The Stalinist System
(The Internal "Evolition" Towards "Liberalization")

Written by Hiroyoshi Hayashi (1972)
Translated by Roy West

1. The Laws of Commodity Exchange and Socialism
2. The Relations of Production Under the Stalinist System
3. The "Socialist" Planned Economy and the Category of Capital
4. Economic Reforms and the Bourgeois “Evolution” of the Stalinist System
5. The “Overall” Development of Commodity Production and the “Shift to Communism”
6. Criticism of ‘Socialist’ Economics

C. The “Socialist” Planned Economy and the Category of Capital
The Reality of the “Planned Economy”

Since the official recognition of the “objective” existence of the law of value in Soviet “socialist” society, it has been endlessly repeated that the principle economic law of Soviet society is the law of planned production, not the law of value. In other words, although the “objective” existence of the law of value is recognized, it is merely “made use of” for the development of the socialist planned economy, and thus ultimately the subject is the “principle of planning”. Such a view, at least before the economic reforms of the sixties, corresponded to objective conditions, and was thus easily understood. What, then, was the supposed “socialist” content of the Soviet planned economy? This is the question that we must examine here. First we will examine its concrete content, and then theoretically consider the meaning of a planned economy on the basis of commodity production.

The foundation of “planning”, needless to say, is the fact that capital exists as state capital. The state organs make plans for production and distribution by means of the lever of social surplus- value that is turned into state capital and absorbed in finances. If one looks at the circulation of the means of production of state capital (i.e. between nationalized enterprises), which Stalin said was not the exchange of commodities, the state organs create and regulate a “goods balance” and a distribution plan in the most important means of production, with lower state organs controlling the remaining means of production. Prior to the economic reforms, separate material balances were created for about twelve thousand means of labor and six thousand objects of labor. The state, with its centralized rule and emphasis on the in-kind form, controlled the whole economy with administrative orders, and this was the crux of “planning”. In addition, by means of state budget expenditures, new enterprises were created, existing ones expanded and reformed, and the “enterprise fund” expanded.

As for the relationship between the state and the kolhozy, in the past there was a great deal of space for direct compulsion on the part of the state with compulsory provision of goods or payment in-kind for MTS. (This has now become a pre-payment system in which the state buys products from the kolhozy farms through orders, but the prices are still unilaterally determined by the state). Ultimately, the sale of consumption goods to consumers is also under state control, with state-run enterprises accounting for two thirds of the total sales, and the cooperative kolhozy the rest. However, as “socialist” economics itself emphasizes, although payment in-kind is the dominant form in this “planning”, this is based not on “the social combination of people’s labor and their labor products” (Marx), but rather upon the “utilization” of the value forms:

To lead the planned national economy, the utilization of such levers as the law of value, commodities and money is extremely important. Included in the national economy plan is the cost-price of products, the money income of enterprises and the national income expressed in money income, as well as its distribution, commodity exchange, credit, finance, and various other indices. The index of value and balance play an important role in the national economy by ensuring correct proportionality. They also have great importance for the planned, centralized direction of investment, as well as other state provisions for housing construction, social and cultural spending. Money and credit are employed in order to correctly and profitably control the allotted material funds, carry out the plan to lower the cost price of products and increase the profitability of production and the accumulation within enterprises.  [Keizaigaku ky?kasho, p. 721.]

The fact that the “plan” appeared to be driven by the form of goods in-kind is the characteristic of a state economy, and does not indicate a socialist nature. For example, in bourgeois states under a controlled economy (i.e. under wartime conditions), the amount of use-value, or products in-kind, is the principle concern. In other words, instead of individual companies aiming for profit, the quantity of use value becomes more important for the state than the price expression of value. Stalin claimed that it was possible to advance towards real socialism by replacing commodity exchange with “products-exchange”, and he thought this had already been realized in the state enterprises. However, “products-exchange” is a problem of a dimension totally different from socialism, and is only the embryonic form and starting point of commodity production.

Moreover, exchange between state enterprises was not simply “products-exchange” since the “products” unmistakably had the form of value. According to Stalin, “products” only had prices for the sake of economic calculation, and this was only the “outer-crust” of a commodity. However, the state enterprises were managed according to an independent accounting system. The funds (capital) for each enterprise were allotted by the state, and in cases where enterprises ran a deficit they were supported by subsidies as long as they could carry out the given state plan. However, each enterprise was required to lower its “cost-price” as much as possible to ensure “profitability”. This need to raise productive power to order to ensure “profitability” is a form that only appears in bourgeois society. Each enterprise owned means of production, and through their working assets were able purchase raw materials and subsidiary materials. This trend was pushed forward even further by the economic reforms in the sixties. Even long before the reforms, each enterprise owned an “enterprise fund” which belonged to the enterprise, not to the state. The state enterprises thus, in many respects, maintained their independent nature as “enterprises”. This was concealed under the Stalinist system, but with the economic reforms this is inevitably manifested as a crucial element. More precisely, economic reform is itself the inevitable outcome, or legal expression, of the “evolution” of the state enterprises as “enterprises”.

