[2]
~
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__AUTHOR__
NINEL BAUTINA
__TITLE__
CMEA Today:
From Economic Co-operation
To Economic Integration
__TEXTFILE_BORN__ 2007-04-26T05:08:15-0700
__TRANSMARKUP__ "Y. Sverdlov"
PROGRESS PUBLISHERS
MOSCOW
[4]Translated from the Russian by Yuri Sviridov
Edited by Barry and Joyce Jennings
H. B. BAyTHHA
COBEPIUEHCTBOBAHHE aKOHOMHLIECKHX BSAHMOOTHOIUEHHfl CTPAH-^JIEHOB C3B
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__COPYRIGHT__ First printing 197511103--652 b 014(01)75 "~/b
[5] Page CONTENTS Chapter I. Relations of Production within CMEA and the Laws Governing Their Development........ Chapter II. Internationalisation of Production and International Socialist Division of Labour.......... Chapter III. The Mechanism of Economic Co-operation and Its Structure................ 34 77 Chapter IV. The Distinguishing Features of the CMEA International Market. The Problems of Equivalent Exchange and Mutual Benefit...............112 [6] ~ [7] __NUMERIC_LVL1__ CHAPTER I __ALPHA_LVL1__ RELATIONS OF PRODUCTION WITHIN CMEAThe emergence of the world socialist system after World War II elevated socialism to a new and higher stage in its development and provided a new environment for the functioning of socialism and new factors of economic growth in the socialist countries.
In this new situation, to combine the current and longterm interests of individual socialist countries with those of the socialist community as a whole is no easy task. The sweeping scientific and technological revolution has posed a series of complex problems not only in the technological, organisational and economic fields, but also in social relations. At present the solution of individual problems facing socialist production is increasingly dependent on the successful tackling of the overall problems affecting the development of world socialism as a whole. Today, Lenin's statement to the effect that, ``who tackles partial problems without having previously settled general problems, will inevitably and at every step 'come up against' those general problems without himself realising it. To come up against them blindly in every individual case means to doom one's politics to the worst vacillation and lack of principle'',^^1^^ has a special relevance and urgency.
Historically, social inter-relationships existing within their national economies precede the establishment of economic relations between socialist countries. The world _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 12, p. 489.
8 socialist system is a community of nations where the socialist relations of production contain more or less developed factors of social reproduction which are primarily situated within the national economies of the countries concerned. In this context the primary fundamental inter-relationships, from the standpoint of the world socialist system as a whole, are the production relations existing within the constituent members' economies. Economic relations between socialist countries are based on their internal relations of production, the latter taking priority over the former.Marx wrote that it is essential to study not only primary relations of production but also ``secondary, tertiary and non-primary, derivative and transferred relations of production".^^1^^ Although these secondary relations rise above the primary relations of production they do not, however, merge with them. International economic relations, as secondary relations of production have a degree of autonomy and exercise an appreciable influence on the progress of social production within a particular country. In this way they form a new specific socio-economic structure---a community of socialist countries---whose characteristics differ significantly from those of any single national economic system. The development of the world socialist system passes through successive stages each with its own material environment determining how mature production relations are within each socialist country and with it the maturity of the economic relations existing among the socialist countries.
Any socio-economic form of international economic relations is derived from the inter-action of similar internal primary relations of production. While not forming an integral part of the latter the international relations rise above them, feeding back more or less intensive impulses which invoke a response from the primary relations of production. At the same time, one should distinguish international economic relations from international relations of production. International economic relations have a more complex structure and form a specific system of relationships involving specific organisational patterns of co-operation, _-_-_
~^^1^^ K. Marx, Grundrisse der Kritik der Politischen Okonomie, Moskau 1939, S. 29,
9 coordinated management and control over activity exchange and the use of specific material incentives and sanctions. This structure is based on a particular system of production relations that has evolved historically.The present international relations of production among the socialist countries represent a phase in the continued internationalisation of production and exchange. As such they are a system of exchange of material values between socialist countries. Goods and services produced by a socialist country pass through the spheres of production, distribution, exchange and consumption. A proportion of these goods and services are ascribed to meet internal needs while the rest are ascribed to meet the requirements of other socialist nations. These latter are activity exchanges maintained by socialist countries through their economic co-operation.
The production and distribution of goods and services (including those that are exported) represent links in the chain of national socialist reproduction and are governed by economic laws that are generated by the primary relations of production. The movement of goods and services, within the sphere of international socialist activity exchanges, occurs in a highly specific economic environment created by the international economic relations. In the course of activity exchanges between socialist countries material values are placed at the full disposal of individual countries and subsequently are absorbed by national consumption which is governed by the economic laws of reproduction of the national product. Thus, the movement of material values within the world socialist system first passes through the phase of production and distribution within the framework of the national reproduction cycle. Later, part of the product goes to the sphere of international exchange, which depends in a varying degree on the national socialist production and which at the same time influences national production by supplying it with specified quantities of material values via the channels of foreign trade. No CMEA country is able to develop in isolation from the rest of the socialist community if only because of the special new features distinguishing the development of productive forces today.
The CMEA countries have developed impressive industrial, scientific and technological facilities of inter-state 10 importance. At present, co-operation among the socialist countries in production, finance, science and engineering takes a variety of forms which influence appreciably reproduction within individual socialist countries. In particular, the CMEA countries are joining forces to solve their raw material, fuel and energy problems. Thus, Hungary meets 90 per cent of her iron ore requirements from imports. Czechoslovakia imports all of her oil, while Poland imports 90 per cent of her iron ore and 100 per cent of her oil. The GDR imports all of her oil and iron ore.
The scarcity of economic resources experienced by some socialist countries limits their potential for developing an economically efficient large-scale production system encompassing the entire national economy and particularly its capital-intensive branches. In this situation reproducing the gross national product depends on both available internal resources and possibilities, and on economic co-operation with other socialist countries and the extent of production internationalisation.
Thus, the reproduction of material values within CMEA is effected not only by national, primary, and socialist relations of production, but in the case of some of its individual elements by the secondary relations of production among the socialist countries.
All socialist countries extend reproduction on a national basis. So far there is no single reproduction process common to all the CMEA countries and regulated by a unified plan covering the entire socialist community. Nonetheless, national socialist reproduction is not closed or inward-looking. Its individual phases reach beyond the confines of the national economy into the sphere of production relations between the different socialist countries. One must identify objective trends within the present reproduction cycle towards the formation of a unified pattern of production and distribution governed by a single economic development plan. The presence or absence of a single pattern of production and distribution determines the character of production relations but cannot serve as a criterion of their existence.
Under capitalism, with its principle of private enterprise and private ownership of the means of production, the reproduction cycle is geared to further private economic 11 interests and as such cannot be a uniform structure. In a similar way, distribution under capitalism is subordinated to private economic interests. The absence of any common economic interest is attributable to the private ownership of the means of production and characterises a particular capitalist form of the relations of production under which the interests of the capitalist class oppose the interests of the working class. Under capitalism the pursuit of profit is the driving force of production but it also keeps the capitalist class disunited. Industrial enterprises and business firms joined together by the social division of labour are disunited by divergent private interests in the socio-- economic sense. Each component of social production under capitalism, personified in the capitalist owner or in a group of owners, is geared to making the biggest possible profit, even at the cost of harming the other components of the system. The interaction of the various components of social production is not socially controlled. The society itself is disunited and does not have any common socio-economic interest.
The socialist form of production relations embraces a single unified pattern of production and the possibility of developing it in the interests of society as a whole and achieving a common economic interest. Economic relations between socialist countries are in their essence international production relations. They are the social form of the movement of material values between countries, the social form of the internationalisation of production and exchange. The fact that within the socialist system there is appropriation by individual countries does not imply the absence of genuine relations of production and property relations among the different socialist countries.
In agreeing among themselves on the appropriation of material values sovereign socialist countries further their own economic interests, which, as a reflection of the socialist ownership of the means of production, means common international interest. The community of economic interests between the socialist countries is determined by their similar economic base, that is, the public ownership of the means of production, similar state structure, popular power led by the working class and a common ideology---- MarxismLeninism. In entering into economic relations with one 12 another socialist countries further the economic interests of the socialist society they represent, and these goals and interests are common to other socialist countries. In this sense the economic interest of an individual socialist country is common to the rest of the socialist community. In as far as the prospects of the further development of the world socialist system are based on the internationalisation of production and exchange and the full utilisation of the economic potential of each country, then they are dependent on the close economic co-operation of all socialist countries, and the common economic interest is the supreme form of interest. The vital national interest of each country is essentially common to all the socialist countries. The successful economic development and the continued improvement of social relations within each socialist country further the common cause of socialism.
It would be wrong to look upon the socialist countries' community of economic interests as a kind of ``idyllic harmony" since it contains inherent contradictions. Such objective factors as the discrepancies in their levels of economic development, elements of state and economic isolation, the varying maturity of production relations and national and cultural differences all combined to make certain divergencies between the national and overall international interests inevitable. However, the dialectics of the correlation of national and international interests in the socialist countries consists in the fact that the vital national interest of any socialist country can only be realised if it forms part of the overall interests common to the rest of the socialist countries.
Building socialism and communism in a particular socialist country is a common cause both for its people and for the working people in the whole of the socialist community of nations. To successfully build socialism and communism, to achieve the highest level in the development of productive forces and to ensure a stable growth of the working people's material welfare---these are the internationalist duty of each socialist country.
Common international interest springs from the similar form of ownership in each socialist country and constitutes a common goal for socialist production.
13The appearance of common interests among the peoples of a number of countries is associated with the elimination of private ownership of the means of production. ``If the peoples are really to unite, they must have common interests. If they are to have common interests, the existing [capitalist.---N.B. ] property relations must be abolished...."^^1^^
Today one may see the common international interests reflected in the co-ordination and dovetailing of national interests and the realisation of mutual economic interests.
As the internationalisation of production develops and the pattern of the international division of labour becomes more diversified and as more and more forms of the means of production become socialised the national isolation of the socialist economies will decrease, allowing a single unified system of production and distribution according to a single plan and forming a unified single system of cooperation among the socialist countries.
Co-operation among the socialist countries is part of the emerging international pattern of the socialist division of labour. There is a connection between the social division of labour and relations of production (property). Marx and Engels in their German Ideology wrote: ``The various stages of development in the division of labour are just so many different forms of ownership, i.e., the existing stage in the division of labour determines also the relations of individuals to one another with reference to the material, instrument, and product of labour."^^2^^
In his critique of Proudhon Marx noted that ``the division of labour and all M. Proudhon's other categories are social relations forming in their entirety what is today known as property"^^3^^. Marx referred here to the relations of bourgeois property, but this statement is applicable to an analysis of the content of economic relations in general and to economic relations among the socialist countries, in particular.
International relations of production or property relations, within which the individual states act as counter agents, _-_-_
~^^1^^ Marx, Engels, Werke, Bd. 4, Berlin, 1969, S. 416.
~^^2^^ K. Marx and F. Engels, The German Ideology, Moscow, 1964, pp. 32--33.
~^^3^^ K. Marx and F. Engels, Selected Works, in three volumes, Vol. I, Moscow, 1969, p. 521.
14 represent an historically conditioned type of international division of labour.Thus, the domination of public ownership in each of the socialist countries, the character of the economic interest which the socialist countries are furthering, the development of mutually advantageous exchange, the formation of stable relationships in key areas of the economy, science and engineering, and the expansion and strengthening of the international market created by the socialist countries make it possible to characterise the totality of economic relations existing among the socialist countries as international production relations of the socialist type.
Establishing a single global working people's co-operative and a world-wide economy is a long process. Lenin wrote: ``Such a union cannot be effected at one stroke; we have to work towards it with the greatest patience and circumspection, so as not to spoil matters and not to arouse distrust, and so that the distrust inherited from centuries of landowner and capitalist oppression, centuries of private property and the enmity caused by its divisions and redivisions may have a chance to wear off."^^1^^
Today Lenin's statement has a particularly topical ring about it. The socialist system gives a great boost to the trend towards unification and consolidation. But it is only a trend that must be further developed and exploited. Elaborating the mechanism of economic co-operation is particularly important in this context. To approach this problem from the right angle, that is to show the role and significance of economics within this mechanism, it is essential to examine how the economic laws which reflect the objective development of economic relations among the socialist countries operate.
The objective laws governing the development of the world system of socialism and their use in the practical work of furthering economic co-operation have been carefully examined by a number of Soviet and foreign economists. Formulating the question of the objective economic laws governing the evolution of the world socialist system depends on the proper interpretation of the structure of socialism as a world system.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 30, p. 293.
15Socialism as a world system represents the dialectical unity of relationships within the national economy of a particular country and of the mutual economic relations existing among the various socialist countries. The laws of the socialist mode of production manifest themselves in a highly specific form within international relations of production while the laws governing the development of economic relations among different socialist countries influence the production cycle within an individual country's economy.
This formulation of the question of the structure of the world socialist system presupposes an analysis of the concrete manifestations of socialist laws and the identification of the common features and national peculiarities in the course of social progress. For instance, the objective laws governing the transition from capitalism to socialism manifested themselves in different ways in the countries forming the world socialist system. That, in turn, determined the diversity of concrete forms and methods of socialist transformation which were dependent on the specific conditions existing in the individual countries. Consequently, the diversity of concrete specific conditions under which individual countries develop modified the operation of the laws of socialism and left an imprint on the specific form of their manifestation.
In the Main Report of the CPSU Central Committee to the 24th Congress Leonid Brezhnev emphasised: ``Not only are we theoretically aware but also have been convinced in practice that the way to socialism and its main features are determined by the general regularities, which are inherent in the development of all socialist countries. We are also aware that the effect of the general regularities is manifested in different forms consistent with concrete historical conditions and national specifics."^^1^^
One other factor that influences the manifestation of the laws of socialism is the existence of the world socialist system which offers additional opportunities for the fuller utilisation of these laws.
Economic laws governing the development of production relations among the socialist countries can be divided into _-_-_
~^^1^^ 24th Congress of the CPSU, Moscow, 1971, p. 9.
16 two types. The first type stems from the socialist mode of production as such, while those of the second type reflect the typical and the most frequently recurring connections among phenomena within international relations of production. As far as the former are concerned it can be said that with the emergence of a world socialist system and the development of economic relations among socialist countries a new sphere for their operation has appeared. The operation of economic laws within this sphere differs from the impact of these laws within individual socialist countries both in terms of scale and in terms of the profundity of socio-economic repercussions. The laws of the socialist mode of production operate within international economic relations to the extent to which the economic relations among different socialist countries have developed. Their operation has a highly specific pattern which is subject to modification.The extent to which economic relations among different socialist countries grew depends on how far national relations of production have advanced, on the extent to which production is internationalised and also on the maturity of socialist relations of production both within individual countries and within the community of socialist nations as a whole.
Public ownership of the means of production means that production and distribution of material values is expanded in the interests of the whole of socialist society. The law that governs this essential connection is a natural objective incentive for the continued expansion and improvement of socialist production. This law is fundamental as it reflects the basic essential link between members of socialist society; without it socialism is impossible. The basic economic law of socialism reveals the essential link between the mode of production and the social goal of production.
Any type of production is ultimately designed to meet consumer demand. What is produced is eventually consumed, and this simple fact is crucial, for, if it were not so, there would be no production and society would not be able to exist. The social form of this connection between production and consumption may vary significantly. The form and method of connection between production of material values 17 and their consumption depends on the type of ownership of the means of production within a society.
The aim of production is also realised in a particular form of material interest that has been achieved. Public ownership of the means of production means that working people are equally related to them and have equal interests in using them. In this context the association of working people operating the means of production are also their owners. The resulting product thus belongs to the whole of society. Under socialism labour power does not stand in opposition to the means of production as commodity does in relation to capital. Labour power under socialism is part of the productive forces at the disposal of society---the association of working people. Because of this society has a common economic interest in utilising the available productive forces. This common economic interest is the satisfaction of society's needs as a whole and of the needs of its individual members. Engels wrote in this connection that ``the means for existence ... through the planned utilisation and extension of the already existing enormous productive forces of all members of society, and with uniform obligation to work, the means for existence, for enjoying life, for the development and employment of all bodily and mental faculties will be available in an equal measure and in everincreasing fulness".^^1^^
All socialist countries have a similar system of production relations based on the public ownership of the means of production. This being so, their ultimate goal in social production is the fullest possible satisfaction of the growing material and spiritual requirements of all members of society. The existence of similar relations of production and common goals in the development of production combined to promote the formation of a system of international economic relations conducive to achieving the ultimate goal of socialist production, providing incentives for better performance and guaranteeing the successful development of efficient production.
In the modern world, when productive forces are developing at a spectacular rate, it is becoming impossible for _-_-_
~^^1^^ K. Marx and F. Engels, Selected Works, Vol. I, p. 149.
__PRINTERS_P_17_COMMENT__ 2---0516 18 an individual country to produce all it needs from its internal resources alone. In this situation, co-operation among the socialist countries is all-important. The need for cooperation stems firstly from the objective laws governing the development of the productive forces during the current scientific and technological revolution. Secondly, co-- operation is necessitated by the significant changes affecting the structure of societal needs. Thirdly, the need for co-operation is explained by the different countries' extensively differing potentials for further economic growth. Fourthly, it is called for by their widely varying natural resources, and finally, by the existence of the world capitalist system which can only be defeated in the economic field by pooling the efforts of all the socialist countries.The need for pooling the socialist countries' economic efforts springs from the very nature of socialism, from its internationalism. Hence, it is one of the most essential features of socialism as a world system: co-operation among socialist countries presupposes the meeting of common, mutual economic interests. That is precisely the reason why relations among socialist countries are conducted on the basis of the principles of socialist internationalism, of respect for state sovereignty, independence and national interest, non-interference in the internal affairs, full equality, and mutual benefit and assistance.^^1^^
Economic co-operation is particularly important in achieving common economic interests of mutual advantage, that is, the economic mechanism whereby the advantages of socialism are realised. The pooling of the socialist countries' efforts also stems from the existence of the world socialist system and ensures its normal development as an alliance of socialist countries.
The experience gained over the past quarter of a century allows us to realistically and profoundly assess and find ways to overcome both objective and subjective difficulties that arise in constructing the new society and establishing _-_-_
~^^1^^ See Comprehensive Programme for the Further Extension and Improvement of Co-operation and the Development of Socialist Economic Integration of the CMEA Member-Countries, Moscow, 1971, p. 15.
19 a new socialist form of interstate relations. The common social system, vital interests and objectives of the peoples of the socialist countries allow them, given the correct policy pursued by Marxist-Leninist parties, to overcome these difficulties and to steadily develop and strengthen the world socialist system.^^1^^The development of economic relations among socialist countries based on the continued internationalisation of production and exchange, involving an increasingly greater part of the national output of different countries, presupposes the maintenance of a satisfactory balance in international economic exchange. Now that the world socialist system is a reality the problem of maintaining a balanced distribution pattern for social labour and of maintaining balance proportions is now acquiring international significance, whereas until recently it was of purely national economic importance.
Proportionality between the different branches of economy and groups of industries is a basic requirement for social production in any form of society. This necessity to maintain proportionality becomes greater the more developed is the division of labour and specialisation and co-operation in production.
Marx in a letter to Ludwig Kugelmann wrote:
``That this necessity of the distribution of social labour in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance is self-evident."^^2^^
Under capitalism, with its private ownership of the means of production, proportions of social production are established spontaneously through the operation of market forces and relations under the influence of the ebb and tide of supply and demand, price fluctuations around value and transfers of capital from one industry to another. In this situation the connection between the different branches of the economy and within each branch takes the form of commodity-money relations and is regulated by the law of _-_-_
~^^1^^ 24th Congress of the CPSU, p. 10.
~^^2^^ K. Marx and F. Engels, Selected Works, in three volumes, Vol. II, Moscow, 1972, pp. 418--19.
20 surplus value. The proportions that result are in fact disproportions because of the crises of overproduction.The public ownership of the means of production, on which socialism is based, gives labour an immediate social character which is evident directly within the production sphere, where ``individual labour no longer exists in an indirect fashion but directly as a component part in the total labour".^^1^^ This creates objective conditions for changing the way in which proportions are established and indeed changing their very nature, and for modifying the overall pattern of economic relations. Public ownership of the means of production presupposes a deliberate balanced mix of individual industries and groups of industries in the national economy, and that these are based on planned development and growth as the dominant overall economic link.
Since proportionality is a requirement for any material production involving large-scale machine industry, planned development and growth is associated with socialist relations of production and public ownership which alone corresponds to public productive forces. Its degree of maturity depends on the extent of socialist socialisation of production and labour.
The possibility for the planned organisation of social production first arose within the womb of capitalism. Having socialised production in the giant monopolies, capitalism took the social character of labour a stage further, thereby making it necessary to plan the organisation of production. History has fully vindicated Lenin's conclusion that the transition to state monopoly ``capitalism is now evolving directly into the higher, regulated form"^^2^^. At the same time state monopoly regulation sharpens the essential contradictions inherent in capitalist reproduction. The exploitation of the working class is intensified by the use of subtle methods. The non-monopolised part of production is increasingly being ousted and the monopolistic concentration of production capital is accelerated. State monopoly regulation is faced with a situation dominated by cut-throat competition between privately owned capitalist monopolies, trusts and _-_-_
~^^1^^ K. Marx and F. Engels, Selected Works, Vol. I, p. 149.
~^^2^^ V. I. Lenin, Collected Works, Vol. 24, p. 306.
21 the non-monopolised part of production, and also between the isolated economies of the different capitalist countries. Because of imperialism's inherent contradictions an organically integrated capitalist system organised on a planned basis is impossible. Lenin's conclusion that the trusts were naturally incapable of fully planned activity, still are and cannot be otherwise is still completely valid today. The development of state-monopoly regulation is evidence of the deepening contradictions between capitalist ownership in all forms of its manifestations and the socialisation of production on a vast scale. Only by introducing public ownership of the means of production, based on the socialisation of the whole economy, can one provide a favourable environment for planned development and growth as the overall form of economic relations. This type of planned development and growth allows production to be geared to common societal interests and makes it possible for the immediate producers, whose economic activity affects every phase of social production, to foresee the ultimate result of their efforts.Maintaining production proportions is a particular factor of planned growth and development. Proportionality on the face of it is a particular ratio of individual components of production within the overall social division of labour. A planned maintenance of these proportions presupposes a distribution of labour and the means of production among the various branches of the economy with a view to achieving a goal common to the whole society, namely the satisfaction of the needs of that society as a whole. Planned development and growth is a way to maintain proportions but only iii a general form. The proportions of social production and its structure's changing characteristics are geared to the achievement of a common social goal. A number of essential characteristics spring from this fundamental fact. Under socialist production the basic economic law of socialism is the chief regulator of economic proportions. Production proportions are geared to achieving the maximum benefit, to be used in the interest of society as a whole. Planned development and growth is one way of maintaining economic proportions which guarantee best results on a minimum outlay of labour.
22On the face of it the proportions in socialist production are the totality of consumer values necessary for the fullest possible satisfaction of society's needs. Under socialism labour remains qualitatively and economically heterogeneous. This complicates the direct comparison of the labour time expended in different areas of production (within state-owned and co-operative-owned spheres) and within different industries and enterprises in the same industry. Such a comparison can only be made indirectly by comparing the expenditures of socially necessary and abstract labour on the basis of value. This results in the proportions of socialist production or the distribution of social labour among different industries having a value characteristic as well as natural and substantive characteristics. Further a planned maintenance of proportions is organically bound up with the use of commodity-money relations and the law of value. This is the situation prevailing in primary relations of production.
Proportionality within the secondary relations of production under socialism implies a pattern of distribution of social labour among the different branches of the national economy which takes into account the objective internal and external potentialities (resources) as well as the requirements of the national economy and economic co-operation. The distribution of the means of production and of labour power is the internal substance of the prevailing pattern of the social division of labour and in addition presupposes the specialisation of production within the economy and within the international division of labour among socialist countries. Accordingly the social character of labour undergoes constant development and now is recognised as international in character. The changing pattern of the social character of labour depends on the progress of the socialist internationalisation of production.
The distribution of the means of production and of labour among the various industries and branches of the economy in line with the exigencies of the international socialist division of labour and the potentialities of each country affects the economic interests of the state.
All this presupposes the voluntary acceptance of obligations concerning international specialisation of production 23 in full conformity with the principles of equality and independence of the socialist countries involved.
A good balance between the expenditures of socially necessary labour and the actual demand for a particular type of product within the framework of the world socialist system emerges in accordance with the development of international socialist division of labour. It represents the correlation between that part of output which is involved in the international economic exchange and that part of the socialist countries' social demand which falls within the sphere of international economic relations. These proportions manifest themselves partly in a form of the correlation between demand (the necessary volume of imports) and supply (the necessary volume of exports).
Since the social character of labour is the objective basis for planned development and growth within a socialist economy the development of planned growth within secondary relations of production depends on the further development of the social character of labour and the emerging international aspects of their social character which reflect the development of the socialist internationalisation of production.
In international socialist relations of production, the further internationalisation of the productive forces and the growth of production socialisation provide the prerequisite material basis of further planned development and growth.
An essential aspect of production internationalisation is the specialisation of national economies within the international socialist division of labour. The labour occupied in specialised industries and enterprises within a socialist country assumes an international significance in production itself, although the specialised part of the economy remains under the countries' socialist ownership.
Developing planning as a form of implementing economic processes between socialist countries directly depends on the internationalisation of production and the development of the international socialist division of labour. To the extent that socialist socialisation assumes an international significance the objective prerequisites are created for a planned development of the economic process within the world socialist system.
24Planned development and growth in international economic relations concerns both international specialisation of production and the associated exchange of activity. At the same time the objective material basis of this exchange is the international character of social labour. Planned development and growth, as a form of the progress of economic processes maintained between different socialist countries, springs from the planned nature of socialist relations of production vis-a-vis individual socialist countries.
It is known that as each socialist country develops its economy the reproduction of the gross national social product is not maintained by relying on the internal resources of that country alone. A basic condition for normal reproduction is economic co-operation and mutual exchange of activity both of which are major factors of economic growth. In this situation planning reproduction within a country is possible, given that there are guaranteed markets and provided there is an organised, planned, system of sales within international activity exchanges, including the world socialist market. Since the sales of different socialist countries' products are involved an objective need arises for maintaining proportions in a planned way within this international sphere of activity exchanges, including the world socialist market.
The special character of international socialist relations of production affects the way in which the law of planned balanced development is applied within this highly specific sphere.
The general form of deliberate utilisation of the totality of economic laws is co-operation in planning procedures.
The CMEA countries' comprehensive programme for economic integration emphasises that ``co-operation in activities, especially the co-operation of plans, is the main method for organising co-operation and extending the international socialist division of labour".^^1^^ The co-ordination of national economic development plans stems from the national economic planning procedures and in this sense is affected by the objective laws governing the development of the national economy of different socialist countries. At the same time _-_-_
~^^1^^ Comprehensive Programme..., Moscow, 1971, p. 24.
25 the co-ordination of national economic plans is voluntary and is aimed at co-ordinating the efforts of different socialist countries. It does not impinge on questions of internal planning, finance and the activity of organisations operating on a profit and loss basis within individual socialist countries.The central planning authorities of the CMEA countries play the leading role in co-ordination of national economic development plans. These planning agencies are responsible for the co-ordination of plans on a bilateral and multilateral basis. They involve in this work the appropriate CMEA agencies, ministries, government departments, economic amalgamations and major industrial units. They also rely in their operations on direct links between government bodies and economic organisations in charge of individual industries in different socialist countries.
The planned development of the international socialist division of labour implies in effect a planned and organised process of production internationalisation.
The involvement of economic organisations and enterprises in social production on a planned basis (the planned inclusion of labour expenditures of individual enterprises in the total labour expenditures of society) provides favourable conditions for a rational and efficient utilisation of social labour and for saving labour time. As Marx put it, ``time economy like the planned distribution of labour time among different branches of production, represents the prime economic law on the basis of collective production".^^1^^
The saving of working time is associated above all with the functioning of public property and with the resultant opportunity for using the available productive forces in the interests of the whole of society. The economy of social labour is a reflection of an essential characteristic of public ownership of the means of production and is directly bound up with the planned character of the progress of economic processes under socialism. The saving of live labour and the reduction of expenditures of embodied labour coupled with the reduction in the rates of material outlays on _-_-_
~^^1^^ Archives of K. Marx and F. Engels, Moscow, 1935, p. 119 (in Russian and German).
26 production represent a saving of labour time and results in a higher labour productivity. Marx considered that rising labour productivity was a universal economic law that operates within all socio-economic formations. Under socialism the social productivity of labour throughout the economy takes priority over individual labour productivity within individual enterprises. This greatly increases the opportunities for using spare capacities for boosting labour productivity and allows a comprehensive approach to the problem of raising labour productivity, to the task of economising at every phase of production, transportation and in the use of the product. The saving of social labour under socialism is helped by society's, the production collective's and the individual producer's vital interest in the steady growth of labour productivity.Saving labour time is not only a matter of rising labour productivity. It would be a simplification to interpret the law of time economy as resulting in a higher labour productivity alone. The law of time economy under socialism is associated above all with planned development and growth, with the possibility of distributing social labour according to a deliberate well-designed plan. This in itself is tantamount to time economy.
The law governing the saving of labour time operates within international socialist relations of production through savings in the socially necessary expenditures made by individual socialist countries. In each country the resultant savings take the form of freeing quantities of labour from a particular branch of the economy and using this labour more efficiently elsewhere. The savings of national socially necessary expenditures are achieved through foreign trade and take the forms of profit. If we bear in mind that 70 per cent of the foreign trade turnover of socialist countries is accounted for by mutual trade we will see that the realisation of the national socially necessary expenditures saved is a common problem which takes the form of guaranteeing mutual benefit.
Under modern production, when the productive forces are developing rapidly, isolated economic activity cannot ensure production on a mass scale with the maximum efficiency in labour expenditures. The saving in expenditures of social 27 labour requires the socialist countries to draw their economics together on the basis of a rational production specialisation and co-operation in economic resources, on the basis of producing the maximum quantity of goods for a minimum expenditure of labour, in conditions of full co-ordination in the use of the economic resources of all socialist countries.
Today none of the socialist countries is yet prepared to regard its own production resources as being a component of the larger production resources of the whole of the social community of nations. Nonetheless pooling resources is not automatic and it is not based on good intentions alone. Success here wholly depends on the efficient implementation of economic measures which meet, in a flexible way, the national interests of each socialist country as it contributes to the achievement of goals common to the rest of the socialist community.
Summing up the foregoing we might make the following generalisations. The economy of social labour within the sphere of international relations of production is associated, firstly, with the planned character of the development of the international socialist division of labour. Secondly, it is associated with the growth of labour productivity springing from the increasing internationalisation of production and the growing possibilities of exploiting the fruits of the continuing scientific and technological progress, which makes it possible to deploy production facilities of optimal size and capacity. Thirdly, it is associated with the growth of labour productivity springing from the optimisation of the structure of national economies under the impact of external economic relations.
The economy of labour within international relations of production reflects then a complex pattern of secondary and primary relations, reflecting the impact of stimuli which promote the steady growth of labour productivity and stem from both the primary and secondary relations of production.
The division of labour among socialist countries, tho measure of isolation of the national property of individual socialist countries and the nature of social labour within them combine to necessitate the commodity-money form of 28 activity exchanges between the different socialist countries and the operation of the law of value.
The relationships existing in the world socialist market represent on the one hand an extension of internal relationships, while on the other they are characterised by a number of special features associated with the fact that the world socialist market does not absorb national markets but rather coexists with them, and sovereign socialist states or business firms duly authorised by them act in their capacity as agents in the international socialist market.
The commodity-money relations existing among socialist countries differ from those in the world capitalist market and also from the modern commodity-money relations existing within the individual socialist countries. Socialist countries enter into economic relations with one another and with capitalist countries. They trade with other socialist countries and with the capitalist countries.
