On Trotskyism - Political Economy - IC

Political Economy

The League for a Workers' Republic was asked in Limerick to explain the difference between Stalinist and Trotskyist political economy. The gist of a confused answer by Basil Miller was that there was no difference. We fear that Mr . Miller does Trotsky an injustice by attributing Stalinist political economy to him. In fact Trotsky brilliantly anticipated the major development in modern anti-Stalin­ ist political economy. And we cannot permit Mr. Miller to rob Trotsky of that honour. We refer to the notion contained in Trotsky's SOVIET ECONOMY IN DANGER, (1933). This pamphlet deals with the first Five Year Plan which was then transforming the Soviet economy.

In the mid-twenties Trotsky had declared the building of socialism in Russia to be impossible . In 1933 he wrote: "Socialism, as a system, for the first time demonstrated its title to victory not on the pages of "Das Capital" but by the praxis of hydro-electric plants and blast furnaces". If socialism is domonstrating its "title to historic vic­ tory" in the industrialisation of the Five Year Plan, that industria­ lisation must be socialist, you might reason. But not at all: "• .•light-minded assertions to the effect that the U.S.S.R .has al­ ready entered into socialism are criminal".(p7) So socialism' s "title to victory" is demonstrated in industrialisation which it would be criminal to call socialist. Figure that out if you can.

Furthermore : "The difference between the socialist and capitalist tempos of industrial development...astonishes one by its sweep. But it would be a mistake to consider as final the Soviet tempos of the past few years " (p37) So, even though it would be "criminal" to describe Soviet industrialisation as socialist, it has, nevertheless, a socialist "tempo". That 's what the man says. God knows what it means.

Here is a further clue: "The laws that govern the transitional soc­ iety are quite different from those that govern capitalism. But no less do they differ from the future laws of socialism, that is, of harmonious economy." (p37) The Soviet economy, then , was not capital­ ist and was not socialist, but was transitional. What does "transi­ tional" mean? It is certain that production relations of a definite nature existed in Soviet industry. "Transitional" does not describe class relations in production .

Production relations must be capitalist, socialist feudal, slave or some other kind hitherto unknown . Slave and feudal relations can be ruled out. Even in their wildest rantings about slave labour camps, imperialist propagandists have not attributed the immense achievements of t:he Smd et t.!cOnomy i... slave obur. l roLsky says it was transi­ L J.l na L ; which is meaningless. Definitly. production relat ions existed .

Trotsky maintained that the non-socialist, non-capitalist Soviet economy, with its transitional eocnomy and socialist tempo, was rid­ dled with major contradictions which were building up to a major crisis .

Basil Miller declared that " the law of val ue was not restricted under Stalin". Naturally, he gave no evidence of this. And in fact the disciple is very much out of key with the master. Trotsky condemned Stalin because he had restricted the law of value. He held the restriction of market relations to be at tbe basis of the supposed crisis in the Soviet economy :

"By eliminating the market and by installing instead Asiatic bazaars the bureaucracy has created, to consummate all else, the conditions for the most barbaric gurations of prices, and consequently has placed a mine under commercial calculation. As a result, the economicchaos has been redoubled." (p34)

1'The regulation of the market itself must depend upon the ten­ dencies that are brought out through its medium. The blue­ prints produced by the offices must demonstrate their economic expediency through commercial calculation. The system of transitional economy is unthinkable without the control of the ruble . This pre-supposes, in its turn, that the ruble is at par. Without a firm monetary unit, commercial accounting can only increase the chaos .11 (pJ0/31).

The market must not be eliminated, because outside the market there is chaos. Plans must justify themselves commercially, i.e. in terms of sound market relations . The market must be regulated by means of the market: by financial control . This indicates that Trotsky's "transitional economy" is nothing but a modern capitalist economy, with its plans based on market relations, and its "regulation of

the market" by means of "tendencies that are brought out through its medium".

A G R I C u L T u R E

As well as demanding market relations in industry, Trotsky demanded the restoration of "Kulak" capitalism in agriculture . (Kulaks are peasant bourgeoi­ sie, equivalent to the big farmers who emerged from the Irish peas­ antry after the Land Acts.) The greater part of the land had been collectivised and the main power of the kulaks had been smashed by 1933. Trotsky declared: "100% coll ectivisa tion has resulted in 100% overgrowth of weeds on the fields"(p23). Which is another absurd Trotskyist phrase . If collectivisation had resulted in a decline in agricultural production the illllllense expansion of industrial production that went on all through the thirties would have been impossible. Without a substantial increase in agricultural production it would have been impossible . That is an elementary economic fact. An expanding industrial sector cannot be based on a declining or stagnant agricultural sector, (unless it is based on agricultural imports, which was not the case in the U.S.S.R.).

Agricultural production did not grow in the remarkable way that in­ dustrial production did . This was due in part to natural causes. Marx explained at length in Capital why the organisation of agricul­ tural production is more difficult than the organisation of industrial production . For one thing, nature plays a role in agriculture that it does not play in industry. Secondly, it was due to social causes. The collectives were made up mostly of small and middle peasants, not workers. As Lenin explained, they could contribute to the build­ ing of socialism if there was determined working class leadership.

In the long run they could be changed from peasants into workers. But for a considerable time they would remain peasants, a vacillating class whose contribution to the building of socialism could proceed only under the pressure of the working class. Leaving aside natural causes, this fact would make the development of socialist agriculture proceed more slowly than the development of socialist industry.

But to develop more slowly is not to decline. If there had been '100% overgrowth of weeds" as a result of collectivisation, the in­ dustrialisation that took place could not have taken place .

"The policy of mechanically 'liquidating the kulak' is now factually discarded (?). A cross should be placed over it officially. And simultaneously it is necessary to establish the policy of severely restricting the exploiting tendencies of the kulak." (p47)

The policy of eliminating the class of capitalist farmers was certainly not discarded . The 'New Economic Policy' (1921)had freed market relations and capitalist production. This was made necessary by  the total disruption of production during the wars of intervention. During the twenties a powerful class of capitalist farmers developed. It was mainly in capitalist farming, and not in small farming, that the agricultural commodities for the towns were produced. In the late twenties the capitalist farmers began to assert themselves as a class. In a bid to extend their power they began to hold the towns to ransom, and a virtual state of war existed. The choice was to allow the kulaks to extend their power , and give them a stranglehold on socialism , or to wage a class war against them. Millions of small peasants and agricultural labourers took up the struggle against the kulaks under industrial working class leadership, and began the colle­ ctive organisation of agriculture. 40,000 industrial workers went into the country to direct collectivisation .

Trotsky's notion of ''restricting the exploiting tendencies of the kulak" is a bureaucratic fantasy. The kulaks were making a bid to free themselves of the restrictions imposed upon them. It was a matter of conceding to them or smashing them as a class. Since kulak production was the main source of agricultural goods for the towns, and since they were using th.is position as a lever against the working class, it was a question of allowing them to free themselves from socialist restrictions as a condition for contin­ uingko supply the towns, or of carrying out an extensive social reorganisation of agricultural production from which the kulak class was eliminated. "Restriction " was a thing of the past.

When the struggle against the kulaks was taken up in 1929 it was not let up until they were eliminated as a class. Like any real struggle it had its periods of intensification and relaxation, its adventurist offensives and its tactical retreats. The Trotskyist method of "criticism" was to take one of these incidents of the struggle and represent it as the main thing. Any real struggle has a certain zig-zag character, as Lenin often explained. Trotsky drew attention to zig-zags in the Stalin period and maintained that they were proof of Stalin 's "empiricism". But only a brureaucrat (and Lenin frequently drew attention to Trotsky's bureaucratic out­ look) could imagine that a real struggle could proceed in accordance with some preconeived blueprint . All that can be established beforehand are the main lines of struggle and the main outlines of strategy.

"...correct, and econoically sound, collectivisation, at given stage, should nof o elimination of the N.E.P. (New Ekonomic Policy), but to the gradual reorganisation of its methods ." (p32)

The capitalist farmers declare war on socialism . When the working class resists they engage in sabotage . When collectivisation begins they carry out a massive destruction of crops and slaughter of cattle. A state of actual civil war exists . How do you proceed gradually in that situation? How are the kulaks to be converted to Fabian socialism? How do you go about a gradual reorganisation of the NEP when the NEP bas been disrupted by the war of the capital­ ist farmers against working class control? There is no answer from Trotsky to these little questions. 

In 1933, Trotsky demands the restoration of market relations in industry, with "plans" derived from the market, and "control"being exercised through financial manoeuvering. The market must only be "regulated" by market methods . In agriculture he demands the restoration of capitalist kulak production.

