Let us now have a look at law of value and issues related to this.
For this we shall take comrade Stalin’s “Economic Problems..” , or rather our compilation of Economic Laws under Socialism” based on “economic Problems..”
Next week we shall have a look at the laws and categories and how they function under different conditions.
THE LAW OF VALUE UNDER SOCIALISM
Stalin:
It is sometimes asked whether the law of value exists and operates in our country, under the socialist system.
Yes, it does exist and does operate. Wherever commodities and commodity production exist, there the law of value must also exist.
Stalin:
In our country, the sphere of operation of the law of value extends, first of all, to commodity circulation, to the exchange of commodities through purchase and sale, the exchange, chiefly, of articles of personal consumption. Here, in this sphere, the law of value preserves, within certain limits, of course, the function of a regulator.
But the operation of the law of value is not confined to the sphere of commodity circulation. It also extends to production. True, the law of value has no regulating function in our socialist production, but it nevertheless influences production, and this fact cannot be ignored when directing production. As a matter of fact, consumer goods, which are needed to compensate the labour power expended in the process of production, are produced and realized in our country as commodities coming under the operation of the law of value. It is precisely here that the law of value exercises its influence on production. In this connection, such things as cost accounting and profitableness, production costs, prices, etc., are of actual importance in our enterprises. Consequently, our enterprises cannot, and must not, function without taking the law of value into account.
Stalin:
. It is precisely here that the law of value exercises its influence on production. In this connection, such things as cost accounting and profitableness, production costs, prices, etc., are of actual importance in our enterprises. Consequently, our enterprises cannot, and must not, function without taking the law of value into account
.
Is this a good thing? It is not a bad thing. Under present conditions, it really is not a bad thing, since it trains our business, executives to conduct production on rational lines and disciplines them. It is not a bad thing because it teaches our executives to count production magnitudes, to count them accurately, and also to calculate the real things in production precisely, and not to talk nonsense about “approximate figures” spun out of thin air. It is not a bad thing because it teaches our executives to look for, find and utilize hidden reserves latent in production, and not to trample them underfoot. It is not a had thing because it teaches our executives systematically to improve methods of production, to lower production costs, to practise cost accounting, and to make their enterprises pay. It is a good practical school which accelerates the development of our executive personnel and their growth into genuine leaders of socialist production at the present stage of development.
Stalin:
The trouble is not that production in our country is influenced by the law of value. The trouble is that our business executives and planners, with few exceptions, are poorly acquainted with the operations of the law of value, do not study them, and are unable to take account of them in their computations. This, in fact, explains the confusion that still reigns in the sphere of price-fixing policy. Here is one of many examples. Some time ago it was decided to adjust the prices of cotton and grain in the interest of cotton growing, to establish more accurate prices for grain sold to the cotton growers, and to raise the prices of cotton delivered to the state. Our business executives and planners submitted a proposal on this score which could not but astound the members of the Central Committee, since it suggested fixing the price of a ton of grain at practically the same level as a ton of cotton, and, moreover, the price of a ton of grain was taken as equivalent to that of a ton of baked bread. In reply to the remarks of members of the Central Committee that the price of a ton of bread must be higher than that of a ton of grain, because of the additional expense of milling and baking and that cotton was generally much dearer than grain, as was also borne out by their prices in the world market, the authors of the proposal could find nothing coherent to say. The Central Committee was therefore obliged to take the matter into its own hands and to lower the prices of grain and raise the prices or cotton. What would have happened if the proposal of these comrades had received legal force? We should have ruined the cotton growers and would have found ourselves without cotton.
Sphere of operation of law of value, just as sphere of operation of commodity production is strictly limited under socialist economic conditions.
A: no private ownership of means of production-they are socialised: this restricts it.
B: law of balanced development and thus the yearly and five yearly plans based on this law restricts it.
It is not a regulator of production under socialist economic conditions at all. It is itself regulated.
Stalin:
But does this mean that the operation of the law of value has as much scope with us as it has under capitalism, and that it is the regulator of production in our country too? No, it does not. Actually, the sphere of operation of the law of value under our economic system is strictly limited and placed within definite bounds. It has already been said that the sphere of operation of commodity production is restricted and placed within definite bounds by our system. The same must be said of the sphere or operation of the law of value. Undoubtedly, the fact that private ownership of the means or production does not exist, and that the means of production both in town and country are socialized, cannot but restrict the sphere of operation of the law of value and the extent of its influence on production.
In this same direction operates the law of balanced (proportionate) development of the national economy, which has superseded the law of competition and anarchy of production.
In this same direction, too, operate our yearly and five yearly plans and our economic policy generally, which are based on the requirements of the law of balanced development of the national economy.
The effect of all this, taken together, is that the sphere of operation of the law of value in our country is strictly limited, and that the law of value cannot under our system function as the regulator of production.
