POLITICAL ECONOMY - THE NATIONAL INCOME OF SOCIALIST SOCIETY

Political Economy

Part III : THE SOCIALIST MODE OF PRODUCTION

B. THE SOCIALIST ECONOMIC SYSTEM

CHAPTER XXXVII : THE NATIONAL INCOME OF SOCIALIST SOCIETY

The Gross Social Product and the National Income in Socialist Society

The gross social product in socialist society is the total material wealth (both means of production and consumer goods) produced in society over a particular period, such as a year.

It is created by the labour of workers in branches of material production: industry, agriculture, building, transport when serving production, and likewise by the labour of trade workers when carrying on operations which continue the production process in the sphere of circulation (such as storing, finishing, transporting, packing goods, etc.). In addition to manual workers, brain workers (scientists, engineers, etc.) employed in branches of material production also participate directly in the creation of material wealth.

In the non-productive branches no gross social product is formed. But although workers employed in the non-productive sphere (State administration, culture, welfare and health services) do not produce material wealth, their labour is necessary to socialist society and for material production: it is socially-useful labour. The Socialist State exercises the functions, vitally necessary to society, of organiser of the national economy and of provider of culture and education. Once socialism has been established, the part played by science in improving technology and increasing production grows immeasurably. Labour expended on training skilled personnel for production is of great importance. Science, education and the arts satisfy the cultural needs of the working people. The welfare and health services provide conditions for fruitful labour by the workers in socialist society. There is thus a mutual exchange of activities in socialist society between workers in material production and those in the non-productive sphere.

Production, the sphere of providing material goods, is the basis of the socialist system, as it is of all others. It is therefore of very great importance to the national economy to increase the share of labour performed by workers employed in material production, by reducing the share performed by workers employed in various non-productive branches. Thus, swollen establishments in State administration, and superfluous administrative and managerial personnel in State enterprises and collective farms, a high level of costs of circulation, all divert labour, especially skilled labour, from the sphere of material production. This hinders the increasing of the national income and inflicts damage on the national economy.

The growth of social wealth and the creation of the abundance of products needed for the building of communist society are promoted by consistently increasing the proportion of labour engaged in the material production sphere, by simplifying and cheapening administrative machinery in every possible way, and by reducing costs of circulation.

Lenin considered that a most important task of Soviet power was

"consistently to reduce the size and cost of the Soviet apparatus by cutting it, by organising it better, by abolishing red tape and bureaucracy and by reducing non-productive expenses." (Lenin, Works, 4th Russian edition, Vol. XXXIII, p. 406.)

In the process of production a part of the gross social product is used to replace means of production which have been consumed. This part embodies the ‘outlays of past labour, transferred to the product from the means of production which have been used up. After this has been deducted, the remaining part of the gross social product constitutes the national income of society.

The national income in socialist society is that part of the gross social product created by the workers in socialist production which remains in a particular period after used-up means of production have been replaced; it embodies the new labour expended.

The national income in a physical form consists of the total means of consumption produced in the country and used to satisfy the needs of society, together with that part of the output of means of production which is used to extend socialist production in town and country.

In so far as commodity production exists in socialist economy, the national income as a whole and all its constituent parts, whatever physical form they may take, appear also as values, in money form. In view of this, both the total mass of consumer goods and that part of the national income which consists of means of production are expressed and measured by means of money.

Owing to price changes the national income is calculated in comparable (fixed or constant) prices, using the prices of a particular year, as well as in current prices. Calculation of the national income in comparable prices makes it possible to establish the real changes in the volume of national income over a period of years.

Under capitalism the national income is produced by the labour of workers subjected to exploitation, and is at the disposal of capitalists and landlords, who retain the lion’s share for themselves in the shape of income not earned by labour; a smaller part passes to the working people. In socialist society the national income is created by the labour of workers free from exploitation, and belongs in its entirety to the working people. Socialism precludes the existence of incomes not earned by labour.

The national income of socialist society consists of the product of labour for itself and the product for society. The product of labour for itself is distributed according to work done among the workers in material production who create it, and it is used to satisfy the personal needs of the workers in socialist production and their families. The product for society created by the workers in material production is the net income of socialist society, and is used to extend production, to develop cultural and health facilities, to cover expenditure on State administration, etc.

The Continuous Growth of the National Income in Socialist society

In socialist society the national income grows continuously and rapidly, as a result of the uninterrupted growth of socialist production, which expands in conformity with the requirements of the basic economic law of socialism. The national income grows considerably more rapidly under socialism than in capitalist society.

The national income of the U.S.S.R., in comparable prices, was 6.1 times the 1913 level in 1940, 10 times in 1950, and about 15 times in 1]954.

Between 1929 and 1954 the national income of the U.S.A., in comparable prices, did not even double itself. The U.S.S.R. national income, also measured in comparable prices, rose over the same period 11 times in spite of the tremendous damage done to the economy by the fascist invaders during the war years.