MARKET SOCIALISM

On the general question of market relations and socialism, Trotsky wrote: 

"If there existed the universal mind that projected itself into the scientific fantasy of Laplace ..., such a mind could, of course, draw up a priori a faultless and exhaustive econ­ omic plan ... In truth, the bureaucracy often conceives that just such a mind is at its disposal; that is why it so easily frees itself from the control of the market and of Soviet dem­ ocracy. But in reality the bureaucracy errs frightfully in  this appraisal of its spiritual resources ..• The innumerable living participants of economy, State as well as private , coll­ ective as well as individual , must give notice of their needs and of their relative strength not only through the statistical determination of plan commissions but by the direct pressure of supply and demand . The plan is checked and to a considerable extent realised through the market."

"Economic accounting is unthinkable without market relations." (p33)

When building socialist industry, "Stalinism" did not base it on mar­ ket relations. Socialist production is non-market production consciously organised by the working class to meet social needs.

Trotsky declared it to be impossible at the very time when it was being built in practice .

The economic achievement of the Soviet Union between the 1930's and the 1950's could not possibly have occurred if Trotsky's market soci­ alist notions had been the guiding theory.

To show the impossibility of Marxist socialism (or Stalinism) Trotsk:· cited examples of disproportions resulting from planning faults which were published in the Soviet press. He saw these as signs of the impending crisis. In fact they were the natural teething troubles of a new system . They were remedied through improvements in -planning, not through financial manoeuvres. Planning methods had to be deve­ loped through trial and error. But the errors did not lead to comm­ ercial crises . There is no evidence of conuncrcial crises during the period of Stalinism. "Socialist " commercial crises only began to appear after Tito and Khruschev began to put into practice the market socialism reconnnended by Trotsky (following Proudhon and Duhring).

(In the modern revisionist manner, Trotsky observes: "...the ultim­ ate cost of economically irrational 'successes' surpasses as a rule many times the value of the successes."(pl4). If this means any­ thing, it means that there was waste in the Soviet economy many more times the amount of what was actually produced, and that with "ratio­nal" economics the growth rate would be multiplied. But it is now a matter of history that no market socialist economy has ever remotely approached the high and sustained rates of development that charact­ erised the Stalin period.)

In conclusion: the difference between Stalinist and Trotskyist poli­ tical economy , which Mr. Miller was so coy about, is that Stalin was a Marxist political economist and Trotsky was a market socialist .

Trotsky did not merely deny the possibility of building a socialist  economy in Russia : he denied the possibility of socialist economy in general.

(The Irish Communist , June 1970)

Next Modern Revisionism

Continue to Read more »

POLITICAL ECONOMY - WAGES IN SOCIALIST ECONOMY

A Textbook issued by the Economics Institute of the Academy of Sciences of the U.S.S.R

Part III : THE SOCIALIST MODE OF PRODUCTION

B. THE SOCIALIST ECONOMIC SYSTEM

CHAPTER XXXIII : THE MATERIAL PRODUCTION BASIS OF SOCIALISM

CHAPTER XXXIII WAGES IN SOCIALIST ECONOMY

Wages and the Economic Law of Distribution According to Work

Lenin taught that socialism presupposes “social labour accompanied by the strictest accounting, control and supervision on the part of the organised vanguard, the most advanced section of the toilers. Moreover, it implies that standards of labour and; the amount of remuneration for labour must be determined." (Lenin, “Report on Subbotniks Delivered at the Moscow City Conference of the R.C.P.", Selected Works, 12-volume edition, Vol. VIII, p. 239.) The workers in State enterprises receive this remuneration for labour in the form of wages.

Continue to Read more »

POLITICAL ECONOMY - THE VICTORY OF SOCIALISM IN THE U.S.S.R.

Part III : THE SOCIALIST MODE OF PRODUCTION

A. THE TRANSITIONAL PERIOD FROM CAPITALISM TO SOCIALISM

CHAPTER XXVI : THE VICTORY OF SOCIALISM IN THE U.S.S.R.

The Consolidation of the Socialist Mode of Production

The successes of socialist industrialisation of the U.2S.S.R. and collectivisation of agriculture brought about a fundamental change in the balance of the types of economic structure and class forces in the U.S.S.R., in favour of socialism and to the detriment of capitalism. Up to the second half of 1929 the decisive onslaught against the capitalist elements had taken place primarily in the towns. On passing to all-round collectivisation and the elimination of the kulaks as a class, this onslaught embraced the countryside, too, thereby acquiring a universal character. The general advance of socialism along the whole front had commenced. As a result of the swing of the bulk of the peasant masses towards socialism, the capitalist form of economy was deprived of its base in the shape of small commodity production and began to perish. By 1930 the socialist sector already held the levers of the development of the entire national economy in its hands. It then not only occupied com­pletely the dominating position in industry but also began to play the decisive role in agriculture. This was evidence that the U.S.S.R. had entered the period of socialism.

Continue to Read more »

POLITICAL ECONOMY - SOCIALIST INDUSTRIALISATION

Part III : THE SOCIALIST MODE OF PRODUCTION

A. THE TRANSITIONAL PERIOD FROM CAPITALISM TO SOCIALISM

CHAPTER XXIV : SOCIALIST INDUSTRIALISATION

Large-scale Industry — The Material Basis of Socialism.

The Essence of Socialist Industrialisation

Socialism can only be built on the basis of large-scale machine production. Only large-scale machine production both in town and country can ensure the victory of the socialist forms of economy over the capitalist forms, an uninterrupted growth of the productivity of labour and the improvement of the welfare of the working people.

Lenin wrote: “A large-scale machine industry that is also capable of re­organising agriculture is the only material basis that is possible for socialism." (Lenin, “Theses for the Report on Tactics of the R.C.P. at the 3rd Congress of the Communist International", Selected Works, 1950, English edition, vol. II, Pt. 2, p. 576.)

Capitalism developed large-scale industry and at the same time created the necessary material prerequisites for the proletarian revolution and the construction of socialism. But because of its inherent contradictions capitalism was unable to reconstruct all branches of the economy in all countries on the basis of large-scale machine production. The majority of countries, especially the colonial and dependent countries, lack an adequately developed large-scale industry. The capitalist countries have a numerous class of peasants carrying on a small-scale personal, private economy based on manual labour and primitive technique. Yet the victory of socialism throughout the national economy cannot be secured without the reconstruction of all branches of production on the basis of modern techniques.

The most important part in large-scale industry is played by the branches producing the means of production—metals, coal, oil, machinery, equipment, building materials, etc., that is, heavy industry. Socialist industrialisation means therefore the priority development of heavy industry with its core the engineering industry.

“The centre of industrialisation, the basis for it is the development of heavy industry (fuel, metal, etc.), the development in the last analysis of the production of the means of production, the development of our own engineering industry." (Stalin, “The Economic Situation of the Soviet Union and the Policy of the Party", Works, 1954, English edition, vol. VIII, p. 127.)

The engineering industry occupies a special place in the economy of a country. A developed engineering industry is essential for the re-equipment of all branches of the national economy with modern techniques—machinery, machine tools, appliances, apparatus and instruments—and is the most important source of technical progress.

Socialist industrialisation ensures a growing preponderance of the socialist forms of industry over the small commodity and capitalist forms. It creates the material basis for the development of socialist forms of economy, and the elimination of capitalist elements. It endows the socialist forms of economy with the technical superiority necessary in order to conquer completely the capitalist sector.

The development of heavy industry is the key to the socialist transformation of agriculture on the basis of modern machine techniques. In supplying agriculture with tractors, combines and other agricultural machinery, socialist industry serves as the foundation for the coming into being and development of these new productive forces in the countryside which are necessary for the victory of the collective farm system.

Socialist industrialisation increases the numerical and relative importance of the working class and heightens its leading role in society. It strengthens the basis of the dictatorship of the working class and of its alliance with the peasantry.

Socialist industrialisation ensures the technical and economic independence and defensive capacity of a country building socialism in the presence of a hostile capitalist world. The development of heavy industry provides the material foundation for producing modern weapons necessary to defend the country from the aggression of hostile imperialist States.

Accordingly, socialist industrialisation is such a development of large-scale industry, and in the first place of heavy industry, as will ensure the reconstruction of the entire national economy on the basis of modern machine techniques, the victory of socialist forms of economy, the country’s technical and economic independence of the capitalist world, and its defensive capacity.

Socialist industrialisation is dictated by the demands of the law that the relations of production must necessarily correspond to the nature of the productive forces and by the demands of the basic economic law of socialism, by the necessity of ensuring the material prerequisites for the building of socialism, for uninterrupted growth of production and a steady improvement in the welfare of the people.

Socialist industrialisation was of vital importance for the U.S.S.R. Pre-revolutionary Russia, although it possessed a large-scale industry, was primarily an agrarian country. In the level of its industrial development, particularly of heavy industry, it was considerably behind than the main capitalist countries.

