direct exchange of products is knocking at the door was premature. The expansion of Soviet trade to the utmost was needed which would prepare the conditions necessary for the direct exchange of products. Similarly it would be necessary to use money for a long time to come, right up to the time when the first stage of communism, socialism, had been completed.18

In the economic discussion of January 1941 Stalin contested the view of L.A. Leontyev that the law of value had been overcome in the USSR. Stalin recognised that the means of production were socialist property and so could not be considered commodities and that the products of the means of production also could not be treated as such, stating that the means of production could not be purchased by the collective farm peasantry from the incomes generated from sales in the collective farm market.

Nevertheless Stalin in 1941 defended the view that the goods manufactured by the socialist factories were not 'products' but 'commodities' on the logic that once a monetarised economy was in existence then commodities also existed. Lenin, he recalled, had criticised the view of Trotsky, who had contended that money was to be regarded as merely a tool of calculation: 'Our answer to him was:


when a worker buys something, is he calculating with the help of money, or is he doing something else? Lenin repeatedly would point out in the Politbureau that such a formulation of the question is wrong, that one should not limit the role of money to being a means of calculation.' Even on the basis of the argument of Lenin there was no reason why the means of production produced by the Soviet enterprises should be categorised as 'commodities' rather than as 'products' for Lenin, in the example cited by Stalin, was referring to consumer commodities produced by socialist enterprises and sold to the workers through the medium of money. While the arguments of Stalin in 1941 contained elements of a solution to understanding the differences between 'products' and 'commodities' in the Soviet economy they did not offer a full solution. Only in Economic Problems of Socialism in the USSR was this finally resolved. In 1952 Stalin argued that the means of production could not be considered as commodities as they were not sold but allocated to the enterprises.19 It was only in the sphere of foreign trade that the means of production in actuality were commodities.20 Then citing the instance of consumer goods Stalin argued that these compensated the labour power expended in the process of production and were produced and realized in the USSR as commodities coming under the operation of the law of value.21 Stalin now noted that the means of production produced by socialist enterprises lost the properties of commodities, they 'cease to be commodities and pass out of the sphere of operation of the law of value, retaining only the outward integument of commodities (calculations, etc.)' Commodities and money were not abruptly abolished in the Soviet Union but gradually changed their nature 'in adaptation to the new, and retaining only its form; while the new does not simply destroy the old, but infiltrates into it, changes it nature and its functions, without smashing its form, but utilizing it for the development of the new'.22

The economic discussion of January, 1941 did not resolve the salient question of the political economy of socialism: What was the basis of the retention of commodity-money relations and the operation of the law of value in the Soviet Union in the realm of economic relations? In 1941 Stalin defended the view that the law of value had not been overcome as in its absence it was not possible to understand the categories of cost, calculation, distribution on the basis of labour or the setting of prices. Value existed under socialism but it had to be used in a conscious manner. Calculations were required using the law of value to determine distribution according to the principle of labour in a society where different types of labour, both skilled and unskilled, existed. Stalin argued that the Soviet experience revealed that production did not advance by using mechanisms such as collective wages and production communes but by deploying the systems of piece-work for the workers and bonuses for the supervisory staff as well as for the collective farm peasantry. Value categories also required to be used in a conscious manner in the field of price-setting. Stalin noted that when the harvest failed in Russia leading to bread shortages and price rises the state had intervened by throwing bread on to the market which led to a fall in the price of this commodity.

More than a decade later in Economic Problems of Socialism in the USSR a sea-change may be witnessed in the understanding of Stalin in answering the question of the reason for the continued existence of commodity production and the operation of the law of value in the socialist economy. Stalin now identified the source of commodity production in the Soviet Union as being the existence of two different forms of socialist property, i.e., the state sector which constituted the property of the whole of society and the group property of the cooperative farms. In the state enterprises the means of production and the product of production were national property but in the collective farms, though the means of production such as the machinery and the land were state property, the product of production was the property of the different collective farms as was labour and the seed, whilst land which was nationalised had been turned over to the collective farms for use in perpetuity and was used by them virtually as their own. As a consequence the state disposed of only the product of the state enterprises and not of the product of the collective farms. As in the time of Lenin the peasantry were unwilling to alienate their products except in the form of commodities so that commodity relations were still needed in Soviet society.23 We may note here that the draft political economy textbook of 1951 had depicted the existence of two forms of socialist property as one of the major reasons for the persistence of value categories in the USSR.24 It was the signal contribution of Stalin to have identified the two forms of socialist property as the fundamental basis of the continuation of commodity production.

