This is a chapter from the book:
The Victory of Morality over Socialism
Chapter 4. Planning with levers: A review of the principles of the Soviet economy
1. The socialist commodity
As it does everywhere else, wealth appears in existing socialist societies in the form of use-values. It consists of products of labor which, depending on their properties, satisfy the needs of consumption or of production. That this simple and pleasing sate of affairs is not the whole story is revealed by the price that things also have. The socialist state, which controls the production and distribution of wealth, determines commodity prices. By doing so it dictates what it considers useful and fair relations of exchange between the various classes of goods.
a) This state is interested in fairness because its purpose in acting as the “agent in control of the economy” is to give the working class the justice that is denied it when it is used as a means of capital. Under capitalism, those who have things to sell set prices as a means of doing business, thereby restricting the availability of these things to those who produce the wealth. The socialist state will not allow such a market that stands between the masses and their vital necessities. It is an enemy of the power of money which characterizes the world of private property. It wants to secure the subsistence of the working population, and will not let anyone or anything but itself decide on both the level of wages and the affordability of the articles of daily use.
b) It is of course rather strange in view of this practice that the socialist state considers it at all useful to fasten a price form on the articles produced under its rule. The state administrators set a market going in order to plan it. They know how the existence of prices restricts people’s freedom to avail themselves of use-values. They are aware of the conflict of interests that inevitably exists between buyers and sellers (the desire for use-values conflicts with the wish to accumulate as much money as possible, money being the equivalent of every kind of wealth). But this does not stop them from subordinating use-values to exchange values in their own society as well. Of course, they also demand that the exchange of commodities for money conform with the distribution outcome desired by the state. In so far as the socialist state organizes a market without competition — no one is allowed to change prices as a means of doing private business — and at the same time subjects everything to the standard of money which it sets, it monopolizes the power of money.
c) This method, which is supposed to be the economic program of a useful kind of government, treats money, the measure of abstract wealth, as an excellent means for planning. A production and distribution of wealth to benefit the people is to be planned by making the use of money function only in accordance with state goals. This state utilizes its monopoly on force to acquire a peculiar kind of economic monopoly, when it installs a “planned price system” to define in practice the desired outcome of the circulation of wealth. It thus measures it’s economic results in money in order to decide, on the basis of sums of money in the national budget, how much wealth and how much work the producers can expect. It reserves for itself the goal of increasing money, and it makes its success here the precondition for everyone else’s share of material wealth. In order to be able to implement its welfare state program, it demands monetary services from its society.
d) One must agree with the fanciers of the “system of planning and control” on one point. The establishment Of such strange “commodity-money relations,” which are then used as a lever, is not to be confused with capitalism. The feat they want to perform from their “commanding heights of the economy” does not consist in simply subordinating use-values to exchange values, subordinating the production and distribution of material wealth to the purpose of accumulating money. They consider “cost-accounting,” which operates with units of abstract wealth, to be an excellent means for “stimulating” and “controlling” the production and distribution of real wealth. But here is one thing they must be told at this point: this awkward form of command is no planning of production. It makes a considerable difference whether a mode of production serves to promote units of value defined by the state or just simply creates more material wealth — as the various commissions and scientists notice when they lament the difficulties of assigning values and are forever chasing after an objective “law of value in socialism.”
e) There is another truth to be derived from the contradiction of a “planned market.” On the one hand, the workers’ advocates shrink from planning labor in accordance with natural conditions and for the benefit of the producers (which would make it more important to acquire technological know-how than to solve the riddle of how to “compare” workers, etc.) On the other hand, they have a tremendous need to establish “objective constraints” which no one can escape. They shun a well-founded imperative of expedient production, only to enforce “laws of socialism.”
2. Socialist profit
The socialist state has a measure for how effectively the firms use their raw material and means of production. This measure does not derive from the special nature of the production in question, but from the decision to make wealth, which is required for all good works, available to the state and, secondly, to do this in the form of sums of money which, thirdly, increase. This measure is called profit and, as an economic indicator, it is the directive to achieve a maximum in surplus over the costs of production. Since both the purchase prices and the sales prices are “planned,” the practical question arises as to how this indicator is to pass from its sad existence as a matter of mere arithmetic to the status of a calculation a firm makes in its own interests. And the contradiction inherent in the question is reflected in the “answers.” The lever which is supposed to bring about advances in the production of wealth “stimulates” a whole array of lousy practices, whose results give the partisans of capitalist exploitation so much to be malicious about.