The socialist character of the mutual economic relations among CMEA member-countries is so far less mature than it is in the economic relations at the level of the primary relations of production. This explains the specific character of relations existing in the world socialist market ( specifically in the international market involving the CMEA countries) as distinct from relations existing in the socialist market of individual socialist countries. But there is one common dominant factor and that is the planned functioning of the market both in the world socialist economy and in the purely national economy. This unique property of the socialist market, springing from the various special conditions dominating production relations among socialist countries, has been duly noted in the CMEA countries' Comprehensive Programme of economic integration: ``...the systematic extension and increase in the effectiveness of mutual trade, the improvement of its organisational forms on the basis of a state monopoly."^^1^^
The law of value operates both in the world socialist market and in the internal markets of individual socialist countries. The essence of this law remains unchanged and is exemplified in the reduction of various types of labour _-_-_
~^^1^^ Comprehensive Programme..., p. 17.
29 expenditures to a unified criterion. However, the mechanism for the operation of the law of value---deviations of price from social value---has varying socio-economic repercussions in the socialist world market and in the internal markets. Within a country the law of value operates in conditions of a single economic organism and society as a whole, by using the entire system of economic laws in a planned way, is able to regulate production exchange and consumption more or less successfully. A different situation prevails within the world socialist system where as yet there is no common international property and each socialist country having economic relations with other socialist countries pursues its own national economic interest.The existence of a system of socialist countries and the development of political, economic, scientific and technological co-operation and mutual assistance among them underlies their gradual drawing together and the levelling-up of their economic development.
The gradual overcoming of disparities in the levels of economic development in the individual socialist countries is an objective historical process. There is an added urgency in levelling up economic development because of the demands made by the current scientific and technological revolution and the further development of co-operation and economic integration. Both industrially advanced and less advanced members of CMEA have an equal vital stake in levelling up economic development. The experience of socialist construction in the European socialist countries has demonstrated that levelling up economic development through the proper use of the chief laws governing socialist construction is achieved through the proper use of these laws in all countries embarking on the socialist path of development. The socialisation of industry and agriculture played the main role in the efforts aimed at boosting the level of economic development.
The levelling-up of economic development is a long process and its effectiveness increases with the improvement in the international socialist division of labour.
Levelling up economic development in the different countries does not mean that advanced industrialised countries should slow down their development and wait for other 30 countries to catch up or transfer part of their accumulation fund to other countries. Levelling up overall economic development in socialist countries is achieved mainly by eacJi socialist country fully using its internal resources. Other ways include the continuous improvement of economic management techniques, the consistent implementation of Leninist principles and methods of socialist economic management and the efficient exploitation of the advantages offered by the world socialist system.
Thanks to the progress of industrialisation, all the European socialist countries, who are members of the GMEA have been able to significantly level up their economic development. This is shown among other things by bridging the gap in the levels of industrial output per capita (see Table 1).
Table 1 Industrial Output Per Capita (USSR = 100 per cent) Country 1950 1955 I960 I'.IG.I Bulgaria 40 50 60 70 Hungary 80 80 80 80 GDR --- 150 160 150 Poland 70 80 70 80 Rumania 30 40 40 50 USSR 100 100 100 100 Czechoslovakia 150 140 140 120Rapid industrial progress has created conditions for boosting labour productivity. The levelling-up of economic development is not an end in itself. The countries building socialism had widely varying levels of economic development and an unsatisfactory economic structure from the standpoint of socialism. They faced the task of overcoming their economic backwardness by socialist methods and of tackling the problem of levelling up their economic development.
The gradual levelling-up of economic development within the CMEA is organically linked with the achievement of a 31 higher labour productivity compared to the capitalist countries. This is a major task of socialist and communist construction.
The levelling-up of economic development within CMEA is the material basis for a greater community of national interests and for making co-operation within the community ever more effective. This goal determines the ways and means of levelling up economic development.
The Comprehensive Programme of co-operation and integration within the CMEA states in this connection: ``Among the main ways for a gradual drawing closer together and evening-out of the economic development levels of the CMEA member-countries are, first and foremost, the maximum mobilisation and utilisation of the efforts and resources of the countries concerned, and the utilisation of the advantages offered by the international socialist division of labour."^^1^^
The levelling-up of economic development is a problem facing all the socialist countries, therefore it should be regarded from the standpoint of the common goals and objectives in the development of the community of socialist countries.
The world socialist system as a whole will gain if the socialist countries have similar levels of labour productivity in the same industries and a similar standard of living. For all CMEA countries and particularly for those less advanced industrially than others the determination of the long-term trends in the formation of a national economic complex is of great importance. During the current scientific and technological revolution setting up such a complex presupposes the development and deepening of international production specialisation. The economic integration of the CMEA countries calls for a comprehensive approach to the job of levelling up economic development, and a full account must be taken of all forms and areas of co-operation. The Comprehensive Programme for the CMEA countries' economic integration outlines concrete ways and means to gradually draw together and level up their economic development, as well as outlining methods of extending all-round _-_-_
~^^1^^ Comprehensive Programme..., p. 19.
32 help and assistance to less developed socialist countries. For instance, less developed countries have been given every opportunity for participating in international production specialisation, including the development of new industries, provided these countries guarantee the high technological level and quality of the resultant products. At the same time guarantees have been provided for a steadily expanding market for the sales of specialised products. Less developed socialist countries will receive effective help and assistance in their efforts to achieve a high technical standard and quality for their specialised products.The provision of effective technical assistance covering the entire range of the production cycle from designing to the launching of mass production is of great importance to solving the problem of levelling up economic development. The problem of levelling up economic development may be solved through enlisting the services of less developed countries in scientific research and development projects and through co-ordination, co-operation and joint implementation of projects. Less developed countries will also be involved in the work of scientific and technical organisations set up by the CMEA countries for joint research and development.
The Comprehensive Programme for economic integration outlines measures to provide a proper material base for levelling up economic development by extending credits through International Bank for Economic Co-operation and the International Investment Bank and also by maintaining the current soft terms under which certain types of products of a seasonal character are exported.
Accelerating economic growth and economic efficiency in the Mongolian People's Republic is no mean task in a larger context of levelling up economic development within the CMEA countries.
The development of an efficient economy in the Mongolian People's Republic is looked upon as a common cause of the rest of the CMEA countries. The measures aimed at stepping up economic development in Mongolia include among other things the joint construction and operation of industrial units, assistance in launching industrial capacities, the granting of credits on easy terms, preferential prices for 33 agricultural produce whenever necessary and in addition free aid to the Mongolian People's Republic in appropriate cases following consultations with its government.
The record of economic development in Mongolia, a country building socialism and by-passing the capitalist stage of development, is a good example of what socialism can do for a once backward country. In the recent past Mongolia was a country where nomadic stock-farming was the only economic activity. Today, industry and building in the republic account for one-third of the national income.
Another example of the effectiveness of socialist countries' economic integration has been provided by the Republic of Cuba which joined the Council of Mutual Economic Assistance in 1972. Explaining the reason why the government of Cuba decided to enter CMEA Carlos Rodriguez, member of the Secretariat of the Central Committee of the Communist Party of Cuba, said that today it is unthinkable to develop Cuba's economy without close economic cooperation with the rest of the CMEA countries, without involving Cuba in the process of socialist economic integration. Cuba's participation in the economic integration would be a further contribution to the strengthening of the unity and cohesion of the socialist countries and it would bolster socialist construction in Cuba itself.
Cuba's economy in conditions of economic integration with the rest of the CMEA countries is better placed to develop in a balanced way making full use of the advantages of the international socialist division of labour. Besides, Cuba now has a large socialist world market for its products. The development of a diversified economy comprising ferrous and non-ferrous metallurgy, certain types of engineering industries, chemical, textile and food industries began when Cuba embarked on the socialist path of development.
Each socialist country, guided by the principles of socialist internationalism, makes its contribution to the achievement of the goals and objectives common to the entire socialist community of nations. Herein lies the main strength of socialist economic integration.
__PRINTERS_P_33_COMMENT__ 3---0516 [34] __NUMERIC_LVL1__ CHAPTER II __ALPHA_LVL1__ INTERNATIONALISATION OF PRODUCTIONThe world system of socialism has entered upon a new stage of its development---economic integration. The objective basis for the economic integration of the socialist countries is the internationalisation of production and exchange which are intimately bound up with the development of the national productive forces and the social division of labour.
The necessity for economic integration for the GMEA countries springs from the maturity of socialist production relations, from the level of the socialisation of productive forces achieved by the socialist countries and from the structural changes that have occurred within the economies of socialist countries.
The final communique of the 25th Session of the Council for Mutual Economic Assistance stated: ``The Communist and Workers' Parties and Governments of the CMEA countries work to improve and develop co-operation and socialist economic integration with a view to solving with greater success the major socio-economic problems facing socialist countries, to advancing productive forces further, achieving the heights of scientific and technological development, improving the standard of living and to building up the defence potential of the CMEA countries.'' The development of socialist economic integration in the CMEA countries is the regulation in a planned way by their communist and workers' parties and governments of the further progress of the international socialist division of labour, the 35 levelling-up of economic development, the formation of modern and highly efficient national economic structures and the gradual overcoming of discrepancies in the levels of economic development.
The CMEA countries' economic integration is based on the implementation of Leninist principles for relations among the working people of countries that have embarked on the road of communist and socialist construction.
Lenin stressed the need for a voluntary alliance of nations that excludes any coercion by one country against another, an alliance based on concrete tasks and a clear realisation of unity and a completely voluntary agreement in the spirit of brotherhood.
At a time when discrepancies in economic development are still important, when national distinctions and differences in state structure are still a factor to reckon with Lenin's proposition about the need for a careful account to be taken of the national differences when working out general methods and forms of joint activity acquire a special urgency. Lenin wrote: ``As long as national and state distinctions exist among peoples and countries---these will continue to exist for a very long time to come, even after the dictatorship of the proletariat has been established on a world-wide scale---the unity of the international tactics of the communist working-class movement in all countries demands, not the elimination of variety or the suppression of national distinctions (which is a pipe dream at present), but the application of the fundamental principles of communism (Soviet power and the dictatorship of the proletariat), which will correctly modify these principles in certain particulars, correctly adapt and apply them to national and nationalstate distinctions."^^1^^
In stressing the need for respect for state sovereignty Lenin, at the same time, warned against national aloofness and isolation against a tendency ``to erect a Chinese Wall around his nationality, his national working-class movement".^^2^^
Historical experience has fully confirmed the validity of Lenin's ideas. The Comprehensive Programme incorporates _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 31, p. 92.
~^^2^^ Ibid. Vol. 6, p. 521.
__PRINTERS_P_35_COMMENT__ 3* 36 Marxist-Leninist principles governing relations among socialist countries, such as socialist internationalism, respect for slate sovereignty, independence and national interests, n on-interference in the internal affairs of other countries, complete equality, mutual benefit and mutual assistance in a comradely spirit.Socialism as a world system implies internationalisation of the productive forces. The development of the productive forces at the present stage calls for concentration of production on an international scale. Socialist countries have developed a variety of forms of economic co-operation which facilitate the process of production internationalisation and economic consolidation of socialist countries. Economic integration of socialist countries takes shape under the impact of production internationalisation and in the course of economic consolidation. Economic integration is a phase on the way to the formation of a single world economy run according to a single unified plan.
The problem of mutually adjusting and dovetailing the national economies of different countries has a direct bearing on international specialisation of production and the development of the international division of labour. The problem of integration in itself is organically linked with the internationalisation of the productive forces and the international division of labour.
The structure of a socialist country's national economy should develop in such a way as to ensure the dovetailing of the economy with the integrational economic links and to achieve the optimum economic mutual adaptability.
Internationalisation of production and exchange first arose in the machine-industry period of capitalism. Lenin wrote: ``The development of the productive forces of social labour is to be observed in full relief only in the epoch of large-scale machine industry."^^1^^
Since the machine system first became the technical base of capitalist production and a large-scale machine industry took shape the natural isolation of different countries has come to an end.^^2^^ Lenin wrote: ``...characteristic features _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 3, pp. 595--96.
~^^2^^ See K. Marx and F. Engels, The German Ideology, p. 76.
37 which distinguish large-scale machine industry from the preceding forms of industry may be summed up in the words--- socialisation of labour. Indeed, production for an enormous national and international market, development of close commercial ties with various parts of the country and with different countries for the purchase of raw and auxiliary materials, enormous technical progress, concentration of production and the population in colossal enterprises, demolition of worn-out traditions of patriarchal life, creation of mobility of the population, and improvement of the worker's standard of requirements and his developmental 1 these are elements of the capitalist process which is increasingly socialising production in the country, and with it those who participate in production."^^1^^Lenin emphasised that capitalist development meant ``the rapid expansion of a close network of channels which cover the whole country, centralising all capital and all revenues, transforming thousands and thousands of scattered economic enterprises into a single national capitalist, and then into a world capitalist economy".^^2^^
The expanding scale of production and the constant transformation of the capitalist mode of production combined to make the capacity of the national market inadequate for a particular type of products turned out in vast quantities. This is one of the essential distinctions and the advantage of the capitalist development of the productive forces compared to feudalism where, ``economic units could exist for centuries without undergoing any change either in character or in size, and without extending beyond the landlords' manor, the peasant village or the small neighbouring market for the rural artisans and small industrialists (the so-called handicraftsmen). The capitalist enterprise, on the contrary, inevitably outgrows the bounds of the village community, the local market, the region, and then the state."^^3^^
The development of productive forces is accompanied by the further growth of the social division of labour which _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 3, pp. 548--49.
~^^2^^ Ibid., Vol. 22, p. 213.
~^^3^^ Ibid., Vol. 3, p. 60.
38 at any given time is dormant within a particular structure of the economy. This economic structure just like the social division of labour, which is the determining basis of that structure, changes under the impact of the developing productive forces and the dominant form of the relations of production.Marx and Engels define the division of labour as ``the totality of the physical aspects of social labour,"^^1^^ ``a definite organisation of the labour of society".^^2^^
The social division of labour is the system of the division of labour among national economies, within the individual national economies and also within particular industrial units. With the basis of each structure level being the same, each level of the social division of labour is characterised by its own special features while at the same time being in a dialectical unity with the other structural levels. In certain periods of the development of social production a particular structural level begins to have a dominant impact on the entire social division of labour. Under certain conditions the international division of labour may have a similarly dominant impact on the structure and efficiency of social production as a whole.
The social division of labour presupposes a mutual interdependence, within a single economic organism, of the different forms of social activity. Specialisation and co-operation are two aspects of the process of the social division of labour. The social division of labour develops through ``specialisation of the instruments of labour, by the formation of detail labourers, and by grouping and combining the latter into a single mechanism, division of labour in manufacture creates a qualitative gradation, and a quantitative proportion in the social process of production; it consequently creates a definite organisation of the labour of society, and thereby develops at the same time new productive forces in the society".^^3^^
The productive forces of a society develop and improve through the individual worker's growing labour productivity. _-_-_
~^^1^^ K. Marx, A Contribution to the Critique of Political Economy, London, 1971, p. 51.
~^^2^^ K. Marx, Capital, Vol. I, Moscow, 1958, p. 364.
~^^3^^ Ibid.
39 That in turn is made possible by the specialisation of instruments and subjects of labour. Other contributing factors include the worker's steadily rising skill and the reduction in the number of operations he has to perform and time economy. The productive power of social labour rises in response to the cumulative effect resulting from the sum total of the productive power of individual producers. The productive power of social labour also rises as a result of labour co-operation, the changing pattern of production and the increasing application of science as an immediate productive force.In identifying the productive forces of society as the basis of the social division of labour Marx stressed that the division of labour is both a form of social relations, implying the specialisation of producers in a given sphere of material production, and the inevitable exchange of activity between specialised collectives of workers.
Division of labour presupposes the distribution of the means of production and labour power among the different fields of activity. The nature of this distribution determines the transition from one stage of the division of labour to another and is ultimately expressed in a changed form of property. Marx wrote: ``The various stages of development in the division of labour are just so many different forms of ownership, i.e., the existing stage in the division of labour determines also the relations of individuals to one another with reference to the material, instrument, and product of labour."^^1^^
Marx pointed out that the division of labour and property are identical in the sense that ``in the one the same thing is affirmed with reference to activity as is affirmed in the other with reference to the product of the activity".^^2^^
Social division of labour is exemplified in activity exchange, in other words, it is identical with the exchange of activity. Differences in the consumer properties of different products manufactured by different producers or groups of producers create the natural need for exchange. If these specialised producers or groups of producers are isolated _-_-_
~^^1^^ K. Marx and V. Kngcls, The German Ideology, pp. 32--33.
~^^2^^ Ibid., p. 44.
40 owners then what we have is not exchange of products but rather an exchange involving consumer values, commodities. This type of exchange takes place through commoditymoney relations.As the productive forces develop and the social division of labour becomes more diversified the national confines of exchange prove to be increasingly too narrow. The productive forces gradually transcend national boundaries. They are followed by the division of labour. Just as the social division of labour within a particular country manifests itself on the national internal market, the division of labour among the economies of different countries manifests itself on the world market. The material basis of the international division of labour is provided by the internationalisation of the productive forces and in the final count the development of the national productive forces.
The internationalisation of production reflects an objective process of the socialisation of the productive forces. To enable the productive forces to cut across the confines of national economies three things are essential: (a) a high concentration of the means of production and labour power within individual enterprises; (b) production specialisation allowing mass production of particular items, and (c) the saturation of the internal market with particular types of product. Thus national production, which develops a particular pattern of specialisation through the social division of labour within the national economy, proceeds to supply its goods to the external market---herein lies its international significance.
National production supplies certain types of goods to the external market, thereby consolidating the pattern of specialisation that has taken shape within the national economy. From the standpoint of the external or international exchange of activity, this appears as a form of the international specialisation of production.
International specialisation is not an isolated entity standing in opposition to the national productive forces and the national structure of production; rather it is the specialisation of individual branches of national production and the specialisation of individual enterprises. The specialisation of national economies, national industries, 41 production units and production amalgamations which supply a steady flow of goods to the external market forms a particular structure of the international division of labour whose character is determined by the dominant type of production relations.
Historically, the international division of labour dates back to the early stages of the world capitalist economy.
The emergence of the world capitalist economy and the development of its division of labour represented a single interdependent process. As capitalism developed and spread throughout the world more and more economic territories were sucked into the orbit of its domination. This facilitated the international division of labour and the emergence of a world market. The emergence of the world market prepared the ground for expanding production and accelerating the development of large-scale industry.
Thanks to the use of machines and steam, the division of labour assumed such vast proportions that the development of large-scale industry became solely dependent on the state of the world market, on international exchange and the division of labour.^^1^^
When capitalism determined the principal trends in social development arid in this sense was the dominant mode of production the social division of labour among different countries was capitalist in character. The international capitalist division of labour is a spontaneous and uncontrolled process. Just as the main stimulus for capitalist production is profit so the object of the international capitalist division of labour is also to make the highest possible profits.
The capitalist mode of production, with its inherent economic laws, determined the forms and methods of the given division of labour among countries in the capitalist economy. The pursuit of profit and competition determined the coercive methods of drawing economic areas into the world capitalist market. The capitalist class in the industrially advanced countries had little difficulty in ousting commodities from economically backward countries from the world market and in gaining control of the backward economies, turning them into a lucrative sphere for their capital.
_-_-_~^^1^^ See K. Marx, The Poverty of Philosophy, iVIoscow, 19(52, p. 134.
42The British Empire was a typical example of this. Britain sucked East India into the world economy. Marx wrote in this connection: ``By ruining handicraft production in other countries, machinery forcibly converts them into fields for the supply of its raw material. In this way East India was compelled to produce cotton, wool, hemp, jute, and indigo for Great Britain. ...A new and international division of labour, a division suited to the requirements of the chief centres of modern industry springs up, and converts one part of the globe into a chiefly agricultural field of production, for supplying the other part which remains a chiefly industrial field. This revolution hangs together with radical changes in agriculture which we need not here further inquire into."^^1^^
The specialisation of national production during the formation of a world capitalist economy developed in such a way that international activity exchanges occurred between the products of machine industry and agricultural products and raw materials. This pattern corresponded to the general division of laboiir according to the types of goods involved.
The international capitalist division of labour developed as a specialisation that was imposed by capitalism. This sprung from the need to develop national productive forces, a need dictated by the law of concentration of large-scale machine production. The international capitalist division of labour is associated directly with the internationalisation of production and exchange.
Marx and Engels wrote in the Manifesto of the Communist Pary: ``National differences and antagonisms between peoples are daily more and more vanishing, owing to the development of the bourgeoisie, to freedom of commerce, to the world market, to uniformity in the mode of production and in the conditions of life corresponding thereto."^^2^^
The internationalisation of production is essentially a process involving the socialisation of the national productive forces represented by individual industries, individual industrial units or groups of units supplying their products to the world market in their capacity of specialised producers.
_-_-_~^^1^^ K. Marx, Capital, Vol. I, p. 451.
~^^2^^ K. Marx and F. Engels, Selected Works, Vol. I, pp. 124--25.
43Capitalist relations of production impart specific features to production internationalisation. First, production internationalisation under capitalism develops spontaneously and is geared to the aim of extracting maximum profits. Secondly, as long as capitalism was able to develop extensively, let us say as long as the products of national capitalist production found free markets, the process of internationalisation proceeded smoothly, encountering few or no obstacles. Factors such as the division of markets between different groups of monopolies, the creation of international monopolies and the uneven development of capitalism in the imperialist era combine to give capitalist internationalisation of production a particular nature. In the era of imperialism, when the formation of the world capitalist economy has been completed, the giant monopolies unify production, thereby increasing its socialisation. The progress of the productive forces, the character of the instruments of labour employed and the vastly increased concentration of production combined to necessitate specialisation in the production of individual parts and components and individual items and thus serve to enhance the internationalisation of production.
The contemporary stage in the development of the capitalist internationalisation of production is reflected in the emergence of a wide variety of international monopoly capitalist alliances. These have divided markets and sources of raw materials among themselves. It is also reflected in the changing structure of world trade which is now being supplemented by the exchange of machinery and machinery for primary products and agricultural produce.
Table 2 Commodity Structure of Exports by Capitalist Countries (in per cent to the total annual output) 1 3 5 5 1968 111 Oil Fuel, food, raw materials 49.4 35.4 33.7 Finished industrial goods, inclusive machinery and equipment 49.2 63.2 64.5 18.4 27.3 28.3 44The share of finished industrial goods in world capitalist trade is growing while the share of raw materials, fuel and food is declining.
Two tendencies noted by Lenin can now be clearly seen: ``The first is the awakening of national movements, the struggle against all national oppression, and the creation of national states. The second is the development and growing frequency of international intercourse in every form, the break-down of national barriers, the creation of the international unity of capital, of economic life in general, of politics, science, etc."^^1^^
These two tendencies have found expression in the increased interpenetration of capital, in a greater degree of internationalisation of economic activity, in a measure of integration of the national economies and in the widening gulf between the major capitalist countries and their former colonies and semi-colonies. Before World War II, developing countries lagged behind the major capitalist countries in every respect. In particular their per capita national income was only 12.5 per cent of that of developed capitalist countries. By comparison, today their national income is about 8 per cent of the advanced capitalist countries and by the year 2000 it is expected to shrink to almost 5 per cent.
The development of the internationalisation of production naturally leads to a closer economic unification of individual branches of the economy of different countries. Based on capitalist property this unification takes the form of international unions of monopolies.
Table 3 The Gross National Product 1'er Capita in Developing and Industrialised Capitalist Countries (in US dollars, 1963 prices) 1950 1960 1. Industrialised countries 1,110 2,040 2. Developing countries :i. Ratio 2:1 11:5 1 :8.9 17cS 1 :11.4 _-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 20, p. 27.
45The integration of the capitalist countries' economies (or parts thereof) springing from the interiialionalisation of production and exchange is particularly intense wilhin the European Economic Community (EEC).
The record of capitalist integration so far has demonstrated that it is the interaction of economic factors arising from the present state of the scientific and technological revolution, from the increased state-monopoly character of capitalism, from political factors associated with the struggle between the two opposing world systems and the intensification of the class struggle within the capitalist countries.
Capitalist integration is, on the one hand, a qualitatively new stage in production internationalisation, while, on the other, a new form of the monopolistic concentration of production. Herein lies its contradictory nature and reactionary socio-economic essence.
The intensive development of capitalist integration is associated with qualitative changes in the available productive forces, the increasing state-monopoly character of capitalism and the intensification of the struggle between the two world systems.
Integration as a stage in the development of production internationalisation is characterised by a deepening and more diversified international division of labour. The dominant forms include intra-sectoral specialisation and specialisation based on the manufacture of a single item or component. Capitalist enterprises specialise in the manufacture of units and components of a specified type in response to the demand for these components in many different countries. Major engineering companies in different countries agree to divide the production programme into specialised components, with each company undertaking to manufacture a particular type of machinery, sets of machinery, components or items. Such agreements result in a more intensified international exchange of machinery and equipment.
In 1969 the capitalist countries as a whole exported a total of 66,000 million dollars' worth of machinery and equipment compared to 53,000 million dollars in 1968. The export of parts and components accounted for about one quarter of the total.
46 Export of Machinery and Equipment from the Developed Capitalist Countries (in million dollars) 1960 1965 1969 All capitalist countries (thousand million dollars) 23.8 49.3 66.0 USA 6,988 10,015 16,500 Franco 1,694 2,660 4,800 West Gorman y 4,996 8,269 13,200 Britain 4,266 5,561 7,100 Italy 1,011 2,230 4,550 Japan 936 2,642 6,200A salient feature of the intensification in the foreign trade turnover of machinery and equipment is the fact that 85 per cent of the total (99 per cent of exports and 76 per cent of imports) is accounted for by industrially advanced capitalist countries. Exports of machinery and equipment from major industrialised capitalist countries are growing rapidly compared to developing countries.
In 1960 21 per cent of the US imports and exports was equipment. In 1969 the percentage went up to 59 per cent. The import of machinery and equipment is on the up and up in other industrialised capitalist countries. Between 1960 and 1970 there was a growing tendency towards exchanging machinery for machinery in trade between the developed capitalist countries. According to data supplied by the Market Research Institute, exports of machinery and equipment from industrialised capitalist countries to developing countries advanced more slowly compared to exports of machinery and equipment in the industrialised capitalist countries although it grew by 14 per cent in 1969 compared to 1968. Therefore the developing countries' share of the capitalist exports of engineering products declined to 24 per cent in 1969 from 28 per cent in 1966 and 35 per cent in 1960.
47 Table 5 Imports of Machinery and Equipment by Major Capitalist Countries (in million dollars) 1960 1965 1969 USA 1,460 2,940 9,750 France 905 2,068 4,400 West Germany 974 2,302 3,850 Britain 962 1,697 3,300 Italy 614 1,092 2,400 Japan 405 711 1,500Economically backward capitalist countries continue to exchange agricultural produce and industrial raw materials for finished engineering products (see Table 6).
Table 6 19611 19C7 1UIJ9 Food, beverages and tobacco Non-food primary products, vegetable oils and fats 29.3 24.5 25.6 20.2 23.7 19.5 Mineral fuels 30.3 33.2 32.7 Chemical products, equipment and other finished goods 15.5 20.2 23.7 Total 100% lOQo/o 100%The bulk of the developing countries' exports are still agricultural produce and primary products. Their chief exports and principal foreign exchange earners include oil, cotton, rubber, tin, copper, rice, sugar, iron ore, grain, meat, cacao, coffee and some other crops.
The above analysis of the structure of commodity exchange between the industrialised capitalist countries and developing countries as well as within the industrialised area of 48 the world capitalist economy gives an idea of the prevailing forms of international capitalist specialisation in production.
The international division of labour, from the point of view of the entire world capitalist economy, involves, on the one hand, the industrially developed countries where a single type of specialisation prevails and, on the other, the economically backward countries which participate in the general type of specialisation. This pattern of specialisation underlies the economic inequality of capitalist countries in the world capitalist economy.
Generations of bourgeois economists from the classical period of bourgeois economics down to the present day have been pointing to discrepancies and variations in the natural conditions as the chief reason for the present pattern of specialisation within the world capitalist economy. The specialisation of an economic territory, according to bourgeois economists, is determined exclusively by the advantages arising from its natural conditions. Such an approach to world trade and the international capitalist division of labour is advocated in the works of Adam Smith and David Ricardo, the founders of political economy. This approach stemmed from their views of capitalism as an eternal, natural and immutable form of society in the best accord with human nature.
Modern bourgeois economists base themselves on the views of Smith and particularly those of Ricardo when they work out their concepts of world trade. The theory of comparative advantage or comparative production cost was evolved over 150 years ago by David Ricardo, who followed in the train of Adam Smith; this theory is now receiving a lot of attention.
The American professor Paul Samuelson is an ardent advocate of the theory of comparative costs. He rightly observes that the differences in the production conditions in different countries constitute the first link in the sequence of arguments on which the theory of comparative costs is based. Specifically, this means that the production capabilities of different countries vary considerably. Developing his thesis about the production potential of different countries Samuelson reduces it to the natural conditions of production. It is beyond doubt, in his view, that equatorial 49 regions are better adapted to growing bananas and northern regions to producing wheat. This assessment underlies the overall concept of international trade which proclaims as profitable any country's participation in world trade, irrespective of her economic development level providing that she exports products that are relatively efficiently produced.
Paul Samuelson, like Adam Smith and David Ricardo, does not bother to look into the consequences that the principle of comparative advantage has for countries with varying levels of economic development and different levels of labour productivity. The practice of world capitalist trade indicates, however, that even in the case of equivalent exchange a more productive labour is a more intensive labour and this is exchanged for a greater quantity of labour of a lower productivity. The difference is appropriated by the country with the higher labour productivity. This provides a material basis for consolidating the economic advantage mentioned above.
The theory of comparative cost represents an attempt to unite the labour theory of value with natural conditions as a factor of production (the ``factor of production" theory came on the scene at a far later period, true, but already Smith and Ricardo had spoken about some of its elements). Herein lies the essence of this theory's methodology which allows its use in defending and justifying the present polarisation of countries within the world capitalist economy.
Using the favourable pattern of the division of labour within the capitalist economy, a group of highly industrialised imperialist countries, such as the USA, Britain, the FRG, France, Italy and Japan, are able to produce 76.53 per cent of the capitalist world's total industrial output, while the economically backward countries, containing about 70 per cent of the capitalist world's total population, account for a mere 10 per cent of total industrial output and have been relegated to the status of suppliers of cheap agricultural commodities to the world market.
The pattern of specialisation within the capitalist economy is clearly reflected in the structure of capitalist countries' foreign trade. Thus, raw materials and food account for 80 per cent of the total exports from countries of Africa and
__PRINTERS_P_49_COMMENT__ 4---0516 50 the Middle East, and for 65 per cent from Asian countries. Using their dominant positions within the capitalist world economy, imperialist monopolies pump an estimated 20,000 million dollars a year out of the economically backward countries through non-equivalent exchange and the export of capital. This compares with 16,000 million dollars which is the total spent by the deueloping countries on expanding domestic production.The specialisation of countries within the world capitalist economy adversely affects their national per capita income which is a key index of the level of economic development. Thus, national per capita income between 1967 and 1968 was 1,560 dollars in Britain, 1,738 dollars in France and 3,303 dollars in the USA (at 1958 prices). By contrast Burma had 59 dollars, Nepal 66, Nigeria 68, India 77 and the Congo 87 dollars per capita.
The Soviet economist, L. Lukin has estimated that in 1850 the national per capita income in the European capitalist countries and in North America was approximately 80 per cent higher than in the colonies (145 and 80 dollars respectively in terms of 1960 prices). In the next 110 years the national income of the imperialist countries increased by 20 times while their population went up by 180 per cent. In the colonies and dependent countries in the corresponding period the national income rose by 160 per cent and the population by about the same percentage. The widening gap in the levels of economic development stems from the gulf in the rates of industrial productivity per capita of population between the developing countries and the highly industrialised ones. According to UN statistics, between 1950 and 1966 industrial production per capita went up in Western Europe by 76 per cent while in the developing countries by 41 per cent.
Power consumption per capita in the countries of Southern Asia, the Middle East and Africa averages about 50 kwh a year. By contrast the United States consumes 6,500 kwh per capita of population while the four most advanced countries of Western Europe consume 3,000 kwh. Similarly steel production per capita is a mere 10 kilos a year in the first group of countries while in the United States it is as high as 600 kilos and in Western Europe---450 kilos a year.