The rapid increase in the national income in socialist society is due to two factors: (1) the growth in the productivity of social labour, and (2) the increase in the number of workers in production. The bulk of the increase results in socialist society from the growth in labour productivity. For example, during the fourth Five-Year Plan 20 per cent of the increase in the national income was a result of the increase in the number of workers in production, and 80 per cent resulted from the growth in labour productivity.

The labour productivity of workers in socialist production, as already mentioned, increases rapidly because up-to-date machinery is introduced in all branches of production (including agriculture), and because the organisation of labour and production is improved, the skill of the workers, collective farmers and intelligentsia1 grows, the material and cultural standards of the working people are regularly raised, and socialist emulation develops.

Increases in the productivity of social labour require the planned and rational use of materials and labour, and, in particular, economical use of the means of production. The latter makes it possible to produce more with the same amount of raw material and equipment, to increase the size of the social product, and, consequently, of that part of it which constitutes the national income. Increasing the number of workers employed in material production is an important factor in the growth of the national income. In socialist society, unlike capitalist society, exploiting classes and their numerous hangers-on do not exist, unemployment is absent, too much manpower is not diverted into the sphere of circulation, and so on. As a result, a considerably greater part of the able-bodied adult population is employed in branches of material production, which create the gross social product. At the same time the number of workers employed in science, education, the arts, and the health services steadily increases. In socialist society all the achievements of material and spiritual culture belong to the people; under capitalism they are mainly utilised by the exploiting classes.

In the U.S.S.R. unemployment has long been a thing of the past, while in the U.S.A. the number of unemployed in 1950-4 amounted to an average of about 10 per cent of the able-bodied population, in terms of the number of man-years of employment and unemployment per annum.

In the U.S.S.R. more than half of the able-bodied population working in non-productive branches are employed in the cultural and welfare services; in the U.S.A. one-seventh of the workers in non-productive branches is employed in these services.

In socialist society the growth of the national income is a most important index of the improvement of the well-being of the population, as it is accompanied by an increase in the incomes of workers, peasants and professional workers. Under capitalism the growth of national income cannot provide an index to the growth of the well-being of the population, as a constantly increasing part of the national income is appropriated by the capitalists and big landowners, and the share of the working people in the national income is progressively falling.

In the U.S.S.R. the volume of the national income, in comparable prices, was three times as great in 1954 as in 1945. In the U.S.A. the volume of the national income increased in comparable prices by only 12 per cent over the same period.

Distribution of the National Income

The national income created in the process of socialist production is ultimately distributed and utilised for consumption and socialist accumulation. In contrast to capitalism, the national income of socialist society is distributed

"not with a view to enriching the exploiting classes and their numerous parasitical hangers-on, but with a view to ensuring the systematic improvement of the material conditions of the workers and peasants and the expansion of socialist production in town and country." (Stalin, "Political Report of the Central Committee to the XVI Congress of the C.P.S.U. (B)", Works, English edition, vol. XII, p. 331.)

The national income is distributed in socialist society in the following manner. In the first place the national income takes the various forms of income in those branches of material production where it is created: (a) in the State sector, and (b) in the co-operative collective farm sector of the economy.

National income created in the State sector of the economy may be divided into two main parts. The first part is the product created by the workers in material production for themselves, and takes the form of the wages of manual and clerical workers in State productive enterprises. The other part of the national income created in the State productive sector is the product for society, or net income. This assumes two main forms: (1) the net income of State enterprises (the profit of enterprises, as it is called); (2) the centralised net income of the State (such as the so-called turnover tax, deductions from profits, and charges calculated on the basis of the wages bill for social insurance purposes).

National income created in the collective farms’ socially-owned sector is the property of the collective farms, and also consists of two main parts: the product for themselves and the product for society. The product for themselves, created by the collective farmers’ work in the socially-owned sector of the collective farms, takes the form of incomes in kind and in money, distributed among the collective farmers according to the work-days earned. The collective farmers also receive income in money and kind from work in their personal house-hold plots. The product for society created by the collective farmers in the socialised sector is the net income of the collective farm. Part of this is used to develop collective farm production and to meet the general needs of the farm, and the material and cultural requirements of the collective farmers. The other part of the net income created in the socialised sector of the collective farms is transformed through the price mechanism and the income tax into centralised net income of the State. In this way collective farms contribute to public expenditure by the State on the extension of production in town and country, on the development of culture, on the strengthening of the country’s defence, and so on.

The total centralised net income of the State therefore embodies not only part of the labour for society expended by the working class but also part of the labour for society expended by the collective farm peasantry.

The product for themselves created by the labour of workers in producers’ co-operatives takes the form of their wages, while the product for society takes the form of the net income of these producers’ co-operative enterprises. Part of this is used to extend production in the co-operatives and to meet the needs of their members. The remainder is transformed into centralised net income of the State by means of the turnover tax and income tax.

