Means of Production

RESTORATION of CAPITALISM in the USSR

Martin Nicolaus

18 Means of Production (I)

There is a widespread belief that the USSR today, whatever else might be said about it, remains fundamentally a planned economy, as opposed to an economy ruled by the anarchy of production. 

This theme is recited seven days a week by every organ of mass propaganda available to the Soviet authorities, and no revisionist primer for "popular" consumption fails to claim it as one of the most important advantages of the Soviet "socialist" system today. Millions of people take this claim as good coin, including many who are critical of Soviet revisionist rule in other respects. Even some people who set out to "expose" how capitalism has been restored in the USSR echo the refrain that under the "reforms" of 1965, central planning -- without quotation marks -- was retained. 

Yet this is a fallacy. Among those who know from their practical experience that the fundamental plannedness of the "new" Soviet economy is a myth are not only the Soviet workers who know it most concretely, but also the directors of Soviet enterprises, Soviet economists specializing in the study of the planning process and the most responsible and authoritative Soviet "planners" themselves. 

Writing in the secluded pages of specialized academic or professional publications, behind a protective screen of jargon -- with other economists and "planners" as audience -- the Soviet writers are more or less obliged from time to time to interrupt their recitals of sleep-inducing generalities with remarks that touch on important practical problems arising in the work of their confraternity. At those moments the talk is very different. 

In the course of a droning recital of the "progress" of the 1965 "reforms," for example, the head of the Department of New Planning Methods of the USSR State Planning Committee (Gosplan), Y. N. Drogichinsky, cannot avoid touching, however lightly, on the fact -- no secret to his primary audience -- that the eighth Five-Year Plan (1966-70) unfortunately did not come off the drawing boards before the "planned" period was already over: 

"The work of drawing up five-year-plans, from the enterprise up to the USSR Gosplan, was not completed in the past five years and, therefore, the enterprises did not have such plans with a breakdown of assignments by years." A bit further on he calls for "the conversion of the five-year-plan into a working program of each enterprise." ("The Economic Reform in Action," in Soviet Economic Reform: Progress and Problems, Moscow, 1972, pp. 211, 224.) 

What is a plan if it is not a working program? 

Or again, in the course of a discussion on the theme of the relation between planning and prices, the deputy chairman of the State Committee on Prices of the USSR Council of Ministers, A. Komin, voices the complaint that, due to the frequent price changes which have become the practice, " it is practically impossible to compile a five-year plan," as the "potential of modern methodology" cannot keep up with the price fluctuations. ("Problems in the Methodology and Practice of Planned Price Formation," Planovoe Khoziaistvo, 1972, No. 9, translated in Problems of Economics, May 1973, p. 48.) 

Speaking on the same theme, deputy Gosplan department chief V. Kotov admits that "in fact, the planning of distribution never attains completed form. Merging with operational management of production, it is completed only with the end of the planned period." In a "considerable and ever-increasing" portion of the economy he admits, there is not even an attempt at planning, but rather "the actual cessation of planning;" and in this situation the plan "essentially loses its meaning" and "an objective assessment of the fulfillment of the plan is impossible." ("Prices: the Instrument of National Economic Planning and the Basis of the Value Indices of the Plan," same source as above, pp. 62, 64, 69, 61.) 

Further admissions of anarchy will be quoted later on. They appear, it should be noted, not in a mass-circulation medium but in the professional planners' journal, whose name ironically means "Planned Economy." It is as if chaos had broken out in the building industry of a country where architecture is the state religion: the politicians speak glowingly, as before, of the glories of the national design, covering up; but the architects, among themselves, must somehow come to grips with the stubborn facts such as the failure to complete blueprints before the buildings are finished, the need to convert construction schedules into "working programs" for contractors, the tendency for drafters to design one thing and builders to build another and so on. One of the Soviet "planners'" most frequent complaints, in fact, is that they cannot even find out what actually is happening in the economy, much less foresee what will happen, not even to speak of imposing a consistent design. 

How did the Soviet economy arrive at this state? The answer, in a word, lies in the conversion of means of production into commodities. It has already been shown (in part 17 of this series) that the "reforms" of 1965 converted the Soviet workers' labor power into a commodity. That is, that the relation between the workers and "their" enterprises was put on a purely commercial basis: produce a profit or get out. The subject now is the side of the 1965 measures which imposed the same social character on the means of production and created the same commercial basis for the relations between one state enterprise and another. 

The socialist viewpoint on this question was succinctly advanced by Stalin in 1952: 

"Can means of production be regarded as commodities in our socialist system? In my opinion they certainly cannot. 

"A commodity is a product which may be sold to any purchaser, and when its owner sells it, he loses ownership of it and the purchaser becomes the owner of the commodity, which he may resell, pledge or allow to rot. Do means of production come within this category? They obviously do not. In the first place, means of production are not 'sold' to any purchaser, they are not 'sold' even to collective farms; they are only allocated by the state to its enterprises. In the second place, when transferring means of production to any enterprise, their owner -- the state -- does not at all lose the ownership of them; on the contrary, it retains it fully. In the third place, directors of enterprises who receive means of production from the Soviet state, far from becoming their owners, are deemed to be the agents of the state in the utilization of the means of production in accordance with the plans established by the state. 

"It will be seen, then, that under our system, means of production can certainly not be classed in the category of commodities." (Economic Problems of Socialism, p. 53.) 

To this should be added the fact that in Soviet socialist practice, the enterprises could hardly have "bought" means of production even if they had had the right to do so. The enterprise had no funds at its disposition for such a purpose, not even depreciation funds to replace the worn-out equipment. When the time came to replace or add equipment, or when machinery was transferred from one plant to another -- always on plan orders -- the corresponding sums of money were allocated or transferred from the center as a bookkeeping operation. (See e.g., Dobb, Soviet Economic Development Since 1917, New York, 1966, Ch. 15.) 

