The Commodity production, the law of value and money under socialism

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On Socialist Mode of Production

The Commodity production, the law of value and money under socialism

The necessity of commodity production under socialism and its features. 

The necessity of commodity production under socialism stems from the existence of two main forms of socialist production—state and collective farm. In state enterprises, the means of production and products are the property of the whole people. On the collective farms, the means of production (working and productive livestock, agricultural implements, outbuildings, etc.) and the products produced by the collective farms constitute group, cooperative-collective-farm property. The main and decisive means of agricultural production (land and MTS machines) are in the ownership of the state. Since the output of state enterprises belongs to the socialist state, while collective-farm output belongs to the collective farms, exchange through purchase and sale is a necessary form of economic connection between industry and agriculture. 

Lenin pointed out that “the exchange of products of large-scale (“socialized”) industry for peasant products is the economic essence of   socialism” [1], that barter is a test of the correct relationship between industry and agriculture. These propositions of Lenin retain their significance for the entire first phase of communism. The Soviet state acquires food for the urban population and raw materials for industry mainly from collective farms and collective farmers, through procurement and purchases. In turn, the collective farms and collective farmers can obtain the money they need to purchase industrial output only by selling their marketable output to the state, through co-operatives and on the collective farm market. 

Thus, agricultural products and raw materials coming from the collective-farm sector to the state and cooperatives in the form of procurement and purchases, as well as agricultural products sold on collective-farm markets, are commodities. Commodities are also industrial products, mainly articles of personal consumption, produced by state enterprises, and bought by collective farms and collective farmers. Since personal consumption items are commodities, they also come to the urban population through purchase and sale. 

Commodity production under socialism is not ordinary commodity production, but commodity production of a special kind. This is commodity production without private ownership of the means of production, without capitalists. It is mainly carried out by united socialist producers (the state, collective farms, cooperatives). Owing to such decisive economic conditions as social ownership of the means of production, the abolition of the system of hired labor and the exploitation of man by man, commodity production under socialism has been placed within certain limits. In view of this, it cannot be transformed into capitalist production and serves socialist society. 

Commodity production in socialist society does not have such an unlimited and all-embracing distribution as under capitalism. Under socialism, the sphere of commodity production and commodity circulation is limited mainly to articles of personal consumption. In a socialist society, labor power is not a commodity. The land with its subsoil is state property and cannot be the subject of sale or lease. State enterprises - plants, factories, mines, power plants with their main production assets (tools of production, buildings, structures, etc.) - cannot be sold and bought, but can be transferred from one state organization to another only with special permission and, therefore, they are not goods, the object of sale and purchase. 

The means of production produced in the state sector - machinery, machine tools, metal, coal, oil, etc. - are distributed among state enterprises. The national economic plans provide for the allocation to each enterprise of certain material resources in accordance with its production program. These funds are supplied by enterprises-producers to enterprises-consumers on the basis of contracts concluded between them. When the means of production are transferred to one enterprise or another, the socialist state retains full and complete ownership of these means of production. The directors of enterprises who have received the means of production from the socialist state by no means become their owners but are authorized by the state to use the means of production in accordance with state plans. Collective farms buy motor vehicles, equipment for their public economy, the simplest agricultural machines and implements. But the main agricultural machines—tractors, combines, etc.—are not sold to collective farms, but are concentrated in state enterprises—machine and tractor stations, which serve the collective farms with the help of these means of production. The means of production distributed within the country among state enterprises are essentially not commodities. But they retain the form of goods, have a monetary value, which is necessary for accounting, for calculation.

In the field of foreign trade, the means of production sold to foreign countries are commodities. Here there is a purchase and sale, there is a change of ownership of goods. 

Use value and value of goods in the socialist economy. 

Those products that are produced and sold as commodities in a socialist society have a use value   created by concrete labor and a value   created by abstract labor. In other words, under socialism the commodity has a dual character, determined by the dual character of the labor that produces the commodity. 