This, indeed, explains the “striking” fact that whereas in our country the law of value, in spite of the steady and rapid expansion of our socialist production, does not lead to crises of overproduction, in the capitalist countries this same law, whose sphere of operation is very wide under capitalism, does lead, in spite of the low rate of expansion of production, to periodical crises of over-production.
With the disappearance of commodity production, value and its forms and the law of value also disappear.
Stalin:
It is said that the law of value is a permanent law, binding upon all periods of historical development, and that if it does lose its function as a regulator of exchange relations in the second phase of communist society, it retains at this phase of development its function as a regulator of the relations between the various branches of production, as a regulator of the distribution of labour among them.
That is quite untrue. Value, like the law of value, is a historical category connected with the existence of commodity production. With the disappearance of commodity production, value and its forms and the law of value also disappear.
computation of the requirements of society will acquire paramount importance for the planning bodies
Stalin:
In the second phase of communist society, the amount of labour expended on the production of goods will be measured not in a roundabout way, not through value and its forms, as is the case under commodity production, but directly and immediately—by the amount of time, the number of hours, expended on the production of goods. As to the distribution of labour, its distribution among the branches of production will be regulated not by the law of value, which will have ceased to function by that time, but by the growth of society’s demand for goods. It will be a society in which production will be regulated by the requirements of society, and computation of the requirements of society will acquire paramount importance for the planning bodies.
we give primacy to the production of means of production in favour of the production of articles of consumption. Because the national economy cannot be continuously expanded without giving primacy to the production of means of production.
Stalin:
Totally incorrect, too, is the assertion that under our present economic system, in the first phase of development of communist society, the law of value regulates the “proportions” of labour distributed among the various branches of production.
If this were true, it would be incomprehensible why our light industries, which are the most profitable, are not being developed to the utmost, and why preference is given to our heavy industries, which are often less profitable, and sometimes altogether unprofitable.
If this were true, it would be incomprehensible why a number of our heavy industry plants which are still unprofitable and where the labour of the worker does not yield the “proper returns,” are not closed down, and why new light industry plants, which would certainly be profitable and where the labour of the workers might yield “big returns,” are not opened.
If this were true, it would be incomprehensible why workers are not transferred from plants that are less profitable, but very necessary to our national economy, to plants which are more profitable—in accordance with the law of value, which supposedly regulates the “proportions” of labour distributed among the branches of production. Obviously, if we were to follow the lead of these comrades, we should have to cease giving primacy to the production of means of production in favour of the production of articles of consumption. And what would be the effect of ceasing to give primacy to the production of the means of production? The effect would be to destroy the possibility of the continuous expansion of our national economy, because the national economy cannot be continuously expanded without giving primacy to the production of means of production.
Stalin:
These comrades forget that the law of value can be a regulator of production only under capitalism, with private ownership of the means of production, and competition, anarchy of production, and crises of overproduction. They forget that in our country the sphere of operation of the law of value is limited by the social ownership of the means of production, and by the law of balanced development of the national economy, and is consequently also limited by our yearly and five-yearly plans, which are an approximate reflection of the requirements of this law.
10; Under socialism there are two forms of profitableness:
profitableness considered from the standpoint of individual plants or industries, and over a period of say one year, is the temporary and unstable profitableness
profitableness considered from the standpoint of the entire national economy and over a period of, say, ten or fifteen years, which is the only correct approach to the question, is the higher form of stable and permanent profitableness which we get from the operation of the law of balanced development of the national economy and from economic planning,
Stalin:
Some comrades draw the conclusion from this that the law of balanced development of the national economy and economic planning annul the principle of profitableness of production. That is quite untrue. It is just the other way round. If profitableness is considered not from the standpoint of individual plants or industries, and not over a period of one year, but from the standpoint of the entire national economy and over a period of, say, ten or fifteen years, which is the only correct approach to the question, then the temporary and unstable profitableness of some plants or industries is beneath all comparison with that higher form of stable and permanent profitableness which we get from the operation of the law of balanced development of the national economy and from economic planning, which save us from periodical economic crises disruptive to the national economy and causing tremendous material damage to society and which ensure a continuous and high rate of expansion of our national economy.
In brief, there can be no doubt that under our present socialist conditions of production, the law of value cannot be a “regulator of the proportions” of labour distributed among the various branches of production.
11;under socialism means of production and, in the first place, the implements of production are not commodities
Stalin:
It appears from your argument that you regard the means of production, and, in the first place, the implements of production produced by our nationalized enterprises, as commodities.
Can means of production be regarded as commodities in our socialist system? In my opinion they certainly cannot.
A commodity is a product which may be sold to any purchaser, and when its owner sells it, he loses ownership of it and the purchaser becomes the owner of the commodity, which he may resell, pledge or allow to rot. Do means of production come within this category? They obviously do not. In the first place, means of production are not “sold” to any purchaser, they are not “sold” even to collective farms; they are only allocated by the state to its enterprises. In the second place, when transferring means of production to any enterprise, their owner—the state—does not at all lose the ownership of them; on the contrary, it retains it fully. In the third place, directors of enterprises who receive means of production from the Soviet state, far from becoming their owners, are deemed to be the agents of the state in the utilization of the means of production in accordance with the plans established by the state.