While occupying first place in the world in the size of its territory and third place in the size of its population (after China and India), Tsarist Russia stood fifth in the world for volume of industrial production, and fourth in Europe. Agricultural production in 1913 accounted for 57’9 per cent of gross production of large-scale industry and agriculture taken together, while industrial production accounted for 42.1 per cent. Heavy industry greatly lagged behind light industry. Many important branches of industry, producing machine-tools, tractors, automobiles and other items, were non-existent. Pre-revolutionary Russia was four times worse off for modern instruments of production than England, five times worse off than Germany and ten times worse off than America. Economic and technical backwardness made Tsarist Russia dependent on the developed capitalist countries. It was obliged to import a considerable part of its equipment and other means of production from abroad. Foreign capitalists were in command of the country’s main branches of heavy industry.

The rule of the capitalists and landlords constantly increased Russia’s dependence on the western imperialist Powers. A direct threat of loss of national independence hung over the country. The exploiting classes were incapable of abolishing Russia’s age-long technical and economic backwardness. Only the working class could carry out this historic task. Already on the eve of the great October Revolution, Lenin. was stressing that it was a question of life or death for Russia to overtake and outstrip the most highly developed capitalist countries, technically and economically.

“The result of the revolution has been that the political system of Russia has in a few months caught up with that of the advanced countries.

“But that is not enough. The war is inexorable; it puts the alternative with ruthless severity: either perish, or overtake and outstrip the advanced countries economically as well....

“Perish or drive full-steam ahead. That is the alternative with which history confronts us." (Lenin, “The Impending Catastrophe and How to Combat it", Selected Works, 1950, English edition, vol. II, Pt. I, p. 164.)

The level of development of the productive forces and particularly the existence of large-scale concentrated industry in pre-revolutionary Russia was sufficient for the victory of the proletarian revolution, for the establishment of Soviet Power—the most progressive political power in the world. However, for the creation of the economic basis of socialism, for the socialist transformation of small-scale backward agriculture and for the improvement of the living standards of the people, it was essential to end the age-long technical and, economic, backwardness of the country and to create a powerful heavy industry. Without a developed heavy industry our country would have been doomed to become an agrarian appendage of the more developed capitalist countries, to lose its independence and with it, all the conquests of the socialist revolution.

With the victory of the proletarian revolution in Russia, a contradiction arose between the most progressive political power in the world—Soviet power —and the backward technical and economic basis inherited from the past. The Soviet Government could not for long have maintained itself on the basis of a backward industry. Socialist industrialisation was necessary in order to overcome this contradiction.

Thus socialist industrialisation in the U.S.S.R. was an historical necessity, springing from the most vital and pressing needs of socialist construction.

The Communist Party and the Soviet State recognised this, and consistently put into effect a policy of socialist industrialisation. The 14th Congress of the Communist Party (1925) posed socialist industrialisation as its main task. In the decisions of the Congress it was stated:

“Economic construction must be carried out with a view to converting the U.S.S.R. from a country importing machinery and equipment into a country producing machinery and equipment, so that in conditions of capitalist encirclement it will not be henceforth possible for the U.S.S.R. to be converted into an economic appendage of the capitalist world economy, and it will be an independent economic unit building itself up in the socialist way." (The C.P.S.U. in Resolutions and Decisions of its Congresses, Conferences and Central Committee Meetings, seventh Russian edition, Pt. 2, p. 75.)

The Rate of Socialist Industrialisation

The fundamental tasks of the socialist transformation of the country and of securing its independence required that industrialisation be carried out in the shortest possible period known to history.

The need for a high rate of industrialisation was occasioned by the external and internal circumstances of the Soviet Union, the first land of socialism in the world.

The external circumstances of development of the U.S.S.R. were conditioned by the presence of a hostile capitalist environment. The imperialist countries possessed a more powerful industrial base, and sought to destroy or at least to weaken the Soviet Union. The question of the rate of industrial development would not have been so acute if the Soviet Union had possessed the same developed industry as the advanced capitalist countries. Nor would this question have been so acute if there had been a dictatorship of the proletariat in other more industrially developed States as well. But the Soviet State was a technically and economically backward country and the only country with the dictatorship of the proletariat. In view of this a basis of advanced industry had to be brought into being at high speed.

The internal circumstances of development of the U.S.S.R. also demanded a high rate of industrialisation. So long as the Soviet country remained a land of small peasants, there remained within it a more stable economic base for capitalism than for socialism. In order to answer the question “who will beat whom", the scattered private property economy of the peasant had to be transformed in a historically short time, on the basis of collective labour and armed with modern techniques. Capitalism had to be deprived of its basis in petty commodity production. This task could not be carried out without the rapid development of heavy industry.

Stalin, in stressing the historical necessity for a high speed of socialist industrialisation, said: “We are 50-100 years behind the advanced countries. We must make good this distance in 10 years. Either we do it, or they crush us." (Stalin, “The Tasks of Business Executives", Works, vol. XIII, p. 39.)

The possibility of a high rate of socialist industrialisation was due to the advantages of the socialist economic system and the particular features of the socialist method of industrialisation.

The average yearly rate of growth of industrial production in the U.S.S.R. was about 20 per cent between 1929-37, while in the capitalist countries it averaged no more than 0.3 per cent during this period. The speed of industrial growth in the U.S.S.R. many times exceeded that of the main capitalist countries at the peak of their development. In the U.S.A., for example, the average yearly growth of industrial production was 1890-5 8.2 per cent, 1895­1900 5.2 per cent, 1900-5 2.6 per cent, 1905-10 3,6 per cent.

The Socialist Method of lndustrialisation.

Resources for Socialist lndustrialisation

Only the socialist method of industrialisation, dependent on the new laws of socialism, can achieve the industrialisation of a country in the shortest historical time. Industrialisation in the capitalist countries usually commences with the development of light industry. The turn of heavy industry only comes after a prolonged period of time. This method of industrialisation was unacceptable for the Soviet country. It would have meant the destruction of the socialist revolution and would have converted the U.S.S.R. into a colony of the imperialist States. The Communist Party rejected the capitalist method of industrialisation and started the industrialisation of the country with the development of heavy industry.

Capitalist industrialisation took place spontaneously, as a result of the capitalist drive for profit. Socialist industrialisation is carried out on the basis of the law of the planned development of the national economy, for the purpose of building socialism and satisfying the growing needs of the working people. It could not be achieved if the regulator of production in the socialist sector were the law of value. The Soviet State laid down, in a planned way, such proportions in the allocation of labour and means pf production to the different sectors as were dictated by the needs of socialist industrialisation and secured priority to the development of heavy industry at a high speed. Under the 1st and 2nd Five-Year Plans the Soviet State directed the bulk of capital investment not into light industry, despite its greater profitability, but into the enterprises of heavy industry, the construction of which was of decisive importance for the victory of socialism. The financial and credit system and foreign trade were used in the interests of industrialisation.

Capitalist industrialisation increases the exploitation and impoverishment of the working class and the peasantry, widens the gulf between town and country, and enslaves the colonial peoples. Socialist industrialisation, in accordance with the requirements of the basic economic law of socialism, provides a solid material foundation for the uninterrupted growth of production, using the most modern techniques. It puts an end to unemployment and increases the real wages of the workers.

Socialist industrialisation provides a basis for the progress of agriculture. It leads to the rise of the living standards of the peasantry, bringing town and countryside closer together and strengthens the alliance between the working class and the peasantry. The Communist Party rejected the hostile aims of the Trotskyists, who proposed to industrialise by ruining the peasantry, and tried in this way to undermine the alliance of the working class and peasantry. Socialist industrialisation is a powerful factor in the economic and cultural development of the formerly backward national regions.

The socialist method of industrialisation steadily extends the internal market, and in this way creates a firm internal basis for industrial development. The direct interest of the workers and peasants in socialist industrialisation stems from all the foregoing.

The industrialisation of such a backward country as Russia was a difficult matter, since the creation of a powerful heavy industry required huge material and financial expenditures.

Alongside the merciless exploitation of the workers and peasants, an important role in the industrialisation of the capitalist countries was played by the influx of resources from without, from colonial pillage, war indemnities and enslaving loans and concessions. These methods of mobilising resources for industrialisation are incompatible with the principles of the socialist system. The Soviet Union had to find ways of accumulating resources for heavy industry without enslaving loans from abroad, from internal sources alone, from the planned carrying out of socialist accumulation. Socialist accumulation is the utilisation of part of the national income for the expansion of socialist production. The accumulation of the necessary resources for building new factories necessitated the strictest economy. We are exercising economy in all things," wrote Lenin, “this must be so, because we know that unless we save heavy industry, unless we restore it, we shall not be able to build up any industry; and without that we shall be doomed as an independent country." (Lenin, “Five Years of the Russian Revolution and the Prospects of the World Revolution. Report to the 4th Congress of the Communist International", Selected Works, 1950, English edition, vol. II, Pt. 2, p. 697.).

In carrying but the difficult task of accumulating resources for industrialisation, the Soviet State relied on the superiority of the socialist economy.