(By "means of production" is meant here mainly the principal machinery and equipment of industry, specifically in state-owned industry; minor tools and implements, agricultural raw materials, land and foreign trade are separate questions here left aside.) 

By the time we come to the 1965 "reforms," the principles Stalin outlined in 1952 had already undergone heavy modifications during the Khrushchev years. As was shown earlier, the state under Khrushchev sold off the machine and tractor stations to the collective farms, converting these means of production into commodities. Additionally the central industrial ministries were abolished, along with much of the compulsory character of such planning as remained. 

As a result, a widespread "gray market" sprang up, in which enterprise directors illegally traded means of production and other goods among one another. (See part 13 of this series) Thus the conversion of means of production into commodities -- the restoration of a basic capitalist relation of production -- was already quite advanced during the Khrushchev years. 

Reference was made earlier also to the June 1965 Moscow conference, which concluded that the "market problem exists not only for consumer goods but also for the means of production." (part 14) A week later came what the Sovietologist Felker terms "a major departure from traditional centralized controls over heavy industry. It was announced that a number of Soviet machine tool enterprises would be permitted to engage in direct business dealings with their customers; in addition, the performance of the plants would in the future be evaluated on the basis of profits rather than on the fulfillment of extraneous plan targets." (Felker, Soviet Economic Controversies, p. 92.) 

At that time, however, enterprises wishing to purchase these machine tools and entering into direct ties with the producer enterprises for that purpose, had as yet no funds (at least not legally) with which to make payment; thus special administrative action was required to create an effective demand (paying customers) for the producer enterprises in the experiment. Nor was there yet a lead market in second-hand means of production, as enterprise directors were not yet permitted to sell off the state property entrusted to them. These limitations on the market in means of production, however, did not last long. In September came the "reforms." 

Alexi Kosygin's sum-up of the experience of the Moscow Transport pilot plants has already been cited. These enterprises prospered, he said, when they "sold superfluous trucks and equipment and discontinued the employment of the superfluous personnel." The explicit right to sell off the means of production on their own judgement of what constitutes "surplus" equipment was granted to enterprise directors under the terms of the new Statute on the Socialist State Production Enterprises, approved by the USSR Council of Ministers that Oct. 4. The new law also provides that, "sums obtained from the sale of material values representing fixed assets will remain at the disposal of the enterprise and are to be used for capital investments in excess of the annual plan." (The statute is translated in Problems of Economics, January 1966, p. 11.) 

Even more significant than putting funds at the disposition of the enterprise director was the provision of the "reform" which allowed enterprises to retain a substantial portion of the profits they generated. (In the past, virtually all profits, if any, had gone directly to the center.) In the first year of the "reforms" operation, enterprises retained 26%, on the average, of "their" profits; by 1968 this had risen to 33% and by 1969, 40%. (Drogichinsky, work cited above, p. 207.) 

The largest and fastest-growing portion of these retained profits went into a "production development fund," earmarked for capital investment by the enterprise. On top of this, enterprises were allowed by statute to retain their own depreciation funds for "complete renewal of fixed assets" and to decide when existing equipment was "to be written off" and new equipment purchased. Finally, enterprises were given the right to borrow from the state bank to finance purchases of means of production. 

In this way the enterprises, which had been financial "paupers" under the rules of the Soviet socialist period, became rapidly flush with liquid assets. Their treasuries swelled up particularly after the 1966-67 wholesale price "reform," which was undertaken -- along the lines laid out by Kosygin in his speech -- in order to allow every "normally functioning" enterprise to operate at a profit. And what a profit! By raising wholesale prices in all industry an average of 8% and prices in heavy industry (chiefly producing means of production) an average of 15%, the price "reform" raised average enterprise profitability to a rate of 20%, while several branches of heavy industry, principally machine-building, established profit rates of over 40%. (L. Maizenberg, "Improvements in the Wholesale Price System," Voprosy Ekonomiki, 1970, No. 6. in Problems of Economics, Feb. 1971, p. 49.) 

The resulting flood of revenues into enterprise funds, while somewhat short of realizing the "principle of total self-financing" that was said to be the goal, came fairly close. (N. Fedorenko, "On the Elaboration of a System of Optimal Functioning of the Socialist Economy," Voprosy Ekonomiki, 1972, No. 6, in Problems of Economics, Jan. 1973, p. 21.) 

In 1969-70, some 80% of total capital investment within the USSR, presumably excluding the military sector, was classified as "centralized," 20% as "decentralized." The latter represents capital investments by enterprises outside the "plan" and derives entirely from the "own" funds. Of the so-called "centralized" investments -- i.e., investments that are classified as coming under the central "plan," despite the actual failure to work out the central plan before the period was over -- some 73.5% (or 58.8% of total USSR investment) also came from the enterprises' "own" funds. 

Another 23.5% of the "centralized" investment (or 18.8% of total USSR investment) was centralized in the genuine sense, representing grants out of the national budget for the establishment of new industries (mainly automobile, aircraft and new branches of chemical industry) and the "development" of new regions (mainly the Far East and Siberia). The remaining 3% of the "centralized" investment (or 2.4% of the total investment) was in the form of long-term loans at interest by the state investment bank (Stroibank). 

Thus, investment financed out of the enterprises' "own" funds amounted to 78.8% of total (nonmilitary) investment in the USSR. (I. Sher, "Long-Term Credit for Industry,'' Voprosy Ekonomiki, 1970, No. 6, in Problems of Economics, Dec. 1970, p. 46, and T. S. Khachaturov, "The Economic Reform and Efficiency of Investments," in Soviet Economic Reform. . . . pp. 156, 164.) 