It will be seen, then, that under our system means of production can certainly not be classed in the category of commodities.
12; Why speak of value of means of production;
A: In the sphere of domestic-internal economic circulation: formal side of the issue: for calculation and settlement ;for checking the enterprises.
B) in the sphere of Foreign trade-extgernal economic circulation: means of production are commodities.
C: see below no 13:
Stalin:
Why, in that case, do we speak of the value of means of production their cost of production their price, etc?
For two reasons.
Firstly, this is needed for purpose of calculation and settlement, for determining whether enterprises are paying or running at a loss, for checking and controlling the enterprises. But that is only the formal aspect of the matter.
Secondly, it is needed in order, in the interests of our foreign trade, to conduct sales of means of production to foreign countries. Here, in the sphere of foreign trade, but only in this sphere, our means of production really are commodities, and really are sold in the direct meaning of the term).
It therefore follows that in the sphere of foreign trade the means of production produced by our enterprises retain the properties of commodities both essentially and formally, but that in the sphere of domestic economic circulation, means of production lose the properties of commodities, cease to be commodities and pass out of the sphere of operation of the law of value, retaining only the outward integument of commodities (calculation, etc.).
13: Under socialism forms of commodities thus of forms of value, money and banks while retaining their old forms lose their old functions and gain new ones.
How is this peculiarity to be explained?
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 adaptation 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 utilizing it for the development of the new. This, in our economic circulation, is true not only of commodities, but also of money, as well as of banks, which, while they lose their old functions and acquire new ones, preserve their old form, which is utilized by the socialist system.
If the matter is approached from the formal angle, from the angle of the processes taking place on the surface of phenomena, one may arrive at the incorrect conclusion that the categories of capitalism retain their validity under our economy.
If, however, the matter is approached from the standpoint of Marxist analysis, which strictly distinguishes between the substance of an economic process and its form, between the deep processes of development and the surface phenomena, one comes to the only correct conclusion, namely, that it is chiefly the form, the outward appearance, of the old categories of capitalism that have remained in our country, but that their essence has radically changed in adaptation to the requirements of the development of the socialist economy.
14; The words “means of production” should not be juggled with. When Marxists speak of the production of means of production, what they primarily have in mind is, the production of implements of production, what Marx calls “the instruments of labour,
Note: Let Maoist and Enverists and of course Khrushchevite -Brezhnevite (as well as all other Titoite Trots) take not of at least this simple fact.
Stalin:
The fourth point.
You assert that the law of value exercises a regulating influence on the prices of the “means of production” produced by agriculture and delivered to the state at the procurement prices. You refer to such “means of production” as raw materials—cotton, for instance. You might have added flax, wool and other agricultural raw materials.
It should first of all be observed that in this case it is not “means of production;’ that agriculture produces, but only one of the means of production—raw materials. The words “means of production” should not be juggled with. When Marxists speak of the production of means of production, what they primarily have in mind is, the production of implements of production, what Marx calls “the instruments of labour, those of a mechanical nature, which, taken as a whole, we may call the bone and muscles of production,” which constitute the “characteristics of a given epoch of production.” To equate a part of the means of production (raw materials) with the means of production, including the implements of production, is to sin against Marxism, because Marxism considers that the implements of production play a decisive role compared with all other means of production. Everyone knows that, by themselves, raw materials cannot produce implements of production, although certain kinds of raw material are necessary for the production of implements of production, while no raw material can be produced without implements of production.
15; Law of value is not the regulator of production of agricultural means of production but is itself regulated by;
A) Prices being fixed
B) quantities of products not being left to spontaneity but being planned.
C) implements of production not being owned by individuals or groups of individuals but by state
Further: is the influence of the law of value on the price of raw materials produced by agriculture a regulating influence, as you, Comrade Notkin, claim? It would be a regulating one, if prices of agricultural raw materials had “free” play in our country, if the law of competition and anarchy of production prevailed, if we did not have a planned economy, and if the production of raw materials were not regulated by plan. But since all these “ifs” are missing in our economic system, the influence of the law of value on the price of agricultural raw materials cannot be a regulating one. In the first place, in our country prices of agricultural raw materials are fixed, established by plan, and are not “free.” In the second place, the quantities of agricultural raw materials produced are not determined spontaneously or by chance elements, but by plan. In the third place, the implements of production needed for the producing of agricultural raw materials’ are concentrated not in the hands of individuals, or groups of individuals, but in the hands of the state. What then, after this, remains of the regulating function of the law of value? It appears that the law of value is itself regulated by the above-mentioned factors characteristic of socialist production.
Consequently, it cannot be denied that the law of value does influence the formation of prices of agricultural raw materials, that it is one of the factors in this, process. But still less can it be denied that its influence is not, and cannot be, a regulating one.
See you next week.