The dual character of labor under socialism is fundamentally different from the dual character of labor in a simple commodity and capitalist economy. Under conditions of commodity production based on private property, the dual nature of the labor that produces the commodity reflects the contradiction between private and social labor. The Socialist economy does not know this contradiction. As has already been said, in the socialist economy labor is not private, but directly social labor. Society plans in advance the work of workers in the production process. The distribution of labor between the various branches of the national economy and individual enterprises is proceeding according to plan. Because of this, commodity fetishism has been overcome in the socialist economy, and the social relations of people do not accept the deceptive semblance of relations between things. 

However, under socialism there are differences between directly social labor in state enterprises, where labor is socialized on a national scale, and directly social labor in collective farms, where labor is socialized only within the framework of a given agricultural artel. In addition, collective farmers also use their labor in their personal subsidiary plots, which are of subordinate importance. These differences in the degree of socialization of labor, the existence of commodity ties between state industry and the collective farms, make it impossible to express and compare the social labor expended on the production of industrial and collective farm products directly in terms of working time. This implies the need for an indirect commensuration of social labor through the use of value and its forms. 

The socialist state, in the process of planned management of the national economy, takes into account both sides of the commodity, both use-value and value. The state requires its enterprises to produce certain types of products - certain use values. If the capitalist is interested in use value only as a carrier of value and surplus value, then in the socialist economy the creation of use values​​and the improvement of the quality of products are of the utmost importance since production is carried out in the interests of the most complete satisfaction of the growing needs of the whole of society. 

In a socialist economy, the value of a commodity is also essential. The state plans production not only in kind, but also in monetary terms. At the same time, a systematic reduction in the cost of manufactured goods and, on this basis, a reduction in prices plays an important role in ensuring the maximum satisfaction of the needs of society. 

In the socialist economy there is no antagonistic contradiction between use value and value, which conceals the possibility of crises of overproduction. The socialist economy ensures the full possibility of fulfilling production plans both in monetary and in-kind terms. 

However, in the practice of socialist construction, when the requirements of economic laws and, in particular, the law of the planned development of the national economy are violated, contradictions may arise between the use value and the value of the commodity. This happens, for example, in cases where the managers of individual enterprises, in pursuit of fulfilling the cost plan, intensively produce individual types of products that are more profitable for the enterprise, without fulfilling the production plan for the entire assortment. But such contradictions are not of an antagonistic nature and are resolved in the manner of planned management of the economy. 

In the socialist economy there is a distinction between complex (skilled) and simple labor, and complex labor is reduced to simple labor. The ratio between complex and simple labor is taken into account when planning production, determining production standards, as well as when planning wages, when wages of various qualifications are established, etc. 

The magnitude of the value of commodities produced and sold in the socialist economy is determined by the amount of socially necessary labor time spent on their production. By socially necessary labor time is meant the average labor time expended by enterprises producing the bulk of the output of a given branch. The socially necessary labor time spent on the production of a unit of a commodity determines the social value of the commodity. The time actually spent on the production of a unit of commodity in individual enterprises is individual labor time, which forms the individual value of the commodity for each of these enterprises. 

The socially necessary time spent on the production of a commodity is an objectively existing quantity. Under capitalism, the socially necessary time is formed spontaneously, behind the backs of commodity producers. In the socialist economy, proceeding from the objective economic conditions and the requirements of the economic laws of socialism, the state plans the growth of labor productivity and the reduction of the cost of production, establishes norms for the expenditure of labor and materials for enterprises; thus, in a planned manner, it affects the amount of socially necessary time spent on the production of goods, in the direction of its reduction. 

An important means of the planned influence of the socialist state on the amount of socially necessary time is the progressive norms for the expenditure of labor and materials, established on the basis of the experience of advanced enterprises. Progressive norms are norms that still have to be achieved in production over a planned period of time. They are below the actual level of labor and material costs per unit of output. Progressive norms are of great mobilizing significance, as they encourage economic managers and the masses of working people to find ways to rationalize production, introduce advanced technology, increase labor productivity, and reduce production costs. After progressive norms have been mastered by the majority of enterprises that produce the largest mass of products, they begin to coincide with socially necessary expenditures of labor and cease to be progressive. On the other hand, during this time, advanced enterprises are achieving a new reduction in labor costs for production. On the basis of the experience of advanced enterprises, new progressive labor expenditure standards are established, the implementation of which leads to a new reduction in socially necessary time. 