a) It is absurd to suspect the planners and controllers of taking capitalism as their example when they introduced their indicator. Businessmen make profits, which increase their means. All their efforts in dealing with the “factors of production” serve this goal, for which the market is the proper instrument. State-owned firms realize a money surplus only when the relation between the state-decreed purchase and sales prices allows for it. They are not free to employ the techniques of competition vis-à-vis sellers and buyers. The money they earn is not available to them as materialized private power, but is the material for state decisions. Thus, managers of a firm basically have no motive at all for organizing their production in such a way as to make it a means for achieving business success on the market. And for this very reason, the drive optimize the relation between costs and surplus takes the form of a state campaign to “stimulate the enterprises” to use productive resources efficiently. The term, “main indicator of planning” is therefore no more apt.
b) The “initiative” the state calls into being only comes about, for the above reasons, if the state links the indicator prescribed to the firms with advantages which they can gain by complying with its wishes and achieving balance-sheet successes. It will not resort to the alternative method of threatening to impose sanctions on them, for reasons connected to the principles of this kind of socialist economy. The suspension of production is even less thinkable; production and its unfaltering progress are the whole point. After all, the “value”-based calculations are not the object of the exercise, but only the state instrument for developing the productive forces. And since the socialist state refuses to have anything said against the ultimate productive force, the workers, regarding “labor” as the prime source of all wealth and holding it in great esteem (despite Marx’ remark in the “Critique of the Gotha Program”), it considers the dismissal of workers a crime: they have a right to work.
c) The advantages the state offers to the firms to induce them to produce in a way conducive to its balance sheet consist in the allotment of resources from the national budget. Partly for the managers, partly for the employees, partly for production, it makes rights and money available which make it worthwhile for the collective to excel at making a profit. This stimulation normally takes the form of modifications in the relation between shares of profit to be paid over to the national budget and shares to remain with the firm. The latter make themselves felt via the firm’s payroll fund and via the fund it can use to renew and expand production (“investment”). Alongside, there is a premium system which draws its criteria from the definition of a target and whether it is fulfilled and over-fulfilled.
d) This means that there is an incentive to make a profit, but by no means that the calculation of the socialist state will work out right. The problem is not that the firms simply ignore the incentives and prefer to take it easy, but that they really take up the offer. They consistently apply the methods of making and increasing profits, which are discussed extensively in public. One must produce more in the same time, and save means of production! When choosing among different products, one must produce the cheapest one (to sell) and cut down on the others. Although new means of production would bring higher productivity and better products, they would conflict with the obligation to be thrifty. Therefore, one must try to exploit the given price relations to achieve “successes” that make it unnecessary to improve production. And even when the resources left in the firm’s fund are used properly and rationally, the planners and controllers notice a very peculiar kind of consequence: the “good” firms sometimes grow better by adhering to the lever — the bad ones keep getting worse since they never deserve any financial allocations.
e) The “firm’s egoism” which the plan calls into being provides its originators with many a problem. They have to pay the price for having failed to plan society’s production. Their value-theoretical love for money as a standard intended to raise the material productive forces to ever higher levels produces results which not even fanatical catcher-uppers and overtakers of capitalism can appreciate. This is why one hears explanations of the following kind:
“Profit as an economic indicator does not reflect the overall efficiency of production. Under certain conditions — as experience has proven — an increase in the profitability of an enterprise may be accompanied by a drop in production and by neglect of consumers’ interests.”
However, such findings do not testify to insight so much as to the intention to carry on in the same way and inaugurate an improvement in the “system of planning indicators.” The phenomena that someone with the name of “Experience” calls our attention to did not come about under “certain” conditions, but under those conditions presented to the firms by the chief political economists. The lament is directed toward nothing but the resolutely “stimulated” separation between the financial and material outcomes of production. Under this imperative, decent products and productive labor inevitably constitute a failure on the balance sheet. Conversely, substandard goods, made by outdated production methods, can be proudly presented as profit. And people who see no contradiction in the socialist decree that the firms should cut down on their own costs and investments but at the same time make all kinds of profit on “high quality products in the desired assortment,” will always be mystified by problems of the “proportionality” of the various departments of their economy. They think the problems are just there — no matter how often they have insisted that the principle of “self-financing of resources for expansion” should apply. Such advocates of the “law of value in socialism” simply overlook the fact that in some cases this self-financing does not merely fail to take place — the plan requires the state to hold back investable resources, thereby perpetuating what is considered unprofitable. This is why they apply themselves again and again to “economic reform” and devise new pricing and indicator systems by way of correction…
f) Due to the unmistakable “delay” in the “development of the forces of production” — these socialists are still fond of drawing a comparison with “rotting” capitalism, especially under the circumstances — they have come up with an idea. It is strictly un-economic and is expressed as a mission that can basically be accomplished much better in socialism than elsewhere, and therefore absolutely must be accomplished. Its name is “revolution in science and technology,” and is pure ideology. It expresses a need of the socialist state which its firms do not fulfil, in spite of all the indicators which are intended to “make the firm’s interests fuse with the state’s interests.” That “the technical level of the entire economy is lagging behind” is fairly worrisome, since “the progress of science and technology is the main lever for creating the material/technical basis of communism.”
