Law of Value- Price System in the USSR in the Pre-War Period

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  Law of Value- Pricing in the national economy of the USSR 

Price System in the USSR in the Pre-War Period

The system of prices currently existing in the USSR took shape mainly in the last five years before the Great Patriotic War, after the entry of the Soviet state into the second phase of its development.

Already in the transitional period from capitalism to socialism, the Soviet state, relying on objective economic laws, determined mainly the movement of prices in the country.

However, the existence at that time of capitalist elements both in production and in the sphere of circulation allowed for the possibility of a spontaneous redistribution through prices of part of the national income in favor of these capitalist elements. This made it urgent for the Soviet state to make full use of the price instrument in the interests of ousting capitalist elements from the country's economy, distributing and redistributing the national income in favor of the working class and working peasants, increasing socialist accumulation for the industrialization of the country, and preparing the material conditions for the complete elimination of the exploiting elements.

All price problems of this period were solved in the conditions of a fierce class struggle. The ousted capitalist elements in town and country tried to use prices in order to strengthen their positions and undermine the dictatorship of the proletariat. Under these conditions, they tried to impose on the country a policy of high, rising prices, to undermine the Soviet ruble. The Party, the Soviet state, in contrast to this, consistently carried out in the interests of the masses, a policy of stabilizing prices for agricultural products and falling prices for manufactured goods.

“In our market,” J. V. Stalin said in a speech at a plenum of the Central Committee and Central Control Commission of the All-Union Communist Party of Bolsheviks in 1929, “there is no free play of prices, as is usually the case in capitalist countries. We determine the price of bread mainly. We determine the prices for manufactured goods. We are trying to pursue a policy of reducing production costs and reducing prices for manufactured goods, trying to maintain price stability for agricultural products. Isn't it clear that there are no such special and specific market conditions in the capitalist countries ?

The victory of the socialist economy in the USSR led to a change in the role and nature of the use of prices.

With the liquidation of capitalist elements in production and in the sphere of commodity circulation, there was no need to use prices as an instrument for restricting and ousting capitalist elements and redistributing their income in favor of the socialist economy. At the same time, the importance of prices as an instrument of economic and organizational activity of the Soviet state increased: stimulating the growth of production and the development of trade between town and country, between branches of the economy and regions of the country; systematic growth of public consumption on the basis of an increase in the purchasing power of the Soviet ruble. The level of influence of the state on pricing in the country has increased unprecedentedly.

In the field of retail prices, this found its expression in the gradual transition, after the abolition in 1935 of the system of rationed supply of food and industrial goods to the population for all consumer goods, to uniform (including belt) retail prices directly set by the state.

A feature of the formation of retail prices until that time was the establishment of final prices for most goods in the distribution network itself, based on individual pricing factors determined by various government agencies. Only for a small group of goods there were fixed retail prices directly set by the government and indicated on the labels of goods, the so-called label prices (for cigarettes, tobacco, matches, toilet soap, student notebooks, electric lamps). For the rest of the goods, the retail prices of each consignment of goods were calculated by trade organizations by adding trade and transport allowances to the wholesale selling prices of the industry, and in rural areas also auto-cart surcharges. At the same time, trade and transport caps were established by the government only for some goods: for other goods, caps were determined by the Ministry of Trade and even (for the so-called “3rd group goods”) by the trading organizations themselves. The size of auto-horse surcharges was approved by regional (territorial) organizations. This practice of determining retail prices inevitably led to discrepancies in prices for identical goods sold by different trade organizations within the same point. At the same time, it extremely complicated the matter of setting prices, required the maintenance of a significant number of calculators in the trading network, and delayed the circulation of goods. Of no small importance was also the fact that the then existing retail price calculation system made it difficult for consumers to control compliance with prices.

The introduction of government-approved price lists for unified retail prices was a powerful factor in strengthening the purchasing power of the ruble and increasing the stability of wages.

First, retail prices could no longer fluctuate depending on changes in the costs of the trading network. Secondly, the differentiation of food prices across a limited number of belts and the introduction of uniform prices for most manufactured goods led to a significant convergence of real wage levels in different areas.

The introduction of price lists for uniform retail prices played an important role in stimulating trading organizations to improve their work and in strengthening control over their compliance with the Soviet price policy. Uniform retail price lists have created unprecedented opportunities for consumers to control prices.

Trading organizations were freed from their unusual functions of calculating state retail prices for all major consumer goods. Instead of trade and transport caps, which were added by trading organizations to wholesale prices, discounts were firmly fixed by the government in each approved price list to cover trade expenses (as a percentage of retail prices).

The transition to a system of firmly fixed uniform state retail prices meant a significant change in the role of the wholesale price of industry in the pricing of consumer goods. By approving fixed retail prices and setting the size of the discount to cover the costs of trade, the state thereby determines the size of the wholesale price of industry.

