PROGRESS.
MARXIST-LENINIST
THEORY
Progress Publishers
Moscow
[4]Translated from the Russian by Lenina Ilitskaya
M. H. PblHAHHA, F. 0. HEPHHKOB, T. H. XVflOKOPMOB
OCHOBbI nOJIHTHMECKOH 3KOHOMHH
Ha CIHZAUUCKOM HSblKC
__COPYRIGHT__ © HsflaTejibcTBO «riporpecc», 1980Printed in the Union of Soviet Socialist Republics
10700--789
0603010000014(01)-80
[5] CONTENTS Chapter 1. THE SUBJECT MATTER OF POLITICAL ECONOMY . . 9 Chapter 2. PRE-CAPITALIST MODES OF PRODUCTION...... 17 1. The Primitive-Communal Mode of Production ... 17 2. Slavery................. 20 3. The Feudal Mode of Production........ 24 Chapter 3. CAPITALIST COMMODITY PRODUCTION....... 28 1. The Principal Features and Stages in the Development of the Capitalist Mode of Production....... 28 2. Types of Commodity Economy........ 31 3. The Commodity and the Labour Contained in It 32 4. Money. Its Essence and Functions....... 37 5. The Law of Value............. 42 Chapter 4. CAPITALIST EXPLOITATION........... 45 1. The Transformation of Money into Capital .... 45 2. Production of Surplus Value......... 48 3. Wages................. 55 4. Capital Accumulation. The Position of the Working Class 59 Chapter 5. THE DISTRIBUTION OF SURPLUS VALUE BETWEEN GROUPS OF EXPLOITERS......... 68 1. Transformation of Surplus Value into Profit .... 68 2. Commercial Capital and Commercial Profit .... 73 3. Loan Capital and Loan Interest........ 76 4. Ground Rent. Agrarian Relations in Capitalist Society 78 Chapter 6. THE REPRODUCTION OF SOCIAL CAPITAL. ECONOMIC CRISES.................. 84 1. Aggregate Social Product.......... 84 2. Simple and Extended Capitalist Reproduction ... 85 3. Antagonistic Contradictions of Capitalist Reproduction and Economic Crises............ 88 6 Chapter 7. LENIN'S THEORY OF IMPERIALISM AND THE CURRENT DEVELOPMENT OF MONOPOLY CAPITALISM . . 95 1. Lenin Continues the Cause of Marx and Engels . . 95 2. The Main Features of Imperialism.......98 3. New Features of the Capitalist Economy. The Scientific and Technological Revolution.........101 4. Distinctive Features of Contemporary Monopoly Development .................104 5. Lenin's Theory of Finance Capital. Finance Capital Today.................106 6. Domination of the Financial Oligarchy......Ill 7. Monopoly Profit and the Enrichment of the Monopoly Bourgeoisie. Economic Principles of the Anti-Monopoly Struggle in the Capitalist Countries.......114 Chapter 8. STATE-MONOPOLY CAPITALISM.........119 1. Lenin's Teachings on the Essence of State-Monopoly Capitalism and the Objective Laws of Its Development 119 2. The Current Stage in the Development of State-- Monopoly Capitalism. The Formation of the State-Monopoly System.................122 3. Basic Forms of State-Monopoly Capitalism . . . . 126 4. State-Monopoly Capitalism and Preparation of the Prerequisites for Socialism............134 Chapter 9. THE WORLD CAPITALIST ECONOMY AND AGGRAVATION OF ITS CONTRADICTIONS AT THE PRESENT STAGE..................137 1. Emergence and Essence of the World Capitalist Economy 137 2. The Export of Capital...........139 3. Economic Partitioning of the World by the International Monopolies. New Features of the International Monopolies...............143 4. Imperialist Integration...........147 5. Territorial Partition of the World.......151 6. Distinctive Features of the Developing Economies. Two Ways of Development for Young National States . 154 7. The Current Development Stage in the World Capitalist Economy and Its Progressing Crisis........157 8. The Monetary Crisis............161 9. The New World Economic Order. The Role of the Soviet Union and the Other Socialist Countries .... 164 7 Chapter 10. IMPERIALISM'S PLACE IN HISTORY. THE GENERAL CRISIS OF CAPITALISM AND ITS INTENSIFICATION UNDER CURRENT CONDITIONS.....168 1. Imperialism, the Final Stage of Capitalism, the Threshold of the Socialist Revolution...........168 2. The General Crisis of Capitalism. Its Main Stages . 173 3. Qualitative Shifts in the Development of the General Crisis of Capitalism under Present-Day Conditions . . . 178 4. The World Revolutionary Process and the Historical Tendency of Capitalism Today........184 Chapter 11. THE COMMUNIST MODE OF PRODUCTION AND ITS TWO PHASES...............187 1. General Features of the Communist Mode of Production 187 2. Two Phases in the Development of the Communist Mode of Production................190 3. The Main Economic Features of Developed Socialism 194 Chapter 12. THE OBJECTIVE ECONOMIC FEATURES OF THE EMERGENCE AND ESTABLISHMENT OF SOCIALISM . 198 1. The Necessity and Essence of the Transitional Period from Capitalism to Socialism.........198 2. The Economic Structure of Society During the Transitional Period................201 3. The Essence of Economic Policy in the Transitional Period..................206 4. Building the Material and Technical Base of Socialism. Socialist Industrialisation............208 5. Socialist Reorganisation of Agriculture......212 6. The Triumph of Socialism..........214 7. The Distinguishing Features of the Building of Socialism. Circumventing Capitalism...........216 Chapter 13. SOCIAL OWNERSHIP OF THE MEANS OF PRODUCTION 219 1. Social Ownership of the Means of Production and Its Two Forms................ 219 2. Economic Laws under Socialism......... 226 3. The Economic Role of the Socialist State...... 228 8 Chapter 14. THE MAIN ECONOMIC LAW OF SOCIALISM..... 229 1. The Essence of the Main Economic Law of Socialism . 229 2. The Main Source of Development of Socialist Production 233 3. Economic Interests under Socialism....... 234 Chapter 15. THE PLANNED DEVELOPMENT OF SOCIALIST SOCIAL PRODUCTION............... 237 1. The Planned, Proportionate Development of Social Production---an Economic Law of Socialism...... 237 2. Ensuring Correct Proportions in the National Economy 240 3. Management of the National Economy...... 242 4. Planning Social Production.......... 245 Chapter 16. COMMODITY-MONEY RELATIONS......... 250 1. Commodity-Money Relations under Socialism . . . 250 2. Commodity and Its Properties......... 251 3. Money in Socialist Society......... 254 4. The Law of Value............. 256 Chapter 17. THE FINANCIAL AUTONOMY OF SOCIALIST ENTERPRISES ..................260 1. The Essence and Main Principles of Profit-and-Loss Accounting................260 2. The Incentive Role of Profit-and-Loss Accounting . . 264 Chapter 18. DISTRIBUTION OF MATERIAL GOODS AND SERVICES . 268 1. Distribution According to Work........26!! 2. Wages and Salaries. Distribution According to Work in Co-operatives (Collective Farms)........270 3. Social Consumption Funds......... . 274 Chapter 19. THE WORLD SOCIALIST ECONOMIC SYSTEM .... 277 1. The New Type of International Economic Relations . 277 2. Socialist Economic Integration. Economic Co-operation of the Socialist Countries...........280 3. The Economic Competition Between the Two World Economic Systems.........., , , . 285 [9] __NUMERIC_LVL1__ CHAPTER 1 __ALPHA_LVL1__ THE SUBJECT-MATTERMarxist-Leninist political economy is concerned with the social relations between people in the process of production. It studies the economic laws governing the production and distribution of material benefits in human society at the various stages of its development.
__ALPHA_LVL2__ Productive ForcesMaterial production is the basis of human existence. To sustain life, people have to produce food, clothing, homes and other vital necessities. The process of production consists in the interaction between man, or rather, society, and nature. Regardless of the form of society, the interaction between man and nature consists in the unity of three elements, viz., labour, objects of labour, and means of labour.
Labour is purposeful human activity aimed at adapting natural objects to satisfy human wants. In acting on nature, men acquire knowledge and skills and introduce improvements into the process of labour. Engels pointed out that labour ``is the prime basic condition for all human existence and this to such an extent that, in a sense, we have to say that labour created man himself."^^1^^
_-_-_~^^1^^ K. Marx and F. Engels, Selected Works in three volumes, Vol. II, Moscow 1962, p. 80.
10Objects of labour are things found in nature, to which man applies his labour. The earth with its subsoil is a universal object of labour. An object to which labour has already been applied and which is to be subjected to further processing is called raw material. The range of objects of labour expands with the progress of science. New objects of labour appear, e.g., synthetic materials.
Means of labour are the things used by man to act upon objects of labour. They include first of all the instruments of labour. Marx called instruments of labour the bone and muscle of production. Man's labour began virtually with the manufacture of instruments of labour. The level of their development is the main characteristic of each historical production epoch. The first instruments of labour were the stone axe, the mattock and bow and arrows. Today they include sophisticated modern machines. Instruments of labour also consist of transport and industrial buildings and installations. The earth, too, is a means of labour.
Means and objects of labour together are called means of production. They can produce nothing by themselves, however, and must be put into operation by people. The means of production and people with their production experience and skill are called productive forces. Since the instruments of production are made and improved by people, the latter are the chief productive force. Productive forces express society's active attitude towards nature. Their level indicates the degree of man's control over nature. As productive forces progress, an increasing role is played by science, which becomes a direct productive force itself. Under present-day conditions, the scientific and technological revolution has extended to each and every productive force (new instruments and objects of labour, new sources of energy, new requirements made on manpower).
Productive forces form one aspect of social production. The other consists of the social relations of production or economic relations between people.
11 __ALPHA_LVL2__ Relations of ProductionAs they change nature in the process of labour, people simultaneously enter into social relations with one another, known as relations of production. The relations between people with respect to the appropriation of material goods are called property relations. They emerge in the process of production as "production is always appropriation of nature by an individual within and with the help of a definite social organisation."^^1^^ There are two types of property relations, which may be either social or private.
Property relations determine the way in which labour power is linked with the means of production. Besides property relations, relations of production also include the exchange of activity between people in the process of production. In a society based on private ownership, this exchange inevitably involves exploitation and competition in different forms. In a society based on public ownership, the exchange of labour activity proceeds in a spirit of voluntary co-operation and mutual assistance.
The relations of production also determine the character of relations of distribution. If the means of production are monopolised by certain groups or classes, the latter appropriate the lion's share of the material goods, while the working people do not always get even the minimum necessary for the reproduction of their labour power. If, on the other hand, the means of production---and consequently all the material goods that are produced---belong to the people, these goods are distributed in the interest of society as a whole.
Another important kind of economic relations consists of relations of consumption. Consumption is the purpose of production and a part of the process of reproduction. The volume of consumption and the nature of requirements depend on production. In exploitative societies, parasitic forms of _-_-_
~^^1^^ K. Marx, A Contribution to the Critique of Political Economy, Moscow, 1977, p. 192.
12 consumption exist while the working people are obliged to consume the cheapest goods of inferior quality.A special place belongs to international economic relations. Marx described them as secondary, meaning that they depend on the character of primary production relations. Their significance is steadily increasing. At present there are many kinds of international economic relations in the capitalist world and, with the emergence of the world socialist system, new international economic relations have appeared.
The different aspects of production relations form an integrated system in which all parts influence and are influenced by one another. The relations of ownership of the means of production, however, play the leading role in this system, for they bind all economic relations into a whole and furnish the main characteristics of the society.
Bourgeois ideologists go out of their way to obscure the decisive significance of the relations of ownership of the means of production.
Meanwhile events show ever more conclusively that the leading role in the system of socio-economic relations belongs to those of ownership of the means of production. This follows especially from a comparison of capitalism and socialism, the diametrical opposition of which is due, above all, to their being based economically on fundamentally different forms of ownership.
__ALPHA_LVL2__ The Connection Between Productive ForcesProduction relations ultimately depend on the level and character of development of productive forces. The low level of productive forces in primitive society was matched by collective ownership of the means of production, collective work and equal distribution. The development of productive forces eventually brought about a change in the relations of production. Social relations of production are not, however, passive. They influence the development of productive forces. New 13 relations of production promote the development of productive forces, but afterwards they act as a brake on them. Productive forces and their social pattern come into conflict, which provides the economic basis for the social revolution.
In studying the social relations of production, political economy also looks into their impact on the development of productive forces. For this reason, such problems, for instance, as the causes and socio-economic effects of the current scientific and technological revolution fall within the subject-matter of political economy.
Productive forces and relations of production as a specific historical entity form the mode of production. There have been five modes of production, viz., primitive-communal, slave, feudal, capitalist and communist. The first [phase of the communist mode of production is socialism.
__ALPHA_LVL2__ Social Structure of Society.Production relations are at the basis of the social structure of society. Thus, private ownership of the means of production causes the division of society into antagonistic classes and engenders the class struggle. Political economy studies the economic principles of the class struggle, providing the scientific foundation for the strategy and tactics of Communist and Workers' parties. In socialist society, which has no antagonistic classes, political economy constitutes the theoretical groundwork of the people's activities aimed at building communism. Such is the basic methodological principle of the Marxist-Leninist approach to the study of the objective laws governing the history of human society as it develops from one stage to another.
Production relations are the economic basis of society, while political and legal views and ideology, and appropriate institutions make up its superstructure. The superstructure is determined by, and acts on, the basis, but the character, extent and effects of its reaction are also determined by the basis. The 14 most important part of the superstructure is the state. Political economy studies the economic role of the state, its influence on the basis, and the socio-economic effects of this influence. Political economy itself refers to the superstructure. MarxistLeninist political economy traces the development of bourgeois political economy and discloses its unsound nature.
The concrete historical sum-total of productive forces, the economic basis and the superstructure make up a socio-economic system.
__ALPHA_LVL2__ Economic LawsThe social relations of production and their intrinsic causal relationships find expression in economic laws. The latter are objective, i.e., they are independent on men's will and consciousness, because of the objective nature of production relations, which are determined by the level of productive forces. These laws are historical, for they express historically definite relations of production.
The operation of economic laws depends on the kind of production relations. Thus, in capitalist society, in which people are divided by private property, economic laws operate spontaneously, being manifested in the class struggle and competition. In socialist society, they are realised through the conscious, organised activity of the people.
This is not understood by those theorists who identify the spontaneous action of economic laws with their objective character. They imply that no objective laws exist in socialist society as there are no and can be no spontaneously operating economic laws in it. These errors are common both among ``Right'' who advocate the develbpment of spontaneous market relations under socialism, and ``Left'', Maoists among them, who ignore the objective economic laws and engage in political adventurism and voluntarism.
People gain knowledge of economic laws and utilise them, but, the limits of this knowledge, as well as the extent and 15 ends to which the economic laws are utilised are, again, determined by the character of production relations.
Every socio-economic system has a set of economic laws that includes both those specific to the given system, and general laws expressing the general conditions of society's existence. Moreover, some laws are not confined to just one socioeconomic system. They all are interrelated, but each expresses some aspect of the given relations of production. The substance of definite production relations as a whole is expressed by the basic economic law that governs a definite mode of production.
As it is concerned with relations of production, political economy naturally also deals with the economic laws governing the production and distribution of material goods at the different stages of society's development.
Surrounding reality is the primary source of knowledge of economic laws and is characterised by multiplicity of facts and diverse phenomena. In order to reveal deep-lying processes, one must resort to scientific abstraction, passing over what is inessential and penetrating into the substance of the facts under observation. The processes being studied are regarded in their qualitative and quantitative definiteness and in their development, which proceeds on the basis of internal contradictions. Thus, theory is made more specific, analysis is supplemented with synthesis, induction is combined with deduction, and the logical train of thought reflects actual historical development.
Bourgeois ideologists do not penetrate into the essence of economic processes. They merely describe facts as they appear on the surface and classify them. This approach allows them to make capitalism look better than it really is, as on the surface capitalist exploitation is disguised. Many bourgeois economists deny altogether the existence of economic laws. Others propound "universal and eternal laws'', universalising and eternalising in theory an historically transient phenomenon.
16 __ALPHA_LVL2__ Party Spirit in Political EconomyIn a class society, political economy is of a class character. Thus, in capitalist society there is bourgeois political economy and proletarian, Marxist-Leninist, political economy, expressing the interests of respective classes. Modern bourgeois political economy is not, in effect, concerned with scientific inquiry, that is, with the search for truth. Its object is to provide various ideological defences of capitalism, to attack Marxism-Leninism and existing socialism, and try to find some practical means to prop up capitalism. In this consists the party spirit, the class character of bourgeois political economy, which bourgeois economists try to conceal behind talk about objectivity and scientific impartiality.
By its scientific analysis of the objective laws governing the development of society, Marxist-Leninist political economy provides the theoretical substantiation of the working class' historic mission as the grave-digger of capitalism and builder of communism. The political economy of the working class was founded by Marx and Engels and was later developed by Lenin. Today Marxist-Leninist political economy is being carried forward in the documents of CPSU Congresses, all other MarxistLeninist Communist and Workers' parties and their international meetings.
[17] __NUMERIC_LVL1__ CHAPTER 2 __ALPHA_LVL1__ PRE-CAPITALIST MODESThe primitive-communal system, which emerged about two million years ago, was the very first socio-economic system. It existed the longest period in human history and only ended between seven and nine thousand years ago.
__ALPHA_LVL3__ Productive ForcesThere were two stages in the development of productive forces under the primitive-communal system. The first consisted mainly in the appropriation of natural products. The second marked the transition to a reproductive economy. During the first stage, the means of subsistence were secured mainly by gathering fruit, grains and other vegetable goods, and by hunting. Stones and sticks were the main instruments of labour, later supplemented by the stone axe and bow and arrows. Then people learned to make and use fire, which protected them from the cold and provided them with better food, thus making them stronger physically.
People improved their skills and accumulated work experience. In primitive society, people worked in common. They had to, because the productive forces were poorly developed. No one was able to provide for himself single-handed. The work of each was direct social labour. People's joint activities in appropriating objects found in nature is called simple cooperation. The natural division of labour by sex and age, which __PRINTERS_P_17_COMMENT__ 2---1921 18 occurred within the framework of simple co-operation, made labour more efficient.
Later on, gathering led to the emergence of arable fanning as men learned to cultivate grains with nutritional food value, while hunting gave rise to livestock breeding, as certain animals became domesticated. This process developed unevenly and took a long time. Arable farming and livestock breeding became leading economic branches only towards the close of the primitive-communal era.
Both arable farming and stock-raising required suitable instruments of labour, so the latter continued to be improved. People began to master the production of metals and metal implements (e.g., ploughs). They also learned to spin and weave.
Thanks to the new instruments of labour and specialisation of communities in arable farming or stock-raising, labour became more efficient and people enjoyed better living conditions.
__ALPHA_LVL3__ Relations of ProductionThe primary cells of society were kindred groups that shared a common dwelling and together procured their means of subsistence. These groups subsequently gave rise to kindred communities which, with time banded into tribes. The leading role in a clan belonged to women (matriarchy). The means of production were jointly owned. The land, animals, implements and dwellings, too, belonged to the community. Some instruments of labour were allotted to individual members of the community and became virtually their personal property. At that time, however, personal property was limited by collective property, and its role was strictly subordinate.
All means of subsistence that were procured were at the disposal of the community and were usually distributed in equal shares.
The main contradiction inherent in the primitive-communal system was that between primitive man's vital needs and the 19 low level of productive forces. The main economic law of this system was the provision of vital necessities for the members of the community, the means of production being common property and only primitive instruments of labour being available.
With the development of productive forces, the relations of production underwent a change. As communities began to specialise in the production of agricultural or animal products, pastoral tribes emerged.
It was, as the founders of Marxism pointed out, the fast major social division of labour. Not only did the pastoral tribes produce more than the others, but the very means of livelihood they produced were different. This made regular exchange possible for the first time ever. At the beginning, it was only sporadic. Eventually, however, as the specialisation and division of labour between communities increased, exchange was carried on on a regular basis.
__ALPHA_LVL3__ Disintegration of the Primitive-CommunalThe development of productive forces and the resultant rise in labour productivity made it possible to manage with individual, rather than collective, labour. For instance, the invention of the plough sped up the transition from collective to individual cultivation of the soil. Land was still common property, but gradually, private landownership was established. Simultaneously, the elders of the tribe were exempted from taking part in common production activities. Now they dealt exclusively with administration, the organisation of exchanges and the conduct of war. These functions were soon used for private gain. Thus, alongside private ownership, a division between rich and poor also emerged. The rise of private ownership was objectively determined by the development of productive forces.
Bourgeois ideologists often argue that collective, communal ownership never existed at all, and that human history presumably started with individual private ownership. This is an 20 attempt to eternalise private ownership, disguising its historically transient nature. Scientific research has established, however, that the first form of ownership was communal.
Vestiges of the communal system occur even now in some countries of Africa, Asia and Latin America, where there are still tribes, chiefs, and communal ownership.
__ALPHA_LVL2__ 2. Slavery __ALPHA_LVL3__ Emergence of SlaverySlave-owning society was the first in human history to be founded on class antagonism and the exploitation of man by man. The objective basis on which classes emerged was the growth of labour productivity, which reached a level at which a surplus product, i.e., an excess over the minimum of the vital means of subsistence, was secured. This made it possible for some people to exploit others. Another prerequisite for slavery was private ownership of the means of production and increasing economic inequality, both of which resulted from the development of productive forces during the disintegration of the primitive-communal system.
The first to appear was patriarchal slavery. It emerged within the patriarchal clan which included, besides free members, also prisoners of war, i.e., slaves. The latter were not the chief labour force in these communities.
Later, patriarchal slavery in some places developed into classical slavery (in ancient Greece and Rome). Many peoples, however, circumvented classical slavery, passing directly to feudalism.
__ALPHA_LVL3__ Productive Forces under SlaveryApart from agriculture and cattle-breeding, crafts became a major economic branch. Their progress resulted in the second major social division of labour, when crafts separated off from agriculture. On this basis commodity production arose, with 21 products made for exchange. Yet, commodity production at that time was not the main kind of production. Under slavery, subsistence economies predominated, i.e., each individual economy's basic needs were satisfied not through exchange, but by what it produced itself. In the era of slavery a branch division of labour emerged both in the crafts and agriculture, and this boosted the improvement of the instruments of labour. Iron was used increasingly. The loom and some other, more sophisticated, implements were invented. Although they were still crude and unwieldy, they still furthered the progress of the productive forces. As the instruments of labour changed, so did the labour force, and labour specialisation appeared. Just as in primitive society, simple co-operation---the association of people in the process of production---was predominant, but under slavery this association was compulsory and implied the exploitation of the producers by the slave-owners.
__ALPHA_LVL3__ Emergence of Economic InequalityThe development of productive forces led to an increase in material wealth and the emergence of private ownership and economic inequality. Another factor promoting this was exchange, which led to the enrichment of certain families. Rich families began to use slave labour on a regular basis. Not only prisoners of war, but also debtors now became slaves, who could be bought and sold.
Slavery as a mode of production became dominant when private ownership appeared and society became divided into the two antagonistic classes of slaves and slave-owners. In addition, there were free small producers----artisans and peasants ---and also merchants and usurers.
The state appeared at the same time as classes. Its machinery was used to keep the slaves under control and build up and maintain the slave-owning system.
22 __ALPHA_LVL3__ Production RelationsUnder slavery the conditions and means of production belonged to the slave-owners, and there was individual, state and church ownership. Not only were the direct producers deprived of the means of production, they were themselves property, regarded virtually like so many head of cattle. Slave labour was compulsory and its results belonged to the slave-owner. He set aside some of the product to feed the slaves, so that they could go on working. This is called the necessary product. The excess over the necessary product, or the surplus product, was used by the slave-owner himself. Some of it found its way to the merchants and usurers in the form of profit and interest on capital.
The purpose of production under slavery was to better satisfy the needs of the slave-owners. The means employed for this purpose was cruel exploitation of the slaves. Such was the main economic law of slavery.
__ALPHA_LVL3__ Contradictions WithinSlavery was more progressive than the primitive-communal mode of production. It gave a certain impetus to the development of productive forces and marked the beginning of progress in art and science. Nevertheless, production expanded only slowly. The slaves were not concerned Swith improving the instruments of labour and their use. As for the slave-owners, they did not work themselves. Most of them led an idle, parasitic life. This shows the historically limited nature of slave-owning society.
Slave society was rent by a complex of contradictions, the main one being the antagonistic contradiction between the slaveowners and the slaves. This contradiction found expression in the position of these classes as exploiters and exploited, and in the struggle between them. Associated with this contradiction was the antithesis between mental and physical work. By far the greater part of society---slaves and small producers---had to 23 do physical work, while intellectual pursuits were the exclusive monopoly of the slave-owners. This division of labour was selfcontradictory for, while it promoted science and production, it choked the slaves' intellectual talents, turning them into mere machines.
The antithesis between town and country also originated under slavery. The towns were slave-owning states, centres of the handicraft industry, trade and culture. They were surrounded by rural provinces and conquered colonial territories, in which production was extremely backward. They exploited the villages by selling them high-priced goods and buying farm produce from them at low prices. The taxes and requisitions exacted from the provinces were another source of exploitation.
Slave society was also characterised by an antithesis between large-scale production involving slave labour and the petty economy conducted by freemen. The small producers were essential to the slave-owning system as they paid the taxes and made up most of the army, but they were ruined in the competition with the large economies that used slave labour. Slave-owners often seized the peasants' land, and many peasants were ruined by merchants and usurers.
Commercial capital emerged from the development of exchange. The separation of trade and merchants was the third major social division of labour. Trade contributed to the further social division of labour. It also induced the slave-owners to step up the exploitation of slaves in order to have more money to buy goods, especially luxuries. Thus, commercial and usury capital tended to aggravate the contradictions in slave-owning society.
__ALPHA_LVL3__ The Decay and Fall of SlaveryThe development of productive forces and the appearance of more sophisticated instruments of labour called for betterskilled workmen, but slaves were not interested in the results of their work, nor were they, for the most part, trained. Their 24 labour productivity dropped, and so did the profits from large estates and workshops using slave labour. The slave-owners began to divide up their estates into small plots for lease to peasants and slaves, who came to be called coloni. A colonus paid the proprietor a big proportion of his produce. Gradually the small subsistence farms began to predominate in the economy.
Of great significance to the fall of slavery was the class struggle. Slave revolts were dramatic expressions of protest against exploitation by the slave-owners. The slaves had no clear notions or aims concerning the reorganisation of society, but their struggle loosened the foundations of the slave system and created the requisites for a transition to a higher stage in the development of society.
__ALPHA_LVL2__ 3. The Feudal Mode of Production __ALPHA_LVL3__ Emergence of FeudalismThe colonatus was an intermediate form in the transition from slavery to feudalism. It was an element of feudalism that existed in the heart of the slave-owning system and that ousted it as a mode of production. In many countries, however, slavery did not develop as a system. In Russia and the Slavonic countries of Central and Eastern Europe there were only a few elements of patriarchal slavery, which never developed into classical slavery. In these countries, the primitive-communal system was directly replaced by feudalism, which existed not only in Europe, but in the East as well. Its establishment in such countries as China, India and Babylonia was prepared for by the development of slavery. Asian nomads passed to feudalism circumventing slavery. Everywhere the transition to feudalism implied the formation of a class of feudal landlords, i.e., big landowners, and a class of dependent and exploited peasants with no land of their own who ran small individual farms on the lord's land.
25 __ALPHA_LVL3__ Productive ForcesAgriculture was the main economic branch under feudalism. The three-field system of agriculture was gradually introduced, and vegetable- and fruit-growing were developed further. Changes also occurred in stock-raising, horse-breeding especially. Under feudalism, subsistence farming prevailed, the needs of the lord and his family as well as of the peasants being met by the produce obtained by the peasants who besides agriculture, also engaged in spinning, weaving and other cottage industries.
Feudalism saw the revival of handicrafts, which had fallen into decay during the disintegration of slavery. They gradually shaped into a separate economic branch with its own internal specialisation. Craft guilds began to form and cities grew.
An important contribution to the development of productive forces was made by the improvement of agricultural implements and methods of metal-working. Nevertheless, technology was changing but slowly, and handicrafts and agriculture were, on the whole, based on manual labour.
As a result of the growth of productive forces and the social division of labour, commodity production developed, an internal market formed, and external trade increased.
__ALPHA_LVL3__ Relations of ProductionFeudal society was founded on the feudal ownership of land, the principal means and condition of production. In Europe, the feudal hierarchy prevailed. A lord granted possession of land in perpetuity to another, on condition of service (vassalage). In the East, state feudal ownership of the land and water resources was widespread, due to the specific historical conditions. Nevertheless, there too, land was owned exclusively by the class of feudal lords. There were two kinds of feudal ownership. The peasants, who were the immediate producers, had no land, exceptions being very rare. Peasants were granted land by the lord in return for various obligations to him. The feudal lords' 26 ownership of the land was the economic basis for the exploitation of the peasants.
Simultaneously there existed peasant and artisan ownership of means of production such as implements, animals and dwellings. This ownership was based on the producer's own work. Under these conditions, apart from economic dependence, noneconomic compulsion was required to exploit the peasants. This was expressed in the peasants' personal dependence on feudal lords, the measure and kinds of which differed from country to country, as well as from one stage of feudal development to another.
The surplus product created by peasants and artisans was gratuitously appropriated by the feudal lord as land rent. The main economic law of feudalism consisted in the production of surplus product by the exploited dependent peasants and its appropriation by the feudal lords as feudal land rent.
Initially, land rent took the form of labour rent, the peasant working for part of the time on his farm to obtain the necessary product, and the rest of the time on the lord's estate to create the surplus product for the latter's use.
A more advanced form of land rent is rent in kind. In this case, the peasant worked on his own farm only, giving up a substantial part of the product to the feudal lord for the use of the land. Rent in kind corresponded to a higher level of productive forces and provided an incentive for the peasants to make their labour more efficient. It was also a sign of growing economic inequality among the peasants. The last form of feudal rent was money rent, the surplus product being handed over to the feudal lord in the form of money, meaning that it had first to be sold and turned into money. Money rent emerged in the period of feudalism's decay, when commodity-money relations had reached an advanced level.
Unlike slavery, under feudal relations of production the producer was, to some extent, interested in the results of his work, and that promoted the growth of productive forces.
27 __ALPHA_LVL3__ Decay of FeudalismWith the progress of agriculture, handicrafts and exchange, feudal relationships became an obstacle to the further development of productive forces. Feudal seclusion hampered the social division of labour and exchange, while the working people's personal dependence on feudal lords obstructed free migration of labour force. All this objectively served to heighten the antagonisms inherent in the feudal system. These were: the antagonism between the peasants and artisans on the one hand, and the feudal lords, on the other; between town and country; between mental and manual work; and between the feudal subsistence economy and growing commodity production. It was due to these antagonisms that feudalism fell into decay and the capitalist mode of production emerged.
__ALPHA_LVL3__ Vestiges of FeudalismVestiges of feudalism survive in many places, especially in the developing countries. One such is the existence of owners of huge landed estates and metayers (share-croppers), who give the landlord a large proportion of the crop in payment for use of the land. Another characteristic vestige of feudalism is payment for the lease of land and use of implements by working the lord's land. Big feudal landownership persists in some industrialised countries as well, serving to preserve semi-feudal rent. All survivals of feudalism play a reactionary role. They hinder the progress of productive forces, expose the peasants to greater exploitation and plunge them deeper into poverty.
[28] __NUMERIC_LVL1__ CHAPTER 3 __ALPHA_LVL1__ CAPITALIST COMMODITY PRODUCTION __ALPHA_LVL2__ 1. The Principal FeaturesCapitalism emerged within the heart of the feudal system. In both town and country, differentiation of the petty producers occurred, leading to the appearance of a handful of rich people and the ruin of numerous peasants and artisans, who were obliged to work for hire. Merchants who had amassed large sums of money also became big manufacturers. Coercion played an important role in speeding up the emergency of the prerequisites for capitalism.
Bourgeois ideologists make out that those who were industrious and thrifty became capitalists, while those who would not work became proletarians. In reality, however, the polarisation of society into those deprived of the means of production and the owners of wealth, the future capitalists, was accompanied by brutal coercion inscribed "in the annals of mankind in letters of blood and fire."^^1^^
The violent separation of the immediate producers from the means of production and the concentration of the latter in the hands of only a few is called the primitive accumulation of capital---primitive because, as it proceeded, requisites were created for genuine capitalist accumulation, which implies the exploitation of wage workers.
A characteristic instance is the forcible expropriation of peasant farms in England in the 15th to 18th centuries. The _-_-_
~^^1^^ Karl Marx, Capital, Vol. I, Moscow, 1975, p. 669.
29 landlords drove the peasants from their plots, which were then utilised to graze sheep. The peasants themselves became proletarians. Simultaneously large funds were being concentrated in the hands of feudal lords, merchants and rich artisans. Another source of wealth accumulation was the plunder of colonial peoples, the slave trade, and so on. Feudalism was finally toppled by bourgeois revolutions, in which peasants and artisans were the main revolutionary force. __ALPHA_LVL3__ The DevelopmentUnder capitalism, in the context of private ownership, socialisation of production takes place. The first capitalist enterprises took the form of simple capitalist co-operation, distinguished by the means of production being owned by the capitalist, who managed them and controlled the product, the larger part of which he appropriated. This co-operation was based on manual labour. Nevertheless, it contributed to the growth of labour productivity, facilitated the emergence of the productive forces of joint labour, and promoted the expansion of industry. It also gave rise to competition among workers.
Simple co-operation was replaced by manufactory. Unlike simple co-operation, manufactory involved a division of labour. It emerged either on the basis of an association of artisans of different trades, who together produced some single commodity, or by introducing a division of labour within the framework of one trade. Owing to the division of labour, artisans became operatives each dealing with a part of the production process. On the one hand, this increased labour productivity, but on the other, workers could not now resume their handicraft on their own account, which made them more dependent on capitalists.
Manufactory resulted in an improvement of the instruments of labour, thereby paving the way for machine production.
30At the late 18th and early 19th centuries, the developed capitalist countries began to change over to large-scale machine production. Craftsmen's tools were replaced by machines in a process known as the Industrial Revolution. Thus, the material and technical base of capitalism was built.
Capitalism is a social system under which all means of production belong to the capitalists, while workers have none at all and are forced to sell their labour power to capitalists to keep body and soul together. Unlike slavery and feudalism, in capitalist society exploitation is disguised. The relations between workers and capitalists are presumed to be those between equal commodity owners, but the secret of capitalist exploitation was disclosed by Marx.
__ALPHA_LVL3__ Stages in the DevelopmentThere are two stages in the development of capitalism. In the first, free competition predominates. The means of production belong, in the main, to individual capitalists. The second, which set in at the turn of the 20th century, is known as monopoly capitalism or imperialism. At this stage, the dominant role in economics and politics belongs to the monopolies, corporations of big capitalists. Corporate property becomes preeminent among the other kinds of capitalist property. Intervention by the bourgeois state in the economy increases, and the system of state-monopoly capitalism takes shape. Imperialism comes to an end during the general crisis of capitalism, i.e., the era of its collapse. This period was ushered in by the Great October Socialist Revolution.
The capitalist mode of production was analysed by Marx in his Capital and the ideas he expounded were developed further by Lenin in his book Imperialism, the Highest Stage of Capitalism.
Marx's analysis of capitalism begins with commodity production.
31 __ALPHA_LVL2__ 2. Types of Commodity Economy __ALPHA_LVL3__ The Main Features of Commodity ProductionCommodity production emerged with the disintegration of the primitive-communal system. It existed in all precapitalist systems. At that time, however, subsistence economies predominated.
In a commodity economy, products are made by separate producers for exchange. This type of economy is based on the social division of labour, where each producer specialises in some one product. The producers are isolated owing to the private ownership of the means of production and products of labour. As a result, market exchange becomes necessary. The exchange of commodities becomes the sole kind of economic relationship linking the separate producers.
__ALPHA_LVL3__ Types of Commodity ProductionThere were two types of commodity production, simple and capitalist, in presocialist societies. Under simple commodity production small producers own the means of production and are workers at the same time. In this economy there is no exploitation. As a private property owner, the small producer gravitates toward the bourgeoisie, while as a worker, he sides with the working class, supporting -its struggle against the bourgeoisie. This is the economic foundation of the alliance between the workers and peasants. Capitalist commodity production is conducted by the capitalists, exploiting wage labour. Here the means of production are separated from the producers. The purpose of such production is to secure profit. Yet, distinct as they are, the simple commodity economy and the capitalist economy are basically of the same type, as both rest on private ownership of the means of production. This fact makes possible the transformation of a simple commodity into a capitalist economy.
Simple commodity production was historically the starting 32 point of capitalism. Under capitalism, the production of commodities becomes universal. All products become commodities, being produced for exchange. Labour power, too, becomes a commodity. The wealth of capitalist society consists of a huge mass of commodities, the individual commodity being the elementary form of this wealth. The commodity contains, in embryo, all the characteristics and antagonisms of this society. For this reason, Marx began his investigation with an analysis of the commodity.
__ALPHA_LVL2__ 3. The CommodityThe commodity is a product of labour capable of satisfying a human need and made for exchange.
The ability to satisfy man's needs is called the use value of a commodity. The nature of these needs is not important. Articles of consumption satisfy needs directly, while the means of production do so indirectly. Use value depends on the natural properties of things. Nevertheless, the utilisation of these properties is a result of the progress of history. Use values exist in any kind of society, but the use value of a commodity is an historical category. In a commodity economy, the producer does not create use value for himself, but for others, as the commodity is meant primarily for sale. Consequently, in order to reach the consumer, a commodity must be sold. In a commodity, use value is the medium through which exchange value is expressed. Exchange value is the second property of the commodity. It consists in the ability of a commodity to be exchanged, in definite amounts, for other commodities. Exchange value is expressed in the ratios in which commodities can be exchanged.
How can entirely different commodities be compared? The answer is in terms of value, which is measured by the amount of social labour that went into the production of each 33 commodity and is embodied in it. Value is an inherent property of a commodity, manifested in its exchange value.
Value is an historical category. It exists only under commodity production, expressing the relations between commodity producers in social production.
Value and use value are indissolubly linked since one cannot exist without the other. Likewise, the use value of a commodity must necessarily have value, as every commodity is meant for sale. This is a unity of opposites: as use values, commodities are essentially different and cannot be compared, while they are similar and comparable as values. A commodity has no use value to the producer, while its importance to the buyer consists in its use value.
__ALPHA_LVL3__ Dual Character of LabourThe properties of a commodity are determined by the dual character of the labour by which it is produced. Every producer engages in work of a definite kind, e.g., he makes cloth, shoes, furniture, etc. Each particular kind of production activity is concrete labour. The various kinds of concrete labour differ as to their purpose, the kind of operations involved, the objects of labour, instruments and results of labour. Concrete labour serves to produce the use value of the commodity, utilising natural materials for this purpose. As William Petty, the English economist, put it, labour is the father, and land the mother, of wealth.
For all the diversity of the actual kinds of labour, they have in common that they all involve an expenditure of muscular and nervous energy, i.e., of human labour power in the physiological sense. This makes it possible to compare commodities.
The expenditure of human labour power in general, regardless of the actual types of labour that may be performed, is called abstract labour. On this basis, all commodities can be compared as masses of congealed abstract labour differing only in quantity. The value of commodity is created by abstract __PRINTERS_P_33_COMMENT__ 3---1921 34 lahour. It exists solely under commodity production, when different kinds ol labour have to be compared. Whereas concrete labour exists under all socio-economic systems, the division into concrete and abstract labour is characteristic of commodity production alone.
In presocialist systems, concrete labour appears directly as private labour, based on private ownership of the means of production and of the products of labour. Each private commodity producer acts as a self-sufficient, independent subject deciding for himself what and how he should produce, and so on. In reality, however, any private labour is a particle of social labour, insofar as commodity production implies a social division of labour. Actually, people work for one another, and their private labour is also social labour. The latter, however, is hidden, becoming apparent only in the process of exchange, through the value of commodities. It may be said that abstract labour is the specific form in which the social character of labour under commodity production is expressed.
The main contradiction of simple commodity production is that between private and social labour, which appears in a number of specific ways. For example, a producer's private labour may fail to be recognised by society, if there is no demand for his product or if it costs too much. This is the source of overproduction of commodities and random price fluctuations.
__ALPHA_LVL3__ Magnitude of ValueWe have seen that value is determined by the amount of abstract labour embodied in a commodity. Bourgeois economists seek to prove that the value of a commodity depends on its utility, but commodities as use values are qualitatively different and cannot be compared in quantitative terms. It is solely as amounts of qualitatively undifferentiated abstract labour that they can have a common measure.
The amount of labour is measured by labour time. In different factories, however, different amounts of time are spent to produce the same commodity, depending on the kind and 35 quality of the equipment, labour organisation, the workers' skills, and so on. The labour time necessary to produce a commodity in an individual factory is called individual labour time, and the labour expended in the process is called individual labour.
Yet, value cannot be determined by individual expenditures, for a commodity can only command one price. This fact was clear to the precursors of Marx, who noted that value was determined by necessary labour. Thus, Smith regarded labour in the best factories as necessary, and Ricardo, in the worst.
Proceeding from the fact that value is a social category, Marx found that it was determined by the socially necessary expenditure of labour or socially necessary labour time. Socially necessary labour time is the time required to manufacture a commodity under socially reasonable production conditions and at the society's average level of efficiency and intensity of labour. Socially necessary labour time gravitates towards the individual labour of the factories responsible for manufacturing the bulk of the given product. These may be the best, indifferent or even the worst factories, depending on which of them account for the biggest share of the output.
The value of a unit of output is influenced by the productivity of social labour, which is measured by the output per unit of time. The higher the productivity of labour and, consequently, the greater the output per unit of labour time, the lower the value of each article will be. This happens because each individual article will embody a smaller amount of socially necessary labour.
In view of the fact that tasks differ in the degree of skill they require, two kinds of labour may be distinguished. Simple labour is unskilled labour requiring no special training. Labour that requires special training is called complex labour. Complex labour creates more value. It is simple labour multiplied or raised to a power, because in this case account is taken of the labour expended on training both the trainee and his instructors.
36 __ALPHA_LVL3__ Form of ValueValue is an inherent property of the commodity, but if we take some one commodity, only its use value can be judged. The value of a commodity can be estimated only by comparing it with other commodities. Value is a social category reflecting the kind of production relations that exist between commodity producers. Consequently, value must necessarily have an external form of its expression. We have already encountered this external form when we spoke about exchange value manifesting itself in the quantitative proportions in which different commodities can be exchanged.
The form of value developed during the historical development of commodity production and exchange. The accidental or elementary form of value appeared at a time when exchange was as yet accidental. In this form, the value of a commodity is expressed through another commodity (relative value). For example. X of commodity A = y of commodity B. Commodity A expresses its value, while commodity B serves as material for expressing value, i.e., an equivalent. We must note that the relative value of commodity A, expressed in terms of commodity B, may differ from the inherent value of A, as it will be influenced by variations in the value of the equivalent.
The equivalent commodity has a special role in that its use value becomes a form of manifestation of value; the concrete labour expended on its production becomes a form in which abstract labour appears; the private labour embodied in the equivalent commodity becomes the embodiment of social labour.
Thus, the internal contradiction of the commodity acquires an external form. Commodity A appears as a use value, or a product of concrete private labour, and commodity B as a value or an amount of abstract social labour.
The development of exchange resulted in the appearance of the expanded form of value:
= y of commodity B x of commodity A = z of commodity C = q of commodity F 37In this case, exchange involves many objects, whereby every commodity in the form of relative value has a multitude of equivalents. Thus, the value of any one commodity has no conclusive definition, which makes exchange difficult.
As commodity production developed, some commodities were singled out as staple articles of exchange, e.g., cattle, pelts, grain, ornaments, and so on. The expanded form of value was replaced by its general form, whereby the value of all commodities is expressed by one general equivalent:
x of commodity A = z of commodity C = y of commodity B q of commodity F = etc.Subsequently the function of general equivalent was attached permanently to one commodity. That is to say, the money form of value appeared. The value of a commodity expressed in money is its price.
__ALPHA_LVL2__ 4. Money. Its EssenceMoney is a special commodity which serves as a universal equivalent. We know already that money is, by origin, a commodity. Gradually, the role of money was assumed by precious metals which proved most suited to the purpose. They are of uniform structure and are divisible, portable and durable. Like any commodity, money material possesses value and use value. Its value is determined by the amount of socially necessary labour expended on the mining and working of the precious metals, while as use values they can he utilised in the production of jewelry and for various other purposes.
Money is a special commodity, however, its special character arising from the equivalent form of value. Money serves as an immediate embodiment of value, of abstract social labour. Unlike other commodities, money has additional use value, being 38 exchangeable directly for any kind of goods. Thus, it possesses universal use value or the capacity to satisfy its owner's every need.
In class society, money is an instrument of exploitation of the working people. In pre-capitalist systems, money was used by merchants, usurers, slave-owners and feudal lords to intensify the exploitation and appropriate the surplus labour of slaves, peasants and artisans. Under capitalism, money becomes capital and is used to exploit wage workers and other sections of the people.
__ALPHA_LVL3__ The Functions of MoneyThe essence of money is manifested in its functions. The first function of money is to be the measure of values. What makes commodities comparable is that both they and money have value, representing so much abstract social labour. This function is fulfilled by ideal or imaginary money. The performance of this function implies the existence of a standard of price, i.e., a stipulated amount of metal, which is a country's monetary unit.
The price of a commodity depends on (1) its own value, (2) the value of the money material, and (3) the supply-- demand ratio for the commodity concerned, which may cause prices to deviate somewhat from value. Taking a long period of time, however, average prices will be revealed reflecting the value of the commodity more exactly.
One typical feature of modern capitalism is the monopoly price. It is fixed much higher or lower than value (lower for goods purchased by monopolies) and is maintained at the same level over long periods. Nevertheless, the fact that value is determined by socially necessary labour breaks through. This is reflected in "price revolutions'', when the monopoly price has to be changed due to competition, and so on. Still, the growing importance of price in the redistribution of income in favour of the monopolies must be noted.
39A second function of money is to be the medium of circulation. Before there was money, a commodity was exchanged for another commodity C---C. With the appearance of money exchange falls into two acts, viz., C---M (sale) and M---C (purchase). There may be an interval between the two acts (if, for example, the seller of commodity does not become a buyer immediately), which creates the danger of overproduction crises.
This function can only be fulfilled by effective money, but it need not necessarily be genuine money. In the process of circulation, money passes from hand to hand, and in this role it can well be replaced by mere symbols of value. This idea arose when it was observed that, as metal coins wore out and so contained less than the stipulated amount of metal, they still continued to perform their function successfully. Subsequently governments began to issue paper money as a substitute for gold in monetary circulation. Paper money cannot be a measure of value, as it has no value of its own; it merely symbolically represents gold.
As an embodiment of public wealth, money comes to be used as a means of hoarding. This function can only be fulfilled by real money. Hoarding is objectively necessary for the regular production of commodities, since every commodity producer needs a money reserve. The power of money increases as commodity-money relations progress and the desire to hoard money grows. Now that in the capitalist countries money circulation is getting out of gear and paper money is being depreciated, capitalists are avidly buying up gold. The hoards are concentrated in the banks which use them in credit transactions to earn themselves profits.
Another function of money is to be the means of payment. This refers to transactions in which money serves to discharge debts, which is done when goods are sold on credit. Credit selling is characteristic of developed capitalism. The development of this function results in the appearance of credit money. When goods began to be sold on credit, bills of exchange appeared, which were used in trade virtually as money. 40 Subsequently, bills of exchange discounted by banks were replaced by bank-notes. Cheques (a cheque is a written order directing a bank to pay money as instructed) are yet another kind of credit money.