Thus, it can only be hoped that the people concerned will start remembering how much “the forces of production” and “the relations of production” can interfere with each other at times. They can then stop bothering with the set phrases on the “process of struggle between the new and the old, between the progressive and the conservative.” This nonsense is not a lever for anyone or anything.
3. Socialist wages
The working population are intended to be the beneficiaries of the planned market. This is why a wage fund was set up in the state’s and firm’s accounting system. The size of this fund determines what the working people get out of life. And this is supposed to be more and more as the plan grows more successful.
The condition for this is the success the socialist state attains with its accounting system. And since there are considerable problems in this area, there is an “opposition between accumulation and consumption” and a need for a very special kind of achievement: the working people are not only expected to work, they are also supposed to perform services for production of such a caliber that the lamented defects disappear. This makes wages into a lever, and “planning and control” into a moral campaign.
a) It is a bad joke that, in this brand of socialism, wages appear as a cost factor to be kept low in relation to the resources of national income intended for the planned development of … This derives from the silly economic notion that the costs of “accumulation” and “consumption” must be paid out of the same “pot of money,” so that the decision in favor of “investment” must, according to plan, be made with a heavy heart in the name of future pleasures. Another fine “law,” which can be obeyed by the planners who invented it, is that productivity must increase first, and after that wages. No one ever demanded that it be the other way round, by the way, and the phenomenon, discussed so eruditely by political economists, actually consists in the simple fact that more and more working people produce more and more wealth without noticeably getting any more out of life for it. Furthermore, this wealth is not even suitable for making its administrators happy.
From the point of view of the working people, the joke becomes somewhat more serious. In view of the planned prices for the necessities of life, they experience the restriction on them in a different way compared to wageworkers in the West. They do not suffer from their wallets not being equal to the supply of goods; but have savings and the problem of when and where they can get something decent for once. It is of little use that rents and food prices are low and the few rags to wear are sold at reasonable prices, so long as the stuff is hard to come by and no good. By the way, these remarks are no Western vilification inevitably denouncing the lack of “private initiative,” but are more or less quotations from debates which are conducted officially in the Eastern bloc, in the commissions, journals and newspapers.
b) In order to eliminate the systematically levered “failures,” which all have to do with the separation between the state’s arithmetical and material output, the planners in charge thought quite early on of spurring a kind of “individual initiative.” This idea and its expert implementation in all kinds of special cases have provided Russian workers with a flourishing premium system and a continual socialist competition. The working people are constantly “stimulated” through and by their managers to earn a few extra kopecks or rights by special achievements. People who fight the “planned” idling, the inevitable spoiled work, etc., by their own efforts, preferably as a brigade, can be sure of praise and some compensation. However, the resulting premium, piece-wage and extra-shift system, in which threats compete with efforts to woo, that has become established alongside the still customary “dawdling,” does not guarantee the success aimed at by the state. In this area, the above-mentioned “egoism of the firm” can be combined very nicely with the deliberately induced opportunistic calculations of the working people. Decades of intense efforts to install and painstakingly justify a hierarchy of wages and hundreds of new, standardized “material incentives” have not produced the hoped-for miracle. With “responsible efforts” in exchange for small benefits, the workers cannot compensate for the mess systematically made by the lever economy. Not even the few exemplary activists who get into the newspaper can perform that feat.
c) Wages are not much good as a lever as long as the state guarantees people a modest existence and, on the other hand, they never have much more in prospect. The men and women of the Party have drawn telling conclusions from this fact. First of all, they have always decided to go on doing the same thing much more resolutely and exactly than ever, which is why there are still “movements” of all kinds. There is one for “innovators” who are not afraid to try out something new for a change and depart from the usual, established routine. There are others with slogans like “Involvement of the working people in the fight to cut down the production costs.” And there are also the customary extra shifts on the anniversary.
Secondly, there have been those who advocate less wooing of people with incentives and more threats, including the threat of dismissing them. But the leaders of the most powerful workers’ and peasants’ state do not agree. Although they have nothing against sanctions for restoring order when drunks, rowdies or, even worse, deviationists disturb the peaceful socialist mores, they will not let go of the “achievement” which distinguishes their society from capitalism in a way obvious to anyone. The right to work, and thus a guaranteed modest existence, must stay!
Thirdly, it occurs to them, quite in keeping with the traditional tenet of the good worker, that it might be some people’s moral immaturity that is hindering the progress of socialism. Laying the blame in public, accusing the working people of lacking discipline — from the speech of the first man in the Kremlin all the way down to the banner in the shop — this is how the “productive forces” are being made to work at present. This too is certain evidence that such a socialist economy involves neither planning nor capitalism