No wonder, then, that one of the much-discussed consequences of the 1965 "reform" has been the failure of bank loans to grow beyond what the economist V. N. Kulikov terms an "insignificant" role in capital investment. At the top of the list of generally known "basic reasons" for this situation Kulikov cites "the high profitability of the majority of existing enterprises which makes it possible to make capital investments from their own resources." ("Some Problems of Long-Term Crediting of Centralized Capital Investments," Finansy SSR, 1974, No. 5, Problems of Economics, Feb. 1975, p. 61) In the Soviet literature, incidentally, the word "own" in this context is not usually put in quotation marks. 

The 1965 measures, in sum, wiped out the legal and financial barriers that had kept the emerging market in means of production underground during the Khrushchev years. The exchange of means of production as commodities -- hard to finance; illegal, but widespread, under Khrushchev -- became respectable, universal and amply supplied with liquidity. So well supplied, in fact, that some enterprises cannot profitably place all "their" funds, but accumulate what is called a "free profit remainder," in which case they "are entitled to offer loans to Gosbank [the central commercial and central bank] for a certain interest fixed by the government." (Manevich, "Ways of Improving. . ." Voprosy ekonomiki, 1973, No. 12, Problems of Economics, June 1974, p. 11) 

Within the enterprises, all power to dispose of enterprise funds is concentrated in the hands of the director. Except for moneys spent for "socio-cultural" purposes, where the trade union officials must be consulted, the enterprise director under the new law brooks no internal interference in decisions regarding how much to invest, when, where and for what. There is no pretense here at "workers' management" or "workers' coparticipation" in investment decisions, as in the Yugoslav and West German variants, respectively. 

Evidently the "new economic system" has brought great changes in the role of enterprise directors. Gone is the enterprise director of the earlier period, who could neither fire the workers nor suppress their criticism; who risked jail or worse if the plan was not met. Gone is the mere "agent of the state" who could not "resell, pledge or allow to rot" the enterprise assets and who could lay hands on hardly more investment funds than could a church mouse. The old enterprise director was little more than the hired conductor of an orchestra. 

Under Khrushchev, many of these people -- willingly or unwillingly -- turned into black-marketeers, embezzlers and other varieties of crooks. The circumstances left little alternative. But this was only a transitional stage in the process of metamorphosis. With the "reforms" of 1965 they emerged as enterprise directors of a new kind. They became not only dictators of the production process iron-fisted industrialists, but also managers of important sums of money, who have to have the eagle eye of investors to succeed. 

What is the political-economic character of these directors? This may be seen by tracing briefly the cycle of their activity. The cycle begins with money, with a certain wage fund and a certain fund "for the development of production." 

The director's activity starts with the purchase of the corresponding commodities -- labor power and means of production. His task then is to combine and to consume these elements of the production process in such a way that, with the sale of the product, the money spent at the outset comes back expanded and multiplied. How the directors arrange the production process to achieve this, some glimpses have been given in part 17. 

A director's task, in a word, is to make the elements of the production process function for him as the component parts of capital, as value that begets value. Should any portion of these elements fail to perform this role for him, the director as has been seen "sells the superfluous equipment and discontinues the employment of the superfluous personnel." 

The greater profit of society, or even a steady high rate of profit such as might be assigned to a given enterprise under a social plan, do not interest this kind of director. As Kotov very justly observes, "enterprises are interested not in high profits in general but in increases in profits paid into their funds." ("Prices. . ." article quoted above, p. 60) Not just steady high profit, but ever more profit, unlimited profit -- and above all, profit for them. Then, with the enterprise funds once more replenished (the director personally of course receives a "share"), the cycle begins again. 

In Khachaturov's words, "an enterprise itself has to decide what investments it is advisable to make for expanding and technically improving production. . . . Of all the alternatives, an enterprise will choose one that provides for the biggest rise in profitability." ("The Economic Reform and Efficiency of Investments" in Soviet Economic Reform. . . , p. 156) 

What is the political-economic character of the director of such an enterprise? Marx pinpointed it a century ago: "The expansion of value . . . becomes his subjective aim" and is "the sole motive of his operations." "The restless never-ending process of profit-making alone is what he aims at." He therefore "functions as a capitalist, that is, as capital personified and endowed with consciousness and a will." (Capital 1, p. 152, emphasis added.) 

The fact that the director is appointed and removed from above and occupies a definite slot in a bureaucracy does not alter the character of his function. He is a bureaucrat-capitalist, but he is put into his post in order to function as capitalist and, should he fail in this role, the bureaucracy relieves him of his duties. His capitalist side is the decisive, overriding element in his character, on which the other side depends. The proof of this lies not, however, in abstract reasoning, nor even merely in comparisons of the "new" Soviet director with his twins in Western state and private corporations; it lies rather in the shreds and tatters to which the Soviet directors, as capitalists, have reduced the power of the bureaucracy that is supposed to "harmonize" their strivings: the central planning machinery. 

19 Means of Production (II)

"The essence of the reform," writes prominent Soviet academician A. Rumyantsev, "consists in concentrating centralized planning on formulating the most general indicators of national economic development, extending the independence of enterprises, providing greater material stimuli to raising the efficiency of production and developing cost accounting." ("Management of the Soviet Economy Today: Basic Principles," in Soviet Economic Reform. . . , p. 16) Its essence, it might be said in other words, consists in giving the central planners the task of keeping the economy as a whole in balance while each particular unit of the economy runs riot in pursuit of its maximum profit. 