Money also performs its function as means of payment with respect to taxes, rent, and so on.
The function of world money is made necessary by the growth of international economic relations. On the world market money, Marx said, sheds its national uniforms. The role of world money is played by gold. It is used as the international means of payment and purchase. Public wealth is embodied in world money, and the movement of the latter from one country to another is the movement of public wealth.
Paper money, too, can fulfil this function, provided it is readily convertible into gold. Following World War II, the dollar was just such a currency. After the United States stopped exchanging dollars for gold, the dollar lost its privileged position.
__ALPHA_LVL3__ The Amount of MoneyThis amount is determined primarily by the total volume of commodity prices. It also depends on the velocity of the circulation of money, as the same unit of money, in changing hands, is involved in the turnover of several units of commodity. Thus, the amount of money required for circulation equals the total volume of the prices of commodities divided by the velocity of the circulation of coins of the same denomination. Counting credit transactions we get the following formula:
sum of commodity prices sum of ---prices of goods sold on credit + sum of bill-- of-exchange and other payments sum of -3pay---ments cancelling each other out average number of circuits 41 When gold is in circulation and paper money is readily exchanged for gold, the amount of money in circulation spontaneously adjusts to it. For example, when circulation decreases, some gold is added to the hoard that serves as the reservoir for money circulation.When bank-notes are not exchangeable for gold, the entire volume of the paper money issued represents the amount of gold that is required for circulation at the time. If paper money is issued in an amount corresponding to the quantity of gold money required for commodity circulation, the paper money circulates at the value of the gold coins for which it is a substitute. When, however, more paper money is issued than that, it depreciates, each unit of money representing an amount of gold smaller than its face value.
__ALPHA_LVL3__ InflationInflation is the excessive issue of paper money and its depreciation. Under the conditions of modern capitalism, inflation has reached unprecedented proportions and has become chronic. It is based on the instability of the capitalist economy and extravagant military spending, which is the cause of the budget deficit. To cover the deficit, governments issue more paper money. There is no longer any difference between bank-notes and paper money. Bank-notes are not exchangeable for gold in any country. In the absence of any official price for gold, paper-money circulation shifts further and further from gold, which results in increasing inflation and plunges currency deeper into chaos.
Inflation is concretely expressed in the rise in the price level, which places a heavy burden on the working people, whose real incomes drop. As a result, production costs decrease and profits increase. Thus, inflation is a way by which the national income is redistributed in favour of the capitalists. Inflation also hits hard the small producers, who have to pay high prices for manufactured goods while all the benefits from the sale of their own produce are reaped by the wholesale buyers.
42Besides inflation, the rise in the level of prices is also due to the monopolies' policy of forcing up prices.
Although the monopolies profit by inflation, they lose by the disruption of the credit and currency system and disorganisation of the capitalist reproduction process. For this reason, bourgeois governments take measures to stabilise their currencies. These measures are : nullification of the depreciated currency without compensation and the issue of a new currency; revaluation or withdrawal of excess money from circulation to restore the value of the currency; and devaluation, i.e., lowering the gold content of the national monetary unit or reducing its rate of exchange with respect to foreign currencies. The latter method is the most usual. It has been applied in Britain, France, the United States and other capitalist countries. As, however, the exchange for gold is not restored, while the causes of inflation continue to operate, devaluation fails to stabilise the currency.
__ALPHA_LVL2__ 5. The Law of Value __ALPHA_LVL3__ Essence of the Law of Value.The law of value is an objective economic law governing commodity production. In accordance with this law, social labour is expressed in the value of commodities, the latter being exchanged in proportion to the quantity of abstract socially necessary labour embodied in them.
Nevertheless, it in no way means that commodities are always exchanged strictly in proportion to their value. The value of a commodity, as has already been stated, appears in the guise of money, as its price, which does not always coincide with value. Under commodity production based on private ownership, prices fluctuate in relation to value. This is due to the competition between producers and constant changes in the ratio of supply to demand. These fluctuations make 43 the law of value a natural regulator of proportions between different industries and lines of production. When supply happens to be greater than demand, the price of the commodity falls, and the producers are obliged to curtail production. When demand is higher than supply, the price rises above value, and the production of the commodity is expanded.
The price level also changes because the values of commodities change with a growth in the efficiency of labour. This also causes a redistribution of labour and means among industries.
__ALPHA_LVL3__ Impact of the Law of ValueThose producers who spend less than what is socially necessary on the production of their goods secure additional income, as prices are regulated by socially necessary labour. Conversely, those whose individual production costs are higher than the socially necessary, suffer losses and go out of business. It is therefore vital for producers to introduce new techniques, improve the organisation of production, and so on. Thus, the spontaneous operation of the law of value furthers the development of productive forces, but it does so only in a limited way, since new plant and processes are kept secret by producers in order to enjoy extra income for as long as possible.
The operation of the law of value causes a differentiation of producers. This is a natural result of the first two directions in which the law of value operates. Producers whose individual costs are higher than socially necessary are ruined, unless they manage to reorganise production. This happens especially when the price of the commodity tends to be lower than its value. Simultaneously, the operation of the law of value secures extra income for those producers who enjoy more favourable conditions of work. Thus ruined commodity producers become wage workers, and thriving ones turn into exploiters of the labour of others. Therefore, simple commodity production breeds capitalist relations.
44 __ALPHA_LVL3__ Commodity FetishismUnder commodity production founded on private ownership of the means of production, relations between producers, determined by the division of labour, are manifested in the exchange of commodities, i.e., in relations between things. In other words, social relations of production are materialised. Under pre-socialist conditions of simple commodity and capitalist economies, these relations form spontaneously and dominate men. This appears in the guise of domination of things over men. The fate of a producer depends on his commodity, on whether he sells it at a profit or at a loss.
Marx described the materialisation of production relations as commodity fetishism. From this objective process derives the mistaken notion that goods and particularly money possess some supernatural power or properties enabling them to dominate men. In fact, however, people are dominated by their own production relations, which are manifested in things. With the abolition of private ownership, commodity fetishism disappears.
[45] __NUMERIC_LVL1__ CHAPTER 4 __ALPHA_LVL1__ CAPITALIST EXPLOITATION __ALPHA_LVL2__ 1. The TransformationThe formula for simple commodity circulation is C-M-G. Here sale is effected for the sake of purchase, the money being completely expended in the process. The ultimate aim of commodity circulation is the use value that the producer must obtain in exchange for his own commodity.
The general formula for capital is M-G-M', where M' = M + m. This means that the sum received from the sale of goods exceeds that which was advanced for their purchase. In this lies the essential distinction between the general formula for capital and the formula for simple commodity circulation. The aim of capital movement is not use value, but increase in value. In this case, purchase is effected for the sake of sale. In this formula, money is not spent completely, but advanced. It follows from the formula that capital is self-expanding value or value for the creation of surplus value. The general formula for capital directly reflects the movement of capital in the sphere of circulation. Nevertheless, it also refers to all other kinds of capital, since it defines the motive and aim of the circuit of capital in all branches of the capitalist economy.
__ALPHA_LVL3__ Contradiction ofThe formula M-C-M' contradicts the law of value. Under this law, commodities are exchanged in proportion to the expenditure of socially necessary labour. It follows that, in the 46 sphere of circulation, value cannot increase. It is quite conceivable that an individual capitalist may get a surplus of value due to a deviation of price from value. Even so, non-- equivalent exchange can only result in gain for some capitalists and loss for others. The whole capitalist class cannot get rich that way, at its own expense.
Consequently, surplus value cannot appear in the sphere of circulation. Neither can it appear without the commodity owner entering this sphere. If he remains alone with his commodity, without coming in contact with other commodity owners, he will be unable to convert it either into money or into capital.
Let us consider the two elements of the general formula for capital. One of them is money. In itself, it cannot be a source of increase in value. Consequently, the secret of surplus value lies in the commodity that the money buys. Moreover, it is not a matter of the value, but of the use value of the commodity, since the first act, M-C, involves equivalent exchange. Surplus value arises, therefore, in the process of the consumption of the commodity, from its use value. The sole commodity the consumption of which creates value and surplus value is labour power.
__ALPHA_LVL3__ Labour Power as a CommodityLabour power is the sum total of man's physical and intellectual abilities, which are realised in the process of production. Labour power as the ability to work exists in any society, but only under certain conditions does it become a commodity. These conditions are, first, the producer's personal freedom, which enables the owner of labour power to enter the market as a seller and deal with the buyer, the owner of money; second, the owner of labour power must have no means either of production or of subsistence, otherwise he would have no reason to sell his labour power.
These conditions took shape as feudalism fell into decay and the capitalist mode of production emerged. The 47 transformation of labour power into a commodity is characteristic of capitalism.
Like every other commodity, labour power has use value and value.
Labour power as the ability to work is inseparable from man, hence its production and reproduction imply that a man's vital functions should be maintained at a normal level. The value of labour power is, therefore, determined by the aggregate cost of (1) the means of subsistence required to sustain the life of the labour power owner; (2) the means required to meet his social and cultural needs, which increase as society develops; (3) the means required to support an average family to keep the labour market supplied; and (4) the means required to train workers in various skills.
Thus, the value of labour power is determined by the value of the vital necessities required for its reproduction.
There are two opposite tendencies in the movement of the value of labour power that come into play with the progress of society.
A higher productivity of social labour tends to lower the value of labour power. As the productivity of labour rises, the value of the means of subsistence decreases, and so does the value of labour power. Similarly, when women and children are involved in production, the value of labour power drops, as all members, rather than the head of the family alone, contribute to its reproduction.
As for the factors tending to increase the value of labour power, they are, first of all, the rising cost of skill improvement, plus both the growth and change in the workers' needs owing to the current technological revolution. Another factor operating to raise the value of labour power is greater intensity of labour, when more vital necessities are needed to sustain a worker's vital functions. Both trends operate simultaneously. Either one or the other predominates at different times and in different countries.
Labour power is consumed in the process of work, when the commodity is produced and value and surplus value are 48 created. The specific use value of the commodity (labour power) consists in its capacity to create surplus value, which is why capitalists buy it.
__ALPHA_LVL2__ 2. Production of Surplus Value __ALPHA_LVL3__ The Process of Labour Under Capitalism.Labour is a process which invariably involves man's active influence on nature. Under capitalism, however, this process implies the consumption of the labour power bought by the capitalist. The worker works under the control of the capitalist, to whom the means of production and labour power belong. For this reason, the product of labour, which is created by the worker, is appropriated by the capitalist.
As a result of the consumption of labour power, wage workers create new value, which is greater than the value of their labour power. For instance, if the value of labour power is ten dollars, and the value created by the worker is twenty dollars, the difference, i.e., surplus value, will be ten dollars. Thus, surplus value is the value created by the labour of wage workers over and above the value of their labour power, and gratuitously appropriated by capitalists.
A capitalist buys the means of production as well as labour power. Let us assume that he spent forty dollars on the means of production that were used up during the production process. Then the capitalist's expenses will amount to fifty dollars, and the value of the commodity produced, to sixty dollars. The difference resulting from the exploitation of labour power is surplus value.
In the process of labour, (1) the old value (the value of the machines and raw material) is preserved and transferred, as a result of concrete labour, to the new commodity, and (2) new value is produced, which is a property of abstract labour. Consequently, the contradiction of the general formula for capital 49 is resolved: surplus value is not created in the sphere of circulation, but in production, through the medium of circulation in which the capitalist buys labour power. It has also been demonstrated that the general formula for capital does not clash with the law of value, provided the capitalist pays the full cost of labour power.
The value of the newly produced commodity can be expressed by the formula c + v + m, where c is the value of the means of production consumed, v is the equivalent of the value of labour power, and m is surplus value.
__ALPHA_LVL3__ Capital: Its Essence and StructureAccording to bourgeois economists, capital is a thing. They only argue about what exactly it is, whether it is money or the means of production or all commodities generally. In reality, capital expresses the production relations of bourgeois society, those between the capitalists and the wage workers. These relations are expressed in things, which is why things acquire a social character.
In identifying capital with a thing---usually with the means of production---bourgeois ideologists view it as an eternal category. In reality, the means of production become capital only under capitalism. Capital necessarily implies the existence of wage labour, and vice versa. They are the two sides of the same relationship.
The part of capital that is turned into means of production does not change its value in the process of production. For this reason, it is called constant capital and is designated by the letter c (from the Latin constantes).
The other part of capital, which is turned into labour power and changes its value in the process of production, is called variable capital, and is designated by the letter v (from the Latin variables). Labour power reproduces the equivalent of its own value and, moreover, creates surplus value which, in its turn, can vary in size. This division of capital was discovered by Marx. It shows that surplus value is not created by the whole __PRINTERS_P_49_COMMENT__ 4---1921 50 of the advanced capital, but only by that part that goes to purchase labour power. It is obvious, then, that only the workers' unpaid labour can create surplus value.
The division of capital into constant and variable refers only to capital functioning in the sphere of production, i.e., exactly where surplus value is created.
Capital employed in production is also divided into fixed and circulating capital. Those elements of productive capital that are wholly involved in production but transfer their value to the product bit by bit, as they wear out, are called fixed capital. These are the means advanced for the construction of industrial buildings, installations, equipment and machinery.
Circulating capital is that part of productive capital the value of which is immediately and entirely transferred to the finished product during the process of production and returned to the capitalist at the end of each production cycle. The elements of circulating capital are raw and other materials, and fuel. The capital advanced for the purchase of labour power is also circulating capital. Labour power, however, does not transfer its value to the product, but reproduces the equivalent of its own value. In the method by which it circulates, however, variable capital does not differ from the other elements of circulating capital. Clearly, the division into fixed and circulating capital is due to the different ways in which capital circulates and in which the value of its various parts is transferred to the product.
The division of productive capital into fixed and circulating merely disguises its division into constant and variable capital.
The relation between the two methods of dividing productive capital can be simplified as follows:
Productive capital Principle of Division Role in creating surplus value Principle of Division The way value is transferred to the product 51 [The value of factory buildings, installations, machines] Constant capital [and equipment] [The value of raw and other materials and fuel] Variable capital [The value of labour power] Fixed capital Circulating capitalBoth methods of division refer solely to capital employed in production. It is only there that surplus value is created and the value of the means of production is transferred to the product. As for commodity and money capital, they make up circulation capital.
__ALPHA_LVL3__ Mass and Rate of Surplus ValueThe labour of the workers in a factory under capitalism, as well under other exploitative socio-economic systems, falls into two parts. The first part of the working day, during which value is created equal to that of labour power, is called necessary labour time, and the labour expended during that time is called necessary labour.
The second part of the working day, during which surplus value is created, is called surplus labour time, and the labour expended in that time is called surplus labour.
The ratio --- surplus labour --- necessary labour expresses the degree to which the producer is exploited by the owner of the means of production in any antagonistic class system such as capitalist society. The ratio of surplus value to variable capital expresses the degree of exploitation under capitalism :
m =--- vThe rate of surplus value shows how the newly produced value is distributed between the workers and the capitalists, which part of the day the worker works for himself and which for the capitalist.
__PRINTERS_P_51_COMMENT__ 4* 52With the development of capitalism, the rate of surplus value increases and, consequently, so does the exploitation of workers. Whereas at the beginning of the 20th century in the industrialised countries it did not exceed 150 per cent, under modern conditions in these countries it fluctuates between 250 and 350 per cent.
The rate of surplus value does not suffice to show the amount of surplus value. The absolute amount of surplus value is called its mass. Given a definite value of labour power, the mass of surplus value produced by an individual worker depends on the degree of labour exploitation.
From the formula, m' =---X 100, it follows that m = vxm', i.e., the mass of surplus value equals the amount of advanced variable capital multiplied by the rate of surplus value.
It is worth noting that capitalist exploitation is disguised. There is no non-economic compulsion under capitalism, such as was found under the slave-owning and feudal modes of production. The wage worker is free, but as he has no means of production, he is forced to sell his labour power and allow himself to be exploited. Labour is, therefore, compulsory under capitalism too, but the compulsion is economic. This essential fact is disguised by the worker's personal freedom, whereby he may be supposed to be selling his labour power because he is willing to do so.
Another feature of capitalist exploitation is the capitalists' insatiable appetite for surplus value, resulting from the fact that the aim of production under capitalism is to increase wealth in the form of money, rather than to satisfy people's needs. Wealth in the form of money can be accumulated limitlessly. Hence the most subtle methods of intensifying the exploitation of the workers.
__ALPHA_LVL3__ Methods of Intensifying the ExploitationIn their pursuit of surplus value capitalists seek to increase surplus time. This can be done in two ways, by the production 53 of absolute and relative surplus value. The surplus value secured by lengthening the hours of work is called absolute surplus value.
The production of absolute surplus value, i.e., prolonging the working day beyond necessary working time, is the general basis of capitalist exploitation. This method predominated in the earlier stages of capitalism. As the workers began to fight for their rights and to organise, bourgeois governments were obliged to enact laws limiting working hours. Absolute surplus value can be produced in other ways too, however, e.g., by speeding up work, overtime and underpayment of workers.
The second method of raising the degree of exploitation is the production of relative surplus value. More surplus value can be secured by cutting the necessary labour time so that the surplus time is correspondingly increased. Necessary labour time depends on the level of social labour productivity. When the latter increases in consumer goods industries and in the industries producing the means of production for them, the means of subsistence become cheaper and this brings down the value of labour power. With the development of machine production, more relative surplus value is created.
Intensification of labour also tells on the production of relative surplus value. When the majority of workers begin to work more intensively, socially necessary labour time becomes shorter.
__ALPHA_LVL3__ Extra SurplusExtra surplus value is appropriated by individual capitalists. It is created in factories equipped with new machinery and employing up-to-date methods of production organisation. In such factories, individual expenditures are lower than the socially necessary ones, and as market prices arc regulated by socially necessary expenditures, the capitalists in whose factories labour productivity is higher get extra surplus value, in addition to ordinary surplus value. As it is secured not by 54 lengthening the working day, but by shortening the necessary labour time, extra surplus value is a kind of relative surplus value. A peculiar feature of it is that it is obtained only by certain capitalists, and then only until the innovations have spread throughout the industry. As it disappears in some factories extra surplus value appears in others. It is a constant and regular thing in capitalist society. The pursuit of extra surplus value makes capitalists introduce new machinery and develop productive forces. Simultaneously, they keep their improvements secret for as long as they can, and this acts as a brake on technological progress.
The three stages in the development of capitalist industry, simple co-operation, manufactory and factory, were each marked by a respective growth in labour productivity, the production of extra surplus value, and exploitation of the workers.
__ALPHA_LVL3__ The Main Economic ContradictionAs capitalism advances, the social division of labour increases, and the number of industries and branches of agriculture multiplies, while the ties between them become closer. Separate economies are replaced by large factories in which great numbers of workers are concentrated under the capitalists' command. There, too, a division of labour exists, the production of each commodity involving the efforts of hundreds and thousands of workers.
Thus, production becomes social, while the means of production and its results belong to private owners, capitalists, who carry on production in order to become rich.
The conflict between the social character of production and the private capitalist mode of appropriation of its results is the main economic contradiction of capitalism. It comes out in the contradiction between the workers and the capitalists. The irreconcilable opposition of interests between the two classes is the principal class contradiction of capitalism.
55 __ALPHA_LVL3__ Fundamental EconomicProduction of the greatest possible amount of surplus value and its appropriation by the capitalists through increasing the exploitation of wage workers is the fundamental economic law of capitalism. It shows the aim of capitalist production, which is to derive as much surplus value as possible. This can be achieved by increasing the exploitation of workers. The law of surplus value shows the essence of capitalist exploitation, the basic production relations of capitalism and those between capitalists and wage workers. It, therefore, determines the way in which the capitalist mode of production develops. This law makes clear the important fact that the existence and growth of capital rest on the creation of surplus value, that the development of productive forces, sped up by the operation of the law of surplus value, aggravates the main contradiction of capitalism and causes the class struggle to mount. The law of surplus value is the law of movement of the capitalist mode of production, which leads to the socialist revolution.
The theory of surplus value, Lenin said, is the cornerstone of Marx's economic doctrine. It exposes the deepest roots of capitalist exploitation and scientifically explains why the revolutionary overthrow of capitalism is inevitable.
__ALPHA_LVL2__ 3. Wages __ALPHA_LVL3__ The Real Essence of WagesSuperficially in bourgeois society, wages appear as payment for labour, and labour as a commodity. In reality, labour is not a commodity; it has no value because labour cannot be embodied in labour. A commodity exists even before its sale; and labour does not start until the transaction is completed. If we assume that labour is a commodity bought by the capitalist at its full value, the capitalist will get no surplus value---but this is contrary to fact.
56Wages are, in reality, disguised payment for the value of labour power. The value of labour power, expressed in terms of money, is the price of labour power. The latter is usually sold at less than its value. Outwardly, wages appear to be the price of labour, so that it looks as if all labour were paid. Indeed, in order to receive the daily value of his labour power, a worker must labour a whole day.
Thus, wages are a modified form of the value and thus of the price of labour power. Wages disguise the exploitation of workers by capitalists, creating the illusion that both are equal commodity owners.
The value of labour power immediately appears in the shape of the two principal forms of wages---time wages and piece wages.
__ALPHA_LVL3__ Time WagesTime wages are payment of the value of labour power for the functioning of labour power over a specified period of time, viz., a day, a week or a month. The value of labour power, moreover, has a special form of expression, which is the price of labour. The latter is computed on the basis of the value of labour power per day, divided by the average number of working hours. In the capitalist countries, labour is often paid by the hour, e.g., when workers do overtime or are on short hours. Such payment for labour is a variant of time wages.
Time wages emerged earlier than the other kinds and were predominant in the early stages of capitalism. They were replaced by piece wages later on. Under the conditions of the current technological revolution, however, when the tempo of work is imposed by machines or production processes, time wages have reappeared on a broad scale. For instance, about 80 per cent of workers in West Germany and France, and 70 per cent of workers in the manufacturing industries in the United States, are now on time wages. Thus, time wages are pegged to the forced tempo of work.
57In the case of so-called incentive wages, workers are paid different rates according to output. They may also receive bonuses for good efforts.
__ALPHA_LVL3__ Piece WagesPayment for labour power computed on the basis of output per unit of time constitutes piece wages, which are a modified form of time wages. The only difference is that the expenditure of labour power is measured in terms of output, rather than working time. In the case of piece wages, there are daily quotas and rates for each unit of output, and the exploitation of workers is even more disguised. There is every appearance of the capitalist paying the worker in full for the products of his labour. Piece wages compell workers to increase the intensity and productivity of labour, which makes the capitalists' profits grow. That was why, for many decades capitalists preferred to keep their workers on piece rates.
At present, as has already been mentioned, the traditional systems of wages are not so popular. They are being increasingly replaced by piece-and-bonus and multiple-factor wages, which are computed on the basis of a number of factors, such as output, quality, economies of raw material, and efficient use of equipment. Those who fulfil or go over the quota stand to receive a bonus, while those who fall short of the quota are threatened with wage cuts.
__ALPHA_LVL3__ ``Profit-Sharing''One form of collective bonus payment persistently introduced in the capitalist countries is something like a system of ``profit-sharing'', which creates a semblance of worker participation in the business and keeps them from striking. What really happens when these systems are applied is that wages are divided into two parts. One, the main part of the wages, is paid regularly, while the other is paid from time to time, the amount depending on the level of profits or savings on production costs.
58These kinds of wages, like all the others, serve to make capitalist enterprises more profitable.
Thus, all systems of wages disguise capitalist exploitation and are simultaneously a means for increasing it.
__ALPHA_LVL3__ Nominal and Real WagesWages received by workers in the form of money are called nominal wages. They are used to procure the means of subsistence, to pay rent, taxes, and so on. As the prices of goods and services are not constant, not only nominal, but also real wages must be considered. The latter are the equivalent of the total of goods and services a worker can buy at the current price level with his earnings after tax and other deductions. Consequently, the level of real wages depends on the amount of nominal wages, the prices of goods and services, and taxes.
Rising unemployment and its pressure on the labour market, the involvement of women and semi-skilled workers into production, and the decreasing demand for labour result in a lowering of nominal wages and serve to bring down real wages.
Higher prices, taxes and rent are all factors contributing to the reduction of real wages.
Workers are struggling against the reduction of nominal and real wages, insisting on a systematic revision of wage rates on the basis of the cost of living index.
Tending in the direction of higher real wages is the growth in the volume of workers' vital needs, which increase as society develops. Nevertheless, only through acute class struggle do the workers manage to get these objective wants met.
To sum up, there are two trends in the movement of real wages, an upward trend and a downward one. During some periods, especially at times of economic crisis or war, real wages tend to decrease. At others, the downward trend is predominant. It must also be borne in mind that a fall or rise in real wages may affect only part of the -working class. Another important thing is that, under capitalism, women, young people and national minority groups are discriminated against in terms 59 of the payment for labour. Also, the value of labour power and real wages may vary from country to country, owing to the difference in the economic and historical conditions and in the conditions under which the working class is formed in each of them.
__ALPHA_LVL2__ 4. Capital Accumulation.The constant renewal and continual repetition of the production process, which is a condition for the existence of society, is called reproduction. Not only material goods, but also labour power and social production relations are constantly renewed. Reproduction may be simple or extended. Renewal of production on the same scale is called simple reproduction. Renewal of production on an ever increasing scale is called extended reproduction.
__ALPHA_LVL3__ Simple ReproductionIn simple reproduction the amount of functioning capital does not rise, with all surplus value being consumed by the capitalist. If we view capitalist production as a continuous process, we see that: (1) the money paid out by the capitalist in wages does not come from his own pocket, but is part of the value that has been created by his workers. This means that it is not the capitalist who advances money to the workers, but the workers who advance money to the capitalist, creating for him a fund out of which he can make further payments for labour power; (2) even if the capitalist's capital has been created by the labour of his fathers (as the apologists of capitalism claim), the passage of time turns it into accumulated surplus value, the materialised unpaid labour of other people, as the capitalist's own savings go for his personal consumption; and (3) capitalist reproduction implies the reproduction of capitalist 60 relations, as it reproduces the capitalist on the one hand, and the wage worker, on the other.
All this applies equally to capitalist extended reproduction.
__ALPHA_LVL3__ Capitalist AccumulationIn extended capitalist reproduction, surplus value is divided into two parts. One part goes for the capitalist's personal consumption, the other is used as capital or is accumulated. The transformation of surplus value into capital is capital accumulation. For this it is necessary to have additional means of production and subsistence, as well as additional labour power. Capital accumulation implies that capital and capitalist production relations are reproduced on an extended scale.
__ALPHA_LVL3__ Organic Composition of CapitalAs capital accumulates, its composition changes. Physically, capital employed in production consists of means of production and labour power. The ratio of the mass of means of production to the number of workers operating them is called the technical composition of capital. With the introduction of better machinery, the technical composition of capital rises.
The ratio of the value of constant capital to the value of variable capital is called the value composition of capital. The technical and the value compositions of capital are closely related. Usually, a change in the technical composition of capital entails a change in the value composition. The ratio of constant to variable capital f---J, i. e., the value composition of capital, insofar as it is determined by the technical composition and reflects the changes in it, is called the organic composition of capital. As the result of technological progress, the organic composition of capital, both in industry and agriculture, rises. During the current scientific and technological revolution, however, it is an extremely uneven process in which some contradictory tendencies can be observed. Periods of rapid growth alternate with periods when the organic composition of capital rises at 61 a slower rate or when it stabilises. These fluctuations are due to such factors as the rapid growth of constant capital when new machinery is introduced, the rising share of skilled labour, the increase in output requiring smaller expenditures of constant capital, and so on.
__ALPHA_LVL3__ Concentration and Centralisation of CapitalAs capitalism advances, concentration and centralisation of capital take place. Both boost progress in technology, higher efficiency of labour and higher organic composition. The concentration of capital is its growth resulting from capitalisation of surplus value, i.e., a growth due to capital accumulation. Both individual and social capitals increase in the process. The centralisation of capital is the fusion of several individual capitals into a larger one; it may also consist in the absorption of smaller capitals by larger ones. The centralisation of capital is the redistribution of available capitals, so that their total does not increase. The concentration and centralisation of capital complement each other and promote the growth of large-scale production. With the advance of capitalism, large enterprises come to play a greater role, thanks to the advantages they have over small ones. It is easier for them to employ new machinery and make production cheaper, to sell their products more profitably, and to secure credit on advantageous terms. The concentration of production in the last third of the 19th century caused the rise of monopoly.
__ALPHA_LVL3__ Accumulation of CapitalThe accumulation of capital results in its growth and higher organic composition. It means that the share of variable capital in the total sum of productive capital decreases. Since the demand for manpower is determined by the size of variable capital, this demand increases more slowly than aggregate 62 capital and production. The progress of technology under capitalism and the intensification of labour result in the ousting of a proportion of employed workers on to the labour market. This gives rise to unemployment. It means backbreaking toil for one part of the workers and forced idleness for the rest. The ranks of the unemployed are swelled by small producers forced out of business. Unemployment is particularly high in periods of economic recession. This is not only an issue of capitalism, but also a condition of its existence. As capitalist production develops unevenly, in cycles, upswings alternating with downswings, there must be an industrial reserve force to meet the demand for labour during the upswings. Capitalists also take advantage of unemployment to sweat the employed workers and cut their wages.
The formation and growth of the industrial reserve force forms the substance of the capitalist law of population. It is relative overpopulation, i.e., a surplus of labour, compared with the demand for it. The modern productive forces make it possible to engage the entire population in useful work and raise its living standard. But this cannot be done under capitalism, for under capitalism production is carried on not in the interest of the people but for the sake of profit.
Relative overpopulation varies in form. It may be fldating, workers alternately drawn into and pushed out of production. There is latent overpopulation which means that ruined and virtually unemployed small producers, who cannot find jobs in the cities, stay in the villages. There is stagnant overpopulation for people who can find only casual work. Partial unemployment, which means that a worker is occupied only a part of the working day or week, is also fairly common. Such workers are not considered unemployed in official statistics, although actually they are semi-unemployed. This kind of relative surplus of labouring people is very profitable for the capitalists. The growth and permanent availability of an industrial reserve force is an essential feature of modern capitalism. When the economy is on the upswing, unemployment merely diminishes, but it does not disappear even then.
63 __ALPHA_LVL3__ General LawStudying the impact of capital accumulation on the position of workers, Marx formulated the general law of capitalist accumulation: "The greater the social wealth, the functioning capital, the extent and energy of its growth, and, therefore, also the absolute mass of the proletariat and the productiveness of its labour, the greater is the industrial reserve army. . . But the greater this reserve army in proportion to the active labourarmy, the greater is the mass of a consolidated surplus-- population, whose misery is in inverse ratio to its torment of labour. The more extensive, finally, the Jazarus-layers of the workingclass, and the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation."^^1^^
This law operates in all capitalist countries, but in different forms and degrees, depending on the specific historical conditions and the extent to which the working class and its allies are organised.
__ALPHA_LVL3__ Relative DeteriorationThe relative deterioration in the lot of the working class consists in the fact that the workers' share in the rapidly growing wealth of society decreases as the capitalists wax rich at an ever faster rate. This process has several concrete expressions. The first is that the workers come to account for a diminishing share of the national income, which represents the entire new value produced in society in the course of a year (v + m). Whereas in the 19th century the workers' share amounted to 45--50 per cent, in the 20th century it has dropped to 35--40 per cent in the industrially developed capitalist countries.
_-_-_~^^1^^ Karl Marx, Capital, Vol. I, p. 603.
64The second is the ratio of the growth rates of wages and profits. The workers' diminishing share of national income implies greater exploitation, which is reflected in the dynamics of profits and wages. Statistics show that the growth of profit exceeds that of wages several times over. The third expression of this process is the workers' diminishing share of the aggregate social product. The capitalist's share is c + m (constant capital plus surplus value), and the workers' share is v. The ratio------- shows that the capitalists' share increases, while that of the workers drops. Fourth, the workers' share of national wealth decreases. By far the greater part of national wealth comes to be concentrated more and more in the hands of a small group of capitalists.
__ALPHA_LVL3__ Absolute DeteriorationThe absolute deterioration in the workers' position is indicated by the trend of real wages, unemployment situation, growth in labour intensity, poorer food and housing. These indicators may change along different lines. If some of them improve a little while others deteriorate a good deal, we can say that the workers' position has become worse. Bourgeois economists do not share this approach. Because of a certain increase in wages in the industrially developed capitalist countries they claim that Marx's teaching on the deterioration of the workers' position is wrong. Marx, however, never held that the drop in real wages was all there was to it. Moreover, he wrote that, with the accumulation of capital, the workers' position deteriorated irrespective of how high or low wages might be. This was due to the position of the workers as the exploited class.
Under modern capitalism, the rapid growth of labour intensity is an important factor in the deterioration of the workers' position. No direct indicators of the growth of labour intensity exist. Nevertheless, figures indicating the growth in industrial accidents and early disablement may serve as indirect 65 indicators. Unemployment, too, plays an enormous role. Bourgeois statistics do not count the unemployed as workers, but they are indeed a part of the working class and their position is an important element of the picture of the life of the working class as a whole. Inflation and the hardships of the economic crisis were responsible for the downward trend of real wages in the mid-1970s.
With respect to wages, bourgeois statistics use, as a rule, average figures often including highly paid managerial staff among industrial and office workers. A discriminating approach should be taken to the composition of the working class, distinguishing between higher- and lower-paid workers. Today even government officials cannot deny that at least one-fifth of American families live in poverty---and this in the richest capitalist country in the world!
Reviewing a book by Kautsky, Lenin pointed out two facts, viz., (a) the growth of poverty as "physical poverty" and (b) the growth of poverty "not in the physical but in the social sense."^^1^^ Physical poverty means undernourishment, poor housing conditions and extremely limited possibilities for satisfying the most vital wants. Such physical poverty exists under capitalism. It is the lot of the jobless and the lower-paid industrial and office workers, those, above all, who are discriminated against because of race, nationality, sex or age. Physical poverty jumps to the eye in the former colonies, which were ravished in the colonial times, and still are ravished by neocolonialists.
Poverty in social terms implies a discrepancy between wages and the vital needs of the working people. Lenin pointed to the indisputable truth that the development of capitalism inevitably entails an increase in the level of wants of the entire population, and so of the industrial proletariat. The scientific and technological revolution has sped up the growth of the workers' essential wants. This refers, in the first place, to expenditure on education, cultural requirements and transport. Nevertheless, wages lag behind the growing wants.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 4, p. 201.
__PRINTERS_P_65_COMMENT__ 5---1921 66Thus, the volume of the workers' unsatisfied wants increases. A comparison of family budgets and wages gives an approximate idea of the dynamics of these two indicators. They testify to the increasing privation of the working class and the absolute deterioration of their position.
The tendency towards the deterioration in the lot of the working class is a socio-economic law of capitalism. The workers' class struggle against capitalist exploitation can assist in diminishing the effect of this law, and cause the living standard to rise to some extent. Still, it cannot abolish the law, as it is objectively determined by the whole system of the capitalist relations of production.
__ALPHA_LVL3__ Historical TrendIn the end, it is accumulation of capital that brings the downfall of capitalism. It is accompanied by an increasing socialisation of production, which becomes increasingly concentrated in big enterprises closely interlinked on the basis of specialisation and co-operation. Capitalist socialisation of production and labour implies the preparation of the material prerequisites for the transition to socialism. The productive forces created by capitalism can no longer be restrained by the boundaries of capitalist production relations. The discrepancy between them increases, making it objectively necessary that capitalist production relations be replaced by socialist ones.
Simultaneously the subjective prerequisites for the transition to socialism also mature. These consist in the growth of the strength and organisation of the working class. Bourgeois ideologists assert that the working class is diminishing, owing to the growth of the "middle sections''. In reality, the proletarianisation of the population has even increased. The proportion of employed persons in the active population has grown in all capitalist countries. In the industrialised countries, employed persons account at present for 83 to 93 per cent of the population. Contrary to the claims of bourgeois economists, the 67 industrial proletariat is growing in size and is concentrated in large enterprises and key industries.
The organisation and awareness of the workers are also rising. Led by Communist parties, they are waging an unremitting struggle against capitalist exploitation and fighting for the revolutionary transformation of society.
The preparation and development of the objective and subjective prerequisites for the transition from capitalism to socialism are the sum and substance of the historical trend of capitalist accumulation.
With the advance of capitalism, Marx wrote, "grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. Thus integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated."^^1^^
_-_-_~^^1^^ Karl Marx, Capital, Vol. I, p. 7If).
[68] __NUMERIC_LVL1__ CHAPTER 5 __ALPHA_LVL1__ THE DISTRIBUTION The value of a commodity is the value of constant capital
consumed in
its production (c); the new value produced or the
value of variable
capital (v) plus surplus value (m).
Therefore, the value of the
commodity may be expressed as =
w = c + v + m.
To a capitalist, the value of a commodity is measured by capital outlays, i.e., by the expenditures on constant capital and wages. Capital expenditures on the production of a commodity are capitalist production costs: k = c + v. This is the portion of the value of a commodity that must be replaced by what the commodity will fetch. Hence the formula for the value of the commodity should now be: w = k + m.
Production costs are the lowest marginal price of the commodity. Every capitalist tries to sell his commodity at a price that will cover his expenses and afford him a profit.
Production costs mask the expenditure of human labour. They appear as capital expenditures plus something over. The division into constant and variable capital is also hidden, both parts being unified in production costs. The latter disguise the fundamental difference between c and v, namely, that the value of constant capital is transferred to the new product, while the value of variable capital forms a portion of the new value produced. Apart from that, the value of labour power appears in production costs in a modified form as the price of labour, all labour being represented as paid.
69Owing to this, surplus value appears as the result of the functioning of all the capital advanced. In Marx's definition, surplus value represented as the issue of all the capital advanced, acquires the modified form of profit which disguises the source of surplus value, the exploitation of wage workers.
The value of a capitalist-produced commodity is expressed by the equation: w = c + p, p being profit.
__ALPHA_LVL3__ Profit Rate The ratio of the profit to the total advanced capital is
called the rate of profit, P' =---xlOO where p' is the rate of
C
profit, p is the mass of profits, and c is advanced capital.
The profit rate shows the extent to which capital increases and, consequently, the profitability of its employment in one industry or another. It blurs the distinction between constant and variable capital to create the impression that profit is the result of the productivity of all capital.
The rate of profit depends, first, on the rate of surplus value, so that the higher the rate of surplus value, the higher, all other things being equal, the profit rate. Second, it depends on the organic composition of capital (---], in this case, in inverse relation, i.e., the higher the organic composition, the lower the profit rate, since surplus value is created by variable capital. Third, it depends on the rate of capital turnover, p' changes in direct proportion to the rate of capital turnover, as the capital which turns over faster, exploits more labour in the course of a year, than does capital that takes longer to turn over.
__ALPHA_LVL3__ Formation of Average ProfitDepending on the combination and interaction of these factors, the profit rate theoretically must vary between enterprises and industries. In fact, however, under free competition, capitalists secure approximately equal profit from equal capital, as profit rates are equalised by competition.
70There are two kinds of competition. Intra-industry competition is competition between enterprises in the same industry in the sale of commodities and for surplus profit. It results in a single price being naturally established on the market for identical commodities. At the basis of the single price is the market or social value of commodities. It is the value of the goods produced under average production conditions in the industry concerned, which make up the bulk of the given kind of goods. Enterprises whose individual costs are lower than the social value secure extra profit, which is a modified form of extra surplus value, playing an important role in the stimulation of technological progress.
Inter-industry competition is that between enterprises in different industries. It is a rivalry for the more profitable spheres of investment and a redistribution of profit. In the course of this competition capital shifts from the less to the more profitable industries. This affects the supply and demand situation and, consequently, prices. If, for example, too much capital enters a high profit industry, supply will outstrip demand, and prices and profits will drop. Conversely, in the industries deserted by capital, the supply will shrink, prices will rise, and profit will increase. Thus, as the result of the flow of capital, the different rates of profit will equalise into a general average rate.
The average profit rate is the ratio of aggregate surplus value to all social capital expressed as a percentage. The mass of profits received in accordance with this rate from each capital advanced is called average profit.
The formation of the average rate of profit may be illustrated by the following table :
Surplus Value of Branch Average Price of Deviation of Capitals Value Commo- Profit Profit Production the Price of (m'=100) dities Rates Rate Production from Value 90c + lOv 10 110 10% 20% 120 +10 80c -f 20v 20 120 20% 20% 120 --- 70c + 30 v 30 130 30% 20% 120 ---10 240c + 60v 60 360 20% 360 71The average rate of profit will be: .-- X 100 = 20 per cent.
After the average rate of profit is formed, the law of surplus value begins to operate through the law of average profit.
In the imperialist age, monopoly domination affects the formation of the average rate of profit as the monopolies undermine inter-industry competition, hindering the flow of capital to high-profit industries. At the same time, new kinds of capital movement appear, e.g., combining and diversification of production. The monopolies dictate to small and medium enterprises, seizing the lion's share of the profit. As a result, the average rate of profit forms the two different levels, a high one for monopoly capital, and a low one for the non-monopoly sector.
__ALPHA_LVL3__ Price of ProductionThe formation of the average profit rate determines the transformation of value into the price of production.
The price of production equals production costs plus average profit (k + pav).
The price of production differs outwardly from value both in form and magnitude. It exceeds value in industries in which the organic composition of capital is above the average, and it is lower than value wherever the organic composition of capital is below the average. Whereas value is determined by the expenditure of socially necessary labour time, the price of production depends on the expenditure of capital and the average profit from the capital. This gives the impression that the price of production has nothing to do with the value of commodities. Actually, however, the price of production is a modified form of value. Production costs are c + y, i.e., value materialised in constant capital plus the reproduced value of variable capital, and average profit is the surplus value accruing from each capital on average. Behind capital expenditures and average profit there are, thus in fact, the expenditures of human labour.
Although the price of production deviates from value, the 72 sum of the prices of production of all capitalist-produced commodities equals the sum of their values. The prices of production of the commodities manufactured under average conditions coincide with their value. Changes in the value of the means of production and of labour power influence production costs and that, in turn, induces a change in the prices of production. Average profit, too, is influenced by a change in value. The larger the aggregate mass of surplus value, the higher the average profit. All this shows that prices of production are regulated by the law of value.
From Marx's teachings on average profit and the price of production it follows that the working class as a whole is exploited by the entire capitalist class, and that every capitalist is interested in stepping up the exploitation of workers in all other enterprises as well as his own, as this results in a higher average rate of profit. On the other hand, the workers can improve their lot only by abolishing capitalist exploitation, altogether for which purpose it is necessary to build up the solidarity of the workers.
__ALPHA_LVL3__ Law of the Downward TrendThe average rate of profit tends to decrease. This is due, first, to the growth in the organic composition of capital as a result of technological progress; second, to the slower turnover of social capital on account of the rising share of expenditure on machines and equipment, which turn over at a slow rate; and third, this is due to the fact that goods become increasingly harder to sell.
Nevertheless, the downward trend of the average rate of profit in no way implies a reduction in the profit mass, which depends not only on the profit rate, but also on the size of the advanced capital. The latter increases, and so does variable capital, and thus the mass of profit grows.
There are some factors counteracting the downward trend in the average rate of profit. These are: increased exploitation 73 of labour power; a drop in wages below the value of labour power; and the growth of relative overpopulation, which affects the wage level. These factors contribute to the growth of the mass of surplus value and, therefore, work against the downward trend of the average rate of profit. The cheapening of the organic components of constant capital, which retards the growth of its organic composition, also acts in the same direction. The extra profits the imperialist countries reap from foreign trade with the backward ones also serve to increase the total profit mass.
The counteractive factors have a particularly strong effect in the monopoly sector, in which advanced technology is employed and the export of capital and foreign trade are concentrated. In addition, this sector makes extensive use of the state in its own interests. In this sector, therefore, the counteractive tendency predominates, and the rate of profit remains high.
The law of the downward trend of the profit rate is indicative of the contradictions in capitalism, above all, that between the goal of capitalist production and the means use to attain that goal. The aim, the pursuit of profit, leads to the introduction of new technology and a rise in the organic composition of capital, thus adding impetus to the downward trend in the average rate of profit. This law aggravates the main contradiction of capitalism as the pursuit of profit accelerates the specialisation and concentration of production, while its results continue to be privately appropriated.
__ALPHA_LVL2__ 2. Commercial CapitalCommercial capital arose with in pre-capitalist economic systems and contributed to the emergence of the capitalist mode of production. Under capitalism, commercial capital is subordinate to industrial capital, which creates surplus value. The function of commercial capital is to serve ;the process of the circulation of industrial capital. Merchants spend their money 74 on maintaining and equipping shops, paying sales staff, advertising, and so forth. Thus, a portion of industrial capital is isolated as commercial capital, and there emerges a kind of division of labour between manufacturers and merchants.
__ALPHA_LVL3__ Commercial ProfitThe purpose of a merchant's activities is to secure commercial profit. On the surface, this profit appears as the difference between the price at which a commodity is sold, and the price at which it is bought, as the excess of price over value.
Actually, the source of commercial profit is the surplus value created by wage workers in the course of production. Industrial capitalists surrender a portion of surplus value to merchants for the realisation of their goods. Thus, commercial capital shares in the distribution of surplus value, without participating in its production. It steps in during the spontaneous shift of capital and the equalisation of profits. The average rate of profit emerges as all aggregate surplus value is assigned to aggregate industrial and commercial capital. Thanks to it, commercial capital also ensures average profits. In practice this is done in such a way that merchant capitalists buy goods at prices lower than their social prices of production, and sell them at a price coinciding with the price of production.
Marx illustrates the mechanism of commercial capital's participation in the equalisation of average profit and the formation of commercial profit with the following example. Let us assume that all industrial capital advanced during a year amounts to 900 units including 720c+180v. If the rate of surplus value is 100 per cent, its mass will be 180m, and the value of the total annual product will be: 720c+180v+180m = 1,080. The profit rate in this case will be: 180 Q- 900 X 100 = 20per cent.
Let us suppose that the realisation of the goods will take an additional capital of 100 units, which is advanced by the merchant. Then the total social capital will amount to 1,000 units, and the average rate of profit will be: 180 1,000 X 100 = 18 per 75 cent. The industrial capitalist will thus receive 162 units of profit, and the merchant, 18 units. This means that industrial capitalists will sell their goods to the merchants at less than value, i.e., 720c+ 180v+ 162p= 1,062, and the merchants will sell the goods at the social price of production, i.e., 720c+ 180v+ 162p + 18h= 1,080 (p is industrial profit, and h is commercial profit).
__ALPHA_LVL3__ Circulation CostsThe expenditure involved in the realisation of goods is called circulation costs and is divided into net or genuine and additional costs. Net or genuine costs are those incurred exclusively in the sale and purchase of commodities. They are the salaries of sales workers, expenditure on maintaining shops, advertising, and so on. No additional value is created in the process. Additional costs arise from continuation of production in the sphere of circulation. They include the sorting, packing, storage and conveyance of goods to the place where they are to be realised.
The labour engaged in these processes completes, as it were, the creation of use value, simultaneously creating value and surplus value, i.e., increasing the value of the goods. For this reason, the additional costs of circulation are replaced as are production costs. Net or genuine costs are a different matter. They are replaced from aggregate surplus value, which brings down the general rate of profit. Under the conditions of modern capitalism, net costs are usually covered by the customers buying monopoly-produced goods. Such goods are sold at high prices. This implies an additional exploitation of the working people in the sphere of circulation.
__ALPHA_LVL3__ Exploitation of Sales WorkersSales workers create no new values; their labour is nonproductive. Nevertheless, their working day, too, is divided into necessary and surplus labour time. During necessary labour time, sales workers realise the mass of commodities that embody 76 the surplus value necessary to pay for the value of their labour power, while during surplus time, they realise the commodities embodying the portion of surplus value that goes to form the merchant's profit.