Under capitalism, the contradiction between individual and socially necessary labor time is antagonistic. Enterprises that use higher technology and make super profits keep their technical improvements secret and beat competitors, bringing them to ruin and death. In a socialist economy, the contradiction between socially necessary time and individual time spent in individual enterprises is not of an antagonistic nature. The socialist economy does not know the so-called "commercial secret": the technical achievements of advanced enterprises quickly become the property of all enterprises in a given branch, as a result of which the development of the entire socialist economy as a whole is ensured. 

The nature of the operation of the law of value under socialism.

Insofar as commodity production and commodity circulation exist under socialism, the law of value continues to operate. 

The economic system of socialism places the operation of the law of value within strictly limited limits. The role of the law of value is limited by the socialization of the means of production in town and countryside, by the narrowing of the sphere of commodity production and commodity circulation, by the operation of the economic laws of socialism and, above all, by the law of the planned development of the national economy. The scope of the law of value under socialism is also limited to annual and five-year plans and, in general, to the entire economic activity of the socialist state. Because of this, the law of value under socialism cannot play the role of a regulator of production. 

If the law of value were to play the role of a regulator of production under socialism, then in a socialist society the most profitable branches and enterprises would develop in the first place, and enterprises of heavy industry, which are very important from the point of view of the interests of the national economy, and which may be temporarily unprofitable, would be closed down. Meanwhile, in the USSR, unprofitable or at first unprofitable enterprises that are essential for the national economy are by no means closed down, but are preserved and supported, and measures are being taken to make them profitable. The socialist state can cover the temporary unprofitability of some branches or enterprises at the expense of income received by other branches and enterprises. 

The socialist state builds enterprises and creates entire branches of production guided not by the pursuit of profit, but by the requirements of the basic economic law of socialism and the law of the planned development of the national economy. 

The scope of the law of value under socialism extends primarily to commodity circulation, to the exchange of commodities—mainly articles of personal consumption. In this area, the law of value retains its role as a regulator within certain limited limits. 

The regulating effect of the law of value in the field of commodity circulation is manifested in the fact that the state, in establishing a certain price ratio between various personal consumption goods, takes into account their value in monetary terms, as well as the demand for these goods and their supply. Ignoring the state of supply and demand would lead to a sharp decline in demand for goods for which prices were excessively high, and for goods with excessively low prices, demand would be artificially inflated. The regulating role of the law of value is most pronounced in the collective-farm market, where prices are formed on the basis of supply and demand, and the movement of prices affects the size and structure of the turnover of the collective-farm market. But the socialist state exerts an enormous economic influence on the collective-farm market, inasmuch as the bulk of goods are sold in the system of state and cooperative trade at fixed planned prices. 

The operation of the law of value is not limited to the sphere of commodity circulation. The law of value also has an effect on socialist production, and this effect is not decisive. 

“The fact is that the consumer products necessary to cover the expenditure of labor power in the production process are produced in our country and sold as commodities subject to the operation of the law of value. It is precisely here that the influence of the law of value on production is revealed. In this regard, such questions as the question of economic accounting and profitability, the question of cost, the question of prices, etc. are of current importance to our enterprises. Therefore, our enterprises cannot and must not do without taking into account the law of value” [2] .

 Articles of personal consumption, which are commodities, have a value. The value of industrial consumer goods includes the value of raw materials produced by the collective farms as a commodity. Part of the newly created value of consumer goods is used to reimburse the cost of money wages, and the other part forms the income of the enterprise, which is in the form of money. Along with this, in the process of production of industrial consumer goods, means of labor wear out: machine tools, machines, factory buildings that are not goods. Inasmuch as all other elements included in the value of industrial consumer goods have a monetary form, the means of labor must also be calculated in money. 