The new 1965 enterprise law, cited earlier, gives the Soviet enterprise directors (as well as directors of combinations of enterprises or"production associations") written protection against having their plan targets changed by superior authority. "Plan targets fixed for the enterprise," says the statute, "may be altered by the superior body only in exceptional cases. . . ." 

The result of this provision is that "planning" not only begins when the enterprise director draws up the enterprise plan, it virtually ends there as well. Even if the central planners were able to perceive the "general interest of society" they could impose that interest against the profit-maximizing plan of the enterprise only with difficulty, in exceptional cases. This is one basic reason why the 1966-70 plans drawn up by the enterprises and sent up to Gosplan (the central planning bureau) did not come back down again in the form of revised working programs for the enterprises, or even for the "ministries." 

In the Soviet literature this is termed "planning from below," though this does not mean, to be sure, planning by the workers themselves. In any system where labor power is a commodity and where the workers do not hold state power, they cannot very well participate in any real sense in planning. It means "planning" by the enterprise directors, who are, technically speaking, "below" the central plan, as are the heads of the "production associations" and the heads of the new "ministries" -- "ministries" which themselves operate on the profit-maximizing principle, as will be seen later on. 

Under this system, as the French socialist theoretician Charles Bettelheim rightly observes, the central "plan" ends up merely running alongside the path chosen by the enterprises and the combines in pursuit of their maximum profit. "In the extreme case," he writes, "the development of commodity relationships ends in the result that the 'planning' organs leave the enterprises 'free' (formally or actually, it matters little) to work out the main lines of their 'plans' by themselves. . . . In such a case, 'the commanding power of money' ('controle par la monnaie') achieves maximum development and the plan becomes no more than an 'accompaniment' ('accompagnateur') to the commodity relationships. It is this direction that has been taken in the Soviet Union since the reforms of 1965." (Calcul economique et formes de propriete, Paris 1970, p. 89) In other words, the plan follows where the profit-maximizing units lead. 

A graphic illustration of what this means in everyday practice is supplied by a radical U.S. economist who traveled to the USSR in June 1974 as member of a delegation organized by the revisionist U.S. Communist Party. "In our discussions with enterprise managers," the visitor recounts, "two important features of the planning process came out. First, all plans originate at the enterprise level, and are then submitted to higher authorities for review. In no case were we told of an example where higher authorities altered the submitted plan in any important respect. Secondly, enterprises are allowed to keep one-third of their after-tax profits for reinvestment outside the plan; i.e., managers are free to invest profits in expanding capacity or buying up other plants in the same branch of industry . . . in any way that seems most profitable. Any productive capacity built or acquired then comes under the plan for production, but these plans again originate with the enterprise." ("Report of a Recent Visit to the USSR," in Red Papers 7, How Capitalism Has Been Restored in the Soviet Union and What This Means for the World Struggle, by Revolutionary Union, Chicago 1974, p. 141; emphasis in original) 

This illustration shows the hollowness of the category of "centralized investments," which was mentioned earlier. For apart from the genuinely central investments undertaken by the state directly, out of its own funds, the bulk of "centralized" investments coming from enterprise funds are really nothing but their outside-of-plan investments of previous years. This year's out-of-plan, planless, profit-maximizing investment by the enterprise is merely renamed next year as "part of the plan" and hence "centralized." In this brilliant fashion even the most socialist public-spirited plan would become corrupted in a few years into a socially-worthless register of opportunism. As Stalin had occasion to say about similar "planning" proposals advanced by the right-opportunist wing of the party in 1929, it is "not a five-year-plan but five-year rubbish." (Works, Vol. 12, p. 84; emphasis added.) 

The actual planlessness in Soviet economy and, moreover, the use of "planning" by the biggest and most powerful enterprises and combines against the rest, shows up with particular clarity on the Soviet market in means of production. In any society, the manner in which the means of production are distributed both reflects and powerfully shapes the course of economic development. This is why in the Soviet socialist period, as Dobb rightly remarks, the 

page 128

planning of the distribution of means of production was given special attention, as it "forms the main artery on which all other branches of the plan depend." (Soviet Economic Development . . . , p. 368) 

In the view of Pavel Bunich, a corresponding member of the Soviet Academy of Sciences, the 1965 "reform" is distinguished by its "uniformity" or "sameness of approach," under which, for example, all enterprises without distinction are granted "equal rights . . . to buy means of production by concluding detailed contracts with suppliers, at wholesale centers and in shops." ("Methods of Planning and Stimulation," in Soviet Economic Reform . . . , p. 36) What he means is that the sphere of "bourgeois right," which under socialism still operates in the distribution of articles of personal consumption (see part 7 of this series), has been extended by the "reform" into the sphere of the distribution of means of production. He omits to mention that while enterprises may enter the market in means of production with equal rights, they do not do so with equal resources. Let us see. 

"There is every reason to affirm," writes the economist V. Budagarin, "that the present market and the system of material-technical supply in the USSR are more extensively using the commodity-money mechanism in the circulation of means of production." Budagarin estimates that "the market in means of production" -- his term -- accounted in 1970 for about two-thirds of the nation's entire wholesale trade turnover (volume of sales). ("The Price Mechanism and Circulation of the Means of Production," Ekonomicheskie nauki 1971, No. 11, in Problems of Economics, July 1972, p. 78) 

Huge as this market is, however, there is not room in it for "equal rights" in reality for all enterprises. Some are "more equal" than others. Budagarin continues: "At present the customer is not able to participate actively in the establishment of the upper price limit for new implements or objects of labor or to oppose the frequent striving to arbitrarily raise the prices for which the means of production are sold. 