Commercial capital exploits not only sales workers, but also other sections of the people by establishing high prices and nonequivalent exchange. One way of intensifying this exploitation is consumer credit, which is granted at a high interest rate.
__ALPHA_LVL2__ 3. Loan Capital and Loan Interest __ALPHA_LVL3__ Loan CapitalLoan capital is capital loaned by money capitalists to industrial and merchant capitalists, which yields interest to the loaning capitalists. It is a portion of industrial capital that has become separated from it and assists in its movement. The formula for loan capital is M-M'. The source of loan capital is money that industrialists and merchants have to spare for the time being, funds accumulated by money capitalists, and the cash incomes and savings of the public at large, concentrated in savings banks.
Loan capital has some distinctive characteristics. First, it is capital as property, i.e., the property of the money capitalist who gives it to investing capitalists (manufacturers and merchants) for their temporary use; second, it is capital as a commodity as that loaning capitalists ``sell'' to investing capitalists; third, it appears only in the form of money; fourth, loan capital is the most parasitic form of capital and its owner has absolutely nothing to do with the functioning of capital; and fifth, it is the most fetishistic form of capital, in which the source of the increase in value, the exploitation of wage labour in the production sphere, is completely concealed. Social relations appear in this case as the relations of a thing in itself. Superficially, it appears as if money has generated money.
77 __ALPHA_LVL3__ Loan InterestThe charge for the use of loan capital is called interest. Industrialists and merchants use the capital loaned to them to secure profit. They hand over a portion of this profit to the loan capitalist as interest. Consequently, interest is a modified form of surplus value, and its source is the unpaid labour of wage workers. The portion of the profit that the investing capitalists keep is called profit of enterprise, which seems, superficially, to be the capitalist's wages for his business activities. Thus, the source of interest and profit of enterprise---surplus value received through the exploitation of wage workers---is altogether concealed. Interest looks like the result of owning capital, and profit of enterprise like the investing capitalist's wages.
__ALPHA_LVL3__ Capitalist CreditCredit is a form of movement of loan capital. Commercial credit is granted by investing capitalists to one another in commodity form. Bank credit is given to investing capitalists by money capitalists and banks in the form of money. Consumer credit is granted to the people at large in the form of deferred payment for goods intended for personal consumption. State credit is obtained by the state by issuing loans and treasury bonds. These funds are often expended unproductively on the arms race and maintaining police and officials. Some are used to repay the national debt and pay out the interest on loans.
Credit plays an important role in capitalist society, assisting in the redistribution of capitals between branches of production and the formation of the general rate of profit. Credit makes it possible to save cash and contributes to the concentration and centralisation of capital. At the same time, it leads to the aggravation of capitalist contradictions. As it speeds up the socialisation of production, credit acts on the main contradiction of capitalism. In stimulating the expansion of production, it increases the gap between production and effective demand, which exacerbates economic crises.
78 __ALPHA_LVL3__ Joint-Stock CompaniesThe separation of the ownership of capital from its functions has caused the appearance of joint-stock companies. A joint-stock company is a concern whose capital consists of many individual capitals combined by the issue and sale of shares. Shares are securities certifying ownership of a part of the capital of a jointstock company. The owner of a share has the right to a certain portion of the company's profits, a dividend. Shares are bought and sold on stock exchanges. The market price of a share is called its quotation, which depends on the size of the dividend distributed per share, and on the lending rate.
dividend Share of quotation =-------:------------ v 100 loan interestBesides shares, joint-stock companies issue bonds, which yield a fixed annual income and are bought out after a stipulated period. Big capitalists who virtually own joint-stock companies use the issue of shares and speculation in shares to increase their profits.
__ALPHA_LVL2__ 4. Ground Rent.Not only capitalists, but also big landowners grow rich on the wage workers' unpaid labour, receiving a part of the surplus value created by them. The distinctive feature of capitalist agriculture is that it involves three classes, viz., landowners, capitalist lease-holders and wage labourers.
A capitalist leases land from a big landowner, exploits wage labourers and pays a part of the surplus value to the landowner for the use of his land. This part of surplus value is called rent, the basic kinds being differential and absolute rent.
__ALPHA_LVL3__ Differential RentLand differs from other means of production in that it is not a product of labour. Its area is limited and cannot be 79 increased. Besides, all land is occupied by capitalist farms. The farms that lease the best and second-best land possess a kind of monopoly of land as an object of capitalist economy. This monopoly gives rise to differential rent. As the amount of produce obtained from the fertile land close to the centres of consumption may not suffice to meet demand, poorer and more distant plots are brought under cultivation. For this reason, in agriculture market prices are based on the prices of production on the poorer and more distant plots. And since not all farms are alike, however, the prices are regulated by the socially normal production conditions.
Work on more fertile land is more productive and the workers create more surplus value. The difference between the social price of production determined by production costs on the poorer land, and the individual prices of production on the best and second-best land, is called differential rent.
The formation of differential rent I (according to fertility) may be illustrated by the following table :
Land Capital Outlay (dollars) Average Profit (dollars) Output ( centners) Individual Price of Production (dollars) Social Price of Production ( dollars) Differential Rent I (dollars) total one one total pro- cen- cen-- pro duce tner tner duce worst 100 20 10 120 12 12 120 average 100 20 15 120 8 12 180 60 best 100 20 20 120 6 12 240 120As we see from the table, land of different fertility, given equal expenditures in each case, yields different amounts of produce. Hence, the individual prices of production of a metric centner will be different, viz., 12,8 and 6 dollars. This produce will, however, be sold on the market not at the individual prices, but at the social price of production, i. e., at 12 dollars per metric centner.
Because labour productivity differs depending on the fertility of the land, there is a difference between the social and 80 individual prices of production. In our example, this difference amounts to 60 on average quality land and 120 on the best. This surplus over average profit, or extra profit, is transformed into differential rent.
Differential rent also appears depending on the location of the land. If it is near a consumption centre, production costs pen unit of produce will be lower and differential rent will accrue as a result. Differential rent is appropriated by the landowner.
Rent according to fertility and location is called differential rent I. It is associated with extensive agriculture, as more and more land is brought into cultivation.
With the change to intensive agriculture, differential rent II develops progressively. It appears when successive capital investments are made in the same land. Since the social price of production is determined by the price of production of the produce obtained from the least effective capital investments, the more effective expenditures yield excess profit. For the duration of the lease, this excess profit is appropriated by the leaseholder. When the lease has to be renewed, the landowner raises the rent, as the land has become more effective, and thus appropriates differential rent II.
Bourgeois ideologists have invented a "law of diminishing returns" of land. Briefly, it is that, after a certain limit (a "biological potential'') has been reached, capital expenditures become less and less effective. This allegedly causes a shortage of high prices for the means of consumption. This concept was disproved by Marx and Lenin, and events themselves have shown it to be invalid.
There is clear evidence that, with the introduction of the latest results of science and technology in agriculture, yields increase and labour becomes more productive. The high prices of foodstuffs and malnutrition of millions of people are no consequence of so-called laws of nature, but of causes inherent in the capitalist system, which allows the monopolies to buy produce cheap and sell it dear.
81 __ALPHA_LVL3__ Absolute RentDifferential rent is created only on the best and average quality land, the poorest land usually affording none. Nevertheless, the growing demand for farm produce makes it necessary to cultivate inferior land, the owners of which must also receive rent. This they can get by selling farm produce at prices higher than the prices of their production. The excess of surplus value over average profit becomes absolute rent, which accrues from all cultivated land.
The condition for absolute rent is that the organic composition of capital be lower in agriculture than in industry. In agriculture, the excess of value over the price of production in industry may be transformed into absolute rent.
The way absolute rent is formed can be seen from the following table:
Organic Sur- Value Indivi- Aver-- Composi- plus of the dual age Branches tion of Value Prod- Rate Rate Aver- Price Absoage of Pro- lute Profit duction Rent Capital uct of of Profit Profit Industry 80c + 20v 20 120 20% 20% 20 120 Agriculture 60c + 40v 40 140 40% 20% 20 120 20In this instance, the difference between value and the price of production amounts to 20 units.
The excess of value over the social price of production can be transformed into absolute rent by reason of the monopoly of private property in land. But for this monopoly, the excess of surplus value would be redistributed among all capitalists. The existence of big landownership hinders the shift of capital from industry to agriculture, however, and so the prices of farm products are higher than that of production. Absolute rent, which makes for dearer farm produce, is detrimental to the people's standard of living.
Now that in the industrialised capitalist countries new machinery is being introduced in agriculture, the organic __PRINTERS_P_81_COMMENT__ 6---1921 82 composition of capital there is becoming higher. Nevertheless, there is still a notable gap in this respect between industry and agriculture. Even if the organic composition of capital in agriculture should become equal to that in industry, absolute rent will persist as long as the monopoly of private landownership continues. The source of absolute rent alone will change as it will be paid by the buyers of farm produce. Thus, big landowners levy a kind of tribute on society in order to get rich.
Nationalisation of the land leads to the abolition of absolute rent. It provides better conditions for the development of productive forces in agriculture by removing obstacles to the inflow of capital, making it unnecessary to spend money to buy land and making lease-holders interested in improving cultivation techniques.
__ALPHA_LVL3__ Advance of Capitalism in AgricultureThe advance of capitalism in agriculture is subject to virtually the same laws as operate in industry. Nevertheless, the ways in which they appear are somewhat specific, owing to the system of economic relations that has taken shape in agriculture, as well as to the very nature of that sector. The monopoly of private landownership and the vestiges of pre-capitalist relations explain why agriculture lags behind industry. Farmers have to bear the twin burdens of pre-capitalist and capitalist exploitation, which makes their lot harder and holds back the progress of productive forces. Monopolies take advantage of the scattered nature of agricultural production, the seasonal character of farm work, and the fact that the produce must be sold promptly to fleece the peasants.
Thus, the working peasants, like industrial workers, are subjected to exploitation. They have a common enemy in capital which merely employs different forms and methods to exploit them. The antithesis between town and country, which arose long ago under the slave-owning mode of production, continues to grow under capitalism. City capitalists exploit working 83 peasants through non-equivalent exchange, usurer's credit and in other ways.
The development of capitalism in agriculture is accompanied by a differentiation of peasants, which implies the ruin of most of them, thus turning small and middle peasants into wage workers. This process has especially intensified during the current scientific and technological revolution, which is seeing an absolute decrease in the number of workers engaged in agriculture. The lot of the working peasantry under capitalism objectively makes it an ally of the working class in the struggle against capitalist oppression.
[84] __NUMERIC_LVL1__ CHAPTER 6 __ALPHA_LVL1__ THE REPRODUCTIONThe constant repetition and renewal of production in society in general is called social reproduction. It involves the reproduction of social capital and of the aggregate social product.
Individual capitals in the aggregate form social capital. The aggregate social product is the total mass of material goods produced over a definite period, usually a year. In capitalist society the aggregate social product appears in commodity form. According to value, it is divided into three parts: constant capital (c), variable capital (v), and surplus value (in). The first part, (c), is the value embodied in the means of production used in manufacturing the social product. This value is, of course, preserved and transferred to the new produce by concrete labour. The second and third parts are the new value produced, i.e., the result of abstract labour. Thus, both the value of a single commodity and that of the total social product consist of c + v + m. In the aggregate social product, the new value produced is called the national income.
__ALPHA_LVL3__ Two Departments of Social ProductionIn its physical form, the social product consists of use values divided, according to the economic purpose they serve, into means of production and articles of consumption. The means of production---means of labour, raw material and auxiliary materials---are utilised for further production. Articles of consumption are used for the personal non-productive consumption of all classes of capitalist society.
85According to the end-use of the two components of the aggregate social product, all social production falls into two departments, viz., Department I, production of means of production; and Department II, production of articles of consumption.
We must look at the aggregate social product in its value form and physical form in order to see the conditions required for its realisation. The problem of realisation consists essentially in finding out how all parts of the social product are replaced in value and in kind, how all goods are realised, i.e., how they find consumers, and in what way the satisfaction of society's demand for means of production and articles of consumption is assured.
__ALPHA_LVL2__ 2. Simple and ExtendedAs throughout his inquiry, Marx employs in examining this problem certain scientific abstractions that are essential to its solution. He considers capitalist reproduction as such, abstracting from pre-capitalist forms of economy, assuming that all commodities are realised at value, and abstracting from changes in the organic composition of capital and the rate of surplus value, and from foreign trade.
__ALPHA_LVL3__ Realisation Under Simple ReproductionSimple reproduction is not typical of capitalism. It is, however, the most essential component of extended reproduction. Analysis of the reproduction of social capital begins, therefore, with simple reproduction.
Let us consider the usual pattern Marx gives for simple reproduction. In this outline, aggregate social capital amounts to 7,500 units. Of these, 5,000 units (4,000c+l,000v) are operating in Department I branches, and 2,500 units (2,000c + 500v), in Department II branches. If the rate of surplus value is 100 86 per cent, the aggregate social product will amount to 9,000 units:
means of production (I) 4,000c+l,000v+1,000m = 6,000, articles of consumption (II) 2,000c+500v+500m = 3,000.Of the 6,000 units of Department I output, 4,000 must be spent in that department to replace the constant capital expended in the course of production. The remaining l,000v+1,000m cannot be realised in Department I. As it consists of means of production, this part cannot be used for the personal consumption of workers and capitalists. I (v + m) therefore has to be exchanged for articles of consumption.
In Department II 1,000 units of product (v + m) are realised, but the other 2,000 cannot be, for they have to be exchanged for means of production to replace the constant capital expended. For that reason, I (v + m) is exchanged for lie.
Thus, one condition required for the aggregate social product to be realised under simple reproduction is the equation, I (v + m)=IIc.
A second such condition is that the total product of Department I should be equal to the constant capital of departments I and II, I (c + v + m) =Ic+IIc. The third condition is that the total product of Department II should be equal to the sum of the variable capital and surplus value in both departments, II (c + v + m) =1 (v + m) +II(v + m).
__ALPHA_LVL3__ Conditions for Realising the ProductUnder extended reproduction a portion of surplus value becomes capital, i.e., it is added to the constant and variable capitals.
In the scheme of extended reproduction, the capital in Department I amounts to 5,000 units: 4,000c+l,000v; in Department II, 2,250 units: l,500c + 750v. If m equals 100 per cent, the output produced will amount to
I 4,000c + 1,000v + 1,000m = 6,000 1 ',000 II l,500c+ 750v+750m = 3,000 j~9'C 87Let us assume that, in Department I, half the surplus value becomes additional capital. The capitalised surplus value is distributed between the constant and variable capitals in the . , . . ... 4,000 c 4 same proportion as is fuctioning capital, i.e., =---• Then, 400 units will be added to the constant capital, and 100, to the variable capital. Hence, the consumption of the means of production in Department I will amount to 4,400 units. That leaves 1,600 units (1,100v +500m) of unrealised product which must be exchanged for articles of consumption.
In Department II, the constant capital expended (l,500c) must be replaced by new means of production. In addition, Department I has called for another 100 units of articles of consumption in exchange for means of production. That affords accumulation for Department II. At the expense of Urn, 100 units more are added to the constant capital. Thus, He will make 1,500+100=1,600 units. This will require the variable capital in Department II to be increased. The organic com-- c i T^ TT u ~2 /l,500c\ position ot capital in Department II being ~T\~7Sn---)' the variable capital should be increased by 50 units taken from the surplus value. Consequently, in Department II 150m was used for accumulation and 600m was kept for the capitalist's personal consumption.
The basic condition for realising the aggregate social product is that I (v + m) be greater than lie, otherwise it would be impossible to increase capital in Department I by adding surplus value. The total product of Department I must exceed the sum of the constant capital expended in both departments, and all new value produced must be greater than the value of the product of Department II.
Thus, social production is characterised by an intricate interlacing and interrelation of all its parts. It requires a certain balance between production of means of production and that of articles of consumption, and between the different branches in these departments. Because of the competition and anarchy in production prevailing in capitalist society, however, the balance is constantly upset, making goods hard to sell.
88 __ALPHA_LVL3__ Law of PriorityLenin developed Marx's teaching on the reproduction of social capital by introducing the growth of the organic composition of capital into his scheme for extended reproduction, which is in line with the progress of technology. On this basis, he formulated the law of the priority growth of the production of means of production over that of articles of consumption. The gap in the growth rates may be greater or smaller, depending on several factors that have varying degrees of effect at different stages in industrial development. At present, growth rates in the two have drawn closer. Nevertheless, the dominant tendency is still a priority growth of Department I.
__ALPHA_LVL2__ 3. Antagonistic ContradictionsCapitalist production develops unevenly, upswings alternating with downswings and activity with stagnation. The reason for this lies in the antagonistic contradictions inherent in capitalism, especially its main contradiction. As the result of capital accumulation and the development of productive forces, production becomes increasingly socialised. Large enterprises and industrial centres appear in which the larger part of bourgeois society's productive forces comes to be concentrated. Simultaneously, the social division of labour, specialisation and co-operation of production intensify, and the links between producers expand, making them increasingly interdependent. Finally, the fragmented processes of production fuse into one social process. As capitalism advances, the subsistence economy disappears, domestic and 89 foreign trade increases, and the world market is formed. Commodities become the result of the labour of thousands. Nevertheless, the private capitalist appropriation of products continues. Production which is social in character, is carried out for the enrichment of big capitalists. The conflict between productive forces and production relations gives rise to other antagonistic contradictions, which all together lead to economic crises.
The main contradiction of capitalism is manifested in the conflict between the organisation of production in individual enterprises and the anarchy of production in society in general. In each enterprise, the work of its shops and departments are to some extent co-ordinated and a certain balance is imposed by the production process itself. On the scale of society, however, production that rests on private ownership and is geared to the pursuit of profit develops spontaneously and is swayed by anarchy. As a result, the balance is continually upset. When disequilibrium becomes general, serious disproportions arise between the departments of social production and its various lines, and a crisis results.
The main contradiction of capitalism also comes out in the conflict between capitalist production's tendency towards unlimited expansion and the limited effective demand. The growth of capitalist production is stimulated by a desire for maximum profit and by competition. Pursuit of profit results in greater labour exploitation and causes a deterioration in the lot of the working people, whose effective demand lags behind the growth of production. This tells on the balance between Departments I and II. Department I can, to some extent, expand independently of Department II, but this independence is merely relative. An insufficiency of purchasing power acts as a brake on the growth of Department II, which in the end affects the growth of Department I as well, since it supplies the means of production for Department II. As a result, the conditions for realising the product are disturbed and recurrent economic crises take place.
Appearing in the form of antagonism between labour and 90 capital, the main contradiction of capitalism causes acute class contradictions and the absolutely different interests and aims of the classes of bourgeois society. It also rules out the possibility of planned development of capitalist production.
Thus, the conflict between productive forces and production relations makes economic crises inevitable under capitalism.
Bourgeois ideologists often claim that, by applying capitalist economic control, the economic crises under capitalism can be eliminated but events have shown that all such attempts inevitably end in failure. Only the abolition of capitalist relations and socialist socialisation of production can put an end to economic crises.
__ALPHA_LVL3__ Cyclic CharacterEconomic crises occur periodically. The first industrial crisis broke out in Britain in 1825, when capitalist machine production became predominant in key industries. The 1836 crisis hit Britain and the United States, and the one in 1847 was the first world economic crisis. In the imperialist age crises became more frequent. In the pre-monopoly era they recurred every 10 to 11 years and in the imperialist age, every 7 to 9 years or less. Especially destructive to the capitalist economy were the crises of 1920--21, 1929--33 and 1937--38, which broke out once the general crisis of capitalism had already set in.
After World War II, economic crises became especially frequent in the United States. In 1957--58 an economic crisis gripped several developed capitalist countries, and in 1974--75 a world economic crisis broke out. It hit all the industrially developed capitalist countries and was the most serious and protracted of all economic crises after the war.
The recurrence of crises means that capitalist reproduction is cyclical. The movement of the capitalist economy from one crisis to the next is called the industrial cycle. It consists of four successive phases of crisis, depression, recovery and boom.
The crisis is the chief phase of the industrial cycle. It comes 91 at the end of one cycle and the beginning of the next. During a crisis, all the contradictions of capitalism become particularly acute and destructive. The scope and duration of the crisis determine the character of the other three phases of the industrial cycle.
When there is a relative overproduction of commodities and they sell hard, this constitutes a crisis. The reason that goods are hard to sell is not that all the people's wants have been satisfied, but that the purchasing power of the masses lags behind the growth of production. During a crisis, production shrinks, unemployment runs high and more than the usual number of small producers are ruined.
A crisis of overproduction sets off a crisis of the credit and monetary system. The repayment of credit stops, the inflow of bank deposits slows down, the rate of interest grows, and the rates of securities fall.
Crises affect the working people worst of all. Capitalists take advantage of the mass unemployment to cut wages, and thus the lot of the working class deteriorates in both relative and absolute terms.
A crisis results in a brief resolution of the conflict between production and consumption. Production is forced down to the level of effective demand. Supplies of commodities are reduced so that fewer goods are offered for sale (some of them often being deliberately destroyed), and thus the conditions are provided for passing to the phase of depression.
During a depression, the drop in production is halted and the supplies of commodities begin to decrease. Spare money capitals appear, and the interest rate is brought down. Constant capital begins to be renewed. This stimulates activity in Department I, causing a rise in employment and, consequently, in Department II.
Recovery is indicated by a marked growth in production and trade. Commodity prices rise. Gradually, production reaches the pre-crisis level.
In the boom phase, production transcends the pre-crisis level. Production, trade and the demand for loan capital increase, 92 and the interest rate rises. By and by, production, stimulated by the pursuit of profit, outruns effective demand. The market becomes the overheated with an excess of goods that cannot be sold. Marketing difficulties begin, and another economic crisis sets in.
The cyclical character of capitalist reproduction results objectively from the nature of capitalism. Attempts by bourgeois governments to eliminate the industrial cycle invariably end in failure. Even so, each crisis and cycle follows a particular pattern that depends on the specific situation in the capitalist world and the individual country at the time. So, between World War II and the 1974--75 crisis, the world cycle became increasingly uneven and asynchronic. This meant that the phases of the cycle did not coincide in different countries.
Partial and local crises were also a feature of the postwar period. Prolonged crises in separate branches of the capitalist world economy became typical. One form of crisis is the protracted monetary crisis.
The different forms of crises are interrelated. Their common source is the aggravation of the main contradiction of capitalism.
__ALPHA_LVL3__ Particular Features of the Crisis of 1974--1975The 1974--75 economic crisis gripped all developed capitalist countries. It was caused by the further international division of labour, rapid development of world economic relations, and the growth of international monopolies. Intensified internationalisation of the capitalist economy is conducive not only to synchronisation of the crisis phases, but also to more protracted crises. Internationalisation of the economy makes it more difficult for countries to improve their economic situation by exporting goods to other countries.
The 1974--75 economic crisis was also remarkable in that it coincided with crises in other spheres of the world capitalist economy, viz., there were simultaneous food, economic, energy and monetary crises. It developed under the conditions of an 93 unprecedented dislocation of the credit and monetary system in the capitalist countries, and was accompanied by mounting inflation.
The crisis was the most acute and prolonged of all those since the war. Industrial production in the developed capitalist countries came to a halt in 1974, and dropped by 5.9 per cent in 1975. The figure was 8.9 per cent for the United States; 10.6 per cent, for Japan; 10 per cent, for Italy and Belgium; and 6.2 per cent, for West Germany. The crisis lasted about two years, whereas previous postwar crises had continued for between 7 and 16 months.
The drop in production resulted in a catastrophic growth of unemployment. According to official figures, the number of totally unemployed in the developed capitalist countries was more than 15 million. As a result of the rising cost of living, the real incomes of the working people in the United States and some other capitalist countries dropped.
The 1974--75 crisis hit the advanced state-monopoly economy. The bourgeois states applied all kinds of economic controls to stimulate economic growth, but, as was only to be expected, these measures only aggravated the contradictions of capitalism, rather than eliminated them. Leonid Brezhnev told the 25th CPSU Congress that one of the chief myths invented by reformists and bourgeois ideologists, that capitalism as it is today can rid itself of crises, had been blown sky-high. Capitalism's instability is becoming more and more obvious.
__ALPHA_LVL3__ Consequences of Economic CrisesBeing the most dramatic manifestation of all the contradictions of capitalism, crises carry the latter to an ever higher pitch. They give an impetus to the reconstruction and growth of new enterprises and a higher concentration of production. Thus, they cause ownership to be concentrated increasingly in the hands of big capitalists. This implies an aggravation of the main contradiction of capitalism.
94Econimic crises result in the destruction of productive forces, an underloading of capacity, and elimination of material values. Mass unemployment and deteriorating standards of living are evidence of wanton destruction of the main productive force, the working people. Economic crises make plain the historically limited nature of capitalism and demonstrate the need for a socialist revolution.
[95] __NUMERIC_LVL1__ CHAPTER 7 __ALPHA_LVL1__ LENIN'S THEORY OF IMPERIALISMModern capitalism is the result of the historical development of the capitalist system. In the course of this development, capitalist society passes through two main stages. The first, known as free enterprise capitalism or pre-monopoly capitalism, was thoroughly studied by Marx and Engels. Their works, especially Marx's Capital, set out the general theory of the capitalist mode of production.
At the turn of the 20th century, capitalism entered a new stage, that of imperialist or monopoly capitalism, which was analysed by Lenin, who developed the science founded by Marx and Engels---dialectical materialism, political economy and the theory of the socialist revolution and the building of a communist society.
__ALPHA_LVL2__ 1. Lenin ContinuesLenin developed a theory of imperialism that was a milestone in the progress of economic thought.
__ALPHA_LVL3__ Teaching on ImperialismLenin's teaching on imperialism is a major scientific feat. For many years he studied the actual development of economic, social and political relationships in different capitalist countries. In preparing his chief work on these problems, 96 Imperialism, the Highest Stage of Capitalism, Lenin studied all contemporary bourgeois, liberal, reformist and other publications. He read and made abstracts of 148 books and 232 articles in Russian, English, French and German. These abstracts, when published, made the weighty volume Notebooks on Imperialism. The ideas set out in Imperialism, the Highest Stage of Capitalism were developed further in other remarkable works by Lenin, such as The Impending Catastrophe and How to Combat It, The State and Revolution, Socialism and War, On the Slogan for a United States of Europe, in the materials on the drafting of the Second Programme of the Bolshevik Party, and so on.
Lenin's historic contribution consisted, above all, in his disclosure of the objective law governing the transition from free enterprise to monopoly capitalism.
After investigating in detail the changes that had occurred in capitalist society since the works of Marx and Engels had been published, Lenin defined the fundamental features of the new stage, which comprised an integral, dialectically uniform system of imperialism. Lenin's theory of imperialism singled out the basis in which the economic essence of the system is expressed. This fundamental system-forming factor consisted, in Lenin's view, in the development and establishment of the domination of the monopolies and financial oligarchy in the economics and politics of the capitalist countries.
Lenin's analysis was by no means confined, however, to elucidating the pattern of the transition to imperialism and describing its essence. Of no less significance was Lenin's study of the development of capitalism at its new stage, explanation of the laws of ``self-motion'' of imperialism and the dialectics of its contradictions.
Another important achievement of Lenin's theory of imperialism was the wider range of economic relationships now studied in the Marxist-Leninist political economy of imperialism. Under the changed conditions, Lenin studied not only the relations between wage labour and capital, but also those between the monopolies and all other sections of capitalist society, the 97 world relations of exploitation by the imperialist system of the overwhelming majority of mankind by exporting capital, setting up international monopolies, and by other kinds of economic and territorial division of the world.
Lenin laid bare not only the economic, but also the political essence of imperialism. He showed that monopoly domination and the aggravation of contradictions in the imperialist age inevitably led to reaction and violence in every sphere of society.
__ALPHA_LVL3__ Theory of Socialist RevolutionLenin's analysis of imperialism enabled him to draw a conclusion about the historical place of the new stage as the highest and final stage in the development of capitalism. As Lenin stressed, the aggravation of the main and all other contradictions of capitalism, the development of monopoly into state monopoly capitalism, and the general crisis of capitalism mean that the entire system of world capitalism was ripe for a socialist revolution.
Creatively developing Marxism, Lenin discovered the law of the uneven economic and political development of capitalism in the imperialist age. He then drew the conclusion that socialism would not be attained simultaneously in different countries, and that the imperialist front need not necessarily be breached in the most advanced country.
By his theoretical and historical analysis of imperialism, Lenin proved that imperialism would collapse as successive revolutionary breaches were made at the weaker points of the world capitalist system and as more and more countries broke away from it. Thus, on the strength of his analysis of imperialism, Lenin evolved a new theory of socialist revolution. This was a major contribution to Marxist theory and a new ideological weapon for the working class and all working people in their revolutionary struggle against capitalism.
__PRINTERS_P_97_COMMENT__ 7---1921 98 __ALPHA_LVL3__ Criticism of Falsifications of LeninismLenin's theory of imperialism was created in a persistent struggle against bourgeois and opportunist falsifications. Thus, Lenin subjected the many open apologies for imperialism that mask its exploitative nature to scathing criticism. He also exposed as unsound the social-liberal and petty-bourgeois criticism of imperialism, which represents it as a kind of ``policy'', thus, ignoring or materially underestimating the underlying foundations of imperialism, which are in the sphere of production.
Today bourgeois science and propaganda, anti-Communists and anti-Sovietists of every stripe, representatives of right and ``left'' opportunism, all go out of their way to belittle Lenin's historical significance and his theory of imperialism. Many of them insist that Leninism has served its time, that Lenin's theory is of purely local significance, that it is only good for Russia. They try to isolate it from Marxism as a whole, to contrapose Lenin to Marx and Engels, to distort the essence of Lenin's theoretical and political activities.
In fact, Lenin's theory of imperialism is still of immense significance under today's conditions.
Lenin's teachings provide the key to understanding the most essential features of capitalism in the 20th century. They have been brilliantly borne out by the great revolutionary processes of the current period, the main content of which is the transition from capitalism to socialism on a world scale.
Lenin's theory of imperialism has been carried forward in the documents of Communist parties and the works of MarxistLeninist economists in the Soviet Union and abroad.
__ALPHA_LVL2__ 2. The Main Features of Imperialism __ALPHA_LVL3__ [introduction.]Applying the Marxist dialectical method in his Imperialism, the Highest Stage of Capitalism, Lenin points out the following five main features, in which the economic essence of imperialism is revealed: "(1) the concentration of production and capital has developed to such a high degree that it has created 99 monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation, on the basis of this 'finance capital', of a financial oligarchy; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopolist capitalist associations which share the world among themselves, and (5) the territorial division of the whole world among the biggest capitalist powers is completed."^^1^^
The main thing that links these five fundamental characteristics of the new stage of capitalism and makes them into a single system is monopoly. Monopoly is the essence of each of the characteristics and is the most essential economic feature of imperialism. The "rise of monopolies, as the result of the concentration of production'', Lenin stressed, "is a general and fundamental law of the present stage of development of capitalism."^^2^^
__ALPHA_LVL3__ Essence of MonopolyThe most important of the characteristics of imperialism is capitalist monopoly in the sphere of production. It consists essentially in a few major enterprises or amalgamations of enterprises seizing a share of production that gives them control over one or several economic sectors. This control is realised as high monopoly profit appropriated by the monopolists.
Such monopolies my be of various kinds. In practice the most widespread associations are cartels, syndicates, trusts and concerns. They differ in the closeness of association between the enterprises. In a cartel, individual enterprises are independent in production and marketing, although they agree on the division of the market and fix shares of production or sales. A syndicate breaks the enterprises' immediate ties with the market. All output is realised as the property of the syndicate through its special agencies. The closest kind of association is the trust, _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 266,
^^2^^ Ibid., p. 200.
100 Emacs-File-stamp: "/home/ysverdlov/leninist.biz/en/1980/FPE287/20070121/199.tx" __EMAIL__ webmaster@leninist.biz __OCR__ ABBYY 6 Professional (2007.01.21) __WHERE_PAGE_NUMBERS__ top __FOOTNOTE_MARKER_STYLE__ [0-9]+ __ENDNOTE_MARKER_STYLE__ nil the members of which lose independence both in marketing and production. Under present-day conditions, trusts more and more often unite enterprises producing unrelated items. A concern is a highly intricate kind of monopoly with enterprises that are usually considered as independent, but that are actually subordinate to the parent company. The latter exercises financial control over them.The objective indicator of monopolisation, as Lenin noted, is the high share of very large enterprises in the total volume of industrial output, the number of workers employed, and the mass of equipment used and power consumed.
The purpose of monopolisation is to secure monopoly superprofit, an end that is achieved by a variety of means, the main one being monopoly prices. Monopolies sell their products at their own high monopoly prices and buy all they need at low prices. The first to suffer are the working people.
__ALPHA_LVL3__ Monopoly and CompetitionMonopolies arose out of free competition, but does this mean that they stifle competition? Many bourgeois economists and right-wing opportunists answer this question in the affirmative. They try to prove that the appearance of the monopolies completely changes the nature of capitalism, brings its spontaneous development to an end and spares society the losses involved in free competition. This is simply not the case, however.
Although they bring with them some new features of production, the monopolies do not abolish competition or anarchy in capitalist production. Moreover, competition itself becomes more acute and all-pervading, as mammoth enterprises employing the machinery of the bov:rgeois state become involved in it. Competition develops both between monopolies and other enterprises and within monopolies themselves. The objective need for competition remains, since the monopolies are based on private ownership of the means of production.
As Lenin repeatedly pointed out, competition under capitalism implies an unprecedentedly brutal suppression of 101 enterprise, energy and initiative, replacing emulation with financial trickery and despotic rule. In place of fair competition, Lenin said, the collusion of a few giants against the rest becomes the order of the day.
In the age of imperialism free competition between nonmonopoly enterprises remains alongside monopoly competition, but it is greatly influenced by monopoly domination.
Thus, imperialism is characterised by a combination of monopoly and competition that gives rise to the especially acute conflicts of modern capitalism.
Monopoly in its various forms and manifestations provides the economic foundations of capitalist society under imperialism. The degree of its domination and the specific features of its organisation and activity are, however, substantially modified by the development of productive forces and the evolution of economic and socio-class relations.
Especially marked changes have been occurring lately in the development of monopolies. In these changes one can see some new features of the modern capitalist economy.
__ALPHA_LVL2__ 3. New FeaturesAfter the Second World War, especially in the past couple of decades, some new features have appeared in the economic development of capitalism.
They emerge under the impact of the very existence of the world socialist system, the abolition of colonial regimes, and pressure of the working-class movement. The achievements of the Soviet Union, historic on the global scale, the growing political, economic and military might of the world socialist system tie the imperialists' hands and exert an ever greater influence on social progress throughout the world.
102 __ALPHA_LVL3__ Imperialism Adapts ItselfSeeking to retain its hold, the monopoly bourgeoisie is trying to adapt to present-day conditions. This adaptation extends both to the objective development of social production and the sphere of economic relations and politics.
Under the impact of the historical opposition between the two systems and the development of the socialist community, capitalism is obliged to take steps that conflict with its nature and essence. Marxists see this as the main feature distinguishing modern imperialism not only from old, classical capitalism, but also from early 20th-century imperialism. But this adaptation in no way implies that the essence of imperialism has changed. It is the nature of imperialism that restricts its possible adaptation, and capitalism is still capitalism in its final imperialist stage.
Even so, the changed conditions under which the system of imperialism exists and functions leave a deep imprint on all processes occurring in the capitalist countries, including monopolies' development. Important factors, among others, are the more rapid industrial development in some capitalist countries resulting from the scientific and technological revolution, the fusion of monopoly and state, the development of monopoly into state-monopoly capitalism, and the rapid internationalisation of industry and capital.
The growth rates of capitalist industrial production have increased considerably since the last war compared with the period between the wars and the early 20th century. The average annual industrial growth rate in the advanced capitalist countries between 1949 and 1974 held at 5 per cent, or more than double the pre-war rate.
In 1974, the gross national product in the United States, was almost four times the 1939 figure, and the volume of industrial production was six times greater.
103 __ALPHA_LVL3__ Impact of the ScientificThis expansion stemmed originally from the developing scientific and technological revolution. In the race between the two systems, the monopolies make wide use of scientific and technological advances to strengthen their position, raise the efficiency and growth rate of production and increase the oppression of the working people.
The development of the science-technology-production complex, industrialisation of science and scientification of industry, and revolutionary changes in the instruments and objects of labour create an intensive demand for means of production, which helps the home market to expand. A vivid example of this is the intensive introduction of computers, as reflected in the rapid growth in their numbers.
Under the impact of the scientific and technological revolution and other factors in the capitalist countries the sectoral pattern of the economy and economic proportions have undergone marked changes. Big strides have been made by many new industries, both ensuring and reflecting the transition to a new level of technology. While the absolute indicators and industrialisation increased, the share of agriculture diminished. An abrupt increase in significance was registered by the non-productive sphere whose share of the aggregate social product in some capitalist countries exceeded the indicators for industry.
The above new features of the development of the capitalist economy over several postwar years by no means removed its inner instability or tendency to decay.
On the contrary, even at good times capitalism was unable to utilise fully the productive forces available and was responsible for the squandering of immense productive resources. Many factors promoting rapid development soon exhausted their stimulative effect and began to aggravate the critical processes of modern capitalism.
Even so. big business took advantage of the accelerated development of productive forces, progress in science and technology 104 to increase its domination and these factors were conducive to a sharp growth in the monopolisation of the capitalist economy.
__ALPHA_LVL2__ 4. Distinctive FeaturesEarly in the 20th century the monopolies held key positions, in only some industries in certain developed countries. In recent decades, however, they have become a decisive force in every sphere of the world capitalist economy.
__ALPHA_LVL3__ Monopoly GrowthFirst of all the increasing size of monopoly enterprises should be noted. Whereas at the beginning of the 20th century in Germany and the United States an enterprise with more than 50 employees was considered a major concern, at present a major enterprise employs more than 10,000 people.
The number of monopolies with assets running into thousands of millions has abruptly increased. At the beginning of the century there was only one such company, United States Steel. In the early 1950s, there were four such companies, viz., American Standard Oil of New Jersey, General Motors and United States Steel, plus the British-Dutch Royal-Dutch Shell. By 1963 the number of such companies had risen to 57, and by 1974, to 344.
According to estimates made by Soviet economists, these 344 monopolies, which constitute only a negligible (0.002) percentage of capitalist companies, control a giant production apparatus including approximately two-thirds of all the labour power and about 70 per cent of assets and profits.
General Motors' 130 plants alone at present employ over 734,000 people, while the value of its annual sales of goods and services exceeds 33,000 million dollars, which is much greater than the gross national product of such capitalist countries as Australia, Denmark or Norway.
105 __ALPHA_LVL3__ Expanding Spheres of InfluenceAt the same time, the sphere of monopoly domination is expanding. Monopolisation has now extended beyond heavy industry to light industries, transport and trade. Monopoly capital is increasingly penetrating into agriculture. There are many large monopolies operating in the food industry, e.g., the Unilevers margarine trust, dairy-produce monopolies like the American Swift, which employs more than one-sixth of US dairy industry workers and the Swiss Nestle, monopolies operating in various light industries, for example, Procter and Gamble, and Reynolds Tobacco, which have more than 3,000 million dollars worth of assets each. The monopoly headed by Marcel Boussac, France's present textile king, is one of the strongest monopoly groups in the country. Especially significant changes have been taking place in trade and agriculture. Supermarkets and other kinds of major trading concerns now play the leading role in the domestic trade turnover of the United States, Japan and many West European countries.
Another feature of the monopolisation process over the past few years has been the marked increase in its rate. The number of mergers and take-overs has increased ten-fold. One notable example is ferrous metallurgy in West Germany, France, Italy and Belgium where, as a result of mergers, the key positions now belong to two or three monopoly groups. In the capitalist chemical industry ten monopolies control more than half of all production in their hands. Five leading electrical engineering monopolies account for two-thirds of the world capitalist production of electrical engineering equipment. One of these monopolies, the American IBM, accounts for over 70 per cent of the computers manufactured in the capitalist world.
Under the influence of the structural shifts in the capitalist economies, technological progress and militarisation of the economy, major changes occur in the balance of forces between the individual monopolies. For example, an estimate for 100 French industrial monopolies shows a considerable strengthening 106 of monopolies' positions especially in the newest chemical industries, the oil and gas industry, radioelectronics, and the aerospace industry.
__ALPHA_LVL3__ Forms of MonopolyThe concentration and centralisation of capital and monopoly associations change considerably in form. As technological relations between individual industries become more complex, combination increases in importance. At the same time, however, there is an intensification of the diversification process when a monopoly combines lines of production technologically unrelated to the monopoly's main product.
Examples of such monopolies are the conglomerates that became fairly widespread in the early 1960s in the United States and then mushroomed in Western Europe and Japan.
Cartels, too, developed new features as major monopolies came to take part in them. The functions of cartels at present are often fulfilled by manufacturers' organisations dealing with market and price regulation. Often enough, monopolies dictate prices without joining cartels, using so-called price leadership, when one major monopoly names the selling price and others follow its lead.
Trusts have also changed a good deal. The modern trust is becoming increasingly similar to the traditional concern and the boundaries between these two types of monopoly associations are becoming more and more blurred. Other recently widespread forms of monopoly include agreements between leading corporations on joint research and development, the joint building of major projects, and so on.
__ALPHA_LVL2__ 5. Lenin's Theory of Finance Capital.As capital and production in industry grew the consolidation of banks continued. The concentration and centralisation of banking capital resulted in the emergence of banking monopolies.
107The concentration of banking capital rested on the development of material production and concentration in industry. Production concentration promoted the growth of the money market while creating a demand for credit and stimulating an expansion of banking activities.
As the banking monopolies grew, they turned from ordinary credit agents into powerful concerns with huge funds at their disposal. The banks increasingly penetrated into industry, becoming co-owners of industrial enterprises.
This was accompanied by a reverse tendency with industrial monopolies buying blocks of shares of major banks or opening their own banks.
Thus, a new form of monopoly appeared as a result of the coalescence of banking and industrial capitals. This was finance capital, representing a fusion of the interests of banking and industrial monopolies.
__ALPHA_LVL3__ Definition of Finance CapitalDescribing the essence of finance capital, Lenin wrote : "The concentration of production; the monopolies arising therefrom; the merging or coalescence of the banks with industry--- such is the history of the rise of finance capital and such is the content of that concept."^^1^^
Lenin's definition of finance capital differs diametrically from that given by R. Hilferding in his Finance Capital. According to Hilferding, finance capital is that which is at the disposal of the banks and is employed by industrialists. Such a definition does not, in fact, differentiate between finance and banking capitals. Ignoring the basis, which is concentration of production, it starts from the specious premise of the primacy of circulation over production, thus furnishing a major principle of reformist ideology and policy. After all, if finance capital is a concept inherent in the sphere of circulation, production need not be touched in order to surmount these relations.
In fact, however, finance capital is a new type of capital, _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 226.
108 resulting from the fusion of the capital of banking and industrial monopolies. In the imperialist age, finance capital becomes the dominant force in the capitalist economy. __ALPHA_LVL3__ New FeaturesThe development of finance capital in recent decades has acquired a number of new features. These include, first of all, the more complicated pattern and complex role of banking capital and banking monopolies. Citing such factors as the more rapid industrial growth and the growth of industrial monopolies, which often leads to increasing self-- financing and relatively less reliance on loans on their part, some bourgeois economists and opportunists speak of the diminishing role of the banks, the ``divorce'' of the banks from industry and so of the self-abolition of finance capital.
In point of fact, the growth of industrial monopoly actually increases, rather than decreases, the role of the loan capital monopolies. Ties between the banks and industrial enterprises are becoming ever broader and more diverse. Besides credit, the banks today render industrial companies a great variety of services. They hold their money capital reserves, organise financing by third parties, perform cash and accounting and financial operations, settle accounts with the industrial companies' customers, pay out dividends on their shares, recover debts for them, pay taxes and make other payments to the state, supervise the pension funds of industrial companies, provide financial and economic information of every kind, give advice on reorganisation, draw up economic programmes, assist in the companies' external economic expansion, and so on.
Over the past few decades the monopolisation level of banking capital has continued to grow. In most capitalist countries the key positions in the credit system are now held by just a few giants with assets running into thousands of millions of dollars. The multiplying branch offices and branches of the major banks also indicate the growth of banking monopoly.
Also characteristic of recent decades is the growth of 109 specialised financial institutions that play an increasing role in the development of finance capital. We mean the proliferation of insurance companies, savings banks, pension funds, investment companies, and so on, which both industrial and banking monopolies are active in setting up. As a result, many of them constitute new forms of the coalescence of industrial and banking capitals and of the further development of finance capital on this basis. A considerable proportion of the capital accumulated is concentrated in the hands of credit and finance institutions of a new type. These funds are used by the monopolists to extend the sources of capitalist accumulation and centralise the money resources of all sections of society in their own hands.
The monopolisation of the banking and credit system gives a further boost to the interlacing and growth of the mutual ties between banking and industrial monopolies. One outstanding example is a new type of monopoly, the finance capital group.
__ALPHA_LVL3__ Financial GroupsA financial group is an economic category representing a coalescence of banking and industrial capitals. Such a group acts to expand the domination of a handful of financial magnates over vast complexes of industrial, financial and other establishments.
A financial group has the following basic features: (1) it has a nucleus formed by closely linked industrial and banking monopolies, (2) it is subject to unified leadership exercised by a variety of means and methods, (3) it is marked by relations of control by which the magnates cement its unity and constantly extend its boundaries.
Compared with other kinds of monopolies, a financial group is less rigid in structure. A comparatively large number of enterprises come under the sphere of influence of several groups, but this does not detract from tremendous role played by financial groups in the economy of modern capitalism.
With the help of the participation system (i.e., the purchase of a share of other companies' capital), personal unions, 110 long-term financial, organisational and technical links, special agreements and other methods, financial groups continually increase their domination.
The growing economic might of a small number of financial groups, which are becoming the leading force of world capitalism, may be considered the most important result of the development of finance capital since the war.
__ALPHA_LVL3__ Financial Groups' DominationAccording to Soviet calculations, the fifty biggest financial groups currently control 50 per cent of the surplus value produced in the developed capitalist countries. Eighteen financial groups in the United States, combining about 200 monopolies, control 60 per cent of the country's industrial production. They control assets worth more than 700,000 million dollars. The largest of them are the Morgan group, which had assets worth over 170,000 million dollars in the early 1970s, the Rockefeller group (over 130,000 million), the California group (more than 70,000 million), and the Chicago group (55,000 million dollars). Five financial groups hold the key positions in Japan, and three in West Germany. The ten biggest financial groups in France control assets of more than 240,000 million new francs, or 40 per cent of the privately held property in the country.
New features are also currently appearing in the organisation of finance capital. With the growth of productive forces and greater inter-imperialist rivalry, the financial groups that used to be mainly family concerns are now, as a rule, coalitions of many millionaire and multimillionaire families united by a community of interests. This is also assisted by the growth of jointstock capital and the coalescence of monopoly and the capitalist state.
The balance of forces between the biggest financial groups has also been changing since the last war. The hold of US finance capital has become much stronger, with the afore-- mentioned 18 American financial groups now controlling roughly 111 half of all the assets belonging to the fifty biggest financial groups of the capitalist world.
In pointing out the immense role of US finance capital, it must be stressed that, over the past 10 to 15 years, the growth rate of American financial groups has often fallen short of that of Japanese, West German and some other monopolies. British and French monopoly groups retain their great financial and economic power. An important role belongs to financial groups in Belgium, Switzerland, the Netherlands, Sweden and other smaller countries.
Present-day capitalist realities thus disprove the bourgeois propaganda allegations concerning the so-called self-abolition of finance capital, the domination of which has never been so extensive and all-pervasive as now in the economy of the capitalist world.