Once the continued existence of the two forms of socialist property was accepted as the basis for the continuation of commodity relations it was necessary to reassess the standpoints which had been adopted in the discussion of January, 1941. Stalin now argued that the law of value was bound to operate in a society where commodity production still existed but it acted as a regulator, and even here it acted within limits, solely in the sphere of commodity circulation in articles of personal consumption. In the realm of production the law of value exerted its influence without having a regulating function.25 The law of value exercised its influence in the production of consumer goods in connection with cost accounting, profitableness, products and pricing in the socialist enterprises. Stalin stressed that business executives and planners in general did not take the operation of the law of value into account: on one occasion they had proposed that the price of one ton of grain should be fixed at approximately that of a ton of cotton, and the price of grain was taken as that of a ton of baked bread. The Central Committee members were compelled to point out that a ton of bread had to be priced above a ton of grain in order to take care of the additional expense of milling and baking, and that generally the price of cotton was generally higher than that of grain as was also borne out by the prices on the world market. They then intervened to lower grain prices and raise the prices of cotton. Had this not been done then cotton production would have suffered.

The economic changes wrought after 1953 were to transform the entire discussion on the political economy of socialism as well as the perceptions of Stalin's formulations of 1941 and 1952. Centralised directive planning essentially ended in 1955 and was replaced by 'coordinative' planning conducted by Gosplan and The All-Union and Union Republic Ministries. In 1957 the system of planned allocation of the products produced by the means of production was terminated and a number of centralised sales organisations were set up under Gosplan to sell the industrial products of Soviet Industry.26 Reflecting the new economic realities the Third Edition of the Textbook of Political Economy noted that the means of production which were transfered from one government enterprise to another through purchase and sale made their appearance as commodities.27 Complementing these developments the system of planned allocation of agricultural machinery to the agricultural sector was ended and a special sales organisation was established in 1957 for the sale of the means of production to the Machine Tractor Stations. In the following year the Soviet government dissolved the Machine Tractor Stations and permitted the sale of agricultural machinery to the collective farms. As a consequence the means of production both in industry and agriculture now began to circulate as commodities.

A section of the political economists (known as the 'tovarniks') now embarked upon the onerous task of creating a 'political economy of socialism' which would answer to the needs of the new market economy in the USSR. In the new dispensation Stalin's conversation of January 1941 came in the line of fire. The open criticism of Economic Problems of Socialism in the USSR had already been incepted by Mikoyan at the Twentieth Congress of the CPSU itself. The standard criticism of the conversation of 1941 in the Khrushchev period ran as follows:

'In 1941, in a conversation with economists, Stalin declared that the law of value existed in the Soviet Union. But the very restricted interpretation he gave to this law and to value categories, including price in effect changed little as compared with the former concepts. The law of value was so 'curtailed' that, actually, its role was denied. The categories of commodity and value were declared to be incompatible with state ownership of the means of production and were not 'admitted' into the sphere of production of the means of production of these 'old categories of capitalism', as Stalin put it, only the 'outward aspect' remained.

'Stalin recognised the law of value as a law of production only for collective farm production. But actually even this was reduced to nought by his assertion that planned procurement prices of agricultural produce, i.e. the prices at which the collective farms sold the bulk of their production for the market, could not be based on value. He declared that value was completely incompatible with planned price formation.