"The producer dictates the price, especially in establishing one-time and temporary prices on newly developed types of products, and frequently uses the existing shortage for a given group or type of resources to bring pressure to bear on the customer." (p. 83, emphasis added) 

What Budagarin here describes is the elementary raw exercise of monopoly capitalist market power, such as can be observed as a characteristic feature of nearly any major wholesale industrial market in the West. (See e.g. John Blair's comprehensive study, Economic Concentration, New York 1972, Chs. 16-20) In view of this, Budagarin's remark that all these practices take place "on an indispensable planned basis" (p. 78) seems almost like an attempt at humor or else a mere formal bow to the ruling rhetoric. But, as will be seen, it is true in a perverse way: the "planners" step in and sanction these strong-arm market tactics with the "planned" label. 

"A special place in the development of wholesale trade and in the application of the price mechanism," Budagarin elaborates, choosing his phrases carefully, "belongs to economic associations -- modern integrated enterprises that conform to the present dimensions of the market for the means of production. On the one hand, as large producers and as customers, these associations have a broader economic base for developing permanent direct relations and for exerting greater influence on the entire price formation process. On the other hand, they possess the economic conditions for influencing production through the system of contractual and economically substantiated accounting prices." (p. 81) 

A closer look at these "economic associations" (they are the same as the "production associations," also called trusts and combines by more plainspoken Soviet writers) will be had further on. What distinguishes them here, gives them a special place, as Budagarin says, is their greater ability to set up direct relations with other enterprises or combines, their power to "influence the entire price formation process" and to "influence production" in society in general. 

Thus the rule of "equal rights" on the marketplace for means of production leads directly to the conquest and occupation of a " special place" by the most giant profit-maximizing institutions, those whose size and diversity conforms, as Budagarin says, "to the present 

"The producer dictates the price, especially in establishing one-time and temporary prices on newly developed types of products, and frequently uses the existing shortage for a given group or type of resources to bring pressure to bear on the customer." (p. 83, emphasis added) 

What Budagarin here describes is the elementary raw exercise of monopoly capitalist market power, such as can be observed as a characteristic feature of nearly any major wholesale industrial market in the West. (See e.g. John Blair's comprehensive study, Economic Concentration, New York 1972, Chs. 16-20) In view of this, Budagarin's remark that all these practices take place "on an indispensable planned basis" (p. 78) seems almost like an attempt at humor or else a mere formal bow to the ruling rhetoric. But, as will be seen, it is true in a perverse way: the "planners" step in and sanction these strong-arm market tactics with the "planned" label. 

"A special place in the development of wholesale trade and in the application of the price mechanism," Budagarin elaborates, choosing his phrases carefully, "belongs to economic associations -- modern integrated enterprises that conform to the present dimensions of the market for the means of production. On the one hand, as large producers and as customers, these associations have a broader economic base for developing permanent direct relations and for exerting greater influence on the entire price formation process. On the other hand, they possess the economic conditions for influencing production through the system of contractual and economically substantiated accounting prices." (p. 81) 

A closer look at these "economic associations" (they are the same as the "production associations," also called trusts and combines by more plainspoken Soviet writers) will be had further on. What distinguishes them here, gives them a special place, as Budagarin says, is their greater ability to set up direct relations with other enterprises or combines, their power to "influence the entire price formation process" and to "influence production" in society in general. 

Thus the rule of "equal rights" on the marketplace for means of production leads directly to the conquest and occupation of a " special place" by the most giant profit-maximizing institutions, those whose size and diversity conforms, as Budagarin says, "to the present dimensions of the market for the means of production." 

Further symptoms of the anarchic distribution of means of production -- distribution according to the dictates of increased profit for one or another enterprise or combine -- are touched on by the prominent revisionist ideologue N. Fedorenko. He invites Soviet economists to "elaborate concrete proposals on the further improvement of the entire system of the circulation of means of production in the national economy. Certain forms of the existing distribution of the means of production frequently lead to an artificial shortage and to the formation of excessive inventories in some sectors of the economy and shortages in others and do not serve to improve the quality of production." ("Current Tasks of Economic Science," Voprosy ekonomiki, 1974, No. 2, in Problems of Economics, Dec. 1974, p. 24) 

The system of distributing means of production as commodities, in other words, brings with it also the fact that means of production are "allowed to rot" in the form of "excess inventories" that no one wants or can afford to purchase. At the same time, artificial scarcities are created, which producer enterprises, as was pointed out, exploit to dictate higher prices and bring pressure on customer enterprises. Both Budagarin and Fedorenko qualify these phenomena not as exceptional, but as "frequent." 

"Our experience points to the existence of a dangerous trend toward arbitrary price rises," reports the economist L. Maizenberg. ("Improvements in the Wholesale Price System," Voprosy ekonomiki, 1970, No. 6, in Problems of Economics, Feb. 1971, p. 64 emphasis added.) 

A stern lecture against enterprises that increase their profits "by arbitrarily jacking up prices on new equipment" is delivered also by economist M. Rubinshtein. He shows on the basis of comparative statistics that this tendency is a main cause of the "low rate of production of new items" in Soviet machine-building industry, a phenomenon much viewed-with-alarm in the Soviet literature. ("Scientific and Technical Progress and Planned Price Formation," Dengi i kredit 1972 No. 9, Problems of Economics, July 1973, p. 

22) He omits however to extend his comparison to Western countries, which would have shown him that resistance to technological modernization and low rate of introduction of new machine tools are standard features in branches of Western industry where monopoly is entrenched. 