51These statistics provide a striking demonstration of the gigantic gap in the levels of economic development between the industrialised capitalist countries and the developing nations of the Third World. This gap makes nonsense of any talk of equitable fair competition or of mutual or equal benefit from trade.
The theory of comparative cost is based on the permanence and the immutability of the production structure and on the consolidation of economic specialisation. This represents its chief methodological flaw. If we were to accept the thesis about the immutability of comparative advantage (which forms the key plank of the theory) then we would have to agree that the present economic structure is here to stay, and a very rich country would continue to be rich, and a poor country would continue to be poor. No such approach can be acceptable in economic relations within the socialist community of nations because such an approach implies the permanence and immutability of the present structure and the present pattern of specialisation and it freezes the present level of economic development. The theory of comparative advantage has its inherent contradictions. Firstly, it is clear that it reduces variations and differing conditions of production to variations of nature. Secondly, in proclaiming equal benefit supposedly accruing to all participants in world trade it ignores disparities in the productivity levels within individual nations. And lastly, in attaching overriding importance to the comparison of production cost, this theory ignores the differences and disparities existing between its constituent parts and limits them to the rate of the capitalist costs of production, leaving out a comparison of the social costs of production.
Conclusions such as the alleged equal opportunity to obtain profit in countries with widely varying economic development levels and the possibility to benefit even in the absence of any advantages in production, all these serve to obscure the true pattern of relationships existing in the world capitalist market.
Taking advantage of the concept's contradictory nature, contemporary bourgeois economists have placed it in the service of the monopolies and are using it to justify the
__PRINTERS_P_51_COMMENT__ 4* 52 Table 7 Some of the Indices of Economic Development in Countries of the Non-Socialist World in 19701 Non-- socialist Electric-- Steel Automo-- world's share of world industrial ity generation, thousand mil. kwh production mil. tons bile production, mil. pieces Exports (thousand mil. $) output, % USA and Canada 46 1,950 130 10 58 Western Europe 34 1,200 160 11 135 Japan and Australia 10 400 100 6 24 Developing coun-- tries 10 270 20 1 58 The non-socialist world as a whole 100 3,900 420 28 2801 ``Mirovaya efconomika i mezhdunarodniye otnosheniya'', Economic survey, 1969, pp. 25,26; ``Mezhdunarodnaya zhizn'', 1970, No. 6, p. 44; I. A. Sokolov, The World. Economy and Revolutionary Process, Moscow, 1971, p. 101.
plunder of economically backward countries by the imperialist countries. At the same time the theory of comparative advantage is not all wrong. If one discards the thesis about the immutability of the comparative advantages and takes up the stand for changing conditions of production in response to the impact of socio-economic factors then it transpires that the principle of the comparison of the national cost of production for different kinds of goods and the determination, on this basis, of the most lucrative export industries has much to recommend itself.
On balance, the theory of comparative advantages and its contemporary modification is strongly apologetic. It is designed in essence to justify and safeguard the present pattern of the international capitalist division of labour which accurately reflects and maintains relations of hostility and rivalry stemming from the domination of some and the subjugation and submission of others. The international capitalist division of labour facilitates the reproduction 53 of capitalist property and strengthens the antagonistic relations between classes and between countries that have been sucked into its orbit.
The division of labour among the socialist countries is based on the development of their national economies. Its essence and main thrust are determined by the laws governing the evolution of world socialism. The objective necessity for an ever fuller satisfaction of the socialist society's requirements, the efficient utilisation of the fruits of scientific and technological progress, the maintenance of sensible economic proportions on a planned basis as well as giving assistance to countries who are relatively backward industrially, all these and other factors underlie the main trends, pace and diversification of the development of the socialist division of labour. Unlike the capitalist division of labour which, to use Marx's phrase, is ``a system of production which has grown up spontaneously and continues to grow behind the backs of the producers'',^^1^^ the international socialist division of labour develops according to plan based on an intimate knowledge and exploitation of the objective economic laws.
The division of labour existing among the socialist countries is linked with the internationalisation of production and exchange. The further development of socialist internationalisation of production is the direct extension and development of the tendency which, as Lenin put it, ``has already revealed itself quite clearly under capitalism and is bound to be further developed and consummated under socialism".^^2^^
When characterised from the standpoint of the productive forces the internationalisation of production and its present integration phase possess features which are in evidence both under socialism and under capitalism. At the same time it has essential distinctions which arise from the nature of the relations of production among socialist countries. The internationalisation of production acquires a definite social trend which depends on the degree of the maturity of similar relations of production that are dominant in the socialist _-_-_
~^^1^^ K. Marx, Capital, Vol. I, p. 106.
~^^2^^ V. I. Lenin, Collected Works, Vol. 31, p. 147.
54 countries and on the nature of international economic relations.The emergence of the world socialist system created a new environment for the development of production internationalisation. Socialist relations of production have made possible the establishment of new types of relations among countries, relations based on full equality and mutually advantageous co-operation. The common goals of production in the socialist countries make it possible to develop and utilise in a planned way the advantages offered by the internationalisation of production.
The socialist type of production internationalisation prepares the ground for the socialist countries' close alliance and allows them to pool their efforts to build socialism and communism.
The socialist internationalisation of production is the material basis for the development of the international socialist division of labour. This, in turn, provides the essential foundation for combining national interests and for improving the efficiency of social production. It actively moulds a rational economic structure in each socialist country. There is a dialectical connection between the internationalisation of production and the international division of labour. Overriding importance in this context is attached to the process of production internationalisation. The need for a division of labour among national economies, which is the essence of international production specialisation, arises from the widening scope of production and the diversifying pattern of production specialisation as the national productive forces develop. On the other hand, the specialisation of national productive forces, which is the intrinsic content of an international division of labour, facilitates a growing concentration of production because now products are manufactured both for the home market and the external market. Production specialisation presupposes co-operation and close links between national economies of the entire socialist community.
As a form of the social division of labour, the international socialist division of labour is designed to overcome the lopsided economic specialisation inherited from the international capitalist division of labour. The progress of the 55 division of labour among socialist countries creates favourable conditions for building up the material and technical basis of socialism and for the development of the socialist relations of production.
In the course of building up the material and technical foundation of socialism some countries, which were formerly dependent economically on foreign capital, sought to diversify their industries and to achieve a measure of economic self-reliance to develop industries sufficiently powerful to meet their needs and to make possible the application of advanced and highly efficient types of plant and equipment.
The trend towards autarchy was inherited by the socialist countries from the preceding stage of their economic development, from the role these countries played within the international capitalist division of labour. The instability of world political relations and the striving of the big national bourgeoisie to dominate their home markets combined to accelerate the trend towards the diversification of production.
The international socialist division of labour is primarily inter-state specialisation and co-operation of production. This division of labour affects the specialisation of industries and sub-industries within national economies and in the final analysis is based on individual enterprises whose rational employment of their production facilities is geared to the world socialist market. The international division of labour, relying as it does on the specialisation of production units and industries, gradually forms a socialist national economic complex with each socialist country being allotted its own position within the world socialist system.
This complex, as an element of the international division of labour, cannot develop as an inward-looking closed economic entity because of the combined impact of a variety of factors, i.e., the disparities in natural resources, manpower availability, production opportunities, etc. This is true particularly in connection with the ever-growing international significance of the productive forces being used. The socialist national economic complex is incompatible with lopsided international production specialisation. The 56 structure of this complex is a well-developed industry, including engineering industries as the bedrock of technological progress and the foundation for the equality of socialist countries and their independence from the western industrialised capitalist countries.
Socialist industrialisation helped the productive forces of the CMEA countries to develop at a high rate and thereby contributed directly to their efforts to overcome the economic backwardness some of them had inherited from their capitalist past. Industrialisation has transformed the economies of the socialist countries and enabled them to gain secure positions in world economy.
The CMEA countries (minus the USSR) have developed an impressive industrial potential which is equivalent to 40 per cent of the Soviet Union's.
Before World War II, the economies of'what are now the CMEA countries were dominated by agricultural production for consumer purposes. Their agriculture-oriented economic structure was reflected in the make-up of their foreign trade turnover. The exports of these countries, with the sole exception of Czechoslovakia, were dominated by raw materials and foodstuffs. This economic structure was in line with the interests of the monopolies in the imperialist countries. Despite their geographical proximity to the main world markets and their generally satisfactory communication networks the European countries who are now members of CMEA had few mutual economic ties; instead they were geared to the markets of Britain, France, Italy, Germany and the USA. Thus, 86 per cent of the total foreign trade turnover of Bulgaria, Hungary, Poland, Rumania and Czechoslovakia went to the industrialised capitalist countries with only 12 to 13 per cent being accounted for by mutual trade. A mere 1 per cent of their trade went to the USSR.
These figures, which relate to the situation in 1938, help one to appreciate more fully the economic evolution of these countries over the past quarter of a century. At p-esent, their economic situation has been strikingly transformed thanks to the changes that socialism brought with it.' All these countries now have developed industries and manufacture industrial plant and equipment. Indeed 57 manufacturing and engineering are the key branches of their economies.
The analysis of the branch structure of an economy presented in the present work acquires special importance primarily because this structure reflects the level of development of the social division of labour and the structure of a socialist country's foreign trade turnover. The structure of the economy influences the achievement of mutual benefit in the economic co-operation among socialist countries. It is also very important as a prerequisite and condition for mutual economic adaptation and for integrating reproduction processes in individual socialist countries. Marx and Engels wrote: ``How far the productive forces of a nation are developed is shown most manifestly by the degree to which the division of labour has been carried. Each new productive force, insofar as it is not merely a quantitative extention of productive forces already known (for instance the bringing into cultivation of fresh land), causes a further development of the division of labour."^^1^^
The development of the social division of labour is reflected above all in the trend towards the industrialisation of production. As early as the late 19th century Lenin noted that the social division of labour ``consists of various forms of processing raw materials (and various operations in this processing)".^^2^^
This process has acquired a massive scale at present. Modern agriculture is progressively losing jobs such as fruit, vegetable, meat and milk processing, etc.
Today efficient agricultural production is unthinkable without the intensive use of industrial products, i.e., farm machinery and implements. Equally it is unthinkable without the application of chemical products that improve the very object of agriculture, the soil. The increasing application of industrial methods to agricultural production gives many farming operations a distinct industrial character. In other words, there is a progressive contraction of agricultural labour and a compensating expansion of industrial labour.
_-_-_~^^1^^ K. Marx and F. Engels, The German Ideology, p. 32.
~^^2^^ V. I. Lenin, Collected Works, Vol. 3, p. 67.
58The steady increase in the number of agricultural machines and the expansion in the labour force occupied in the industrial servicing of agriculture in one form or another results in a shrinking agricultural labour force. Marx wrote that, ``a greater part of the non-agricultural population assist in agriculture, supplying constant capital---which grows with the advance in cultivation---such as mineral fertilisers, seeds from other countries, machinery of every sort".^^1^^
Today this process has acquired a vast scope. In Czechoslovakia, to take one example, between 1950 and 1970 the number of persons employed in the country's entire economy grew by 1,229,000 (from 5,777,000 to 7,006,000). The country's industrial labour force grew from 1,674,000 to 2,609,000, an increase of 935,000. The industrial workforce was expanded both by an influx of fresh workers into the country's economy and by a re-distribution of the workforce among the various branches of the economy, including a curtailment in the agricultural work-force. In Bulgaria the intensification of production and the growth in labour productivity in agriculture have meant a reduction in the agricultural work-force. The agricultural workers thus released went into industry. Exports of agricultural produce yielded additional foreign exchange and were used to promote industrial development. The volume of industrial production in 1966 increased by 23.6 times compared to 1939, while the country's gross agricultural output in that year was more than double the average annual agricultural output in the years before World War II. Between 1966 and 1970 Bulgaria's industrial output expanded by 68 per cent.
Between 1956 and 1970 Bulgaria's agricultural production grew more slowly than the country's industrial output.
The faster progress of industrial production changed the branch structure of the country's national income increasing industry's contribution. In 1971 industry's contribution to the Bulgarian national income was 51 per cent; this was 41.7 per cent for Hungary, 61.4 per cent for the GDR, _-_-_
~^^1^^ K. Marx, Theories of Surplus-Value, Moscow, 1968, p. 159.
59 21.2 per cent for Mongolia, 58.5 per cent for Poland, 57.4 per cent for Rumania, 52.4 per cent for the USSR and 62.9 per cent for Czechoslovakia.^^1^^The change in the contribution of industrial and agricultural production to the national income indicates a progressive trend in the evolution of the economic structure of socialist countries.
Nonetheless agriculture continues to hold an important place in the economics of the CMEA countries even though by and large its contribution to their national incomes has declined.
Table 8 Average Annual Growth Rates Country Industry Agriculture 1956-- 1960 1961-- 1965 1966-- 1970 1956-- 1960 1961-- 1965 1966-- 1970 Bulgaria 16.5 11.3 10.9 5.7 2.9 3.7 Hungary 7.8 7.2 6.2 0.5 1.3 1.5 GDR 8.9 5.4 6.5 2.6 1.3 --- Poland 9.9 8.5 8.4 3.7 2.8 --- Rumania 11.3 13.8 11.8 1.1 2.5 2.0 USSR 10.3 8.6 8.4 6.0 2.1 2.5 Czechoslovakia 10.6 5.3 6.7 2.1 0.4 4.9 All countries 4.8 2.0In the socialist countries all social production is divided into two parts---the production of producer goods and the production of consumer goods. The separation of industrial output from the overall social product and an analysis of the correlations between industrial producer goods (Group A) and consumer goods (Group B) make it possible to analyse the basic proportions in industry, the leading branch of the national economy (see Table 9).
The correlation between groups A and B gives an idea _-_-_
~^^1^^ See CMEA Statistical yearbook 1972, Moscow, 1973, pp. 48, 327 (in Russian).
60 The Shares of Industrial Groups ``A''~and ``B'' of Total Industrial Production (%) Group A Group B Country Pre-war leveli 1966 1970 Pre-war level 1966 1970 Bulgaria 22.6 51.0 54.7 77.4 49.0 45.3 Hungary 44.8 70.0 63.9 55.2 30.0 36.1 GDR --- 71.0 70.2 --- 29.0 29.8 Poland 47.1 60.0 66.3 52.9 40.0 33.7 Rumania 45.5 60.0 70.4 54.5 40.0 29.6 Czechoslovakia 49.3 61.0 61.6 50.7 39.0 38.4 USSR 61.2 75.0 73.4 38.8 25.0 26.61 The pre-war year for Poland and Czechoslovakia is 1937, for Hungary and Rumania-1938, and for Bulgaria---1939.
of the structural shifts within the industry of each socialist country. Group A is made up of several major industries encompassing hundreds of manufacturing and mining units. An expansion in Group A's output can be achieved through both the mining industries and through the manufacturing industries, including engineering. That is why when noting the shift in favour of Group A we should look to see which industries have accelerated their development whereby the preponderance of Group A over Group B has been achieved. In all CMEA countries the share of electrical power generation and the raw materials industry has grown significantly within Group A. Also within Group A the manufacturing industries, above all engineering, are of decisive importance in boosting labour productivity. Engineering in all the CMEA countries has expanded in a spectacular way (see Table 10). In some CMEA countries engineering industries have been built up almost from scratch. In 1945 Rumania, for instance, was able to meet only 1 per cent of her needs for engineering products from domestic production.
As Table 10 indicates there has been a noticeable coming together of the CMEA countries' economic structures.
61 Table 10 The Share of Engineering and Metal Working of Industrial Output (%) Country 1950 1955 1966 Bulgaria 9.3 11.7 18.2 Hungary 21.6 --- 30.5 GDR --- 30.0 39.0 Poland 8.0 17.1 26.1 Rumania 13.3 18.8 29.2 Czechoslovakia 20.8 28.8 32.2 This is based on the structural changes in industry and the increased share of engineering in industrial production.All of the socialist countries have become manufacturers of machinery and plant and are participating in the division of labour between engineering enterprises. The existence of developed engineering in most CMEA countries is the real basis for the levelling-up of economic development and this offers opportunities for a more radical drawing together of the national economic structures through international intra-sectoral specialisation.
The further progress of engineering, consistent with steadily rising efficiency, poses a series of problems. Being the manufacturer of the instruments of labour, engineering industries serve all the branches of the economy. Therefore, to promote technological progress, and to deepen and diversify the social division of labour primarily affects engineering industries and their products. The deepening of the social division of labour in engineering means a rapid expansion of the product range. Industrially developed countries often have a very wide product range in their engineering industries running into 130,000 different items. The further deepening and diversification of the division of labour within engineering is part of the general trend in the development of the national economy, i.e., the trend towards converting each industry into the manufacturer not only of individual products but also even individual components of a product.
62The engineering industries in the CMEA countries today display a clear tendency towards standardisation. The pattern of standardisation in the engineering industry so far has kept the costs of production at a high level and impeded technological progress. Each socialist country individually is unable to organise a large-scale production of every product it needs; therefore, greater concentration of production inevitably presupposes a more meaningful and precise definition of the intra-sectoral specialisation within the CMEA countries.
The socialist countries who are members of CMEA produce almost the entire range of engineering products known in the world today, they also produce one-third of the world output of machine tools and equipment. Some countries produce more engineering goods than they need and so they export the surplus. Thus, the GDR exports 70 per cent of her ships and vessels, 65 per cent of her machine tools, 60 per cent of optical goods and products of precision engineering. Hungary exports 67 per cent of her total output of machine tools, 80 per cent of her instruments, 35--40 per cent of her communications equipment, 65 per cent of her rolling stock and 87 per cent of her diesel engines.
In Czechoslovakia the share of machinery and industrial equipment in the overall volume of exports has increased from 20 per cent in 1948 to 48.5 per cent in 1965 and reached 49.6 per cent in 1970. Bulgaria provides a striking example of rapid progress in this area. There the share of engineering products in the overall volume of exports has been growing at a brisk rate. In 1960 the proportion was 13.6 per cent and rose to 30.5 per cent in 1971.
In Poland machinery and equipment formed 34.4 per cent of the country's total exports in 1965. In 1971 the proportion was 39.8 per cent. In Hungary machinery and equipment accounted for 31.9 per cent of the total exports in 1971. In the GDR the proportion was 51.8 per cent. Exports of machinery and equipment go primarily to other CMEA countries.
The rising trend in exports of engineering products testifies to a highly developed internationalisation of production and to closer interrelationships between national production and the external market. At the same time the level of 63 development achieved by the engineering industry in the CMEA countries makes the development of intra-sectoral specialisation a top priority task at present.
Under the current scientific and technological revolution the product range of engineering industries is constantly expanding. This calls for extending the division of labour further so as to concentrate economic and labour resources on the production of the optimal range of products. Only through intra-sectoral specialisation, involving the whole of engineering, is it now possible to develop production units of the optimal size and to introduce efficiently the latest developments of science and engineering, thereby boosting the efficiency of overall social production.
International intra-sectoral specialisation of production is not only a means of raising the technical standard and rationalising industry, it is also a means for improving the structure of a country's social production. It also allows one to use the available scientific, research and development personnel and the material resources more effectively. This type of specialisation implies concentration on the production of the same type of products in one or a few countries to meet the requirements of the interested countries. It also implies an improvement in the engineering and technical level and the organisation of production and in addition promotes the establishment of stable economic links and production co-operation among countries. However, the level of specialisation achieved to date in the CMEA countries does not yet correspond to the available economic potential.
Apart from engineering the development of the fuel and raw material industries are of great importance in promoting scientific and technological progress and in creating an optimal economic structure. Balanced economic development calls for co-ordination and interaction between the power and fuel industries and manufacturing.
On the whole, the world socialist system possesses sufficient quantities of all types of energy resources and impressive raw material resources. The socialist countries have over 50 per cent of the known deposits of iron ore and bauxites, 85 per cent of potassium salts, about 90 per cent of manganese ore, over 80 per cent of oil, substantial 64 stocks of nonferrous metals, gas and different types of chemical raw materials.
But the socialist countries vary widely in self-sufficiency in energy resources. For instance, most of the coal deposits are situated in Poland, Czechoslovakia and the GDR. The resources of coking coal and common coal are concentrated only in Poland and Czechoslovakia while other socialist countries have modest deposits of lignites. The distribution of oil resources is even more uneven, with 80 per cent of the total known deposits of oil being in Rumania (excepting the Soviet Union).
Since the end of the last war, when the East-European countries went socialist, prospecting for energy resources has been stepped up and as a result the output of the available types of fuel has gone up substantially.
In 1970 the CMEA countries produced over 613 million tons of coal, 365 million tons of oil and 202 million tons of iron ore (see Table 11).
Table 11 Country Coal output mln. tons Oil output mln. tons Electricity generation thousand mln. kwh 1950 1968 1970 1950 1968 1970 1950 1968 1970 Bulgaria Hungary GDR 6.0 13.3 139.9 30.9 27.2 243.0 31.2 27.8 256.5 0.5 0.5 1.8 0.3 1.9 0.8 3.0 19.5 15.4 13.2 63.0 19.5 14.5 67.7 Poland 82.8 155.5 165.9 0.16 0.5 0.4 9.4 55.5 64.5 Rumania 3.1 14.8 22.8 5.0 13.3 13.4 2.1 27.8 35.0 USSR 261.0 594.0 624.0 0.37 307.0 353.0 91.2 638.0 740.4 Czechoslovakia 46.0 100.4 105.9 0.06 0.2 0.2 9.3 41.4 45.2Because of the rapid increase in the consumption of fuel and other energy resources and in view of the uneven distribution of these resources among the socialist countries there is an urgent need to improve the efficiency of the utilisation and structure of the CMEA countries' fuel and energy supplies.
65The Comprehensive Programme of integration calls for a unified single concept of the structure of energy and fuel supplies lo be worked out for the CMEA countries by 1980 and for increasing efforts to be made to use the different, types of energy-yielding resources in such a way as to boost the efficiency of the CMEA countries' energy industries.
As the productive forces continue to expand, the utilisation of fuel and raw material resources acquires an increasingly greater international significance. An analysis of the foreign external economic links of the CMEA countries shows that in some countries the raw material and fuel requirements are almost completely satisfied from mutual deliveries. Thanks to mutual deliveries, the CMEA countries cover 98 per cent of their exports of coal, up to 96 per cent of their oil and petroleum products requirements, some 80 per cent of their iron ore needs and the bulk of their needs for nonferrous metals, sawn limber and cotton. The mutual deliveries of fuel and raw material constitute a crucial component of the reproduction cycle in each of the socialist countries.
The Soviet Union is the biggest exporter of fuels and raw materials to the European socialist countries. The Soviet Union exports to the CMEA countries over 65 per cent of their coal imports; this is almost a hundred per cent in the case of oil, 75 per cent in petroleum products, 50 per cent in coke, 85 per cent in iron ore, almost 100 per cent in pig iron, 83 per cent in ferro-alloys, 61 per cent in rolled steel and 60 per cent in cotton (see Table 12).
The Soviet Union continues to play the primary role in the export of raw materials and fuels to the CMEA market.
In 1970 alone the Soviet Union supplied 19 million tons of coal, 33 million tons of oil, 16 million tons of iron ore (in terms of iron), 4.8 million tons of pig iron and 5.3 million tons of rolled stock to the European socialist countries.
Co-operation among the socialist countries in the exploration and introduction of more efficient methods of utilising fuels and energy in different branches of national economy, as well as in improving the efficiency of secondary energy resources is a factor of great importance in the socialist countries' efforts to improve the efficiency of their power industries.
66 Table 12 Imports of Raw Materials and fuels l>y C.MKA Countries in 1970 Country uilii. ( . i :'. s foul niln. tons I run ore in In. Inns Cotton thousand tons Bulgaria 5.70 4.89 1 . 13 00.60 Hungary GDR 4.35 10.31 1.98 7.92 3.11 1 .49 97.70 KHi.OO I'olaud 7.01 1.12 11.84 15(1.1)11 Czechoslovakia 9.80 4.52 12.72 113.00 USSR --- --- --- 258.00 Rumania 2.29 0.72 6.26 83.20 Total 39.40 21.15 36.55 809.10So far wo have been dealing with production's primary forces of energy in the form of electric and thermal power. It is now important to find out about the socialist countries' self-sufficiency in electric power.
Electricity output in the CMEA countries as a whole approached 987,000 million kwh in 1970. By comparison, the total in 1950 was only 135,000 million kwh. However, at the present time consumption of electric power is racing ahead of production. This can be seen from the changing correlation between the growth rates of industrial production and those of power industry.
In some socialist countries the output of electric power lags behind the growth of industrial output. In order to ensure the priority development of the growth rates in the power industries compared to other branches it is essential to make the utilisation of primary resources of energy more efficient and change the structure of the energy and fuel supplies as a whole.
The Comprehensive Programme of integration calls for the identification of the basic trends in the development of electric power generation up to the year 1990. It also calls for the identification of long-term trends in the development 67 of unified power systems in Hie CMEA countries and requires proposals for the construction, by interested socialist countries, of new power transmission lines lo link national power grids to be worked out.
The Comprehensive Programme also stresses the need for interested CMEA countries to jointly create scientific, technical, production and organisational facilities for accelerating the development and efficient introduction of nuclear power engineering on a commercial basis. The goal of meeting more fully the growing requirements for fuels, raw materials and energy is only to be achieved on the basis of pooling the efforts of interested countries in the form of bilateral and multilateral co-operation.
The fuel and energy problem facing the CMEA countries cannot be solved through the physical expansion of mutual trade in raw material resources because this method alone is fraught with the danger of a gap developing between the requirements of importing countries and the potential of exporting countries. Hence the need for a new approach to tackling the problem of raw materials and fuels. Above all it is essential to work out a co-ordinated structural policy for manufacturing industries, to make more efficient the utilisation of domestic and imported raw materials and fuels by relying on the latest achievements of science and engineering, to elaborate a unified concept of the structure of fuel and energy supplies and to make possible the joint utilisation of capital investments made by individual countries in the development of the raw material and fuel industries.
The development of different forms of mutually advantageous co-operation is planned in the long term. The Comprehensive Programme of integration, apart from envisaging the continuation of mutual deliveries of fuels and raw materials on the basis of the established forms of foreign trade, also calls for developing new forms of organisation and economic co-operation. Thus it is planned jointly to construct and operate fuel producing enterprises as well as those producing electric power and raw materials. Efforts to solve the energy and raw materials problems will be helped by the wide use of credits under specific agreements as well as credits advanced by the International Investment Bank for 68 Table /.'I Commodity Coin posit ion of Exports (``„ of total) Country Fuels, raw and other materials Machinery and equipment 1950 1960 1965 1970 1950 I960 1965 1971) Bulgaria Hungary GDR 8.4 8.2 9.3 13.4 29.8 7.9 14.5 25.2 8.2 14.9 20.9 0 23.0 13.6 38.0 48.2 24.8 32.7 48.9 29.1 32.4 50.5 Poland --- 34.2 25.1 24.3 7.7 28.0 34.4 38.5 Rumania 33.8 37.0 25.3 22.9 4.2 16.6 18.6 22.6 USSR 15.7 37.2 39.6 37.7 11.8 20.5 20.0 21.5 Czechoslovakia 22.6 19.7 20.3 18.9 26.4 45.1 48.5 50.2 Country Industrial consumer Roods Food products and raw materials for the food industry 1950 I960 1965 1970 1950 I960 1965 1970 Bulgaria 1.5 17.9 13.6 14.9 87.9 56.4 49.9 43.4 Hungary 20.3 17.8 21.3 21.1 45.9 27.4 26.9 26.7 GDR .--- 14.8 18.7 20.0 --- 6.0 6.1 7.5 Poland 12.2 10.1 12.3 15.6 --- 23.1 22.7 16.0 Rumania 1.3 5.8 11.0 18.1 54.6 35.9 35.3 26.8 USSR 4.9 2.9 2.4 2.7 39.5 27.3 22.1 19.5 Czechoslovakia 25.3 20.4 16.5 16.5 19.7 10.4 9.2 7.4 the construction of enterprises and units to complement the development of energy and fuel industries.
Apart from commercial, production and credit co-operation it is intended to use contract type building organisations, manpower resources and the necessary material and financial resources of the importing countries to set up facilities to produce and transport those types of products they are interested in.
The creation of the industrial complex and the changed structure of the economy has influenced the structure of foreign trade, its geography and economic role.
69In most socialist countries who are members of CMEA both imports and exports tend to grow faster than the index of national income. Thus, between 1960 and 1967 exports in Bulgaria advanced by an average of 17.1 per cent and imports 12.5 per cent while national income grew 6.8 per cent. In Hungary the figures were 12.2 per cent, 11.8 per cent and 5.7 per cent, respectively. In the GDR---6 per cent, 5.2 per cent and 4.3 per cent, respectively; in Poland--- 11.7 per cent, 8.7 and 5.7 per cent; in Rumania---13.2 per cent, 14.4 per cent and 9.0 per cent. In the USSR---7.0 per cent, 8.0 per cent and 6.6 per cent; in Czechoslovakia--- 7.7 per cent, 8.9 per cent and 2.8 per cent.
This data also indicates that between 1960 and 1970 imports tended to grow at the fastest rate and had a beneficial effect on the growth rates of foreign trade turnover among the CMEA countries.
As Table 14 shows, between 1966 and 1968 the growth of foreign trade turnover slowed down. Between 1961 and 1965 for each per cent of the increase in national income foreign trade turnover increased 1.4 per cent, i.e., the elasticity coefficient was 1.4. Between 1966 and 1968, by comparison, for each per cent of increase in national income foreign trade turnover increased 0.95 per cent, i.e., an elasticity coefficient of 0.95.
The Comprehensive Programme of economic integration calls for a further expansion of mutual foreign trade consistent with efficiency. The further development of international production specialisation coupled with further progress in international production co-operation will ensure a constantly expanding range of goods exchange.
Between 1971 and 1975 the CMEA countries are expected to increase substantially mutual deliveries of goods and services. In this period the commodity turnover of the Soviet Union's trade with the GDR is expected to reach some 22.000 million roubles, with Czechoslovakia---13,500 million, with Poland---13,000 million, with Bulgaria--- 12,000 million, with Hungary---9,000 million and with Rumania---5,000 million roubles. The commodity turnover between the Soviet Union and other CMEA countries between 1971 and 1975 is expected to total over 76,000 million roubles.
70 Table 14 Commodity Composition of Imports (% of total) Country Fuels, raw and other materials Machinery and equipment 1950 I960 1965 | 1970 1950 I960 1965 1970 Bulgaria 33.0 24.7 26.7 29.1 37.2 43.2 43.6 40.6 Hungary 26.3 27.9 27.4 23.2 22.0 28.3 28.7 31.0 GDR --- 42.7 44.2 32.3 --- 12.6 17.9 34.1 Poland --- 25.1 24.5 26.4 32.4 27.1 32.8 36.4 Rumania 24.8 35.4 32.4 31.1 37.1 32.5 38.9 39.6 USSR 26.9 21.3 12.5 12.7 21.5 29.8 33.4 35.1 Czechoslovakia 26.1 27.7 27.5 23.7 11.2 21.7 29.9 33.4 Food products and raw Industrial consumer goods materials for the food Country industry 1950 I960 1965 1970 1950 I960 1965 1970 Bulgaria 4.7 7.6 5.0 5.5 13.9 16.7 17.3 16.1 Hungary 1.5 5.1 5.3 7.6 41.4 29.2 27.8 24.4 GDR --- 5.3 4.1 4.5 __ 39.1 33.0 28.1 Poland 3.3 5.4 6.7 6.1 --- 33.9 27.4 21.6 Rumania 10.2 5.2 6.7 5.5 22.3 18.1 14.3 15.6 USSR 7.4 17.2 14.2 18.3 34.4 23.7 30.2 25.0 Chechoslovakia 2.6 3.3 5.3 8.5 51.1 37.1 28.4 24.0 Table IS Average Annual Growth Rates in Principal Areas of the Economy of the CMEA Countries 1951-- 1955 19--57-- 1060 1901-- 1965 196«-- 1968 Gross Industrial Output 13.6 10.1 8.3 8.(i Gross Agricultural Output 3.8 4.6 2.7 4.4 National Income 11.0 8.4 6.1 7.8 Foreign Trade Turnover 13.6 11.3 8.4 7.4 71Reciprocal deliveries of products from industries which shape the course of scientific and technological progress are increasing particularly fast.