The impact of the law of value on the production of means of production is carried out through consumer goods, which are necessary to compensate for the cost of labor. Consumer products, being commodities, can be bought by workers only with money, at the expense of money wages. From this follows the need to use the monetary form in the production of means of production to account for all other elements that, along with wages, form the cost of industrial output. 

If consumer products, which are commodities, have a value, then the means of production, which are not commodities, have the form of a commodity and value used for the purposes of calculation, accounting, and control.

In contrast to capitalism, where the law of value acts as an elemental force dominating people, in the socialist economy the operation of the law of value is recognized, taken into account and used by the state in the practice of planning the national economy. Knowledge of the operation of the law of value and the ability to use it help business executives rationally manage production, systematically improve working methods, carry out economic accounting, find and use hidden reserves to increase output. 

The socialist state takes the law of value into account when planning prices. Price   in the socialist economy is the monetary expression of the value of a commodity, which is established in a planned manner. When planning prices for means of production produced in the public sector, only the form of value is used to account for the social labor expended on their production in money. In setting prices, the state proceeds from the social costs of production, which in the industries that produce goods represent the value of these goods. 

The question of an economically justified approach to price planning is of great importance for the development of the national economy.

“In the problem of prices, all the main economic and, consequently, political problems of the Soviet state intersect. Questions of establishing correct relations between the peasantry and the working class, questions of ensuring the mutually connected and mutually conditioned development of agriculture and industry ... questions of ensuring real wages, strengthening the chervonets ... all this rests on the problem of prices” [3] . 

Accounting for the operation of the law of value is necessary to establish the correct ratio of prices for various goods and material incentives for their production. It is impossible, for example, to establish the same procurement price for a ton of cotton and a ton of grain, regardless of the fact that the cost of cotton is much higher than the cost of grain. On the other hand, grain prices must not be set too low, as this would undermine the material interest of the collective farms and collective farmers in grain production and would be detrimental to the development of grain farming. 

Thus, for example, economically justified procurement prices set for cotton, wool, beets, and other agricultural products contributed to an increase in the production of these products. On the contrary, low procurement and purchase prices for potatoes, vegetables, milk, meat, and grain hampered their production. A significant increase in procurement and purchase prices for these products, carried out in 1953 by a decree of the Council of Ministers of the USSR and the Central Committee of the CPSU, was a very important incentive to increase their production. 

However, the law of value is not a regulator of state prices, but only one of the factors affecting these prices. There is no "free play" of prices in state and cooperative trade. The socialist state fixes the prices of commodities with various deviations from the social costs of production, from the value of commodities. In doing so, it proceeds primarily from the requirements of the basic economic law of socialism, the need to ensure the continuous growth of production on the basis of higher technology and to satisfy the growing needs of the whole of society. The state uses the price mechanism to establish such proportions in the distribution of funds between sectors, which are determined by the needs of the planned development of the national economy. 

Thus, for example, the state, with the help of an appropriate price policy, uses part of the revenues created in some branches to quickly develop other branches that are less profitable, but are of great economic importance. By setting low prices for the means of production, the state encourages the introduction of advanced technology in state-owned industrial enterprises, and also equips collective farm production with high technology through the MTS. The state sets prices based on the need to ensure a certain profitability (profitability) of enterprises, takes into account the quantity of certain goods, their importance in the economy. With the help of prices, it stimulates the production of certain products, regulates the demand for them. 

By virtue of all these limitations of the law of value, its operation under socialism is not accompanied by those destructive consequences in the form of crises, unemployment, and the destruction of productive forces, which are inevitable companions of this law under capitalism. It is precisely because of this that, despite the continuous and rapid growth of socialist production, the law of value does not lead to crises of overproduction in the USSR, while under capitalism the law of value, despite the low rates of growth of production in the capitalist countries, leads to periodic crises of overproduction.