Progress-minded Western engineers, industrial consultants and economists have often remarked on the excessive age and backwardness of the existing stock of means of production in the United States. (See e.g. Blair's Economic Concentration, Chs. 9-10; Seymour Melman's Pentagon Capitalism, New York 1970 pp. 184-191; Baran and Sweezy, Monopoly Capital, New York 1966, pp. 93-97 and others. The phenomenon and its roots are already mentioned by Lenin in his Imperialism, Ch. 8.) 

As in the West so in the present-day USSR, the official ideology stands, of course, for rapid technological progress; but the actual economic relations, based on the production of means of production as commodities for monopoly-dominated markets, defy the ideology and dictate restriction of the development of the productive forces. 

A most pathetic effort at proving the alleged plannedness of the Soviet market in means of production has been made recently by the head of the Department of New Planning Methods of Gosplan, Y. N. Drogichinsky. He is at great pains to prove that the bulk of Soviet trade in means of production is not "unrestricted free trade" because there is not (and, he emphasizes, will not be) "free choice of suppliers and customers." 

He seems unaware that in the Western countries also, the actual "free choice of suppliers and customers" and "free trade" has long been restricted and is daily being more thoroughly stamped out by monopolistic corporations, precisely on the basis of the commodity-money relationship. The "independent" gas station owner, for example, hardly has a free choice of gasoline suppliers; and the so-called "free trade" has long ago ceased to prevail on the majority of industrial markets. 

The Western antimonopoly literature is filled with accounts of exclusive dealing arrangements and the so-called "reciprocity ties" between major corporations in different branches, by which any "free choice" of suppliers and customers is excluded. In a 1965 survey by Fortune magazine, for example, it was found that all major U.S. heavy-industrial corporations, and 78% of all larger U.S. industrial corporations generally, had this sort of exclusive relationship with at least part of their suppliers or customers, usually with those of major importance to them. (Quoted in Fitch and Oppenheimer, "Who Rules the Corporations -- III" in Socialist Revolution, Nov.-Dec. 1970, p. 84; see also Blair's study, Ch. 14) The mere restriction or absence of "free trade" and "free choice of partners" is anything but a proof of socialist plannedness. 

Drogichinsky's sole illustration of "planning" on the market in means of production, significantly, is drawn from the Soviet automobile industry, which -- being a brand-new industry with its starting capital supplied directly and wholly from the state budget -- occupies an exceptional position, like the artificially implanted new industrial centers in the Far East and Siberia. The whole "plannedness" of supplier-customer relations in Drogichinsky's illustration reduces itself to the profundity that the automobile combine is not "free" to buy rolled steel from, for example, the fishing industry or the vodka distillers, but must buy it from the steel combine. Even on this level, Drogichinsky's illustration shows, however, that the auto-steel supply "plan" is not confirmed until after the "plans" of the enterprises concerned have been taken into account -- meaning in this context, after the profit-maximizing aims of all sides have been built into the "plan." 

Truly comical is Drogichinsky's attempt to assert general validity for this case. Some 70% of the market in means of production, he says, consists of "large lot wholesale trade conducted directly between supplier and customer." This trade, he straight-facedly asserts, "is based on the five-year plan for the production and delivery of products with an annual distribution of targets of the five-year plan." He then draws an elaborate flow chart with extensive supplementary explanations to show how the "new planning system" works. At the end, however, comes a bit of a letdown. The experience of the 1966-70 

plan period, it seems, unfortunately showed there were some "problems," such as -- "the fact that there were no five year plans of ministries, associations and enterprises with targets broken down by year." This is really picking up a rock to drop it on one's feet. ("On Wholesale Trade in the Means of Production," Voprosy ekonomiki, 1974, No. 4, in Problems of Economics, Oct. 1974, pp. 89-107, emphasis added.) 

20 Prices 

When the Soviet central "planners" seek out the reasons for their inability to plan, they point the finger mainly at the instability of prices. 

The prices which state enterprises charge one another, under the conditions of the "new economic system" established in 1965, change rather frequently. These are wholesale prices, and the changes may or may not directly affect the price level in retail trade. But whether they do so or not, the frequent wholesale price changes are an essentially "new" phenomenon in the Soviet economy -- a phenomenon which deals the mortal blow to the "planners'" efforts. 

"There have also been price revisions in the past, even if they were considerably less frequent," writes V. Kotov, the deputy Gosplan chief, in an article quoted earlier. He refers here to the socialist period of Soviet economy. "But with the comprehensive centralization of management, less developed economic relations, stable prices and a formal attitude toward cost accounting, this problem [of price changes] was less urgent." 

This is to say, during the period when there was real central planning and direction of the economy, when commodity-money relations were restricted and subor- dinated to the political priorities of the proletarian dictatorship and when enterprises were not out for maximum profit for themselves, then prices were stable and rarely had to be changed. 

It is different since the "reform," continues Kotov. "Now that more complicated management has been partially decentralized and the role of commodity-monetary relations (including their most important element, prices) has been elevated in the economic incentives, its importance [the importance of the problem of prices changes] has increased considerably." 

And this is no wonder. Since the goal or "incentive" for each enterprise or combination of enterprises is to increase its profits, there is a built-in pressure in the system for each enterprise, to push up its selling prices and-or to push down the prices at which it buys from other enterprises. As buyers and sellers of commodities, the state enterprises stand toward each other like contestants in an economic tug of war. Those in a stronger position impose the price on the weaker; but the relative strengths of the combatants are constantly shifting, as the fluctuations in prices testify. 

At the outset of the 1965 "reform," Kotov writes, it was envisioned that prices in interenterprise trade would be revised about once every five years. Even this strikes Kotov as too frequent from the standpoint of the central "planners." But in practice, wholesale prices have been "officially" changed annually, and unofficially more often than that, Kotov among others points out. 