The changing economic situation in the socialist countries and the progress of their industries combine to promote the internationalisation of production. This internationalisation is being accelerated by the current scientific and technological revolution which has pushed to the fore a number of basic problems (provision of adequate power supplies and synthetic raw materials to modern industries, etc.) which no individual country is in a position to tackle single-handed. Practically speaking, there is every opportunity now for a gradxial bringing together of the socialist countries' economies in preparation for a transition from the economically inefficient goal of attaining self-sufficiency in many types of products to a more rational pattern of specialisatijn within the framework of the international socialist division of labour.
At present it is too early to tackle the task of uniting the socialist countries' economies into a single economic complex resting on optimal production proportions. The main thrust of this process is towards the development of socialist economic integration and promotion of international production specialisation. The development of the division of labour and its diversification helps to strengthen inter-relationships between the socialist countries' economies, facilitating their gradual unification to form a single economic complex. This is a long process of gradually overcoming the trend towards economic autarchy and of creating favourable conditions for complete economic integration.
As this process develops on a planned basis it becomes possible to identify a period of the formation of modern and efficient national economic structures, followed by a period of the formation of international economic complexes and finally a period of the complete merger of the national economies into a single world socialist economy.
The CMEA countries' Comprehensive Programme of economic integration is based on the principles of co-- operation, mutual assistance, voluntary association arid full equality. This is fully in accord with Lenin's vision 72 of the future trends in the formation of what he called a unified world co-operative of working people.
The years of socialist development have seen major changes in production, science and engineering in all the CMEA countries. Today these countries are an important factor in the world economy. In 1971 the socialist countries accounted for 39 per cent of world industrial production. The CMEA countries accounted for about 33 per cent of the increase in national income and for about 11 per cent of the increase in industrial production.^^1^^
The CMEA countries lead the world in the oulpul of steel, machine tools, tractors, railway rolling stock and some other items. Industries that shaped the cause of technological progress recorded particularly impressive growth rates. The output of plastics, synthetic fibres and resins lias doubled and the production of high-grade steels has considerably expanded.
These impressive achievements have not only come about through the efforts of the individual socialist countries. They are the result of their close economic co-operation. The CMEA countries are maintaining an intensive trade among themselves. Up to (>2 per cent of the aggregate commodity turnover of the CMEA countries is accounted for by mutual trade.
In 1971 an estimated 65.4 per cent of the mutual commodity turnover for all the socialist countries was accounted for by their trade with the Soviet Union. The Soviet Union is the biggest trade partner of the CMEA countries. Of these the GDR is the Soviet Union's biggest trade partner taking 14.(i per cent of the USSR's total foreign trade with the rest of the world and nearly 23 per cent of the USSR's trade with the socialist countries. The volume of trade between the USSR and the GDR is double that between Britain and the FRG. Czechoslovakia accounts for 10.2 per cent of the Soviet Union's foreign trade turnover which is 50 per cent more than the trade with Britain and France and over 150 per cent more than the trade between Britain and Italy. Poland accounts for 10.7 per cent of the USSR's foreign _-_-_
~^^1^^ The World of Socialism'. Facts and Figures, Moscow, 1972, p. 12 (in Russian).
73 trade, Bulgaria, for 8.7 per cent, Hungary---7 per cent and Rumania---4 per cent.^^1^^Soviet supplies meet about one-third of the CMEA countries' import requirements for machinery and equipment. In return, the Soviet Union is the principal importer of engineering products from the European socialist countries.
The present level of economic development has been attained largely through extensive growth. This has aggravated the problem of resource sufficiency and has created scarcities in manpower and economic resources. These problems can only be solved through considerable efforts in scientific, technical, production and social fields. In this situation further economic growth in the socialist countries can be maintained largely through intensifying all the factors of social production on the basis of the efficient exploitation of scientific and technological progress backed up by active economic co-operation among the socialist countries as a potent factor in boosting the efficiency of social production.
All this adds to the importance of a system approach to the solution of major national economic problems, one that takes account of the close interaction between research and development activities, and production and marketing. Such an approach presupposes a careful account to be taken of the potentialities and resources not only of the individual socialist countries but also of the socialist community as a whole. Scientific forecasting and methodological projections which are designed to help in identifying future structural trends in all areas of scientific, technological and economic activity as well as to determine the most efficient ways of fitting an individual country's national economy into the overall international socialist division of labour are particularly urgent.
Scientific and technological co-operation is the key factor in bringing together the CMEA countries' economies. The need to expand and improve scientific and technological co-operation is necessitated by the common goal of boosting the efficiency of social production and also by the limited availability of manpower and economic resources. Today _-_-_
~^^1^^ Soviet Trade in 1971, Statistical Review, Moscow, 1072, p. 10 (in Russian).
74 science and engineering have become capital-intensive areas.Economists in the GDR have estimated that there are already branches of their country's economy where the share of expenditure on pure research and development research is as high as one-third of the total. Often the cost of research in development projects exceeds the value of its impact on a particular section of industry. Today it is science and engineering that determine the main thrust of the structural changes and shifts occurring within each country's economy and in her foreign trade links with the rest of the community. Scientific and technological co-operation is largely determining the efficiency of external economic relations. Economists from CMEA countries have estimated that design and technological solutions resulting from joint R & D ventures form up to 20 per cent of the total innovations and improvements introduced into production.
Over the past two years Bulgaria has spent a total of 175,000 leva in purchasing technical documentation from the USSR. The economic benefit that only a part of it subsequently yielded is estimated at 4 million leva.
Further progress in science and engineering calls for the intensification and diversification of international specialisation both in basic research and in R & D. A few hundred Soviet and 840 R & D organisations and research institutes in the other socialist countries jointly work on some 2,000 scientific and technical problems.^^1^^ Agreement has been reached to do joint work on the problem of the synthesis of new types of plastics and synthetic resins, and on the development of new semi-conductors and super-pure metals. Scientists in the socialist countries have also joined forces to develop new systems of programme control for use in conjunction with machine tools, and to develop automatic equipment for use in scientific research. To this end the CMEA countries are setting up organisations, institutes and co-ordinating centres to expand and improve co-- operation in science and engineering. One of these is the International Co-ordinating Council of Management. Another is the Institute of Economic Problems of the World Socialist _-_-_
~^^1^^ The World of Socialism: Facts and figures, p. 128.
75 System. Work is well advanced on developing a unified system of scientific and technical information. The CMEA countries as a whole have developed one of the world's largest pools of scientific potential. Collective exploitation of this will enable each socialist country to acquire sufficient elbow room in its economic development and free it from dependence irrespective of the extent of its economic resources. The solution of this problem calls for technical reequipment, a concentration of efforts in the strategic sectors of scientific and technological progress, and the correct choice of the key component of that progress on the basis of forecasting.The expansion of scientific and technological co-operation will allow the CMEA countries to pool their efforts right across the board in all areas ranging from joint efforts in basic research, R & D activities, through joint exploitation of industrial projects to the marketing of finished products. This will facilitate the rational distribution of economic resources and will make for a lasting and dependable economic gain. The system approach to the promotion of scientific and technological co-operation as an activity that affects all stages of social reproduction will help in moulding a highly efficient economic complex in each of the CMEA countries.
The structure of a national economy must be such as to ensure the maximum economic compatibility. Iji other words it should enable the economy to fit well into the CMEA as a whole.
A socialist country's economic complex is a component of the international socialist division of labour and it cannot develop as a closed inward-looking entity because of a series of factors, among which are included the international nature of socialism as a mode of production, the growing importance of the international application of productive forces, and disparities in the availability of manpower and natural economic resources.
The socialist national economic complex is incompatible with a lopsided specialisation. This complex comprises a developed industry built around engineering as the prime mover of technological progress and the material basis for the socialist countries' economic equality and their collective 76 economic independence from the capitalist world. All the CMEA countries are making efforts to re-group available resources with a view to changing production proportions in such a way as to boost the industries that are in the van of technological and economic progress.
Now that economic integration in the CMEA countries is gradually becoming a reality bourgeois propagandists in the West are making much noise about what they call ``Soviet hegemonism''. At the same time they are ``recommending'' their own prescriptions for the market regulation of economic co-operation, in an effort to spoke the wheels of the CMEA countries' growing economic potential and to besmirch what is in fact the key method of stepping up economic, scientific and technological progress.
The implementation of the Comprehensive Programme of integration contributes to the greater cohesion and unity of the socialist countries. As Lenin put it, ``socialism, by organising production without class oppression, by ensuring the well-being of all members of the state" promotes and greatly accelerates ``the drawing together and fusion of the nations".^^1^^
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 324.
[77] __NUMERIC_LVL1__ CHAPTER III __ALPHA_LVL1__ THE MECHANISM OF ECONOMIC CO-OPERATIONToday higher efficiency in socialist production is impossible without effective economic co-operation with other countries. A better and fuller use of the economic laws of socialism is essential both in internal economic activity and iii economic co-operation among the socialist countries as a whole.
Today the development of economic integration calls for an adequate mechanism of integration to be set up that will regulate the socialist countries' external economic relations and the adoption of specific forms of economic co-operation that will benefit most the participating countries and effectively exploit the advantages of socialism. Managing the integration process as a co-ordinated planning activity by the social forces represented by the Communist and Workers' Parties and governments of the CMEA countries is very important in highly developed economies. The Marxist proposition that ``mere knowledge, even if it went much further and deeper than that of bourgeois economic science, is not enough to bring social forces under the domination of society"^^1^^ has preserved its value to this day.
The fundamental principles of managing the CMEA countries' economic integration are set out in the Comprehensive Programme.
``Socialist economic integration is completely voluntary and does not involve the creation of supra-national bodies; _-_-_
~^^1^^ F. Engels, Anti-Diihring, Moscow, 1969, p. 376.
78 it does mil affect questions of internal planning and of Ilic financial and self-financing activity ol organisations."^^1^^The voluntary adoption by each socialist country of certain undertakings to implement specific measures in the scientific, technological, production and economic fields that arise from joint projects, concerns, tentatively speaking, the preparatory stage at which the overall task facing the country and the assessment of her national resources, expected costs and benefits are evaluated. The stage at which the country implements its economic undertaking must be adequately backed up by well co-ordinated intracconomic and specific extra-economic measures.
The management of the integration process involves a minimum of three tasks. Firstly, it is necessary to identify the main thrust of the integration process and to determine its main stream. The Comprehensive Programme of economic integration outlines these principal avenues thus: the creation of a highly efficient national economic structure, the expansion of international specialisation, especially in engineering, and the development of a unified concept of the structure of the participating countries' fuel arid energy supplies with a view to improving the efficiency of their power industries. The principal component of the integration process is scientific and technological co-- operation designed to ensure further growth in the present scientific and technological revolution on the basis of pooling the scientific potentials of the participating countries and joint projects in scientific research and R & D activities. Scientific and technological co-operation is expected to improve significantly industries' technical facilities and to expedite the introduction of advanced technology, thereby allowing the highest scientific and technical level for the available productive forces to bo achieved and economic efficiency in social production to be stepped up as far as possible.
Management of the integration process means solving the problems that arise when a socialist country adopts specific undertakings. In this context it is essential to ensure the country's material interests and to take into account the _-_-_
~^^1^^ Comprehensive Programme..., p. 15.
79 interests of all the countries arid to dovetail them. Finally, there is the task of effecting the undertaking and of fitting the results of the functioning of the national economic complex into the larger context of international activity exchanges. These tasks are interrelated and involve a variety of partial solutions. Hence, the need for a comprehensive approach to the solution of each. For instance, when tackling the task of international specialisation in engineering it is essential to take into account scientific and technological co-operation, the economic conditions of production and the marketing of the specialised products. Management of the integration process means dovetailing reproduction of national products with economic co-operation and with ensuring its effectiveness. All this calls for a system of economic measures and economic, organisational and legal forms which would match the system of economic relations within the individual socialist countries and within mutual extra-economic relations.Integration of national reproduction processes through economic co-operation is ensured by the intra-economic and extra-economic mechanism of co-operation.
As mentioned elsewhere, economic relations among the socialist countries are by their nature essentially secondary, being derivatives of the production relations within individual national economies. By relying on these structural inter-relationships it is possible to look upon the economic mechanism of co-operation as a derivative and secondary entity compared to the intra-economic mechanism, where a number of the intra-economic mechanism's parameters play their role, the determining role, within the extraeconomic mechanism.
The relative independence of the socialist countries' mutual economic relations and its active feedback to the primary relations of production confer on the economic mechanism of co-operation a measure of independence. The economic mechanism of co-operation must ensure that a socialist country's industries and subindustries co-operate in the international socialist division of labour, in other words, to promote integration. The solution of this practical task in each individual case depends on dovetailing the elements of the intra-economic mechanism of countries
80 who are participating in a particular project will) tho corresponding elements of the mechanism of economic, co-- operation.From the theoretical aspect, the problem of the economic mechanism involves a series of questions, notably the question of this mechanism's place within socialist relations of production and the question of its role in socialist reproduction. Marx wrote that ``the economic relations of a given society present themselves in the first place as interests".^^1^^
Public ownership of the means of production in socialist countries enables socialist society to bring the movement of the available productive forces under its control. Achieving a common socialist public interest, which is an integral value and not a simple sum total of the contributions of different forms of production, is impossible without management through central planning.
Speaking at the 24th Congress of the CPSU Alexei Kosygin said: ``The Central Committee of the Party and the Soviet Government hold directive planning to be the main and determining factor and commodity-money relations can and must be applied to strengthen planned guidance of the national economy and stimulate the initiative of enterprises and amalgamations operating on a profit-and-loss basis. In our country, commodity-money relations have a new, socialist content. It stands to reason that we reject all the erroneous conceptions that substitute market regulation for the guiding role of state centralised planning."^^2^^
Reducing economic incentives to value alone and placing them in opposition to planning measures as essentially noneconomic is wrong if only because planning is essentially an economic activity and nothing is changed by the fact that the planning measures are based on directives issued from the centre. The present system of national economic planning practised in the socialist countries is based on the combination of management through central planning and the economic planning independence of individual economic units. The need for centralised planning stems from the _-_-_
~^^1^^ K. Marx and F. Engels, Selected Works, in three volumes, Vol. II, Moscow, 1969, p. 363.
~^^2^^ 24th Congress of the CPSU, p. 181.
81 public ownership of the means of production in the pursuit of a common public economic interest. Management through centralised planning is economically most effective because it relies on the centralised net income of the state and is designed to identify the main thrusts (proportions) in the development of the economic process as a whole. Management through centralised planning is exercised by the state through its authorised economic planning agencies and is mandatory in character, i.e., it is subject to mandatory fulfilment.Economic measures adopted in a central plan have both an immediately material form (for instance, the determination of the basic product range, distribution of manpower in accordance with qualifications among the various fields of activity, etc.) and indirect, value form (price systems, including competitive price levels for different types of goods).
The economic mechanism is a totality of material inducements and incentives and specific economic and organisational forms which set in motion and maintain a particular economic system. The nature of an economic mechanism depends on the way in which a given system of production relations functions. The public ownership of the means of production presupposes that the economy functions through a plan. Therefore, the economic mechanism in a socialist country has a planned character.
Material inducement as part of the economic mechanism comes in the form of direct and indirect measures by which a socialist society can, through appropriate institutions, influence the economic process. This process represents the interaction of economic factors.
The interaction of economic factors is achieved through a series of planning measures which directly affect the factors of economic necessity or the creation of a specific situation for their behaviour. An economic incentive ( economic measure) directed at an economic factor thereby modifying its behaviour (for instance, investments in a specific project, the wage fund of a given enterprise, etc.) represents a direct economic lever or measure.
When an economic incentive alters the economic situation and thereby alters the behaviour of a factor, it represents an __PRINTERS_P_81_COMMENT__ 6---0516 82 indirect measure of influence on an economic process. For instance, the planned determination of raw material consumption quotas or that of primary products or prices alters the economic situation, thereby affecting such factors as the social labour productivity. At the same time direct measures affecting the economic factor and indirect measures affecting the economic situation have a planned character. The reduction of planning to direct measures alone tends to limit the possibilities of planning as a co-ordinated economic activity, restricting its room for manoeuvre and reducing its impact on the economic process.
In the economic inter-relationships among the socialist countries the economic process is a more complex entity. Some of the objective factors develop in different directions, thereby giving rise to varying socio-economic consequences. Some factors are associated with the varying degrees of maturity in primary socialist relations of production and may prevent the coincidence of the interests of individual countries. Other factors have directly to do with disparities in the level of economic development achieved by different socialist countries. In the present system of social relations this takes the form of variations in the national effectiveness of activity exchanges.
The direction of these two groups of factors may on the surface appear as a lack of interest on the part of individual countries in increasing the output of capital-intensive industries or as lack of interest in a particular form of cooperation. The divergence in the directions along which some of the factors develop takes the form, on the one hand, of an objective process of production internationalisation resulting in a growing proportion of the national income realised in foreign trade and the consequent growing importance of foreign trade and that of external economic relations among the socialist countries for the reproduction of social product, and, on the other, of an insufficient share of specialised products in the foreign trade turnover, a shortage of products from capital-intensive industries and insufficiently high growth rates in the volume of foreign mutual trade in contrast to the high growth rates in the foreign trade of the individual countries. Apparently the way out of this situation is to make better use of the economic 83 incentives inherent in socialism and a greater co-ordination of Ihe socialist countries' planning activities. The main effort of organising co-operation and the key component of its economic mechanism is joint planning activity.
The goal of economic integration poses a series of problems for the socialist countries. Their solution calls for a new approach to joint planning and for a significant improvement of all of its forms.
The basis for expanding planned co-operation among the CMEA countries is furnished by mutual consultations on the main problems of economic policy. These mutual consultations are concerned with ``the basic trends and instruments of economic, scientific and technical policy decisive to the shaping of mutual co-operation in the key branches of production and other spheres of the national economy".^^1^^
To be sure, each socialist state has sovereignty in elaborating its economic policy. Economic policy in the socialist countries is mapped out by the Communist and Workers' parties at congresses and plenary sessions and finds expression among other things in the directives for the development of the national economy. At the same time, with economic integration, an effective solution of national economic problems is unthinkable without the pooling of efforts. In this context consultations among the socialist countries are essential for the co-ordination of the strategic economic development objectives. Such consultations, apart from their economic importance, are of great political significance since they make for a more co-ordinated solution to problems which are vital for the rapid development of the world socialist system.
The subject and substance of mutual consultations among the CMEA countries are dependent on the maturity of production relations among them and on the specific problems tackled by the socialist countries at a given time. At the present stage of their economic development and co-operation the results of mutual consultations take the form of recommendations made on the basis of the interchange of information between the interested countries. The exchange of information relating to economic measures within national _-_-_
~^^1^^ Comprehensive Programme..., p. 22.
84 economies and aimed at solving problems relating to economic integration is essential for the effective development of the existing forms of joint planning. Today there is every prerequisite for maintaining a regular exchange of economic information. But consultations among the CMEA countries go beyond the exchange of information. By now there are real opportunities for a co-ordinated solution of a series of common problems. One of the most important and urgent problems in the short term is to use the latest achievements of scientific and technological progress more efficiently in the interests of speedier socialist construction. The Comprehensive Programme underlines that socialist integration ``creates favourable conditions for the more effective utilisation of the resources of those countries and for the extensive development of the scientific and technological revolution".^^1^^The acceleration of technological progress is a cardinal problem facing all the socialist countries. Therefore the CMEA countries are tackling it on a collective and wellco-ordinated basis. Mutual consultations are designed to facilitate better co-ordination of the principal efforts in scientific and technological research and in introducing the fruits of scientific and technological progress into the economic cycle.
Another major aspect of mutual consultations among the CMEA countries concerns the co-ordinated employment of economic instruments of national economic policy. This largely determines the extent of a country's involvement in the international division of labour. To successfully tackle problems posed by socialist integration it is essential to ensure that the principal trends of internal economic policy are able to tackle the international problems arising from the goal of socialist integration. Such a co-- ordination prepares the material ground for advancing integration. Admittedly where there is still a measure of isolation, in terms of national and state structure, the ownership of the means of production and variations in economic development and production structures, the existing national economic mechanisms vary widely. Hence, the need _-_-_
~^^1^^ Comprehensive Programme..., p. 15.
85 for mutual consultations on problems of mutual accommodation and standardisation in the individual components of the economic mechanisms which have an immediate bearing on planning procedures and the management of external economic activities.The Comprehensive Programme lays emphasis on those aspects of mutual consultations among the CMEA countries which bear on the improvement of economic co-operation among them and in particular on ``questions concerned with the improvement of the economic, scientific and technological co-operation between the CMEA member-countries; questions concerned with tying up the co-ordination of plans with the fuller utilisation of commodity-money relations; basic trends of foreign economic policy, including considerations on the creation of favourable conditions for the development of specialisation and co-operation in production, science and technology".^^1^^
Mutual consultations among the CMEA countries on problems of economic policy which have a bearing on the development of external economic links are of special importance when long-term contracts are drafted, when agreements covering economic, scientific and technical co-operation are worked out, and when major joint economic measures are implemented. The results of such consultations have a beneficial effect on the long-term plans for the development of co-operation among the socialist nations. They play a major part in moulding the concept of joint measures which are later implemented. Economic forecasting normally sets the stage in socialist planning. Economic forecasts prepare the ground for long-term and five-year economic development plans as well as for long-range plans. On the basis of economic forecasts it is possible to identify the main economic trends and in this sense the forecasts form the basis of subsequent planning The Comprehensive Programme, itself a long-term plan for the development of the world socialist economy in the next 15--20 years, calls for the extension of forecasts covering economic development co-operation among the CMEA countries. Economic forecasting makes it possible to extend the horizons of economic _-_-_
~^^1^^ Comprehensive Programme..., p. 23.
86 foresight, makes for continuity and identifies the order of priorities in the build-up of the individual stages of into gration.Co-operation in forecasting occurs in a variety of ways, the chief of which is the interchange of experience in the development of forecasts covering national economic, scientific and technological progress. In recent years the CMEA countries have been paying increasing attention to economic forecasting that would provide an informed basis for current planning procedures. Work is well under way to improve methods of economic forecasting and thus make forecasts more precise and valid. Experience shows that individual countries vary in the extent of their preparedness for the solution of methodological and practical questions of forecasting. The CMEA countries' scientists and economic executives have widely differing points of view on the nature and the inter-relations between forecasts and dayto-day planning. The search in the CMEA countries for better forecasting procedures is complemented by efforts to introduce system analysis, mathematical methods and electronic computers on a wide scale.
In conditions of developing socialist integration, national forecasts cannot be worked out in isolation from the objectives of co-operation. Hence the importance of exchanging experience of forecasting theory and methodology and the significance of dovetailing the similar problems facing different socialist countries, especially those problems that affect the progress of external economic relations. The results of forecasting on an individual socialist country's economy provide the point of departure for the elaboration of different alternative forecasts of the development of integration. The elaboration of joint forecasts is an essential instrument of integration. In the words of the Comprehensive Programme, ``joint forecasting shall be carried on by countries on co-ordinated subjects and shall take into account the common methodological principles and organisational forms, as well as the results of national forecasts".^^1^^
It is intended that all interested countries within CMEA should work out estimates and expected trends in the _-_-_
~^^1^^ Comprehensive Programme..., p. 26.
87 devolopment of science, technology and certain branches of production which are of great importance for developing and deepening integration. The Comprehensive Programme calls for forecasting co-operation covering the development of the fuel, energy and raw material industries, including geological surveys and prospection and geological estimates of available natural resources. There will be joint forecasting in petrochemistry, in all-round production automation as well as in public education and the training of skilled industrial personnel.The co-ordination of national economic development plans is one form of co-operation in economic planning. The further growth of the CMEA countries' economies and the deepening and diversification of international production specialisation poses the problem of the transition to a new stage in this form of co-operation.
The objective basis for the co-ordination of national economic development plans is the development of socialist intcrnationalisation of production and the further progress of socialism as a planned national economic system. The productive forces of any socialist country function in a planned way. In so far as in any given socialist country the socialisation of the means of production assumes an international significance, then the objective prerequisites are furnished for developing economic activity in a planned way within the whole of the socialist community.
The socialist countries' economic integration presupposes the development of a master plan covering progress in the most important areas of international production specialisation. The scientific, technical and economic tasks to be tackled within the framework of international specialisation cannot be accomplished in iive years. The Comprehensive Programme of integration proceeds from the assumption that planning for a long term helps identify the basic development trends in the key branches of the national economy and sectors of production for the next 10 to 20 years, reflects the basic objectives of the socialist countries' economic policy for a long period in socio-economic, scientific and technological progress and provides the guidelines for the participation of each socialist country in the overall division of labour within CMEA.
88Of particular importance for co-ordinating national economic plans, in the context of multilateral international production specialisation, is the elaboration of the principles of multi-variant solutions to specific economic problems. The multi-variant character of draft plans is of increasing importance in national economic planning. This reflects the specific features of the economic process as a multifactoral process containing imponderables. The economic process, viewed from the standpoint of relations among the socialist countries, comprises a series of new specific factors and complicating circumstances, all of which increase the element of uncertainty. The elaboration of several alternative draft planning measures in international specialisation ensures the flexibility of the resultant measures and encourages greater interest from the participating countries and thereby is more in keeping with the principle of voluntary association and participation of socialist countries in economic co-operation. The effectiveness of planning cooperation within socialist integration depends on the allround solution of the problems being co-ordinated and on broad areas of science, technology, capital investments, specialisation and co-ordination being embraced, as well as on the co-ordination on this basis of reciprocal deliveries and their basic terms.^^1^^
Co-ordination of long-term development plans is the new stage reached in the development of closer co-ordination of national economic development plans. This goal was envisaged in 1960 at the 13th Session of CMEA which formulated the principles of the organisational mechanism for co-- ordinating national economic development plans until 1980. Under this programme the countries concerned were supposed to submit to the appropriate CMEA agencies their preliminary ideas on the basic direction of national economic development and external economic ties, on a larger scale than formerly. In recent years this programme has been intensively applied. After studying the experience accumulated over the past few years, the socialist countries are devoting most of their attention to elaborating parallel directions for their structural economic policies with a view to tackling _-_-_
~^^1^^ See Comprehensive Programme..., p. 24.
89 fundamental production, scientific and technological problems. The transition to the co-ordination of long-term economic development plans was preceded by measures to strengthen and improve planning and economic forecasting in the socialist countries. The Comprehensive Programme of integration defines the role of co-ordinating long-term development plans within economic planning co-operation among the CMEA countries. In the words of the Programme, ``the problems for which long-term plans are co-ordinated generally emerge during mutual consultations on the basic problems of economic, scientific and technological policy and co-operation in forecasting, and also during the coordination of five-year plans".^^1^^ It should be noted that the long-term plans for co-operation outline a unified concept of jointly solving particular problems. Later, on the basis of long-term forecasts plans are made to utilise the CMEA countries' resources in the long term. An example of the sort of work being conducted in this field is the elaboration of a long-term plan for the development of the CMEA countries' fuel and raw material resources. Under this plan a basic concept of the structure of the participating countries' fuel and energy resources is worked out, with special reference to those factors whose utilisation will be crucial in increasing the production of particular types of energy, fuel and raw materials. Thus, the CMEA countries have agreed that constructing nuclear power stations is an important long-term direction in the development of electric power facilities. Nuclear power stations are now being built on a co-ordinated basis in different socialist countries. These stations will help overcome shortages of electric power that some socialist countries experience. Between 1974 and 1975 Bulgaria plans to commission several nuclear power stations with a combined capacity of 880,000 kilowatts. Bulgaria will have the benefit of extensive Soviet technical help in this. Towards the end of the next five-year period, covering 1976 to 1980, Hungary will complete its first nuclear power station of 2,000,000-kilowatt capacity. By 1980 two nuclear power stations with a combined capacity of 1.7 million kilowatts will have been built in _-_-_~^^1^^ Comprehensive Programme..., p. 28.
90 Czechoslovakia. It is expected that by 1990 the combined capacity of Czechoslovakia's nuclear power stations will reach 10-- 12 million kilowatts.^^1^^ To successfully solve a wide range of problems concerned with achieving a sufficiency of fuel and raw material reserves in the CMEA countries, long-term plans call for unifying investments to be made in the construction of major centres of a high efficiency and performance. On a Soviet initiative, it is planned to build a mammoth iron-and-steel complex near the city of Kursk. This project, to be executed by the joint efforts of the CMEA countries, will be drawing on the rich iron ore deposits of the Kursk magnetic anomaly. When completed the complex will have a capacity of 10--12 million tons of rolled steel and several million tons of other items.The co-ordination of long-term development plans is not identical with the co-ordination of the CMEA countries' current national economic development plans, either in terms of its main thrust or in terms of its instruments and forms. Whereas current plans are geared to ensuring the progress of those industries which are selected for expansion in the short term, long-term planning is aimed at changing the structure of production and is called upon to help find the optimum variants of co-operation. Whereas in the course of long-term co-ordination only the fundamental concept of the socialist countries' economic, scientific and technological progress is shaped, in the case of current co-- ordination this concept is implemented on a phased basis. A concept, in this context, must reflect alternative ways of implementing a particular programme. A programme may define approximately the planned volume of production of a particular product, estimates of costs, the shares of participating countries in joint financing of a project and the expected technical and economic benefits. Such a problem will be elaborated through a comprehensive complex approach. The co-ordination of long-term development plans prepares the ground for the national economies to participate more actively in the joint reproduction process.
_-_-_~^^1^^ See A. I. Zubkov, Industrial Integration of the CMEA Countries, Moscow, 1973, p. 17 (in Russian).
91This work is directed towards working out measures aimed at improving co-operation in production, science and technology, and in those areas where the material foundations are laid for deepening and diversifying economic relations among the CMEA countries.
At present and in the future the co-ordination of the national economic development plans within CMEA will be an important part of planning co-operation, because it is a practical tool for implementing measures aimed at the economic integration of the CMEA countries. The Comprehensive Programme states in this connection: ``The CMEA member-countries consider that their co-ordination of fiveyear plans is ... one of the main means for the formation of stable and mutually advantageous economic, scientific and technological ties between them."^^1^^
The implementation of long-term plans covering joint activity allows the period for agreement on closer co-- ordination of co-operation to be extended and for planning targets to be made more realistic and substantial. However, plan co-ordination for a five-year period ensures the implementation of planned measures and is more closely linked with national planning than other forms of joint planning. The Comprehensive Programme stresses the improvement of forms and methods of co-ordinating five-year economic development plans. Bilateral consultations among the CMEA economic planning agencies are the starting point in all measures aimed at co-ordinating economic development. These consultations include the exchange of information on immediate national economic development prospects. This information is based on the relevant calculations and technical and economic studies of different versions of the construction of new projects and the manufacturing processes. These data are supplied by the respective national planning agencies. Great importance in this context is attached to the comparability of the national planning indices and to the uniformity of the methodological principles underlying these indices, because the participating countries supply data in terms of their national currencies (data on the volume of production, national income, the volume and structure _-_-_
~^^1^^ Comprehensive Programme..., p. 29.