The wholesale price of the industry acts as a share of the industry in the final price at which the goods are sold to the consumer - the state retail price. Thus, the external isolation of the wholesale prices of industry from retail prices was eliminated. The retail price of consumer goods now determines the upper limit of the wholesale price of the industry. This encourages industry to measure its costs of production with the retail price.

The attitude of the industry towards the pricing process itself has also changed. Retail prices and the market have ceased to be an area of interest only to trading organizations. The financial results of the economic activity of industrial enterprises directly depend on how the sale of mass consumption products develops.

As long as retail prices were formed by adding trade markups to wholesale prices, the value of distribution costs in the trade network did not directly affect the financial results of industry. In the transition to fixed retail prices, the final retail price is divided into two components: the share of trade, fixed in the trade discount, and the share of industry, representing the rest of the price after deducting the trade discount from it. Obviously, the larger the share of trade, the smaller the share of industry. Such a construction of prices contributed to the strengthening of mutual control over the costs of production and circulation.

Of great importance for the pricing of consumer goods were the changes made in the system of withdrawals of monetary savings, realized in the prices of goods, to the state budget that had been in force until that time. Instead of a separate existence, along with the turnover tax of the budget difference and the budget margin, which were a relic of the price system of the rationed supply period, a single form of exemptions was introduced - the turnover tax.

At the same time, in a number of branches of light industry, the procedure for calculating and paying the turnover tax to the state budget was changed. Practice has shown that for commodity groups with a large assortment of products (for example, for fabrics), the existing form of exemptions from turnover tax in the form of a percentage rate on the wholesale price of industry turned out to be unsuccessful. In the presence of even a large number of rates, it was impossible to ensure a more or less uniform profitability for articles and varieties of goods. This led to distortions in the formation of the director's fund at individual enterprises and to the violation of planned targets for the assortment. Since 1939, first in the textile industry, and then in a number of other industries, a system of two price lists was introduced. This system provided for the existence, along with a fixed retail price list, of a wholesale price list (excluding VAT), built on the basis of the planned cost of individual types of products and normal profitability. The difference between retail prices, net of trade discounts, and wholesale prices, net of VAT, went to the state budget. The introduction of wholesale price lists without VAT ensured not only a greater uniformity in the profitability of various articles and product varieties, but also a greater stability of the financial position of enterprises.

The interests of strengthening the role of prices in every possible way as an instrument of economic and organizational activity of the Soviet state demanded a reform of wholesale prices for means of production. The system of wholesale prices that had taken shape at one time provided for state subsidies to the most important branches of heavy industry.

Subsidies from the state budget were inevitable at a certain stage in the development of our industry. In a short time, the Soviet state built a huge number of new enterprises, created a number of industries that did not previously exist in Russia. The development of these enterprises required a certain amount of time, and it is quite natural that in the beginning many new types of products had increased production costs.

To build wholesale prices on the basis of these temporarily increased production costs would be to misdirect economic organizations, to promote their complacency, to deprive them of incentives to improve production methods. Obviously, the level of wholesale prices and the issues of profitability could not be approached from the point of view of the moment. It was imperative to take into account the prospects for a further significant reduction in the cost of production and to subordinate all the work of economic organizations to this perspective.

After during the first half of the second five-year plan significant successes were achieved in reducing the cost of production and the opportunities for savings increased not only in light, but also in heavy industry, the question naturally arose of abolishing the system of state subsidies and building prices on the basis of reimbursement of industry costs. . The system of state subsidies, absolutely inevitable and justified at a certain stage in the construction of Soviet industry, then became a brake on its development. During 1936-1940. reform of the wholesale prices of the industry was carried out. The essence of the reform was to build wholesale prices based on cost and minimum profitability.

At the same time, transport tariffs were reformed. Railway transport tariffs were determined taking into account the reimbursement of the cost of freight traffic and profitability in amounts that ensure the expanded reproduction of railway transport mainly from its own sources of accumulation. Tariffs for river and sea transport were determined with the expectation of stimulating consumers to the comprehensive use of water transport resources.

During the same period, the current state procurement prices were finally formed, which were brought into line with the new conditions for the procurement of agricultural products that had developed as a result of the abolition of rationed supply. The question was raised in a new way of strengthening the role of procurement prices in stimulating productivity and increasing the delivery of products and agricultural raw materials to the state. To this end, first for cotton, and then for a number of other types of agricultural products, special bonuses were introduced for increasing supplies to the state.

Thus, by the beginning of the Great Patriotic War, a unified system of fixed state wholesale, retail and procurement prices had developed. The presence of this system was an important factor in the stability of the Soviet economy during the period of severe military trials.