The expropriation of the landowners and capitalists made it possible to use for socialist industrialisation a considerable part of the resources which had formerly been appropriated by the exploiters and expended, on parasitic consumption. Soviet power freed the country from huge annual payments abroad as interest on the Tsarist loans and as dividends to foreign capitalists on their investments in Russia. Before the revolution, 800-900 million gold roubles (£85-£95 millions) were expended annually in this way.

The Soviet peasantry got rid of rent payments to the land-owners and considerable indebtedness to the banks. Since the peasantry was interested in the development of industry it was able to allocate a part of its resources for this purpose.

The incomes of nationalised industry, foreign trade, State internal trade and the banking system were the most important sources of finance for socialist industrialisation. Their importance constantly increased with the growth of socialist industry.

Socialist industry has indisputable advantages over capitalist industry in ensuring the growth of accumulation. It is the largest and the most concentrated industry, being on a nationwide scale, and is freed from the operation of the law of competition and anarchy of production. The planned direction of industry, the rational use of its resources, the labour enthusiasm of the working class and the rapid development of techniques created conditions for an uninterrupted growth in the productivity of labour. As a result, socialist industry was enabled steadily to reduce the cost of production, that is, the expenditure of enterprises on the production and sale of their products, expressed in money terms.

One of the important advantages of socialist economy over capitalist is the concentration of the entire monetary accumulation of State and co­operative enterprises in the country, as well as the free resources of the population deposited in State credit institutions, and their planned use for industrial development. The Soviet State ensured the wise expenditure of accumulated resources on the most important requirements of industrialisation. It followed a policy of strictest economy, all round simplification and cheapening of the State and cooperative apparatus, firmer cost-accounting, financial discipline and opposition to unnecessary expenditure of State resources.

All these sources of internal accumulation provided thousands of millions of roubles for industrialisation and made possible large-scale capital investment in industry, particularly in heavy industry.

In this way the Soviet Government successfully overcame the difficulties connected with the accumulation of resources for industrialisation.

Application of the socialist method of industrialisation meant a great gain in time, securing the creation of a first-class socialist industry in the shortest possible time and with a high rate of growth.

Capital Construction. The Mastery of New Techniques and the Problem of Cadres

The accomplishment of socialist industrialisation requires the expansion of capital construction, which was realised in the U.S.S.R. on a large scale. The building of new enterprises, in which more than half the total capital investments in industry was spent, played the chief role in the capital works.

The specific feature of socialist industrialisation in the U.S.S.R., which was determined by the historical conditions of the development of the first stage of socialism, was the need for the creation of all the basic branches of modern heavy industry in the shortest space of time. Scores of branches of modern industry which did not exist in pre-revolutionary Russia, the automobile and tractor industries, the machine-tool industry, a number of chemical industries, the aviation industry, the production of modern agricultural machinery and high-grade steels, and many other industries which in the capitalist countries had been the result of a long period of historical development, were created in the U.S.S.R. during the years of the pre-war Five-Year plans. The basic equipment of the most important branches of heavy industry was created almost anew in a short space of time. The building of new enterprises and reconstruction of those already operating were carried out through the use. on a mass scale of the achievements of modern world technique. The new industrial enterprises were equipped with the latest machine-tools, lathes and apparatus. The process of technical reconstruction covered all branches of industry.

As a result of all this, during the years of the pre-war Five-Year plans, a powerful industry equipped with up-to-date machinery was created.

The basic production funds of all industry (production buildings and installations, machinery and equipment) in 1937 were 5.5 times greater than in 1928, while in the branches producing the means of production they were 7 times greater. During the Five-Year Plans thousands of factories and mills were put into operation. They included scores of giant plants of socialist industry; the Magnitogorsk and Kuznets metallurgical combines, the Dnieper hydro­electric station, the Stalingrad and Kharkov tractor works, automobile factories at Moscow and Gorky, the Urals and Kramatorsk heavy engineering factories, the ball-bearing factory in Moscow the chemical combines at Stalinogorsk, Solikamsk and Berezniki, and numerous other enterprises. The new works began to occupy chief place in the total volume of industrial production. Already by 1937 more than 80 per cent of all production came from enterprises newly built or reconstructed during the first two Five-Year Plans.

During the first Five-Year Plan (1929-32) capital investment in industry amounted to 35.1 milliard roubles (in present-day prices) of which 30.1 milliard roubles were invested in heavy industry. During the second Five-Year Plan (1933-7) capital investment in industry amounted to 82.8 milliard roubles, of which 69.1 milliard roubles were directed into heavy industry. During the three and a half years of the third Five-Year Plan (1938-June 1941) 81.6 milliard roubles were invested in industry, of which 70.3 milliard roubles were invested in heavy industry.

The creation of numerous enterprises equipped with up-to-date machinery set a new, difficult task, that of providing industry with cadres of qualified workers and specialists capable of fully mastering and utilising this technical equipment. These cadres had to be created on a mass scale and in a short space of time.

The problem of supplying labour-power for socialist industry was decided by other means than in the conditions of capitalism, where the chief source of additional labour-power is the reserve army of unemployed. Unemployment was completely eliminated in the U.S.S.R. by the end of 1930, during the years of the first Five-Year Plan. The chief sources from which industry was provided with cadres were the natural increase in the urban population and the reserves of labour-power in the countryside, produced as a result of the new machinery with which agriculture was equipped and the resulting increase in the productivity of labour.

Socialist industrialisation required a systematic rise in the skill of the workers.

The personal interest of the masses in the development of socialist industry, the new character of labour and the growth in the technical efficiency of the workers was shown in the increased activity and creative initiative of the working class.

The task of training new cadres of production engineers and technicians presented itself in all its acuteness. The training of skilled workers in factory schools, and at various courses for production and technical training of new workers, was organised on a large scale. The Soviet State’s planned organisation of industrial training and the interest of the working masses in raising socially-owned production accelerated and facilitated the mastery of new techniques. In this way the conditions for a rapid growth in the productivity of labour were created.

The working class had to create its own intelligentsia, capable of serving the interests of the people and taking an active part in socialist construction. During the first and second Five-Year Plans, the Soviet State developed a huge programme for training cadres, through its network of higher educational institutions and technical colleges, for industry and other sectors of the national economy.

Between 1928 and 1937 the number of manual and clerical workers in industry increased from 3.8 millions to 10.1 millions, i.e., 2.7-fold. The number of skilled workers using the newest mechanical equipment grew considerably more rapidly than the working class as a whole. Between 1926 and 1939 the number of turners increased 6.8-fold, milling machine operators 13-fold, etc. The number of diploma engineers increased 7.7-fold.

The Conversion of the U.S.S.R. from a Backward Agrarian Country

into an Advanced Industrial Power

The victory of socialist industrialisation in the U.S.S.R. was made possible because the Communist Party and the Soviet State based their policy on the laws of economic development and skilfully utilised the advantages of the socialist economy. As required by the task of building socialism and satisfying the growing material and cultural needs of the working people, industrial construction was developed on a gigantic scale. The programme of industrialisation of the country found its practical embodiment in the Five-Year Plans, which gave the Soviet people a clear perspective and proved a powerful force, mobilising the working people for the building of socialism.

During the first Five-Year Plan mass socialist emulation was developed, in the effort to fulfil and overfulfil the plans. The second Five-Year Plan was marked by the rise of the Stakhanovite movement. This was connected with the mastery of modern first-class techniques by the workers; it shattered the technically backward, low standards of output and replaced them with higher standards. The Stakhanovite movement was a new stage in socialist emulation. This emulation of the broad masses of the working class brought out the progressive role of the new socialist relations of production, as the chief and decisive force making for a great upsurge of the productive forces. Socialist emulation opened up enormous reserves for increasing the productivity of labour and speeding up the rate of industrialisation. Socialist emulation, widely developed, was the chief factor in the fulfilment of the first and second Five-Year Plans ahead of time.

An important part in the struggle to industrialise the country was played by the consistent application of the economic law of distribution according to work which combined the personal material interests of the working people with the interests of social production. Payment for work in accordance with its quantity and quality, encouraged the growth of the productivity of labour, improvement in the skill of the workers and perfecting of production methods.

The successful fulfilment of the industrialisation programme changed the balance between industry and agriculture. While agricultural production increased, industrial production increased far more rapidly. This resulted in a sharp increase in the share of industrial production in the production of the country as a whole. Socialist industry was transformed into the decisive force of the national economy. The relative proportions of the branches producing the means of production and the branches producing consumer goods was altered. Production of means of production took the predominant place in the total volume of industrial production, and began to play a leading part in the development of industry and the economy of the entire country.

Engineering in the U.S.S.R. had reached a level of development where it was capable of producing within the country any machines that might be required. The Soviet Union had achieved technical and economic independence of the capitalist countries.