92 of capital investments, and foreign trade turnover). In addition to these indices, which characterise the overall scale and specific directions in co-operation, a system of analytical qualitative indices is also crucial. These include national norms on the input-output characteristics of capital investments, the prime costs of production, its capital and labour intensity, the expected technical and economic benefits, etc. Analytical indices are becoming increasingly important for joint planning in the socialist countries since they make it possible to plan the economic efficiency of cooperation.Considerable experience has been gained in joint planning work aimed at co-ordinating the CMEA countries' five-year national economic development plans. This experience prepares the ground for improving and developing the different forms of co-ordination. Whereas formerly plan co-ordination was largely a matter of dovetailing, on a reciprocal basis, deliveries of specified foreign trade goods (assortment, product range and value contingents), in recent years the centre of gravity in planning has shifted to the production sphere. Today the development of international specialisation and co-operation in production, science and technology is the principal object of plan coordination. Already between 1966 and 1970 work on as many as 140 major problems and 500 themes was co-- ordinated. The solution of all these problems was instrumental in accelerating scientific and technological progress in the socialist countries. In future, plan co-ordination will involve the closer dovetailing of the main directions of co-operation in production, science and technology. Between 1971 and 1975 it is planned to resolve on a joint basis 43 problems bearing on fuel and raw material in the CMEA countries and on the further development of modern industries. This will prepare the ground for major structural changes in the external economic relations within CMEA. Thus, the volume of mutual deliveries of engineering products between the USSR and other members of CMEA is expected to go up by 80 per cent by the end of 1975. Exports of Soviet-buij'l. machinery and equipment will double to reach 33 per cent of the Soviet Union's total exports to the CMEA countries. Shipments of machinery from CMEA countries to the USSR 93 are expected to go up by 50 per cenl, to reach a total value of 18,000 million rubles by 1975. The agreement, on economic, scientific and technological co-operation between the USSR and Hungary for the period 1971--1975 calls for the joint solution of a wide range of production problems, specifically specialisation and co-operation in the aluminium industry and in the manufacture of transport equipment and machinery and petrochemicals. The construction of two major chemical complexes (one in the USSR, the other in Hungary) is planned based on unified production technology. When completed, the two complexes will produce annually 130,000 tons of ethylene and 80,000 tons of propylene. The agreements on co-operation between CMEA countries for 1971--1975 are marked by the mutual desire to diversify and at the same time intensify mutual relations, something that facilitates the further improvement of their external economic relations. For instance, the volume of Hungary's external economic relations with other CMEA countries is expected to expand by 60 per cent. Specifically, machinery and equipment deliveries are expected to double. The GDR's trade with the rest of CMEA is expected to increase by 70 per cent. Special attention is being paid to expanding trade in engineering products, chemicals and a wide range of instruments. Whereas the volume of trade between the USSR and the GDR is to go up by 56 per cent to reach a total of 22,000 million rubles' worth of goods, the deliveries of machinery and equipment are expected to double and reach a total value of 10,000 million rubles. The co-ordination of national economic development plans within CMEA, until recently a periodic measure, is now becoming a more comprehensive and continuous form of planning activity. This activity is maintained at all the stages of planning, long-term, medium-term and short-term and at all the levels, from the central planning agencies through the industrial ministries down to production amalgamations.
Acting on the decisions of the 26th CMEA Session (1972), the socialist countries' economic planning agencies began to work out programmes for co-ordinating their national economic development plans covering 1976--1980. Parallel with this work these agencies recommend that work be 94 started on dovetailing efforts aimed al solving individual economic problems which were likely to be on the agenda in the period up to 1990. The timely co-ordination of plans is expected to be a necessary basis for agreements covering economic co-operation and trade among the CMEA countries in the next five-year period. By combining concrete current tasks with long-term goals it is possible to identify the principal directions that the integration process will follow and to find the most effective ways of tackling the problems arising out of integration.
The Comprehensive Programme of socialist integration sets forth one other type of joint planning activity which has gained some currency in the last few years. In the words of the Programme, ``interested CMEA member-countries shall jointly plan individual branches of industry and lines of production. This new form of co-operation in the planning field is intended to bend their efforts on the most rapid achievement of advanced scientific and technological results, on raising labour productivity, ensuring competitiveness on the world market".^^1^^ This form of international planning calls for co-ordinating co-operation at a far higher level within the framework of a carefully designed and mutually agreed plan. Even during work on the Comprehensive Programme of socialist economic integration, the special 23rd CMEA Session recognised the expediency of preparing recommendations on joint plans covering individual branches of production with a view to including them in the plans covering the current five-year period (1971--1975). Branches of production such as container transportation ( containerisation), the manufacture of some types of ferrous rolled stock, machine tools and electronic computers were singled out as areas of primary concern. In 1972 some CMEA countries concluded agreements on co-operation in joint planning covering the production of certain types of metal-cutting lathes (semi-automatic and fully automated digital-- programmed machine tools). The agreements called for joint R & D for these types of machine tools as well as specialised production and co-operation and the mutual deliveries of parts and components for them during the period 1972--1975. _-_-_
^^1^^ Comprehensive Programme..., p. 30.
95 Eliminating Ihe duplicate production of machine tools is expected to cut the total labour expenditures involved by 80 per cent. In 1975 the jointly planned production of digital-programmed machine tools within CMEA is expected to increase by 410 per cent compared to the 1971 level.^^1^^ This new joint planning activity is experimental, but already it has made good progress and is acquitting itself well in the socialist countries' economic co-operation. At the same time there are the theoretical and practical tasks of methodologically dovetailing the national planning systems. Current thinking in this context is towards devising a plan that will closely co-ordinate the solutions of R & D, scientific research and production problems and the marketing of the resultant selected products. The point here is that such problems cannot be effectively or fully solved within the framework of national economic development plan co-ordination. Joint planning is aimed at pooling the interested countries' efforts and resources and at orienting them towards the early achievement of good results in scientific and technological progress. It is aimed at facilitating developments in the key directions of the basic branches of production and at intensifying all the existing forms of economic inter-relationships within CMEA. This shows itself best in the establishment of varied stable links and ties in material production.In sum, the essence of joint planning can be described as follows: joint activity by interested countries aimed at the simultaneous and comprehensive integrated solution of problems facing the development of particular industries and branches of production. This encompasses design and research activities, technical and economic verification, production specialisation and co-operation among the participating countries and the terms of marketing and sales. Joint planning in the final analysis is expected to result in the formation of large-scale production and research complexes meeting the most exacting requirements of the contemporary scientific and technological revolution and which are capable of satisfying the needs of the CMEA countries in the goods they need. In the long term, joint planning will _-_-_
~^^1^^ Ekonomicheskaya gazeta, 1971, No. 47.
96 be extended to tlie main part of the extended reproduction process, thereby 1'acilitating the formation of a single integration al plan.For the moment, in our judgement, joint planning is still an element of the broader system of plan co-ordination. Therefore planning as it is now practised is called upon to ensure the co-ordination of efforts aimed at tackling problems facing the CMEA countries. It should be remembered that the most salient feature of joint planning is the fact that the socialist countries are operating as independent national units and are sovereign owners of their capital equipment and the products they manufacture. This objective circumstance presupposes a combination of national and international interests. Naturally, joint planning will be covering those branches of production and those problems in which the participating socialist countries have a common long-term interest and which cannot be tackled efficiently by traditional methods of economic development plan co-ordination. In implementing this plan the countries concerned decide on the extent of their participation and specify those measures they are prepared to carry out. This is done with a view to ensuring mutual benefit.
In all forms of planning co-operation the central planning agencies of the CMEA countries play the dominant and leading part. This is only to be expected and is explained by the position and role of management through central planning within national economic planning and by the responsibility the central planning agencies have for organising the entire effort of co-ordinating plans on a multilateral and bilateral basis. The implementation of the Comprehensive Programme of economic integration calls for a broad-based involvement in planning co-operation by ministries, government departments, production associations and major industrial units.
The co-ordination of national economic development plans, as international specialisation in production increases,is bound to have a more complex structure during the transition from co-ordination in overall planning targets, for output volume and product range for exchange between countries through planned co-ordination of the development of individual branches and sections of production, to joint planning 97 for the development of individual industries and sectors of production.
The co-ordination of national economic development plans, covering the progress of individual industries and branches of production, presupposes the inclusion of elements of the national economic planning systems of the countries concerned and this is essentially an organic interaction between external and internal elements of the economic mechanisms. These interrelations presuppose the merging of both planning activities in the socialist countries and their national economic management systems. This merging is not expected to follow a single standardised pattern to which planning and economic management will have to conform.
National economic management must respond to the evolution of production relations in the socialist countries and within the material and technological basis of socialism. The improvement of economic management is a constant process. The common laws governing socialist development in different countries mean that there are common features in their economic management systems. The implementation of economic reform in the European socialist countries reflects a number of common socio-economic changes that occurred in each of them. Notably, the fact that most of them have embarked upon the period of developed socialism, the emergence of a number of new branches of production complicating production and technical links within their economies, the accelerating effect of scientific and technological progress on the development of the productive forces and a reduction in the service life of plant and equipment, etc. These common economic development trends are behind a number of common features that characterise the improvement in economic management in the European socialist countries. These mark a new and in-depth approach to the problem of centralised planning and the economic function of the individual enterprise, to the use of commodity-money relations and to the role of material inducement and incentives under socialism.
The subordination of socialist production to a common social economic interest calls for centralised planning covering reproduction throughout the economy. The regulation of production on a social scale is possible when based __PRINTERS_P_97_COMMENT__ 7---0516 98 on the proper use of economic laws. The dominant form of centralised management is the state's national economic development plan. As interrelations within a country's economy acquire a more complex pattern, centralised management, which relies on progressive trends of economic development, plays an increasingly important part in the direction of overall economic development.
Specific features in the socialist countries' development give rise to the unique character of their economic reforms, which does nothing to erode the unity of its principal trends.
The economic reforms implemented in the USSR and other CMEA countries are designed to improve the scientific level of planning, and to ensure a fuller use of the economic levers in order to raise the efficiency of social production.
Raising the efficiency of social production in the socialist countries is unthinkable without taking into account such an increasingly important factor as economic co-operation, particularly foreign trade. A fuller use of such economic levers as cost accounting, price, profit, credit and material incentives in national economic planning increases their importance in external economic relations.
The economic reforms now being implemented in the socialist countries to improve planning and economic management, cover a wide range of measures in foreign trade. All of them are aimed at improving the efficiency of foreign trade and at dovetailing the economic activity of industrial and foreign trade organisations. The foreign trade mechanisms in the CMEA countries are improved through the state monopoly of foreign trade and the strengthening and improvement of planning principles.
Enlisting industrial ministries, production associations and major enterprises in the foreign trade activity helps to establish a direct link between the economic activity of the enterprises and the foreign trade organisations. This includes creating material incentives funds for industrial enterprises.
The common changes occurring in the internal economic mechanism, particularly in the foreign trade sectors of the socialist countries' economies, facilitates economic co-- operation. Thus, common elements in the economic reforms allow better use to be made of the opportunities for direct 99 production relations in bilateral co-operation. At the same time the system of economic measures ami management in each country has and for some time will continue to have specific features. These arise from the actual level of development of the productive forces, the structural peculiarities of production, and national traditions, etc. Nonetheless a number of elements of the intra-economic mechanisms have a direct bearing on the further progress of integration, they have an immediate impact on the interest of economic organisations undertaking certain measures contributing to international specialisation and production co-operation and can contribute to the process of integration only provided that co-ordinated decisions are adopted by the interested countries.
We believe that the drawing together of intra-economic mechanisms must above all affect the elaboration of common standards of material interest. An industrial export enterprise must be made to show a direct financial interest in its export activity. This is all the more important now that international specialisation is advancing rapidly both in depth and in scope. This is only to be expected because there is no such thing as international specialisation in general, isolated from national production, from its structure and from the economic conditions surrounding the activity of enterprises within the national economy.
International specialisation boils down to the specialisation both of national production as a whole and of its individual components which results in its contribution to a particular structure of the international division of labour. Specialised enterprises, including those that are exportoriented, maintain links with other enterprises within the national economy in terms of organisation and in terms of their relations with superior economic and guiding government agencies. The economic activity of the enterprises which export their products is directly dependent on the system of management and planning within the given economic organism and also on the type of material incentives and the actual planning system covering price formation.
The economic reforms implemented in the CMEA countries included a price reform. This latter reform contributed to the emergence of common features in the economic 100 Emacs-File-stamp: "/home/ysverdlov/leninist.biz/en/1975/CMEAT178/20070426/178.tx" __EMAIL__ webmaster@leninist.biz __OCR__ ABBYY 6 Professional (2007.04.30) __WHERE_PAGE_NUMBERS__ top __FOOTNOTE_MARKER_STYLE__ [0-9]+ __ENDNOTE_MARKER_STYLE__ [0-9]+ reforms. These reforms presupposed that prices would be brought closer to the national socially necessary expenditures and that favourable conditions would be provided to ensure industrial enterprises' profitability. In this sense enterprises that export part of their products improved their economic situation, but because of the widely differing conditions existing within the national price systems and the varying extent to which world trade conditions were taken into account within the internal price formation, world prices and national variations in material incentives, export-oriented national enterprises had a varying degree of financial interest and sometimes had no financial interest at all when supplying the export market. We believe that national enterprises can be provided with equal material interests, firstly, on the basis of the continued merging of national price systems, with due account taken of the conditions of mutual and world trade, and, secondly, through interested countries setting up special credit funds in exceptional cases for financing joint projects and enterprises producing capital-intensive goods or those products that are in short supply.
The provision of equal material interests puts a new complexion on the problem of mutual advantage in external economic relations among the CMEA countries. From now on it will be solved largely at the stage of the national production of export goods and not only, as formerly, on the basis of foreign trade transactions. This is in keeping with the tasks of developing international production specialisation and will allow all socialist countries to show an equal interest in deploying specialised production units and in providing market outlets for the resultant products.
The second trend in the efforts to bring together intraeconomic mechanisms concerns management systems, or more specifically, the systems of the subordination of economic units and of different structural levels and the procedure for adopting appropriate decisions.
Today problems of establishing direct links are tackled at varying levels of the management systems in the CMEA countries. The disparities in the levels of economic organisations making decisions in foreign trade cause long delays 101 and impede efforts to ensure mutually advantageous conditions for enterprises involved in co-operative economic intercourse. This is not to say that it is advisable instead to grant the right of opting out from export-import operations to any economic unit or any industrial enterprise.
Among the CMEA countries only a comparatively limited category of major industrial enterprises and groups of enterprises have a right to supply the world market. The dayto-day economic independence of enterprises is being expanded parallel with efforts to strengthen centralised planning management, notably to consolidate the state monopoly of foreign trade. The advantages offered by management through central planning coupled with a state monopoly of foreign trade may be lost if individual enterprises are given the right to export their products at will.
An individual enterprise often finds it difficult to evaluate correctly the current state of demand, to organise the delivery and marketing of its products and at the same time improve and diversify production specialisation and cooperation, and centralise its auxiliary and subsidiary operations, let alone identify the national economic expediency of its own actions in the foreign trade. The situation is far more fortunate with major production amalgamations which operate on a self-financing basis. These are composed of, in addition to manufacturing units, a variety of supporting R & D organisations and research establishments.
In view of the steadily improving structure of economic management in the CMEA countries and the need to develop further international specialisation in production, the Comprehensive Programme calls for the creation, both within individual countries and as part of the economic, scientific and technological co-operation among them, of appropriate economic and legal prerequisites for the development of direct links between ministries, government departments, as well as between economic, scientific and R & D organisations.
On the one hand, direct links between the government and economic agencies of the CMEA countries form an integral part of 1.ho overall .system of external economic relations, and, on the other, part of the national planning and management systems which determine their rights and 102 terms of reference. Thus, the direct links lie on the borderline between national and external economic mechanisms.
The economic development of the socialist countries today, the need to exploit efficiently the fruits of the scientific and technological revolution and the goal of integration, combine to orient economic co-operation within CMEA towards the solution of long-term complex problems.
The solution of long-term problems of economic co-- operation calls for an organic dovetailing of the activities not only of production and foreign trade organisations, but also of scientific, R & D organisations and financial and monetary agencies. The centre of such a complex is the links between production and scientific and R & D organisations. Such amalgamations are capable of ensuring the speedy introduction of the latest break-throughs in science and technology that make new production methods possible and of organising the output of specialised products consistent with economic efficiency and high quality, on an economically viable basis. The foreign trade organisations forming part of the complex will provide market research facilities and exercise supervision over the fulfilment of relevant planned targets.
The Comprehensive Programme of economic integration for the CMEA countries does not suggest the setting-up of supra-national management bodies. The adaptation of national economic structures will be achieved through international agencies with the voluntary participation of interested countries. At the present time the mechanism of economic co-operation is composed of co-ordinated planned measures affecting the national economies of the countries involved and of specific external economic measures affecting the socialist community as a whole. This is the relatively isolated system of economic incentives and forms of economic organisation (the extra-economic mechanism of co-operation) which will ensure close co-operation and the dovetailing of the national economic interests of the co-operating countries.
The external economic mechanism covers co-operation in economic planning, including co-ordination of national economic development plans as well as a package of measures 103 that use the existing system of commodity-money relations and economic organisation.
A salient feature of the external economic mechanism is that its economic instruments and the associated system of cost levers exercise an impact on the economic situation of co-operation. The totality of cost instruments (prices, rates of exchange, conversion factors, settlements and charging media, customs duty and preferences) represent a relatively isolated part of the economic mechanism in comparison with the relatively greater significance of commodity-money relations and their instruments in external economic relations.
In international economic co-operatioii, the economic mechanism, provided it is adequate to integrational processes, is in the formative stage. The development of various forms of co-operation in production, the changing trends of economic relations towards enhanced material interest, and the tightening-up of material responsibility for the fulfilment of economic undertakings insistently demand a better grasp of the way economic laws work.
The scientific quest in this area has raised the question of using cost accounting in economic relations among socialist countries.
The possibility of using cost accounting for the furtherance of economic co-operation is sometimes questioned on the grounds that the cost-accounting system has taken shape as a method of economic management within individual countries. In a sense these doubts are well founded. When the world socialist system first emerged some workers in the field of theory and practice attempted to transplant, in a crude way, the systems of economic levers and forms of economic management from one country to another. Though these worked well within individual countries they did not work quite so well when transplanted to other countries. This represented one extreme. The other was disregard for the experience of economic development gained by individual socialist countries. An analysis of the experience of socialist construction in individual countries helps one to evolve a system of economic levers which ensures both the efficient functioning of an individual economy, and the balanced development of socialism as a world system. That 104 is why, although the system of cost accounting did indeed take shape within individual socialist economies, a number of its principles are relevant to the situation in other socialist countries and can be successfully applied to external economic relations.
Within the world socialist system economic levers are used to ensure the common material interest and to elevate national interests to the level of international interests. Such a system of economic levers must rely on the planned utilisation of economic laws and ensure the planned development of the international socialist division of labour aimed at boosting the efficiency of social production in individual countries and in the world socialist system as a whole. Economic cost accounting, as a system of the planned growth of economic relations between socialist countries on the basis of the equal material interest of each, becomes increasingly important as the scale of economic co-operation expands.
Using the principle of material interest in relations between the socialist countries which are members of CMEA, should not be identified with the use of this principle within individual socialist countries. The national income produced by the socialist countries is distributed and redistributed within them in accordance with problems and tasks which arise at a particular period. The redistribution of national income occurs within an individual economy whose size it does not change.
Applying the principle of material interest in the economic co-operation between socialist countries is closely bound up with the size of their respective national incomes.
In secondary production relations material interest takes the form of the benefit which accrues to a country as a result of her co-operation with other countries.
The problem of the efficiency of economic co-operation is often identified with the effectiveness of the international socialist division of labour. In our judgement this approach is wrong. Economic co-operation is a much broader notion than the international division of labour among socialist countries. This co-operation occurs in different forms in Ihe relations between socialist countries, one of which is co-operation in economic planning, in specialisation 105 and co-operation in production, and in the granting of credits. Other forms of co-operation include the joint building and operation of economic units and establishments, developing natural resources and joint research and development activities.
Most forms of economic co-operation boil down to the exchange of goods and services. Trade through international economic relations is the universal form of exchange activity between different countries. From the standpoint of the structure of commodity exchange and the origin of the goods involved, trade is extremely heterogeneous. A part of the commodity exchange is associated with specialisation and co-operation in production and represents a flow of specialised products, while another part is associated with credit relations, including long-term special-purpose credits advanced for the development of natural resources, while a third part may represent commodity turnover purely in accordance with trade agreements. But the entire commodity turnover is in effect a reflection of the existing pattern of the international division of labour. This being so, the effectiveness of trade is often interpreted as the effectiveness of the division of labour and of economic co-operation as a whole.
The results of foreign trade have a direct bearing on the size of a country's national income. The profit derived from foreign trade supplements the national income thus creating better opportunities for improving the standard of living. For each country the income it receives from foreign trade equals the value of the socially necessary expenditure of labour saved through foreign trade. The problem of ensuring the profitability of foreign trade is of prime importance today particularly in view of the steady expansion of foreign trade and its growing importance in the distribution of the national income.
Socialist countries are by no means indifferent to the size of the economic benefit that accrues to them as a result of economic co-operation. A socialist country uses the benefits of foreign trade in the interests of the whole of its people. This benefit underlies the country's material interest in economic co-operation. Since each socialist country conducts its economic activity independently, its material interest 106 in economic co-operation appears to be individual in character, at any rate on the face of it. But as each socialist country uses the benefits it obtains from economic co-- operation for the common weal, to improve the living standards of its people, the national interest in effect becomes a common international interest shared by other socialist countries. Two major conclusions follow from this: (a) there is an objective need for ensuring co-operation on the basis of mutual benefit; and (b) national interest does not stand in opposition to international interest as does private interest in respect to public. There is no basis for antagonistic contradictions between national and international interests even though national and common international benefits may not always coincide.
The effectiveness of economic co-operation is dependent on the effectiveness of international production specialisation, the effectiveness of joint construction activities (credit relations) and the effectiveness of foreign trade as a whole. At the same time it should be emphasised that the problem of improving the effectiveness of co-operation is closely bound up with the problem of boosting production efficiency within individual socialist countries.
The international socialist division of labour is called upon to ensure the effective advance of social production both within individual countries and in the socialist community as a whole, to ensure a rapid improvement in the standard of living and to overcome the historically based differences in levels of economic development that persist among the socialist countries. The effectiveness of external economic relations can be deduced from the increasing efficiency of socialist production within each country and on the basis of the dynamics of its national income.
Socialist economic integration based on the international socialist division of labour allows specialised production on an optimum scale to be developed and this ensures maximum efficiency. This is designed to serve both the domestic market and to meet the needs of other socialist countries.
The effectiveness of specialised production within the international socialist division of labour depends on the extent to which the relevant factors affecting the present level of development of the productive forces are taken into 107 account. This effectiveness is shown in the growth of labour productivity or in the amount of socially necessary labour outlays saved and is used in the interests of the whole of society.
Inasmuch as specialised production is nationally owned then the benefits that accrue from it belong to the owning country. The benefit obtained from specialisation is realised through foreign trade by way of mutual exchange between socialist countries. Today when specialised products from a wide variety of industries are involved in the mutual commodity turnover it would be proper to look at the question of the efficiency of international specialisation in a particular industry, such as, for instance, engineering. Put this way the question takes on a concrete aspect, namely: what is the magnitude of the economic benefit offered by specialised production compared to non-specialised production? Are socially necessary outlays of labour saved as a result?
It is common knowledge that a particular variant of specialisation depends on the economic conditions pertaining in a country with its specific natural conditions, the skill of its industrial work-force, labour intensity and technical equipment, and the specific forms of production organisation. These and other factors are behind the differences in the level of labour productivity. Technical and economic differences between countries disappear as the standards of economic development level up. This is of prime importance in evaluating the economic efficiency of the international socialist division of labour. That is the reason why the so-called national approach is inadequate. It may so happen that the benefit one country derives from a particular pattern of specialisation may eventually prove to be a net loss for another and may fail to improve labour productivity in the socialist community as a whole. Such an approach to the evaluation of the effectiveness of international specialisation allows one to determine the overall effect on the socialist system as a whole.
However, because specialised production is nationally owned, one should also assess the benefit of specialisation from the standpoint of the country concerned. Specialised production is partly realised in the flow of goods to the 108 external market. Therefore, the benefit, that is inherent in its value, is realised through foreign trade either increasing or decreasing foreign trade income. The benefit obtained from the specialised production of those products that are exported comes as part of the benefit accruing from the foreign trade maintained by a socialist country. Naturally the indices of the economic effectiveness of foreign trade, which include goods from specialised production, may be used as a guide in assessing its effectiveness.
The economic effectiveness of the international socialist division of labour from the standpoint of an individual country is expressed in the amount of national socially necessary expenditures saved and is realised through the exchange of goods and services with other countries. These savings may be obtained either through foreign trade in the form of foreign exchange earnings or indirectly in the form of the higher efficiency of social production within the national economy under the impact of a particular pattern of foreign trade.
The history of the economic development of the socialist countries is replete with examples of how their economic structures were altered under the influence of foreign trade.
The economic effectiveness of foreign trade is often determined by the amount of socially necessary labour expended on exports compared to the amount that would be necessary to produce the imported products at home. The expenditures on export products are understood as outlays necessary for the purchase of a specified quantity of imported goods. By comparing the magnitude of expenditures on export products with the expenditures that would be necessary on the domestic production of the imported goods one may arrive at the effectiveness of foreign trade. One bases such a calculation on the possibility of initiating the manufacture of any type of product at home. In effect, however, even with the maximum expenditure there are some branches of production which are impossible to develop in a particular country, especially in those where the natural conditions are not right. Therefore, it is possible to use this index only when a country produces a particular commodity and it is necessary to expand its production under a specialisation agreement so as to meet the needs of other socialist 109 countries for this commodity, or, if this is inexpedient, when it is necessary to turn production over to another country.
Basic to the determination of foreign trade effectiveness is the analysis and comparison of at least four sets of factors, including the socially necessary labour expenditure on the production of export goods, the potential socially necessary expenditures in the event of production expansion or abandonment of particular goods, the prices formed on the world socialist market of export and import products and the prices prevailing on the world capitalist commodity markets.
The effectiveness of foreign trade indicates the amount of national socially necessary labour expenditure saved through collaborative efforts on the basis of the international socialist division of labour.
The chief criterion for the determination of the effectiveness of interstate specialisation, from the standpoint of the whole of the socialist community, is the growth of labour productivity which has international importance.
The question arises as to why the growth of labour productivity, from the standpoint of international interests, should be the chief criterion of the effectiveness of the division of labour. The answer is, firstly, that each new stage of the social division of labour generates a new productive power which boosts labour productivity; secondly, the growth of labour productivity throughout the socialist system ensures the levelling-up of their standards of economic development; thirdly, it creates a solid basis for a balanced growth of material welfare in all the socialist countries; and fourthly, it improves the position of the world socialist system in its economic competition with capitalism. Lenin's proposition on the importance of the growth of labour productivity as the crucial factor for the victory of the new social system over capitalism is of exceptional importance for the whole of the socialist community.
One can determine the effectiveness of social production throughout the world socialist system by using the criterion of the growth of labour productivity because of the very mature international socialist production relations and the sufficient depth and diversification of interstate 110 specialisation in production. The employment of this criterion, from the standpoint of international interests, will be increased in scope when the internationalisation of production and socialisation within the world socialist economy is based on roughly the same levels of economic development, including high labour productivity in the specialised branches of the economy. At present the effectiveness of the international socialist division of labour is assessed in terms of the difference in labour productivity before arid after specialisation was introduced. The comparison of these differences in individual industries is of great importance today as specialisation in different industries is characterised by a varying depth and degree of diversification.
Thus the effectiveness of the international division of labour as it affects individual industries can be determined in terms of the difference between labour productivity before and after specialisation. Labour productivity may be expressed in natural and value indices, the use of which encounters certain difficulties. The labour productivity index expressed in terms of a quantity of goods produced in a unit of time before and after specialisation is rather relative on account of the essential incomparability of different types of goods. The consumer properties of one and the same product manufactured in different countries may vary considerably and this is expressed in relevant technical and economic parameters. Further, the output of a specialised branch of production differs from products manufactured at non-- specialised enterprises in a number of technical and economic parameters. The complications involved in comparing the consumer properties of different products manufactured to meet the needs of the same community make the use of natural indices of labour productivity difficult.
A labour productivity indicator expressed in terms of the value of a unit of output before arid after specialisation presupposes, firstly, the comparability of the products and, secondly, the determination of the value of a unit of output before and after specialisation.
The growth of labour productivity in a specialised branch of production takes a national value form since specialised production within the international socialist division of labour is owned by the socialist country where it is located. 111 Hence the need for reducing the national value lo an international value as expressed in currency.
The solution of the problem of combining national and international interests is associated with the equitable allocation of the benefits accruing from international economic co-operation.
In view of this the ``Basic Principles of the International Socialist Division of Labour" states that the interest of eacli socialist country in developing and intensifying the international division of labour, from the standpoint of the world socialist system as a whole and effective in those cases where a country for some reason fails to obtain an adequate benefit or suffers temporary losses, must be supported by the other socialist countries with a vital interest in co-operation using appropriate methods and forms.
[112] __NUMERIC_LVL1__ CHAPTER IV __ALPHA_LVL1__ THE DISTINGUISHING FEATURES OF THE CMEAThe further elaboration of the theory of the world socialist market is a major task at present as represents a comprehensive analysis of the problems that have bearing on the improvement of foreign trade prices consistent with the principles of mutual benefit and the provision of incentives for mutual commodity exchange. The Comprehensive Programme of economic integration points out in this connection: ``The development of the trade ties between CMEA member-countries shall continue on the state monopoly of foreign trade and shall be attended by a strengthening and improvement of planning principles. The development of trade ties shall be closely linked with the improvement in the co-ordination of national economic plans and of the currency-financial relations between the CMEA membercountries, as well as an improvement in the system of foreign trade prices."^^1^^
The steady expansion of that part of national production which transcends national boundaries and is interacting with the process of reproduction within other countries represents the most general prerequisite for the emergence and development of a world market. Just as the social division of labour within national economies is clearly reflected in the home market, so the division of labour between different countries is reflected in the world market. Lenin wrote: ``The market is a simple expression of the _-_-_
~^^1^^ Comprehensive Programme..., p. 40.
113 social division of labour under commodity economy...."^^1^^ The world market is based on the division of labour among different countries and commodity production.The world capitalist market promoted the formation of national domestic markets. External commodity circulation in turn promoted the emergence and development of internal national commodity circulation. This is especially true of colonial countries that have been drawn into world capitalist economic relations.
In the course of history the relationships between the world capitalist market and national markets changed in response to the progress of production internationalisation and exchange. In conditions of pre-monopoly capitalism, the world capitalist market existed side by side with national markets and sometimes above them.
In the era of imperialism internal markets drew closer together as integration gained momentum. The world capitalist market disintegrated into more or less isolated regional markets.
When the socialist revolution was victorious in Russia in 1917 the country dropped out of the world capitalist economy. However, the laws of capitalism continued to govern the movement of the world economy and the world market. In 1937 socialism accounted for 9-10 per cent of the world industrial production and for 2-3 per cent of the total volume of world trade. When socialism triumphed in Russia it was essential for it to hold its ground in the face of the aggressive capitalist environment and to use trade with capitalist countries, such as was possible at the time, to build up the material and technical foundations of socialism.
When the world socialist system came into being the situation for the world economy and trade changed radically, for then a sizable region left the world capitalist economy. Within this region there exist objective socio-economic conditions for independent integration.
The emergence of the world socialist system created favourable conditions for the development of foreign trade relations between its constituent members. The territorial proximity of the European socialist countries and the Soviet _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 1, p. 102.
__PRINTERS_P_113_COMMENT__ 8---0516 114 Union, and the possibility of the mutual adaptation of national complexes, made possible by the existence of the same type of socio-economic structure, combind to provide favourable conditions for intensive mutual commodity exchange through foreign trade to create a regional international market (GMEA) within the world socialist market.The point of departure for the formation of the world socialist market was the emergence of the world socialist system as a political and economic commonwealth of countries united by a common state and political structure and sharing common goals in social and economic development. The formation of the world socialist market proceeds alongside the development of regional integration among some socialist countries. However, the world socialist economy cannot take shape and develop only through that market and its instruments. The formation of the world socialist economy presupposes the use of all the forms of economic relations inherent in socialism as a mode of production.
Marx and Engels in their broad definition of communism pointed out that if socialisation under communism were complete throughout society, economic relations would not assume the form of commodity exchange. Marx in his Critique of the Gotha Programme wrote: ``Within the co-- operative society based on common ownership of the means of production, the producers do not exchange their products; just as little does the labour employed on the products appear here as the value of these products, as a material quality possessed by them, since now, in contrast to capitalist society, individual labour no longer exists in an indirect fashion but directly as a component part of the total labour."^^1^^
This thought is echoed by Engels in his Anti-Duhring. Lenin in his work The Agrarian Question in Russia at the End of the 19th Century published in 1908 wrote referring to one of the long-term tasks of socialism: ``Socialism, as we know, means the abolition of commodity economy."^^2^^
In his later works Lenin emphasised the need for the correct use of commodity-money relations. In the spring of _-_-_
~^^1^^ K. Marx and F. Engels, Selected Works, in three volumes, Vol.III, p. 17.