Thus in socialist society there takes place the formation of different categories of income, received directly in the sphere of material production. Part of the national income, the product for themselves created by workers in production, is distributed according to work done, and takes the form of the wages of manual and clerical workers engaged in production, the collective farmers’ personal incomes and producers’ co-operative workers’ wages. The other part of the national income, the product created for society by the workers in production, or the net income of society, takes the following forms: net income of State enterprises, net income of collective farms and co-operative enterprises, and centralised net income of the State. However, as stated above, some part of the net income of enterprises is transformed into the centralised net income of the State in the course of the distribution of the income.

In the course of the further distribution of the national income, mainly through the State Budget, part of it is transformed into the incomes of non­productive branches, and of the workers employed in them.

In socialist society the State expends large sums on meeting a number of social needs—such as the education and health services, the maintenance of State administration, and increasing the country’s defensive capacity. Socialist society cannot advance unless it accumulates year by year and extends social production. It could not develop the productive forces or satisfy the growing needs of the population without this. Hence follows the economic necessity of concentrating in the hands of the State a considerable part of the national income, in the shape of a cash fund to be spent on the purposes that have been mentioned. This fund is formed almost entirely out of the centralised net income of the State; only a very small part of it consists of receipts from the population (taxes and loans). The Budget plays the main part in concentrating resources in the hands of the State and in apportioning them for social needs.

Part of the net income of society is expended by the State on social and cultural services and administration, and takes the form of the wages of scientific, educational and health workers, and of workers in State administration and the armed forces. A considerable part of the cultural and welfare services (education and health) is supplied to the population in town and country without payment, at State expense. Part of the cultural and welfare institutions and enterprises reimburse themselves for their expenditure out of payments by the population for the services rendered. The State pays pensions, allowances and stipends, and grants various privileges, holidays with pay, etc. This increases the real wages of manual and clerical workers and the real incomes of the peasantry.

Ultimately the whole national income of socialist society may be divided into the consumption fund and the accumulation fund.

The consumption fund is that part of the national income which is used to satisfy the growing material and cultural requirements of the workers, peasants and intelligentsia. It is formed primarily from the product created by the labour of workers in production for themselves. A further substantial part of the consumption fund is formed by the State, the collective farms and the co­operatives out of the product for society, expended on social and cultural services. Increases in the consumption fund are the conditions necessary for the growth in the incomes of the working people.

In socialist society the incomes of workers, peasants and intelligentsia grow continuously and rapidly for the following reasons:

(1) the uninterrupted extension of production makes it possible to employ additional workers each year, drawn from the natural growth of population, with a resulting increase of the gross income of the working people;

(2) the skill and productivity of labour, the average earnings of manual and clerical workers, and the average income of collective farmers, increase regularly;

(3) State Budget allocations for culture, education, and health are increasing;

(4) funds received by the working people in the shape of social insurance and social security payments and so on are increasing. Moreover, the real incomes of the working people in socialist society increase more rapidly than their nominal (money) incomes, because the State pursues a policy of reducing the prices of consumer goods.

The rapid and continuous growth of production is the source of the continuous improvement of the material and cultural standard of living of the working people. To achieve this growth in production, part of the national income has to be transferred to the accumulation fund.

The accumulation fund is the part of the national income of socialist society which is used to extend and improve socialist production in town and country, to increase non-productive funds for cultural and welfare purposes, including the housing fund, and to form reserves. Thus the accumulation fund provides material conditions for the growth and improvement of socialist production on the basis of higher technique, and for further increases in the well-being of the people.

The working people of the U.S.S.R. receive about three quarters of the national income for the satisfaction of their personal material and cultural needs, out of both the product for themselves and the product for society. The remainder of the national income is used for socialist accumulation in town and country.

BRIEF CONCLUSIONS

(1) The national income of socialist society is that part of the gross social product which embodies the newly expended labour of workers, peasants, and intelligentsia employed in production. In contrast to capitalism, all the national income under socialism belongs to the working people.

(2) The national income grows considerably more rapidly in socialist society than under capitalism, because socialism is free from the anarchy in production, waste, and economic crises inherent in capitalism, and ensures that materials and labour are used in a planned and rational way. The growth of the national income is brought about, firstly, by increasing the productivity of social labour, and, secondly, by increasing the number of workers employed in the branches of material production.

(3) The national income is distributed in conformity with the requirements of the basic economic law of socialism, and this leads to a continuous increase in the incomes of the working class, the peasantry, and the intelligentsia. One of the main factors in the increase of the incomes of the working people is the outlays by the State, the collective farms, the co-operatives, and social organisations on the social and cultural needs of the population. The growth of the national income in socialist society is one of the main indices of the increased well-being of the working people.

(4) The national income of socialist society is divided into the consumption fund, used to satisfy the continuously growing material and cultural needs of the people, and the accumulation fund, providing the material conditions for the rapid growth and improvement of socialist production, on the basis of higher technique.