Between 1913 and 1940 production of large-scale industry in the U.S.S.R. Increased nearly twelvefold. In volume of industrial production the Soviet Union already occupied, at the end of the second Five-Year Plan, first place in Europe and second place in the world. The U.S.S.R. also occupied second place in the world for volume of railway-freight turnover. The share of large-scale Industry In gross output of large-scale industry and agriculture combined, had been raised from 42.1 per cent in 1913 to 77.4 per cent in 1937. In 1913 the share of means of production in gross output of all Industry was 33.3 per cent and in 1940 more than 60 per cent. On the eve of the first Five-Year Plan, the U.S.S.R. imported approximately one-third of all its machinery. Already by 1932 less than 13 per cent was imported, and by 1937 only 0.9 per cent. The Soviet Union not only ceased to import automobiles, tractors agricultural and other machinery from the capitalist countries, but even commenced to export them.

The rapid growth of Soviet industry made the large-scale socialist enterprise predominant in industrial production. In 1924-5 the share of the private sector in the U.S.S.R.’s industrial output amounted to 20.7 per cent. With the completion of the second Five-Year Plan private industry was finally eliminated. The socialist system had become the only system in the industry of the U.S.S.R.

Socialist industrialisation raised the material and cultural level of the working people. The building of heavy industry provided a basis for the technical reconstruction and rapid development of the sectors producing consumer goods—agriculture, the light and food industries. Capital investment in the consumer industries was almost trebled in the second Five-Year Plan as compared with the first.

In the course of socialist industrialisation there were fundamental changes in the location of industry. New first-class industrial centres were founded in the eastern regions of the country—in the Urals, Western Siberia and Kazakhstan. Socialist industrialisation. was accompanied by the expansion of the old towns and the creation of new towns. Throughout the country, and particularly in the east, large towns and industrial areas sprang up which became economic and cultural centres completely transforming the character of the surrounding districts.

With the success of the industrialisation programme the Soviet Union was converted from a backward agrarian country into a mighty socialist industrial Power. A solid industrial base had been created for the technical reconstruction of the entire national economy, for strengthening the defensive capacity of the U.S.S.R. and for a steady improvement of the living standards of the people. The contradiction between the most progressive political authority in the world and the backward technical and economic base inherited from the past had been abolished.

Thus during the pre-war Five-Year Plans there took place a tempestuous growth of the productive forces of socialist industry. In the thirteen pre-war years the Soviet Union had covered the ground which the developed capitalist countries had taken approximately ten times longer to cover. This was a most outstanding leap forward from backwardness to progress, the like of which world history had never known. The gigantic development of the productive forces of the U.S.S.R. would not have taken place if the old capitalist relations of production had not been replaced by the new socialist relations.

The victory of industrialisation in the U.S.S.R. was achieved by the Communist Party and the Soviet State in struggle—struggle to overcome the enormous difficulties arising from the economic backwardness of the country, the most stubborn resistance of the capitalist elements which were being eliminated, and the existence of a hostile capitalist environment. The Communist Party won its fight for the industrialisation of the country in battle against the worst enemies of socialism, the Trotskyists and Bukharinists, who opposed to the Party’s general line of industrialising the country the line of converting the Soviet Union into an agrarian appendage of imperialist countries and tried to deflect the U.S.S.R. on to a capitalist path of development.

The socialist industrialisation of the U.S.S.R. was of enormous international significance. The rapid conversion of a formerly backward country into a powerful industrial Power demonstrated the indisputable advantages of the socialist system and strengthened the position of the U.S.S.R. in the international arena. The experience of industrialisation in the U.S.S.R. is today being used by the countries of people’s democracy moving along the road of socialist construction.

The process of industrialisation in each country taking this path depends on both internal and external conditions. The Soviet Union being the first, and for a long time the only country building socialism in an environment of hostile capitalist Powers, was obliged to bring into being a heavy industry, comprising all basic branches, in an extremely short period and from its internal resources alone. This gave rise to enormous difficulties in the building of socialism in the U.S.S.R. The countries of people’s democracy enjoy today different and more favourable circumstances, since there exists a powerful camp of democracy and socialism. Industrial construction in these countries takes into account the particular features of each country, which include their natural conditions and the economic expediency of developing this branch or that, bearing in mind all the advantages of a broad division of labour and economic mutual assistance between the countries of the socialist camp.

BRIEF CONCLUSIONS

(1) A large-scale machine industry is the material basis of socialism. Heavy industry is of decisive importance for building socialism. The essence of socialist industrialisation is the creation, using internal sources of accumulation, of a powerful heavy industry capable of re-organising the entire national economy, including agriculture, on the basis of the most modern techniques and of assuring the complete pre-dominance of socialist forms of economy, the technical and economic independence of the country, and its defensive capacity.

2) The socialist method of industrialisation, having decisive advantages over the capitalist method, ensures the priority development of heavy industry at a high speed. Socialist industrialisation is carried out on a planned basis in a historically very brief period, and is put into effect in the interests of the working people. The nationalisation of industry, the banks, transport and foreign trade creates new sources of accumulation undreamed-of under capitalism, and makes possible the rapid mobilisation of resources for building up heavy industry.

(3) The Soviet State, led by the Communist Party, carried out the programme of industrialisation embodied in the Five-Year Plans, thanks to the fact that its policy was founded on economic laws and that it utilised the superiority of socialist economy and the labour enthusiasm of the working class and the entire working people. During the pre-war Five-Year Plans a technically advanced industry was built up which was the basis for the technical reconstruction of the entire national economy, strengthening the defensive capacity of the country and raising the living standards of the people. The Soviet Union was transformed into a strong industrial Power, independent of other countries and producing all the machinery and equipment it required with its own resources. The new socialist relations of production in the country were the decisive force which determined and secured the rapid growth of the productive forces of socialist industry.

Continue to Read more »

POLITICAL ECONOMY - THE COLLECTIVISATION OF AGRICULTURE

Part III : THE SOCIALIST MODE OF PRODUCTION

A. THE TRANSITIONAL PERIOD FROM CAPITALISM TO SOCIALISM

CHAPTER XXV : THE COLLECTIVISATION OF AGRICULTURE

The Historical Necessity for Collectivisation of Agriculture. Lenin’s Co-operative Plan

To build socialism it is necessary not only to industrialise a country but also to transform agriculture on socialist lines. Socialism is a system of social economy which combines industry and agriculture on the basis of socialist ownership of the means of production and collective labour.

The socialist transformation of agriculture is the most difficult task of the revolution after the conquest of power by the working class. In contrast to industry, where the socialist revolution finds large-scale and highly-concentrated production, agriculture in the capitalist countries has not reached such a degree of capitalist socialisation of production. Small-scale scattered peasant households numerically predominate in it. So long as small-scale individual farming is the predominant form of agriculture, the basis of the bourgeois economic order continues to exist in the countryside, and the exploitation of the poor and a considerable section of the middle peasantry by the rural bourgeoisie, remains. The system of small-scale commodity production is unable to save the peasant masses from poverty and oppression.

Continue to Read more »

POLITICAL ECONOMY - THE BASIC ECONOMIC LAW OF SOCIALISM

Part III : THE SOCIALIST MODE OF PRODUCTION

B. THE SOCIALIST ECONOMIC SYSTEM

CHAPTER XXIX : THE BASIC ECONOMIC LAW OF SOCIALISM

The Nature of Economic Laws under Socialism

As a result of the replacement of the old bourgeois production-relations by socialist production-relations, the economic laws of capitalism, expressing relations based on the exploitation of man by man, cease to operate. The law of surplus-value, the basic economic law of modern capitalism, disappears from the’ scene. The general law of capitalist accumulation, the law of competition and anarchy of production, together with other laws, also disappear. The categories which express capitalist relations cease to exist: capital, surplus-value, capitalist profit price of production, wage-labour, the value of labour-power, etc.

Continue to Read more »

POLITICAL ECONOMY - THE LAW OF PLANNED PROPORTIONAL DEVELOPMENT

Part III : THE SOCIALIST MODE OF PRODUCTION

B. THE SOCIALIST ECONOMIC SYSTEM

CHAPTER XXX : THE LAW OF PLANNED PROPORTIONAL DEVELOPMENT OF THE NATIONAL ECONOMY

The Necessity for Planned Development of the Economy in a Socialist System

As is known, every social formation requires for its existence and development definite proportions in the distribution of labour and means of production among the different branches of the national economy. Under capitalism the essential proportions in the development of production are arrived at spontaneously, through constant fluctuations, disproportions and periodic crises. In directing their capital into one or other branch of production, capitalists are guided by such spontaneous barometers of economic life as the fluctuations of market prices, rates of profits, rates of interest, quotations of shares, etc.

In socialist economy, as a result of the socialisation of the means of production, the spontaneous barometers of economic life are abolished. Socialist society cannot develop blindly and by drifting along of its own accord. In socialist conditions the necessary proportions in the distribution of means of production and labour-power between branches of the economy can only be achieved in a planned way. Planned development of socialist economy is made necessary and possible by social ownership of the means of production. Engels stated that the passing of the means of production into social ownership makes possible “socialised production upon a predetermined plan". (Anti-Duhring, English edition, 1954, p. 395.) In contradistinction to private ownership of the means of production, whichdisunites the commodity producers and gives rise to competition and anarchy in production, social ownership unites a multitude of enterprises into a single national economic whole, subordinated to a single aim arising from the requirements of the basic economic law of socialism. Large-scale socialised production in a socialist society can develop only through Ii general plan, which provides unity of action for the whole of society and ensures the necessary proportions in the development of individual industries and enterprises and of the national economy as a whole.

