The Materialy was an internal planning document produced under the
direction of N. Osinskii in 1931. It measured the material production produced under the early central plan between 1928 and 1930 (Davies 1994, p28). It sought to establish the balance of the national economy during the first five year plan. It expounded the newly established Stalinist understanding of “value” in a planned economy.
Marx noted in his Critique of the Gotha Programme that the abolition of exchange in a socialised economy meant that labour was no longer indirectly social. It was no longer mediated through the sale of commodities on a market, but was directly social. In a socialist economy actual costs of production, the actual amount of labour time required to produce a given output, could be directly established through the direct democracy of the association of producers. But the terror of the USSR’s secret police state was anything but democratic.
Without market exchange or socialist democracy, the apparatus had no mechanism for measuring the real social cost of production. The Materialy,
expressed the contradictions of this neither one thing or another economy. It explains the confused attempt of the central planners to demonstrate the correspondence of the
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physical output of the plan with a notional “national income”. The planners were clear that, “The crucial distinguishing feature of our expanded reproduction in
comparison with capitalist reproduction is that it is not the reproduction of capital but the reproduction of use-values” (Pervukhin 1985, p121). The planners abstracted from the social preconditions for the existence of the value form, to assert that while surplus value did not exist in a planned economy, value production did;
“The value of a social product (a commodity) in capitalist society consists of the following three fundamental parts: 1. The embodied value of means of production consumed in production (“C”), 2. The value of labour power (“V”) and 3. Surplus value (‘M’). The last two elements (V+M) are the value newly created in the given cycle or the given year, and at the level of society as a whole they equal national income. Consequently, if we eliminate the surplus value form (which does not exist in socialist society) national income may be taken to be the sum of labour expended by society in production in the given year” (Pervukhin 1985, p106).
If there is no exchange value, then there is no value. If there is no value then there is no surplus value. Even so the Materialy measured Soviet “national income” by separating the contribution of living labour to annual physical production. Soviet “national income” represented the “value” of the total labour expended in the given year and expressed in a form of subjective accounting unit or as its authors would have it, in monetary terms. It was “…analogous to a commodity producing society, which expresses production and national income through money in value terms”, inasmuch as it counted the “value” of the physical quantity of use values produced in a year that could be ascribed to living labour (Pervukhin 1985, p107). This “value” was no value at all, but a subjective and arbitrary fabrication of the planning
agencies. In 1933 Trotsky commented;
“Cast iron can be measured in tons; electricity, in kilowatts; cloth, in meters. But it is impossible to create a universal plan without reducing all its branches to one and the same value denominator. If the denominator is itself fictitious,
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if it is the product of bureaucratic discretion, then it eliminates the possibility of testing and correcting the plan in the process of its implementation. Fixed prices that are not controlled by a stable currency open up unlimited room for bureaucratic subjectivism in the area of planning” (Day 1982, p300).
Capitalist prices are not determined post-factum, after the sale of the product, but in the here-and-now at the point of sale. Market prices oscillate around average socially necessary labour times, as capital seeks to maximise profit rates. In a capitalist economy the labour of the individual only becomes part of the labour of society on exchange. The profit motive is driven by unequal exchange, the
divergence of prices from values, through the act of sale in a market. The profit motive and exchange cannot be separated. In those industries with higher than average levels of productivity, the weighted average of labour time exceeds the average and vice versa. Under normal market conditions, this weighted average informs the market price.
Competition reduces many prices to a single market price. That price when multiplied by the volume of sales of this similar product, allows for the payment of the total labour time expended in that industry. More productive firms will be able to sell their commodities at a price above their value. This does not alter the total profits produced, but redistributes them. The extra profit of the more productive firms comes straight out of the pocket of their less efficient rivals, as increases in
productivity are immediately rewarded by higher profits. Money acts as the means of exchange, the universal equivalent and means of redistribution.
This movement of capital establishes, or tends to establish, the socially necessary labour time incorporated in the product at the moment of exchange, modified by the redistribution of capital to maximise profit rates. Prices are active. They change according to supply and demand and determine the distribution and redistribution of the productive resources. Bureaucratic subjective centrally planned prices are something else altogether, neither a regulator of, or regulated by the market.
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After the Second World War Soviet and Polish economists reprised the value debate, they conceded a “guarded acceptance” of the existence of the law of value in a planned economy. The assorted economists could not demonstrate how concrete labour could be transformed into abstract social labour without exchange. Strumilin, a leading participant in the debate, tried to produce a “work time calculus” but “it was only by shrewdly dodging the intractable task of reducing concrete labor to abstract labor, and socially necessary expenditures to individual work-time expenditures, that he is able to make any headway in offering a solution to the pricing problem based on Marxian value concept” (Zauberman 1960, p24).
The financial statistics produced by the Soviet authorities were not based on objective costs. Soviet accountants could count the number of labour hours expended and divide this by the quantity of goods produced. They could establish an average physical correlation between them, but this had no financial consequences for the aggregate plan targets, or the individual enterprise. Even if they decided that a unit of labour was worth a given amount it had no material impact on what was produced, consumed or invested. It was an accounting numeraire, used to reimburse the enterprise wage fund. This was not a value relationship. It meant that the use of Soviet financial statistics, even if modified, could not establish the true “value” of Soviet output, as this output had no genuine market value, as there was no genuine market.
From the early 1930s Western statisticians sought to develop independent estimates of Soviet growth. S.N. Prokopovich (1931), a Russian former Legal Marxist, then exiled in the USA, developed the first Western estimate of Soviet national income. He examined Soviet growth in the post-revolutionary period up to 1930, including the first two plan years. Prokopovich commented on the narrow basis of Soviet national income measurements, limited to material products only. He thought that Soviet value measures did not accurately reflect the growth of physical production, not for any reason of principle, but due to a failure to account for the deterioration in quality of production during the Soviet period. He attributed the growth of output in the first two plan years, to a forced reduction in consumption to
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fund investment in fixed and circulating capital. He very shrewdly noted that without competition between capitals there was no internal mechanism in the central plan to raise productivity. But his study was too early to consider the real impact of central planning. Prokopovich did not remark at all on the change from market to plan prices.
In 1939 Colin Clark, a Cambridge statistician who pioneered the use of Gross National Product (GNP) as the measure of national income (Stone 1985), produced an initial estimate of Soviet output in UK prices.