__ALPHA_LVL2__ 6. Domination of the Financial Oligarchy __ALPHA_LVL3__ [introduction.]The formation of finance capital has led to the emergence of its personification---the financial oligarchy, which consists of all the owners of finance capital.
__ALPHA_LVL3__ The Wealth and CompositionThe financial oligarchy is comprised of a negligible minority even within the bourgeoisie, but this handful of magnates holds undivided sway over the economics and politics of the imperialist countries. In the United States, for example, a mere 1 per cent of property owners possess 59 per cent of all property in the country. What is more, the preponderant position among these most wealthy persons is occupied by only 250 to 300 families. The wealth of oligarchy members is constantly increasing. According to estimates, in the United States the Rothschild clan alone in the 1920s had property worth 660 million dollars, while now their property is worth at least 4,000 million dollars. The personal property of 112 the Ford family increased over the same period from 660 million to 3,800 million dollars, of the Mellons, from 450 million to 4,600 million, and of the Du Fonts, from 239 million to 5,000 million dollars. Recent decades have also seen the rise of new dynasties, due especially to the militarisation of the economy and state regulation.
The financial oligarchy naturally undergoes changes in composition. Some financial dynasties are forced out of business by rivals, and new ones spring up in their place. The Japanese financial oligarchy is a case in point. After World War II, alongside the old ``zaibatsu'', the oligarchy was joined by a whole group of new magnates from new industries and the sphere of external economic activities. At present, the key positions in the Japanese economy belong to about the 300 richest families.
The changes that occur in the composition of the financial oligarchy have nothing to do with the concepts spread in bourgeois economics and propaganda.
__ALPHA_LVL3__ Critique of BourgeoisThe ideologists of imperialism seek to conceal the fact that the oligarchy exists, or at least to disguise its domination. To this end, they speak of a so-called ``democratisation of capital'', allegedly resulting from the development of joint-stock companies, of the ``evaporation of property" or ``social mobility" as the result of which big fortunes are supposed to ``vanish'', and the bourgeoisie itself is declared to no longer exist. Bourgeois economists spoke of the `` democratisation of capital" even at the turn of the 20th century, and Lenin exposed the falseness of such assertions right then. A jointstock company does not involve the breakdown of property into smaller units. On the contrary, it constitutes an ideal method for enhancing the centralisation of capital and enriching a few capitalists at the expense of the numerous small share-holders.
As for the concept of the "evaporation of property'', it should be stressed that it has no foundation in statistics. Analysis of the 113 available data, e.g., statistics on legacies, disproves such assertions most conclusively. For instance, in France, according to the notary offices, 80 per cent of inherited fortunes are worth only 5,000 francs or less. This France of the labouring people---- industrial workers, peasants, artisans and professionals---is opposed by another France in which an insignificant minority of the population possess 70 per cent of the private property.
The theory of ``social mobility" or its variant, the `` managerial revolution" theory seems at first sight to be better founded. Indeed, university education is today more accessible to the masses, the role of managers is increasing, and some of the top managers join the ranks of the ``great''.
In reality, however, such facts do not confirm the ``social mobility" of capitalist society. The position of most social groups and classes remains the same. The great majority of those holding managerial jobs still merely work for the owners of capital who pay them wages. If some of them---very few indeed---join the oligarchy, this changes nothing in its nature.
__ALPHA_LVL3__ Distinctive Features of the OligarchyToday the financial oligarchy is absolute master of the capitalist economy, irrespective of the form of government in the individual capitalist country (be it a republic, monarchy, etc.). The financial oligarchy is completely remote from production and is parasitic on the capitalist nations.
Another feature of the oligarchy is its increasingly cosmopolitan character. The tendency towards an international interweaving of financial capitalist cliques, noted by Lenin, is proceeding today as never before.
The omnipotence of the financial oligarchy is enhanced by its growing ties with the state machinery and by the emergence and development of the system of state-monopoly capitalism. The financial oligarchy also controls all means of ideological propaganda: the major publishing houses, newspaper trusts, radio and television companies that continually brainwash the working people in the interests of the bourgeoisie.
__PRINTERS_P_113_COMMENT__ 8---1921 114The reactionary part played by the financial oligarchy comes out especially in the preparation for, and conduct of, imperialist wars and its use of the entire weight of the state in order to enhance its own domination and intensify the exploitation of the workers and other non-monopoly sections of capitalist society.
__ALPHA_LVL2__ 7. Monopoly Profit and the EnrichmentAs free enterprise is superceded by monopoly rule, the operation of the economic laws of capitalism is not abolished, but the forms in which they are manifested are modified. The main law of the capitalist system, which operates in all its stages, is, of course, the law of surplus value. Under free enterprise capitalism, this law takes the form of the law of average profit. Under monopoly capitalism, it operates as the law of monopoly profit.
__ALPHA_LVL3__ The Essence of Monopoly ProfitMonopoly profit is the profit of monopoly associations in excess of average profit which consolidates their predominant position in production and circulation. The excess of monopoly over average profit is called monopoly superprofit.
Individual capitalists could secure superprofit under free enterprise capitalism too, but competition would not allow this to continue for long. The situation is radically different under imperialism: the monopolies, which seize dominant positions in every sphere of society, derive superprofit all the time.
Where does this addition to average profit come from? Having taken control of the huge economic resources, invested in the different spheres of the economy---in industry, transport, trade, the services, banking, agriculture---the monopoly bourgeoisie exploits the entire capitalist society. Hence, monopoly profit 115 appears as a complex, synthesised form of monopoly income derived from all spheres of the economy.
Monopoly profit expresses the entire complex of production relations in the imperialist age. Under free enterprise capitalism, average profit expresses the relationship between the whole capitalist class and the proletariat, as well as those between individual capitalists in their pursuit of the greatest possible share of surplus value. Monopoly profit expresses production relations between the monopoly bourgeoisie and all the other classes and sections of modern capitalist society, above all, the workers and the middle strata in the developed capitalist countries and the working people in the colonial and dependent countries, as well as relations between the monopoly and non-monopoly bourgeoisie and the monopolies themselves.
__ALPHA_LVL3__ Sources of Monopoly ProfitMonopoly profit springs from numerous and diverse sources, the chief one being, of course, the exploitation of workers employed in monopoly enterprises. Monopoly domination leads to greater exploitation in the very sphere of production. The higher technological level of monopoly enterprises and better organisation of labour make it possible for the monopolies to raise labour productivity and appropriate superprofit as the result of the difference in production costs, compared with less well-equipped enterprises.
Labour intensification is a most important means for deriving monopoly superprofit. The monopolies increase the intensity of labour by speeding up the general work rhythm in all sectors of production. They resort widely to time and motion studies and introduce sweating systems of remuneration for labour, which increase the workers' dependence on their employers.
Modern intensification of labour involves an extreme expenditure of nervous energy, which has a ruinous effect on labour power. Often enough, the intensity of work reaches such heights that no improvement in the workers' living conditions can compensate for it. The result is pure destruction of labour power.
116Another source of monopoly profit is the exploitation of foreign labour by the monopolies. At the start of the economic crisis of the 70s, the West European countries had 15 million immigrant workers whom even the Western press called " outcasts''. Foreign workers are usually paid the lowest rates, they are not covered by social insurance and live in appalling conditions.
Besides, the surplus value created by the workers, a considerable proportion of the value of labour power is also a source of monopoly profit. The fact that the monopolies appropriate a portion of the value of labour power is indicated by the gap between the value of labour power and the level of wages paid by the monopolies.
The monopolies also use the surplus value produced in other enterprises to increase their profits. This is done through a system of monopoly prices, whereby the surplus value produced in society is redistributed to the advantage of the monopolies.
Monopoly prices are often much higher than the value of the goods. To maintain the selling price at the high monopoly level, the monopolies so regulate production as to keep the market always strained. They use every means to secure an absolute and continuous rise in the prices of their goods.
It is for this reason that monopoly domination is a major cause of the constantly rising cost of living in the capitalist world.
Also relatively widespread under imperialism are low monopoly prices, which are set lower than the value of the goods. The monopolies buy goods from small commodity producers and nonmonopoly capitalists at such prices.
Monopoly prices are a means for the additional exploitation of the workers as buyers of the monopolies' goods.
With the help of the price mechanism, the monopolies fleece and ruin the middle sections of capitalist society. They seize the value of the surplus, and a part of the necessary product of small producers in town and country by selling them goods at exorbitant prices and buying their products at prices kept down artificially. The system of monopoly prices is applied especially 117 to peasants, whom the monopolies fleece both as producers and consumers.
Colonial plunder is also a major source of monopoly profit. The whole system of economic and political relations between the imperialist and the developing countries turns on this, the export of capital, non-equivalent exchange and increasing exploitation of the developing nations being widely employed in the process.
The monopolies appropriate the surplus value produced in their enterprises in the countries where they invest capital. As they invest in local enterprises, the monopolies continually expand the sphere of exploitation. They also become owners of a portion of the value of the necessary product created by small commodity producers in the developing countries.
Financial magnates also derive profit from various financial transactions. There are many ways to exact monopoly gains: by controlling other people's capital, appropriating promotional profit (the difference between the share price and the capital actually invested in a joint-stock enterprise) and speculating on the stock exchange. Financiers get more and more profits from transactions involving government securities. In the final analysis, the different methods employed by the "financial wizards" come down to the redistribution of the surplus and some of the necessary product made in society.
Under modern capitalism, the formation of monopoly profit and its appropriation by the monopolies are increasingly linked with the bourgeois state.
__ALPHA_LVL3__ Monopoly and SocietyThus, an analysis of the essence, sources and ways of appropriating monopoly profit shows that monopoly domination conflicts with the interests of the majority of the people. The capitalist monopolies are the workers' chief enemy. They are also the enemy of the peasants, artisans and other urban small property-owners, of the majority of office workers and intellectuals. Lenin's theory of monopoly profit discloses the objective 118 foundations for a broad coalition of all non-monopoly sections. The leading role in this coalition belongs to the working class. The interest of the other non-monopoly sections in an abolition of the power of the financial oligarchy, which creams off monopoly profit from the whole of society, makes it possible for the working class to unite their efforts and set up a broad anti-monopoly front capable of abolishing the monopoly rule and carrying out far-reaching social, economic and political reforms.
[119] __NUMERIC_LVL1__ CHAPTER 8 __ALPHA_LVL1__ STATE-MONOPOLY CAPITALISM __ALPHA_LVL2__ [introduction.]While remaining monopolistic, modern capitalism is also acquiring new features, compared with the start of the 20th century. Its state-monopoly character is increasing, and the development of monopoly into state-monopoly capitalism is proceeding at a faster rate.
State-monopoly capitalism is monopoly capitalism characterised by a fusion of the power of capitalist monopoly with that of the state.
__ALPHA_LVL2__ 1. Lenin's Teachings on the EssenceTeachings on state-monopoly capitalism (and the term `` statemonopoly capitalism" itself) were originated by Lenin. In his works published at the beginning of the century Lenin developed Marxist theory by advancing a number of propositions on the changing role of the state as the monopolies emerged and developed, on the strengthening of the mutual ties, and on the greater utilisation of the state by the monopoly bourgeoisie. In his Imperialism, the Highest Stage of Capitalism Lenin revealed the essence of state monopoly, showing the union of monopoly with bourgeois governments. Especially important were Lenin's works The Impending Catastrophe and How to Combat It and The State and Revolution, which set out the basic elements of his theory of state-monopoly capitalism.
120 __ALPHA_LVL3__ A Single MechanismCentral to Lenin's analysis is the proposition that monopoly and the state coalesce into a single mechanism. The fusion of the power of monopoly and the state implies no loss of autonomy by the bourgeois state with respect to individual monopolies or groups of monopolies. In politico-economic terms, however, the drawing together of monopoly and the state has a definite meaning. Its class content, clearly identified and described by Lenin, consists in defence of the common interests of the monopoly bourgeoisie in maintaining and strengthening the capitalist system, and in increasing monopoly profits.
After describing the essence of state-monopoly capitalism, Lenin showed that monopoly capitalism must inevitably grow into state-monopoly capitalism, which he regarded as the highest form in the monopolisation of the capitalist economy. The successive stages of this process are: concentration of production, the emergence of an industrial monopoly, monopolisation of banking, the formation of finance capital and the financial oligarchy, and the development of state-monopoly capitalism. Speaking at the 7th (April) All-Russia Conference of the RSDLP(B) in 1917, Lenin said: "The concentration and internationalisation of capital are making gigantic strides; monopoly capitalism is developing into state monopoly capitalism. In a number of countries regulation of production and distribution by society is being introduced by force of circumstances."^^1^^
__ALPHA_LVL3__ The Causes and Developmental FeaturesLenin described the causes of the fusion of monopoly and the state. He repeatedly stressed that the development of statemonopoly capitalism was based on aggravation of the internal contradictions of the capitalist mode of production, above all of its main one, that between the social character of production and the private mode of appropriation. The unprecedented growth in the socialisation of production under continuing _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 24, p. 305.
121 private capitalist ownership carries the conflict between productive forces and capitalist production relations to the extreme. Extended reproduction of capital is impossible without the intervention of the state, with whose help the monopoly bourgeoisie hopes to alleviate the contradictions of the moribund capitalist system.Lenin also analysed other factors that contributed to the growth of state-monopoly capitalism, such as the monopolies making the state take over the unprofitable enterprises which are needed by them and using the state in their rivalry with other monopolies, imperialist wars, and so on.
Lenin was also the first to describe the concrete forms of state-monopoly capitalism. It would be hard to find any widespread kind of state-monopoly mechanism today that Lenin did not thoroughly study and describe in his works. He described state ownership and the role of state economic regulation through the budget and fiscal system, through the fixing of prices and wage levels, the drafting of economic development programmes and the establishment of inter-state imperialist alliances.
It is especially worth noting that Lenin's theory of statemonopoly capitalism not only exposed its essence and the objective laws of its emergence and development, but also showed its role in the development of the proletariat's class struggle. Lenin demonstrated with brilliant foresight that state-monopoly capitalism implied the most complete "material preparation for socialism''. The dialectics of its development consists in the further aggravation of all the contradictions of capitalism.
Lenin's teachings on state-monopoly capitalism have been carried forward in the documents and decisions of the Communist Party of the Soviet Union, the documents of the international communist movement, and the contemporary works of MarxistsLeninists.
Lenin studied the state-monopoly tendencies that were observable early in the century. The first world war gave an impetus to the development of monopoly into state-monopoly capitalism.
122The further development of state-monopoly capitalism was promoted by the world economic crisis of 1929--33. At that time, two variants of state-monopoly economic regulation appeared: the ``liberal'' New Deal of US President F. D. Roosevelt, and the fascist variant that emerged in Nazi Germany where, in view of war preparations, state intervention was stepped up for the sake of militarisation of the economy.
During the Second World War the development of statemonopoly capitalism entered a new stage.
Particularly notable changes in that sphere occurred, however, in the years following World War II.
__ALPHA_LVL2__ 2. The Current Stage in the DevelopmentIn the postwar period, the development of monopoly into state-monopoly capitalism acquired a number of new features.
__ALPHA_LVL3__ New Features of the DevelopmentThe process gained considerable impetus. State-monopoly capitalism extends to ever wider spheres of social production, circulation, distribution and consumption. The expansion of the fusion of the monopolies and the bourgeois state results, in many capitalist countries, in the appearance of an integral and continually functioning system of state-monopoly capitalism, in fact implying the transformation of monopoly capitalism into statemonopoly one.
Modern capitalism is, above all, state-monopoly capitalism adapting to the conditions of the struggle between the two world systems.
The state-monopoly character of modern capitalism is constantly increasing and ever greater use is being made of the state levers for stimulating monopoly concentration of production and capital, state redistribution of a bigger and bigger share of national income, the awarding of military contracts to monopolies, 123 government financing of industrial R & D programmes, the drawing up of national economic development programmes, imperialist integration and new forms of capital export.
__ALPHA_LVL3__ Factors Influencing the DevelopmentAccelerated development of monopoly into state-monopoly capitalism occurs under the impact, above all, of the struggle between the two world systems and the class struggle in the capitalist countries. State-monopoly capitalism is the principal way in which capitalism adapts to the changed conditions.
The greater economic need for the fusion of monopoly and the state is due to the intensification of the main contradiction of the capitalist mode of production.
The current scientific and technological revolution has contributed immensely to speeding up the growth of state-monopoly capitalism.
Under the scientific and technological revolution, rivalry and the pursuit of profit necessitate constant increases in the size of employed capital and the scale of production. Private monopoly capital, despite the giant growth of capitalist concentration, often does not suffice, however, to expand production on the basis of advanced technology. The single mechanism of monopoly and the state becomes essential to the further progress of the scientific and technological revolution. The imperialist state allocates large funds for research in government institutions and to support private R & D. The state also plays an increasing role in providing the other conditions necessary for the development of modern capitalist production, e.g., it supplies private monopolies with raw materials, fuel and energy, trains skilled personnel for them, regulates the labour market, lends them money to invest, guarantees sales, and so on.
Of no small importance in the evolution of the fusion of monopoly and the state is the internal contradiction Marx discovered in the development of capital itself and associated with the downward trend in the average rate of profit. State-- 124 monopoly capitalism is instrumental in securing the monopoly upper crust a high level of profit through greater exploitation of workers, peasants, intellectuals, and developing nations.
The monopolies increasingly make the state take over the function of building and expanding the infrastructure, as well as shoulder the expenses involved in maintaining unprofitable enterprises and entire industries that are, nevertheless, essential to modern production.
The overgrowing of monopoly into state-monopoly capitalism is also attributable to the intensifying rivalry between monopolies on the world market, the disintegration of the colonial system of imperialism, and other changes in the international situation of the imperialist countries.
State-monopoly capitalism is neither a new stage of capitalism, compared with monopoly capitalism, nor any sort of ``superimperialism'', and contrary to the claims made by bourgeois ideologists and right-wing opportunists, it in no way implies that capitalism is being overcome.
__ALPHA_LVL3__ The System of State-Monopoly CapitalismAt the same time, it would be dangerous to ignore the new features engendered by the formation of mature state-monopoly capitalism. These new features, characteristic of advanced statemonopoly capitalism, are the result of the further development of the social character of production, of greater monopoly domination in economics and politics and the further fusion of the monopolies with the bourgeois state. The formation of the statemonopoly system affects all the main features of imperialism. Major changes take place, for instance, in monopoly, the economic foundation for imperialism. We have already mentioned the broad process of monopolisation that develops, among other things, under the impact of the bourgeois state. The point is, however, that the very existence of private monopolies becomes impossible without some form or degree of fusion with the state. From now on, the bourgeois state is a necessary direct participant in the reproduction of monopoly capital, and 125 no monopoly activity in any sphere of the capitalist economy is possible without it. The fusion of finance capital with the state invests modern finance capital with a state-monopoly character. The monopolies avail themselves increasingly of profitable government contracts, credits and subsidies, tax privileges and other forms of enrichment through government funds. As a result, the financial oligarchy comes to include a growing number of former civil servants who used their office for personal enrichment and gain membership of the plutocracy.
Monopolies and different groups of the financial oligarchy are always competing for government post and for influence on government institutions, from which they hope to derive immediate benefit. In the process, the state and individual monopolies often come into conflict. The conflict arises from infringement of the interests of one group or another, and the divergence between the private and common interests of the monopoly bourgeoisie. The financial oligarchy respects the independence of the state apparatus if its own basic interests are secured. For the oligarchy the important thing is that the stability of the capitalist system should be ensured and that favourable conditions for the reproduction and accumulation of monopoly capital should be maintained.
The fusion of monopoly and the state has an impact on other features of imperialism as well. Under developed state-monopoly capitalism, capital is increasingly exported by the state itself. State-monopoly capitalism engenders new forms of economic partition of the world, such as imperialist integration and international corporations. The territorial partition of the world assumes the form of neocolonialism, which is an attempt on the part of the state-monopoly system to preserve the economic and political holds of imperialism in the developing countries while the old colonial empires are disintegrating.
As the state-monopoly character of modern capitalism becomes more pronounced, all its contradictions are aggravated. State-monopoly capitalism, in enormously socialising production and centralising its management, greatly exacerbates the main contradiction of the bourgeois system, that between the social 126 character of production and the private mode of appropriation. People become increasingly aware that the situation is unnatural where industrial complexes often serving more than one country remain the private property of a handful of millionaires and multimillionaires. The need to replace capitalist production relations with socialist ones becomes more and more pressing.
__ALPHA_LVL2__ 3. Basic FormsUnder the impact of various social, economic and political factors, state-monopoly capitalism acquires distinctive features in each imperialist country, but its main characteristics and forms are found in the overwhelming majority of countries. The distinctive features under present-day conditions are: personal union of monopoly capital and bourgeois governments, statemonopoly ownership, state economic regulation and programming, regulation of relations between labour and capital, state consumption, and participation of the state-monopoly system in the external economic expansion of monopoly capital and in the other spheres of the monopolies' international policy.
__ALPHA_LVL3__ Personal UnionAs Lenin demonstrated, personal union of monopolists and bureaucracy was one of the earliest forms of state-monopoly capitalism, appearing at the same time as monopoly. Under developed state-monopoly capitalism, personal union has become widespread and constant. Bourgeois journalists have christened it ``pantouflage'', an activity of government executives sitting on the boards of private industrial and banking companies and the monopoly agents and monopolists who themselves become government ministers and presidents. The result of this two-way process is the emergence of a single state-monopoly ruling force, which plays the leading role in shaping and pursuing imperialist policies. Of particular significance is the kind of personal union that results from the fusion of military circles and monopolies 127 manufacturing weapons. This is the military-industrial complex, which today has an immense impact on the government policies of the United States and some other imperialist countries.
Another form of personal union that has become current in recent decades is the close relationship between associations of industrialists and the bourgeois state machinery. These associations are increasingly becoming the headquarters of a kind of monopoly capital. The National Association of Manufacturers in the United States, the Federation of German Industries in West Germany, the French Employers' National Council in France, the General Confederation of Italian Industry and other similar associations actively participate in the elaboration of national policies and protect the interests of the monopoly bourgeoisie vis-a-vis the working people and all other non-monopoly sections at home, as well as with respect to foreign competitors.
__ALPHA_LVL3__ Business Activities of the StateClosely linked with personal union are the business activities of the state, an important form of state-monopoly capitalism. Public property such as public land, administrative buildings, post offices, railways, tobacco and alcoholic drinks monopolies and individual state-owned enterprises also existed in the earlier stages of capitalism.
In the age of imperialism, especially since the last war, such property has expanded immeasurably and its role has changed. It has become of greater significance to maintaining and consolidating the system of monopoly domination.
In the developed capitalist countries at present, the state and local government bodies account for approximately a fifth of the capitalist wealth (from 15 to 25 per cent). The state has become a major industrial entrepreneur in the capitalist world. Stateowned and mixed enterprises account for 15--20 per cent of industrial production in such countries as West Germany, Britain, France and Italy. In Britain, the government controls the coalmining industry, gas works and electricity generation. In France, the public sector controls about 80 per cent of the fuel and 128 power facilities (almost the entire coal and gas industries, electricity generation and a proportion of the oil industry), some major engineering and metal-working enterprises (the production of motor cars, tractors and aircraft), some chemical plants, and so on. In West Germany, the state controls about 25 per cent of the country's joint-stock capital, including a large proportion of coal, iron-ore, aluminium and power production. Public property in the United States (federal, state and local government property) amounts to about 23 per cent of the national wealth.
The public sector controls the greater part of contemporary transport facilities in the developed capitalist countries. In Western Europe, for example, state-owned enterprises account for more than half the total volume of traffic.
State-monopoly property is now one of the mainstays of the imperialist banking and credit system. It has been estimated that the state, counting the central banks of issue and mixed financial institutions, owns roughly a third of all bank assets. These figures are still higher in some countries. In France, for example, the state currently accounts for two-thirds of the country's total bank assets. The public sector accounts for 55 per cent of all deposits in Italy; 52.2 per cent, in West Germany; 50 per cent, in Belgium; 26 per cent, in Luxembourg; and 29 per cent, in the Netherlands.
Bourgeois ideologists, as well as some right-wing Social-- Democratic leaders, are trying to pass off state-monopoly property as a kind of socialist property. In fact, it is the property of the entire monopoly bourgeoisie, which uses it for its own enrichment. State-owned enterprises usually sell their product to private monopolies at reduced prices, and buy from them at high prices. This enables the private monopolies to realise in their profits the surplus value produced by workers in state enterprises. The syphoning of the surplus value produced by workers in state enterprises into the coffers of the private monopolies leads to a deficit in the public sector. This deficit is made up from the state budget, i.e., at the expense of the taxpayers.
While exposing the capitalistic nature of state-monopoly 129 ownership, the working class, Communist and Workers' parties repudiate the remedies suggested by the ``left'' opportunists, who see no difference between the public and private sectors. Communists stress that, under certain conditions, state ownership may be a weapon in the struggle against the private monopolies. This is precisely why the majority of Marxist-Leninist party programmes in the developed capitalist countries demand nationalisation, but of a kind involving the active participation of the masses and democratic control over the nationalised enterprises. Democratic nationalisation does not yet imply a transition to socialism, but it presupposes that the financial oligarchy is pressurised and ousted from key positions in the economy. Democratic nationalisation is possible only if there is a radical change in the political superstructure of the imperialist countries.
__ALPHA_LVL3__ State Economic RegulationThe various activities of the state in regulating the capitalist economy are an essential form of state-monopoly capitalism.
The key element to the entire system of state financial and economic regulation consists in redistribution of the national income through the state budget. At the beginning of the 20th century, the budget accounted for a comparatively modest share of the national income. Today, in the United States, Britain, Japan, West Germany, France, Italy and some other capitalist countries, public revenues make up from 26 to 55 per cent of the national income. The tax burden has increased greatly. The working people have to contribute a sizable proportion of their wages in direct and indirect taxes.
Thus, in the United States, the federal budget, state budgets and those of local government bodies account for roughly a third of the gross national product (GNP). The USA saw its taxes double just during the last 10 years. These financial resources are powerful levers of the state-monopoly system in the United States.
The state's share in the investment in the capitalist countries is increasing. In France, for example, the state at present __PRINTERS_P_129_COMMENT__ 9---1921 130 accounts for over 30 per cent of total investment, as against 5 per cent just before the Second World War.
The state uses the budget to carry out fiscal regulation of the economy by such means as increases or decreases in public expenditure, capital investment programmes and subsidies granted to industries and enterprises. Fiscal policy is based on tax manipulation, such as changes in tax rates and rules of tax payment, and the introduction or withdrawal of tax privileges.
Of no small significance is state price control and state control of credit terms. The most usual methods of credit control consist in altering the bank of issue's discount rate so as to make credit dearer or cheaper; raising the obligatory minimum deposits held in the bank of issue, also with the purpose of boosting or reducing the merchant banks' credit resources; and selling or buying securities in order to influence the money market and reproduction through the credit system.
The afore-mentioned spheres of government activity are only comparatively effective in the public sector. As for the capitalist economy as a whole, the activity of the state cannot countervail the laws of spontaneous development and anarchy of production.
The bourgeois state also tries to regulate the economy with other financial levers---e.g., by introducing equipment depreciation regulations---and by administrative regulation, viz., control of public utilities, over the banking and credit system and other services.
All these means of regulation were initially applied independently. Under developed state-monopoly capitalism, they are increasingly included into comprehensive economic programmes.
Greater participation by the state in financial and economic control and development of the public sector provide the basis for the emergence of the system of capitalist economic programming.
__ALPHA_LVL3__ Capitalist ProgrammingEconomic programmes in capitalist society are based on private ownership of the means of production, by virtue of which 131 they are of an indicative (advisory) character. Their indices are not binding on capitalist enterprises, and their content is subordinated to the interests of the monopoly capitalists. It must be stressed that the economic policies of the bourgeois state, synthesised in the national economic development programmes, reflect primarily the strategic interests of the financial oligarchy. Capitalist programming which relies on the consolidated power of monopoly and the state, attains a certain measure of effectiveness. Nevertheless, like all other forms of state-monopoly capitalism, it cannot abolish the uneven and disproportionate development of the capitalist economy, the imbalance between industries or rivalry between enterprises. Even if economic programming implies the introduction of some elements of balanced development in spontaneously developing production, these elements can reach no farther than the private and anarchic nature of capitalist production will allow. Economic programming, which was engendered by the further aggravation of the contradictions of modern capitalism, is powerless to eliminate them, as is state-monopoly capitalism in general.
The chief obstacle to really balanced economic development under capitalism is private capitalist ownership of the means of production. It makes it impossible to gear social production to satisfying the wants of all members of society, which inevitably throws social production out of balance and ultimately results in overproduction crises. This means, Lenin said, that the "trusts, of course, never provided, do not now provide, and cannot provide complete planning."^^1^^
One outstanding example is the economic crisis that has gripped all centres of world capitalism. It hit the highly developed state-monopoly economies hardest. Capitalism has spared no efforts to keep pace with the times and do what it could to regulate the economy. This stimulated economic growth, but, just as Communists had foreseen, did nothing to eliminate the contradictions of capitalism.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 25, p. 443.
132 __ALPHA_LVL3__ ``Incomes Policy''Of late, the capitalist governments have been assiduously devoting themselves to regulating relations between labour and capital in favour of the monopolies. The growing significance of these activities is due to the increase in the number of industrial and office workers employed in state enterprises and institutions, as well as to the mounting class struggle in the capitalist world. Thus, in the United States the proportion of factory and office workers employed in state enterprises increased from 6 to 18 per cent of total wage labour from 1929 to the 1970s respectively. (Furthermore, the proportion of servicemen is currently more than 4 per cent.) The incomes of industrial and office workers in the public sector account for over 20 per cent of the total wage fund in the United States.
As a result of the prolonged and persistent class struggle, a system of social insurance with the participation of the state has emerged in a number of capitalist countries. Its objective political meaning is that the state commits itself to pay part of the expenses involved in the reproduction of labour power, which the private monopolies would not defray.
Government "incomes policy" is clearly class-biased. The benefits paid to the population by the bourgeois state under pressure from below are more than cancelled out by taxes and other forms of income withdrawal, such as higher prices, higher rent, fares and rates. "Wage freezing" is readily employed, especially at times of economic crisis. An ``austerity'' policy, imposing limits on the growth of wages and curtailing welfare expenditure, yields additional profits to the monopolists.
__ALPHA_LVL3__ Militarisation of the EconomyOne form of state-monopoly capitalism is what is known as public consumption. Whereas, in the past, public consumption used to acquire tremendous proportions during times of war, now it swallows up a large share of the country's social product in peacetime as well. A big portion of public purchases is associated with militarisation of the economy.
133Militarisation of the economy and the arms race constitute one of the most distinctive features of modern state-monopoly capitalism.
By militarising the economy, the imperialist states seek to assure economic growth and bolster aggressive and reactionary forces both at home and abroad. The wars conducted in the earlier half of the 20th century alone cost more than 4,000,000 million dollars. The total number of persons serving in the army, working for war and catering for the armed forces in the capitalist world currently amounts to almost 100 million. Huge government orders and extravagant spending on maintenance of the armed forces and accumulation of strategic reserves contribute to the continual growth of the military economy. The major capitalist countries are seeing the formation of a military-- industrial complex, which is a union of the biggest monopolies and the upper crust of the military.
The military-industrial complex is the strongest lobby in the United States. The military spending of the US government has sky-rocketed under its pressure. Thus, in the 1977--78 fiscal year US total military allocations amounted, according to official figures, to 116.7 thousand million dollars, to be raised to 128.4 thousand million in the 1978--79 fiscal year. As President Carter pointed out in his State of the Nation speech at the beginning of 1978, a broad programme for developing new strategic arms systems as well as building up US armed forces in Europe and other areas, was currently under way.
State military expenditures provide a major source of enrichment for the bigger monopolies.
The militarisation of science under state-monopoly capitalism presents a terrible menace to mankind's future. More than 70 per cent of the enormous increase in public spending on science currently goes for military research.
Growing militarisation of the economy is extremely detrimental to its all-round progress. The arms race, with its attendant one-sided development of some industries only, throws the unstable capitalist economy further out of balance. Militarisation means higher taxes and lower living standards. Should the arms 134 race be brought to a halt, vast resources would be released for improving the living standards, aiding the developing countries, protecting the environment and solving the other vital problems facing mankind.
Monopoly capital also uses the bourgeois state to consolidate and expand its own dominance in the international arena.
Bourgeois governments promote the foreign economic expansion of domestic private monopolies, taking steps to make them more competitive on the world market. The state guarantees the private monopolies' export of capital to colonial and dependent countries.
With the advance of state-monopoly capitalism, international monopoly corporations emerge.
__ALPHA_LVL2__ 4. State-Monopoly CapitalismUnder state-monopoly capitalism, the socio-economic and political contradictions of capitalist society are further developed and aggravated.
__ALPHA_LVL3__ Aggravation of ContradictionsThe first to be mentioned in this connection is the main contradiction of capitalism. Centralisation of the economy on a national and international scale, while the means of production remain in private ownership, inevitably intensifies the antagonisms of capitalist society. State-monopoly development makes the main contradiction of capitalism appear in new forms, such as the conflict between the growing socialisation of production and the state-monopolistic methods of its regulation.
The state-monopoly system is spearheaded against the interests of the working class and the working people at large. Hence, the development of state-monopoly capitalism aggravates the conflict between labour and capital.
As a result, under today's conditions the division of society 135 into the two main antagonistic classes, the proletariat and the capitalists, gains impetus. Substantial changes occur in both the ratio between the classes and their composition. The working class becomes stronger numerically and its role in production grows, while the insecurity of a great part of it, its dependence on the employers and lack of political rights also increase. The pattern of the working class undergoes a change. While the growth of the industrial proletariat proper slows down relatively, the proportion of workers employed in new industries and production lines rises. The scientific and technological revolution tends to increase the overall skills of the proletariat, but capitalist exploitation obstructs this tendency, making it an instrument of gain for the employers.
State-monopoly capitalism speeds up the ruin and impoverishment of the mass of peasants and farmers and the urban petty bourgeoisie. The middle sections of the bourgeoisie become relatively smaller. The capitalist class itself becomes differentiated, with the dominant state-monopoly oligarchy breaking off from it and increasingly setting itself against the rest of society.
__ALPHA_LVL3__ Impact on the Revolutionary ProcessIn fighting for their economic and political interests, the working people are now confronted not merely by individual capitalists, but by the united strength of the bourgeois state and the monopolies. Hence the inevitable growth and sharpening of the class struggle and the need for the working class to organise and build up its forces.
Under state-monopoly capitalism, the economic struggle of the proletariat necessarily develops into a political struggle spearheaded against the state-monopoly system as a whole. The working class is the strongest opponent of monopoly rule and the centre of attraction for all anti-monopoly forces.
The development of monopoly into state-monopoly capitalism and the formation of the state-monopoly system has a considerable impact on the strategy and tactics of the revolutionary movement, giving rise to the objective need for a struggle for a 136 democratic alternative to state-monopoly regulation and for the transition to socialism on this basis.
The revolutionary forces in the capitalist countries proceed from the dialectically contradictory nature of state-monopoly capitalism. Independently of the will and consciousness of the monopoly bourgeoisie, the development of state-monopoly capitalism signifies that all the material prerequisites for the socialist revolution and the groundwork for the future socialist society are being prepared. Lenin wrote that "state-monopoly capitalism is a complete material preparation for socialism, the threshold of socialism, a rung on the ladder of history between which and the rung called socialism there are no intermediate rungs".^^1^^
State-monopoly capitalism builds a ramified machinery for administering economic affairs, which Lenin called the " mechanism of social management".^^2^^ The proletariat and other anti-monopoly forces can and must use this to organise the building of a new society.
It is certainly necessary in the process, to abolish the domination of monopolies that determines the class content of the "mechanism of social management" today. It means that statemonopoly capitalism cannot develop into socialism of its own accord. State-monopoly can be made to serve the people only if state power is wrenched from the bourgeoisie and far-- reaching socio-economic reforms are effected.
Whether this is carried out in a relatively peaceful way or by means of an armed struggle, depends on the specific conditions in each country, on the balance of forces between the proletariat and the bourgeoisie, on the revolutionary awareness and organisation of the working class and its revolutionary vanguard, and on the ability of the working class to lead the rest of the people. Thus, state-monopoly capitalism tends to exacerbate all the contradictions of capitalism and engenders an upsurge of the anti-monopoly struggle.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 25, p. 359.
~^^2^^ Ibid., p. 431.
[137] __NUMERIC_LVL1__ CHAPTER 9 __ALPHA_LVL1__ THE WORLD CAPITALIST ECONOMYUnder free enterprise capitalism, the export of commodities was the predominant form of international economic relations. The development of foreign trade in the capitalist countries furthered the emergence of a world capitalist market.
__ALPHA_LVL2__ 1. Emergence and EssenceThe emergence and development of monopoly determined the spread of other kinds of international economic relations which became typical of the epoch of monopoly capitalism. The export of capital came to be of immense significance. International monopoly associations were formed that effected an economic partition of the world. The imperialist countries became ``loaded'' with colonial possessions, which led to the territorial partition of the world.
Thus, the advent of imperialism meant that the world capitalist economy had taken shape. Lenin described it thus: " Capitalism has grown into a world system of colonial oppression and of the financial strangulation of the overwhelming majority of the population of the world by a handful of 'advanced' countries."^^1^^
The world capitalist economy as the sum total of imperialist international relations is marked by the domination of the major _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 191.
138 imperialist powers' financial oligarchy, meeting the class interests of the oligarchy. On the other hand, the world capitalist economy is the result of the objective development of productive forces, industrialisation, and the international division of labour. The tendency towards the internationalisation of productive forces and the economy in general, and towards closer economic relations among nations is a progressive one. It boosts the efficiency of social labour and is conducive to the formation of the objective and subjective prerequisites for socialism. The domination of private ownership of the means of production and the monopoly stranglehold warp this tendency, however, giving it a reactionary bias. The internationalisation of production is carried out by exploiting and plundering dependent peoples and eliminating weaker rivals.All the laws that govern the capitalist mode of production and all its contradictions are manifested in the world economy, but in a specific way. So, the main contradiction of capitalist production is seen in the conflict between the growing internationalisation of the economy, which makes for its further socialisation, and the appropriation by the imperialist monopolies of the results and benefits accruing from the growth of international economic ties.
The progress of the world capitalist economy is attended by ever fiercer conflicts between imperialist powers and monopoly groupings fighting among themselves for profits and spheres of influence, and by conflicts between the colonies and young independent nations, on the one hand, and the imperialist system striving to maintain its hold on the former colonies, on the other.
For some decades now, the world capitalist economy has been undergoing marked changes. After the Great October Socialist Revolution, the capitalist system was no longer universal. As a result of socialist revolutions in a number of European and Asian countries and in Cuba, a world socialist system has emerged and its economic and political potential is constantly increasing. In these circumstances, the mechanism by which the financial oligarchy exerts its international domination is undergoing 139 momentous changes that affect all the major aspects of the world capitalist economy and international economic relations.
2 __ALPHA_LVL2__ 2. The Export of Capital __ALPHA_LVL3__ [introduction.]The shift of capital from one country to another is a vital feature of the world capitalist economy. The export of value in order to appropriate the surplus value produced in other countries used to be practised prior to imperialism as well, but it was only after the transition to imperialism that it became permanent and assumed an increasing scope. According to Lenin, the export of capital becomes "one of the most essential economic bases of imperialism".^^1^^
__ALPHA_LVL3__ The PossibilityWhy does the export of capital become typical of capitalism in its monopoly stage?
The development of capital export is based on monopoly domination. Securing high profits, the monopolies increase extremely the volume and rate of their accumulation. At the same time, they restrict the free flow of capital into their branches, in order to limit competition and maintain profits at a high level. As the result, some capital cannot be invested profitably enough at home and the surplus capital threatens to affect the profit rate. It is, of course, only a relative surplus as it could well be employed to develop some branches or areas in the imperialist countries themselves. The profit gained would not, however, be the high monopoly profit the capital could yield if invested abroad. This determines the objective necessity, arising from the very nature of monopoly, of exporting capital to other countries.
On the other hand, in the less developed countries, where capital is scarce, good conditions for its investment are present in the shape of cheaper labour, cheap land and cheap raw materials. This determines the possibility, in addition to the _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 277.
140 necessity, of exporting capital to other countries, as they are drawn into the turnover of world capital and the elementary conditions for the development of capitalism are provided within them. __ALPHA_LVL3__ Forms of the Export of CapitalAs the export of capital progresses, it assumes various forms. Capital may be exported in the form of functioning or loan capital. Functioning (entrepreneurial) capital is invested by its owners themselves in industry, agriculture, transport or trade. The distinctive feature of the export of functioning capital is that it is associated with entrepreneurial profit. Monopolies that export functioning capital open branch offices abroad or set up mixed enterprises involving the participation of local and foreign capitals.
The export of functioning capital may be in the form of direct or portfolio investments. Direct investments are those that ensure control over foreign enterprises. In Western statistics, different criteria are applied for defining direct investments. In some capitalist countries, e.g., in West European countries, investment is classed as direct if the foreign investor holds more than 25 per cent of the capital of an enterprise. In the case of a direct investment, the capital-exporting monopolies appropriate entrepreneurial profit, as well as dividends on shares, and are in a position to control the total real capital of a foreign company. In the case of a portfolio investment, the investors get only the dividends on their shares.
A capital exporter need not engage in business on his own account in the country of investment. Often enough, he merely lends his capital to foreign manufacturer^ or governments. This case involves the export of loan capital. Loan capital is exported to secure a fixed amount of interest, and it may be either longor short-term capital export (for terms longer or shorter than a year).
As imperialism develops changes occur in the relative strength of capital-exporting countries, the volume, pattern forms and 141 specific purposes of the export of capital and its geographic distribution. These changes were especially marked after World War 11.
__ALPHA_LVL3__ Changes in the Export of CapitalFirst of all, there has been a huge growth in the export of capital. Just before World War I, the foreign investments of the three major capital exporters (Britain, France and Germany) reached 35,000 million dollars. Before World War II, the imperialist countries' total investments abroad amounted to 53,000 million dollars.
In the early 1970s (1972), the total foreign capital investments of the major capitalist countries stood at 292,500 million dollars, with the United States accounting for 180,900, Britain for 56,000, West Germany for 29,000, France for 23,600, and Japan for 2,700 million.
Thus, the rapid growth in the export of capital after the war was accompanied by marked changes in the balance of forces between the imperialist states. The export of capital became still more uneven as the US monopolies became the biggest financial exploiters in the capitalist world, concentrating increasingly on direct investment.
Other capitalist countries, especially traditional capital exporters like Britain and France and, since the early 1950s, West Germany and Japan, too, resumed capital exports, which resulted in a fiercer struggle for spheres of investment.
In the first half of the 20th century, capital was exported mainly from the imperialist to colonial and dependent countries. Even in the 1950s, the less developed countries accounted for over two-thirds of current capital exports. Since the 1960s, considerably more capital began to move between advanced capitalist countries. Today, developed countries, particularly those of Western Europe and Canada, account for more than 70 per cent of foreign investments by the US monopolies.
This change in the direction of capital exports does not mean 142 that the rate of profit has dropped in the less developed countries; they are a source of fabulous profits to this day.
Why, then, have capital exports changed direction? The main reason is the collapse of the colonial system. The reforms effected in many young states limit the opportunities for exporting capital on the previous terms.
The structural shifts occurring in the capitalist economies under the impact of the scientific and technological revolution also play a major role. The monopolies connected with new sectors and industries are becoming more active. The new industries are often oriented towards countries with large markets, plenty of skilled labour and a relatively high scientific and technical potential.
As huge streams of capital flow from one developed capitalist country to another, the conflicts between them begin to increase in intensity. A dramatic example of this is provided by the relations between Western Europe and the United States. The West European monopolies answer the inrush of American capital into Europe by invading the US financial market.
In describing the current situation, it would be wrong to underestimate the developing countries' significance as spheres of capital investment. Today, too, Latin America, Asia and Africa account for a third to half of the invested capital of the United States, Britain, France, West Germany, Japan and other capitalist countries. Their role as a source of profit is even greater.
The rapid growth of capital exports in the form of public investments and loans is an essential feature of the export of capital since the war. Whereas, previously, the state appeared mainly as a mediator or guarantor of the export of capital, it has now become an immediate and active participator in it. State capital is often used where private investment may, for various reasons, be unprofitable or hazardous. The export of capital by the state is widely used in the political interests of the imperialist countries.
In order to disguise the real motives and the exploitative nature of state capital exports, the latter often appears as ``aid'' 143 to foreign countries. In reality, such ``aid'' is dictated by the military, political and other interests of imperialism and, as often as not, merely enhances the recipients' economic dependence on the monopolies.
Another sign of the growing activity of the bourgeois state in the export of capital is the development of state-monopoly regulation of the international movement of private capital.
The integration processes characteristic of the contemporary world capitalist economy facilitated the rapid growth of the export of capital through international credit and finance institutions.
The changed conditions after the Second World War caused a change in the sectoral pattern of capital exports. Recently, the fastest growth has been registered by investments in the manufacturing industry. At the same time, investment remains high in many extractive industries and the power industry. The export of functioning capital is coming to play a growing role, for it assures more stable profits in the present situation of financial instability in the capitalist world. Direct investments now predominate. The sale of licences, diverse scientific information and technical services is now a very important aspect of the export of capital.
As a result of postwar development, the export of capital has become a major weapon in the struggle for the economic partitioning of the capitalist world, a means for pursuing a neocolonialist policy with respect to the developing countries and bringing pressure to bear on the policies of the developed capitalist countries.
__ALPHA_LVL2__ 3. Economic Partitioning of the WorldThe capitalist world economy today is characterised by a systematic struggle for the economic partitioning and repartitioning of the world among associations of capitalists.
144International capitalists' associations, Lenin wrote, existed before imperialism, too: "Every joint-stock company with a membership of capitalists from various countries is an ' internationally organised association of capitalists'.'' Imperialism is characterised by the "economic partitioning of the world among international trusts, the partitioning of countries, by agreement, into market areas."^^1^^ Agreement to partition world markets among the biggest monopolies Lenin called supermonopoly.
In his works Lenin analysed the factors that determined the rise of the international monopolies. They are based on a concentration of production and the development of national monopolies. The way for the international monopolies was paved, above all, by the export of capital, by the expanding foreign economic relations and spheres of influence of the national monopolies, and the extensive internationalisation of capital and economic relations in general.
__ALPHA_LVL3__ The Essence of theInternational monopolies are a "new stage of world concentration of capital and production, incomparably higher than the preceding stages."^^2^^
Although international monopolies began to form in the 1860s to 1880s, they did not become a typical feature of capitalism until the beginning of the 20th century. It has been estimated that, at the end of the 19th century, there were roughly 40 international monopolies, and by 1910 their number had risen to 100. Just before the Second World War, there were more than 1,000 international monopolies in the capitalist world.
In the early decades of the 20th century the international monopolies focussed primary attention on the sphere of circulation. The most frequent were ordinary cartels. National monopolies joined the international cartels, agreeing among themselves on selling prices, the distribution of markets, and output _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 26, p. 167.
~^^2^^ Ibid., Vol. 22, p. 246.
145 and sales quotas. International monopolies such as trusts and concerns were far less numerous. __ALPHA_LVL3__ International Monopolies TodaySince World War II, especially during the past 10--15 years, important new features have emerged in the development of the international monopolies.
Under contemporary state-monopoly capitalism, the international monopolies have been developing on an unprecedented scale. Today virtually all the major monopolies are more or less international in character. In their clutches they hold dozens of countries which they use as raw material depots and where they carry on scientific and technological research and make various goods, adapting production to local market conditions.
The development of the international monopolies is sped up by the overall changes in the position of capitalism, its spheres of influence shrinking under the impact of the emergence and consolidation of the world socialist system. By means of international associations of monopolists, capitalism is adapting to the current conditions of the struggle between the two systems.
