In a capitalist economy it is not the total number of hours worked that determines the value of production but the total of the socially necessary hours worked. Two identical commodities, which have taken unequal amounts of individual labour will embody a larger or smaller share of the labour of society or labour in general. The proportion of this general labour competition establishes for any individual commodity is its socially necessary labour time. Competition is nothing more than the process whereby individual labour times are merged into one, the average for that commodity. All things being equal, only this single average price, when multiplied by the quantity of commodities sold can equal the total labour time taken to produce these various commodity producers, “Individual labour
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contains general human labour only in so far as it is socially necessary” (Engels 1975, p372). If value is measured by the concrete quantity of physical labour expended then less efficient labour will have a higher value than more efficient labour, “…if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his
commodity be”. In a capitalist system, market competition ensures that, “It is the quantity of labour required for its production, not the realized form of that labour, by which the amount of the value of a commodity is determined” (Marx, 1982, Capital
I, p677).
Whereas in the system of central planning Jasny (1951a) noted that
“Disregard of cost and all kinds of waste are among the principal weaknesses of the Soviet system” (p9). As a result;
“There is no such close correlation in the Soviet economy between production costs and selling prices (the latter being understood as minus turnover taxes resting on the finished goods; turnover taxes on raw materials are part of the costs) as is observed in a private economy. Such a normal procedure as adding an appropriate profit to the production costs and accepting the total as the approximate selling price is inapplicable to the Soviet economy (p84). Workers could be cajoled into work through a combination of direct repression and piece rates, but if production units were allocated a larger quantity of inputs to produce a smaller quantity of outputs they received a higher payment. They were rewarded for their inefficiency.
In a capitalist mode of production concrete labour times incorporate both necessary labour time, the amount of labour required to reproduce the labourer, and surplus labour time, the amount of labour above that minimum. The act of exchange expresses their sum and provides the objective basis for the measurement of national income. In the centrally planned economies no such mechanism existed. The
apparatus did not separate necessary from surplus labour, such transparency would have rendered their position at the head of a socialist and even communist “state”
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impossible. The financial aggregates of the central plan obscured the real relations of production. Planned prices were arbitrary and subjective. Enterprises received
different quantities of inputs – and therefore – different quantities of their nominal rouble unit of account – to produce different quantities of outputs, “valued” at different amounts. These amounts did not correspond even approximately to the surplus product. Some of the surplus labour time was incorporated in the various taxes and margins, but it was impossible to cost these labour times, even in the aggregate, accurately.
Concrete labour times under capitalism are transformed into socially
necessary labour through the market mechanism. They represent the value of labour newly added to production, not in the USSR. Where much labour was socially unnecessary, a significant proportion of new labour was used to remedy defects in inputs, was duplicated, remedial, overlapping or hoarded. If transposed to a market economy this wasted labour did not add to total output. Thus the aggregation of concrete labour hours in order to convert them to western market values overstated “national income” in the USSR.
Forced labour robbed the worker of the self-discipline needed to harmonise labour times in the absence of competition. There could be no universal standard of labour to replace money as the universal equivalent. In a capitalist system money forces labour times towards the average and eliminate the inefficient as enterprises make losses and go bust. In the USSR there was no such mechanism, “Technically the procedure is that the losses of individual enterprises are offset by profits, if any, of the same “glavnoe upravlenie” (glavki) or trust (immediate subdivisions of the commissariats)” (Jasny 1951a, p84). This increased the total aggregated concrete labour time in a way that was incompatible with a market economy. Capitalist
accountancy and the Western system of national accounts could not be applied to it.