Continue to Read more »

POLITICAL ECONOMY - SOCIAL LABOUR IN SOCIALIST SOCIETY

Part III : THE SOCIALIST MODE OF PRODUCTION

B. THE SOCIALIST ECONOMIC SYSTEM

CHAPTER XXXI : SOCIAL LABOUR IN SOCIALIST SOCIETY

The Character of Labour in Socialist Society

The consolidation of socialist relations of production denotes a fundamental change in the character of work. Labour-power has ceased to be a commodity. The working people, with the aid of the means of production belonging to them, work for themselves, for their own society. Work in socialist society is work freed from exploitation.

“For the first time after centuries of working for others, of working in subjection for the exploiter, it has become possible to work for oneself, and moreover to employ all the achievements of modern technique and culture in one’s work." (Lenin, “How to Organise Competition", Selected Works, 1950; English edition, Vol. II, Part I, p. 368.)

Under capitalism free labour presents itself directly as private labour and its social character is seen only in the market, behind the back of the commodity producers, whereas labour in socialist society has a directly social character, and is organised in a planned way on a country-wide scale. In consequence of this, the labour of each individual worker appears directly as part of the total social labour. The planned organisation of social labour provides the opportunity, unknown under capitalism, of making the fullest use of labour reserves on the scale of the whole society.

Continue to Read more »

POLITICAL ECONOMY - COMMODITY PRODUCTION,

Part III : THE SOCIALIST MODE OF PRODUCTION

B. THE SOCIALIST ECONOMIC SYSTEM

CHAPTER XXXII : COMMODITY PRODUCTION, THE LAW OF VALUE, AND MONEY, IN SOCIALIST SOCIETY

The Necessity for Commodity Production in Socialist Society, its Characteristics

Commodity production is made necessary in socialist society by the existence of two basic forms of socialist production—State and collective farm. In State enterprises both means of production and output are public property. In collective farms, means of production (such as draught and productive livestock, agricultural implements, farm buildings and seeds), and the output collectively produced, are group or co-operative collective farm property. The basic and decisive means of production in agriculture (land and the M.T.S. machines) are State property. Since the output of State enterprises belongs to the Socialist State, and collective farm output belongs to the collective farms, exchange of goods through purchase and sale is the necessary form of economic connection between industry and agriculture. Here, as in all purchases and sales the seller loses his right of ownership to the commodity, and the purchaser becomes its owner.

Lenin pointed out that “the economic essence of socialism is exchange of the products of large-scale (‘socialised’) industry for peasant products" (Lenin, Plan of the pamphlet “On the Tax in Kind", Works, 4th Russian edition, vol. XXXII, p. 308), and that commodity exchange is a check on the correctness of the relationship between industry and agriculture, the working class and peasantry. Lenin’s statements remain “true for the whole of the first phrase of communism. The Soviet State acquires food for the urban population and raw material for industry mainly from collective farms and their members through regular commodity exchange, through compulsory purchase at fixed prices and voluntary purchase by contract, at higher prices. Collective farms and their members in their turn can obtain the money they need to acquire the output of industry only by selling their own marketable output to the State, to co-operatives, and on the collective farm market.

Thus agricultural produce and raw materials acquired from the collective farm sector by the State and the co-operatives by compulsory purchase or by contract are commodities; and so are agricultural products sold by collective farms and their members in collective farm markets. Industrial products (mostly consumer goods) produced by State enterprises and purchased by collective farms and their members, are also commodities. In as much as manufactured and agricultural consumer goods are commodities, the urban population also acquires them through purchase and sale. In this case there is a transfer of commodities from State and co-operative ownership, or from the private ownership of collective farmers, to the private ownership of the workers and other employees.

In socialist economy commodity production is commodity production of a special kind, without private ownership of the means of production, without capitalists. In the main it is carried on by united socialist producers (the State, collective farms, the co-operatives). The means of production are socially owned, and the system of hired labour and the exploitation of man by man is abolished; these decisive economic conditions confine commodity production in socialist economy within definite limits. It cannot turn into capitalist production, and serves socialist society.

In socialist society commodity production is not as unlimited and universal in its scope as it is under capitalism. The area of operation of commodity production and circulation is limited mainly to consumer goods. Labour-power is not a commodity. The land and natural resources are State property and cannot be bought or sold. State enterprises cannot be bought and sold, and may be transferred from one State organisation to another only by special permission: this includes works, factories, mines, arid power stations, and their fixed productive stocks (machinery, buildings, installations, etc.). They are therefore not commodities, not objects of sale or purchase.

Means of production produced in the State sector (such as machines, machine tools, metal, coal, oil, etc.) are chiefly distributed among State enterprises. The national economic plans provide for the allocation to each enterprise of definite material funds appropriate to its production programme. The enterprises producing these funds supply them to the consuming enterprises on the basis of contracts between the two parties. When means of production are transferred to a particular enterprise the Socialist State remains their full owner. Directors of enterprises who receive means of production from the Socialist State in no way become their owners; they are simply agents of the State, invested with the function of utilising the means of production in accordance with State plans. The main agricultural machines, such as tractors and combine harvesters, are not sold to the collective farms but are concentrated in the machine and tractor stations, which are State enterprises and serve the collective farms with the assistance of these means of production.

The means of production bought by the industrial co-operatives collective farms and collective farmers: motor vehicles, equipment for the social farming of the collective farm, cement, iron bricks coal timber for building, the simplest agricultural machines and tools are all commodities. The means of production sold to foreign States are also commodities. In these cases, purchase and sale, an exchange in the ownership of the commodities, takes place.

Thus, the means of production manufactured by State enterprises and distributed within the State sector are essentially not commodities. Since, however, consumer goods, agricultural raw materials and part of the means of production are commodities, while socialist economy represents a single whole in which all parts are interconnected, the means of production, which circulate inside the State sector, also retain the commodity form. This is reflected in the fact that the means of production are expressed in the money form of value, which, is necessary for the realisation of economic accounting, stock-taking and calculation.

Use-Value and Value of a Commodity in Socialist Economy

Products which are made and realised as commodities in socialist society have a use-value, created by concrete labour, and a value, created by abstract labour. In other words, a commodity, has a two-fold character in socialist society determined by the two-fold character of the labour embodied in the commodity.

The two-fold character of labour in socialist society, radically differs from the two-fold character of labour in simple commodity production and in capitalist economy. The contradictions between private and social labour which are typical of commodity production based on private property do not exist in socialist society. As stated above, labour in a socialist economy is not private but directly social labour. Society plans the process of production, the distribution of labour among different branches of the national economy and among particular enterprises. In view of all this, commodity fetishism is overcome in socialist economy, and social relations between men do not assume the deceptive form of relations between things.

But in socialist economy there are differences in the directly social nature of labour in State enterprises and that in the collective farms, which arise from the differences between the two forms of socialist ownership of the means of production. In State enterprises labour is socialised on a national scale, by virtue of which the product of labour, too, belongs to the whole of society in the shape of the Socialist State. In the collective farms labour is socialised within the limits of the given agricultural artel, by virtue of which the products of labour, too, are the property of the artel. In addition, collective farmers use their labour on their personal auxiliary plot, which is of subordinate importance. Labour in the subsidiary husbandry is private labour; it is not directly social labour.

The differences in the degree to which labour is socialised in State enterprises and collective farms, and the existence of commodity connections between State industry and the collective farms, due to the two forms of social ownership, make it impossible to express and compare directly, in the form of labour-time the social labour expended in producing the output of the State and collective farm sectors. This makes necessary the indirect reduction of the social labour expended on the production of industrial and collective farm output to a common expression and measure, by utilising value and its forms. This is effected by reducing the various concrete forms of the labour of workers and collective farmers to their equivalent in abstract labour, which creates the value of a commodity.

The Socialist State in the process of planned management of the national economy takes into account both aspects of a commodity, its use-value and its value. The State requires that its enterprises should produce particular forms of output—particular use-values. Use-value is of interest to the capitalist only as a bearer of value and surplus-value, but in socialist economy the creation of use-values and the improvement of the quality of output have an independent and very great importance, for production is carried on in the interests of the fullest possible satisfaction of the growing needs of the whole of society.

In socialist economy the value of a commodity is also of very substantial importance. The State plans production in money indices as well as in physical indices. Here the systematic reduction of the value of commodities which are produced, and the reduction of prices on this basis, plays a great part in ensuring the maximum satisfaction of the needs of society.