What happens under such conditions to central "planning"? Kotov, says: "Plans are generally devised in current prices. With the introduction of new prices following the confirmation of the plan, disparities develop between its targets for value indices and the prices that are actually in force. As a result an objective assessment of the fulfillment of the plan is impossible and the level and effectiveness of planned management and economic incentive are lowered." ("Prices: The Instrument of National Economic Planning and the Basis-of the Value Indices of the Plan." Planovoe khoziaistvo, 1972, No. 9, in Problems of Economics, May 1973, p. 61, emphasis added.) 

Another Soviet revisionist economist, the planning specialist I. Usatov, explains apologetically that "under present conditions, at a time when commodity-monetary relations and their most important attribute -- prices -- are being broadly used for the economic stimulation of rapidly growing production, the importance of their influence on the quality of the plan has increased substantially. As a result of the practice of making partial changes in price -- a practice that has become established in the last few years -- higher-echelon economic organs could not correctly plan and exercise effective control over the fulfillment of plans or make higher demands on their enterprises. . ." ("The Elaboration of Plans and the System of Prices," Ekonomicheskie nauki, 1972, No. 9, in Problems of Economics, March 1973, p. 54, emphasis added.) 

In plainer words, in an economy where commodity money relations prevail between enterprises, central planning is impossible. Kotov says the same thing in different terms when he complains that the current Soviet central price-setting system "is virtually divorced from the planning of production." (same article, p. 65) His colleague A. Komin, who is deputy chairman of the state committee on prices, writes that "it is practically impossible to compile a five-year plan while simultaneously revising wholesale prices and accounting for changes in wholesale prices." For Komin and others, the problem is no longer how to set prices and to plan their evolution, but how to forecast them. ("Problems in the Methodology and Practice of Planned Price Formation," Planovoe khoziaistvo 1972 No. 9, Problems of Economics May 1973 p. 48) 

The USSR possesses, of course, an extensive apparatus that is supposed to control prices of all types, including especially those current in trade between state enterprises. A closer look at the activity of these organs shows, however, that their effectiveness is hardly much higher than was that of the "Cost of Living Council" established under Nixon's New Economic Policy in 1971. All the big capitalist states of the 20th century have resorted at one time or another to price controls; but none have succeeded for very long in achieving their proclaimed objectives. 

What are the Soviet price bodies doing about the instability of prices, a phenomenon whose very existence violates the principles of central planning and control? 

In the first place, they are hard at work drawing up survey questionnaires, which they send out to the state enterprises in order "to obtain average prices for supplies and items expended on the output of various branches," as the statistician Eidelman reports. In other words, the central bureaus concerned with prices are trying to find out what prices are actually in force throughout the economy. They do not know. Since 1959 (the year after Khrushchev eviscerated central planning) the central statistical bureaus have been sending out questionnaires at the end of each plan period, Eidelman reports, adding proudly that in 1972 for the first time all enterprises in some industrial branches (instead of merely a sample) will receive the questionnaires. 

In this way the central statistical administration (where Eidelman holds the post of "chief of the administration of the balance of the national economy") hopes to "elicit the most important interrelations and proportions in the national economy that determine the development of the economy in the Ninth Five-Year plan and that hold great importance for economic analysis and planning." ("The New Ex-Post Interbranch Balance. . ." Vestnik statistiki, 1972, No. 6, in Problems of Economics, May 1973, p. 23) 

Of course it would be unreasonable for the central planners to control or even to have current information about the prices and quantities sold of every last little item and service in every corner of so vast an economy as that of the USSR. But the ignorance of the Soviet "planners" is not confined to these marginal matters. The development not only of details, but -- as Eidelman testified -- even of the main proportions in the whole economy proceeds independently of their will and prior knowledge. A necessary result, as will be seen in a moment, is that the main proportions develop "out of proportion." 

How can the price-control bodies maintain the pretense that they are controlling prices when they do not even have enough current price information to determine the main lines of development? The answer is what the Soviet "planners" call the "normative method" of price-setting. As Komin (of the central price committee) explains, because of all the price changes "there is an annual increase in the volume of work involved in confirming prices." The central bureaus cannot keep up. 

For this reason, Komin writes, "it is essential to incorporate extensively the normative method of establishing prices . . . . The essence of this method is the centralized confirmation of base prices and their norms, and markups or discounts by price formation organs and the establishment of concrete prices by enterprises or associations themselves." (article cited above, p. 47) 

A "fine" method of price control, this! The central organs lay down the theoretical prices and establish prices in the abstract; but as for the concrete prices, the enterprises and combines establish them on their own. This method reduces the price "controllers" to the role of dispensing general formulas to guide enterprises and combines in figuring out how much they ought to be charging. 

The content of these formulas, however, could not be more convenient from the viewpoint of the enterprises. For, as Komin explains, "socially necessary expenditures on production are the economic basis of prices in a socialist economy." In other words, "the real content of the process of bringing prices closer to socially necessary expenditures of labor is the coordination of prices with social production costs in money terms. For this reason, in practical terms the economic substantiation of prices amounts to the precise definition of the enterprise cost of production and of the magnitude of the surplus product (profit, turnover tax, rent)." (article cited, pp. 37, 39) 

What Komin has actually defined here is nothing else than the elementary theory of prices in a capitalist economy, as set out by Marx in "Capital" and other works. It is the basic method by which capitalist enterprises seeking to maximize their profits establish their selling prices. There is not a shred of socialism in it. 