“Planning” in the Soviet Union was not socialist “planning”, but a forcible method for heavy industrialization, i.e. state capitalistic accumulation. The surplus value, which was squeezed from the peasants through the turnover tax [nalog s oborota] and from the workers in the form of ‘deductions from profits’ [otchislenie ot pribylei], was collected, and turned into state capital. This expressed the importance and necessity for Soviet Society to advance industrialization. The accumulation of national capital in backward Russia, which could not necessarily rely on the exploitation of industrial workers for capital accumulation, had to use the method of state accumulation, that is, “planning”. In this sense, the “socialist” method of “planning” was in fact a means to forcibly develop the national economy.

“Planned Economy” as a Means for State Capitalist Accumulation

The “socialist” planned economy in the Soviet Union was a reflection of the forcible accumulation of national capital, and contained not one ounce of socialist content. In this period, the pressing need was to accumulate national capital, not introduce a system to ensure that state capital could operate “efficiently”. The systematic guarantee of this was the Stalinist system, and its method was the so-called “planned economy”, i.e. the accumulation of national capital as state capital. Without extensively utilizing so-called “extra-economic compulsion”, it is doubtful that there would have been any way for a large backward country to form national capital in the age of imperialism and emerge as a great bourgeois state. Each enterprise was forced to concentrate only on production. This is clear from the fact that the index of “total output” was given the top priority, reflecting the demands of the period for the forced accumulation of national capital in the form of state capital. More than the formation of “value”, it was the formation of “goods” that was important. This is why today the Stalinist system can be called “a goods in-kind” economic system, because the capital directly allocated by the state “according to the plan” held significance, above all, as use-value, not value. The formation of national capital was materially expressed, for example as “heavy industrialization”. If capitalist development is observed, not from the viewpoint of individual capital, but from the state perspective, materially speaking it can be called “heavy industrialization” (the bourgeoisie evaluated postwar Japanese capitalism from this national perspective). Since the formation of national capital in the Soviet Union directly took the form of state capital, and this was allocated by the state “according to the plan”, it was necessary for the Stalinist system to place priority on use-value rather than value. Of course, this ultimately was the allotment of state capital, not the direct arrangement of the means of production.

We must reject the fantasy that the Soviet “planned economy” had socialist content. Even in the era of Stalin prior to economic reforms, when the “planned economy” was most thoroughly enforced, it did not have socialist content. Socialism is not a system of extra-economic compulsion (and therefore is not a question of “utilizing” the law of value, etc). Rather, socialism concerns the direct realization of the determination of value, i.e. the realization of a system of production and distribution based on labor expenditure.

In response to our thesis that Soviet “socialism” is in fact state capitalism, and its “socialist” methods actually represent the forcible accumulation of state capital, some may wonder where exactly does “capital”, or the capital=wage-labor relationship exist. In Russia money (roubles) is invested to be “profitable”, in other words it was self- augmenting value. In this case, when individual state enterprises “delivered” products, it was not important whether or not they received money. The fundamental point was that these goods were realized as value (and as profit-included value). But what is self-augmenting value if not capital? This is the most general and abstract, and thus non-conceptual, definition of capital. In industrial capital, this self- augmentation is made possible through the exploitation of the proletariat. However, other forms of capital do not necessarily rely on the exploitation of the proletariat within production. State capital in the Soviet Union was formed and augmented not only through the exploitation of the proletariat, but also through the exploitation of the peasantry through circulation. This demonstrates that “fixed funds” and “distribution funds”, far from not being capital, are in fact one of its particular forms.

“Fixed funds”, for example, are allocated by the state. A large part of the “profit” of enterprises is collected by the state, and becomes part of state revenue along with the turnover tax, and forms the “fixed funds” which are in turn distributed to each enterprise or used to create new enterprises. How can the “fixed funds”, created and augmented in this fashion, be anything but capital? Does the mere fact that it is called a “fund” deny its essence as self-augmenting value? The confusion caused Soviet ruling class causes by calling every form of money a “fund”, is identical to the bourgeoisie’s use of this word to refer to money as currency or money as money-capital. Of course, in the Soviet Union, the accumulation of capital takes the form of the accumulation of state capital, not individual capital, but this does not mean that it has “socialist” content. In the next chapter we will examine the contradictions inherent to the development of national capital (capital accumulation) in this form.