In socialist economy the antagonistic contradiction between use-value and value with which is linked the possibility of crises of overproduction, does not exist. At the same time a non-antagonistic contradiction between use-value and value can arise under socialism as well. Socialist economy makes it fully possible to fulfil production plans in both monetary and physical terms.

However, this possibility is not always realised. In the practical work of economic construction, the contradiction between use-value and value is revealed, for example, in cases of excessive amount of a commodity, when a commodity cannot be sold because of its low quality, because it does not correspond to the demand, and so on, or in cases where individual enterprises in a drive to turn out the more profitable sorts of articles fail to fulfil the plan as regards range and quality of production. Contradictions of this kind are revealed and resolved in the course of the planned management of economy.

In socialist economy there is a distinction between complex (skilled) and simple labour, and complex labour is expressed in terms of simple labour. The relation between complex and simple labour is taken into account in planning production, in fixing output standards, and in planning wages (when the payment for different skills, etc., is fixed).

The magnitude of the value of commodities produced and realised in socialist economy is determined by the quantity of socially-necessary labour-time expended on producing them. Socially-necessary labour-time means the average labour-time expended by the enterprises which produce the bulk of output in the branch concerned.

The socially-necessary time is a quantity which has an objective existence. The socially-necessary labour-time expended on producing a unit of a commodity determines the social value of the commodity. The time actually expended in producing a unit of a commodity in particular enterprises is the individual labour-time which determines the amount of the individual value of a commodity in each of these enterprises. Under capitalism socially-necessary time is formed blindly, behind the backs of the commodity producers. In socialist economy the State, basing itself on objective economic conditions and on the requirements of the economic laws of socialism, plans the growth of labour productivity and the reduction of production costs, and fixes standards for the expenditure of labour and materials in each enterprise. In this planned way it uses its influence to reduce the quantity of socially-necessary time used in producing a commodity.

Under capitalism the contradiction between individual and socially-necessary labour-time is antagonistic in character. Enterprises at a more advanced technical level receive surplus profit, keep their technical improvements secret, and thus defeat, ruin and destroy their competitors. In socialist economy the contradiction between the individual time expended at particular enterprises and the socially-necessary labour-time is not antagonistic in character. “Commercial secrecy" is unknown in socialist economy: in consequence, it is possible for the technical achievements of more advanced enterprises to be quickly spread to all enterprises in the branch of the economy concerned, and thus socialist economy as a whole is improved.

Progressive standards of expenditure of labour and materials the fixing of which takes into account the experience of more advanced enterprises, are an important means by which the Socialist State exercises a planned influence on the quantity of socially-necessary time. They pave a great mobilising importance, as they encourage economic managements and the mass of working people to seek out methods by which production can be rationalised, new technology brought into use, labour productivity raised and output costs lowered. After these progressive standards have been reached by a majority of enterprises (producing the greater part of the total output), they begin to coincide with socially-necessary labour outlays and cease to be progressive. However, the more advanced enterprises have meanwhile again reduced labour outlays on production. On the basis of the experience of the more advanced enterprises, new progressive standards of labour outlays are fixed; and, by achieving these, socially-necessary time is again reduced.

All this helps to speed up technical progress and the rapid development of the productive forces of socialist society.

The Nature of the Operation of the Law of Value in Socialist Economy

The law of value continues to operate in socialist economy to the extent that commodity production and circulation still exist. The economic structure of socialism confines the operation of the law of value within strict limits. The means of production in town and country are socialised, and the sphere of operation of commodity production and circulation is restricted. The role of the law of value is limited by these factors, by the operation of the economic laws of socialism, primarily the law of planned development of the national economy, by the planning of the national economy, and in general by all the economic activity of the Socialist State.

The law of value in socialist economy cannot be the regulator of production. As already shown, the regulator of socialist production is the law of planned, proportional development.

In building enterprises and even in establishing whale branches of production, the Socialist State is guided not by the urge to make profit but by the requirements of the basic economic law of socialism and the law of planned development of the national economy. If the law of value functioned as the regulator of production, the most profitable branches and light industrial enterprises would be the first to develop in socialist society, and heavy industrial enterprises, which were very important from the paint of view of the interests of national economy but which temporarily might be unprofitable, would have to close down. However, in the U.S.S.R. enterprises which are at first unprofitable, or show only a small profit, are not closed dawn if they are necessary to the national economy: they are continued and subsidised, although at the same time steps are taken to make them profitable.

In contradistinction to capitalism, where the law of value operates as a blind farce dominating man, the operation of the law of value in socialist economy is known, taken into account and utilised by the State in the practice of planning the national economy.

The sphere of operation of the law of value in socialist economy covers primarily the circulation and exchange of commodities (mainly consumer goods). In this sphere the law of value retains the function of a regulator to a certain limited extent. The regulating role of the law of value in the sphere of commodity circulation is revealed first and foremast through prices.

When planning prices, the Socialist State takes into account and uses the influence of the law of value. The problem of securing a sound economic basis for the planning of prices is of great importance for the development of the national economy.

“In the problem of prices all the main economic and therefore, the political problems of the Soviet State intersect: Questions of establishing correct relations between the peasantry and the working class, and of achieving an inter-connected and inter-dependent development of agriculture and industry . . . questions of securing real wages and of strengthening the chervonets,[1] ... all these came up against the problem of prices." (Resolution of the Central Committee of the C.P.S.U. (B), February 1927. The C.P.S.U. in Resolutions and Decisions of its Congresses, Conferences and Central Committee meetings, Pt. II, 7th Russian edition, 1953, p. 225.)

In fixing prices, the State takes as its starting paint that it is necessary far enterprises to make a certain amount of profit, and it takes into account the quantity of particular commodities and their importance in the economy; and it uses prices to. stimulate the production of particular goods and to regulate the demand far them. The Soviet State consistently follows a policy of reducing prices of consumer goods in the interests of improving the welfare of the people.

In fixing the prices of consumer goods, the State takes into account bath their value expressed in money terms and the supply and demand of these commodities. If the supply-and-demand situation were ignored, demand would fall sharply for goods with especially high prices, and would be artificially raised for goods with very low prices.

The regulating function of the law of value appears most fully on the collective farm market, where prices are formed on the basis of supply and demand; price movements, moreover, influence the size and structure of commodity turnover on the collective farm market. But the Socialist State has a tremendous economic influence on this market, since the bulk of all commodities are sold in the State and co-operative trading system at fixed planned prices.

The regulating action of the law of value in the sphere of commodity circulation is kept within strict limits. In State and co-operative trade there is no “free play of prices". The Socialist State’ fixes the prices of commodities with certain deviations. from the value of the commodities. In doing so it proceeds primarily from the fact that the basic economic law of socialism makes it necessary to ensure a constant expansion of industry on the basis of the high techniques for the purpose of satisfying the growing requirements of the whole of society. The State uses the price mechanism to fix proportions in the distribution of means among the branches that follow from the requirements of planned development of the national economy. The State, for example, by means of an appropriate price policy uses part of the incomes created by some branches to produce a rapid rise of other branches.

The operation of the law of value is not limited to the sphere of commodity circulation. The law of value also influences socialist production.

Through prices, the law of value influences collective farming output. The level of prices and the relationship between them, in accordance with which the collective farms and collective farmers sell their output, exert a substantial influence in materially stimulating the production of particular agricultural products. It is wrong, for example, to fix the same State purchase price for a ton of cotton and a ton of grain, failing to take into account the fact that the value of cotton is considerably greater than the value of grain. On the other hand, it is wrong to fix grain prices too low, as this would undermine the material interest of the collective farm and its members in producing grain, and would harm the development of grain-farming.

Thus, for example, economically sound State purchase prices were fixed for cotton and other industrial crops, and this promoted an increase in their production. On the other hand low State prices over a certain period of time for compulsory purchases and purchases by contract of potatoes, vegetables, milk, meat and grain, hindered their production. The State prices paid for these products were considerably increased in 1953-5, and this was a very important incentive to their increased production.

The influence of the law of value on the light and food industries is connected with the fact that the consumer goods which these branches produce are commodities. The value of manufactured consumer goods includes the value of the raw material produced as a commodity by the collective farms. Part of the newly-created value of consumer goods is used to replace outlays on money wages, and the remainder forms the income of the enterprise, received in money form. In addition in the process of producing manufactured consumer goods: means of labour; such as lathes, machines and factory buildings, are worn out. These are not actually commodities; but since all the other elements entering into the value of manufactured consumer. goods are expressed in a money form of value, the means of labour, too, must be expressed and calculated in money.

Although the means of production manufactured in the State sector and circulating within it are, essentially, not commodities, nevertheless in so far as they retain the commodity form they also possess the value form. In this sense one speaks of the value of the means of production, their cost of production, price, etc. Here it should be borne in mind that these categories conceal the relations of production of the State socialist sector which, in essence, do not have a commodity character.