The only modifications of this elementary capitalist method that have been introduced in the USSR are the monopoly-capitalist methods of setting prices on the basis of the production-cost-plus-profit of the least efficient enterprise in an industry and of raising prices of given commodities to the level of more costly substitutes. As Komin's colleague Kotov reports by way of example, "industry prices on oil and gas are set in order to raise the low prices on these products to the level of the high prices of coal." In addition, he writes, in some branches there is "the need to construct prices on the basis of 'marginal' enterprises and to charge differential rent." (article cited, pp. 52, 58) If these are socialist pricing principles, then General Motors, U.S. Steel and Exxon are also socialist enterprises. 

The role of the Soviet price "control" bodies, in short, appears at least in part to be that of enforcing the capitalist monopoly prices prevailing in certain industries, especially in the raw materials extracting branches. That this is not entirely a coincidence may be seen from an observation by the economist Kuligin, who noted as early as 1969 that the price-control bodies were being infiltrated by those whom they were supposed to control. "With increasing frequency," Kuligin writes, "individual economic elements or their representative organs that have a direct interest in the price level are beginning to take part in work connected with centralized price formation." ("Improvement of Price Formation Under the Economic Reform," Ekonomicheskie nauki, 1969, No. 4, Problems of Economics, October 1969, p. 32) The foxes, in other words, are taking an ever greater part in running the chicken coop. 

Kuligin warns that the continuation of this trend might lead to "Runaway prices," such as have been experienced (he says) in Poland, Czechoslovakia and the German Democratic Republic. He is naive, however, in his belief that the gradual takeover of the control apparatus by the controlees is an aberration in the "new system." The basic design of the 1965 "reforms," as will be shown, is to promote precisely such a takeover, and on the very largest scale. 

The thing Kuligin is pointing to has of course its count- 

less parallels in U.S. monopoly capitalism today. The antimonopoly literature in the U.S. shows case after case where federal "regulatory agencies" are staffed by representatives of the industry they are supposed to regulate. The bourgeois state with all of its branches is nothing more than an instrument to serve the most powerful sections among the capitalists. It is no different in substance in the present-day USSR. To imagine that the Soviet central state apparatus today genuinely plans and controls the Soviet economy independently of and even against the enterprises and combines, is, as facts show, an erroneous notion. 

Cyclical crises -- the capitalist pattern of "boom and bust" in the economy -- is a feature of revisionist rule in the Soviet Union now being hinted at by Soviet economists themselves. 

After surveying the reasons for the absence of genuine planning behind the so-called Eighth Five-Year "Plan" (1966-70), deputy Gosplan chief Kotov makes the following glum observation regarding the ninth edition, which was projected on the basis of 1971 prices: 

"Even the new prices will hardly retain their stability during the new five-year plan. As experience has shown, a broad price revision during the effective period of a five-year plan is not advisable, since it causes changes in national economic proportions and norms, disrupts the interrelationships and continuity of plans and makes the fulfillment difficult. In such a case, the five-year plan in terms of value indices essentially loses its meaning . . . . " 

As Kotov had foreseen, a new across-the-board price revision was undertaken at the beginning of 1973, once again scrambling all the initial calculations. 

Even more long-faced is Kotov's look into the slightly more distant future, and rightly so. For the "planners'" inability to control the main proportions and interrelations in the national economy as a whole signifies an unstable, unbalanced course of economic development. Kotov admits just that, though in a roundabout way, saying: 

"Experience in the elaboration of the prospective development of the national economy until 1980, and of five-year plans in existing (at the time of their elaboration) prices, has shown that subsequent price revisions fail to maintain the continuity of long-range and current plans not only with respect to targets in terms of value indices but also with regard to general value proportions." (p. 68, emphasis added) 

This is to say, in so many words, that such basic economic properties as (for example) the ratio of the production of means of production to the production of consumer goods or the ratio of production of consumer goods to the effective demand for them, develop the Soviet economy in an erratic, unplanned, basically uncontrolled way. The development of imbalances in such general value proportions, however, is precisely the precipitating cause of general crises in any capitalist economy. The conclusion is inevitable that the pressures making for the alternation of boom and bust, of so-called "prosperity" and general depression, are built into the basic structure of the Soviet economy. It remains to be clearly seen to what extent the Soviet state, like its Western counterparts, is able temporarily to conceal, repress or shift abroad the effects of these underlying imbalances. 

Soviet economists so far do not speak directly about the subject of economic cycles in the Soviet economy, any more than they openly refer to labor power as a commodity. The literature shows a great deal of guarded concern, however, about fluctuations in the Soviet economic growth rate, which the revisionists generally blame on the effects of the weather on the harvest. 

There is a rash of articles also on the theme of economic "indeterminacy." The economists Babynin and Belousov, for example, explore methods of predicting the uncertain course of Soviet price trends. ("Forecasting Wholesale Prices," Voprosy ekonomiki, 1972, No. 4, in Problems of Economics, Sept. 1972) Komin says that "the problems of forecasting prices have not as yet been resolved in either theoretical or practical terms" -- a plaint in which the main body of Western bourgeois economists would join him. (article cited, p. 49) The mathematical economist Veger tries his hand at constructing a formula for predicting profit rates on the basis of unknown price trends ("Cal- culating Economic Effectiveness Under Conditions of Indeterminacy," Voprosy ekonomiki, 1972, No. 2, Problems, August 1972). 

Academician Rumyantsev, finally, observes, in true academic fashion, that "centralized planning in conditions of broad independence of enterprises is also faced with the need of elaborating methods of managing an economy marked by growing indeterminance, probability (stochastics) of its processes." ("Management of the Soviet Economy Today -- Basic Principles," in Soviet Economic Reform. . . . p. 32 .) 

Indeterminacy, probability, stochastics -- these are all merely evasive ways of saying that present-day Soviet economy is characterized by the anarchy of production.