Richard Moorsteen (1962) a collaborator of Bergson and part of the United States Air Force Project Rand discussed whether Soviet machinery prices were “meaningful” in the sense of accurate indicators of factor costs or market prices
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(p8). Moorsteen claimed there was “no definitive solution” to this question, although he considered that as Soviet prices did not include charges for rent, entrepreneurial profit or interest it was “impossible to value the marginal product of any factor correctly”. Impossible seems fairly definitive. But Moorsteen continued as the price books compiled by planners showed some consistency and inasmuch as
industrialisation reduced the administrative “price” for assorted outputs, there was some comparison between the movement of market prices and administrative ones. He concluded that although it was impossible for Soviet prices to be meaningful, this did “not refute the hypothesis that Soviet machinery prices are ‘meaningful’”. Even though these points were “inadequate to confirm” they were “meaningful” (p13). It was impossible for planned prices to be meaningful, but this impossibility did not refute the notion that they might be meaningful. Mark Harrison (1996) a
contemporary defender of Bergson argues that despite their deficiencies, Soviet data of production, prices, outlays and employment, were not arbitrary fabrications,
“…they are meaningful (although the meaning was rarely to be found on the surface), are capable of interpretation, and if interpreted correctly, provide a sufficient foundation for statistical aggregation and economic evaluation. Soviet GDP can be measured” (p170).
Moorsteen and Harrison miss the point. Soviet aggregates were meaningful, they represented a real thing, the physical quantity of concrete labour time required to produce a given output, but they were not meaningful as market prices, as the foundation for measures of national income.
Alec Nove (1955) considered that Soviet prices reflected “Soviet realities” and that, “the Soviet price system was not an arbitrary creation of the government” (p257). Soviet planners used prices, the accounting totals attributed to production units, as a measuring rod. Enterprises had to meet costs, the accounting total of physical quantities of inputs allocated to them, from income. These accounting prices were interrelated and so assisted the production of the required assortment of goods. Where policy required they could be adjusted for the use of relatively scarce and
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costly productive resources. Consumer goods were under-priced relative to effective demand to ensure the disposal of goods. While agricultural prices needed to provide adequate incentives for the farmers (p257). Nove considered that the limitation of Soviet national income measures to material goods was in the tradition of Adam Smith, but Nove failed to differentiate between the subjective value estimates of the planners and the objective value facts of the market.
Paul Studenski (1958) who alongside Julius Wyler developed some of the earliest Western estimates of Soviet national income, noted that after 1931 Soviet,
“…estimates in constant prices lost their contact with reality. The estimates became completely divorced from all current financial transactions of society, all of which are expressed in current prices. They could no longer be related to the national budget, the unified financial economic plan, and the five year plan, or any parts thereof….National income estimates became a mere index of the growth of material production and a very imperfect and abstract index at that” (p352).
Studenski’s emphasis on the significance of current prices repeated a point made by Leontief (1943). But the real issue with Soviet prices was more
fundamental, without exchange, prices were never reduced to an objective abstract standard. They were accounting totals only. The aggregation of physical labour hours was not an alternative way of measuring the value production of the centrally
planned economy; it was a different way of measuring a different economy. It meant that in Soviet accounting measures of the efficiency of output did not determine production decisions (Campbell 1960). Soviet economists were aware of this but ignored its significance (Lapidus & Ostrovityanov 1929). The central plan lacked both the democracy of the producers and the act of exchange. Trotsky the 1925 head of the state electro-technical board remarked that;
“If there existed the universal mind described in the scientific fantasy of Laplace – a mind which might simultaneously register all the processes of
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nature and society, measure the dynamic of their movement and forecast the results of their interactions – then, of course, such a mind could a priori draw up a faultless and exhaustive economic plan, beginning with the number of hectares of wheat and ending with the buttons on a waistcoat. True, it often appears to the bureaucracy that it possesses just such a mind: and that is why it so easily emancipates itself from control by the market and by soviet
democracy. The reality is that the bureaucracy is cruelly mistaken in its appraisal of its own spiritual resources” (Day 1988, p29).
On the one hand, false accounting obscured the parasitic social role of the apparatus; on the other it was the inevitable response of every layer of society to the tyranny of Stalinist centralisation. To the extent that planned prices did accurately represent the production of real things they were no truer from the point of view of a capitalist market economy. Soviet planned prices were not meaningful even if they were meaningful. Nevertheless, it was these prices and the physical quantities of production that underpinned them, that formed the basis for the subsequent attempts to develop a Western “real” national income for the USSR.