~^^2^^ V. I. Lenin, Collected Works, Vol. 15, p. 138.
115 1921 he raised the problem of using commodity exchange and the market in the interests of socialist construction both in theory and in practice. In his report ``On the Food Tax" at the Tenth All-Russia Conference of the Communist Party Lenin emphasised: ``We had to bring up the question of what economic basis we required immediately for the alliance between the working class and the peasantry as a stepping stone to further measures.``The stepping stone is to prepare the exchange of industrial goods for agricultural produce; to create a system under which the peasant would not have to surrender his produce otherwise than in exchange for urban and factorymade goods, but which would not subordinate him to any of the forms existing under the capitalist system. In view of the prevailing economic conditions, however, we could not even think about that. That is why we have adopted the transitional form I have spoken about, namely, to take produce in the form of a tax without giving any equivalent, and to obtain additional produce through the medium of exchange...."^^1^^
In his report Lenin set out a number of fundamental propositions on the construction of socialism in Soviet Russia, a country dominated by small peasants. He first put forth the proposition on barter between agriculture and state industry as forming the economic basis of the alliance between the working class and the peasantry. He wrote: ``This free turnover is a means to establish economically stable relations between the working class and the peasantry."^^2^^
Lenin's second proposition concerned the food tax as a form not unknown under capitalism. His third proposition pertained to food tax as a form of the appropriation of part of agricultural produce without adequate equivalent compensation as distinct from commodity exchange which normally presupposes an exchange of equivalent values. Fourthly, Lenin spoke of the food tax as a transitional form of relations in preparation for the time when agricultural products would be exchanged for industrial goods strictly on an equivalent basis. Lenin stressed that the _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 32, p. 406.
~^^2^^ Ibid., p. 413.
__PRINTERS_P_115_COMMENT__ 8* 116 introduction of the food tax was compelled by the circumstances, that the state lacked adequate supplies for an equivalent exchange. Finally, his fifth proposition was that an equivalent food exchange was essentially commodity exchange.This latter proposition was clearly formulated in the ``Draft Resolution on Problems of the New Economic Policy" which said: ``Commodity exchange is brought to the fore as the principal lever of the New Economic Policy. It is impossible to establish a correct relationship between the proletariat and the peasantry, or an altogether stable form of economic alliance between these two classes in the period of transition from capitalism to socialism, without regular commodity exchange of products [Emphasis added.---N.B .} between industry and agriculture."^^1^^
Of particular importance in this connection is the famous proposition of Lenin's which he formulated thus: ``All economic councils and all economic bodies must now concentrate on commodity exchange (which also includes the exchange of manufactured goods, for the foodstuffs produced by the peasants are not commodities in the politico-economic sense of the word; at any rate, they are not only commodities, they are no longer commodities, they are ceasing to be commodities [Emphasis added.---N.B.]."^^2^^ These distinctions enable us to state that an article produced in a socialist society has an immediate social form of movement whicli is fundamentally different from the capitalist commodity form of goods. However, the specific features of immediate social labour under socialism or the socialist stage of maturity of immediate social labour imparts to an item produced in a socialist society a commodity form of movement.
These specific commodity relations attending the movement of a product in a socialist society can only function in a planned way.
The Programme of the CPSU adopted by the 22nd Congress of the CPSU states: ``It is necessary in communist construction to make full use of commodity-money relations in keeping with their new content in the socialist period. In this, such instruments of economic development as cost _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 32, p. 433.
~^^2^^ Ibid., p. 384.
117 accounting, money, price, production cost, profit, trade, credit, and finance play a big part. With the transition to the single communist form of people's property and the communist system of distribution, commodity-money relations will become economically outdated and will wither away."^^1^^The nature of production relations coupled with a special method of functioning of socialist economy, conditions the establishment of a particular pattern of relationships between supply and demand. Thus, in the era preceding imperialism capitalism functioned through the mechanism of free competition when goods were produced for a largely unknown market and where free transfers of capital from one sphere to another and a free play of prices predominated.
Under private property society cannot foresee the ultimate result of the operation of economic units because these become apparent only on the market which for this reason plays an exceedingly important role in regulating the capitalist economy. It is on the market that the results of production emerge clearly and it is the market that sends impulses back to the sphere of production. Production regulation is possible only through the market, through the mechanism of supply and demand.
Under monopoly capitalism, the market mechanism underwent significant changes. Lenin wrote: ``Capitalism in its imperialist stage leads directly to the most comprehensive socialisation of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sorb of a new social order, a transitional one from complete free competition to complete socialisation."^^2^^
The emergence of monopolies as a reflection of the process of capitalist socialisation changed the economic mechanism of production, undermining the mechanism of free competition and strengthening the elements of planning. As statemonopoly capitalism developed so did the tendency towards a planned economy. Under state-monopoly capitalism the spontaneous nature of the market mechanism is already undermined from within. The high degree of socialisation _-_-_
~^^1^^ The Road to Communism, Moscow, 1962, p. 536.
~^^2^^ V. I. Lenin, Collected Works, Vol. 22, p. 205.
118 prepares the ground for government regulation. Social production in its present-day capitalist form is increasingly in need of centralised regulation, as the experience of France, Britain, the FRG, Italy, Japan and some other countries shows. There attempts are made to introduce centralised regulation in individual branches of the economy. However, the economic process of modern capitalism taken as a whole continues to be largely spontaneous. Planned development is but an element in the overall functioning of production which is based on the free play of market forces and which reflects the essential deep-seated contradictions of capitalist economy.Public ownership of the means of production creates objective conditions enabling society to place the movement of productive forces of a socialist economy under its control. Socialism in an individual socialist country develops in a planned way. The proportions characterising national reproduction are formed according to plan. The development of the internationalisation of production involving the production of goods and services in quantities which can be fully realised on the external market is directly bound up with the proportions of national production which are regulated in a planned way. Therefore, the planned nature of exchange activity within a socialist country can be maintained provided it is backed up by the planned organisation of the international activity exchange, by the maintenance of proportions in a planned way, in close association with production internationalisation. From the standpoint of the socialist community of nations the proportions of international activity exchanges appear as proportions characterising the world socialist market.
Relations between CMEA countries on the international market are maintained on the basis of the state monopoly of all forms of trade with a constant concern for strengthening and improving the principles of planning. State monopoly in foreign trade is a distinguishing feature of the CMEA market. It predetermines the stability of trade relations between CMEA countries. Another essential feature of commercial relations between CMEA countries is the fact that they are subject to the co-ordination of the national economic development plans. In view of these fundamental 119 distinctions the Comprehensive Programme of economic integration devotes special attention to long-term agreements concluded on the basis of the close co-ordination of the national economic development plans of individual socialist countries. In the words of the Programme, ``In these agreements reciprocal commodity deliveries in accordance with corresponding bilateral and multilateral inter-- government treaties and agreements, concluded between the authorised economic organisations of the countries, shall increasingly form the basis for sound and enduring production ties.'"^^1^^
The Comprehensive Programme calls for efforts to improve long-term trade relations as a major form of mutual trade which lends itself well to detailed planning. The improvement of long-term trade relations depends on the expansion of economic co-operation and the further intensification and diversification of international production specialisation.
The intensification of production co-operation, notably in raw materials and fuels, and the further development of international specialisation and co-operation in mass production are bound to cause functional changes in the CMEA countries' mutual foreign trade. It is called upon to ensure viable long-term production ties between CMEA countries. This represents a new feature of trading relations between CMEA countries, one that has an immediate bearing on integration. At the same time in the foreign trade activities of the CMEA countries, their international market may exercise an active impact on the further economic growth in each socialist country, while long-term trade agreements will facilitate the implementation of their national economic development plans. To solve this task the Comprehensive Programme calls for determining ``the basic reciprocal commodity deliveries for the whole period covered by long-term agreements, in the agreements themselves as well as in the five-year national economic development plans of the countries concerned".^^2^^
In practical terms this will mean a better dovetailing of the internal markets with a view to their eventual integration.
_-_-_~^^1^^ Comprehensive Programme..., p. 41.
~^^2^^ Ibid., pp. 41--42.
120The impact of the CMEA countries' international market on their domestic economies will result in the creation of additional capacities for the production of export goods within the international social division of labour and, in the words of the Comprehensive Programme, in an increase in ``the production of commodities to attain a fuller satisfaction of the requirements of the socialist market, taking into account that the expansion of the trade turnover and the improvement of its forms depend on the development of material production, co-operation in the commodity exchange...".^^1^^
__*_*_*__ __NOTE__ These are long chapters and this "* * *" could be a chunk break.The mutual external economic relations of the CMEA countries have not yet created optimal conditions necessary to permit the efficient operation of a regulation mechanism similar to the one which operates within their domestic economies. The internal markets of the CMEA countries still operate in relative isolation from one another. Their gradual merging will be achieved as the integration gains momentum on the basis of the utilisation of common laws governing the construction of socialism and the observance of the basic principles of socialist economic management. At present the CMEA countries' market is operating more or less independently, subject to the impact of appropriate measures of regulation which are closely bound up with the specific features of the way the law of value operates.
In substance, the law of value means the reduction of the national socially necessary expenditures to international ones, and its operation manifests itself through fluctuations of national value with respect to the international one, and a number of socio-economic consequences follow as a result. Under capitalism it is above all the opportunity to redistribute the national income from one country to another through the medium of foreign trade. Inasmuch as the difference between national and international values is appropriated by a given country which thus augments its income through foreign trade, this can serve as a material basis for putting that country's national interest to the forefront.
_-_-_~^^1^^ Comprehensive Programme..., p. 42.
121Relations existing in the world socialist market represent a continuation of the internal relations existing within individual socialist countries although, on the other hand, they possess a number of specific features arising from the state sovereignty of the countries concerned and their relative economic independence. State sovereignty and the equality of all the participating countries presuppose free and voluntary co-operation. Economic independence presupposes co-operation based on mutual benefit with adequate compensation for socially necessary labour expenditures, with strict observance of the economic interest of each country in relation to its ownership of the means of production, and with the right to dispense with its state budget and national income as it sees fit. Each country, maintaining a more or less independent economy, is vitally interested in ensuring that its foreign trade compensates adequately for the socially necessary labour it expends. Without adequate compensation for its socially necessary expenditures a country will fail to fully recover the amount of value represented by the aggregate labour force. If this is the situation it means that part of the national income produced by a country will accrue to another country through foreign trade channels.
Commodity exchange in the internal market on the basis of value defined by the socially necessary labour expenditure on the production of goods in an independent economy means that goods of a certain type form part of the aggregate product and the value of each type of goods represents a part of the aggregate value as materialised in the given type of goods. In other words, the value of each type of goods is measured not by the individual labour expenditure but rather by the socially necessary one. The principle of equivalence within an internal market presupposes an exchange of goods in strict accordance with their social value or the socially necessary labour expended on their production. An equivalent, as an internal base line of the mechanism of the law of value, represents the qualitative characteristics of individual labour, its social character, and the quantity of the characteristics of individual expenditures equalised to a definite quantity of socially necessary labour expenditures. The principle of equivalence presupposes deviations
122 of individual labour expenditures from socially necessary ones. If there were no deviations, that is to say, if individual expenditures were the same then the principle of equivalence would lose its point. The equalising of two magnitudes into a third one is fraught with the danger of a loss of part of the aggregate individual labour expenditures on the production of one type of commodity and, conversely, the possibility of a gain for another type of commodity. Commodity exchange on the basis of equivalence, in accordance with the law of value, places the owners of different types of goods on the same footing and at the same time makes it possible to identify a common form of the labour embodied in the goods. Equivalent exchange is the only method of comparing different goods and of comparing differing labour expenditures through identifying a common quality, in this case expenditures of social labour. In a socialist economy the deviation of individual labour expenditures from the socially necessary ones is effected through the planned system of pricing based on profit, property rent and other types of payments and the state budget. The magnitude of the newly created value remains the same and is only redistributed within a given economy undergoing changes in the relationships of its constituent components.Differences in the operation of the law of value under socialism and under capitalism concern the method of forming the magnitude of equivalence. Under capitalist commodity production, the value of equivalent (social value) comes about spontaneously as a weighted mean of individual labour expenditures. Under socialism the magnitude of the equivalent is also dependent on the socially normal conditions of production which permit the output of the maximum amount of goods. But a socialist society can adjust the socially normal conditions of production depending on the tasks it sets itself.
Inasmuch as value, in general, has the sole form of manifestation---price, the social value, an equivalent, represents the focal point of prices. The whole problem of comparing individual expenditures in this case boils down to fluctuations of individual expenditures in relation to the price ``mean'', which, as we have noted above, is formed in a planned way under socialism.
123The deviation of individual expenditures from the planned price ``mean'' results in a redistribution of the newly created value between enterprises and different branches of a given socialist economy. The use of the law of value and of the principle of equivalence in a national economy consists in a planned redistribution of the newly created value in accordance with the goal set, through the medium of pricing based on the socially necessary expenditures of labour.
Price as a form of value develops more or less independently. The connection between price and value is determined by objective economic laws governing the measuring of value by socially necessary labour expenditures. These laws manifest themselves in the reduction of individual labour expenditures to socially necessary ones and also in the fluctuations of prices in relation to the socially recognised magnitude of value. The substance of the concept of price, as an economic category, goes beyond its being a form of value.
Apart from the fact that price is the only form of value its economic role is determined by the dominant type of production relations.
Under capitalism and under pre-capitalist forms of production the possibility of deviations from the magnitude of value which is inherent in price ``adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another".^^1^^
Under socialism prices are determined by the entire system of economic planning. Therefore, price reflects not only the law of value, but also the law of planned and balanced development and the basic economic law of socialism. Price reflects faithfully the degree to which the entire system of the economic laws of socialism is utilised. In view of this the functions of price may change. The system of planned prices reflects not only the value of goods but is used as an incentive to develop further the individual branches of production, to stimulate technological improvements and improvements in the structure of production and consumption. It is also used as a means of redistributing _-_-_
~^^1^^ K. Marx, Capital, Vol. I, p. 102.
124 the national income produced among the various branches of the economy. In addition it influences the real incomes of the population in an immediate way.At any given point price possesses a definite qualitative characteristic. This characteristic is a complex notion subject to the operation of a variety of factors which can be broadly classified as follows: (a) factors affecting expenditures of socially necessary labour, i.e., factors forming the socially recognised magnitude of value, and (b) factors determining the deviation of price from the magnitude of value, in other words, specific price-forming factors.
The magnitude of value is determined by the amount of the socially necessary expenditures of labour. Socially necessary labour, or in the words of Marx, ``the labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time".^^1^^
The magnitude of value is directly proportional to the amount of socially necessary labour expended and inversely proportional to the productive power of labour. The higher the productive power of labour, the less is the amount of working time necessary for the production of a unit of consumer value. The productive power of labour in turn is dependent on a number of interacting factors such as the efficiency of the means of production used and their concentration, the technological standard of labour, the extent of the division of labour and the consequent level of combination of the production process, the level of science and the degree of its technological application, the average skills of the industrial work-force and the prevailing natural conditions.
In this analysis of the factors influencing the magnitude of value, Marx attached great importance to the role of natural conditions. He wrote: ``Diamonds are of very rare occurrence on the earth's surface, and hence their discovery costs, on an average, a great deal of labour time. Consequently much labour is represented in a small compass.... According to Eschwege, the total produce of the Brazilian _-_-_
~^^1^^ K. Marx, Capital, Vol. I, p. 39.
125 diamond mines for the eighty years, ending in 1823, had not realised the price of one-and-a-half years' average produce of the sugar and coffee plantations of the same country, although the diamonds cost much more labour, and therefore represented more value. With richer mines, the same quantity of labour would embody itself in more diamonds, and their value would fall."^^1^^The impact of natural factors may be direct or indirect. The direct impact is evident in those industries which use natural resources (agriculture, raw material and fuel industries). The same amount of labour expended (all the other things being equal) results in a greater output of wheat in a good year compared to a bad year. The same amount of labour expended in a mine producing high-grade ore and in one producing low-grade ore results in a greater or lesser output of metal respectively.
Natural conditions influence the location of centres producing goods whose transportation is costly (coal, ores, etc.) and as a result influence the socially necessary expenditure of labour on the production of these goods. Besides, natural conditions exert an appreciable influence on the production process and on labour productivity. Therefore, the differences in natural conditions predetermine the regional levels of socially necessary expenditures and thus the zonal price differentiation.
The magnitude of value is formed in the production process where the magnitude of socially necessary expenditures is subject to the influence of such factors as the technological standard of labour, the qualifications and skills of the workers, production organisation and the natural conditions of labour. Besides, the magnitude of value grows in the circulation sphere inasmuch as, as Marx put it, the process of production continues. Thus, transportation increases the value to the extent to which it provides the connection between different cycles of the production process as it supplies raw materials to processing centres or supplies finished products to consumption centres. It should be emphasised that transport expenses are a product to be added to value, for without them it would be impossible to produce a _-_-_
~^^1^^ K. Marx, Capital, Vol. I, p. 40.
126 commodity or to supply the user. Therefore, transport expenses form an integral part of the socially necessary expenditures of labour on the production of certain goods.Socially necessary expenditures of labour on the production of the same type of goods are dependent on the reproduction of the total body of goods of this specified type, while the aggregate expenditures represent the aggregate expenditures of labour. In this sense what we say about an individual type of commodity and about the determination of its value is fully applicable to a quantity of goods of a certain type supplied to the market. The value of the total amount of goods equals the total market value.
Let us assume that a large quantity of goods is produced under more or less the same socially normal conditions. Assuming that a comparatively limited volume of goods has been produced under slightly worse conditions while another portion of goods under better conditions we find that ``the market-value is determined by the value of the commodities produced under average conditions".^^1^^
Let us assume also that the quantity of goods supplied to the market remains the same but the proportion of goods produced under worse conditions is not equalised by another proportion of goods produced under better conditions. We find that the goods produced under worse conditions add up to a greater volume than the goods produced under better conditions and under average conditions. In this case the market value will be regulated by the worse conditions of production.
It may also happen that goods produced under better conditions add up to a greater volume than goods produced under average and worse conditions. In this case the amount of goods produced under the best conditions will be the regulator of the resultant market value.
Strictly speaking, the market value of each type of goods or each separate portion of the total volume of goods is determined by the aggregate value of that total, produced under varying conditions, and by that part of the total value which is represented by each separate type of goods.
_-_-_~^^1^^ K. Marx, Capital, Vol. Ill, Moscow, 1971, p. 182.
127Market value as a centre from which market prices deviate under changing conditions is thus defined as a comparative magnitude depending on the share of the total volume of goods produced under certain conditions and on the magnitude of value of each constituent part of the goods produced by a given industry within a particular national economy. The magnitude of the value of each type of goods represents a part of the value of the total volume of the given type of goods. As Marx put it, ``each individual commodity, in this connexion, is to be considered as an average sample of its class".^^1^^
A volume of goods of a given type must meet society's need for this type of consumer value. The magnitude of value of each type of goods is the quotient of the division of socially necessary expenditures of labour to produce the volume of this type of goods by the quantity of consumer values, which represent a social need. Socially necessary expenditures of labour, in other words, the magnitude of the value of a particular type of commodity depends on the magnitude of the social need for this type of goods. Marx wrote, ``For the market price of identical commodities, each, however, produced under different individual circumstances, to correspond to the market value and not to deviate from it either by rising above or falling below it" the supply of goods must be adequate to meet the social need for the goods, in other words, the market should be supplied with an amount of goods ``for which society is capable of paying the market value. Should the mass of products exceed this demand, the commodities would have to be sold below their market value; and conversely, above their market value if the mass of products were not large enough to meet the demand".^^2^^
If supply and demand regulate market prices or, to be more precise, the deviations of market prices from the market values, then, on the other hand, market value determines the correlation of supply and demand, in other words, that very centre in relation to which market prices fluctuate. A drop in the market price can result in an expansion of a social need and, conversely, an increase in market prices--- in a reduction of social needs.
_-_-_^^1^^ K. Marx, Capital, Vol. I, p. 39.
^^2^^ Ibid., Vol. III, p. 181.
128The correlation of the supply of goods and the social need for them is the factor which influences that magnitude of value and the extent of the deviation of price from value. This being the case, we may safely classify this factor in the group of factors which determine the socially necessary expenditures of labour and equally in the group of factors which are known as specifically price-forming factors.
The specific price-forming factors are organically linked with those other factors which determine the socially necessary expenditures of labour and, on the other hand, with those which under socialism reflect the requirements of the basic economic law of socialism, the law of planned and balanced development and the law of distribution according to work done.
The magnitude of socially necessary expenditures of labour depends on the productivity and intensity of labour as basic characteristics of the status of social labour. A reduction in the socially necessary expenditures of labour on the production of a unit of output makes it possible with the same amount of labour expended to produce more goods and thus meet more fully a particular social need. A reduction of the socially necessary expenditures of labour, ``as large-scale industry develops'', K.~Marx pointed out, ``creation of the real wealth" become ``less dependent on labour time and quantity of labour consumed, than on power of those agents, which are put in motion during the labour time''.
The creation of wealth as a result of the further progress of the productive forces is increasingly dependent on the technological standard of labour. The direct connection between the technological standard of labour and its productivity is not always expressed in equal proportions of growth or decline. The technological standard and productivity of labour, in turn, are contingent on capital investments in the instruments of labour in the available fixed and circulating production assets.
The value of fixed assets is gradually transferred through the assets' use. Under socialism the transfer is fixed as a rate of amortisation, which is determined in a planned way. Whereas in the creation of consumer values the entire 129 volume of fixed assets participates, in the creation of value only that part which is amortised counts. At the same time it takes a varying amount of fixed assets to produce different types of consumer values of the same value. The same magnitude of value embodied in different types of consumer value is created with varying amount of investment in productive assets. The amount of productive assets necessary to produce a unit of different types of goods varies depending on the nature of the given industry. The gap in the relative levels of productive assets used to produce a unit of different types of goods is inadequately expressed in the socially necessary expenditures of labour on account of the specific nature of the rate of amortisation index.
It is necessary when planning prices to take into account capital intensity. In practical terms this means taking into account the time factor associated with varying periods of the recovery of capital investments in the productive assets in different industries. By taking into account capital intensity, as a contributor to price, it is possible to show the national economic effectiveness of the production of different types of goods because such prices indicate that the more capital-intensive goods require more funds and resources than less capital-intensive ones, even with the same socially necessary expenditures on their production.
The intensification and deversification of the social division of labour and the expansion of the chemical industry with the consequent introduction of new synthetic types of raw materials result in a mounting supply of interchangeable goods.
The socialist principle of economic management requires the utilisation in productive and individual consumption of those products which ensure maximum effect at a minimum outlay. Consumer values of different origin can satisfy the same type of needs and, therefore, they can be regarded as belonging to the same type of aggregate product, while the expenditure of labour on their production as uniform socially necessary expenditures. At this point we run into a difficulty, namely, how does one regulate the value of different types of goods of varying quality to ``equal price" for the same consumer value.
__PRINTERS_P_129_COMMENT__ 9---0516 130Price should also take into account the correlation of supply and demand for a particular type of product. By taking into account the operation of the law of supply and demand we may bring requirements and the volume of output into full agreement. A system of prices which fails to take full account of this correlation artificially increases a shortage of some types of goods and is one of the reasons for freezing commodity stocks.
A volume of commodities satisfies a particular social need to the extent required by society. There is a direct dependence between the quantity of goods supplied to the market and their market value. With a given level of labour productivity in each area of production the output of a given amount of goods requires a given amount of socially necessary labour which has no intrinsic link either with the usefulness of the resultant goods or with the specific nature of its consumer properties. However, if a larger, or smaller, quantity of a given type of products has been produced than the magnitude of the social demand for it, then part of the social working time expended has been wasted, and in the words of Marx, ``the mass of the commodity comes to represent a much smaller quantity of social labour in the market than is actually incorporated in it".^^1^^
The socially necessary expenditures of labour are formed under the impact of factors operating in production and exchange and determining the social demand for a particular type of product. These expenditures form the basis of price formation and play the role of the price centre.
In different countries the magnitude of the socially necessary labour expended on the reproduction of the same type of goods varies, as do the prevailing natural conditions, the actual level of economic development and the levels of productivity and intensity of labour. These determine variations in the national socially necessary expenditures. Each country has a definite average level of labour intensity and for this reason the same amount of labour time represents different quantities of labour expended.
It is a fact that the productivity and intensity of labour influence the magnitude of socially necessary expenditures _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 187.
131 of labour in a unit of time, that is, the magnitude of value in opposite directions. An increase in labour productivity results in a lower value per unit of consumer value without changing the magnitude of the value created in the same period of time. An increase in labour intensity does not alter the magnitude of the value of a unit of consumer value, but increases the magnitude of value created in a given period of time. At the same time a higher labour productivity or a higher labour intensity increase the amount of consumer values created in a unit of time. The amount of consumer values influences the magnitude of a particular social need, for each type of consumer value is part of the social consumer value, while its value is part of the aggregate value. This circumstance obscures the difference in methods of creating value, the increased amount of consumer values present in the market blurring the differences in labour productivity and labour intensity. An increase in labour productivity and labour intensity manifests itself in the same way, namely, in a greater amount of consumer values. This forms an objective basis for ensuring that national labour of a higher productivity be recognised as labour of higher intensity. In the world market a higher level of labour productivity may in the case of a particular country have the same consequences as a higher level of labour intensity, that is, national socially necessary labour may create a greater value per unit of time than the same amount of labour in another country. This fact contributes to a tendency of the world capitalist market due to the influence of various types of commercial and political barriers and agreements which become more important under monopoly domination. Marx pointed out that ``the law of value in its international application is yet more modified by this, that on the world market the more productive national labour reckons also as the more intense, so long as the more productive nation is not compelled by competition to lower the selling price of its commodities to the level of their value".^^1^^In trade between socialist countries each is interested in ensuring that her foreign trade contributes to the growth of her national income. Differences in the levels of economic _-_-_
~^^1^^ K. Marx, Capital, Vol. I, p. 560.
__PRINTERS_P_131_COMMENT__ 9* 132 development and in the levels of labour productivity underlie differences in the socially necessary expenditures that are embodied in goods. On the other hand, it is a mistake to assume that an exchange of equal consumer values supplied to the market by two or several countries is effected in accordance with the national socially necessary expenditures, which vary from country to country. Gould it be then that national socially necessary expenditures are adduced to international ones in the same way as individual value is reduced to social value in the internal market?In a sense, the world market is a continuation and extension of national markets, while at the same time existing side by side with them. As an extension and continuation of the national markets, the world market is subject to the same economic laws which govern the workings of the national markets. Relations existing in the world market in their pure form as relations associated with commodity exchange and transformation of value do not differ in this sense from relations existing in the national market. But this is an oversimplified and abstract approach which can only be justified by the need to get at the essence of the process. In actual fact relations existing in the world market possess clearly pronounced distinguishing characteristics as compared to relations existing in the national market. The world market exists side by side with the national market (for instance, when world market prices determine prices on the national market). In principle, the world market does not swallow up the national market. Thus, the world capitalist market after drawing pre-capitalist modes of production into commodity circulation contributed to the development of capitalist relations (transformation of capitalist modes of production can also be effected in an extra-economic way). The world capitalist market for this reason, if for no other, is not only and not always an extension and continuation of the national market. Sometimes a national capitalist market was formed as a result of the direct influence of the world market. External commodity exchange facilitated the emergence and development of internal national commodity circulation. This was particularly true of those countries which were drawn into 133 capitalist relations as colonies. The mutual influences of the external market and the development of the capitalist mode of production was underscored by Marx when he wrote that ``the expansion of foreign trade, although the basis of the capitalist mode of production in its infancy, has become its own product, however, with the further progress of the capitalist mode of production, through the innate necessity of this mode of production, its need for an ever-expanding market".^^1^^
Already at this stage of our analysis we may draw the conclusion that the world capitalist market is on the one hand a mere ``extension'' of national markets since the law of value operates on the world market in the same way as it does on the national markets. On the other hand, the world market differs from the internal market in significant respects, and for this reason the operation of the law of value is characterised by important distinguishing features. These features which are characteristic of the world market as distinct from the national market affect the formation of the equivalent to which national socially necessary expenditures are reduced. This equivalent takes the form of international value, in other words, international socially necessary labour expenditures as the price centres.
Some economists in identifying the formation of national value with international tend to reduce the specific features of the operation of the law of value to purely quantitative terms. They argue that by no means the total volume of marketable produce of an industry reaches the world market, but only a proportion. Therefore, sometimes the principal producers of a particular type of goods are not the principal exporters, that is, they often play a lesser role in determining the terms of sale than their contribution to world production may suggest.
International value as a category of the world market expresses relations between countries which are commodity owners or between monopolies which are commodity owners (which is not the same thing, naturally). The magnitude of international value depends on the extent of world trade in particular types of commodities.
_-_-_~^^1^^ K. Marx, Capital, Vol. Ill, p. 237.
134International value reflects international relations characterised by the fact that each country owns the products she produces, while the existing division of labour among countries presupposes an exchange of activity.
Value and its particular derivatives, such as exchange value, social, market and international values, as a political economic category reflects more or less faithfully the objective processes affecting social relations. In this sense value has a specific qualitative characteristic determined by the available type of production relations.
Examining the development of social relations as a natural historical process Marx demonstrated that each stage of that development has a qualitative characteristic in the shape of the actual mode of production. Each mode of production is subject to the operation of a particular system of laws. Marx in characterising each mode of production as a totality of specific production relations, on the one hand, emphasised their continuity as different stages of social evolution, while on the other, their ever-changing character (negation). In the epilogue to the second edition of the first volume of Capital, Marx cites an extensive excerpt from one of the works of N. Siber, a professor of political economy at Kiev University, which, in Marx's opinion, contained a correct exposition of the problem of law modification. This is what N. Siber wrote: ``The one thing which is of moment to Marx, is to find the law of the phenomena with whose investigation he is concerned; and not only is that law of moment to him, which governs these phenomena, in so far as they have a definite form and mutual connection within a given historical period. Of still greater moment to him is the law of their variation, of their development, i.e., of their transition from one form into another, from one series of connections into a different one. This law once discovered, he investigates in detail the effects in which it manifests itself in social life__Marx treats the social movement as a process of natural history, governed by laws not only independent of human will, consciousness and intelligence, but rather, on the contrary, determining that will, consciousness and intentions__ If in the history of civilisation the conscious element plays a part so subordinate, then it is self-evident that a critical inquiry whose 135 subject matter is civilisation, can, less than anything else, have for its basis any form of, or any result of, consciousness. That is to say, that not the idea [Emphasis added.--- N.B.], but the material phenomenon alone can serve as its starting point. Such an inquiry will confine itself to the confrontation and the comparison of fact, not with ideas, but with another fact [Emphasis added.---N.B.]. For this inquiry, the one thing of moment is, that both facts be investigated as accurately as possible, and that they actually form, each with respect to the other, different moments of an evolution; but most important of all is the rigid analysis of the series of successions, of the sequences and concatenations in which the different stages of such an evolution present themselves....
But it will be said, the general laws of economic life are one and the same, no matter whether they are applied to the present or the past. This Marx directly denies. According to him, such abstract laws do not exist [Emphasis added.---N.B.].... On the contrary, in his opinion, every historical period has laws of its own.... A more thorough analysis of phenomena shows that social organisms differ among themselves as fundamentally as plants or animals... Nay, one and the same phenomenon falls under quite different laws in consequence of the different structure of those organisms as a whole, of the variations of their individual organs, of the different conditions in whichJ.hose organs function, &~c.''^^1^^
Marx pointed out that Siber provided a good outline of his method. The above-quoted excerpt, which outlines Marx's method of cognition, is of fundamental theoretical importance for the purposes of the present study, for the following reasons. Firstly, one and the same phenomena operating in different social organisms behave differently. Secondly, the transition from one order of inter-relationships to another is adequately reflected in the law of change. Thirdly, an analysis of phenomena including the phenomena of social life should be conducted by comparing different factors and not by comparing facts and the idea. Fourthly, following the identification of a law and the form of its _-_-_
~^^1^^ K. Marx, Capital, Vol. I, pp. 17--19.