The scientific and technological revolution has a tremendous impact on the advance of the international monopolies, for it enhances the objective prerequisites and need for the international fusion of capital. National boundaries more and more frequently prove too narrow for the productive employment of capital. The internationalisation of production and exchange becomes indispensable for the further development of productive forces. The monopolies take advantage of this progressive tendency, turning it into a source of gain and a means for building up their economic and political positions.
As the result of postwar development, the monopolies' economic potential has grown and their significance increased. They are becoming the leading force of monopoly capital. It has been estimated that the largest 500 international monopolies now account for at least one-third of the value of the capitalist countries' gross national product. Roughly half of the industrial __PRINTERS_P_145_COMMENT__ 10---1921 146 output of the capitalist world is manufactured in their enterprises. They control about 60 per cent of capitalist world trade and account for 90 per cent of capital exports from the developed capitalist countries. The indicators of many of these monopolies exceed those of many countries. Such leviathan monopolies develop a powerful organisation and management system, have their own transportation facilities, communications, intelligence and armed forces. Today the international monopolies operate primarily in industrial production, covering all key sections of modern industry. The most common types of monopoly are associations like trusts or concerns.
A distinction is usually drawn between two kinds of international monopolies. There are so-called multinational concerns resulting from the fusion of capital of different nationalities, and transnational concerns that are national in composition and control, but international in their spheres and activities. Transnational companies axe now the most widespread.
The British-Dutch Royal Dutch Shell in which American, French, Belgian and other monopolies also take part, is an example of a multinational concern. The American Exxon (the former Standard Oil of New Jersey), General Motors, General Electric, etc., are examples of transnational monopolies.
Within the scope of international monopoly capital, the key positions belong to the American monopolies. American capitalists control at least half of all the transnational companies. Recently, however, the monopolies of other capitalist countries, West European and Japanese ones above all, have stepped up their activities. Their international associations are engaged in fierce rivalry with the American concerns and are expanding in the developing countries.
__ALPHA_LVL3__ Critique of Bourgeois InternationalBourgeois ideologists seek to represent the monopolies as a wellspring of progress, a factor in speeding up economic development.
147Although the advance of the international monopolies is indeed conducive to further international specialisation and cooperation of production, their common socio-economic and political role is very far from what the apologists of capitalism claim.
First of all, the international monopolies subject a great part of the working class to ruthless and subtle exploitation. They currently employ a total of more than 20 million people in their enterprises.
The international monopolies exploit the people in many countries as consumers of the products controlled by them. They use intra-company, rather than real market prices, which allows them to manipulate prices in order to secure maximum gain for themselves at the expense of the local consumers. They use various tricks to minimise tax and other payments to the state. Their activities are a threat to the sovereignty of the countries where their enterprises are located.
The activities of the international monopolies are fraught with special danger for the developing countries. The international monopolies are making inroads into the colonial and dependent economies, subjecting them to their influence and exploiting their manpower and natural resources. They play the main role in drafting and implementing the neocolonialist policy of imperialism.
The main features of the current struggle for the economic partitioning of the world include international state monopoly agreements.
__ALPHA_LVL2__ 4. Imperialist Integration __ALPHA_LVL3__ Its EssenceThe tendency for nations to draw together economically, and towards economic integration, existed under free enterprise capitalism, too. Still, it is only under imperialism that it has developed into the sweeping process of the internationalisation __PRINTERS_P_147_COMMENT__ 10* 148 of production and exchange embracing every aspect of society and assuming the form of inter-state economic associations of capitalist countries. Nevertheless, this process is capitalist in form, i.e., it is associated with the exploitation and subjugation of some countries by others and with rivalry among the leading imperialist powers and monopolies.
Imperialist integration has gained impetus since the Second World War. It is stimulated by the changed balance of power between the two opposite world systems, by the collapse of the colonial system of imperialism, and the increasing pressure for the development of productive forces on account of the scientific and technological revolution. It is influenced immensely by the growing monopolisation of the capitalist economy and the development of monopoly into state-monopoly capitalism. Interstate associations are a form in which contemporary state-- monopoly capitalism is developing.
__ALPHA_LVL3__ IntegrationIntegration is developing on a wide scale, especially in Western Europe, where the confrontation between the two systems and the growing impact of the forces of democracy and socialism are particularly strong. West European imperialism is loosing its colonial possessions, but the objective need for new productive forces is most dearly manifest here, by treason of the region's comparatively fragmented political pattern and the relatively narrow home markets. Economic integration in Western Europe is also stimulated by the desire of local monopoly circles to enhance their positions vis-a-vis their more powerful competitor, US imperialism.
Early attempts at politico-economic unification of the West European countries, the projects for setting up a so-called United States of Europe, date back to before the First World War. Lenin exposed the imperialist nature of these projects, which were never realised, owing to the aggravation of interimperialist contradictions.
149 __ALPHA_LVL3__ The Common Market.The European Economic Community (EEC), or Common Market, set up in 1957, is a most mature form of imperialist integration. Initially, it had six members, viz., France, West Germany, Italy, Belgium, the Netherlands and Luxembourg. In 1973, the EEC was joined by Britain, Denmark and Ireland. It also has some associated members (Greece, Turkey and some African countries).
Over the years, the Common Market has emerged as a primarily trade and economic bloc. Its members have abolished most customs and other restrictions with respect to one another and set up a common customs system with respect to third countries. Within the EEC, obstacles to the movement of capital and manpower have largely been removed. Efforts have been launched to unify the economic policies of the member countries.
The establishment of the Common Market assisted in strengthening the ties between its members, furthered capitalist concentration and promoted the specialisation and co-operation of production.
The example of the European Economic Community makes it clear that inter-state integration can, at a certain stage, have an invigorating effect on the economic situation and the course of capitalist accumulation.
Experience has also shown, however, that integration groupings fail to abolish the inherent laws governing capitalist economic development, anarchy in production, capitalist rivalry and inter-imperialist contradictions.
The history of the Common Market is full of fierce rivalry between its members, above all between the West German and French monopolies, and, lately, those of Britain. It was also the arena of rivalry of the West European monopolies against those of the USA, Japan and some other capitalist countries.
150 __ALPHA_LVL3__ Critique of BourgeoisEver since the interstate and private monopoly associations appeared, bourgeois ideologists, right-wing opportunists and revisionists have argued that such unions made possible a stable peace among peoples. Thus, Kautsky, the theoretician of the Second International, maintained that, as a result of international agreements between monopolists, the age of imperialism, with its conflicts and wars, would be replaced by a peaceful age of ``ultra-imperialism''.
Criticising such theories, Lenin wrote: "There is no doubt that the trend of development is towards a single world trust absorbing all enterprises without exception and all states without exception. But this development proceeds in such circumstances, at such a pace, through such contradictions, conflicts and upheavals---not only economic but political, national, etc.---that inevitably imperialism will burst and capitalism will be transformed into its opposite long before one world trust materialises, before the 'ultra-imperialist', world-wide amalgamation of national finance capitals takes place."^^1^^
Modern apologists of imperialism are trying to make out integration to be a purely technological process, devoid of any social or class meaning. They depict it as a harmonious drawing together of national economies, the elimination of national insularity, and the increasing satisfaction, on that basis, of society's needs.
In reality, integration under the domination of capitalist production relations inevitably implies an enhancement of relations of dependence and subjugation. The monopolies are taking advantage of the progressive technical and economic tendency for their own selfish ends.
Under the sway of monopoly capital, the struggle for world markets and economic domination cannot be abolished, as it is the sphere in which the essence of imperialist international relations is manifested.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 107.
151The monopolists are not content to partition the world economically. The international monopoly associations actively participate in the colonial expansion of imperialism. One outstanding example is the Common Market, which has become an instrument for the West European monopolies' collective . colonialism.
Lenin wrote: ``The epoch of the latest stage of capitalism shows us that certain relations between capitalist associations grow up, based on the economic division of the world, while parallel to and in connection with it, certain relations grow up between political alliances, between states, on the basis of the territorial division of the world, of the struggle for colonies, of the 'struggle for spheres of influence'."^^1^^
__ALPHA_LVL2__ 5. Territorial PartitionThe territorial partition of the world by the imperialist powers was completed towards the start of the 20th century.
The result was the emergence of the imperialist colonial system, i.e., a system of economic exploitation of backward and weak countries by the imperialist states on the basis of political and national oppression.
After the Great October Socialist Revolution and the First World War, a crisis of the imperialist colonial system set in. After the Second World War this crisis terminated in the collapse of the colonial system. In 1919, 69.4 per cent of the population of the Earth lived in colonies or semi-colonies, which occupied 72 per cent of the area of the globe.
In 1945, the territory occupied by colonies reached 38.6 million square kilometres, populated by more than 670 million or about 30 per cent of the area and population of the globe. In _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 253.
152 1976, i.e., after the last major colonial empire (the Portuguese) had collapsed, all non-self-governing territories occupied an area of 1.5 million square kilometres, populated by 11 million or less than 1 per cent of the area and population of the globe. The colonies that still exist are mainly small areas, the largest of them being Hongkong (under British control) and Puerto Rico (under US control). In addition, several millions more live under colonial conditions under the racist regimes of South Africa and Rhodesia.More than a hundred new states emerged on the ruins of the colonial empires. The collapse of the imperialist colonial system and the appearance of independent nations is a result of the national liberation revolution which, supported by the world socialist system and the international working-class movement, has mounted high in the past 15 to 20 years.
__ALPHA_LVL3__ The EssenceThe end of the colonial system could not resolve all the socio-economic and political problems of the developing countries, for imperialism still seeks to keep these countries in its orbit under the changed conditions. The monopolies have to resort to new, mostly economic, methods, but essentially they come down to the same thing. They help to perpetuate the developing countries' economic and political dependence on the imperialist powers and to preserve them as a source of enrichment for the monopolies.
On the other hand, the young states are confronted by a range of objective problems springing from their economic backwardness, the old legacy of their colonial past.
The replacement of traditional colonialism by neocolonialism is a concession wrenched from the imperialists by the young nations, but neocolonialism is also an aggregate of more perfidious and hidden methods of imperialist exploitation and an attempt to keep the developing countries within the world capitalist system. The economic basis of neocolonialism is monopoly 153 capital and the system of state-monopoly capitalism. Trying to find social support, the neocolonialists are willing to come to terms with the local bourgeoisie in the developing countries and are ready to make use of reactionary elements in their governments. Seeking to tie the developing countries economically to their former colonial masters, the neocolonialists foster capitalist relations in them, turning them into agro-industrial appendages of the imperialist system.
The neocolonialists' favourite methods include setting up puppet regimes in developing countries, drawing them into aggressive military blocs, and arranging diverse ``co-partnerships'', ``commonwealths'' and ``alliances'' between the colonial powers and their former colonies in order to maintain their economic and political hold on the latter.
The export of capital in the guise of so-called aid for the underdeveloped countries is an essential component of neocolonialist policy. Neocolonialist ``aid'' serves the political and economic ends of the imperialists. Most of it goes to maintain reactionary regimes or is used for military-strategic purposes. The remaining portion makes these countries still more dependent on the imperialist monopolies that continue to exploit them.
No talk about the West's "new role" or "beneficial influence" on the young economies can alter this fact.
According to US official statistics, in just two years, 1974 and 1975, branches of American-controlled international monopolies pumped 23,300 million dollars in profits, dividends and interest out of the developing countries, investment in their enterprises coming mainly from undistributed profit, i.e., local funds again, amounting to only 13,000 million dollars, or little more than half the sum they realised on the investment. That is, undoubtedly, rapacious exploitation of the developing countries.
These countries' losses are in no way recompensed by the finance they receive from the public funds of the advanced capitalist countries. The funds that come back to the developing countries from the West as ``aid'' do not cover even the payments on foreign investments and have, besides, diverse strings attached to them,
154Another distinctive feature of neocolonialism is collective action by the imperialist countries in setting up interstate economic organisations (e.g., the International Bank for Reconstruction and Development, the International Monetary Fund, etc.) and in drawing the liberated countries into inter-state economic associations of the Common Market type.
Neocolonialism does not abolish the discrimination practised against the developing countries; it makes it worse in every respect. This is manifested in foreign trade, in currency relations, and in the way the young states assimilate the results of the scientific and technological revolution.
To quote an example, on the world market the developing countries encounter tariff and other barriers that hinder them from exporting manufactured products and force them to gear their economies towards the production of raw materials. The average tariff rate in the advanced capitalist countries is 2 per cent for raw cotton, 3.5 per cent for metal ores and 1 per cent for timber, but it is 22 per cent for cotton goods, 15 per cent for metals and 17 per cent for timber goods.
As a result of capitalist discrimination, the developing countries' economic problems, as was pointed out in the Soviet Government statement of October 4, 1976, On the Restructuring of International Economic Relations, continue unsolved, and the gap between them and the industrialised countries is growing still wider.
__ALPHA_LVL2__ 6. Distinctive FeaturesThe liberated countries have inherited economic backwardness from their colonial past, as is manifested in the parallel existence of several patterns of production. Subsistence economies, small commodity production, capitalist production, and some vestiges of feudalism and even, of the primitive-communal system are still to be found in these countries.
155 __ALPHA_LVL3__ State of the EconomyPolitical independence acted as a catalyst to the development of productive forces and gave a somewhat added impetus to economic progress. Nevertheless, most of the developing countries are still extremely backward and predominantly agricultural. The extractive industries are in the lead, while engineering and some other manufacturing industries, especially those associated with the progress of technology, are almost entirely absent. Many of the developing countries retain their one-sided specialisation in some one, or only a few kinds of goods. As a result, their share in world capitalist industrial production is still very small. In the mid-1970s, the developing countries, which were then inhabited by 70 per cent of the population of the capitalist world, accounted for a mere 13--14 per cent of its industrial production. The gap in per capita national income levels between the developed capitalist countries and the developing ones is 1:100, and is still on the increase.
Economic backwardness explains the extremely low living standards of the overwhelming majority of people in the developing countries. Owing to hunger, the deficient health service and a high incidence of epidemics, the death rate is very high, especially among children. The developing countries suffer from a shortage of teachers and other trained personnel.
The people of the countries led by progressive revolutionary democratic forces are waging an unremitting struggle to further the socio-economic development of their countries, to eliminate their lag and build an advanced economic framework.
__ALPHA_LVL3__ Choosing a Course of DevelopmentThe difficulties facing the young national states set them the urgent choice of a course for their further socio-economic development.
One course still followed by many developing countries is the capitalist one, which for most of them implies a continued dependent position in the world capitalist economy. The progress 156 of capitalist relations in these countries, even though accompanied by a one-sided development of productive forces, inevitably leads to increasing mass poverty, greater social differentiation and a mounting class struggle. Events have shown that, even where some reforms have been introduced in agriculture and industry in such countries, assisted by state capitalist measures, the imperialist states still exert the same control over them, if not more so.
There is, however, another possible course: that of developing the national liberation revolution, of a socialist orientation.
The possibility, in principle, for the economically backward countries to develop along this path has been proved by the Soviet national republics and Mongolia. Lenin established that it was now objectively possible for some peoples to go over to socialism, circumventing capitalism. Assisted by the proletariat in the developed countries, Lenin wrote, the backward countries can go over to socialism and "through certain stages of development, to communism, without having to pass through the capitalist stage."^^1^^
A socialist orientation implies the complete abolition of the old colonial economic structure, of the monopoly stranglehold, and of neocolonialist dependence. A radical agrarian reform and industrialisation on the basis of the priority development of the public sector make it possible to undermine the economic positions of local reactionaries and to democratise the country's society and politics. It is essential that, in the process, the working people's control be established over government bodies, as this will guarantee democratic freedoms, and that revolutionary democratic organisations be set up to take the lead in effecting far-reaching socio-economic and political reforms.
The socialist orientation has its difficulties and problems, including those of accumulation , of these countries' narrow home markets, and of their low cultural and professional training standards.
Nevertheless, it has been shown that only on the basis of a _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 31, p. 244.
157 socialist orientation can the socio-economic problems of the developing countries be solved.Speaking at the 25th CPSU Congress, Leonid Brezhnev noted the far-reaching progressive changes in the socialist-oriented countries, enumerating the main trends of change in many liberated countries in recent years, such as the shift of emphasis in industrial development to the public sector, the abolition of feudal landownership, the nationalisation of foreign enterprises to assure the young states' effective sovereignty over their own natural resources, and the training of their own personnel. Farreaching progressive changes are taking place in that part of the world, despite the difficulties. This is certainly a process of historic importance.
The destruction of the imperialist colonial system and the development of many young nations along a socialist-oriented path have become major factors in further aggravating the crisis of the world capitalist economy.
__ALPHA_LVL2__ 7. The Current Development StageThe factors tending to aggravate the crisis of the world capitalist economy include: the abolition of the capitalist system in a large group of countries; the development and consolidation of the world socialist system; the collapse of the colonial system and the fall of old empires; the beginning of the breakdown of colonial economic patterns in the newly-independent countries; the growth of economic ties between these countries and the rest of the world.
__ALPHA_LVL3__ Dislocation of World Economic RelationsThe crisis of the world capitalist economy is not a temporary disorder, but a chronic and irreversible dislocation of the capitalist world economic relations typical of the imperialist age. Lenin was the first to note this. Describing capitalism as it was 158 in the early 1920s, he referred to the "~'dislocation', break-up of the whole system of world economy".^^1^^
Another important manifestation of the crisis of the world capitalist economy, besides the shrinking of its sphere as a result of the development of socialism and the collapse of the colonial system, is the aggravation of the contradictions between the imperialist countries.
The reason for this is the increasingly uneven economic and political development of the capitalist countries. Lenin found that, under monopoly capitalism, the capitalist countries' economic development becomes much more uneven, the balance of power altering rapidly and jerkily.
This is due to the development of the monopolies which have additional opportunities for maintaining their growth rates, seizing new markets and investment spheres. Also of great significance is the scientific and technological revolution, which makes it possible for individual countries or monopoly groups to break into the lead, and state-monopoly capitalism. Using the state, the monopolies in some countries may secure higher growth rates. For example, in West Germany, Japan and France, state regulation and economic programming in particular after the last war contributed to the growth of national monopolies and enhanced their role in the world economy.
As a consequence of the uneven, spasmodic development, the balance of power between the capitalist countries and the monopolies keeps changing, so that markets, spheres of influence and territories have to be continually repartitioned. In the past, the increasingly uneven economic and political development of capitalist countries culminated in world wars.
Under today's conditions, thanks to the consolidation of the world socialist system, national liberation revolutions and the mounting influence of progressive democratic forces in the capitalist countries, mankind has its first chance ever to avoid war. This requires the solidarity of all anti-imperialist forces.
The fact that a world war to repartition markets is now _-_-_
^^1^^ V. I. Lenin, Collected Works, Vol. 35, p. 451.
159 unlikely in no way implies a slackening of the fierce inter-- imperialist conflicts, which show themselves in ruthless rivalry, veritable trade and currency battles and a tense struggle for the evernarrowing sphere in which exploitation and gain are possible. __ALPHA_LVL3__ Changed Balance of PowerThe results of the uneven development of the capitalist countries are measured in terms of each country's share in the industrial production of the capitalist world. Let us take a look at the development of the major capitalist countries over recent years.
As a result of World War II, the might of the United States increased immensely. Shortly after the war, it accounted for 55--56 per cent of the capitalist countries' industrial production, or almost twice as much as all the West European countries together. West Germany and Japan were thrown back, their share of capitalist industry in 1948 dropping to 4.2 and 1.3 per cent respectively. The positions of Britain and France were weakened.
As time passed West European and Japanese monopolies gradually revived, while the United States' positions became weaker. Early in the 1960s, the United States accounted for 44 per cent of world capitalist production, the same as in 1929, and in the mid-1970s its share fell further to 39 per cent. The share of the Common Market countries, on the other hand, had increased since 1948 from 11.6 to 26 per cent. Production has grown especially fast in West Germany and Japan. The latter was in 3rd place in the late 1960s; in the early 1970s it emerged into 2nd place, pushing West Germany back into 3rd, Britain into 4th, and France into 5th place. Currently Japan accounts for roughly 10 per cent of capitalist industry, and West Germany for about 9 per cent. Britain has continually lost ground since the war, and today her industry accounts for just a little over 5 per cent of capitalist industrial production, whereas the figure was 10 per cent in 1948 and 13 per cent in 1913. France has managed to maintain her position, if not quite as high as at the best times before the last war.
160As a result of the operation of the law of uneven economic and political development and inter-imperialist rivalry in the capitalist world, the one centre before the war has been replaced by three, viz., (1) the United States of America, (2) Western Europe which, in spite of its internal conflicts, in general holds up against the United States, and (3) Japan, which never ceases trying to rally the capitalist countries in the Pacific area around itself.
__ALPHA_LVL3__ Fiercer Competition.There is growing economic rivalry among these three groupings for spheres of capital export, control over the main sources of raw material and fuel, and for markets.
It has now become particularly evident for, under the impact of the cyclical crisis of the capitalist economy, competition among the major capitalist countries and imperialist monopolies has become fiercer. The greater power of the international monopolies has made the competitive struggle still more ruthless. The governments of the capitalist countries are making repeated attempts to moderate their contradictions and come to terms on joint anticrisis measures, but the nature of imperialism is such that each endeavours to gain advantages at the expense of the others and to impose its own will. Differences surface in new forms, and contradictions erupt with new force.
The current situation is indicative of the intensification of the capitalist world, economic crisis, as is evidenced by the substantial reduction in foreign trade and the deterioration in the balances of trade and payments of the developed capitalist countries. In 1975, the gross foreign trade turnover of the industrialised capitalist countries dropped by approximately 10 per cent, in constant prices compared with 1974. The volume of foreign trade at that time decreased in all leading capitalist countries. Reciprocal trade among the advanced capitalist countries decreased most of all, while their trade with the developing and socialist countries continued to increase.
161In the mid-1970s, the foreign trade deficit of the developed capitalist countries reached unprecedented proportions. The aggregate deficit of their trade balances amounted, for example, to 27,000 million dollars in 1974, and of their balance of payments on current transactions, to as much as 33,200 million dollars. Although in 1975 and 1976 the situation improved somewhat, this was mainly due to a curtailment of trade, imports falling more than exports, in almost all the developed capitalist countries.
As a result of the crisis of capitalist international economic relations, the foreign trade of the capitalist countries, instead of being a factor in maintaining the overall economic situation, levelling out the cyclic fluctuation and even stimulating economic growth, in the 1970s became a channel for spreading production recessions, inflation, unemployment and the other maladies of the capitalist economy from country to country.
One of the most dramatic manifestations of the increasing crisis of the world capitalist economy today is the capitalist monetary crisis.
__ALPHA_LVL2__ 8. The Monetary Crisis __ALPHA_LVL3__ [introduction.]For many decades, the monetary crisis has been a chronic evil of the capitalist world.
The classic forms of monetary crisis, typical of the entire development of capitalism since the First World War, are: the collapse of the gold standard, i.e., a discontinuation of the free exchange of banknotes for gold; attempts to use the paper money of the leading imperialist countries as international reserve currencies; the emergence of diverse exclusive currency zones and groups; the introduction of all kinds of currency restrictions hindering the normal course of international payments; instability and disequilibrium in payment transactions among the majority of capitalist states; frequent alteration of the gold content of currencies and sharp fluctuations in their market rate; intensification of currency contradictions within the imperialist camp and
__PRINTERS_P_161_COMMENT__ 11---1921 162 subsequently between the imperialist and the developing countries loo.In the 1970s, however, an essentially different stage of the monetary crisis set in.
__ALPHA_LVL3__ Collapse of the Bretton Woods SystemThe collapse of the Bretton Woods system spelled the collapse of the West's entire monetary system that had taken shape as a result of the Second World War and the period following it.
What were the major principles of the monetary system established at Bretton Woods in 1944 as dictated by pressure from the American monopolies?
The three ``cogwheels'' of the Bretton Woods mechanism were:
(1) The introduction of the dollar as a substitute for gold, without any formal renunciation of gold (as the monetary standard). The dollar was freely exchangeable for gold at an official price in international transactions;
(2) Stability of the gold content of the dollar, as guaranteed by the United States;
(3) Fixed exchange rates that could deviate no more than one per cent from par. To assure such stability, an International Monetary Fund (IMF) was set up, in which the leading positions were seized by the US monopolies.
The objective basis for such a system was provided by the American monopolies' domination of the world capitalist economy. The US gold reserve accounted for 75 per cent of the total gold stock of the capitalist countries. "The dollar is worth more than gold,'' they said at the time. The keen demand for dollars created a "dollar shortage'', which was a most acute problem.
The Bretton Woods system was successfully employed for a long time by US finance capital. By putting dollars into world currency circulation, the system made possible the large-scale investment of American capital abroad, the maintenance of US military bases on foreign soil, the waging of local wars and the financing of other military measures, as well as the extension of US imperialism's economic and political hold over the world.
163 __ALPHA_LVL3__ Dollar CrisisYet, as already mentioned, after the war the balance of power between the United States and the other capitalist countries was gradually changing. By the early 1970s, the United States accounted for much less in every sphere of the world capitalist economy.
The international financial and economic positions of the United States were undermined by its chronic balance of payments deficit caused by immense military expenditures abroad and the drastic reduction in its gold reserves. In 1975, the United States no longer accounted for 75 per cent of the capitalist countries' gold reserve, but for a mere 29 per cent of it. In 1975, the figure for the West European countries was more than double that of the United States, at over 65 per cent of the capitalist countries' gold stock, compared with 22 per cent soon after the war.
On the other hand, as a result of massive injections over the years, the world war flooded with dollars, and the "dollar shortage" gave way to a "dollar surplus".
This sealed the fate of the Bretton Woods system, which lost whatever objective grounds it may have had.
1971 saw a new stage in the monetary crisis, when the United States announced a ``temporary'' halt to the exchange of dollars for gold, subsequently agreeing in principle to devalue the dollar in terms of gold, which was the first devaluation since 1934. Thus, the US Treasury turned the dollar into an ordinary capitalist currency, non-exchangeable for gold and subject to devaluation. As soon as February 1973, the dollar was devalued a second time.
As a result, US foreign debts running into many thousands of millions of dollars turned out to have no gold backing.
At the same time, in the 1970s, the United States and the other capitalist countries also renounced the system of fixed foreign exchange rates and adopted floating exchange rates ( collectively or individually) through a series of agreements and unilateral moves. The final decision in this respect was passed 164 by a session of the interim committee of the International Monetary Fund that met in January 1976 in Kingston, Jamaica. The session renounced the obligatory fixing of exchange rates and decided to let them find their own level.
Thus, all the principles of the Bretton Woods system were suspended. Speaking at the end of 1975, Heinz Wuffli, director of Credit Suisse, a major capitalist bank, said that having officially made the dollar inconvertible, the United States had virtually shattered the Bretton Woods system.
In this situation, the US imperialists are doing everything to shift the burden of the monetary crisis on to their partners in Western Europe and Japan. The monetary crisis has inflicted heavy losses on the developing countries. The worst hit are the working people onto whom the monopolies are trying to shift these difficulties.
In the capitalist world diverse plans are now being discussed for a new system of international monetary relations. Some see the way out in a return to the gold standard; others, on the contrary, believe that gold should be replaced by some sort of paper certificate, e.g., by the so-called Special Drawing Rights of the International Monetary Fund. Meanwhile, the monetary crisis, like the general crisis of the world capitalist economy, is getting worse.
Events make it increasingly obvious that the way out of these difficulties lies in dealing with the adverse effect of the capitalist mode of production on the world economy.
__ALPHA_LVL2__ 9. The New World Economic Order.With the change in the balance of power in favour of socialism in the world arena since the war and the growing influence of the national liberation movement and democratic forces in the capitalist countries, fresh opportunities have arisen for restructuring international economic relations on an equal and equitable basis. The socialist world, the developing countries 165 and all progressive forces in the capitalist countries have an objective interest in the establishment of a new world economic order on that basis.
The Soviet Union and the other socialist countries are waging a constant struggle for peace and international co-operation, and for the freedom and independence of nations. The struggle to end discrimination and all manifestations of inequality, highhandedness and exploitation in world economic relations was mentioned at the 25th CPSU Congress as one of the major objectives of the international policy of the CPSU and the Soviet Government.
The Soviet Government statement of October 4, 1976, On the Restructuring International Economic Relations testifies to the Soviet Union's firm resolve to achieve this noble aim. The statement says that the Soviet Union supports each country's sovereignty over its own natural resources and the right of every people to choose freely its course of development, and an end to exploitation by foreign capital and by the international monopolies.
The truly equitable relations between the Soviet Union and the other socialist community countries, their growing economic, political and cultural co-operation, which helps eliminate differences in development levels and promotes the all-round social progress of the socialist world, is an example of how problems of international relations should be solved.
Another example is provided by the international economic relations of the Soviet Union and the socialist community with the developing countries. The Soviet Union and the other socialist countries render the young states diverse economic, technological and political assistance. This assistance includes the granting of credits and loans, the drafting of economic development plans and programmes, participation in laying the foundations of the developing countries' economies, heavy industry in particular (the fuel and energy complex, metallurgy, engineering etc.), participation in the development of agriculture, technological aid, surveying, the training of local personnel both in the Soviet Union and on the spot, consumer goods supply, assistance 166 in developing health services and culture and in improving the people's welfare.
Even in the 1960s, the Soviet Union removed altogether all tariffs on goods from the developing countries and the other fraternal socialist countries reduces them to a minimum. The socialist community is doing everything possible to the further industrialisation of the developing countries, assuring a stable and constantly growing market for their exports. For example, the average annual growth rate of the socialist countries finished and semi-finished good's imports from the developing countries amounted to 22 per cent from 1971 to 1975, and to over 35 per cent in the next two years.
Almost 3,000 national economic projects have been completed or are under construction in more than 60 developing countries with the socialist countries' assistance. The Soviet Union is helping to build 500 enterprises, while another 500 have already been completed and put into operation. Ninety per cent of the total Soviet economic and technical assistance to the developing countries is in the production sphere. More than three-quarters goes to develop the engineering and power industries. The Soviet Union has helped to train about half a million experts and skilled workers for the developing countries.
The socialist countries' assistance to the developing countries should not be gauged by its scope alone. Its exceptionally easy terms, as well as the fact that it is an obstacle to imperialist exploitation, must also be taken into account.
The co-operation between the Soviet Union and other socialist community countries and the liberated countries assumes the nature of a stable division of labour, in contrast to the system of imperialist exploitation in international economic relations.
The present alignment of world class forces makes it possible for the liberated countries to resist imperialist diktat and insist on just, i.e., equitable, economic relations.
Ties between the socialist and the capitalist countries are of no small importance to the successful restructuring of international economic relations. The consistent struggle waged by the Soviet Union and all progressive forces for peace and co-- 167 operation has contributed decisively to detente. Aggressive imperialist forces are still going on with the arms race, however, and flashpoints of danger to peace still exist. This is why the working people in the capitalist countries must carry on their struggle against the monopolies and the state-monopoly system, which foster enmity and suspicion among nations.
The urgent problem of restructuring international economic relations can and must be solved by the joint efforts of all progressive forces coming out for peace and international co-- operation.
[168] __NUMERIC_LVL1__ CHAPTER 10 __ALPHA_LVL1__ IMPERIALISM'S PLACE IN HISTORY.Lenin's teachings on imperialism include a definition of imperialism's place in history, i.e., in the entire previous development of capitalism and in the subsequent progress of human society.
__ALPHA_LVL2__ 1. Imperialism, the Final Stage of Capitalism,Imperialism has grown as a development and direct continuation of the basic properties of capitalism in general, but capitalism became imperialism only at a specific stage in its development. This was when some of its basic properties began to turn into their opposites, when features of the transitional period from capitalism to a higher social system became evident all along the line.
Imperialism is the highest stage in the development of capitalism, coming after pre-monopoly capitalism. At the same time, it is the last stage of capitalism, the threshold of the socialist revolution. Studying the historical place of imperialism, Lenin arrived at the conclusion that "Imperialism is a specific historical stage of capitalism. Its specific character is threefold: imperialism is (1) monopoly capitalism; (2) parasitic, or decaying capitalism; (3) moribund capitalism."^^1^^
_-_-_~^^1^^ V. I. Lenin, Collated Works, Vol. 23, p. 105.
169 __ALPHA_LVL3__ Monopoly DominationMonopoly domination is the main distinguishing feature of imperialism,, determining its place in history. Lenin pointed out four principal manifestations of monopoly.
First, as a result of capitalist concentration, monopoly domination is established in the production and sale of commodities.
Second, monopoly domination resulted in the seizure and monopoly ownership of the main sources of raw materials.
Third, the establishment of the omnipotence of the monopolies is expressed in the concentration and centralisation of banking capital; finance capital and the financial oligarchy establish their domination in the economics and politics of bourgeois society.
Fourth, monopoly grows out of colonial policies, imperialism marking the era of monopoly possession of colonies and of fierce struggle for division and redivision of the world.
The development of monopoly along these lines constantly results in the fusion of the monopolies and the bourgeois state and in the development, on that basis, of monopoly into statemonopoly capitalism. Under the impact of the internal and external contradictions of the capitalist mode of production, a system of state-monopoly capitalism takes shape that operates in the monopolies' interest.
__ALPHA_LVL3__ ParasiticMonopoly domination is the basis for the decay and growing parasitism of capitalism, which is its second characteristic indicating its place in history.
In what is the decay and parasitism of capitalism implicit in its imperialist stage and how is this process connected with monopoly domination?
In answer to these questions, Lenin wrote: "Monopolies, oligarchy, the striving for domination and not for freedom, the exploitation of an increasing number of small and weak nations 170 by a handful of the richest or most powerful nations---all these have given birth to those distinctive characteristics of imperialism which compel us to define it as parasitic or decaying capitalism."^^1^^
It is in the nature of a monopoly to strive to preserve and secure the privileged position it has attained, and to oppose all changes that may undermine its domination. Economic domination on the market and the assurance of high monopoly profits make the monopolies less willing to introduce new machinery and more inclined to hold back technological progress. Monopolies often buy patents for no other purpose than to keep the new inventions hidden from competitors.
General Motors, one of the world's largest industrial monopolies (USA), is known to utilise only 1 per cent of the inventions it patents. At the same time, according to the US Department of Commerce, 80 per cent of American industrial enterprises make hardly any use of the latest achievements in science and technology.
The tendency to hold back the development of productive forces does not mean that the latter are stoppered down or that all progress in science and technology comes to a halt. Alongside the tendency to hinder technological progress, there is an opposite one, towards its development. Warning against oversimplification and distortion of realities, Lenin wrote: "It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of the bourgeoisie and certain countries betray, to a greater or lesser degree, now one and now another of these tendencies. On the whole, capitalism is growing far more rapidly than before; but. this growth is not only becoming more and more uneven in general, its unevenness also manifests itself, in particular, in the decay of the countries which are richest in capital...".^^2^^
This in-depth description should be especially remembered _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 22, p. 300.
~^^2^^ Ibid.
171 now that the scientific and technological revolution provides mankind with unprecedented opportunities for remaking Nature, producing enormous material wealth and multiplying Man's creative abilities. In making the progress of science and technology subservient to gain and exploitation, imperialism prevents its all-round development in the interests of society.The decay of capitalism is today most vividly manifested in the militarisation of the economy. Not only does growing militarisation imply an extravagant squandering of productive forces, it is also a threat to the very existence of human society.
The decay of capitalism at its monopoly stage is also manifested in its increasingly parasitic nature. The parasitism of the bourgeoisie grows to the utmost and a great part of it completely loses touch with material production, turning over even managerial functions to special employees. There is a growing section of rentiers, i.e., capitalists living on income from securities.
Not only does the monopoly bourgeoisie lead a parasitic life, it also diverts a considerable proportion of the population from productive work, more people being engaged in military service, the police and as the household servants of capitalists.
Capitalism's decay and parasitism in the imperialist age are also seen in the turn towards reaction in all areas of society and politics. Lenin wrote that "Both in foreign and home policy imperialism strives towards violations of democracy, towards reaction. In this sense imperialism is indisputably the 'negation' of democracy in general, of all democracy.. ,".^^1^^
__ALPHA_LVL3__ ImperialismOn the strength of his in-depth study of the monopoly stage of capitalism, Lenin drew the conclusion that imperialism was moribund capitalism. He wrote: "The epoch of capitalist _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 23, p. 43.
172 imperialism is one of ripe and rotten-ripe capitalism, which is about to collapse, and which is mature enough to make way for socialism."^^1^^The inevitability of the socialist revolution is determined by the fact that imperialism exacerbates all the contradictions of capitalism, both those typical of capitalism in general and the new ones engendered by monopoly domination.
The first to be aggravated is the conflict between productive forces and production relations. The intensification of the main contradiction of capitalism---that between the social character of production and the private capitalist mode of appropriation--- shows that capitalism circumscribes the development of productive forces and that these are no longer suited by capitalist production relations. Because of this, the conflict between labour and capital becomes more acute.
In the imperialist age, especially under contemporary statemonopoly capitalism, the conflict between the monopoly bourgeoisie and the rest of society intensifies. Imperialism clashes with the vital interests of both manual and mental workers, of the different social strata, nations and countries.
International contradictions, those between the imperialist and the developing countries, between the imperialist states themselves, and their groupings and the monopolies, too, are aggravated.
With the emergence and advance of the world socialist system, the contradictions between the two world systems sharpen.
The sharpening and extension of all contradictions makes for the active involvement of ever wider sections of the people in the anti-imperialist struggle. As a result, imperialism not only prepares the material prerequisites for socialism, but also brings capitalist society to the verge of revolution. For this reason, imperialism is moribund capitalism, the threshold of the socialist revolution.
_-_-_~^^1^^ Ibid., Vol. 22, p. 109.
173 __ALPHA_LVL2__ 2. The General Crisis of Capitalism.Lenin called the historical period of the "collapse of capitalism in its entirety and the birth of socialist society" the general crisis of capitalism.^^1^^
The general crisis of capitalism should not be confused with the concept of economic crisis discussed above. The economic crisis of overproduction is a phase in the recurrent economic cycle including conflicts of reproduction. The overproduction crisis closes the cycle and at the same time, by a violent temporary resolution of conflicts, initiates the next cycle.
The general crisis of capitalism is the world-wide, historic process of the breakdown of the capitalist mode of production, involving all aspects of capitalist society---the economy, politics and ideology---and the revolutionary replacement of capitalism by socialism on a world scale.
The general crisis has various features, but they may be reduced to the following four major ones.
The first and main characteristic of the general crisis of capitalism is that the world has split into two systems, the socialist and the capitalist. The split was initiated by the Great October Socialist Revolution. Lenin said that the proletarian revolution in Russia was only the start of the world socialist revolution. It was followed, as Lenin foresaw, by other powerful revolutionary explosions. Capitalism collapsed in some countries of Europe, Asia and Latin America.
The progressive change in the balance of forces in favour of socialism and the shrinking of the sphere of imperialist domination is a most important feature of the general crisis of capitalism.
The second characteristic of the general crisis of capitalism is the crisis of the colonial system of imperialism, which terminated _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 27, p. 130.
174 in the final collapse of the system as a result of the mounting national liberation movement. The peoples of the liberated countries, supported by the socialist community and the international working-class movement, are righting to throw off economic dependence on imperialism and neocolonialism. Some of the young states orient themselves on socialist development.The third characteristic of the general crisis of capitalism consists in the aggravation of the internal economic contradictions in the imperialist countries, the growing economic productive forces of modern capitalism---changing increasingly under the impact of the scientific and technological revolution---and to the changing economic basis, especially to monopoly growth and the development of monopoly into state-monopoly capitalism.
Last, the fourth characteristic of the general crisis of capitalism is the developing crisis of bourgeois politics and ideology, whereby the entire bourgeois ideological machinery is geared to justification of the capitalist system and to the widest possible dissemination of anti-communism and anti-Sovietism.
In the course of its development the general crisis of capitalism passes through a number of stages, each with its own distinctive features.
__ALPHA_LVL3__ The First StageThe first stage was ushered in by World War I and Russia's separation from the imperialist system as the result of the Great October Socialist Revolution.
Even at the first stage of the general crisis of capitalism, when the Soviet Republic found itself in a hostile environment, the socio-economic superiority of socialism over capitalism was already evident. Towards the close of the 1930s, the Soviet Union developed from being a backward agrarian country into an advanced agro-industrial power possessed of all the key modern industries.
175At the first stage of the general crisis of capitalism, the crisis of the colonial system set in. The exploitation of colonial peoples by the monopolies helped to bring the objective and subjective prerequisites for the anti-colonialist struggle into play.
The victorious socialist revolution in multinational Russia and, later, Mongolia's embarking on a socialist course of development opened up before the colonial peoples the prospect of shaking off imperialist oppression and solving the national question on the basis of equality and disinterested mutual assistance. Thereupon, the national liberation struggle in the colonies gained impetus.
The capitalist economy became still more unstable. In 1929 the worst crisis in the history of capitalism broke out, followed by an extremely long depression. Before any real boom had set in, capitalism was beset by another crisis in 1937, never having recovered its 1928 pre-crisis level.
As the contradictions of monopoly capitalism increased, it developed into state-monopoly capitalism. The monopolies stepped up their oppression of the masses, and a number of bourgeois states became fascist.
In the end, the development of the crisis resulted in a Second World War.
__ALPHA_LVL3__ The Second StageThe second stage of the general crisis of capitalism unfolded during World War II. As a natural consequence of the aggravation of all the capitalist system's contradictions during and after World War II, the imperialist chain was breached in a number of countries in Europe and Asia, and a world socialist system took shape.
The superiority of socialism became evident from the higher economic growth rates of the socialist system than those of capitalism. The socialist countries' share in world industrial production increased from 10 per cent in 1937 to 27 per cent in 1955.
The victory of the Soviet Union in the Second World War 176 made the circumstances propitious for a growth of the national liberation struggle and the overthrow of colonial regimes. China, North Korea and North Vietnam threw off the colonial yoke and disengaged from the capitalist system of world economy. The imperialist colonial system began to fall apart.
The outcome of World War II made itself felt in the economies of the imperialist countries. On the one hand, under the impact of the revolution in science and technology and some other factors, their economic development became somewhat faster, but the development of industries, areas and countries became more uneven. The contradictions associated with structural shifts in the capitalist economy were aggravated. With the growth of monopoly power, the decay of capitalism increased and its contradictions intensified. The antagonism between labour and capital grew. In the major imperialist countries, state-monopoly capitalism made headway.
Militarisation of capitalist economy was one of the chief manifestations of the decay of capitalism. The development of the military-industrial complex had a detrimental effect on the imperialist countries' foreign and home policies, and on bourgeois ideology and culture.
__ALPHA_LVL3__ The Third StageThe far-reaching changes in the world balance of forces in favour of socialism in the mid-1950s indicated that the general crisis of capitalism had entered its third stage. What are the distinctive features of this stage?
Whereas the beginning of the first and second stages coincided with world wars, the third stage started during the peaceful coexistence between the two different social systems, which is a specific form of their political, economic and ideological struggle.
The most essential change marking the third stage is that the world socialist system has become a decisive factor in the development of human society. This does not mean, of course, 177 that from now on the solution of all the problems confronting mankind depends solely on the efforts of the world socialist system. Yet, socialism is ever scoring new victories.
Great changes have taken place in Soviet society, and these have made it possible to draw the important theoretical and political conclusion that a developed socialist society has been built in the Soviet Union by the dedicated efforts of the Soviet people under the guidance of the party of Lenin.
The consolidation of socialism's position has also found expression in the development of socialist integration and in the fact that the family of socialist states has been joined by a new member---People's Cuba, the first American country to become socialist.
The socialist countries accounted at the beginning of the 1970s for 39 per cent of world industrial output.
Another feature typical of the third stage of general crisis of capitalism is the collapse of the colonial system of imperialism, which spread to the African continent and Latin America. The struggle has been stepped up in the former colonies to end imperialist monopoly domination, carry out socio-economic reforms and achieve economic independence.
At the third stage of the general crisis of capitalism the statemonopoly character of modern capitalism increases, as do all its economic and social contradictions. In the developed capitalist countries a state-monopoly system takes shape that seeks to moderate the contradictions of capitalist society, but the development of state-monopoly capitalism has done nothing to balance the economy, stop the crises of overproduction or prevent the spread of the world capitalist economic crisis.
Increasing monopoly exploitation and oppression of the workers and all non-monopoly sections tends further to aggravate social contradictions and to intensify the class struggle.
At the same time, bourgeois politics and ideology are deteriorating still further. The crisis of bourgeois politics is indicated by the growing stratification of the bourgeoisie, the waning influence of the more reactionary imperialist circles and a stronger tendency towards detente.
__PRINTERS_P_177_COMMENT__ 12---1921 178 __ALPHA_LVL2__ 3. Qualitative Shifts in the DevelopmentFar-reaching qualitative shifts are occurring in the development of the general crisis of capitalism in the 1970s. Capitalism's adaptation to the changed conditions does not imply its stabilisation as a system. The general crisis of capitalism continues to grow.
__ALPHA_LVL3__ Role of the Socialist CountriesFirst mention should be given to the main feature of the general crisis of capitalism---the struggle between the two opposite social systems. In the 1970s, the world balance of forces changed in favour of the socialist system and to the detriment of imperialism, ushering in a new stage in the development of socialism into a decisive factor behind social progress. The farreaching qualitative shift in the balance of forces has resulted from the further consolidation of the world socialist system and from the substantial weakening of imperialism's position both at home and abroad.
The socialist countries are playing a growing role in the world economy, too. The socialist community is now the most dynamic economic force in the world.
World socialism has became much stronger as a social system. Its greater social maturity is indicated by the Soviet people's success in building the material and technical basis for communism. Most of the other socialist countries have put forward the building of a comprehensively developed socialist society as their immediate task and are successfully advancing towards their goal. Go-operation between the fraternal socialist countries has risen to a qualitatively new level.
The achievements of the socialist countries, the Soviet Union above all, in the military and economic fields have brought a fundamental change in the balance of forces between the two world systems and are a factor in containing aggressive imperialist wars.
179 __ALPHA_LVL3__ The Turn Towards DetenteFar-reaching qualitative changes in the balance of forces between socialism and capitalism have provided the objective basis for a turn in the relations between the socialist and the capitalist countries, for a transition from cold war and explosive confrontations to detente and for the firm establishment of the principles of peaceful coexistence between states with different social systems.
The vigorous and purposeful efforts exerted by the Soviet people, led by the CPSU, in implementing the Peace Programme evolved by the 24th and 25th GPSU Congresses, and the efforts of all the socialist countries, the international workingclass and communist movements and all forces of democracy and peace in the capitalist countries have made detente a leading trend in world development.
Detente is becoming increasingly tangible. Honourable and equitable principles of international relations have been recognised and secured by international documents. The first, if rather modest, understandings have been reached, closing some channels of the arms race. Co-operation between the socialist and capitalist countries is developing successfully in trade, economics, science and technology, in the field of culture and many other areas.
Some influential imperialist quarters, representatives of the military-industrial complex and 'the Chinese leaders, who have made common cause with the forces of reaction, are, however, coming out against detente and the strengthening of the security of nations. They advocate an escalation of the arms race and, in particular, production of that barbarous new weapon, the neutron bomb and its deployment in Western Europe.
Throughout the world a struggle is developing to curb the militarists and their political agents, whose activities are endangering peace. As always, marching in the vanguard of the worldwide struggle for peace are the progressive forces of the Earth, the socialist countries, Communist and Workers' parties, and diverse democratic, political and public organisations.
180The peace-loving peoples of the Earth highly appreciate the unflagging, determined efforts of the Soviet state, the Communist Party of the Soviet Union and the Soviet people to stop the arms race and achieve disarmament. What they want is a stable peace, condemning actions that increase the possibility of another world war, understanding better and better the indissoluble relationship between socialism and the cause of peace.