'Recent years have witnessed a sharp change in the attitude toward profit both in economic theory and in practical economic activity. The party has resolutely cast aside the subjectivist propositions which gained currency during the period of the cult of Stalin's personality, including the grossly mistaken approach to such categories inherited by socialism from the past as commodity, value, price and profit.'28

L.M. Gatovsky here expressed the views of a period when commodity production had become ubiquitous in the Soviet economy. It was felt necessary to demolish the views of Stalin to the effect that while commodity production and the law of value continued to operate in the economy it was necessary to restrict their sphere of operation.
This journal considers it an honour to publish for the first time in any language the 'Five Conversations with Soviet Economists 1941-52'.29

    References
  1. Politicheskaya ekonomiya, Uchebnik, Moscow, 1954, pp.316-632. The second edition of this manual was published in the USSR in 1955 and came out in an English translation: C.P. Dutt and Andrew Rothstein ed., Political Economy. A textbook issued by the Institute of Economics of the Academy of Sciences of the USSR, London, 1957.
  2. I. Lapidus and K. Ostrovityanov, An Outline of Political Economy, London, 1929.
  3. Archiv A.N. SSSR, F. 352, op.1, Ed. Khr. 165, l. 1-4.
  4. F. 352, op. 1, Ed. Khr. 23, l. 5.
  5. Factual details on the pre-war model political economy manuals may be located in D.V. Valovoi, Ekonomika: vzglyady raznykh let (stanovlenie, razvitie i perestroika khozyaistvennogo mekhanizma), Moscow, 1989, pp. 46-51. See also ed. A. Leontyev, Politicheskaya ekonomiya, Kratki kurs, Gosizpolit, Moscow, April 1940, 472 pp. Printed manuscript.
  6. L.A. Leontyev, 'Political Economy in the Soviet Union', ed., G. Adhikari, Marxist Miscellany, Vol.2, Bombay, 1945, pp.80-114.
  7. Politicheskaya ekonomiya, Kratki kurs, Ogiz, Moscow, 1946, 575, pp. and Politicheskaya ekonomiya, Kratki kurs, Ogiz, Moscow 1948, 696 pp. Printed manuscripts.
  8. Politicheskaya ekonomiya, Uchebnik, Gosizpolit, Moscow, 1951, 502 pp. Printed manuscript.
  9. Tamara Tochanova, Mikhail Lozhnikov, (Compilers): I, primknuvshii k nim Shepilov, pravda o cheloveke uchyonom, voine, politike, Moscow, 1998, pp. 127-28, 180-82, 281-82.
  10. Politicheskaya ekonomiya, Uchebnik, 3rd revised edition, Moscow, November, 1958, 680 pp.
  11. Politicheskaya ekonomiya, Uchebnik, Third revised and expanded edition, Moscow, 1959, 708 pp.
  12. Oskar Lange, ed., Problems of the Political Economy of Socialism, New Delhi, 1962; Mao Tsetung, A Critique of Soviet Economics, New York, 1977 and Mao on Stalin, The Economics of Socialism, Edinburgh, 1977.
  13. Politicheskaya ekonomiya, Kratki kurs, ed., L.A. Leontyev, Moscow, April 1940, p.350. Printed manuscript.
  14. Ibid., p.349. Emphasis added by L.A. Leontyev. See also: V.I. Lenin, Collected Works, Vol.32, Moscow, 1973, p.384.
  15. Loc. cit.
  16. Ibid., p.385.
  17. J. Stalin, Economic Problem of Socialism in the USSR, Moscow, 1952, p.17. Emphasis in the original.
  18. J. Stalin, Works, Vol.13, Moscow, 1956, pp.349-50.
  19. J. Stalin, Economic Problems, p.58.
  20. Ibid., p.59.
  21. Ibid., p.23.
  22. Ibid., p.59.
  23. Ibid., pp.19-21.
  24. Politicheskaya ekonomiya, Uchebnik, Moscow, 1951, pp.343-44, Printed manuscript.
  25. J. Stalin, Economic Problems, p.23.
  26. Vijay Singh, 'Stalin and the Question of 'Market Socialism' in the Soviet Union After the Second World War', Revolutionary Democracy, Vol. 1, No. 1, April 1995, p.9.
  27. Politicheskaya ekonomiya, Third revised edition, Moscow, 1958, p.503.
  28. L.Gatovsky, 'The Role of Profit in a Socialist Economy', Kommunist, No.18, 1962.
  29. A shorter variant of the January 1941 conversation has been published in: Richard Kosolapov, Slovo Tovarishy Staliny, Moscow, 1995, pp.161-168.