“The fact of the matter is that in our socialist conditions economic development proceeds not by way of upheavals, but by way of gradual changes, the old not simply being abolished out of hand, but changing its nature in adoption to the new, and retaining only its form: while the new does not simply destroy the old, but infiltrates into it, changes its nature and its functions, without smashing its form, but utilising it for the development of the new." (Stalin, Economic Problems if Socialism in the U.S.S.R., p. 59.)

In socialist society the value form of the means of production is of great economic importance for the national economy.

The law of value influences the production of means of production through consumer goods, which are needed to replace the expenditure of labour-power. Consumer goods are commodities, and workers can get them only by buying them with money from their wages. Hence the money form of value has also to be used in the production of means of production, to keep account of all the other elements which, combined with wages, are included in the industrial output costs.

The influence of the law of value on the production of the means of production and consumer commodities is manifested through the system of economic accounting, which is based on payment in money form for expenditure of labour, and which stimulates an increase in the productivity of labour, and lower costs and greater profitability of production. Knowledge of the operation of the law of value and ability to use it assists economic workers to manage production rationally, to improve methods of work consistently, and to find and make use of hidden reserves to increase output.

The Socialist State uses the law of value in carrying out control, through the financial and credit system, over industry’ and the distribution of the social product.

The use of the law of value is of great importance in operating the economic law of distribution according to work. The money form of wages is the means of control over the measure of labour and over the measure of reward in socialist society.

The restriction of the law of value, control over it, and its planned use are a tremendous advantage which socialism has over capitalism. It is thanks to this restriction that the operation of the law of value in the U.S.S.R. is not accompanied by destructive consequences in the shape of crises, whereas under capitalism the law of value, despite the low rates of development of industry in the capitalist countries, leads to periodic crises of overproduction, to unemployment and to the destruction of part of the productive forces.

Money and its Functions in Socialist Economy

The necessity of money in socialist society is determined by the existence of commodity production and the law of value. “Before the socialist revolution the Socialists wrote that it is impossible to abolish money at once. . . . A great many technical, and what is much more difficult and more important, organisational gains are necessary in order to abolish money." “In order to abolish money, it is necessary to arrange the organisation of the distribution of products for hundreds of millions of people, an affair of many years." (Lenin, The Deception of the People by the Slogans of Equality and Freedom. Little Lenin Library, Vol. XIX, pp. 26, 35-6.)

Money fundamentally changes its nature in being applied to the needs of the development of socialist economy. Under capitalism, money is turned into capital and is a means of appropriating the unpaid labour of other people. In socialist economy, on the other hand, money is a weapon of economic construction in the interests of the mass of the people in accordance with the requirements of the basic economic law of socialism. It is an expression of the socialist relations of production.

Under socialism money fulfils the role of universal equivalent in the national economy as a whole. The money form is used not only. in the circulation of consumer goods and those means of production that are commodities, but also in the economic turnover of those means of production that are not essentially commodities but which retain the commodity form. The unity of socialist national economy, the indissoluble connection and relationship between the production of means of production and the production of articles of consumption, between State industry and collective farm production, requires a single measure to express and measure the social labour expended On the production of what is produced. In socialist economy, where two forms of socialist ownership exist, only money can be such a universal measure of social labour.

Whereas under capitalism money serves as an instrument for the spontaneous calculation of social labour, a calculation that is made behind the back of the commodity producers through market fluctuations, in socialist economy money is the economic instrument of the planned management of the economy, and serves in the production and distribution of the social product.

Consequently, money in socialist society is the universal equivalent, the economic instrument for planning the national economy, the means used for universal accounting and control over the production and distribution of the social product, over the measure of labour and the measure of remuneration.

The new nature of money under socialism is expressed in the fact that while the old form is retained, there is a change in the social content and the purpose of the functions of money compared with the functions of money under capitalism.

Money has primarily the function of a measure of the value of commodities, i.e., it measures the social labour embodied in them. In the conditions of socialism, when two basic forms of socialist production exist, only a money form can be used to express the results of the economic activity of an enterprise, to compare the results of the work of enterprises and of branches producing different goods, and to measure the volume of output of branches of the economy and of the national economy as a whole. Since the means of production, although they are not commodities, retain the form of commodity and value, money in its function as a measure of value serves also as a means for keeping account of the social labour expended on means of production.

Of course only a monetary commodity which itself has can have the function of a measure of value—such as gold. In the Soviet Union and the other countries of the socialist camp gold plays the part of universal equivalent. Soviet currency has a gold content, being tokens of gold.

In socialist society money can only fulfil the functions of a measure of the value of commodities by virtue of its connection with gold. Lenin connected the abolition of gold money with the victory of socialism on a world scale. He said: “In the R.S.F.S.R., for the time being it is necessary to retain gold, sell it as dearly as possible and to buy goods with it as cheaply as possible." (Lenin, “On the Significance of Gold at Present and after the Complete Victory of Socialism", Works, Russian edition, Vol. XXXIII, pp. 89-90.) Soviet money retains the historically derived connection with gold.

On the basis that gold is a universal equivalent, the Soviet State fixed a gold content for the rouble in carrying out the currency reform of 1922-4. The gold content of the rouble was later fixed indirectly, by establishing an exchange-rate for the Soviet rouble with first the franc and later the dollar. In 1950, in connection with the increased purchasing power of the rouble and the reduced purchasing power of the dollar and other capitalist currencies, the Soviet State fixed the gold content of the rouble directly, at 0.222168 grams of gold. The exchange-rate of the rouble with other currencies was raised to correspond with its gold content.

The Soviet State produces and accumulates gold as the universal money used for trading both with the countries of the capitalist world market and with the countries of the world market of the socialist camp.

The Soviet State uses money, in its function as a measure of value, as a means for planned leadership, accounting and control over the course of production and the distribution of the social product, as an instrument for carrying out economic accounting. Thus, for example, by comparing the planned and actual cost of production, the cause can be found why the actual cost of production is in excess of the planned cost and the necessary measures devised to reduce the cost of production and increase the profitability of the enterprise.

In its function as a measure of value money is used by the Socialist State in the planning of prices. In socialist economy price is the money expression of the value of commodities, and is established in a planned way.

In socialist economy money is also a pricing-unit. In the Soviet Union this unit is the rouble.

In socialist economy money has the function of a means of circulation of commodities. Money acts as a means of circulation in the purchase and sale of commodities. The function of money as a means of circulation is used to extend commodity turnover.

Money in socialist economy has the function of a means of payment.Money acts as a means of payment when wages are paid out to workers and employees, when loans are borrowed and repaid by socialist enterprises, when taxes are paid, etc. The Socialist State uses money in its function as a means of payment to supervise the work of socialist enterprises. For example, money is advanced to enterprises by the bank to’ the extent that they fulfil their production plan. The bank requires loans to be repaid promptly, and this provides an incentive to plan fulfilment by the enterprise, which will not be able to accumulate sufficient money to repay the loan without fulfilling the plan.

In socialist economy money has the function of a means of socialist accumulation and saving. State enterprises and collective farms keep their money in banks. The money incomes of enterprises and organisations, and their money which is temporarily not in use, are used for the needs of socialist accumulation, to extend production, to form reserves, and to meet the material and cultural needs of the population. As a result of the improvement in the well-being of the working people their money savings are increasing. These are kept in savings banks.

In socialist society gold performs the functions of world currency. The gold reserve is mainly a State reserve fund of world currency. In foreign trade, gold as an instrument for buying and selling is a means of international accounting by the State.

The stability of the Soviet currency is secured not merely by the gold fund, but primarily by the huge quantity of commodities in State hands which are released into the trade network at stable planned prices. In no capitalist country does money have such a reliable backing as in the Soviet Union.

BRIEF CONCLUSIONS

(1) Commodity production in socialist society is made necessary by the existence of two basic forms of socialist production: State and collective farm. Commodity production and commodity circulation are limited mainly to consumer goods. Commodity production in socialist society is commodity production of a special kind, without private ownership of the means of production, and without capitalists. It serves socialist society.

(2) A commodity in socialist economy has use-value created by concrete labour, and value created by abstract labour. The contradiction between private and social labour does not exist in socialist society. In socialist economy both the creation of use-values and the improvement of the quality of output and also systematic reductions in the value of commodities on the basis of the planned (1) reduction of the socially-necessary time spent on their production are of the utmost importance.

(3) The sphere of operation of the law of value in socialist economy is limited. The law of value is not the regulator of production, but influences production and has a regulating influence on commodity circulation. The law of value is used in the process of the planned management of the national economy. The operation of the law of value is taken into account in the planning of prices.

4) Money in socialist economy is a universal equivalent, an economic instrument for planning the economy, a means for controlling and keeping account of the production and distribution of the social product, the measure of labour and consumption. Money has the function of a measure of value, a means of circulation, a means of payment, and a means of socialist accumulation and saving, a world currency. Soviet money is backed not only by the gold reserve but primarily by the mass of commodities which is concentrated in State hands and sold at State planned prices.

Continue to Read more »