The changed world balance of forces has brought essential changes in the national liberation movement, too, whose successes have been manifested in such major events as the historic victory of the Vietnamese people over imperialist aggression and the establishment of the Socialist Republic of Vietnam; the collapse of the Portuguese colonial empire and the establishment of socialist-oriented regimes in the former Portuguese colonies, in particular, Angola, Mozambique and Guinea-Bissau, the major achievements of the liberated countries in the struggle against neocolonialism and in taking full charge of their own national wealth; and the advance made in the building of a new world economic order. The class struggle waged by the working people for social progress has gained impetus in the developing countries.
In recent years, far-reaching qualitative shifts have also occurred in the socio-economic and political development of imperialism.
__ALPHA_LVL3__ Capitalism's Economic DifficultiesFrom 1974 to 1976, the capitalist world was seized by the worst economic crisis of the postwar period. A major feature of this was that the crisis of overproduction coincided with a number of structural ones, such as the energy and raw material, ecological and monetary crises, a state-monopoly regulation crisis, the urban crisis and an unprecedented growth of inflation.
The latter has become a chronic malady of capitalism today. The scope of inflation has increased sharply, while prices have grown at a much faster rate.
Whereas in the 1950s prices in the developed capitalist 181 countries increased on average by 2-4 per cent, in the 1960s they increased by about 3-5 per cent, and in the 1970s, by 10--15 and even 20 per cent or more a year.
The chronic character of inflation, its great scope and growing rate can be observed in all the developed capitalist countries. Of the three imperialist centres, Japan was the worst hit by inflation. Western Europe came next. Inflation has seized not only the centres of contemporary imperialism, but also the developing countries.
The energy and raw material crisis, especially aggravated in the 1970s, caused numerous complications in the capitalist economy. The shortage of fuel and power and other raw materials and the higher prices for them are partly the result of contradictions in the internal development of the capitalist countries. Viewed from this angle, the energy and raw material crises are structural crises of the capitalist economy, engendered by uneven economic development, cutthroat competition, and the main law of capitalism, that of the production and realisation of surplus value.
The old system of exploitation of the former colonies' fuel and raw material resources which imperialism tried to improve by neocolonialist methods, has crashed.
Thus, viewed from the angle of the relations between the imperialist and developing countries, the energy and raw material crisis may be described as a crisis of these relations, as the collapse of the system of capitalist exploitation, as a natural result of the peoples' persistent struggle for their national and social emancipation.
The imperialist monopolies and the system of state-monopoly capitalism continue their onslaught on the developing economies under the changed conditions, too. They take advantage of the higher prices of fuel and raw materials to enrich themselves; the prices of manufactured exports from the industrialised capitalist countries continue to grow. More and more illusory is becoming the developing countries' hope to get rid of the "price scissors" in world capitalist trade, which have caused and continue to cause enormous damage to the newly free states.
182According to UN figures, ever since 1975 price ratios on the world market have again been unfavourable to the developing countries.
The exploitative policy of the capitalist monopolies towards fuel and raw material resources is vigorously opposed by the developing countries. The Soviet Union and the other socialist countries consistently defend the right of every country to exercise effective control over its own natural resources and their utilisation, and the activities of foreign corporations.
__ALPHA_LVL3__ Ecological CrisisRandom and rapacious exploitation of natural resources and increasing pollution of the environment confronted the capitalist countries in the 1970s with the threat of an unprecedented ecological crisis. Bourgeois scientists declare the ecological crisis to be an unavoidable outcome of human history, independent of socio-economic relations. It is blamed variously on the population explosion or on man's "inborn biological cruelty" or on his bad upbringing. Lately it has become more and more fashionable to pin the responsibility for the ecological crisis on the scientific and technological revolution.
In reality, this crisis is not technological but socio-economic, since the relations between Man and Nature are social relations. The chief cause of the ecological crisis lies in the social system that directs the 'progress of science and technology towards profit, towards the exploitation of Man and Nature.
Lately the monopolies and the bourgeois state have been making efforts to moderate the ecological difficulties, but the private-property character of their policies renders their measures ineffective, which entails further and increasing harm to Nature.
This is especially obvious in the United States which, according to American experts' estimates, is responsible for roughly half of the total pollution of the globe. Every year 1.3 thousand million tons of farm waste, a thousand million tons of mining waste, 350 million tons of food waste and sewage, 172 million tons of toxic fumes and 18 million tons of motor-car scrap 183 accumulate in the United States. Direct damage from air pollution (not counting the losses incurred through illness and undesirable ecological effects) is estimated currently at 18,000 million dollars in the United States, and in 1978 it was expected to reach 25,000 million dollars.
Environmental pollution has assumed threatening proportions in Japan. A brochure published by a group of Japanese scientists after visiting some districts in Japan in 1974, ran: " Industrial areas and cities are spreading, like a cancerous growth, all over Japan at an extraordinary pace. As a result, small contaminated spots grow into enormous areas, now extending throughout the country. Japan is in a critical situation indeed. Immense integrated plants, with their forests of tall stacks, symbolise today the arrogant triumph of state-monopoly capitalism.''
Environmental pollution has become an acute problem in Western Europe and elsewhere in the capitalist world.
The imperialist monopolies try to cope with it by moving ``dirty'' industries to the developing countries, in a kind of ecological expansion.
As the ecological crisis expands, the state-monopoly system seeks to make the working people bear the brunt of it.
The fact that the bourgeois state can do nothing to make ecological problems less acute, let alone cope with them, is a mark of the crisis of state-monopoly regulation of the capitalist economy, which points to qualitative changes in the development of the general crisis of capitalism at the current stage.
The regulation crisis is also manifested in the urban crisis, which is particularly acute in the United States, but is also apparent in many other capitalist countries.
The unprecedented coincidence of the various crises that have afflicted the capitalist economy of late is indicative of its greater instability and of the fact of essential changes that it is undergoing.
184 __ALPHA_LVL3__ Ideological and Political CrisisEqually important changes are taking place in politics, ideology and culture in bourgeois society as attested by the profound moral and political crisis of the 1970s. This is a crisis of the traditional bourgeois political institutions, which are being increasingly discredited. It also finds expression in growing corruption, the higher crime rate and lower moral standards.
The 1976 Berlin Conference of the Communist and Workers' Parties of Europe reviewed the present stage of the general crisis of capitalism and the economic, ideological and political crisis of bourgeois society, stemming from it, and came to the conclusion that the economic and social structure of capitalist society increasingly conflicts with the people's needs, as well as those of social progress and democratic political development.
__ALPHA_LVL2__ 4. The World Revolutionary ProcessLenin's theory of imperialism, in particular the doctrine of the historical place of imperialism, is a direct continuation and development of Marx's teachings on the historical tendency of capitalist accumulation and the inevitable revolutionary downfall of capitalism.
The Great October Socialist Revolution and the socialist revolutions in other countries, the establishment of the world socialist system, the growth of the national liberation and working-class movements throughout the world, have fully borne out the truth of the Marxist-Leninist teachings on the inevitable downfall of capitalism and the truimph of socialism.
The three forces that are at present the main components of the current world revolutionary process are: the countries of victorious socialism, the struggle of the working class in the developed capitalist countries, and the national liberation struggle of the peoples of the developing countries.
185The world socialist system is the main achievement of the international working-class and all the world's progressives. As the countries of the socialist community grow stronger, its role in the revolutionary remaking of the world is continually increasing.
In defence of the future of all mankind, the socialist countries are fighting for peace and consistently implementing the principle of peaceful coexistence between countries with different social systems.
The struggle provides better opportunities for the entire world revolutionary anti-imperialist movement. As was stressed at the 1976 Berlin Conference, the policy of peaceful coexistence and active co-operation between states, irrespective of their social systems, and detente are in the interests of both each people and the progress of mankind. Far from implying a political and social status quo in any country, on the contrary, they provide the best possible conditions for the struggle waged by the workers and all democratic forces for the firm establishment of the inalienable right of every people to choose freely its own development course and to follow this course for the struggle against monopoly domination, and the fight for socialism.
Under the new conditions, the workers in the capitalist countries are waging an heroic struggle for better living standards and fighting against the ruinous consequences of the economic crisis, for far-reaching socio-economic reforms, for democracy and socialism. In the pitch and scope of industrial action, the 1970s were the most significant since the war.
Other social sections coming out against monopoly oppression are rallying increasingly around the working class. A broad antimonopoly front is being formed, which facilitates the further growth of the political understanding of the people, of their organisation, and of the struggle for socialism.
Marching in the van of this struggle are the Communist and Workers' parties. The international communist movement is becoming the most significant political force of the present day.
The third major force in the world revolutionary process is the national liberation movement which has been scoring great 186 victories in recent decades. In waging this struggle, the developing countries rely on the strength, prestige, and support of the socialist community and the international working-class movement.
The unity of today's great revolutionary forces the further consolidation of their alliance , and the development of their joint struggle are indispensable conditions for speeding up the world revolutionary process, abolishing the capitalist system, exploitation and oppression, and ensuring the triumph of peace, democracy and socialism throughout the world.
[187] __NUMERIC_LVL1__ CHAPTER 11 __ALPHA_LVL1__ THE COMMUNIST MODE OF PRODUCTIONThe communist mode of production is the highest socio-- economic form of organisation of social production. It has regular economic features of development, which are studied in the political economy of communist society. This section of political economy, like political economy in general, was developed by the founders of Marxism-Leninism---Marx, Engels and Lenin, arid enriched by the theoretical and practical revolutionary activities of the Marxist-Leninist parties and the strugggle of the millions engaged in building a new, communist society.
The political economy of communist society theoretically validates and demonstrates to the working people the immense superiority of socialism and communism over capitalism, rallying them for the struggle against imperialism, and for the triumph of the noble ideals of mankind, for communism, and arming them with a knowledge of the economic Jaws governing the building of socialism and communism, which makes this process clearly understandable to everyone involved in it.
The section of political economy dealing with the first phase of communist society, socialism, is better elaborated theoretically and tested in practice. For this reason, the political economy of communist society is called the political economy of socialism.
__ALPHA_LVL2__ 1. General FeaturesThe communist mode of production prevails throughout the development of communist society, determining its content. The 188 society itself passes through the two phases: socialism, which is its lower phase, and communism, the higher one. The communist mode of production is continually changing and improving, but it has some general features that are present throughout.
__ALPHA_LVL3__ General Features of Productive ForcesThe productive forces of communist society are organised in large-scale socialised production and prevail as such in all branches of the national economy. They absorb all the latest achievements of science and technology and are utilised in the people's interests. In communist society, all the necessary conditions are provided for the best possible utilisation of natural, as well as accumulated material and manpower resources. Productive forces are developed in a balanced fashion, according to a plan. The plan determines all the processes of social production in advance, including the growth and improvement of productive forces. In communist society, the socio-economic barriers to the employment of new technology, which are typical of capitalism, are abolished. A capitalist employs a new technology when it costs him less than the wages of the workers it replaces. In communist society, it is not the saving on wages, but the lower aggregate expenditure of labour (whether embodied in the means of production or live), the fact that the technology makes work easier, substituting for man in unhealthy jobs, and so on, that are the criteria for assessing the economic feasibility of introducing a new technology and developing productive forces in general. Marx wrote that, "in a communistic society there would be a very different scope for the employment of machinery than there can be in a bourgeois society".^^1^^ In communist society, a complete harmony of the material and personal elements of productive forces appears and continually develops. The machinery improved during the technological revolution needs workers with high cultural and technical training standards. Communist society provides full scope for achieving this. In the Soviet Union, for _-_-_
~^^1^^ See Karl Marx, Capital, Vol. 1, p. 371.
189 example, 78 per cent of the gainfully employed population have a higher or secondary education. At the same time, the steady growth of the general educational, cultural and technical level of the people has a marked impact on the development of the material and objective elements of productive forces and scientific and technological progress. Highly educated experts both successfully manage modern production and continually improve it. The result is a highly efficient social production. __ALPHA_LVL3__ General FeaturesProduction relations too retain a whole range of general essential features throughout the development of communist society. The main one is the predominance of public ownership of the means of production. Unlike private capitalist ownership, public ownership implies that the means of production are owned by the working people themselves, not by a few capitalist exploiters. The working people join together and set up a collective public economy. In communist society nobody can appropriate material goods at the expense of other people's work. Such goods belong to their makers, to the working people themselves.
Public ownership of the means of production determines the new character of the entire system of production relations as one based on friendly co-operation and mutual assistance between workers free from any exploitation.
Production relations in communist society find expression in the character of the labour of the members of society, who work for themselves and for their society. Free creative labour prevails. People work with dedication, stinting neither strength nor ability, in order to make their life more secure, more interesting and varied, and their native land more powerful. The right of every citizen to work is not merely proclaimed, but also assured by the very nature of production relations. For the first time in human history, satisfaction of the needs of the labouring people becomes the motive force behind social production. On this 190 basis an identity of the economic interests of all members of society emerges.
A planned development of social production is a general feature of production relations under socialism and communism. It means that the country's national economy is organised and developed in accordance to a plan drafted in advance.
The domination of public ownership and balanced development of the national economy make the production process and the work of its participants directly social production and social labour. This means that the efforts of each worker and body of workers (individual labour) are pre-planned and expended in producion to create the material goods and services needed by society, to satisfy a definite social requirement, i.e., they are included directly and immediately in aggregate social labour.
__ALPHA_LVL2__ 2. Two Phases in the DevelopmentSocialist social production is the first or lower phase of the communist mode of production, of which communist production is the higher phase. They differ from each other in the degree of maturity of productive forces and relations of production. It was in this sense that Lenin described socialism as incomplete communism.
__ALPHA_LVL3__ The Material and Technical BaseThe material and technical base of socialism consists of largescale, planned machine production, developing in the interests of the people and prevailing in all sectors of the economy.
The material and technical base of socialism is a necessary prerequisite for building the material and technical base of communism, which is a higher stage in the development of the material and organisational foundations of social production.
The material and technical base of communism implies complete electrification of the country and the widespread use of 191 new kinds of energy, complete mechanisation and growing automation of production, the introduction of chemical processes into production, and the effective utilisation of high-quality, economical and productive instruments of labour and materials. The appropriate organisation of social production is characterised by the optimal concentration, national specialisation and cooperation of production. The continually improving means of production are used directly in production by highly educated workers who are constantly improving their skills and knowledge. This is the basis for achieving a labour efficiency higher than that under capitalism, which is of primary importance to the triumph of communism.
__ALPHA_LVL3__ Forms of Public OwnershipOn the basis of the growth and improvement of the material and technical base of society, changes take place in production relations too, above all, in the relations of ownership of the means of production.
Under socialism, public ownership of the means of production takes two forms, viz., national state ownership (belonging to the whole people) and collective farm and co-operative ( collective-group) ownership. The first means that the means and products of production belong to society as a whole, which is personified and represented by the socialist state. The second means that the means of production belong to individual co-operative enterprises (collective farms).
Unlike under socialism, under communism uniform public communist ownership will predominate. The development of the two forms of socialist ownership into communist ownership takes place through the improvement of both state and co-operative property and their gradual drawing together and fusion into uniform communist property.
The two forms of socialist ownership of the means of production determine the respective social pattern of the first phase 192 of communist society. Under socialism, there are two classes, the working class and the co-operative (collective farm) peasantry, as well as the intellectual social stratum. These are friendly classes, without any antagonistic contradictions between them, for their existence is linked with the single (social, socialist) type of ownership of the means of production.
With the transition of society from socialism to communism on the basis of the single national communist ownership of the means of production, the lines between classes and the social stratum will be obliterated and society will enter the phase of classless development.
__ALPHA_LVL3__ Changed Character of LabourAs society progresses from socialism to communism, the character of labour performed by the members of society changes. Under socialism, traces of the old attitude to labour still persist. People look at it as a means of acquiring the good things of life, not yet as a vital need. For this reason, material incentives to work still have to be provided.
At the same time a new attitude to work is developing. Work without exploitation, work for oneself, for one's own society increasingly make it an honour and duty for all members of society. Not wealth or noble birth, as was the case in old society, but only a person's contribution to work that determines his social status and brings him honour and general esteem.
The new character of labour emerging under socialism and people's conscious attitude to labour as a public duty, gradually spread everywhere. Labour is transformed into communist labour. In the higher phase, communist society, it determines all aspects of human activity. Lenin gave an exhaustive definition of communist labour. He wrote: "Communist labour in the narrower and stricter sense of the term is labour performed gratis for the benefit of society . . . labour performed without expectation of reward, without reward as a condition, labour performed because it has become a habit to work for the common good, and 193 because of a conscious realisation (that has become a habit) of the necessity of working for the common good---labour as the requirement of a healthy organism."^^1^^
__ALPHA_LVL3__ Principles of the Distribution of Material GoodsThe level of productive forces and the characteristics of labour under socialism make it necessary to apply the principle, "From each according to his abilities, to each according to his work.'' The point is that, in socialist society, material goods and services are not yet abundant. Their production is limited, so they can hardly be distributed according to need. Furthermore, under socialism material incentives to labour are required. All this makes it necessary for society to introduce strict control over the measure of work and of consumption, control that is exercised by distributing material goods and services according to work done.
Under communism, the higher level of productive forces, the abundance of material goods and services, and the communist attitude to work will make it possible to adopt the principle, "From each according to his ability, to each according to his need.''
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 30, p. 517.
__PRINTERS_P_193_COMMENT__ 13---1921 194 __NOTE__ 2007.01.22 1 of 2 - END - this is on page 193 in original. Page 193 has the beginning of two LVL3's inbetween a footnote marker in body and footnote. __ALPHA_LVL3__ Gradual Abolition of Commodity-Money RelationsUnder socialism commodity-money relations remain, things being produced as commodities that are exchanged by sale and purchase with the help of money and money circulation.
In contrast to capitalism, in socialist society commoditymoney relations have a new, socialist content. The economy develops according to a plan and the relations that have been preserved are used for the development of production.
When society goes over to communism, these relations will gradually wither away as the reasons for them are gradually __NOTE__ 2007.01.22 2 of 2 - END - this is on page 193 in original. removed. These reasons will be discussed in the chapter " Commodity-Money Relations''. Under communism enterprises will be linked, and the material goods and services distributed among the population, not by sale and purchase but by the direct exchange of activities and distribution in physical terms. Money and money circulation will no longer be needed.
__ALPHA_LVL3__ Main Features of the DevelopmentThe transition from socialism to communism is governed by the objective laws of society's development, in the first place, the law of the correspondence of production relations to the character of productive forces. With the creation of the material and technical base of communism, socialist production relations develop into communist ones. At the same time the new man is moulded, a man of communist society, possessed of a lofty communist consciousness.
The building of communism proceeds according to a plan, on the basis of the economic strategy for society's development, as elaborated by the Marxist-Leninist parties.
The transition from socialism to communism takes place gradually. Socialism and communism are phases in the development of the same society, there being no fundamental difference between them. For this reason, the transition from the lower phase of society, i.e., socialism, to the higher phase, or communism, is an evolutionary process. At the same time, it should be remembered that a gradual transition does not imply that the process of communist construction is slow. On the contrary, this process is exceptionally dynamic, developing under the conditions of close interaction between the current scientific and technological revolution and the advantages of socialism.
__ALPHA_LVL2__ 3. The Main Economic FeaturesThe gradual evolution of socialism into communism means that communist society develops without interruption. Changes take place within its main phases, too. Socialism, for example, 195 passes through two stages. The first is that involving the construction of socialism in the main. The second is the stage of developed socialism.
The historical place of developed socialism is characterised by the fact that, at this stage, communist society begins to develop into its higher phase, i.e., it involves the large-scale building of communism.
In the Soviet Union, the main work on building socialism was completed in the latter half of the 1930s. Today the Soviet Union is a country of developed, mature socialism.
__ALPHA_LVL3__ The Highly Developed MaterialThe material and technical base of developed socialism is characterised by fully-formed comprehensively developed machine production. The Soviet Union has a modern versatile industry, large-scale socialist agriculture, highly developed transport and other sectors that together constitute a single powerful national economic complex.
Developed socialism implies that a fairly high level of the socialisation of production has been attained in the shape of production and scientific-industrial associations, combines and territorial complexes in industry; inter-farm associations and agro-industrial complexes in agriculture; corresponding organisational forms of socialisation in other sectors of the national economy, providing for optimal concentration, effective specialisation and co-operation of production.
There is a great difference between the contemporary material and technical base in the Soviet Union and that which was built in the initial period of socialism. In 1975, the production of the aggregate national product and national income in the Soviet Union exceeded the 1940 level more than 11-fold. From 1940 to 1975, industrial output increased almost 17-fold and agricultural output, by 130 per cent, while the population increased by only 30 per cent. This was possible thanks to the much higher production efficiency and, above all, to the rise in 196 the productivity of labour. In 1975, labour productivity in industry exceeded the 1940 level 6.6-fold, and in agriculture (in 1973), 3.8-fold.
The country's industrial potential continues to grow.
__ALPHA_LVL3__ Mature Socialism Production RelationsAt the stage of developed socialism, production relations attain complete maturity, and the process of their development into communist relations begins. Socialisation of the means of production and instruments of labour rises to a new and higher stage, a result of the development of national and collective-farm and co-operative property and their gradual drawing together. Socialist farms predominate absolutely in the national economy.
The economic laws of socialism reach their highest degree of maturity, and their utilisation in the interests of society becomes as full and efficient as possible.
The development of production relations is seen in the greater social division of labour and interdependence of all parts of the national economy. The growth of socialisation increases the significance of the planned organisation of social production. The system of planned economic regulation rises to a higher level and the principle of democratic centralism in management gains ground which both enhances centralism in the control of social production and helps the broad creative initiative of the working people in factories, institutions and local government bodies to unfold. The scientific validation of the economic plans and long-term planning become the focus of attention and the methods of economic work are improved. (All this will be discussed in detail in subsequent chapters.)
The production relations of developed socialism provide great scope for utilisation of the results of the scientific and technological revolution, and are a powerful factor in scientific and technological progress.
197 __ALPHA_LVL3__ Considerably HigherUnder developed socialism, new opportunities emerge for greatly improving the people's well-being. The steady rise in material and cultural levels becomes the main strategic sphere of activity for the Communist Party. In the Soviet Union, this has found concrete expression in the way the substantial increase in the well-being of the Soviet people is included in the fiveyear economic development plans as their chief economic target.
At present, real per capita incomes in the Soviet Union double roughly every fifteen years.
Primary attention is focused on improvement of working and living conditions, of the health service, education and culture. The levels of well-being and culture and working and living conditions of the different social strata, of the urban and the rural population are rapidly drawing closer together. All this facilitates the moulding of the new man and promotes the ailround development of the individual.
[198] __NUMERIC_LVL1__ CHAPTER 12 __ALPHA_LVL1__ THE OBJECTIVE ECONOMIC FEATURESThe first and lower phase of communist society, or socialism, is ushered in by a socialist revolution. The downfall of capitalism and the establishment of the first phase of communist society began with the Great October Socialist Revolution in Russia. Now the Soviet Union, the first country in the world to have built socialism, has been joined by many other nations on the road to building a new society.
__ALPHA_LVL3__ PrerequisitesThe socialist revolution is an inevitable result of society's development, prepared for by capitalism, in the heart of which the objective and subjective prerequisites for the socialist revolution mature. Under capitalism, productive forces attain a high degree of development. Production acquires a social character as, owing to the concentration of production, increase in the social division of labour, greater specialisation and co-operation of production, sectors and enterprises; ail parts of social production become interdependent, and the world capitalist economy is formed. Productive forces and the social character of production call for an appropriate social mode of appropriation of the material goods and for socialist relations of production. This objective prerequisite for the socialist revolution reaches its greatest degree of maturity under imperialism, and especially statemonopoly capitalism for, as Lenin said, there are no intermediate rungs between this and socialism.
199At the same time the working class grows in capitalist society and becomes increasingly consolidated and well-organised. This is a formidable social force capable of overthrowing capitalist rule in an alliance with the people of town and the countryside and under the guidance of its Marxist-Leninist party. This is how the subjective prerequisite for the socialist revolution emerges and matures.
The socialist revolution takes place in the country that, at the given moment, is the weak link in the chain of world imperialism resulting from the aggravation of all the contradictions of imperialism, both internal and external.
__ALPHA_LVL3__ Identifying Features of the Socialist RevolutionThe historical period between capitalism and socialism is called the transitional period. The need for it is determined by the specifics of the socialist revolution and its distinctions from the bourgeois revolution. The latter begins and ends with the bourgeoisie taking power. The seizure of power by the proletariat in an alliance with the working people only initiates the socialist revolution. The bourgeois revolution finds the capitalist economic basis (the system of capitalist production relations) ready-made, as it had taken shape within the heart of feudal society. Capitalist enterprises spring up and develop side by side with feudal ones, because both are based on different forms of the same sort of private ownership of the means of production. The bourgeois revolution merely brings the political power of the bourgeoisie in line with the already existing capitalist economic base.
Socialist enterprises and socialist production relations do not emerge under capitalism, for socialist ownership differs fundamentally from capitalist ownership and is incompatible with it. Lenin wrote: "The difference between a socialist revolution and a bourgeois revolution is that in the latter case there are 200 Emacs-File-stamp: "/home/ysverdlov/leninist.biz/en/1980/FPE287/20070121/287.tx" __EMAIL__ webmaster@leninist.biz __OCR__ ABBYY 6 Professional (2007.01.25) __WHERE_PAGE_NUMBERS__ top __FOOTNOTE_MARKER_STYLE__ [0-9]+ __ENDNOTE_MARKER_STYLE__ nil ready-made forms of capitalist relationships; Soviet power~... does not inherit such ready-made relationships...'^^1^^
The working class in alliance with the working people in town and village overthrows the capitalist government and takes power into its own hands in order to build a socialist economy. This takes a definite period of time, the transitional period, during which the material and technical base of socialism is created and capitalist production relations are destroyed and replaced by socialist ones. Enterprises are organised on a new social foundation. A cultural revolution is put through. The working class prepares itself as a force capable of guiding society.
The duration of the transitional period depends on many conditions, external as well as internal. During the building of socialism, the working class has to overcome stubborn resistance from the overthrown exploiting classes. In addition, the Soviet people had to build socialism while surrounded by hostile capitalist countries and suffering from the economic dislocation caused by an imperialist and a civil war and foreign armed intervention.
The other socialist countries are now building a new society under more propitious circumstances. There is a socialist system in the world, a community of socialist countries rendering one another disinterested assistance, and another world war is no longer inevitable.
__ALPHA_LVL3__ General Objective FeaturesThe building of socialism during the transitional period is derermined by a number of general, objective features essential to the socialist revolution and the building of socialism that must take place, in one form or another, in all countries in which a socialist revolution has taken place. The fact that these are necessary is borne out by the experience of building a new society in the Soviet Union and other socialist countries. These objective features are as follows:~
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 27, p. 90.
201establishment of the power of the working class acting in alliance with the whole working people;~
use of real political power to abolish the socio-economic domination of capitalist and other exploiters;~
mobilisation of the working people in the struggle to build a new society and transformation of the economy and all social relations on socialist principles;~
defence of the revolution from all attacks by class enemies, both internal and external.
The building of socialism has distinctive features in different countries. They spring from the specific historical conditions of their development, from their national specifics and the different levels of maturity of productive forces and social relations. This leaves definite imprint on the realisation of the general, objective features of the socialist revolution and the building of socialism, determining the distinctive ways in which they are implemented and the different durations and rates of various social reforms. It is as necessary for these objective features to be taken into consideration as it is for them to exist. A profound understanding of these objective features and a reliance on them, combined with a creative approach and consideration of the specific conditions in each individual country, have always been an inalienable quality of Marxists-Leninists.
__ALPHA_LVL2__ 2. The Economic StructureThe economic pattern of the transitional period is characterised by the presence of many structures of social production simultaneously, none of them being predominant.
In any country building socialism, during the transitional period there are usually three economic structures, viz., the socialist, petty-commodity and private capitalist. In the Soviet Union and some other countries there were two more---the state-capitalist and patriarchal.
202 __ALPHA_LVL3__ The Socialist Production Structure.The socialist economic structure in the transitional period is represented by the state-owned industrial, agricultural, transport, and commercial enterprises and banks, and also co-operative enterprises.
The socialist production structure emerges in two ways: in the process of the socialist nationalisation of the means of production belonging to capitalists and landlords, and as a result of small producers in town and country forming co-operatives. The choice of ways depends on the fact that the socialist revolution takes place when there are several forms of private ownership of the means of production, viz., big ownership by capitalists and landlords and small ownership, based on personal work. Different approaches are needed for transforming the various kinds of property into socialist property.
Abolition of capitalist and landlord ownership is effected by means of socialist nationalisation, i.e., revolutionary expropriation of the means of production from the exploiting classes and their transformation into the property of the socialist state. The means of production become national property.
Socialist nationalisation abolishes the economic domination of the capitalists and lays the material and socio-economic foundations for organising and operating socialist enterprises, providing the economic basis for the dictatorship of the proletariat and making the power of the working class more stable and durable.
Usually, as a preliminary measure to nationalisation, workers' control is established in capitalist enterprises. Its purpose is to limit the economic power of the bourgeoisie and prepare for the situation in which production is managed by the workers themselves.
Socialist nationalisation is effected, depending on the circumstances, either by confiscation, i.e., the appropriation of enterprises without compensation, or by partial compensation. The choice of the form of nationalisation depends on the bourgeoisie's behaviour. If it resists tooth and nail, as was the case in Russia, 203 where the bourgeoisie unleashed a civil war and foreign armed intervention, the choice is confiscation. If, however, the bourgeoisie peacefully submits to people's power, it receives partial compensation for its property. This was the procedure in other socialist countries with regard to the local bourgeoisie not guilty of collaboration with the nazi invaders. As for enterprises belonging to the invaders and the local, mostly big, bourgeoisie with a collaborationist record, they were taken away from their owners without any compensation being paid.
Nationalisation conducted by a socialist state in the transitional period differs fundamentally from capitalist nationalisation, which does not abolish capitalist production relations, so that the exploitation of man by man remains. Capitalist countries are willing to nationalise in the interests of the capitalist class. Socialist nationalisation provides all the conditions necessary for the socialist socialisation of production and the emergence of socialist forms of economy, with their socialist production relations. The exploitation of wage labour is abolished. As a result of socialist nationalisation, a state form of social socialist ownership emerges.
The socialist economic structure plays the leading role in the country's economy during the transitional period. It is a progressive form of production to which the future belongs as the dominant form of social production. The socialist structure predominates during the transitional period in large-scale industry, banking and big enterprises in other branches of the economy. Lastly, it enjoys every support from the government, the dictatorship of the proletariat.
__ALPHA_LVL3__ Petty-CommodityThe petty-commodity production structure is represented by peasant farms in the countryside and small enterprises in the towns. In many countries, especially those with a low or medium level of development, it predominates during the transitional period. In the Soviet Union, for example, in 1923--24, this 204 production structure accounted for 51 per cent of the gross national product.
The petty-commodity production structure rests on small private ownership of the means of production and the personal labour of the owners of the means of production. Petty-- commodity production under commodity-money relations is in a state of constant differentiation, throwing out poor people who have lost their means of production at one end and capitalists at the other.
The socialist state renders petty-commodity producers, farmers in particular, economic aid and support, restricting their exploitation by capitalist elements.
__ALPHA_LVL3__ Private CapitalistThe private capitalist production structure consists of medium and small capitalist industrial, agricultural and commercial enterprises. It owes its continued existence to the fact that, during the transitional period, it is not possible to wipe out all capitalist enterprises at once.
In capitalist enterprises, the exploitation of wage labour continues, in other words, there are capitalist relations of production. The socialist state restricts, however, the activities of capitalist enterprises, the degree of exploitation, the size of capitalist accumulation, and so on, using such economic methods as price formation, profit taxes, and so on, and legislation.
__ALPHA_LVL3__ State-CapitalistDuring the transitional period the state-capitalist production structure exists in the shape of capitalist enterprises working on a contract basis for the socialist state, i.e., under its control; state enterprises leased temporarily to capitalists; and mixed public and private enterprises. State capitalism under the dictatorship of the proletariat is utilised in order to build socialism. 205 It helps to further the country's economic development and capitalist enterprises are gradually transformed into socialist ones. In the Soviet Union, state capitalism was represented mainly by concessions and the leasing of state enterprises to foreign capitalists. It existed within rather narrow limits. In 1923--24, for example, state-capitalist enterprises accounted for a mere one per cent of the gross national product. In other socialist countries, state capitalism existed mainly as mixed public and private enterprises. This kind of state capitalism is typical of the socialist state that partly buys out capitalist enterprises. As compensation, the capitalist initially gets a portion of the profits of the enterprise, and then a certain percentage on his share of the capital. In time, the enterprises pass completely into state ownership.
__ALPHA_LVL3__ Patriarchal StructureThis production structure is represented by the economies of small producers engaged in a subsistence economy, who are, therefore, not connected with the market. Its existence in the Soviet Union at the beginning of the transitional period was due to the presence of remote economically backward areas. The share of the patriarchal production structure was insignificant.
In the countries that are building socialism circumventing capitalism, whose economies are poorly developed, the share of the patriarchal structure is usually greater.
__ALPHA_LVL3__ Contradictions of the Transitional PeriodThe economy of the transitional period has a number of contradictions. The main one is that between the nascent and growing socialism and the historically disappearing capitalism which is moribund, but nevertheless resisting stubbornly. It is an antagonistic contradiction, resolved in a bitter and merciless class struggle.
Another major contradiction is that between the socialist and petty-commodity production structures. The former consists of 206 large, mainly industrial, enterprises that develop in accordance with the laws of extended reproduction. The petty-commodity production structure is represented by small peasant economies that develop, as a rule, in accordance with the laws of simple reproduction.
There is a source of constant imbalance between large-scale industry and small farm production. In addition, small private production has spontaneous anarchic tendencies that run counter to the planned development of large-scale socialist production. It is not an antagonistic contradiction and it is resolved by means of socialist transformation of petty-commodity production.
__ALPHA_LVL2__ 3. The Essence of Economic PolicyThe decisive direction of the economic policy of the MarxistLeninist party and socialist state during the transitional period is the building of the main features of socialism. To fulfil this task, the state takes and controls large-scale industry, the banks, transport, foreign and much of domestic trade, and other key positions in the national economy. It directly controls the socialist production structure and exerts a planned economic influence on non-socialist ones, making use of commodity-money relations for this purpose. It allows the temporary functioning of private capital, at first limiting it and then ousting it altogether as the socialist production structure gets stronger and socialism is built.
__ALPHA_LVL3__ The Main Economic TasksThe primary task of the proletarian government during the transitional period is, Lenin said, to socialise production in practice, i.e., to provide for the planned development of social 207 production. In the initial stages of socialist construction, the fulfilment of this task implies the planned functioning of production in the socialist sector under the management of the socialist stale, which exerts systematic influence on the market ( commodity-money) relations between the socialist and non-socialist production structures, above all, petty-commodity production, with the purpose of using them in the interests of building socialism.
During the period of transition from capitalism to socialism, commodity-money relations persist, the main reason for this being that there are several production structures functioning simultaneously in the country. The economic links between such production structures, which are based on different forms of ownership, can be effected only through the sale and purchase of products. In different production structures commodity-money relations have different socio-economic natures. Within the socialist production structure, commodity-money relations acquire a new, socialist content. They are planned by the state and, as such, are used for the purpose of building socialism. During the transitional period currency circulation is brought to order. Enterprises are made to pay their way. Material incentives to work are provided, enterprises are granted credit, and so on.
In the non-socialist production structures, commodity-money relations are spontaneous, production being governed by the law of value.
Commodity-money relations between the different production structures are used by the socialist state to exert an economic influence on non-socialist production. Of particular importance is the way they are used to enhance the alliance between the working class and labouring peasantry as much as possible. In the Soviet Union this was evident in connection with the introduction of the New Economic Policy (NEP) in 1921. The peasants were to pay a tax in kind, whereas previously a surplusappropriation system had been in operation. This allowed the peasants to have surpluses for sale on the market. They developed an interest in expanding their production. Industry received more agricultural raw materials and people in the towns received more 208 food. At the same time, both peasants and townspeople wanted to buy more consumer goods, so the development of industrial production and trade became urgent.
Under free trade, small peasant private farm production inevitably bred capitalists, so-called kulaks (rich peasants), but state-owned industry was not yet able to satisfy the demand for manufactured goods immediately or fully and the nascent socialist trade could not cope with the entire volume of commodity turnover, between town and country in particular. So the government had to permit private capitalist enterprise not only in agriculture, but also in industry and trade.
This entailed no danger to socialist construction for, under the dictatorship of the proletariat, when the state holds the economic reins, there is every opportunity not only to curb capitalist production, but also to utilise it for developing the economy. Later, as the socialist production structure grew in strength during the process of socialist construction, capitalist production is gradually ousted by measures of economic coercion.
With respect to petty-commodity production by peasants and artisans, the purpose of the state's planned economic influence is to effect its socialist transformation by means of voluntary cooperation.
__ALPHA_LVL2__ 4. Building the MaterialSocialist industrialisation is the main link in the building of the material and technical base of socialism. Such industrialisation involves the creation of heavy industry, including its main branch--- engineering, and the equipment of enterprises in all branches of the national economy with machinery. The experience of building^ socialism has shown that industrialisation has or is taking place to some degree in all countries building socialism. This is because, in the countries that have experienced a socialist revolution, heavy industry, engineering, and large-scale machine production were either absent, underdeveloped or unevenly 209 developed, i.e., did not embrace all branches of the economy or all parts of the country.
If, however, heavy industry and large-scale machine production had already taken shape under capitalism, the building of the material and technical base of socialism was reduced mainly to the reconstruction of capitalist production. The consequences of capitalist ``rationalisation'', which led to overintensification of work are eliminated; the uneven distribution of industry over the country's territory, resulting in its division into industrially advanced and backward agricultural districts, is overcome; the depredation of natural resources is stopped, and so on. The sectoral pattern of production and its organisation in general are aimed at ensuring the planned and balanced development of the national economy and the satisfaction of the people's wants.
__ALPHA_LVL3__ The Essence and SignificanceSocialist industrialisation lays the foundations for the material and technical base of socialism. In ensuring the domination of large-scale machine production, socialist industrialisation facilitates the firm establishment of socialist forms of economy and socialist production relations throughout the national economy.
Large, well-equipped socialist enterprises economically surpass the capitalist ones still functioning during the transitional period, thus creating the conditions for closing them down. The main contradiction of the transitional period is resolved in favour of socialism.
Socialist industrialisation is one of the major prerequisites for the socialist reorganisation of small-scale agriculture, so it helps to resolve the non-antagonistic contradiction between largescale socialist industry and small-scale farm production.
Socialist industrialisation boosts the international position of the young socialist state, enhances its economic and defence potential, and makes the country economically independent of the capitalist ones.
__PRINTERS_P_209_COMMENT__ 14---1921 210 __ALPHA_LVL3__ Difference Between SocialistSocialist industrialisation is fundamentally different from capitalist industrialisation in character, consequences, sources and rates.
Socialist industrialisation is a condition for building socialism, consequently, it is in the interests of the working people. Capitalist industrialisation aggravates the contradictions of capitalism and intensifies the exploitation of workers. It is accompanied by unemployment, excessive intensification of labour, an increase in industrial accidents and occupational disease. It also entails the ruin of small producers (peasants and artisans).
Socialist industrialisation is carried out in a planned fashion. In the Soviet Union, for example, it became reality as a result of the successful fulfilment of the GOELRO plan (the State Plan for Electrification of Russia) and the early five-year economic development plans. Capitalist industrialisation, unlike socialist, occurs spontaneously in the bitter struggle between rival capitalist enterprises.
The source of funds for capitalist industrialisation is the profit secured by the capitalists as a result of the unbridled exploitation of the workers in their own countries, the plunder of colonies and dependencies, indemnities exacted from conquered nations, and foreign loans. Socialist industrialisation in the Soviet Union was carried out mainly with the funds obtained from state enterprises, such as industrial and commercial establishments and banks. Some funds were obtained from the peasants, whom the revolution had freed from all debts and rent payments, and others received from domestic loans placed among the population. The imperialist countries would grant the Soviet Union no loans.
Socialist industrialisation proceeds much faster than capitalist. This is boosted by the nascent and developing socialist relations of production, which are inherently balanced, and by the aim of socialist production, which meets the interests of the working people. The high rate of industrialisation in the USSR was also due to the need for the country to rapidly achieve 211 economic independence and an adequate defence capacity in view of the hostile capitalist environment. Whereas industrialisation in the United States, Britain, Germany and France, in fact all the industrially developed capitalist countries, took several decades, it was accomplished in the Soviet Union in a dozen years or so.
__ALPHA_LVL3__ Socialist IndustrialisationSocialist industrialisation in the countries building socialism today is greatly facilitated by the existence of the world socialist system, the mutual assistance, easy credits and loans between the socialist countries. As they industrialise, the socialist countries readily fall back on the experience accumulated by the Soviet Union. All this promotes the rate of industrialisation. At the same time, the fact that there is a world socialist system makes it unnecessary for the socialist countries to force the rate of industrialisation in order to achieve an adequate defence capacity as soon as possible. The world socialist system and the socialist community provide them with reliable protection against possible encroachments on their independence on the part of world imperialism.
Socialist industrialisation in the socialist community countries has yet another significant feature. Today the countries building socialism do not have to develop all branches of industry, especially heavy industry, at all costs. They concentrate their efforts on developing those industries for which they have favourable natural conditions and which are traditional to it, so that the necessary skilled labour is easily available for developing them. The scale of production is calculated so that it will satisfy both the country's domestic demand and the needs of other countries. Thus, in planned exchange for the products of these industries, the socialist country obtains what it needs from the other socialist countries.
__PRINTERS_P_211_COMMENT__ 14* 212 __ALPHA_LVL2__ 5. Socialist ReorganisationThe socialist revolution finds two forms of private production in agriculture, viz., the enterprises of big landlords and capitalist lease-holders, and small peasant economies. People's government deals with the former as with exploiting enterprises. They are nationalised and state farming enterprises established in their stead. Such approach cannot be taken to peasant farms, for peasants are toilers and allies of the working class in its revolutionary endeavours. Thus small peasant economies are not nationalised, but reorganised into large socialist enterprises through the formation of co-operatives.
'
__ALPHA_LVL3__ Nationalisation of LandThe revolutionary reorganisation of the ownership of land is the major prerequisite for the socialist reform of agriculture, which is carried out in two ways. The choice -is determined by the peasants' interests. In countries in which the traditions of private landownership among peasants were not developed (Russia, Mongolia), the peasants spoke for nationalisation of all land, its confiscation from big landowners by the state. This land was then returned to peasants in usufruct. In other countries, in which the traditions of private landownership were strong, the peasants wanted the land allotted to them as their private property. Here nationalisation of the land was only partial. Large agricultural enterprises were set up on nationalised land, but most of the farmland became the peasants' property. In either case, the agrarian problem is solved in accordance with the slogan, "Land is for those who work it.''
__ALPHA_LVL3__ Farm Co-operativesSmall peasant farms cannot make efficient enough use of machinery or, to a large extent, they are too small for this and lack 213 the necessary funds. They cannot adequately provide for the expansion of production and for the peasants' greater well-being. The predominance of small-scale farm production in the countryside is a constant source of imbalance between agriculture and industry in which large socialist enterprises predominate. Furthermore, small peasant commodity production breeds capitalism and a stratum of exploiters---the kulaks in the countryside. This makes it necessary to reorganise small peasant production into largescale socialist-type production capable of using machinery on a large scale. This is achieved in a country building socialism by the peasants voluntarily forming co-operatives.
The co-operative plan was elaborated and validated by Lenin. Its main principles are: (1) that the co-operatives should be formed voluntarily, (2) that the reorganisation should be gradual, (3) that the state should render the co-operatives material and organisational assistance, and (4) that the form of reorganisation should be selected that meets the peasants' interests most fully, which is co-operation.
Socialist reorganisation of small commodity production can take place only on a voluntary basis. The peasants must be shown that co-operation is profitable, so they will support the idea and set up co-operative enterprises themselves. This task is easier to tackle when approached gradually. If the peasants would rather not set up a co-operative organisation of a higher type right away, initially there should be co-operatives in the sphere of circulation (consumers' and marketing co-operatives) or the simplest forms of producer co-operatives, such as mutual assistance teams, associations for the joint working of land, and so on, to be followed later by producer co-operatives of the highest type. In the Soviet Union this was originally the agricultural artel, but is now the collective farm, on which the private interests of the collective farmers, yesterday's petty commodity producers, are most happily combined with their social interests. On a collective farm there are, besides the common economy, personal subsidiary small holdings belonging to the collective farmers. Income from the common economy is distributed among the collective farmers according to the work each performs.
214In other socialist countries, where the land was allotted to peasants as their private property, an intermediate form of cooperation is used before transition to the highest form. Here the income from the common economy is distributed not only according to work done (the greater part), but also according to the share of land contributed on joining the co-operative.
Co-operatives need constant assistance from the socialist state, which grants them credits on easy terms, puts machinery at their disposal, makes the diverse experience of state farms available to them, and so on.
The co-operation of petty-commodity production in agriculture provides for the triumph of socialist production relations in a major branch of the national economy. On its basis the kulaks, extremely tenacious and dangerous enemies of socialism, are eliminated.
__ALPHA_LVL2__ 6. The Triumph of Socialism __ALPHA_LVL3__ [introduction.]At the end of the transitional period, socialist production becomes predominant throughout the national economy.
__ALPHA_LVL3__ Triumph of the First PhaseThe creation of the material and technical base of socialism and the firm establishment of public socialist ownership in its two forms, plus the entire system of socialist production relations, means that the pluralistic economy of the transitional period with its multiple production structures is replaced by socialist production throughout. The first phase of the communist mode of production is thus firmly established.
In the Soviet Union, in 1937 the volume of large-scale industrial production was eight times greater than in 1913. Eighty per cent of industrial output was obtained from new or completely modernised enterprises. The productivity of labour in industry had increased by 220 per cent. The Soviet Union became a mighty industrial country.
215Socialist enterprises began to predominate throughout the national economy. In 1937, they accounted for 99.1 per cent of the national income, 99.8 per cent of industrial output and 98.5 per cent of agricultural output (including the personal subsidiary small holdings of collective farmers, factory and office workers).
The triumph of socialism found expression in the class structure of society. The exploiters were eliminated. Factory and office workers accounted for 50 per cent of the total population. The new class of the collective-farm peasantry, together with artisans organised in co-operatives, made up 47 per cent of the population.
As a result of the triumph of socialism, the economic inequality of the different nations and nationalities inhabiting the country was abolished and living standards rose. In the USSR, the real incomes of workers in industry and construction in 1940 exceeded the 1913 level by 170 per cent, and the peasants' real incomes, by 130 per cent.
__ALPHA_LVL3__ Triumph of theThe building of socialism requires that the cultural level of the people be raised considerably. The material and technical base of socialism and large-scale machine production need skilled workers and experts with a higher or secondary education. As production grows, science and culture also advance. All this necessitates not only higher cultural and technical standards of workers and collective farmers, but also the creation of a force of intellectuals who have come from the people and are wholly devoted to it.
Elimination of the cultural lag, a sharp upswing in the general educational, cultural and technical level of the people is a component of the socialist revolution and is a cultural revolution in its own right. It implies gigantic progress in society's cultural development, a qualitative transformation of culture itself as it begins to develop on the basis of socialist ideology.
216The cultural revolution was of particular significance to the Soviet Union. In pre-revolutionary Russia, three-quarters of the population were illiterate. Towards the end of the transitional period, illiteracy had been virtually stamped out. As a result of the cultural revolution, the Soviet Union became a country of advanced science, national in form and socialist in content.