136 manifestation, with the given relationships of the phenomena in question, an essential element of the analysis is to ascertain the transition from one form of the law's manifestation to another in response to a changing pattern of relationships between phenomena and also to examine the consequences resulting from the manifestation of the law in a particular society.Value in different systems of inter-relationships of social phenomena also expresses, in an indirect way, individual expenditures in the overall aggregate expenditures of social labour. This property of value is common to values existing under different forms of social production. At the same time the character of individual expenditures changes, just as the character of social expenditures and the method of including individual expenditures in the aggregate social expenditures change, as the actual mode of production changes, and for this reason it is not only the form of manifestation of the law of value that changes, but its very substance from the standpoint of social relations and its consequences from the standpoint of society as a whole. Value as a law governing the interaction of social phenomena generated by private ownership of the means of production expresses the private character of social labour.
Value as a law governing the interaction of social phenomena associated with socialist ownership of the means of production expresses the immaturity of the immediate social character of labour and the incompleteness of the process of socialisation. Value is a social property of things reflecting as it does social relationships. Herein resides its essential qualitative characteristic, which is regarded only as a definition of its quantity, in the words of Marx, accumulation of abstract labour. Value is indifferent to social relations. On the subject of the circulation of industrial capital in the world market at a time when capitalist circulation actively draws into its orbit and ``processes'' all pre-capitalist forms of activity exchange differing from itself,^^1^^ Marx wrote as follows: ``No matter whether _-_-_
~^^1^^ But it is the tendency of the capitalist mode of production to transform all production as much as possible into commodity production. The mainspring by which this is accomplished is precisely the __NOTE__ Footnote cont. on page 137. 137 commodities are the output of production based on slavery, of peasants (Chinese, Indian ryots), of communes (Dutch East Indies), of state enterprise (such as existed in former epochs of Russian history on the basis of serfdom) or of half-savage hunting tribes, etc.---as commodities and money they come face to face with the money and commodities in which the industrial capital presents itself and enter as much into its circuit as into that of the surplusvalue borne in the commodity-capital, provided the surplusvalue is spent as revenue; hence they enter into both branches of circulation of commodity-capital. The character of the process of production from which they originate is immaterial. They function as commodities in the market, and as commodities they enter into the circuit of industrial capital as well as into the circulation of the surplus-value incorporated in it. It is therefore the universal character of the origin of the commodities, the existence of the market as world-market, which distinguishes the process of circulation of industrial capital."^^1^^
In a situation where two world systems coexist in the world market we have commodities produced under capitalist production and under socialist production circulating alongside one another. It is common knowledge that the social form of a product changes in response to alterations in the character of social labour and the changing degree of maturity of a particular type of production relations. As Lenin put it, products of a socialist enterprise ``are not only commodities, they are no longer commodities, they are ceasing to be commodities".^^2^^
_-_-_ __NOTE__ Footnote cont. from page 136. involvement of all production into the capitalist circulation process. And developed commodity production itself is capitalist commodity production....The commodities entering into the process of circulation of industrial capital [Emphasis added.---N. B.] regardless of their origin and of the social form of the productive process by which they were brought into existence, come face to face with industrial capital itself already in the form of commodity capital, in the form of commodity dealer's or merchant's capital. And merchant's capital, by its very nature, comprises commodities of all modes of production. (K. Marx, Capital, Vol. II, pp. 113--14.)
~^^1^^ K. Marx, Capital, Vol. II, Moscow, 1971, p. 113.
~^^2^^ V. I. Lenin, Collected Works, Vol. 32, p. 384.
138A product manufactured under socialism has an immediately social form of movement which is fundamentally different from the commodity form of a product manufactured under capitalism.
In The Poverty of Philosophy Marx wrote: ``In principle, there is no exchange of products---but there is the exchange of the labour which co-operated in production. The mode of exchange of products depends upon the mode of exchange of the productive forces. In general, the form of exchange of products corresponds to the form of production. Change the latter, and the former will change in consequence. Thus in the history of society we see that the mode of exchanging products is regulated by the mode of producing them."^^1^^
The product of a socialist enterprise is an embodiment of new socialist relations of production. This product comes about as a result of a direct fusion of labour power with the means of production which under socialism do not represent capital. The production and sale of a product from a socialist enterprise are both planned. The product of a socialist enterprise, circulating within the internal market, is less of a commodity than a product circulating in the world socialist market. The commodity form of the movement of a product turned out by a socialist enterprise and supplied to the world socialist market reflects relations existing between isolated socialist owners, while the product itself is a material embodiment of the existing socialist production relations between different socialist countries.
Commodities produced under different forms of social production which are dominated by private property are drawn into the circulation of monopoly capital. They either accompany the export of capital or are swallowed up by imported capital. Apart from that, commodities produced under different forms of pre-capitalist and capitalist production are drawn into the world socialist market where their movement is subject to the laws governing socialist relations. At present capitalist (monopolistic) commodity circulation is no longer all-embracing, and is unable to subordinate and ``process'' even similar forms, let alone differing forms of activity exchange. This is the reason why, _-_-_
~^^1^^ K. Marx and F. Engels, The Poverty of Philosophy, p. 86.
139 strictly speaking, on the world market there exist two different types of commodity circulation regulated by the interaction of two different types of social phenomena.International value as a reflection of an aspect of international production relations and of the law governing the relations between different commodity producers only appears to be indifferent to the type of international economic relations prevailing at any given point in time. This purely apparent ``indifference'' of international value underlies the concept of price in trading relations within CMEA. If we regard international value as a law governing commodity exchange in foreign trade it follows that commodity exchange is a constituent component of international economic relations which represent a function of the dominant mode of production existing in the participating countries ( contracting parties).
The world socialist and capitalist systems have two corresponding basic types of international economic relations uniting the interaction of fundamentally different processes. International economic relations among the socialist countries are characterised by mutual assistance, complete equality, planned determination and maintenance of proportions in the activity exchange, and by mutual interest in securing equitable profits for all.
International economic relations among the capitalist countries are based on exploitation and domination of the strong over the weak, and take shape spontaneously. It follows from this that different types of interaction of social phenomena are subject to different laws. International value reflects ``the common element" of the two basic types of international relations, but the common element behaves differently in different areas of the world economy owing to the fundamental differences between socialism and capitalism as essentially different social organisms and owing to the widely varying conditions under which this element has to function.
Commodity value, according to Marx, took shape and evolved universally in the course of world trade dominated by capitalist relations and the existence of a single world capitalist market. In the present-day conditions, marked by divisions of the world economy and the world market,
140 international value as a social property of commodities circulating in the world market reflects a particular type of world economic relations and only when viewed as a quantitative entity does it seem a universal unified value. This is a semblance of international value rather than its essence.International value in the sphere of production relations among the socialist countries is an objective criterion of comparison between national social values of goods produced by socialist countries.
Showing the way in which international value (cost of production or its modifications) is formed is a crucial task for the theory of value and has a direct bearing on the formation of foreign trade prices.
In the world market the law of value regulates the exchange not merely of goods as such but of goods embodying socially necessary expenditures of labour by different national economies. The means of production in each national economy are fixed and cannot be ``transferred''. Therefore, the same industries in different countries appear as isolated industries on the world market.
In his analysis of the specific features of the operation of the law of value in world capitalist trade Marx emphasised that no equalisation of profits can ever occur in the world market, primarily because of the immobility of the means of production. Nations participating in world trade receive varying profits for the same goods, for the same expenditures and for the same volume of inputs. From the standpoint of the world market they get varying magnitudes of value and surplus value. In Marx's words, ``the difference in the various national rates of profit is immaterial to commodity exchange".^^1^^ In other words, to a certain extent different countries relate to each other in the same way that different branches of production do, ``so long as the means of production ... can be transferred from one sphere to another only with difficulty..."^^2^^.
In different countries, because of the variations of the organic structure of capital (in the final analysis varying _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 177.
~^^2^^ Ibid.
141 levels of labour productivity) and national and social differences in the quality of life, varying rates of profit obtain, which are realised to a certain extent in world prices. These do not become equalised as equal profits on each unit of capital invested in the different national economies.National variations in the rate of profit enable the capital of an advanced country, invested in world trade, to secure a greater profit compared to that which can be obtained within the country. This is the key factor inhibiting the operation of the law whereby there is a tendency for the average rate of profit to decline in response to the growth of the organic structure of capital, in most cases, within the country of origin. If the national rates of profit in the whole world capitalist economy and the world capitalist market evolved into a uniform average rate of profit there would be no material basis for the economic domination of the industrialised capitalist countries over the economically backward ones.
Capital invested in foreign trade fetches a higher rate of profit on account of the competition between goods produced under less favourable conditions. This results in an advanced capitalist country being able to sell its goods at a price higher than the national cost of production but lower than that of the rival country, since labour in the advanced country is regarded as being of a higher intensity. It may turn out for a country that sells its goods at a price below that of another, more developed country, that it puts in ``more materialised labour in kind than it receives, and yet thereby receives commodities cheaper than it could produce them. Just as a manufacturer who employs a new invention before it becomes generally used, undersells his competitors and yet sells his commodity above its individual value, that is, realises the specifically higher productiveness of the labour he employs as surplus-labour. He thus secures a surplus-profit. As concerns capitals invested in colonies, etc., on the other hand, they may yield higher rates of profit for the simple reason that the rate of profit is higher there due to backward development, and likewise the exploitation of labour, because of the use of slaves, coolies, etc. Why should not these higher rates of profit, realised by capitals invested in certain lines and sent home by them, enter into 142 the equalisation of the general rate of profit and thus tend, pro tanto, to raise it, unless it is the monopolies that stand in the way. There is so much less reason for it, since these spheres of investment of capital are subject to the laws of free competition. What Ricardo fancies is mainly this: with the higher prices realised abroad commodities are bought there in return and sent home. These commodities are thus sold on the home market, which fact can best be but a temporary extra disadvantage of these favoured spheres of production over others. This illusion falls away as soon as it is divested of its money-form. The favoured country recovers more labour in exchange for less labour, although this difference, this excess is pocketed, as in any exchange between labour and capital, by a certain class. Since the rate of profit is higher, therefore, because it is generally higher in a colonial country, it may, provided natural conditions are favourable, go hand in hand with low commodity-prices. A levelling takes place but not a levelling to the old level, as Ricardo feels."^^1^^
Marx's ideas as set forth in the above extract from Chapter XIV of Capital, Volume III, are of fundamental importance for the solution of our problem.
A greater profit obtained from foreign trade (compared to internal trade) participates in the equalisation of average profits on the national market. This is what Engels meant when he wrote that ``the production prices hold good in international and wholesale trade"^^2^^ in a sense that prices of goods involved in international trade are regulated by the national average profit and not by the world cost of production or the world average profit. However, some economists pointing to Engels' statement quoted above assert that market, international value becomes converted into the cost of production. Actually, what happens in this case is the identification of the mechanism of the conversion of value with the cost of production within a sufficiently advanced capitalist mode of production in a country with the mechanism of the law of value operating on the world _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, pp. 238--39.
~^^2^^ K. Marx, Capital, (F.~Engels. Supplement to Capital), Vol. Ill, p. 904.
143 capitalist market. True, there is a tendency towards this since even under conditions of the world capitalist economy there is another tendency at work towards the internationalisation of production and exchange which inevitably takes the form of a striving towards a single monopoly. However, this tendency is offset by efforts aimed at creating an ``independent'' economy, a tendency that has been increasingly in evidence following the disintegration of the colonial system of imperialism.Analysing the specific features of the operation of the law of value in international trade, Engels remarked on the role of commercial capital in the conversion of value into the cost of production in the internal market. Commercial partnerships facilitated the equalisation of the rate of profit within the larger national partnership while fluctuating widely within different national commercial partnerships. Engels wrote: ``The merchant's efforts are deliberately and consciously aimed at making this rate of profit equal for all participants (in a partnership---N.B.). ...In the big trading companies the allocation of profit pro rata of the paid-in capital share is as much a matter of course... But this high rate of profit, equal for all participants and obtained through joint labour of the community, held only locally within the associations, that is, in this case the `nation'".^^1^^
The equalisation of the rate of profit within individual partnerships took place through equalising the rate of profit prevailing at different markets within the same country. Later, the rate of profit was gradually equalised between different nations exporting to the same market the same type of goods or similar goods. In other words, there was a process of equalisation of different rates of profit within the framework of a definite trade association or partnership. These partnerships imposed their prices on overseas buyers of home produced goods or on home buyers of overseas goods which enabled the merchants to secure equally high profits.^^2^^ The foregoing indicates that Engels did not think that world market prices were subject to regulation from _-_-_
~^^1^^ K. Marx, Capital, (F. Engels. Supplement to Capital), Vol. Ill, pp. 901--02.
~^^2^^ Ibid.
144 the average profit. Emphasising the specific characteristics of the external market Marx and Engels wrote that in tho world market nations act in the same way as individual branches of industries within which the means of production are fixed and for this reason they supply the world market with goods which are priced not on the basis of their cost of production but rather on the basis of their value.These specific characteristics of the law of value on the world market established by Marx and Engels during their analysis of capitalism has a certain significance for the world socialist market. Each socialist country expects compensation for the socially necessary expenditures of labour on her exports. In other words, she expects compensation for the social value represented by her export goods. At the same time within that country the value of export goods may exist in a modified form analogous to the cost of production: it may contain an element which redistributes the net income produced. But when the given goods reach the world market the expenditures of labour embodied in them become identical to the aggregate socially necessary expenditures of national labour.
In the world socialist market a socialist country operates as her goods' rightful owner and producer. It is only natural for her to be vitally interested in receiving adequate compensation for the labour expenditures put in. Add to this the fixed ``immobile'' existence of the means of production within a socialist country and it is evident that no objective conditions exist in the world socialist market to enable the conversion of value into the cost of production. It is clear that international value is in this case the centre of world prices.
The point of departure in the formation of the quantitative ``definiteness'' of international value and of international socially necessary expenditures is the formation of national value of a particular commodity within a particular country. In this process individual values acquire a measure of comparability to become part of the social (national) value.
International commodity exchange reflects a higher stage of production socialisation. In the world market national levels of expenditure come as individual levels of expenditure requiring a corresponding measure of social recognition. 145 The economic mechanism of social recognition at the international stage possesses a number of distinguishing features.
The relatively stable correlation ratios of socially necessary expenditures on different types of goods take shape as a result of repeatedly recurring processes of exchange involving these goods (within individual countries the proportion of exchange generally has a higher stability than in the international sphere). In commodity exchange between groups of countries stable levels and ratios of international expenditures are not formed for all types of products manufactured by the given group of countries and not even for all types of mutual export goods but rather they are formed for those goods which in the course of years have been regularly supplied to the given international market in significant quantities. In the world socialist market the most intense mutual trade is maintained by the CMEA countries. This is where relatively stable proportions of commodity exchange have emerged, thus giving the CMEA market a considerable regional importance within the global socialist market. This regional level of emerging international socially necessary expenditures on goods exchanged by the CMEA countries is subject to the influence from the levels of expenditures prevailing in the world capitalist market.
To give an example: the possibility of acquiring a particular type of product outside CMEA at a favourable price may cause production facilities engaged in the manufacture of the product to be curtailed within CMEA and the export of this product from CMEA would also be cut. This will hit exporters with the least, favourable production conditions particularly badly. In turn, it will depress the level of socially necessary expenditures. Conversely, the difficulty in acquiring certain types of goods (for instance, strategic goods) outside CMEA necessitates initiating and expanding less favourable or less profitable sources of these goods within CMEA. Increased expenditure on these types of goods will form part of the aggregate socially necessary expenditures and under certain conditions may become the chief regulator for the entire volume of these types of products. The relative independence of correlations of expenditures within CMEA is maintained by special conditions 146 characterising economic co-operation among the CMEA countries, which include among other things a more durable link between countries with planned economies, the capacity of national markets of the socialist countries, etc. All this taken together serves to cushion the adverse impact of external factors on the formation of expenditures within CMEA.
The international socially necessary expenditures within CMEA are in the final analysis expenditures made by the latter on a volume of goods and services sufficient to meet the needs of the CMEA countries at a regional level.
Marx repeatedly noted that socially necessary expenditures for the great majority of goods are expenditures corresponding to the average level within the respective industries. This does not mean of course that these expenditures coincide with the mean value of individual expenditures (national expenditures, in this case). The average economic value is formed under the influence of a number of factors, the main ones being (a) the correlation between the available resources of a particular commodity and demand for it;
(b) the share that goods produced from CMEA internal resources form of the overall volume of goods necessary to meet the requirements of all the CMEA countries; and
(c) correlation between the total output of the products and that part which is exported.
The correlations of socially necessary expenditures are subject to such factors as the dynamic movement of expenditures within different industries, the accelerated technological progress, rapid growth rates in production and other substantial investments made in the past period, prolonged production cycles, and the establishment of standard ratios between the level of expenditures and the volume of production. Of particular importance in this context is the identification of standard goods for determining social (national and international) expenditures. The choice of standard goods is by no means a mere technical method. It reproduces in basic outline the actual formation and social recognition of the level of necessary expenditures on staple consumer goods within each group of consumer values. Expenditures on other types and varieties of a particular commodity are derived from the latter.
147A crucial problem of scientific analysis and the quantification of international socially necessary expenditures within CMEA is to establish a range of products for each industry which can be exchanged on a regular and stable basis and thus participate actively in the formation of the resultant expenditures. At present there are two approaches to the solution of this problem of equalisation: one is based on the aggregate volume of output of a particular commodity within CMEA, the other is based on the volume of mutual exports. We believe that both approaches suffer from onesidedness.
Needless to say, the total output of goods cannot all be exported and a considerable part of the former does not exert a significant influence on the determination of the actual level of international expenditures. At the same time if the buyer has negotiated with three different firms and signed a contract with one of them it is evident that the price under this contract will have been influenced by all three firms. Similarly, the CMEA market is influenced both by actual exporters and potential exporters who are close to the former in terms of production conditions. The pressure of potential exporters on the level of expenditures that receive international recognition grows with the demand for a particular type of product and drops when demand does.
It is especially important in this context to take full account of potential export opportunities in those fairly frequent cases where countries with a low labour productivity in a particular industry act as the chief exporters to the CMEA market in the type of goods produced by the industry. In this situation neither the more efficient producers of these goods nor the importing countries can recognise the increased expenditures sustained by the exporter as internationally necessary expenditures. The latter will apparently gravitate more and more towards the national expenditures of the more efficient producers, even though the latter do not export the given type of product.
The formation of socially necessary expenditures within each national or international sphere of commodity-money relations proceeds in a certain environment, the nature of which (socio-economic, political, organisational conditions) determines the forms and methods of this objective process.
__PRINTERS_P_147_COMMENT__ 10* 148The economies of the CMEA countries have individual characteristics which are peculiar to them alone and which will persist for some time to come. On the one hand, CMEA as a community of sister socialist nations, presupposes planned co-ordination of production and mutual ties and a continued expansion in joint arid closely co-ordinated measures in production, exchange and consumption. On the other hand, CMEA is an alliance of sovereign states, who are the rightful owners of their own means of production, goods and services and who have monopoly rights over the external economic relations under their jurisdiction. As joint measures in production, construction, diversification and the intensification of production specialisation within individual industries expand, conditions are created for direct control by the participating countries over the formation of the international expenditures. If several countries tackle a production problem, it becomes necessary to compare the contribution of each with the result obtained and also to distribute equitably the profits secured as a result of co-operation.
Actually, this is what the deliberately controlled determination of international socially necessary expenditures is all about. The intensification of production specialisation among the CMEA countries prepares the ground for the planned formation of international socially necessary expenditures. When reduced to a quantifiable uniform international standard national contributions to joint projects and ventures can count on an equitable share of the resultant profits. Thus, the planned formation of international socially necessary expenditures presupposes, among other things, the redistribution of the profits resulting from joint projects and co-operation. However, at present direct methods of control over the formation of joint expenditures and methods of determining the participants' share of the resultant profits are not used widely enough in co-operation among the CMEA countries. The predominant forms of co-operation are based on bilateral and multilateral agreements for the exchange of goods and services produced by the participating countries under their own national economic development plans. Formed on the basis of the national planning, socially necessary expenditures serve as a point of departure in the 149 formation of international expenditures. However, the methods of determining them may be either direct or indirect. National planning is a direct method of determining socially necessary expenditures, but it is confined to the framework of national socialisation. Only insofar as socialist socialisation transcends national frontiers do real conditions arise for the direct determination of international expenditures and consequently for the direct determination of the share of each contracting party in the profits from their co-- operation. A different situation arises when, for instance, a bilateral trade agreement is signed which does not cover international specialisation in production and under which each contracting party is interested in obtaining its own ``share'', and in boosting its own national efficiency. In this case what is compared is not national socially necessary expenditures in the same industries of different countries, but rather expenditures on the products of different industries of the same country. In other words, there is a direct comparison of respective exchange efficiencies and not of expenditures within respective industries.
The effect produced by international commodity exchange has two basic elements: = (a) the metamorphosis of value forms which enables a country to receive goods which are in short supply in exchange for those of which it has an abundance and = (b) the saving of social labour by each participating country arising from the differences between the national expenditures on the export products and the expenditures which would have been sustained if the country undertook to produce the imported goods herself. If the latter magnitude is greater than the former in the case of each country, then the exchange is mutually beneficial. Correlations of national commodity exchange efficiencies may vary widely. Among the possible correlations of foreign trade prices for any two types of goods there is a certain range of mutual benefit which is limited by these correlations which coincide with the corresponding correlations of national expenditures of the participating countries (if foreign trade prices coincide with the correlations of national expenditures of one of the countries then the value produced by the mutual exchange drops to nil). Between these two limits there is a great number of points which express 150 the varying distribution of the benefit from mutual exchange among the participating countries. Naturally each country is anxious to raise its national exchange efficiency both by choosing the most advantageous range of exports and imports and by obtaining the best price adjustment and co-- ordination.
The question arises as to whether there is any central approximation which will ensure in a given situation of production conditions and exchange an economically stable ratio of national exchange efficiency. Apparently, such a centre will take the form of a situation in which neither country will be able to use export resources more efficiently than the export situation allows.
As a result of a more or less prolonged process of approximation and of mutual concessions on prices and the range of goods exchanged, commodity exchange between countries approaches a condition which could be described as a balanced correlation of national exchange efficiencies. National exchange efficiency for each participating country is fixed proportionately in relation to the labour productivity in their export and import industries. This, however, means that the profits resulting from commodity exchange are distributed in accordance with the international estimates of the production results of each country involved in the mutual exchange. The mechanism of balancing national efficiencies of exchange leads to the establishment of prices which gravitate towards international expenditures.
This is the complex mechanism that governs the formation and social recognition of international expenditure levels in international commodity exchange. Within CMEA, the role of this economic mechanism and the strain on it increases on account of the fact that direct transfer of labour and capital resources between countries within CMEA occurs on a relatively limited scale.
Thus, when co-ordinating the national economic development plans of a country care is taken to exercise direct control over the formation of international socially necessary expenditures, the magnitude of which later determines the given country's share of the profits resulting from commodity exchange.
In the case of market relations between two or more 151 countries, the national exchange efficiency is normally taken as the point of departure. The contracting parties under this arrangement find out about the international socially necessary expenditures indirectly through the medium of their national efficiency.
Thus, the formation of international expenditures in mutual co-operation among the CMEA countries is maintained through two interlocking economic mechanisms. However, the indirect determination of international expenditures through the interaction of national exchange efficiencies is not identical to the formation of international value under a capitalist economy. We believe that the specific features of the indirect determination of international expenditures in comparison with the spontaneous formation of international value lie in the fact that national goods involved in international exchange are both produced in a planned way and their value is formed in a planned way. The volume of exports and imports is also regulated by the national planning agencies, the market for their realisation generally being known in advance. The determination of international expenditures on the CMEA market is a key to ensuring an equivalent exchange among the CMEA countries.
The problem of equivalency is not new, of course, but today its practical role in efforts to arrive at an understanding of the economic relations among socialist and among capitalist countries is of major importance.
As pointed out elsewhere, an exchange is said to be equivalent provided it is maintained in accordance with international value. A non-equivalent exchange results when price deviates persistently from international value and the resulting difference is appropriated continuously by one of the contracting parties.
The economic superiority of a capitalist country enables it, through the mechanism of monopoly-instituted high or low prices, to impose terms of exchange which are advantageous to it alone. This is the essence of non-equivalent exchange. The sale of goods above or below their national social value cannot be regarded, in our opinion, as a sign of non-equivalent exchange. Equivalency in the broad sense implies a comparison of individual expenditures of labour 152 time and expenditures of socially necessary labour time. This comparison manifests itself in a variety of forms conditioned by the character of social labour and the dominant type of production relations.
Under socialism we have indirect comparison of labour expenditures with socially necessary ones through the medium of what is known as value equivalency which is a form of social value. Value equivalency underlies monetary equivalency which is directly observable. Value equivalency, as an indirect criterion, cannot provide a faithful picture of the actual efficiency of particular labour expenditures from the standpoint of society as a whole. This distortion is made worse by monetary equivalency particularly with paper money circulation. To mitigate the distortion of the actual labour equivalency arising from the use of a monetary equivalent society takes advantage of such counteracting factors as rent payments, interest and charges for the use of productive assets.
In the case of international economic relations monetary equivalency increases deviations from the labour equivalency not only because of the operation of the currency exchange rate but primarily because of the specific operation of the law of value in the world market.
In the course of world trade the goods exchanged come as a concrete form of national labour of varying productivity. The specific features of the law of value in the world market lie in particular in the fact that more productive labour comes as one of higher intensity and as such is exchanged for a relatively greater quantity of labour of lower productivity.
Marx in his examination of the problem of exchange in world trade noted: ``Say, in his notes to Ricardo's book translated by Gonstancio, makes only one correct remark about foreign trade. Profit can also be made by cheating, one person gaining what the other loses. Loss and gain within a single country cancel each other out. But not so with trade between different countries. And even according to Ricardo's theory, three days of labour of one country can be exchanged against one of another country---a point not noted by Say. Here the law of value undergoes essential modification. The relationship between labour days of 153 different countries may be similar to that existing between skilled, complex labour and unskilled, simple labour within a country. In this case, the richer country exploits the poorer one, even where the latter gains by the exchange, as John Stuart Mill explains...."^^1^^
The problem of the exchange of products of a higher and more productive labour for products of less productive labour is very relevant to the world socialist market too. This being so, some economists sometimes speak of this problem having similar consequences in both the world socialist market and the world capitalist market.
It is a fact that the international value of food products, as with other goods, is determined by the expenditures of labour sustained by the countries which are the chief producers of food. What is more, small commodity value proportions also influence the international value of food products. That is why the international values of all types of goods involved in international commodity exchange are formed in accordance with the level of labour productivity prevailing in the industrialised country and not in the ``world'' village.
A certain group of raw materials and food products included in the export programmes of developing countries have a deliberately understated international value because of a number of known historical causes. The international value of a volume of commodities that reaches the capitalist market is determined by the labour expenditures necessary from the standpoint of their production and realisation in the industrialised countries. As a result of the developing countries exchanging their goods for goods embodying a labour of higher productivity in accordance with international value, i.e., based on equivalent, the developing countries continuously lose part of the national value embodied in their goods. The losses and gains of developing countries involved in world trade arise from the differences in labour productivity existing between them and their trade partners. Value equivalency may well be observed but it is precisely here that the differences between value _-_-_
^^1^^ K. Marx, Theories of Surplus-Value, Part III, Moscow, 1971, pp. 105--06.
154 and labour equivalences come to light in bold relief: the exchange may be equivalent in terms of value, but it is not in terms of expenditures. This conflict between value and labour exchanges is the basis for the exploitation of developing countries by industrialised capitalist countries. The law of value with its mechanism of exchange equivalency acts in the world capitalist economy as a law of exploitation, of the plunder of developing countries by economically advanced capitalist countries. This exploitation is based on equivalency, with the non-equivalent exchange being the additional supplementary source which makes all the difference.Nonetheless the view has been expressed by some economists that the industrialised capitalist countries' exploitation of developing countries is based solely on non-- equivalent exchange. We believe that this view is wrong. Actually the material basis of the domination of industrialised capitalist countries is their relatively higher levels of labour productivity, particularly in export-oriented industries; it is this given equivalent exchange in the world market, that secures greater profits for them.
Marx had this in mind when he wrote: ``Just as a manufacturer who employs a new invention before it becomes generally used, undersells his competitors and yet sells his commodity above its individual value, that is, realises the specifically higher productiveness of the labour he employs as surplus-labour."^^1^^
Here the gain arises from the national value being lower compared to the international one. An industrially advanced capitalist country also benefits from its imports.
There is quite a different situation in the case of developing countries where labour productivity is low and where the economic structure is weak. By participating in world trade these countries can expect to secure a profit of sorts, firstly by importing goods they do not produce and whose national value if domestically produced would be higher than the international one, and, secondly, by exporting goods embodying a high labour productivity . However, this is no more than the opportunity to derive a profit and can only become _-_-_
~^^1^^ K. Marx, Capital, Vol. Ill, p. 238.
155 a reality when the import structure corresponds well with the country's economic development perspective. By using her economic superiority an industrialised capitalist country is free to impose on a less developed country an import which would actually inhibit the development of that country's productive forces even though the former sells her goods at the international value.Apart from this, industrialised capitalist countries are in a position to substitute synthetic materials for natural ones. This leads to a drop in raw material prices and has an adverse effect on the economic opportunities of the economically backward countries which traditionally export natural raw materials. For instance, by importing consumer goods at comparatively low prices, an economically backward country meets the consumption requirements of its compradore bourgeoisie. To cover the imports the country is compelled to export traditional primary products. Those countries which implement industrial development projects while importing capital goods benefit from their importexport operations in a substantially different sense. The redistribution of national income in favour of a country with an economic superiority is associated with the structure of import-export operations and can be effected on the basis of equivalent exchange. Non-equivalent exchange usually results from an interference with the way in which the law of value operates and is associated with the economic policy of monopolies. It is maintained through the medium of the so-called price scissors.
With economic relations between socialist countries the importance of equivalent exchange is often exaggerated and is sometimes even identified with mutual benefit. Commodity exchange based on an equivalent, in accordance with international (regional) value, reflects the fact that the labour embodied in one national product is indirectly equivalent to the labour embodied in another national product, because it is equivalent to internationally recognised socially necessary expenditures of labour.
International values are the centre around which national values fluctuate. National values may be higher than international ones, lower than them, or equal to them depending on the correlations of national or international conditions 156 of production. The deviation of national values from international ones is not opposed to the principle of equivalence. In fact it is what makes the mechanism of the latter possible.
By making national expenditures equal to international ones and by exchanging the national products according to their international values, in the world socialist market, all countries with their own national labour expenditures are subject to the same criterion---international value. This equality with respect to the criterion of equivalence is a contradictory thing and may have a varying effect on the national socially necessary expenditures of labour for the manufacture of goods which are supplied to the world market. This problem is particularly important when industrially less developed countries participate in international specialisation and production co-operation. Under the Comprehensive Programme of integration the less developed socialist countries will benefit from being able to rely on effective co-operation and assistance. This will enable them to raise both their technological level and the quality of their specialised products. It is also intended to provide these countries with ``soft loans" in addition to the special credits that the International Investment Bank makes available. These measures, outlined in the Comprehensive Programme, are expected to help level up conditions of production in the different socialist countries.
For instance, if a less developed socialist country (in industrial terms) specialises in the manufacture of, say, combine harvesters it is expedient to fix a price level that would enable this country to receive adequate compensation for its national socially necessary labour expenditures on combine harvester production. Another way of ensuring the efficiency of a socialist country's foreign trade, when the country has a low labour productivity, is through a careful choice of export commodities.
Countries with a high labour productivity gain more from an equivalent commodity exchange because less developed countries sometimes have to expend more labour time to produce the same volume of goods. However, on the basis of equivalent exchange each country may receive a greater magnitude of national value from her imports than that embodied in her exports.