__ALPHA_LVL3__ The Historical Place of the Transitional PeriodThe period of transition from capitalism to socialism is the period of the revolutionary transformation of the old capitalist society into a new communist one. The transitional period begins when power (passes into the hands of the proletariat and ends when the main features of socialism, i.e., of the first phase of communist society, have been built. In the Soviet Union, the transitional period started in October 1917 and ended in 1937.
The triumph of the first phase of the communist mode of production---socialism, leads to radical changes in the entire social superstructure. The friendship between the peoples inhabiting the country becomes stronger, the society becomes morally and politically unified, and the domination of socialist ideology and patriotism is firmly established. Society undertakes to complete the building of socialism and to create developed socialism.
__ALPHA_LVL2__ 7. The Distinguishing FeaturesThe problem of economically backward countries passing to socialism without having to pass through the stage of capitalism or of advanced capitalism was first completely solved by Lenin. He wrote that "... with the aid of the proletariat of the advanced countries, backward countries can go over to the Soviet system . .. without having to pass through the capitalist stage."^^1^^ Thus Lenin _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 31, p. 244.
217 developed the Marxist-Leninist teachings on the transition of society to socialism. The economically backward countries and peoples were shown a clear prospect of struggle for the establishment of a new society and for liberation of the working people from all forms of exploitation. __ALPHA_LVL3__ The Main StagesThe developing countries pass through two stages of revolutionary reform. The first is the national liberation anti-imperialist revolution, a stage of non-capitalist development and socialist orientation. This is necessary because, in the backward countries the conditions for building socialism right away are not available, for the level of productive forces is very low, pre-capitalist forms of social relations predominate, there is no or hardly any proletariat, and so on.
The national liberation revolution of a socialist orientation paves the way for beginning to build socialism. People's power is established in the country; the activities of foreign monopolies are taken under control, restricted and then completely ended; banks and major enterprises are nationalised; the public sector of the economy is set up and expanded; industrialisation is launched; agrarian reforms and the organisation of co-operatives among the peasants and artisans are conducted on a large scale; control over trade is exercised, foreign trade and domestic wholesale trade in particular.
The young national states that choose a course of independent development enjoy all the necessary conditions for fulfilling these tasks. The main condition is the existence of the world socialist system. The socialist countries render the young developing states all-round aid and safeguard them from possible military attack by aggressive imperialist states. This does not mean, however, that the national liberation anti-imperialist revolution proceeds smoothly or that the tasks of socialist orientation take care of themselves. Success is won in a bitter struggle against both external and internal reaction.
218Only once productive forces have been developed in the country and industry, the material basis for the existence of the working class, has been established, all other tasks of the democratic transformation of society fulfilled, the labouring peasants, young people and middle strata in the towns, led by the working class, become consolidated into a mighty social force, and the working class, led by the Marxist-Leninist party, in an alliance with the working people of town and country has taken power into its own hands and established the dictatorship of the proletariat, only then can the country begin the stage of the socialist revolution involving the building of socialism.
History has shown the truth of the Marxist-Leninist doctrine on the possibility of attaining socialism without having to pass through the capitalist stage This was the course followed by the Soviet peoples of Central Asia and the Far North and by the working people of Mongolia. Since World War II, a similar path towards socialism circumventing the stage of advanced capitalism has been followed by the people of Vietnam.
[219] __NUMERIC_LVL1__ CHAPTER 13 __ALPHA_LVL1__ SOCIAL OWNERSHIPOwnership as an economic category expresses the relations between people arising from their appropriation of material goods or things. These relations, i.e., property relations, permeate the whole system of social production relations. The determining role is played by the ownership of the means of production, which reflects the relations between people on account of the fundamental conditions of production.
__ALPHA_LVL3__ Social Ownership of the Means of ProductionUnder socialism, social ownership of the means of production predominates. It reflects the relations between members of society, i.e., the working people in the joint appropriation of the means of production. This means that, under socialism, there is no division of society into those who have and those who have riot. Working people are the joint, collective masters of the material conditions of production. They form an association of workers who are free from exploitation, for they themselves own the means of production and this fact has abolished the exploitation of wage labour.
Social ownership of the means of production determines the new way in which labour is connected with the means of production. Whereas, under capitalism, workers deprived of the means of production have to sell their labour power to capitalists, who own the means of production, this is not necessary under 220 socialism. Working people as joint owners of the means of production directly fuse their labour power with the means of production. They do not sell their labour power to anybody so it stops being a commodity.
Social ownership of the means of production is the determining relation in the entire system of socialist production relations. It determines---besides the social forms in which the exchange of activity between members of society takes place in production ---the character and forms of the relations of distribution, exchange and consumption. All these relations are developed in the interests of the people. Social ownership of the means of production determines the content of socialist production relations in general as relations of comradely association and mutual assistance between workers free from exploitation.
__ALPHA_LVL3__ Two Forms of Social OwnershipSocial ownership of the means of production under socialism exists in two forms, viz., state (national) and collective farm and co-operative (collective-group) property. This is because the two friendly classes of socialist society, namely, the working class and the class of the co-operative peasantry (collective farmers) followed two different paths in their progress towards communism. The workers base their production on state (public) property, which emerges as a result of the nationalisation of capitalist enterprises. The collective farmers voluntarily pool their individual means of production and create co-operative property.
The two forms of social property are of one type, as both express similar relations of joint appropriation of the means of production and engender comradely co-operation and mutual assistance between the members of production.
There is, however, a difference between them, too. State property is a more advanced relationship. It expresses socialisation of the means and products of production on the scale of the whole of society. Co-operative and collective farm property is socialisation only within the framework of the bodies of cooperative members.
221The property trade union and other mass organisations need to carry out their tasks is also socialist property.
The leading and determining role in the system of relations of ownership and the production relations of socialism in general and in the development of the socialist national economy belongs to state ownership of the means of production. This is the determining factor that makes the entire national economy a single production mechanism, a single giant enterprise. It accounts for the prevailing part of all the means of production. These are state enterprises, with their productive capital, in all sectors of the economy, transport, banking, the land, subsoil, waters and forests. The means belonging to the state play an important role in the formation of co-operative production. State ownership of the means of production determines the socialist nature of cooperative property, since co-operation becomes socialist only when socialist state ownership of the means of production predominates in society. Lenin wrote: "Under our present system, co-operative enterprises ... do not differ from socialist enterprises if the land on which they are situated and the means of production belong to the state, i.e., the working class."^^1^^ Lastly, state ownership of the means of production is the main source of the progressive development of the national economy towards communism, being, among other things, the source of growth and improvement of co-operative production.
In this connection the erroneous and harmful views on socialist property as co-operative property, and proposals to transfer state enterprises to separate bodies of working people. To implement such proposals would be to undermine the foundations of the socialist economy, removing all that in which the leading and determining role of state ownership is manifested. However, eliminating state socialist property would imply ending the planned, balanced development of social production and centralised management of the national economy, as all this is connected with the existence of socialist state ownership of the means of production. The national economy would be abandoned to _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 33, p. 473.
222 anarchy, to the spontaneous market situation with all its consequences, i.e., periodic recessions, unemployment, inflation, price rises, and so on. __ALPHA_LVL3__ Two Kinds of SocialistThe two forms of socialist public ownership of the means of production are matched by two kinds of socialist enterprise, viz., state and co-operative ones. The latter are to be found in agriculture (agricultural co-operatives---collective farms), in industry, in housing construction, and so on. By their socio-economic nature, state and co-operative enterprises are similar, as they are based on forms of one type of public ownership of the means of production. They involve no exploitation of wage labour, and they function in the interests of the working people among whom relations of friendly co-operation and mutual assistance arise.
At the same time, there are distinctions between such enterprises. The means of production and products of state enterprises belong to society in general in the person of the state. The means of production and products of co-operatives belong to the members of the co-operative enterprise. The economic activities of state enterprises are planned by the state as to the entire volume of the products to be realised. Co-operatives, in particular collective farms, conclude a contract with the state to produce and sell to the state a particular volume of the produce needed by society. On the whole, the entire volume and structure of production are planned by collective farms at their own discretion. A portion of the produce is sold by the collective farms to consumer co-operatives and on collective-farm markets.
The wages of workers in state enterprises are guaranteed by the state and paid out of the funds placed at the enterprise's disposal, but belonging to the state. Remuneration for work in co-operatives is guaranteed by the co-operatives. Its source is the co-operative fund of payment for the work done. Nevertheless, the state assists the co-operatives in paying their workers, granting them credit if necessary. Besides the income from the 223 collective economy, co-op members (collective farmers) receive incomes from their subsidiary small holdings.
State enterprises are run by state-appointed managers. As for the co-operative (collective farm), its highest body is the members' general meeting, which elects a board and chairman, that manage the co-operative on behalf of the general meeting.
Under socialism, besides producer co-operatives, there are many other kinds, viz., housing co-operatives, trade, orchard-- andkitchengarden, country-cottage, garage co-operatives, and so on.
__ALPHA_LVL3__ Development of SocialistSocialist social property is constantly developing. Its forms are gradually merging, the distinctions between them fading, and with the transition to communism they will fuse into a single communist national property.
The development of state (national) property at the stage of developed socialism is characterised by the fact that the concentration, specialisation and co-operation of production, which take place as a result of scientific and technological progress, reflect a further extension of the social division of labour and a further complication and consolidation of the economic links between the different parts of the national economy. Relations between working people in the joint (national) appropriation of material goods are continually improving as the team spirit, mutual assistance and co-ordination of the activities of the participants in social production increase, development becomes still better planned and, on this basis, the management of the national economy improves.
Participants in co-operative production (collective farmers) more extensively realise state ownership immediately, which is reflected in their increasing utilisation of centralised social consumption funds, through which they are even better assured a free education, health service and social security (pensions, allowances, including sick benefits, and so on).
224Both characterise the growing socialisation of production on the basis of the development of state (national) property.
Collective farm and co-operative property also develops.
First, the growth of productive forces in agriculture makes it urgently necessary to organise inter-farm associations for construction, produce processing, the fattening of livestock, poultry farms, and so on, as well as agro-industrial complexes combining the production, storage and processing of agricultural raw materials. They are organised by co-operatives (collective farms) and state agricultural and industrial enterprises. As a result, the socialisation of production increases. If inter-farm associations are set up by co-operatives (collective farms), the socialisation of production expresses the development of collective farm and co-operative property beyond the limits of individual enterprises. The relations of collective farm and co-operative property become more mature. When inter-farm associations or agro-industrial complexes are organised with the participation of co-operatives (collective farms) and state enterprises, the growth of socialisation of production is characterised by the joint participation of state and co-operative means of production in a single production process and they are thus unified.
Second, the development of collective farm and co-operative property occurs under the impact of the growing assistance rendered to co-operatives (collective farms) by the state, which supplies them on an increasing scale with modern machinery and other means of production; trains experts; promotes the agricultural sciences; carries out reclamation and irrigation projects; grants credits to the co-operatives; and so on. As a result, cooperative (collective farm) production grows and improves. One of the manifestations of this process can be seen in the gradual drawing together of relations on co-operatives and those in state enterprises. In 1965, for example, guaranteed remuneration for work was introduced on Soviet collective farms. Net income distribution funds have been set up on collective farms, these being similar in purpose and form to those of state enterprises: the cultural and domestic purposes fund, financial aid for collective farmers fund, material incentives, production development funds, 225 and so on. Working and living conditions on the farm are becoming more and more similar to those in the cities. All this reflecst the development of collective farm and co-operative property.
Third, the development of collective farm and co-operative property finds expression in the greater significance attaching to the common economy in the growth of co-operative members' personal incomes, compared with the share coming from their subsidiary small holdings.
__ALPHA_LVL3__ Personal PropertyBesides social ownership, there is personal ownership under socialism. This expresses the relations between individual members of socialist society on the one hand, and bodies of workers and society in general, on the other, on the basis of individual appropriation mostly of personal consumer goods.
Personal property has an exclusively labour origin, i.e., it issues from the individual's own work, especially in social production. Thus, personal property expresses its connection with social property. Its objects cannot be a means of exploitation of wage labour.
Personal property under socialism develops together with the growth and improvement of social production. The amount of material goods belonging personally to the working people is increasing from year to year. At the stage of developed socialism, the quantity of articles for cultural and domestic use increases especially rapidly.
Personal property is manifested in people's individual interests, in their striving to realise these interests as fully as possible, and to satisfy their varied needs more fully. They can achieve this only by taking an active part in social production. Hence personal interests are joined and combined with those of bodies of workers and society as a whole.
One variety of personal ownership under socialism is represented by co-operative (collective farm) members' ownership in productive livestock, poultry, farm buildings and __PRINTERS_P_225_COMMENT__ 15---1921 226 some simple tools for their personal holdings. These are based on small plots allotted by the co-operatives to their members (and their families). The size of a personal holding is strictly limited and it is of a subsidiary nature. The main source of personal income is the common economy.
Personal subsidiary holdings are needed in the period of developed socialism, too, but as the common economy develops and the collective farmers' incomes received from it increase, the subsidiary personal holdings will lose their significance and gradually disappear.
__ALPHA_LVL2__ 2. Economic Laws Under Socialism __ALPHA_LVL3__ Economic Laws OperatingUnder socialism there is an economic law operating that determines the development of social production in all socio-- economic systems. It is the law of the correspondence of production relations to the character of the productive forces. The law of value also operates, its existence arising from the presence of commodity-money relations under socialism. There is also the law of extended reproduction---the need for the production of means of production to increase faster than that of consumer goods. At the same time, under socialism the laws inherent in the communist mode of production begin to operate: the main economic law, the law of planned, proportionate development of the national economy, of the steady rise in the productivity of labour, accumulation and so on. Some economic laws do not extend beyond the socialist phase: the law of the distribution of goods and services according to work done and the law of value.
As in previous socio-economic systems, the economic laws operative under socialism are objective. They are not invented and cannot be annulled or altered at will. Their effect springs from the economic conditions prevailing in society, from the predominant relations of production, the content of which they express. At the same time, the way in which they operate under 227 socialism is different from under capitalism. It is determined by the character of the socialist relations of production and the domination of social ownership.
__ALPHA_LVL3__ Knowledge and UtilisationUnder capitalism, when private capitalist ownership predominates and producers are separated from one another, economic laws manipulate people like a spontaneous and random force.
Under socialism, social production becomes a single economic organism. It is united by social ownership of the means of production. Anarchy gives place to the planned development of production. Economic laws express the content of socialist production relations of friendly co-operation and mutual assistance between workers free from exploitation. All this makes it both possible and necessary to have a knowledge of economic laws and to utilise them in the interests of society, i.e., the working people themselves. Under socialism, all members of society are interested in the development of socialist production and the speedy building of communism. All are aware that this goal will be reached the sooner, the better the economic laws are understood and put to use. For this reason, the Marxist-Leninist parties of the socialist countries take vigorous measures to develop economics and disseminate economic knowledge among the people. The operation of the economic laws of socialism is objective and therefore incompatible with an arbitrary interpretation of them or ignoring their content in economic practice. Such voluntarism is fraught with the most undesirable consequences. No fetish should be made of economic laws in the belief that people are powerless before them. Under socialism, people can not only learn the content of economic laws, but also provide the best possible conditions for their correct operation, thus providing wide scope for their fuller and more effective manifestation. In this sense, the working people under socialism become genuine makers of their own history, active builders of the new society.
__PRINTERS_P_227_COMMENT__ 15* 228 __ALPHA_LVL2__ 3. The Economic RoleThe socialist state led and guided by the Marxist-Leninist party is the body that controls social production under socialism. The economic role of the socialist state is fundamentally different from that of the capitalist state which, first, cannot control the private production predominant under capitalism, expecting obedience to its instructions, and must confine itself to economic measures; second, it cannot overcome the spontaneous operation of the economic laws; and, third, its economic influence on production is effected in the narrow class interests of the financial oligarchy.
Under socialism, the state controls social production by relying on the domination of national socialist property, on its leading and determining role in the country's economic development. In the Soviet Union the state owns 90 per cent of all means of production. The socialist state combines centralised guidance through instructions with economic incentives to economic growth, such as profit-and-loss accounting, prices, credit, and so on. State management of the economy under socialism is profoundly scientific and is based on a comprehensive analysis of the level of production and the requirements of society's economic development, and relies upon a knowledge of economic laws. Being a state of the working people, the socialist state performs its economic role in their interests. This is typically both of the state of the dictatorship of the proletariat and that of the whole people, which it becomes at the stage of developed socialism.
The economic activities of the socialist state are determined by the policies of the Marxist-Leninist party. The party, equipped with the Marxist-Leninist theory of scientific communism and a knowledge of the laws of society's development, determining the prospects for the building of socialism and communism, taking into account the country's internal and external circumstances, and expressing the interests of the people, can and does work out and successfully implements a genuinely partisan, scientific and popular economic policy.
[229] __NUMERIC_LVL1__ CHAPTER 14 __ALPHA_LVL1__ THE MAIN ECONOMIC LAWA special place in the total system of economic laws belongs to the main economic law, which expresses the main social characteristic of the mode of production, the main cause and effect relationship inherent in production relations, the relationship between the immediate aim of social production and the means for attaining it.
The natural aim of production in any society is to satisfy the people's needs, i.e., the consumption of material goods, and services. In antagonistic class society, however, the relationship between production and its immediate aim is broken in the economic interests of the ruling class---the owners of the means of production. The aim of production is here to realise the interests of this ruling class. Under capitalism, the immediate aim of production is the appropiation by the capitalists of the maximum possible profits, as the economic interest of the ruling class of capitalist society is the pursuit of profit. The aim of capitalist production is attained through the exploitation of wage labour.
Under socialism, there are no antagonistic classes and the means of production are public property, being owned by the working people themselves. In such circumstances, the immediate aim of social production is to satisfy the people's wants. The immediate and natural aims of production coincide.
The means providing for the attainment of the aim of socialist social production is its growth and improvement.
230 __ALPHA_LVL3__ The Aim of Socialist ProductionThe fact that socialism implies the development of production in the interests of the people was repeatedly noted by the founders of Marxism-Leninism. Lenin wrote that socialism signified the introduction of a systematic organisation of production "to ensure the well-being and many-sided development of all the members of society".^^1^^ These words express very well the content of the aim of socialist production. To ensure the wellbeing and all-round development of all members of society, their requirements, the variety and composition of which are determined by the socialist way of life, have to be increasingly satisfied.
Requirements keep growing and changing. It is, therefore, very important to study them systematically. Such a study makes it possible to define scientifically-founded standards of consumption of material goods and services by different sections of society, taking account of sex, age, living and working conditions, and to develop production on that basis.
Bourgeois economists deny the main economic law of socialism as it is treated in scientific socialism. They claim that production under socialism is carried on for its own sake, in order to enhance the economic and political might of the state, and not to raise the people's living standards.
Revisionists, too, distort the main economic law of socialism. Right-wing revisionists reduce the aim of socialist production to the distribution among the workers of the profits obtained by enterprises based on group ownership. They thus deny the common aim of socialist production and counter the aims of the bodies of workers in individual enterprises. Left revisionists allege that, to strive for the increasing satisfaction of the people's wants, is to revive bourgeois tendencies.
Both distort the essence of socialism, attempting to deny socialism's major advantage over capitalism.
_-_-_^^1^^ V. I. Lenin, Collected Works, Vol. 29, p. 102.
231 __ALPHA_LVL3__ The Standard of LivingThe extent to which the aim of socialist production is realised finds concrete expression in the standard of living. At the stage of developed socialism, the aim of socialist production, the main economic law in general, constitute the basic content of the economic strategy of the Communist party. Like all strategies, the economic strategy of the Communist party starts by setting its tasks and putting forward its fundamental, long-term aims. The supreme one is, as it has always been, a steady rise in the people's material and cultural standards.
The standard of living is characterised by a number of indicators, the main ones being the dynamics of real incomes, the growth and changing pattern of consumption, the provision of housing, the conditions in populated areas, the cultural and educational level, the health service, working hours, working conditions, and so on.
In the Soviet Union, the first country to have built a developed socialist society, these indicators demonstrate the people's high living standards, and the increasing satisfaction of their material and cultural wants. For example, between 1940 and 1976 real per capita incomes increased more than five-fold. The growth of real incomes is ensured by the stable prices for staple consumption items and the lowering of prices for certain kinds of goods as soon as this becomes possible. The dynamics of popular consumption are characterised by the growth of commodity turnover. Compared with 1940, this has increased almost 9-fold, and the consumption pattern is constantly improving. The more valuable foodstuffs and goods for cultural and recreational purposes are consumed in larger quantities, and the quality of goods and services is rising. Housing development is conducted on a large scale in the Soviet Union. It is worth noting that Soviet rents are very low, a mere 4-5 per cent of a family's average earnings. Much is done to improve cities, villages and other population points. Large funds are allocated for environmental protection.
232In the USSR, the problem of universal secondary education has been virtually resolved. Much attention is focussed on the further development of socialist culture and art, which play an important role in ideological, political, moral and aesthetic education and in the shaping of cultural and intellectual requirements.
The health service continues to improve, medical assistance is of better quality, and disease prevention is growing in scope. Medical care, as well as education, in the USSR is free.
The working people's leisure and recreation are ever better organised and sports activities are conducted on a mass scale.
In 1975, the working week in the Soviet Union was 40.7 hours. While the working day is being reduced, steps are being taken to eliminate manual, low-skilled and arduous jobs and a whole progamme of measures implemented for the protection of labour, making it healthier and developing its creative character.
The constant rise in the standard of living under socialism is supplemented by a series of achievements of no less importance in people's lives. These are guaranteed employment, confidence in the future for the current and future generations, a peaceful life for everyone. There is also the sense of collectivism, mutual support and assistance, the sense of being master of one's own country and the feeling of responsibility for its present and future.
__ALPHA_LVL3__ The Means for Achieving the AimThe well-being and all-round development of all members of society are achieved through the growth and improvement of socialist social production. The material and technical base of socialism provides all the necessary conditions for this.
At the stage of developed socialism, when reserves for extensive expansion of production have been virtually exhausted, intensive economic development begins to predominate. It becomes particularly important to raise the efficiency of production and quality of work. Under these conditions, the growth of production is achieved mainly by raising the labour productivity, saving raw and other materials, fuel, energy and by better 233 utilising fixed capital (machines, mechanisms, buildings, and so on). As a result, it becomes much easier to expand production.
The means used to attain the aim of socialist production are the dynamic and balanced development of social production, its greater efficiency, acceleration of scientific and technological progress, higher labour productivity, and the all-round improvement in the quality of work throughout the national economy.
__ALPHA_LVL2__ 2. The Main Source of DevelopmentThe main source of development of socialist social production is the non-antagonistic contradiction between the level of production and the people's constantly growing requirements. This contradiction is directly and immediately connected with the operation of the main economic law of socialism. It is resolved by ensuring a correct interaction and compatibility between the constantly developing aspects of a single thing, in this instance, of the aim of socialist production and the means of its achievement.
The growth of well-being and the all-round development of the members of society imply the increasing satisfaction of their needs, which are altering and increasing. Their growth is determined by the development of production and satisfaction of the old needs, for the satisfaction of one need gives rise to new ones. Marx and Engels wrote in this connection that ''. .. the satisfaction of the first need, the action of satisfying and the instrument of satisfaction which has been acquired, leads to new needs."^^1^^
Under socialism, the needs that are to be satisfied are expressed as effective demand and the benefits and services that are scheduled to be rendered to the population through the social consumption funds. Hence the first task of production is to satisfy these needs, but people's needs extend further than those mentioned above. In addition, with the development of production and the satisfaction of the existing needs, new ones arise, so, _-_-_
~^^1^^ Karl Marx, Frederick Engels, Collected Works, Vol. 5, 1976 p. 42,
234 production does not stand still, but continues to grow and improve in order to satisfy these growing needs.This contradiction, with some modifications, remains even within the higher phase of communist society. Distribution will be according to need. The reasonable needs of the members of society will be fully satisfied. Production will be stimulated by the appearance of fresh needs on the basis of the development of production and complete satisfaction of the existing ones.
People's needs under socialism do not develop spontaneously. They are formed under the impact of society. As a result, there appear such that are more and more closely in line with the socialist way of life and that promote the all-round development of the individual in communist society.
__ALPHA_LVL2__ 3. Economic Interests Under Socialism __ALPHA_LVL3__ [introduction.]The character of production relations finds expression in the economic interests of members of society. These interests are the incentives to people to work in production, to achieve their goals and satisfy their needs.
__ALPHA_LVL3__ The Supreme Economic InterestIn capitalist society, rent by antagonistic contradictions, economic interests appear as class interests, for there are no common interests under capitalism. It is different with socialist society. Here there are no antagonistic classes. The whole of society is one producers' association united by the domination of national ownership of the means of production and its leading and determining role in the national economy. This gives rise to the people's common economic interest in the growth and improvement of production with the aim of fuller satisfaction of needs.
The public economic interest under socialism is the supreme interest. In addition, there are other kinds of economic interests, viz., those of bodies of workers in different enterprises and the individual interests of members of society. They are components of the common, supreme economic interest.
235 __ALPHA_LVL3__ Economic Interests of Bodies of WorkersThe economic interests of bodies of workers and individual interests exist under socialism as independent interests. The reason for this is that labour has not yet completely matured into direct social labour. In socialist society labour is not yet the habit of working without considering the remuneration aspects. The expectation of remuneration for labour constitutes the content of the afore-mentioned economic interests. The workers of each enterprise, besides being interested in the development of social production, are interested in providing for the normal course of reproduction in their enterprise and increasing their own wellbeing, while every worker is also interested in improving the well-being of himself and his family.
__ALPHA_LVL3__ Identity of Economic Interests of Socialist Society.The individual interests of every member of society and the interests of bodies of workers are components of the joint, supreme economic interest of society, which accounts for their unity. At the same time, economic interests are distinguished as a whole and by their components, this forming the non-antagonistic contradiction of economic interests. In order that this contradiction might become a motive force behind society's economic development, it must be correctly resolved, which means combining interests. Individual interests must serve collective ones, and these must provide for the realisation of society's supreme economic interest. What is of benefit to society, must be of benefit to the enterprise; what is of advantage to the enterprise, must be of advantage to each of its workers. If, for example, society needs a set of goods or services, this set, apart from being included in the production plan, must, through series of measures, such as the system of prices at which the enterprises producing it will sell it and others providing economic incentives to enterprises, as well as through the system of payment for work and bonuses, be made of interest to the bodies of workers and individual workers, so 236 that they might want to produce this particular set. Otherwise, the interests of society, bodies of workers and individual workers may fail to coincide. There will be a (danger of disequilibrium. As a result, some goods and services may be produced in excessive quantities, while others will be in short supply.
A contradiction of interests is a concrete manifestation of the contradiction between the level of production and the growing needs of society. Under socialism, when alongside the supreme economic interest of society there exist the economic interests of bodies of workers and individual workers, the contradiction of interests is the connecting link between the satisfaction of growing needs and the development of production, which is the source of their satisfaction.
Bourgeois economists deny that there are economic interests under socialism, saying that they exist only if there is private enterprise. Right-wing revisionists allege that the supreme economic interest under socialism is the interest of the body of workers in an individual enterprise, while left revisionists say that production activities in socialist society should be based on sheer enthusiasm of the people.
In reality, economic interests do exist under socialism and they play an important stimulating role. They prompt individual workers, bodies of workers and society as a whole to try to achieve better production indices. Thus economic interests, when being realised, become material incentives to better work.
At the same time, under socialism members of society become more and more aware of the immense social significance of labour. Active participation in joint work is increasingly viewed as a prime honour and public duty. People become interested in recognition of their merit as workers not for the sake of remuneration, but for the sake of fulfilling this duty. The concrete forms and methods in which this interest is realised make up the content of moral incentives to work.
The greatest effect in the development of production is achieved when both material and moral incentives are applied, for then due consideration is given to the character of labour under socialism.
[237] __NUMERIC_LVL1__ CHAPTER 15 __ALPHA_LVL1__ THE PLANNED DEVELOPMENTThe planned development of production is a joint, conscious, and purposeful production activity. It implies control of production from a single centre and co-ordination of all parts of the production process. Under socialism planned development extends throughout the national economy to become its economic law.
__ALPHA_LVL3__ The Law of Planned, ProportionateThe character of economic ties in the social production process is determined by the relations of ownership of the means of production and its immediate purpose. Under socialism there is the domination of social ownership of the means of production, national state ownership playing the leading and determining role. The latter makes the national economy into a single production organism, one giant enterprise. Production is socialised on the scale of the entire national economy. Under socialism the working people work for themselves, for their society. The identity of their economic interests in connection with realisation of the aim of socialist production determines the unity of their production activities. All this engenders the objective need for planned, proportionate development of social production on the scale of the national economy. Planned development becomes the universal form of development of social production. It embraces production proper, distribution, exchange and the consumption 238 of material goods and services. Being characteristic of socialist production relations, the planned, proportionate development of social production becomes an economic law of socialism.
The operation of this law creates the necessary conditions for the rational utilisation of material, financial and manpower resources, making it possible to concentrate them at the decisive points and spheres for the development of the national economy. It is a powerful factor in the progress of science and technology, which is especially important during the current scientific and technological revolution. It helps to save working time and make social production more efficient. In this way, the uninterrupted, dynamic development of social production is ensured, thus demonstrating the indisputable superiority of socialism over capitalism.
__ALPHA_LVL3__ Planned Regulation of Social ProductionThe regulation of social production is the most important function of the law of the planned, proportionate development of social production. Such regulation implies the management of production from a single economic centre and co-ordination of the actions of its participants on the scale of the entire national economy. The planned regulation of production begins with taking stock of society's material, financial and manpower resources, the pattern and size of industrial and other social needs. Society's resources are distributed between the spheres and sectors of the national economy, different areas of the country and various enterprises with a view to organising production in line with social needs. Thus, all parts of social production are made strictly proportionate and well-balanced.
The law of planned, proportionate development, as a regulator of social production, interacts with other economic laws, especially with the main economic law of socialism, which determines the content and character of the national economic proportions.
The planned regulation of production is conducted as a conscious, scientifically-founded social act, implying knowledge 239 and deliberate utilisation of the economic laws operative in the national economy.
One indispensable component of planned regulation is scientific prevision (forecasting) of the expected changes in the needs of the society, in the pattern and scope of production determined by the development of society. Thus, society calculates and coordinates its actions not only for the curent period of time, but also the long term.
Planned regulation is conducted by the socialist state by giving directions that are combined with such economic levers as profitand-loss accounting, prices, credit, entrepreneurs profit, and so on, the working people taking part in this process and their initiative being heeded.
Worthy of mention in this connection are the deeply erroneous assertions by bourgeois scholars that the planned nature of social production under socialism is nothing but an arbitrary intervention by the state. Left revisionists interpret planned development in a similar way.
Right-wing revisionists also mistakenly depict socialism without its centralised state planned regulation of social production. They hold that production is regulated by the market situation and the spontaneous operation of the law of value, thus denying the operation under socialism of the law of the planned, proportionate development of social production and preaching the cult of spontaneousness and competition.
__ALPHA_LVL2__ The Impossibility of Planned DevelopmentThe planned development of social production is possible only under socialism, not capitalism. However hard bourgeois economists try to prove the opposite, events stubbornly disprove their allegations. Under capitalism there is only a need for planned economic development, this springing from the social character of capitalist production, but the domination of private ownership prevents this need from being fulfilled.
Capitalist enterprises, isolated one from another by private 240 ownership of the means of production, operate on their own account. They cannot co-ordinate their actions either with one another or with the social demand for their products. In the capitalist world, anarchy prevails in social production.
Under imperialism, especially under state-monopoly capitalism, the capitalist countries attempt economic regulation and programming through government intervention. The ideologists of imperialism hasten to convince the public that such actions by bourgeios states are nothing but planned development of the economy, that they signify the appearance of a new ``planned'' capitalism, capable of overcoming its vices and providing for crisis-free development. In reality, capitalist economic regulations and forecasting are an attempt by the bourgeois states to influence production by providing economic incentives with a view to directing its development in the interests of the financial oligarchy. This does not eliminate the domination of private capitalist ownership nor the anarchy in social production, and is incapable of giving direction to the economy. It therefore has nothing in common with planned development. Marx wrote: "The essence of bourgeois society consists precisely in this, that a priori there is no conscious social regulation of production."^^1^^ This is proved by the recurrent economic crises accompanied by deep slumps in production, the squandering of material values, unemployment, inflation, all of which are still characteristic of the state of the capitalist economy.
__ALPHA_LVL2__ 2. Ensuring Correct ProportionsPlanned development is a production relation implying the objective need for co-ordination of all parts of social production, i.e., proportionate development of the national economy. _-_-_
^^1^^ K. Marx and F. Engels, Selected Works, in three volumes, Vol. 2, 1977, p. 419.
241 Lenin wrote: ``Constant, deliberately maintained proportion would, indeed, signify the existence of planning."^^1^^Proportionate distribution of material and manpower resources between economic sectors takes place in every society with a social division of labour. Marx 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. . ."^^2^^
In capitalist society, the national economy has a spontaneous equilibrium that is the average of the constant violation of equilibrium, i.e., as disequilibrium. It occurs because of the anarchy of social production, when each enterprise pursues its own private interests.
Under socialism, equilibrium becomes a function of society's conscious activity managed from a single economic centre. The balance of the economy is not only calculated, but also maintained. All parts of the national economy are organised and co-ordinated so as to make production as efficient as possible and to achieve the best results with the least input of means of production and labour. In managing this process, the state planning bodies work out the optimal economic proportions.
Imbalance is, however, possible under socialism, too. It emerges as a result of planning errors, unexpected changes in social needs, natural disasters, and so on. To prevent and cope with this, special reserves of production capacity, raw materials, fuel and consumer goods are accumulated. With the help of the reserves, all enterprises can work without interruption and, consequently, high growth rates are maintained.
__ALPHA_LVL3__ The Types and CharacterThe proportions that are established and maintained in the national economy of a socialist society are varied, but they may be divided into groups.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 3, p. 617.
~^^2^^ K. Marx and F. Engels, Selected Works, in three volumes, Vol. 2, p. 419.
__PRINTERS_P_241_COMMENT__ 16---1921 242General Economic Proportions. These are the ratios of the growth of the aggregate social product to the national income, of consumption to accumulation, of the productive to the nonproductive spheres, of Department I (production of the means ot production) to Department II (production of the consumer goods) of social production, and so on. They embrace the economy as a whole and define the dynamics of its basic structure.
Inter-sectoral proportions. The most important of these is the ratio of the development of industry to that of agriculture. They also include the proportions between the branches of industrial and agricultural production. These define the structure of the production of the aggregate social product and the changes that occur in this structure.
Intra-sectoral and intra-factory proportions. These embrace the production of specific kinds of goods and express the links in the process of the development of this production.
Territorial proportions determine the relations in the dynamics of production in the different areas of the country. Territorial proportions are formed taking account of the comprehensive economic development of the different areas and the rational distribution of industry throughout the country. They are of great importance to the scientifically-based utilisation of the country's natural and labour resources.
The content of national economic proportions is determined by the needs of the developing society, the operation of economic laws, the level of production, the available material, financial and manpower resources, progress in science and technology, and so on. In other words, the balance of a socialist national economy is achieved on a strictly scientific basis, with due regard for the specific conditions under which social production is developing.
__ALPHA_LVL2__ 3. Management of the National Economy __ALPHA_LVL3__ [introduction.]Planned, proportionate development of social production is implemented during the management of it.
243 __ALPHA_LVL3__ The EssenceA socialist economy is a single production organism developing according to plan, and therefore must be managed. Marx wrote: "All combined labour on a large scale requires, more or less, a directing authority, in order to secure the harmonious working of the individual activities, and to perform the general functions that have their origin in the action of the combined organism. . ."^^1^^
Economic management under socialism is fundamentally different from economic management in capitalist society. There it is confined to private enterprises, companies and monopoly corporations. Although bourgeois governments try to direct their countries' economy in general, stepping up their intervention in every possible way, this ``direction'' runs up against the blind wall of capitalist private property and anarchy in social production, as capitalist production is regulated by the market situation, by the spontaneous operation of the law of value.
Under socialism, the entire economy is managed, this involving a system of organisational economic measures that provide for the continuous and purposeful, co-ordinated functioning of the national economy. Management includes the following components: organisation of management (provision of the organisational structure for management), economic planning, utilisation of appropriate economic methods and provision of economic incentives to produce. The central management body under socialism is the state.
__ALPHA_LVL3__ The Basic PrinciplesUnity of political and economic management is a basic principle of the organisation of economic management. This principle ensues from the leading role of the Marxist-Leninist party in the development of social production. The party determines the prospects for the country's social development, elaborates _-_-_
~^^1^^ Karl Marx, Capital, Vol. 1, 1975, p. 313.
244 economic policy and determines the economic strategy and tactics. It also directs the activities of the economic bodies, supervises their work, selects and trains economic personnel. In this way, the Marxist-Leninist party together with governmental economic management bodies, which it does not replace but supervises, implements the unity of the political and economic guidance of society.Of great importance in the organisation of management is the principle of democratic centralism. This implies a combination of centralised state leadership of the national economy with the broad participation of the working people in the management of production at all levels. The people take a most active part in the work of the highest legislative and local government bodies. Participation by the working people in the management of production is implemented through the activities of mass organisation (e.g., trade unions), people's control bodies, standing production conferences in enterprises, and so on.
Democratic centralism in management, like all other systems of economic management, is being continually improved. Both principles of democratic centralism must be enhanced simultaneously. On the one hand, centralism must be developed, thereby raising an obstacle to departmental and parochial tendencies. On the other hand, so must democratic principles, the initiative of the people, relieve the upper management echelons of minor matters, and provide for prompt and flexible decision-making.
A combination of sectoral and territorial economic management is one of the principles of management. Under socialism, especially at the stage of developed socialism, when sectors of the economy become powerful, well-equipped and exceedingly complicated systems, it is important to provide for the development of production and the unity of economic and technical policy primarily in sectoral terms.
It is no less important, however, to ensure the development of production in territorial complexes. This is necessitated by the interests of specialisation and inter-sectoral production cooperation within the limits of territorial and economic areas. Both the one and the other must be correctly matched.
245In the Soviet Union, the organisation of two- and three-tier management systems in diverse branches of industry and construction, is being completed. These are worked out on the basis of general schemes, while the organisational pattern of management in non-productive branches is improved. The central place in these measures belongs to the establishment of associations. At the same time, territorial management, too, is improved. In particular, much attention is focussed on comprehensive development of the economy in the Union republics and setting up territorial industrial and agro-industrial complexes.
__ALPHA_LVL2__ 4. Planning Social Production __ALPHA_LVL3__ [introduction.]Planning is a most important element of economic management. Consequently, like management in general, it is a system of organisational economic measures aimed at implementing the economic law of planned, proportionate development of social production. Its concept includes the drafting of economic plans and supervision of their fulfilment. In planning practice a series of fundamental requirements have evolved that provide for maximum efficiency.
__ALPHA_LVL3__ The Main PrinciplesThe most important planning principle consists in its party spirit. In socialist society, planning has a truly partisan character. It embodies the economic policy of the Marxist-Leninist party. Every economic plan represents a particular stage in the implementation of the party's programme and is aimed at the building of socialism and communism.
Of no less importance is the scientific substantiation of economic plans. In the planning process, account is taken of the sum total of socialist economic laws, the level of production, social needs, the latest scientific and technological advances, all that is new and progressive which appears in the course of the building of socialism and communism. Noting the importance 246 of scientific substantiation of plans, Lenin wrote that "our extensive plans in this field are not fantasies, but are borne out by and based on technology and science."^^1^^ The documents of the CPSU stress the need to improve further the scientific substantiation of planning, taking fuller account of social needs and their satisfaction using material, financial and manpower resources most efficiently, balancing plan targets, combining sectoral and territorial planning still better, making more use of a programme-objective approach drafting comprehensive programmes and improving the system of planning standards and indicators with a view to allotting them a role in increasing production efficiency.
The principle of democratic centralism is also reflected in planning. The need to combine closely centralised, planned management by the state and economic independence in planning by local authorities, economic bodies and enterprises aimed at the maximum utilisation of the local production reserves and the creative activity of the people in drafting and carrying out plan targets is an objective law of socialist production.
In the Soviet Union, at present industrial associations and independent (non-amalgamated) enterprises receive centralised plan assignments from their ministries according to ten indicators, viz., the overall volume of sales, the basic product range, the wages fund, material and technical supply, the introduction of new machinery, capital construction, growth in labour poductivity, total profits, payments into the state budget and allocations from the budget. This is necessary in order to assure the general economic balances as planned. Everything else is planned by the associations and enterprises themselves, using their possibilities, reserves and the workers' initiative.
Once the economic plan has been approved by a legislative body (the Supreme Soviet in the USSR), the plan becomes a law binding on all organisations and citizens. This expresses the fact that the plan is a directive. It demonstrates particularly clearly the essential difference between socialist planning and _-_-_
~^^1^^ V. I. Lenin, Collected Works, Vol. 30, p. 334.
247 capitalist economic programming, which is purely advisory, and the advantage of the former over the latter.Bourgeois economists seek to distort the essence of socialist planning by counterposing centralism to the democratic character of planning and identifying the binding nature of the plans with voluntarism, with the state allegedly issuing ill-founded orders. In reality, this is far from the case. Moreover, centralism and democracy, and the binding nature of planning are thoroughly substantiated scientifically and play a decisive role in making planning highly efficient.
Of great importance in planning is the principle of the continuity of planning and the combination of long- and mediumand short-term plans.
Long-term planning is an instrument for speeding up the development of productive forces by using the results of scientific and technological progress and solving the major socio-- economic problems involved in building socialism and communism. The best planning term for this purpose has been found to be a period of fifteen years. The Soviet Union and the other socialist countries have drafted and are now implementing economic plans for the period up to 1990.
The main form of forward planning is medium-term plans (five-year plans). They determine the main guidelines for the socialist countries' economic development for five years ahead.
A major role is played in planning by short-term or current plans. They specify the five-year plans with reference to a shorter time interval, making it possible to introduce corrections into the five-year plans and provide for planning continuity. Shortterm plans are usually drafted for one year.
Five-year and annual plans are drafted not only on a nationl economic scale, but also for each association and enterprise.
__ALPHA_LVL3__ Planning MethodsThe efficiency of planning is largely determined by the methods used. The drafting of a national economic plan starts with 248 the scientific forecasting of the expected change in social needs, social production, scientific and technological progress, demographic processes, and so on. On this basis, the strategic direction of economic development for the period is worked out, and the main content of the plan determined.
In drafting an economic plan, they also use a comprehensive, systems method of planning. The national economy is regarded as a single economic complex, one socio-economic system with a multiplicity of interrelated and interdependent subdivisions and development spheres.
In the documents of the CPSU, considerable attention is focussed on improvement of the comprehensive planning method. The importance is stressed of drafting comprehensive programmes on major scientific and technical, economic and social problems. The documents point out the need to improve the comprehensive planning of economic and social development, not only on a national economic and sectoral scale, but also for smaller units, such as associations, enterprises, areas and cities.
The main method of planning is the method of balances. The method of balances is a system of interrelated indicators whereby society's needs and the means for satisfying them ( resources) are co-ordinated. Balances help to keep the economy in equilibrium. They show up bottlenecks, so that the necessary readjustments can be made and the balance restored.
In the process of planning, material (physical), cost ( financial) and labour (manpower) balances are drawn up.
Material balances help in co-ordinating the production and consumption of a product or group of products in physical terms, and in determining the relations between industries.
Cost balances co-ordinate the sources of finance in terms of money and the requirements for the finance. Cost balances are: the national income balance, the State Budget, the balance of personal incomes and spending, the balances of enterprises, and so on.
Labour balances are drawn up in order to see that the national economy is provided with the necessary number of workers with specific skills and trades. The balances co-ordinate the 249 requirements for labour with the sources for satisfying them.
The USSR and the other socialist countries draft an interindustry balance of the production and distribution of the social product.
The overall economic picture is reflected in the national economic balance, which brings together all the indicators characteristic of the main proportions of the country's economic development.
In compiling the balances, like in planning generally, mathematical economic methods are employed, involving the use of computers.
__ALPHA_LVL3__ Distinctive FeaturesGo-operative (collective farm) production is based on cooperative ownership of the means of production. Nevertheless, relying on the leading, determining role of national ownership, the socialist state plans co-operative production, too. The planning of co-operative (collective farm) production has some distinctive features, however. The central planning bodies give state enterprises some basic indicators that are binding on them and determine their production activities. Go-operative enterprises (collective farms) receive from the state a plan-order committing them to sell to the state so much farm produce over a number of years. The plan-order is the basis on which co-operative enterprises draft their overall production plans, which are drafted independently by co-operatives, taking account of their own resources and the aid they are to receive from the state in terms of farm machinery and other means of production, scientific development and the training of machine operators and other necessary experts.
[250] __NUMERIC_LVL1__ CHAPTER 16 __ALPHA_LVL1__ COMMODITY-MONEY RELATIONS __ALPHA_LVL2__ 1. Commodity-Money RelationsThe reason for the persistence of commodity-money relations under socialism is, first, that there are two forms of social socialist ownership of the means of production, which relatively isolate co-operative enterprises economically from one another and from the public sector of the national economy. Co-- operatives and the state interact by exchanging commodities. Second, another reason for the existence of commodity-money relations is the incomplete maturity of direct social labour under socialism, which is manifested, among other things, in the workers, including those in state-owned enterprises, having an economic interest in the results of their production. This material interest implies that the economic activities of enterprises are remunerated through an exchange of the products of work, which thereby become commodities. State enterprises are, therefore, also relatively isolated economically.
Commodity relations under socialism, unlike capitalist relations, rest not on private, but on social ownership of the means of production. In socialist society, the producers are the socialist enterprises.
Commodity relations under socialism are devoid of the antagonisms inherent in capitalism. They do not lead to the exploitation of other people's work. Commodity-money relations under socialism are a concrete manifestation of socialist production relations, developed according to a plan in order to satisfy people's growing needs as fully as possible.
251Commodity-money relations under socialism, unlike capitalist relations, cover a limited sphere.
Labour power is no longer a commodity. In socialist society, neither enterprises nor land can be bought or sold.
Nevertheless, the smaller scope of commodity production certainly does not mean that commodity-money relations in socialist society must be forcibly curtailed. They must be skilfully combined with the advantages of social production and used to promote it.
The trend in the development of commodity relations under socialism is fundamentally different from under capitalism. They do not lead to the bankruptcy of one and the enrichment of another enterprise, as is usually the case in commodity production under capitalism. The economic conditions do not breed commodity-capitalist tendencies in the business activities of socialist enterprises, nor make them capitalist enterprises.
__ALPHA_LVL2__ 2. Commodity and Its Properties __ALPHA_LVL3__ Use Value and Value of CommoditySpecific features of socialist production are manifested in the characteristics of the commodity, the product of commodity production, and of its source, the labour of commodity producers.
Under socialism, too, every commodity has a use value and value, which express its dual nature. Use value is the ability of a thing to satisfy some human need. Its meaning in socialist society is entirely different from that in capitalist society. Capitalists are interested in the production of certain use values because they embody value and surplus value, for value cannot exist without use value.
Under socialism, the aim of social production is to promote the well-being and all-round development of the members of society. For this reason, the production of use values in ever greater quantities, of ever greater diversity and better quality, meeting the people's growing requirements, is of the first importance.
252The other side of the commodity is its value.
Value is, as we know, the abstract labour of commodity producers, embodied in the commodity. Unlike under capitalism, the value of commodities produced in socialist enterprises is the labour of the workers in socialist enterprises embodied in the commodities, which is free labour, labour for the worker himself, for his own society. The value of the commodity under socialism expresses socialist production relations. This is a major characteristic of commodity-money relations under socialism.
The magnitude of value is determined by the amount of labour expended to produce the commodity. The amount of labour is measured by its duration, i.e., by labour time.