157In other words, there is a possibility of securing a profit through equivalent exchange because export goods come from the industries with the most favourable ratios of national and international expenditures. This is also possible through the use of mutually co-ordinated economic measures. Mutual benefit in equivalent exchange is achieved by each country participating in the more efficient areas of the international socialist division of labour. The question arises when for objective economic reasons national expenditures deviate from their centre (international socially necessary expenditures of labour), should one regard this as ``unfair treatment" towards other participants in the exchange. We believe that there is no substantive reason for regarding the deviation of national foreign trade prices from the world prices as a drawback for the latter.
Firstly, although equivalent exchange is based on international value this does not imply that each participating country should always obtain equal benefit.
The deviations from the equivalency of exchange may, under certain circumstances, contribute to levelling up the benefit of the exchange.
Secondly, price deviations, from proportions of equivalency and within certain limits, do not cause a redistribution of the national incomes among the participating countries, rather it leads to a different distribution of the resultant benefit of international exchange. To ensure this, it is necessary to set up a reliable mechanism for distributing the profit which results from international production specialisation.
Thirdly, at a particular stage of development deviations of the foreign trade prices from expenditures are a necessary form of changing production proportions and exchange within CMEA. Consequently, the very disturbance of the equivalency becomes a method of its restoration.
Finally (since this involves an exchange between countries, which own their export products), the equivalency of exchange should be regarded not only from the standpoint of individual goods but also from the standpoint of the overall mutual benefit of export activities. Within mutual exchange, if price deviations from international expenditures are economically justified and conform to a specified 158 material structure of mutual exports, then individual deviations from equivalency would cancel themselves out.
International value is used to compare national socially necessary costs, national value, which represent a given nation's labour expenditures. When a country buys goods from another country at a particular price it pays for the goods out of its national income. From the standpoint of the purchasing country these expenditures, including the profit accruing to the vending country, take the form of expenditures on the production of the goods. At the same time each country is interested in ensuring that these expenditures are lower than those it would make if it produced the same goods itself.
Each country can compare the value of the goods she exports and that of the goods she imports on the basis of her internal prices. In this case the benefit from exchange coincides with the efficiency of foreign trade. However, this benefit may be overt or covert depending on the principle by which expenditures on exports are compared with the possible expenditures on producing the goods a country has to import. The mechanism of the law of value in world trade relates expenditures on imported goods to the possible socially necessary expenditures that would be sustained if the country decided to produce the imported goods herself. Actually, this involves a comparison of the costs of production.
Each socialist country is interested in ensuring that a minimum possible part of her national income be transferred through the foreign trade channels in order to secure adequate quantities of imported goods. At the same time all socialist countries have a vital interest in mutually advantageous trade. We are witnessing an intricate and multidirectional intertwining of national and overall economic interests. The optimum combination of these factors follows from the efficient utilisation of all the existing economic levers.
The CMEA international market is playing a very special role within the socialist commonwealth of nations as it helps identify the real benefit by relating world prices to rational ones, by giving each country an interest in choosing a particular variant of stable exports or imports and by 159 facilitating progress in chosen areas of national production specialisation.
Now that the CMEA countries are becoming increasingly industrialised the further development of international production specialisation will speed up the expansion of their foreign trade, while at the same time it will place a premium on greater efficiency in mutual trade.
The nature of the economic interrelations among the socialist countries presupposes the complete equality of the partners, mutual assistance and a common interest in securing mutual benefit.
With the current spectacular progress in science and technology, the effective growth of the national productive forces calls for their close dovetailing through international specialisation of production. This is the basis of mutual benefit.
Ensuring mutual benefit goes beyond the problem of securing a profit from foreign trade operations. Its solution involves a series of measures aimed at developing further co-operation within CMEA, primarily planning co-- operation.
The benefit of international commodity exchange is usually associated, on the one hand, with the metamorphosis of value forms through which a country receives goods she needs in exchange for the goods she exports. Today the importer is not only interested in meeting shortages in the quantity of certain types of goods, he is increasingly interested in their quality. Emphasis is being increasingly placed on how up-to-date the goods are, and on whether they meet the current requirements imposed by scientific and technological progress. Other important considerations include guaranteed supplies of spares and the ease of operation and maintenance. On the other hand, for each participating country the benefit it secures from mutual exchange comes in the form of savings of social labour which result from the difference between national expenditures on exports and those that would be sustained if the imported items were produced at home. If the latter exceeds the former then the exchange makes sense.
Mutual benefit implies, firstly, that each participant derives a profit from its trade with the others. The 160 magnitude of the benefit obtained by each of the partners cannot be the same because of the varying levels of labour productivity which underlie the varying correlations of national socially necessary expenditures (national wholesale prices) and international expenditures (current contract prices). Secondly, it implies differing structures of production and differing correlations of labour expenditures on the production of a particular range of goods. This is something that is seen in the different comparable prices in the CMEA countries. Thirdly, it implies differing structures of foreign trade turnover. These were shaped by the national economic structure, traditional export and import patterns and the advantages arising from mutual co-operation and current contract prices in mutual trade among the GMEA countries.
In this situation mutual benefit implies the achievement of a certain correlation of the benefits obtained by partners from mutual trade.
An optimum correlation of national efficiencies would be achieved when the way prices relate to one another indicate that no country could use the given export resources more efficiently than they are already being used. The achievement of this optimum mutual benefit is facilitated by the choice of the most efficient export industries while the profit arising from commodity exchange is distributed in accordance with the international assessment of the production results obtained by each participating country.
Therefore, one should bear in mind the real extent of the losses in each transaction and the possibility of compensating for them by gains from other transactions. The equilibrium of benefits secured by trading partners should be regarded from the standpoint of the overall mutual commodity turnover.
When economic co-operation progresses in a planned way aimed at intensifying and diversifying the division of labour among the socialist countries, and at facilitating the economic integration of the CMEA countries, the participating countries achieve an ``equilibrium of benefits" from mutual trade by the planned balance of national exchange efficiencies.
To ensure a planned identification of mutual benefit it is necessary in the first place to identify the national 161 efficiency of each CMEA member's trade with other CMEA countries. Secondly, it is necessary to ensure mutual co-- ordination of national efficiency either through changes in the pattern of foreign trade or through prices. Thirdly, it is necessary to compare the national trade efficiency among CMEA countries with that obtained from trade with nonsocialist countries.
Conditions necessary for ensuring mutual benefit depend both on the economic situation of co-operation and on the economic mechanism of each socialist country. The co-- ordination of national economic development plans makes for the stability and durability of ties, guarantees markets, and allows a country to meet its needs from external sources. In this sense co-ordination is an essential condition of mutual benefit. The achievement of mutual benefit also depends on co-ordinating certain elements of the economic systems in the different socialist countries. Despite some differences in the national economic mechanisms there are a number of economic incentives which give economic organisations a genuine interest in undertaking certain obligations in international specialisation and production co-operation and, consequently, in the practical implementation of economic co-operation. The stability and durability of economic relations depends to a large extent on the national economic mechanisms coming together, and this, above all, affects the working-out of standard norms of material interest. Co-ordinating incentive norms will allow an economic interest to be ensured and will form a solid material basis of the mutual benefit from economic co-operation.
Determining conditions of mutually advantageous exchange is all too often identified with securing conditions for equivalent exchange. Mutual benefit is associated with exchange equivalency since it is derived from exchange through the price mechanism. If mutual benefit, from the standpoint of the market alone, depends on two basic factors: the structure of commodity exchange and the correlations of internal and contract prices, then the equivalency is directly dependent on price formation, more specifically on the socially recognised centre of prices around which individual expenditures fluctuate. Alternatively, conditions of exchange equivalency may be regarded both from
__PRINTERS_P_161_COMMENT__ 1/2 11---0516 162 positions of an individual transaction and from the standpoint of the overall commodity exchange.Until 1964 mutual trade between the socialist countries operated on the basis of bilateral settlements. Under these settlements currency reserves from the export of products to a given country were to be used to purchase goods from that country. This settlement procedure made the trading partners concerned to balance mutual deliveries and stimulated them to choose the more advantageous products for each trade transaction. In January 1964 agreement was reached by which it was no longer necessary to balance trade on a bilateral basis. The essential thing was to balance trade within the socialist alliance as a whole. At this point it would be in order to examine the meaning of the principle of equivalency from the standpoint of the overall commodity turnover.
When equivalency is viewed from the standpoint of the overall commodity turnover, each country, on the basis of equivalent exchange, is in a position to obtain a benefit because goods for export and import come from those industries with the most favourable correlations between national expenditures and contract prices.
Thus, the equivalence of exchange in world trade is only a particular case of securing mutual benefit.
Owing to differences in the production environment in different countries national values can deviate from the internationally recognised equivalents. Consequently, variations in the benefit obtained by different countries are not only possible, but are often a fact.
Economic integration based on the achievement of mutual benefit as a material incentive, despite appreciable differences in labour productivity and other economic factors, does not exclude deliberately regulated deviations from the value equivalent. Deviations from international (regional) value, that takes the form of world prices, make it possible in the first place to take into account the specific conditions of production and marketing in the CMEA countries, secondly, it facilitates the achievement of material interest in co-operation, and, thirdly, it creates conditions for intensifying mutual trade among the CMEA countries as opposed to trade with third countries. Establishing 163 such a system requires that wholesale prices be brought closer to the national social expenditures. This makes it possible to accurately identify differences in the production conditions among the CMEA countries, on the one hand, and in the industrialised capitalist countries, on the other. It also allows one to determine more precisely the extent to which expenditures by the CMEA countries deviate from the prices prevailing in the world commodity markets.
Mutual benefit is realised through correlations of contract and national wholesale prices.
As a result of the economic reforms implemented in some socialist countries their internal prices were brought significantly closer to socially necessary expenditures. In other socialist countries internal prices were brought closer not only to socially necessary expenditures but, through the medium of a variety of normative indices, to the prices prevailing on the world commodity markets. As a result, in some countries there was still a gap between domestic and foreign trade prices, while in others, this gap was more or less closed. Differences in the principles of domestic price formation result in different correlations between domestic prices and contract prices. This is true even in those cases when no significant gap exists in the correlation of national socially necessary expenditures of labour. As a result the real extent of the trade benefit in a particular product is distorted as is the idea of benefit or non-benefit from a country's foreign trade turnover.
Under the new conditions, the economic benefit obtained by a firm or an economic amalgamation from its export and import operations does not dispense with the problem of a country's foreign trade efficiency and of ensuring that trade among the CMEA countries is mutually advantageous. On the contrary, it tends to complicate the problem. An individual enterprise is in a position to establish quickly a direct link with a contracting party if it evaluates effectiveness from the standpoint of its own profit alone, but it is unable to evaluate correctly the contribution to the country's overall benefit. State centralised planning, which shapes a variety of measures aimed at stimulating priority development in trade among the CMEA countries, is the only condition for ensuring the overall national __PRINTERS_P_163_COMMENT__ 11* 164 effectiveness of foreign trade and the possibility of co-ordinating the mutual benefit shared by all the socialist countries.
Despite the fact thajt) benefit is realised through prices .and their specific levels and despite the fact that a definite .correlation of the benefit among different countries is secured through the same mechanism it would be wrong to regard price as the only condition for ensuring mutual benefit. .The provision of conditions favouring mutual benefit in trade among the CMEA countries is associated with co-- ordination of a number of measures affecting domestic economic policy. This ensures the material interest at all the stages of the economic system participating in: foreign trade ( particularly in cases of direct production relations), with the elaboration of a system of external economic measures creating a preference in mutual trade compared to trade with third countries.
The problems of price formation on the CMEA market are becoming more urgent now that economic integration of the CMEA countries is being developed and planning and economic management techniques in each of them are being improved.
In accordance with the principles formulated at the Ninth Session of CMEA, the mutual trade among the CMEA countries is based on the practice of fixing contract prices according to world prices but without the harmful influences of the capitalist market with its characteristic trade cycles.
The system of prices prevailing on the world market is the system of contract prices based on the prices now in force on the world capitalist commodity markets. Between 1946 and 1950 the Soviet Union traded with the European socialist countries on the basis of the current prices prevailing in the world market. Between 1951 and 1953 prices on the capitalist world commodity markets rose sharply and the stop prices of 1950 had to be used in trade among the socialist countries. This was the first attempt at ridding world prices of some of the anarchic elements of the capitalist market. Between 1954 and 1957, when prices fell sharply, the problem of reviewing the basis of contract prices had to be tackled once again. In that period the contract prices in mutual trade among the socialist countries was based on the prices quoted on world commodity 165 markets. In 1958 prices in the world capitalist market, particularly for raw materials, slumped.
In the Subsequent period prices of finished goods and raw materials changed in favour of the former. In view of this the Ninth Session of CMEA (June 1958) recommended that contract prices for the period 1958--1964 be determined on the basis of the 1957 world market prices. When contract prices for 1965--1966 were reviewed the average world prices for the five years 1960--1964 were taken as the base.
Contract prices co-ordinated on a bilateral basis continue to remain stable throughout the period of contract. The point of departure in the formation of contract prices is the choice of a base price, base market. For instance, for oil the base world prices are taken to be those quoted of oil on the Eastern coast of the Mediterranean. For iron ore it is the Swedish export prices, for ferrous rolled stock it is the export prices in force at Antwerp or the prices prevailing at other similar markets.
Determining contract prices on the basis of the prices prevailing on the world commodity markets is complicated by the choice of commodity market. At the moment there is no single world, universal market in which both capitalist and socialist markets could operate as constituent components. A capitalist market comprises a number of national commodity markets.
The plurality of world commodity markets gives rise to a plurality of prices for one and the same type of product. Besides, for each product there is one price at which the product is sold to a permanent wholesale buyer, and another price at which individual transactions are concluded, and a third price at which the product is sold to socialist countries. The plurality of prices is also associated with credit relations. One price prevails for selling a product on credit while another prevails if the product is sold for cash. Different prices are fixed for the same type of goods depending on the influence of political and monopoly groups, currency zones and deliveries under special programmes. Apart from that, each world commodity market has prices that are formed in different ways. Such prices include first of all those prevailing at international commodity exchanges (1), where masses of goods, including industrial and 166 agricultural raw materials, are quoted. Other prices are quoted in special catalogues and price lists (2). A third category of prices is those used on world capitalist markets. These prices are fixed as an average statistical level calculated on the basis of customs statistics for a specified range of goods (3). In world capitalist trade there are also prices used for individual transactions by major exporters of a given product (4). However, there are no regular publications quoting such prices, known as representative prices. Finally, there are the domestic prices used in capitalist countries (5). These differ from foreign trade prices because of certain protectionist and tax policies and the great number of intermediate commercial links and especially because of the influence of monopolies and state-monopoly organisations.
The prices prevailing on the world commodity markets reflect both the production conditions in the capitalist countries and the various methods of state-monopoly regulation. So far the production conditions in socialist countries have insignificant influence on the formation of prices on world commodity markets. Those goods on whose price level the socialist countries are exercising an appreciable influence are oil and petroleum products, coal, ores, timber and sawn timber, rubber, pig iron, ferrous rolled stock, aluminium, etc. The socialist countries are major buyers or sellers of these goods. As the socialist countries' share of trade on the world market grows, the conditions of production and marketing in the socialist countries are expected to increasingly determine world prices.
The instability and plurality of prices on the world commodity markets and the proportions of capitalist reproduction reflected in them make them difficult to use as a reference point for trade among the socialist countries and they, therefore, have to be carefully adjusted.
World prices are adjusted to exclude fluctuations arising from changes in the market situation and the activity of monopolies and the policies of capitalist countries. This is done in order to bring them closer to the international value created in the world capitalist economy. Bringing the prices prevailing on world commodity markets closer to international value does not exclude them from the impact of the contradictions of capitalist reproduction. Thus `` 167 purified'' prices, even if they are brought closer to international value, Will continue to reflect capitalist conditions of production with their tendency for raw material prices to decline. When these prices are used as a basis for contract prices, they make it preferable to export machinery and equipment, rather than raw materials, fuel and food.
There is a considerable difference of opinion among economists about the use of the prices prevailing on the world commodity markets for trade among the socialist countries. Some consider that commodity prices in mutual trade between socialist countries must be determined by the expenditures necessary within the framework of the world socialist economy. Others believe that in order to secure an equivalent equitable commodity exchange between socialist countries it is essential to use world market prices after excluding those elements which result from extraeconomic and other distorting factors.
The world socialist market co-exists with the world capitalist market. On the world capitalist market thesocialist countries purchase industrial equipment and some raw materials which are in short supply at home. The production conditions in the socialist countries influence price formation on a limited range of goods on the world market. It would be a mistake, however, to conclude from this that the world socialist market is a constituent part of a single world market where a single world value is created and that, therefore, prices formed on the world commodity markets are the only objective criterion for trade among socialist countries. International commodity exchange is maintained on both the socialist and the capitalist markets and these function in fundamentally different ways.
The world socialist market and the way it functions reflects a particular stage in the formation of the world socialist division of labour, a phase in the growth of the world socialist economy.
However, even at the present stage in the development of the world socialist market, particularly the regional CMEA market, it represents a totality of highly specific planned realisations through the market.
Trade between socialist countries is largely based on inter-governmental agreements concluded in accordance with 168 the exigencies of co-ordinating the national economic development plans of the countries involved. These trade agreements specify a definite price level which remains const ant for the duration of the agreement.
The CMEA market functions in such a way as to ensure the mutual benefit and the material interest of each participating country in expanding mutual trade. This cannot be achieved through the mechanism of ``automatic spontaneous market regulation'', or through the free play of prices on the basis of competition with all the resulting consequences.
Under socialism production quotas are regulated in a planned way and in this situation a competitive market cannot serve as a reliable criterion. Differentiation, the enrichment of some production collectives and the ruin of others, these things are incompatible with the essence of public ownership in the socialist countries. It is common knowledge that socialism does not rest on groups or individual collectives owning the means of production, but rather on public ownership, that is where society as a whole owns the means of production and where society is interested in all the available productive forces being used efficiently in the common interests of prosperity.
Socialist production is immediately social and is planned in an organised way. It differs greatly from the capitalist production with its market regulation. Commodity relations under socialism play a subsidiary role. The regulation of production depends not on the existence of commodity production as such but rather on the substance of the socialist mode of production, on the nature of the existing ownership of the means of production. The market mechanism cannot be a regulator of socialist production because under socialism the social character of labour is insufficiently mature and there, therefore, exist commodity-money relations and economic activity is subject to the law of value.
In the present situation of the world socialist economy, foreign trade prices are designed to stimulate a rational pattern of the international socialist division of labour and to stimulate production specialisation and co-- operation.
169As international specialisation develops stable commodity Hows emerge and regional commodity markets come into being within the CMEA. The regional commodity markets within the CMEA market are characterised by the massive purchase and sale of different commodities. Another of their characteristics is the relatively limited number of sellers who account for the bulk of exports and imports of similar products. The level of international (regional) expenditures for these products is determined by their production conditions (at any rate they serve as a reference point).
Within the framework of CMEA economic co-operation commodity markets for machinery and equipment are formed. Thus, the bulk of machine tools supplied to the CMEA market comes from the German Democratic Republic, Czechoslovakia and the USSR. Cranes and hoisting and transport equipment are supplied by Bulgaria and the GDR, tractors by the USSR, railway rolling stock by the GDR and Poland, and motor vehicles by the USSR, Czechoslovakia and the GDR.
The commodity markets emerging within the world socialist market are already playing a crucial role in the CMEA countries' national reproduction processes. Purchases of cranes, combine harvesters and cars on the CMEA commodity markets amount to 90--100 per cent of the imports of such items by countries like Bulgaria, Poland and Mongolia.
Commodity markets for fuels and agricultural products have also been taking shape within the CMEA market. The principal suppliers of fuels and raw materials to the CMEA market include the USSR (oil, petroleum products, iron ore, zinc, cotton), Poland (coal and zinc), Rumania (petroleum products), Poland and Bulgaria (zinc). Imports of coal, oil and iron ore from the CMEA regional commodity markets meet from 60 to 100 per cent of the domestic needs of the socialist countries for fuels and raw materials. At present, in I he regional CMEA markets expenditures of socially necessary labour on fuel, raw materials and agricultural products run at a higher level than in some of the world capitalist markets.
The special level of production costs in mining and agriculture in the socialist countries stems from the need to use 170 low productivity mines in difficult geological conditions and also from the higher wage levels for industrial workers and farmers in the socialist countries compared to those in the capitalist countries which export the same type of products. The comparatively high level of prices for engineering products stimulates production expansion and exports. The relatively low level of prices for raw materials and fuels in a situation marked by a scarcity of natural resources, a high level of capital inputs and a rapidly growing demand, relative to mining potential, combine to create a massive demand for these commodities on the world socialist market. In addition, because of the clearing system of settlements, socialist countries seek to buy raw materials and fuels with the proceeds from their sales of other types of raw materials and fuels (goods in short supply).
A different situation is taking shape on the CMEA machinery and equipment markets. Here, over the past few years, there has been a continued balance of demand and supply through levelling up the volumes of mutual deliveries of engineering products. Indeed, whereas in 1960 exports were lower than imports, in 1965, they covered a substantial proportion or all of the imports. At present, there is a tendency towards expanding machinery and equipment exports. Machinery and equipment now account for a quarter of the aggregate increase in foreign trade turnover.
The CMEA countries take the export prices of the major export (or import) transactions concluded by firms (the major suppliers of machinery and equipment) as the current world base prices for certain types of machinery and equipment in trade within CMEA.
At the same time, in each major transaction the firm involved specifies its own price. Apart from that, a firm fixes a price level which takes into account the specific delivery conditions for particular equipment (paid for on credit terms or on a lease basis). That is the reason for the plurality of machinery and equipment prices. Engineering products manufactured by the socialist countries which are members of CMEA have performance characteristics which differ from similar types of machinery and equipment produced by foreign firms and this makes the choice of samples much more difficult.
171The plurality of prices for engineering products coupled with the considerable difficulties in substantiating and choosing inhibit the use of these prices as a basis for contract ones. In practical terms it becomes impossible to use the existing principles of price formation when contract prices are iixed for units and components because information about the world prices for these items is, for the most part, not available.
The Comprehensive Programme of economic integration of the CMEA countries lays great importance on mutual trade in machinery and equipment. This group of commodities is the most active and dynamic sector of their overall commodity turnover. It is intended to improve mutual trade in machinery and equipment by efficiently and rapidly transmitting to the buyer relevant information about the available exports. In addition, measures will be taken to radically improve maintenance and after-sale services for the machinery and equipment supplied. This will include setting up special maintenance centres. Inasmuch as the CMEA machinery and equipment market coexists with similar world commodity markets systematic market research is becoming imperative.
The issue of prices reflecting production conditions within the socialist countries is becoming urgent primarily because of the continued progress in the international production specialisation which is the material embodiment of its internationalisation. As specialisation becomes more diversified and develops in breadth and in depth, the socialist internationalisation of production is increasingly being realised and production conditions arise which determine the international socially necessary labour expenditures within the world socialist economy. A question arises in this connection: would it not be possible to take the production costs of specialised individual enterprises and groups of enterprises manufacturing a particular range of products in the CMEA countries as a basis for contract prices for the specialised products on the world socialist market? There are two possibilities here.
To begin with, prices prevailing on the world commodity markets are generally lower than those of the socialist market. A country engaged in the manufacture of specialised __PRINTERS_P_171_COMMENT__ 12* 172 products niay have a relatively low labour productivity and a higher level of wages than other C.MKA countries. In this case the formation of foreign trade prices would reflect comparatively high national production costs and would result in comparatively high prices. Should the foreign trade prices be far higher than the prices on the world commodity markets, then the importing countries would have no interest in purchasing specialised products. In this situation, all other things being equal, it would be more profitable for them to buy these products on the capitalist market rather than produce them themselves. It would be more profitable to exploit the advantages of participating in the world division of labour.
The other possibility is that the productivity of labour in one country is higher than in the other countries and consequently the national production costs are comparatively lower. In these conditions, foreign trade prices based on lower national production costs arc equal to or even lower than prices prevailing on the world commodity markets.
In this situation the prices on the world commodity markets cannot be used as a reference point at all with the result that the only basis for prices on the world socialist market are the current socially necessary expenditures sustained by the major exporters of the given machinery and equipment. Determining prices for specialised engineering products, based on the expenditures sustained by the major exporters makes it possible to avoid some settlement difficulties associated with the absence of reliable world prices for engineering products and particularly with a choice of similar typos of machinery and individual components.
Expenditures on the manufacture of specialised products can only be taken into account in a rather relative way because each country can only determine its own production expenditures. Another sovereign country's expenditures on the manufacture of products can only be taken into account through the price it quoted during negotiations over a specific contract or trade agreement. Each sovereign country calculates its own production costs, fixes its export efficiency factors and also what would be advantageous and what would not be advantageous. This freedom enables it 173 to impose a price ceiling for specialised products. It is around this that mutually acceptable decisions for specific agreements are negotiated with its partners.
We believe that prices for specialised products should reflect conditions in the country where these products are manufactured. At the same time, these prices should be acceptable not jnly to the exporter but also to the importer; they should meet their mutual economic interests. In this connection there is the question of limits on price stability.
A buyer of machinery, after deciding not to produce this type of machinery himself, expects that the exporter of this machinery will derive a profit from expanding his production capacity and will be motivated to lower his price, because he would have no interest in keeping prices on the same level for a period of years. The principle of long-term price stability for machinery and equipment at best meets the exporting country's profit interests, but it may not always meet the interests of the importing country. The principle of mutual benefit in this situation is observed only during negotiations preceding a contract. Long-term price stability cannot reflect either the ever-changing production conditions or the changing market trends, thus it becomes a brake rather than an incentive for specialisation. In other words, it comes into conflict with mutual benefit, the basic principle of economic co-operation. At the same time the planned character of economic co-operation among the socialist countries presupposes a dynamic pattern of mutual benefit and consequently a dynamic way of solving the problem of foreign trade prices.
Price, as one of the levers of plan realisation, must reflect the whole range of changing economic conditions and for this reason, if for no other, it must be sufficiently flexible. Apparently, it would be advisable, when agreements covering production specialisation arc being negotiated, to foresee in advance the principal conditions underlying price variations and in this way ensure a continual if not simultaneous observance of the principle of mutual benefit and of combining national and overall international interests of the socialist countries concerned. An economically substantiated price review based not on the formal indices of the five 174 year development periods but rather on the observance of production conditions will facilitate a further intensification and diversification of international production specialisation.
The prices prevailing on the world socialist market must help solve current and long-term problems of economic cooperation while the principles underlying price formation must conform to objective processes.
The most important principle of price formation is the unity of prices for the same or similar type of goods involved in all commercial transactions concluded between socialist countries. Uniform prices ensure the equivalence of mutual relations in foreign trade among socialist countries since they imply the use of a uniform criterion of exchange (a qualitatively definite magnitude).
Another principle of price formation on the world socialist market is that the system of prices reflects the reproduction proportions maintained by the CMEA countries. This is something that in our opinion must ensure the mutually beneficial commercial transactions concluded among them.
The economic situation is in a constant state of flux. This being so, then that which is adequately reflected in today's prices will not be in tomorrow's and as a consequence prices will no longer reflect the actual state of affairs. This will surely hinder the optimum functioning of the reproduction process. The changing conditions of production and marketing must be reflected in prices. Hence, price flexibility is an all important principle of price formation, although it should not be identified with a ``free play of prices''. It implies an overall stability, a stability of the general level of prices, the absence of inflationary trends and the mobility of individual components of the price system. This is exemplified in the possibility of changing prices for certain types of goods, including the products of individual branches of production and industries.
As internationalisation of production develops it brings the actual processes of national reproduction closer together and co-ordinates them. The proportions of national reproduction arc increasingly dependent upon the marketing success of the aggregate social product. This creates the 175 next principle of price formation, the levelling-up of the price systems in the different socialist countries.
The implementation of economic reforms has changed the position and status of the socialist enterprise under the planned management of the national economy. The performance of an industrial enterprise is now increasingly dependent on the success of its sales, including its exports. In practical terms this requires national and international outlays and capital inputs to be compared, and it implies a comparison of national wholesale prices with world prices in terms of transferable rubles.
This comparison will take into account national and international interests under the given conditions. It will express national interests if national expenditures are lower than the international ones. Conversely, when national expenditures exceed the international ones, it will be necessary to use a national system of surcharges and discounts to ensure an acceptable level of profitability. In practical terms it will be tantamount to the levelling-up of foreign trade prices. Such a system will further national interests.
As production specialisation gains momentum specific measures aimed at encouraging and ``spurring on" the production of specialised goods in order to meet the specific requirements of individual countries will grow in importance. In these circumstances, it will not be enough to have a system ``working'' for the domestic market. An outwardlooking system oriented towards the external market will be needed. Apart from these measures, which will form a constituent component of the overall mechanism of economic co-operation, a unified system of incentives and encouragement will be required. These will be called upon to maintain the CMEA countries' interests in the marketing of their products, primarily on the CMEA market, but later on world commodity markets.
On the CMEA market, the assessment of goods and price proportions is based on a careful consideration of the existing price ratios prevailing on the world commodity markets. Each country, irrespective of whether or not it is in a position to choose between the different commodity markets, estimates the cost of a hypothetical transaction on the 176 world commodity market. Therefore, the overall system of incentives must reflect the specific production conditions and the interests of economic co-operation existing within the CMEA.
A unified system of incentives can be set up provided the realignment of wholesale prices, to take into account socially necessary expenditures and other price-forming factors, has been completed. This realignment will make it possible to reliably identify the way in which production conditions in CMEA differ from those in industrialised capitalist countries, and the same applies to the prices prevailing on the world commodity markets (provided, of course, national economic policies are closely co-ordinated). If this is done it would then be possible to specify the range of goods which should be granted customs preferences (through protective customs duties) in mutual CMEA trade. This would be done to ensure that mutual trade develops in the most advantageous way from the standpoint of the entire socialist community and from the standpoint of individual CMEA co\mtrics.
With this kind of economic co-operation among the CMEA countries, prices on the world socialist market will become an effective economic lever to be used in a planned way by the socialist states to influence the pattern of mutual commodity turnover.
An economically substantiated body of prices for the CMEA market will in fact be a system of world prices which reflect the conditions of production and marketing within the socialist community. They will be composed of the international (regional) value of the CMEA market, and allowances will be made for the existence of the world capitalist market. This system of world prices must not only reflect the economic structure existing in the socialist countries, it must also stimulate progressive changes, including long-term changes. Because its significance is limited world price, as an instrument of a planned economy, cannot be the only criterion for the choice of a particular variant of economic co-operation.
Just as commodity-money relations do not determine the movement of a socialist economy, price cannot serve as a point of departure, as the absolute and sole criterion of the 177 efficiency of economic relations between socialist countries.
The effectiveness of co-operation between socialist countries depends on the use of the entire range of economic laws of socialism and primarily on an expansion of planning co-operation. Constructing economic, scientific and technological progress forecasts, the co-ordination of national economic development plans in the long term, the refinement of current five-year economic development plans, the expansion of joint planning and the exchange of experience gained in improving planning and economic management, these are some of the main avenues in building up co-- operation within CMEA.
At present a crucial aspect in improving planning cooperation is a comprehensive approach to solving problems of common interest. The need for a comprehensive approach to integration is explained by the changes that have occurred in the economic structure of each socialist country under the impact of the sweeping scientific and technological revolution and the continuing specialisation of production. A comprehensive approach to solving problems posed by economic integration can be a success provided the leading role of the central planning agencies in the CMEA countries is strengthened and the mutual co-ordination of centralised planning activities is assured. The use of commodity-money relations within the framework of well co-ordinated planning activities enhances the importance of a collective currency and the existing CMEA system of international credit.
The Comprehensive Programme of economic integration adopted by the 25th Session of CMEA outlined the prospects of economic co-operation within' CMEA. The Programme has been further elaborated in documents adopted by congresses of the Communist and Workers' Parties of the socialist countries and in relevant decisions taken by their governments. These documents stress the need for an all-sided approach to solving problems posed by economic integration in the CMEA countries. They stress the need for further extension of scientific and methodological studies to find a co-operation mechanism best suited to Ihe current tasks of economic development in the socialist countries, a 178 mechanism that would improve the organisational and economic forms of the current integrational process.
The implementation of the Comprehensive Programme of economic integration will result in a higher efficiency of social production in the CMEA countries. It will boost living standards, and strengthen the political and economic unity and cohesion of the fraternal socialist countries.
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