A distinction must be drawn between the individual and social value of the commodity. The individual value is determined by individual expenditures of labour, i.e., by the average time it takes to produce a commodity in an individual enterprise. Social value is determined by the socially necessary expenditures of labour, measured by the average labour time it takes to produce a commodity in a given society.
Social value is an objective magnitude. Under capitalism it is formed spontaneously. In socialist society, people consciously influence its formation, on the basis of a plan. Using all the factors contributing to higher productivity of social labour, socialist society creates the conditions for saving socially necessary labour, and consequently, for reducing the social value of output. This is essential to lowering the prices of goods.
__ALPHA_LVL3__ Prices of GoodsSocial value is expressed in the price of the commodity, which is the money form of value, and its components, cost and net income. In socialist society, there is no spontaneous play of prices, which are planned by the state. The basis for planning prices is the average cost in an industry, plus a certain amount of net income.
The cost consists of enterprises' expenditures, expressed in 253 money form, on the means of production consumed and remuneration for labour.
Net income is the difference between price and cost. It is the form in which the value of the product for society is expressed, i.e., the share of the products created by workers in socialist enterprises which is over and above that described as the product for oneself. The value of the latter is distributed among the workers according to work done. Net income appears in two forms, viz., as the profits of enterprises and turnover tax. Profit is obtained by enterprises in amounts depending not only on the volume of output and prices, but also on efficiency. Profit at given prices will be the higher, the more products of better quality are turned out and the lower the cost.
The turnover tax, like profit, is included as a certain percentage of the price of the commodity. Immediately after sale, the turnover tax is deducted for the state and is, therefore, a a form of centralised net income.
Under socialism, there are several kinds of prices, each serving a function of its own.
The following are the prices employed in the Soviet Union:
1. Wholesale price of the enterprise.
2. Wholesale price of the industry.
3. Purchasing price paid for the agricultural produce of collective and state farms.
4. Retail price employed in state and co-operative trade.
5. Collective farm market price.
At wholesale enterprise prices enterprises sell goods to other enterprises and sales agencies. The wholesale price of the enterprise consists of the average cost planned for the industry, plus a fixed amount of profit.
At wholesale industry prices products are sold by sales agencies to commercial organisations. This price is based on the wholesale price of the enterprise, plus planned profit and expenditures on maintaining sales agencies and the turnover tax.
At purchasing prices collective and state farms sell agricultural produce to the state. Purchasing prices are differentiated according to natural and economic regions, because costs widely 254 differ from one area to another on account of the greatly dissimilar natural conditions. Purchasing prices are fixed at the highest level for regions with the worst natural conditions, and at the minimum level for those with the best natural conditions.
The final prices at which citizens buy goods in state and cooperative shops are retail prices. They are made up as follows: planned average cost, the enterprise's profit, turnover tax, the costs and profit of the sales agencies of the industry or wholesale commercial organisations, and the costs and profit of retail trade enterprises.
Collective farm market prices are formed somewhat differently. They are not planned by the state, but largely depend on supply and demand. The state does use its commodity reserves, however, to exert a regulating influence on the price level on the collective farm market. When goods are in sufficient supply in state and co-operative shops and on the collective farm market, market prices tend to be similar to the planned retail state and co-operative prices.
Being a form of value, price shows how value changes. As a result of a higher productivity of social labour, value decreases. It becomes possible to lower prices. In 1975, for example, Soviet state retail prices of consumer goods stood at 75 per cent of the 1950 level. In the tenth five-year plan period (1976--1980), like in the preceding one, state retail prices for staple foodstuffs and other staple goods were kept stable, while those of some goods were lowered when the opportunity for this arose, and a stock of commodities was built up.
__ALPHA_LVL2__ 3. Money in Socialist Society __ALPHA_LVL3__ The Essence of MoneyThe existence of money and money circulation in socialist society is due to commodity-money relations. The value of goods cannot be expressed otherwise than in price, which is the money form of value.
255Money under socialism differs from that in capitalist society, where it is used as capital, i.e., a means for exploiting wage labour. Under socialism, money cannot become capital. In socialist society nobody can hire workers in order to exploit them, i.e., nobody can appropriate the workers' unpaid labour.
Under socialism money is a means for conducting a planned economy in the interests of the working people.
Only a commodity that has a value of its own can, of course, be money. Gold is such a commodity, but it does not function in the sphere of circulation in the socialist countries. It is represented in circulation by paper money issued by the State Bank. In the Soviet Union, the rouble represents 0.987412 grammes of pure gold.
A high stability of money is a major advantage of socialism over capitalism. Money neither does nor can enjoy such stability in capitalist countries, where nobody can say today what his money will buy tomorrow, let alone the day after. The purchasing power of money in capitalist society is unstable and inflation is intrinsic.
It is different under socialism. The purchasing power of money here acquires extraordinary stability. It is guaranteed by the goods that come into circulation as enterprises fulfil the government production plan for sale at fixed, planned prices.
__ALPHA_LVL3__ Functions of MoneyMoney in socialist society performs the functions of the measure of values, medium of circulation and means of payment, socialist accumulation and people's savings. The function of universal money in socialist society is fulfilled by gold. The national currency is not issued on the world market. Payments for foreign trade transactions are made on a reciprocal delivery basis or in foreign currency. Gold as a means of purchase and payment in foreign relations is used extremely rarely.
The function of universal money in relations between the socialist countries belonging to the Council for Mutual Economic Assistance (GMEA) is fulfilled by the transferrable rouble (see Chapter 19).
256 __ALPHA_LVL2__ 4. The Law of Value __ALPHA_LVL3__ Law of ValueCommodity-money relations are always associated with the operation of the law of value. Under this law, the exchange of commodities is effected according to the amounts of socially necessary labour that went into their production, i.e., according to their social value.
The law of value operates in socialist society through the mechanism of planned price formation.
Prices are planned taking account of the law of value. They are fixed not on the basis of individual values, but on that of social value. Goods of superior quality are priced higher, as better quality requires an additional labour input.
In planning prices, supply and demand are also taken into account. In socialist society supply and demand are calculated in order to balance them.
Nevertheless, under socialism, they may fail to coincide for individual kinds of goods. The constant increase and improvement in production and the steady growth of the people's wellbeing are invariably accompanied by a rise and structural changes in social needs. This entails a change in the demand for goods currently produced, often creating a very great demand for new ones and ones of superior quality. The changes in society's needs are taken into account when the new plan is drafted. It is not always possible, however, to adjust the scope of production promptly to the demand for certain goods. This is so, for instance, when there is not enough production capacity or raw materials to produce goods in high demand. The reverse also happens, when supply begins to outrun demand. Very often the demand for out-of-date or obsolete goods drops, shifting to others, and is no longer in keeping with the scope of production.
The supply and demand ratio is taken into account in planning prices. When demand exceeds supply and it is impossible to balance them quickly by expanding the production, prices may be raised in order to limit demand. At the same time, when 257 relatively high prices are fixed for such goods, measures are taken to expand their production. Conversely, when the supply of some items greatly exceeds the demand for them, production is halted and prices lowered, otherwise a glut may occur.
In the process of planned price formation, a deviation of price from value is also possible when there is no discrepancy between supply and demand. A deviation of wholesale prices is used as a powerful economic method for stimulating or limiting the production of some good or other.
A deviation of retail prices from the value of consumer goods is employed to effect a characteristically socialist social policy in the sphere of the people's well-being.
To create a high demand for prime consumer goods, prices are set at a relatively low level. Also relatively lower are those for items used to maintain health (medicines, etc.) or, for instance, promote culture (textbooks, etc.) and those for children's goods, such as children's clothing, toys, and so on. Rent, rates and fares are low. Thus, it becomes necessary to make up what is lost from the price reductions enumerated above, so another group of goods is selected and priced relatively high. These are usually articles that cannot be described as necessities, e.g., jewelry, expensive furs, cut glass, and so on, or items that are better consumed in moderation, e.g., vodka and cigarettes. Deviations of prices from value are thus mutually balanced.
__ALPHA_LVL3__ The Operation and UtilisationThe operation of the law of value in production consists, above all, in the fact that here the value of goods is formed, individual values being reduced to social value.
This is done by means of the money forms of value, viz., price and its components, i.e., cost and net income (enterprises profit). Individual values of goods are partly expressed in the form of cost in different enterprises. There are also the wholesale prices in production, which are a form of expression of social value. A comparison of the average cost and wholesale price of a __PRINTERS_P_257_COMMENT__ 17---1921 258 product yields the net income derivable from the sale of that product. In this way, individual value is compared with, and reduced to, social value.
The money forms of value, i.e., price, cost and profit, have a great impact on socialist production, but they do not regulate it, as they do under capitalism. The law of value under socialism is not a regulator of social production.
Under socialism, social production is regulated on the basis of the law of planned, proportionate development, which operates as a regulator of production in close conjunction with the main economic law.
Bourgeois economists, however, consider the law of value, the spontaneous price mechanism, to be the sole regulator of production.
They are echoed by right-wing revisionists, who claim that ``real'' socialism is "market socialism'', under which the law of value operates as a spontaneous regulator of social production. In their opinion, it must operate through the market mechanism, through the spontaneously emerging market situation. They deny the need for centralised planned management of the national economy and allege that prices become really effective only when they form spontaneously under the impact of supply and demand.
In reality, "market socialism" implies no more than a transfer of the objective characteristics of capitalism to socialist society.
__ALPHA_LVL3__ The Operation and UtilisationThe law of value also operates in the sphere of circulation. It applies to the material and technical supply of socialist enterprises, wholesale and retail (state and co-operative) trade and trade on collective farm markets. Here the law of value operates in the acts of sale and purchase, when the prices of goods are realised. The more correct and economically justifiable the planned prices, the smoother this process.
The sale of goods at economically reasonable prices has a great impact on production. It provides profit out of which 259 production costs can be replaced and funds accumulated. Depending on the price level and average cost, production may or may not be profitable. This cannot fail to affect the enterprises' economic activities and make their workers interested in one kind of product or another, so it must affect the proportions of social production set by the national economic plan.
Correctly fixed prices promote prompt sales, so that the turnover of financial resources is accelerated throughout the economy. As a result, the growth rates of social production increase.
[260] __NUMERIC_LVL1__ CHAPTER 17 __ALPHA_LVL1__ THE FINANCIAL AUTONOMYThe main links in socialist production are enterprises and associations. These turn out products that provide for the growth and improvement of the social product and satisfy the people's increasing needs.
Social needs are reflected in national economic plans. Socialist enterprises are obliged to fulfil the plan assignments set by the socialist state.
Yet, to fulfil the plan assignments efficiently, i.e., to turn out high-quality products satisfying social needs, and do it with minimum means of production and labour inputs, the workers must be economically interested in performing well. This is done by introducing the method of profit-and-loss accounting in socialist enterprises and associations.^^1^^
This expresses the relations of production between society in general, as represented by the socialist state, and the socialist enterprises, and between the socialist enterprises themselves. In these relations, a combination is achieved of the economic, material interests of the workers and the supreme interest of society in producing the goods and services it needs. Thereby an identity of interests of society and bodies of workers is attained. When enterprises are financially autonomous, social production is organised in a planned way, involving the use of commodity-money relations and material incentives to good work.
_-_-_~^^1^^ Everything said below on profit-and-loss accounting in enterprises also applies to associations.
261Lenin repeatedly called attention to the importance of financial autonomy to the building of socialism, and its connection with material incentives. He wrote that socialism should be built not "directly relying on enthusiasm, but aided by the enthusiasm engendered by the great revolution, and on the basis of personal interest, personal incentive and business principles.. ."-^^1^^
The requirements that self-supporting socialist enterprises have to fulfil called the principles of profit-and-loss accounting.
__ALPHA_LVL3__ Managerial and OperationalThe managerial and operational autonomy of socialist enterprises is the major principle of their financial autonomy. This managerial and operational autonomy is not boundless, however, but only permitted within the limits of the national economic plan.
To arrange their business activities strictly in keeping with the needs of socialist society, enterprises must fulfil the plan assignments set by the state. That is law. Even so, no plan, however perfect, can keep track of all the specific conditions under which enterprises operate, or all the latent, as yet untapped reserves for the growth and improvement of production.
So, in order to mobilise the workers in an enterprise to fulfil the state plan in the best way possible, bearing in mind the rapidly growing and changing needs of society, and to get them interested in doing so, the enterprise is given some autonomy and the funds enabling it to exercise this. The state remains the owner of these funds. The enterprises can only use them to carry on their independent business activities. They are given the status of a legal person, i.e., they can enter into business contract relations with other enterprises, engage personnel, arrange procurement, production and sales. The enterprises keep an account in the State Bank, enjoy bank credit, have their own financial accounts reflecting the state of their operations, and so on.
_-_-_~^^1^^ V. I. Lenin, Collected Works, Vol. 33, p. 58.
262Go-operative enterprises are autonomous by definition. They operate using their own co-operative funds.
__ALPHA_LVL3__ Solvency of Production ActivitiesThe next, equally important principle of profit-and-loss accounting is that the enterprises pay their own way. They cover their expenditures on production with the funds obtained from the sale of their poducts. In this way, their operations are made directly dependent on commodity-money relations---on the sale of products, purchase of the necessary means of production and the use of value forms such as price, cost, profit, and so on, which make it possible to take account of the sum total of expenditures on the consumer means of production and remuneration for labour, compare results with expenditures and manage production.
It is important for self-supporting enterprises to be profitable. The means an enterprise obtains from the sale of its output, must both cover its costs and provide a profit. Out of the profit, funds are formed for satisfying the needs of enterprises and their workers. A portion of the profit is contributed to the state budget, forming the state's centralised net income.
__ALPHA_LVL3__ Material ResponsibilityThe next principle is that self-supporting enterprises, which have a material incentive to perform well, are also materially responsible for the results of their work.
The commodity-money relations between socialist enterprises are based on business contracts concluded by them. Such contiacts stipulate the range and volume of output, quality, terms of delivery, prices, the time and terms of payment, and so on.
Fulfilment of business contracts plays a decisive .part in ensuring the enterprise's smooth operation and timely fulfilment of state economic plans. This makes it urgently necessary that business contracts be constantly improved and their role in the 263 relations between enterprises increased to raise the latter's responsibility for the fulfilment of such contracts. In this connection, society regards the extent to which an enterprise has fulfilled its contract as a major indication of the fulfilment of the national economic plan.
If enterprises violate the terms of the contract, delivering goods of inferior quality and with delays, not paying promptly, and so on, they have to pay fines to the other party. These fines are paid out of profits, the less of which remains, the worse the financial position of the enterprise.
Furthermore, when contract delivery commitments and obligations are not fulfilled, managers forfeit their bonuses.
__ALPHA_LVL3__ Control OverThe performance of a socialist enterprise is checked by state bodies to which it is subordinate, e.g., ministries, and people's control bodies.
Specific control over the performance of enterprises is exercised by the State Bank. All socialist enterprises keep their spare money in the bank, where they keep special accounts. They also make payments to other enterprises and send money to the State Budget through the bank, and obtain credit from it when necessary. Accordingly, the State Bank has a perfectly clear picture of the financial state of every enterprise.
Intra-Factory Profit-and-Loss Accounting
Profit-and-loss accounting, and a comparison of actual arid planned indicators are widely used to check on the operations of shops, departments, sections and teams in enterprises. This is the basis for organising financial autonomy within enterprises (factories, co-operatives). The sub-departments of enterprises are less autonomous than the complete enterprise. They are not legal persons, they cannot sign contracts with other such departments or enterprises to sell their output or buy means of 264 production. Nevertheless, they have their plant and other means of production reserved for them, are given a plan assignment covering the production of a certain output, its cost, and so on. To get their workers interested in good results, their material incentives are made directly dependent on fulfilment of the plan. For this, the afore-mentioned accounting and control are necessary.
When employed fully and correctly, the financial autonomy of enterprises is an effective means for developing socialist social production. This is why its principles are distorted in every possible way or altogether denied by bourgeois theorists. There is no unity of opinion among them concerning the system of socialist profit-and-loss accounting, but two basic standpoints can be singled out from their diverse opinions. One group maintains that the profit-and-loss accounting in a planned economy is purely symbolic, that it is nothing more but a series of rules drafted for the benefit of factory managers, a manager's code of conduct, so to say, and that the managerial and operational autonomy of enterprises and the contract system are purely arbitrary.
The other group of bourgeois economists views the profitand-loss accounting under socialism out of its historical context, blurring the fundamental distinctions between the socialist and capitalist systems.
Both are gravely mistaken, as is testified by this account of the essence of the method and its principles.
__ALPHA_LVL2__ 2. The Incentive RoleSocialist society is interested in the assets of enterprises being utilised to the best effect, in the plant being loaded to capacity and kept as busy as possible; in economies of raw and other materials, fuel and power; in output being sold and means of production purchased for a minimum expenditure of current assets, and so on.
265For this purpose, a whole range of incentive measures are applied.
Payment for assets is one of them. In the Soviet Union, every state-owned enterprise has to contribute a certain fixed amount of profit to the state budget. This contribution depends on the size of the enterprise's fixed assets (buildings, installations, plant, etc.) and current assets normalised (raw and other materials, fuel, inventories, financial resources, etc.) and usually amounts to 6 per cent of their value.
The purpose of the payment for assets is to get enterprises financially interested in the thrifty and efficient use of productive assets. Payment for assets is in direct proportion to their size, so the greater the profit per unit of fixed and normalised current assets, the more remains at the disposal of the enterprise.
__ALPHA_LVL3__ The Incentive Role ofThere are a number of incentive funds in Soviet enterprises that are formed from profit. These are: the production development fund, material incentive fund, and the social and cultural measures and housing construction fund.
The first is the production development fund, which comes from three sources, viz., deductions from profit; partly from depreciation allowances for the complete replacement of fixed assets, and money obtained from the sale of surplus equipment.
The production development fund is set up in enterprises to finance investment in new machinery, modernisation, and so on.
Deductions from profits into the production development fund are in direct proportion to profits. At the same time, they are directly dependent on fulfilment of annual plans for the growth in sales or profits and for profitability.
Thus, a direct relationship is established between the possibilities of technically improving and expanding production and the performance of the enterprise.
The second fund, which is also formed from deductions from 266 profit, is the material incentive fund. This is the source of bonuses for the best individual results, special allowances, and prizes for the leaders of the factory socialist emulation movement.
The fund affords the enterprise an effective way of encouraging its workers in their individual achievements and in their interest in the enterprise's overall showing. Bonuses from this fund are paid both repeatedly during the year and annually.
Bonuses paid for the final results of the year, apart from the workers' individual results, also depend on their compliance with the rules and length of service in the given enterprise.
The social and cultural measures and housing construction fund goes for building houses, paying for trips to sanatoria and rest homes, building and maintaining factory holiday homes, sanatoria, clubs, sports facilities and children's establishments, such as summer camps, kindergartens and creches.
A notable incentive to good performance in production is provided by the accepted procedure for forming the material incentive, and social and cultural and housing construction funds. Deductions from profits into these funds are fixed as a percentage of the total annual wage fund of the enterprise. In this instance, just as in the formation of the production development fund, account is taken of the extent to which the enterprise has fulfilled its annual plans for sales, the growth of profits or profitability.
Furthermore, when making deductions to form the incentive funds, account is taken of the extent to which the enterprise has fulfilled or overfulfilled its plan assignments for raising labour productivity and turning out products of superior quality.
Deductions from profits to form incentive funds are made at stable rates fixed for a term of five years, which puts all industries on an equal footing with respect to their incentive funds.
At the same time, the standards provide for an economically sound balance between the growth of profits, expenditures on production, and the growth of labour productivity. Enterprises must not be allowed, for example, to obtain an increment in profits by producing other than its proper line of goods or deviating from the approved standards of quality or from the state's 267 price policy. Under socialism, the chief way of securing larger profits must be to increase the production efficiency, to cut average costs, raise labour productivity and improve quality.
The efforts of enterprises to adopt tight plans and to utilise their internal reserves in order to fulfil the plan ahead of schedule are especially encouraged. To this end, deduction rates into incentive funds are raised as an incentive to adopt and fulfil plans exceeding those set by the state.
As it is very important that production be made more efficient, the Communist Party has set the task of even further increasing the role of the incentive funds. Their formation is made directly dependent on the results achieved by enterprises and associations in raising production efficiency, achieving technological progress, improving quality and fulfilling their contracts.
The bonus system is being improved in a similar way.
__ALPHA_LVL3__ Combining Financial AutonomyThe financial autonomy of enterprises implies a close combination of material incentives to work and moral ones, such as awarding the honorary titles of Socialist and Communist shockworkers to individuals and whole enterprises, presenting challenge streamers and banners to winners in the socialist emulation movement, commending, entering on the roll of honour and awarding orders and medals to the very best in each sphere.
Enterprise financial autonomy is constantly combined with the socialist emulation movement organised between workers in one enterprise and between enterprises. The socialist emulation movement is a method for mobilising the creative labour of workers to achieve the best production indicators, to raise the cultural and technological level of the working people and inculcate a communist attitude to work.
The close link between wage and moral incentives to work and the development of the socialist emulation movement reflect the essence of socialist production relations.
[268] __NUMERIC_LVL1__ CHAPTER 18 __ALPHA_LVL1__ DISTRIBUTIONUnder socialism, the working people work for themselves, for their society, so material goods and services are distributed in socialist society in the interest of the working people.
There are two forms of distribution of consumer goods and services under socialism, according to work and through the social consumption funds.
__ALPHA_LVL3__ The Economic LawIn the first phase of communist society, under socialism, the level of production can not yet provide an abundance of goods and services. At the same time, labour is viewed by members of society as a means of making a living. It is not yet a prime necessity, a habit without expectation of remuneration. This makes it necessary for society to keep account of the work done and the amount consumed and for members of social production to have a material incentive to work. This is done by distributing material goods and services according to work, a method of distribution that under socialism is objectively necessary and is, therefore, its economic law.
Distribution according to work implies the equivalent compensation for labour expended, minus a portion that goes to satisfy society's needs. Each person receives from society as much as he gives to it.
269Distribution according to work expresses the relation between members of society, bodies of workers and society in general with respect to the portion of national income that goes for the personal consumption of the people.
Distribution according to work presupposes that certain principles are fulfilled. The first is that work is obligatory, for under socialism there is no other source for appropriating means of consumption. The second principle is that of equal pay for equal work. Socialism permits no discrimination in payment on the grounds of sex, age, race or nationality. This is worth noting, for under capitalism such discrimination is practised widely. Distribution according to work implies differential wages, according to how arduous or difficult the work is. More skilled and complicated labour, which is multiplied by simple labour, creates more value per unit of time, so it is paid at a higher rate. Work underground, in hot shops, or in a harsh climate requires a higher expenditure of energy and so is paid more liberally. Differentiation of wages constitutes the third principle of distribution according to work.
Distribution according to work is incompatible with egalitarian distribution, which is the petty-bourgeois, vulgar idea of socialism. In reality, there is nothing in common between wholesale levelling out and the socialist method of distribution. Socialism implies incentives to work well, while egalitarianism rejects them. Socialism, with the help of distribution according to work, induces the working people to raise their cultural and technical standards and skills, while egalitarian distribution does not.
There will be no egalitarian distribution under communism either. Distribution according to needs does not mean distribution of everything in equal shares, regardless. People under communism will have the most varied tastes and needs. Consequently, material goods and services will not be distributed on a shareand-share-alike basis but in accordance with the various needs.
270 __ALPHA_LVL3__ Distribution According to WorkSocialism makes all members of society equal with respect to the means of production and the right to work. Socialism provides for the equality of all members of society with respect to the principle of distribution according to work. Socialism is unable, however, to ensure equality in the satisfaction of needs. Distribution according to work among people of different abilities and skills, who are single or have large families, is based on their participation in social production, not their needs. The only way to reduce this inequality in distribution under socialism is, in the first place, to increase the cultural and technical standard of the working people and improve their skills so that the qualitative difference between the kinds of labour will be reduced, as will the difference in earnings.
Second, a particular role in reducing the difference in the satisfaction of needs under socialism belongs to increasing social consumption funds.
The final elimination of inequality in the satisfaction of needs can only be achieved under communism, when material goods and services are distributed according to needs.
__ALPHA_LVL2__ 2. Wages and Salaries.The economic law of distribution according to work operates through a system of payment to the industrial and office workers of state-owned enterprises and institutions, and distribution according to work among co-operative (collective farm) members.
__ALPHA_LVL3__ The EssenceUnder capitalism, the wages paid to workers are the money form of the price and value of their labour power. Under socialism, labour power is not a commodity and so does not 271 possess a value. Wages in socialist society have a fundamentally different content. They represent a portion of the national income, expressed in the form of money, which is earmarked for distribution according to work among those engaged in social production, according to the quantity and quality of the work performed by each of them.
Wages under socialism express the relations of individual workers to the body of workers in the enterprise and society in general. They are not associated, as they are under capitalism, with the value of labour power and fluctuations in the labour power supply and demand ratio. Wages under socialism increase as the national income, quantity and quality of the work performed grow. They are precisely what makes workers under socialism interested in a growth of the national income, and not merely of the portion that is distributed according to work, but of the entire national income. Under socialism, there is no antagonistic contradiction between the portion of the national income distributed according to work (the product for oneself) and the portion that goes to meet social needs (the product for society). Both are for the good of the people. The portion that goes to meet social needs is returned to the working people as social consumption funds and new enterprises, also belonging to the people including those serving cultural and domestic purposes. Nothing like this can be found under capitalism, where the capitalists line their pockets with the increment in the national income. There is an antagonistic contradiction between the portion of the national income that me working people get, and the portion appropriated by the capitalists.
Expenditures of labour may be measured by labour time or the amount of output. The method by which labour is measured determines the form of wages. Under socialism, there are time wages and piece wages. The former are applied in automatic production, the chemical industry with its continuous processes, on repair jobs, and so on. In this instance, earnings depend on the time put in and the worker's skills. In 1975, in the USSR, 43.8 per cent of industrial workers were on time wages.
Piece wages are paid when it is possible to keep account of 272 the individual labour expenditures and when the amount of these expenditures is not determined by a system of machines or production processes, but depends on the efforts of the worker himself. Piece wages may be individual or collective, the latter being paid when workers are organised in teams. In the team, the earnings of each member are determined by the time worked and his skills. Team wages are of great educational significance. They inculcate the team spirit in working men and women, teaching them to assist and support each other and to be exacting on others and themselves. .
Both time and piece wages are usually supplemented with bonuses for good performance as to the quantity and quality of output. Wages are then called time-and-bonus and piece-- andbonus wages, respectively.
Wages are also differentiated depending on working conditions. Incentive rates are applied in key economic branches, e.g., in the industries directly associated with scientific and technological progress. This helps to attract skilled labour to these indu-
stries.
Office workers, engineering and technical staff are paid according to the establishments' table of fixed salaries, which takes account of the post held.
Wages and salaries under socialism are rigorously planned. The wage fund for the plan period is fixed for the economy as a whole and for industries, associations and enterprises, which is necessary to ensure economic equilibrium. Taking account of the wage fund, planners work out the balance of personal money incomes and expenditures and determine the ratio between the growth of wages and labour productivity. The latter should grow faster than wages. Then a correct ratio is established between the portion of the national income used for the people's consumption and that channelled into accumulation (expansion of production, capital construction for cultural and domestic purposes and the creation of the emergency reserves).
Wages and salaries in socialist society keep steadily increasing. This, among other things, indicates the rise in the people's standard of living.
273Seeking to discredit socialism, bourgeois economists and revisionists have chosen to criticise the system of distribution according to work applied in the socialist countries. Bourgeois economists claim that distribution according to work under socialism is cither arbitrary or in no way different from distribution according to the value of labour power under capitalism. In reality, this is far from the case. Distribution according to work is an objective economic law of socialism, and it differs fundamentally from distribution according to the value of labour power.
Right-wing revisionists call for the replacement of the uniform system of distribution according to work by distribution depending on the incomes of individual enterprises. They deny the need for society, under socialism represented by the state, to watch over the measure of work and the measure of consumption. As for ``left'' revisionists, they preach only egalitarian distribution, but the harm caused by wholesale levelling out has already been demonstrated here.
__ALPHA_LVL3__ Distribution According to WorkDistribution according to work in agricultural co-operatives (on collective farms) is also implemented according to the quantity and quality of labour, but it has distinctive features of its own. These features spring from the fact that, first, these are agricultural enterprises and, second, co-operative ones.- On collective farms, the results of work, for instance, in arable farming are finally known at the end of the agricultural year, while the fund for distribution according to work is not derived from the centralised state income, but from that of the co-operative enterprise.
During the initial period of the collective farm movement in the USSR, distribution according to work was based on the work-day, a unit of quantity and quality of labour expended by collective farmers in the common economy of the collective farm. Each member notched up so many work-days for fulfilling his daily quota, account being taken of the difficulty of the work. __PRINTERS_P_273_COMMENT__ 18---1921 274 At the end of the agricultural year, the money and produce set aside for distribution, were distributed according to the number of work-days collected by individual farmers. This system of distribution failed to provide a sufficient incentive, as the collective farmers' income was finally determined only at the end of the year. So, in time, the guaranteed work-day system was introduced and was then superseded by advance payments to collective farmers every quarter and every month, on the strength of the work-days to their credit.
Since 1965, the collective farms of the Soviet Union have adopted guaranteed monthly cash payments, no longer based on work-days. Every farm has established a guaranteed minimum payment, amounting to 90 per cent of the full remuneration fund. This guaranteed minimum is paid to collective farmers every month. The remaining ten per cent is distributed at the end of the year, depending on whether the plan has been fulfilled with respect to the quantity and quality of produce. This additional payment includes, moreover, rewards for overfulfilment of the plan and savings of inputs.
From 1965 to 1975, remuneration for labour on Soviet collective farms increased 70 per cent. During the tenth five-year plan period (1976--1980) it is to increase by another 26 per cent and reach an average of 116 roubles a month.
__ALPHA_LVL2__ 3. Social Consumption Funds __ALPHA_LVL3__ [introduction.]The second form of distribution of material goods and services under socialism is through the social consumption funds.
__ALPHA_LVL3__ Composition of the Social Consumption FundsDistribution through the social consumption funds, like distribution according to work, expresses the relation between members of society, workers in enterprises and society in general with respect to the portion of the national income that goes for the people's personal consumption. Through the social funds citizens are granted free public education and further training, 275 free medical assistance, allowances, pensions, scholarships, paid holidays, trips to rest homes and sanatoria either free or subsidised, the upkeep of children in creches and kindergartens, and so on. The bulk of the social consumption funds (70 per cent) comes from the State Budget and is centrally distributed. In addition, social consumption funds are set up by associations, enterprises and institutions.
The social consumption funds keep increasing from year to year, as can be seen from the following figures.
Payments from the Social Consumption Funds Years Total (thous. million roubles) 1950 1960 1965 1970 1975 1980 ( estimated) 13,0 27,3 41,9 63,9 90,1 117 Per capita (roubles) 72 127 182 263 354 __ALPHA_LVL3__ Socio-Economic SignificanceDistribution through the social consumption funds is of great socio-economic significance. Under socialism, certain social needs, such as public education, medical care, children's preschool establishments, etc., must be provided for jointly, for this is more effective from the standpoint of material, financial and manpower expenditures and more expedient in meeting needs. Furthermore, this form of distribution is the seed of the communist distribution of goods and services. It is largely independent of the amount of labour contributed to social production by individuals. Material goods and services are made available to members of society with regard to their needs and society's possibilities. Distribution through the social funds makes it possible to bring the real incomes of various sections of the working people somewhat closer together, thereby diminishing __PRINTERS_P_72_COMMENT__ 18* 276 the inequality in the safisfaction of needs that distribution according to work cannot eliminate. Lastly, it instils a team spirit with respect to the satisfaction of needs. In this connection, distribution through the social consumption funds, without being the chief form of distribution, grows more quickly than that according to work.
Critics of socialism allege that the social consumption funds are no advantage of socialism, for similar funds exist under capitalism as well. In reality, in the capitalist countries the state spends money on satisfying the people's social, cultural and other needs because it is prompted either by the needs of capitalists (e.g., the training of labour) or under pressure from the working people. It is then done as a forced concession on the part of the bourgeoisie to the working people in their fight for their rights.
Under socialism, the social consumption funds are, first, much larger than under capitalism and constantly on the increase; second, they are engendered by the very economic system of society, by the main economic law of socialism.
As a characteristic of the standard of living under socialism, the notion of real income is applied. This consists of the sum of real wages and the material goods and services received from the social consumption funds. In 1975, the real incomes of Soviet industrial and office workers, estimated per working person, were 250 per cent higher than in 1940, and collective fanners' incomes, 480 per cent higher.
[277] __NUMERIC_LVL1__ CHAPTER 19 __ALPHA_LVL1__ THE WORLD SOCIALISTWith the emergence of the world socialist system following socialist revolutions in a number of countries, a world socialist economic system has formed that is characterised by a new type of international economic relations.
__ALPHA_LVL3__ The Essence of the SocialistThe world socialist economic system consists of the sum total of economic relations of sovereign socialist states, linked by the socialist international division of labour and friendly co-operation and mutual assistance. The closest inter-state economic relations exist between the member-countries of the Council for Mutual Economic Assistance (CMEA), which was formed in 1949, comprising a really fraternal community of socialist countries.
The world socialist economic system, like the world capitalist one, has its material basis in the growth of productive forces and the resultant concentration of production. To be efficient, large-scale production must have an adequate market. This creates a tendency towards the internationalisation of production, and its spread beyond national boundaries. Under capitalism, however, this process occurs on an antagonistic capitalist social basis. This is why the world capitalist economy is characterised by relations of domination and subjugation and by cutthroat competitions. The world socialist economic system emerges on a fundamentally different social basis. It is formed by socialist 278 states in which socialist production relations predominate, so it is characterised by co-operation between equals and friendly mutual assistance, rather than by the domination of some countries over others or cutthroat competition. Marx wrote: "For the peoples to be able truly to unite, they must have common interests. And in order that their interests may become common, the existing (capitalist---Auth.) property relations must be done away with, for these property relations involve the exploitation of some nations by others. . .''.^^1^^
Co-operation and mutual assistance of the socialist countries are dramatically manifested in the principle of socialist internationalism, which pervades their community. This principle implies the combining of the economic interests of individual socialist countries with their common international interest.
The economic relations between socialist countries are characterised by the operation of the economic laws of socialism, especially the main economic law of planned, proportionate development of social production. This is expressed in the socialist countries' desire to pool their efforts to obtain an increase in the people's well-being and in the planned development of their world economic relations. The formation of the world socialist economy also involved the wide application of the economic law by which the levels of economic development of the socialist countries draw closer together. Advanced socialist countries render all-round assistance to those at a lower level of economic development, thus bringing them gradually up to their own level. In 1960, for example, the per capita national income ratio between the CMEA countries was 1:2.3, and the industrial output ratio, 1:3.5. In 1973, the ratios were 1:1.5 and 1:1.8 respectively, implying an almost 60 per cent reduction in the difference.
The law of the drawing together of economic development levels is the diametrical opposite of that of uneven economic development that operates under imperialism.
_-_-_~^^1^^ Karl Marx, Frederick Erigels, Collected Works, Vol. 6, p. 388.
279 __ALPHA_LVL3__ International SocialistThe international socialist division of labour is one of the main characteristics of the world socialist economic system. It springs from the socialist countries' varying natural conditions and historical traditions and the need for concentration of specialised industries, which, in turn, necessitates inter-state industrial co-operation.
The social content of the international socialist division of labour is determined by the domination in the socialist countries of production relations characterised by relations of socialist ownership. In this connection, the international socialist division of labour has a number of important features distinguishing it from the division of labour in the capitalist world. Antagonistic contradictions and the competitive struggle make the international capitalist division of labour unstable. It is marked by distorted, one-sided specialisation of the economically backward countries, whose national economies are strongly dependent on the imperialist countries. Today, neocolonialism not only helps to maintain this dependence, but even to increase it.
The division of labour between the socialist countries is effected in a planned fashion, on a rational, scientific basis. Each country develops the industries for which its natural conditions are most favourable and a traditional skilled labour force is available. The volume of production is determined with respect to the needs of all the socialist countries, but this does not lead to monoculture. Specialisation is supplemented by a complex of associated and complementary industries. As a result, each socialist country builds a comprehensive national economic complex including industry and agriculture, the production of capital and consumer goods, extractive and manufacturing industries, etc. The socialist countries establish close co-operative links with one another. The proportionate development of each economy is supplemented by that of the community as a whole. This provides the best possible conditions for rational use of natural and manpower resources, for raising the efficiency of social 280 production in all the co-operating socialist countries. Thus, in 1959, the 23rd CMEA Session decided to draft a long-term programme entitled the Comprehensive Programme for the Further Extension and Improvement of Co-operation and the Development of Socialist Economic Integration by the CMEA Member-Countries. The Programme was approved by the 25th CMEA Session in the summer of 1971. It is a plan for economic integration of the socialist community for the period up to 1990. The Comprehensive Programme is now being successfully implemented.
__ALPHA_LVL2__ 2. Socialist Economic Integration.Socialist economic integration is the process of the planned drawing together of the socialist economies and the creation of a complex of interrelated national economies. This integration is developing fully in line with the principles of socialist internationalism, sovereignty and full equality of the socialist countries, respect for their national interests, mutual advantage and comradely mutual assistance. The socialist countries own the enterprises and other economic projects built in them under integration plans. Payments to the countries that took part in their construction are made on a product-pay-back basis with the products of these enterprises. Later the output is traded under conventional agreements.
The Comprehensive Programme for Economic Integration sets the CMEA members the task of extending economic, scientific and technological co-operation with a view to developing their productive forces and raising the efficiency of social production; improving the pattern and increasing the scope of production in line with the scientific and technological revolution; meeting the co-operating countries' growing demand for raw materials, fuel, capital and other goods over a long period; 281 raising the material and cultural standards of the peoples; developing the world socialist market; strengthening the positions of the CMEA countries in the world economy, in the economic rivalry with the capitalist countries and in building up the defences of the socialist community.
As the Comprehensive Programme is being implemented, the economic co-operation and integration of the socialist countries grows apace. In 1975, the CMEA countries adopted their first Concerted Plan of Multilateral Integrative Measures for 1976-- 1980, which envisages the further development of mutually beneficial specialisation and co-operation of production, the joint construction of economic projects, and greater co-- operation in R & D and other spheres.
At the present stage of socialist economic integration, a number of major economic problems have been solved for the long term. The CMEA countries, according to a decision of the 30th CMEA Session, are working out and implementing longterm programmes (up to 1990) for supplying the growing needs of the community countries for energy, fuel, raw material, consumer and capital goods.
The economic integration of the socialist countries differs fundamentally from imperialist integration. Socialist economic integration covers every sphere of economic activity and is carried out in the interests of the working people. It is marked by a strict equilibrium and it promotes a growth in production efficiency in each individual socialist country and the community as a whole.
__ALPHA_LVL3__ Forms of Economic Co-operationAs already noted, the CMEA members are connected by close co-operative ties. They co-ordinate their national economic plans, co-operate in science and technology, develop interstate specialisation and co-operation of production, build economic projects together, co-operate in international trade and credit relations.
282The main form of co-operation of the socialist countries is joint planning and co-ordination of their national economic plans. They co-ordinate sections of their plans covering industries co-operating on the basis of the social division of labour between these countries. As co-operation develops, the co-ordination of plans becomes more comprehensive and detailed, on both a bilateral and a multilateral basis. The significance of multilateral coordination increases with the progress of economic integration. Inter-state balances for the development of the power and raw material industries, and the manufacturing industry are worked out and implemented, as are others between and within industries, between capital goods and consumer goods production, and so on. Inter-state economic balances are closely tied up with the national economic balances within the individual countries.
The forecasting and planning the growth and improvement of production in the long term have increased in significance. Accordingly, special attention is focused on the drafting of longterm goal-oriented programmes.
Of no less importance in the economic relations of the socialist countries is co-operation in science and technology. This covers the exchange of technical documents, know-how, and joint R & D projects, which involve the co-ordination of scientific research plans and the collective establishment of scientific centres. The scope of this effort is evidenced by the following figures. From 1971 to 1975, the R & D bodies of the GMEA members jointly studied 177 major scientific and technological problems. From 1976 to 1980, more than 250 such problems are to be tackled by common efforts. At present, about 1,600 scientific bodies and 47 co-ordination centres in the socialist community are taking part in co-ordinated research.
An important place in scientific and technological co-operation belongs to mutual aid in the training of scientific, technical and other specialists.
Co-operation enables the socialist countries to utilise the latest results in science and technology in economic development. Such co-operation is of special significance in the context of the current scientific and technological revolution.
283The socialist countries also co-operate closely in the interstate specialisation and co-operation of production. This form of co-operation is particularly effective, as it promotes a high concentration of specialised production, with due regard for the wide circle of consumers formed by the co-operating socialist countries together. Specialised production makes it possible to utilise the best achievements of science, technology and labour organisation, introduce comprehensive mechanisation and automation and computerise production on a large scale.
The co-operation of production that grows on the basis of inter-state specialisation promotes the socialist countries' economic integration and establishes favourable conditions for the development of their domestic production for minimum outlays.
Another form of the socialist countries' co-operation is the joint construction of economic projects. These are built where the natural and other conditions are particularly favourable. The funds are provided by the co-operating countries and the International Investment Bank, founded in 1970 by the GMEA members.
Jointly built enterprises are usually in the capital-intensive extractive and manufacturing industries requiring large capital investments. Examples of the joint efforts of the socialist community countries in the Soviet Union are the Ust-Ilimsk Pulpand-Paper Works, the Kiembai asbestos mining and concentrating plant, the gas pipeline from Orenburg to the Western border of the USSR, the high-voltage transmission line between Vinnitsa (USSR) and Albertirsa (Hungary). The Medet copper deposits in Bulgaria and coal, copper and sulphur production in Poland are also being developed. The production of nickel is being expanded in Cuba. Capacities for the production of isoprene rubber are being constructed in Romania. Some of the output of these enterprises, as already noted, will be sent to the countries participating in their construction.
The socialist countries are co-operating broadly in trade and credit relations. The trade relations between the socialist countries form the world socialist market existing alongside the capitalist one.
284The mutual trade between the socialist countries has certain essential distinctive features. It is carried out on the basis of fixed, planned, mutually beneficial prices that are established by trade agreements usually concluded for five-year periods. The prices are founded on those on the world capitalist market, once the effects of incidental and speculative fluctuations have been removed.
To facilitate trade and multilateral payments, in 1964 the CMEA countries founded the International Bank for Economic Co-operation (IBEC). Payments for deliveries of goods and services between socialist countries are made in transferable roubles. This is a clearing currency, but it very well fulfils the functions of a measure of values, means of payment, means of accumulation and universal money on the world socialist market. The transferrable rouble differs from the domestic currencies of the socialist countries. Its gold content is 0.987412 grammes of gold.
The trade between the CMEA countries is on the increase. From 1971 to 1975, its volume almost doubled. Reciprocal deliveries cover from 80 to 100 per cent of the major import and export needs of the socialist countries. Reciprocal trade between the CMEA countries accounts for about 60 per cent of their foreign trade turnover.
The socialist countries maintain stable, mutually beneficial credit relations. Credits are granted at a low interest or interestfree. Their credit relations allow the socialist countries to accumulate funds for massive capital investments. Credits are usually repaid with traditional exports.
The socialist countries also obtain credit from the International Bank for Economic Co-operation and the International Investment Bank. The former finances commercial transactions, the latter capital construction. Credit is granted both in transferrable roubles and in hard currency, which the socialist countries use in their transactions with capitalist countries.
285 __ALPHA_LVL2__ 3. The Economic CompetitionThanks to the advantages of socialism over capitalism and to the co-operation between the socialist countries, their economies are making steady headway and competing successfully with those of the capitalist countries. The ideologists of imperialism and opponents of the socialist community try to deny this. Bourgeois economists set out to discredit CMEA and its fruitful activities. They allege that the socialist countries are unequal and dependent on the USSR. They regard socialist integration as a means by which the Soviet Union exerts its control over the other socialist economies and subordinates their development to its own interests.
Revisionists are put out by the way the socialist countries cooperate and borrow each other's experience, including Soviet experience. They seek to undermine the unity of the socialist countries, tie their economies to the capitalist economy and make them dependent on the imperialist countries. Events refute their inventions, however, and thwart such attempts. The successes achieved by the socialist countries and the superiority of the socialist economy over the capitalist system are borne out by facts.
__ALPHA_LVL3__ Socialism's Superior Economic Growth RatesThe superiority of socialism over capitalism is primarily evident in economic growth rates, which are decisive in the economic competition between the two systems and the basis of an economy's dynamism.
Contrary to allegations by the adversaries of socialism to the effect that the socialist countries have no advantages over the capitalist ones, economic growth rates provide further evidence to the opposite.
Changes in the national income are the most general indicator of the state of an economy. In the 25 years from 1950 to 1975, the national income in the CMEA countries increased 6.5-fold (7-fold in the USSR), and in the EEC countries only 286 2.8--fold. A comparison of the growth rates in industry, the key economic sector, reveals a similar picture. Over the same 25 years, industrial output increased 10-fold in the CMEA countries, but only 3.1-fold in the developed capitalist countries. The socialist countries' share of world industrial output increased from 20 per cent in 1950 to 40 per cent in 1975.
__ALPHA_LVL3__ Growth of Per Capita ProductionComparing the growth of per capita production in the socialist and the capitalist countries, we shall see that the former have scored great successes in this respect, too.
The CMEA countries have outstripped the developed capitalist countries in industrial per capita production in general. In 1975, the developed capitalist countries accounted for a little over half world industrial output and 18.5 per cent of the population of the globe. The CMEA members, meanwhile, produced approximately a third of world industrial output, their total population amounting to 9.4 per cent of the world population. Thus, one per cent of the population of the developed capitalist countries accounted for a little over 2.7, and one per cent of the population of the CMEA countries for 3.5 per cent of world industrial output.
These figures are important as they reflect a growth of production resulting from higher labour productivity and scientific and technological innovations in production.
__ALPHA_LVL3__ Secure Living ConditionsThe constantly rising standard of living of the socialist nations, compared with the living conditions of the working people in the capitalist countries, are a graphic demonstration of the advantages of socialism and an irrefutable proof of its success in the economic competition against capitalism.
The standard of living is characterised by many indicators, the main ones being real incomes, job availability, working and living conditions, educational opportunities, cultural standards, 287 the health seivice, social insurance and social security. On all these counts, the socialist countries have scored great success. With rising wages, no inflation, and stable prices, personal real incomes are continually on the increase. In just five years (from 1971 to 1975), per capita real incomes in the CMEA countries increased by about 29 per cent. There is no unemployment in the socialist community and no wage discrimination. Everything is done to improve labour conditions and protect the environment. Education and medical care are free. The people's cultural standard is rising rapidly. Sports are developing. The systems of social insurance and security in the socialist countries are unparallelled anywhere in the world.
Meanwhile, in the capitalist countries the working people are subjected to ruthless exploitation and suffer from excessive intensification of labour, which results in a growing industrial accident rate and poor health. Inflation and rising prices swallow up the wage rises wrenched by workers from their exploiters. As a result, there has been a drop in real wages. In the capitalist countries wage discrimination is widely practised on the grounds of sex, age, race and nationality. The working people suffer from unemployment and millions are engaged for only a shortened working day or working week. The medical and college tuition fees in some capitalist countries have increased sharply in recent years.
It is not only the material circumstances of the people that are deteriorating in the capitalist world. A degradation of society's intellectual life has set in. Crime is on the increase. People are turning to drugs. Capitalist culture is deluged with pornography. The great advantages of socialism over capitalism are indisputable; the socialist countries' successes in the economic competition with the capitalist world are becoming increasingly evident.
[288] __ALPHA_LVL0__ The End. [END]REQUEST TO READERS
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