What is the historical significance of this form of capital accumulation? This has to be understood within the context of the history of capitalism. In the early nineteenth century, industrial capitalism had already assumed a clear shape, particularly in England. This was centered in particular on the textile industry where mechanization and the factory system had developed. Capitalism, established in England, spread to other western countries and Japan, and by the late nineteenth century it had already entered the era of imperialism based on the concentration of capital and the formation of monopoly capital. But instead of the old capitalist state of England, this concentration of capital and formation of monopoly was more prominent in Germany, the United States, as well as Russia. Even though these latecomers to capitalism lacked England’s foundation based on a long period of accumulation of individual capital, and trailed behind in the domestic accumulation of capital, in response to the need to rapidly accumulate capital they were able to (or had to) rapidly create a massive amount of centralized capital by concentrating small capital through the joint stock company system and banks, or absorbing all of the national surplus-value and converting it into capital.

However, at the dawn of the twentieth century, the method of Germany was already completely inadequate for a colonial, or semi-colonial, large backward country to resist the menace of imperialist rule, while developing their national economy. Today, regardless of whether a country belongs to the “socialist” bloc or not, most economically backward countries rely on the method of state capitalism. In this sense, there is no essential difference between countries like the USSR and China and countries such as India and Egypt. However, it could be said that there is a decisive difference in terms of the “efficiency” of state capitalism between the “socialist” countries who carried out “national-democratic” revolutions thereby incorporating agriculture into the state capitalist system by means of agricultural collectivization, and those countries (e.g. India or Egypt) that largely left feudalistic relations in agriculture untouched. The former, on the basis of domestically accumulated capital, took the path of “socialism in one country” and “self-renewal” and their accumulation of national capital was forced and rapid, whereas the latter relied on the capital of advanced capitalist countries (and are therefore dependent and exploited), and their development has been stagnant and marked by frequent collapse. Countries such as India and Egypt often call their state capitalist systems “socialism”, but this is only a manifestation of the internal demand for backward countries to maintain national independence in the twentieth century amidst imperialistic advanced capitalist states, and achieve their own national development. To this extent, state capitalistic methods have great historical significance. Without the high national economic development of large countries such as the Soviet Union, China and India, world socialism would be nothing more than a daydream. History has shown that even if socialism had been victorious in Europe or North America, it still would not have been a simple task of human history for these large countries to automatically become socialist.

The “Planned Economy” and Commodity Production

Without the sublation of the law of value (commodity production), “planning” in the real socialist sense is impossible. This idea should be obvious to Marxists. The law of value means that the allotment of the aggregate labor for the production of various kinds of goods corresponding to society’s needs is not yet under conscious control, and instead is carried out through the actions of mutually independent individual private producers or capitalist companies as a sort of “natural inevitable” law. Therefore, the existence of the category of value is an expression of the fact that “the process of production has mastery over man, instead of the opposite”.(*) The fact that labor takes the form of value clearly shows that a society lacks the necessities for socialist “planning”. If one claims a “planned” economy on the foundation of commodity production is possible, we would say that the essence of such “planning” is bourgeois. The modern monopoly bourgeoisie has already carried out this sort of “planning” for many years for business adjustments, and by the national bourgeoisie for the sake of national economic development. Saying that “socialist” planning is possible alongside commodity production, implies that the capitalist economy could also be “socialistically” planned. This ideology is precisely the sort of reformist fantasy used to deceive the proletariat.  [(*)Marx, Capital vol. 1, p. 175.]

Looking for the essence of socialism in “planning” is extremely one-dimensional. Planning can only have a socialist nature in the following sense. For Marx, the historical character of the various forms of commodity value become perfectly clear when separated from the society of commodity production, and this provides the basic design of socialist society.

Let us finally imagine, for a change, an association of free men, working with the means of production held in common, and expending their many different forms of labour-power in full self-awareness as one single social labor force. All the characteristics of Robinson's labor are repeated here, but with the difference that they are social instead of individual. All Robinson's products were exclusively the result of his own personal labour and they were therefore directly objects of utility for him personally. The total product of our imagined association is a social product. One part of this product serves as fresh means of production and remains social. But another part is consumed by the members of the association as means of subsistence. This part must therefore be divided amongst them. The way this division is made will vary with the particular kind of social organization of production and the corresponding level of social development attained by the producers. We shall assume, but only for the sake of a parallel with the production of commodities, that the share of each individual producer in the means of subsistence is determined by his labour-time. Labour-time would in that case play a double part. Its apportionment in accordance with a definite social plan maintains the correct proportion between the different functions of labour and the various needs of associations. On the other hand, labour-time also serves as a measure of the part taken by each individual in the common labour, and of his share in the part of the total product destined for individual consumption. The social relations of the individual producers, both towards their labour and the products of their labour, are here transparent in their simplicity, in production as well as in distribution.   [Ibid., p. 171-2.]

Here Marx clearly wrote “apportionment in accordance with a definite social plan”, and it is precisely “planning” in this sense that makes socialism really socialism. Here there is absolutely no question of “utilizing the law of value”, because the fundamental precondition of this “planning” is the sublation of the law of value.

Since the appearance of Stalinist “socialism”, “planning” and “nationalization” have been equated with socialism. But socialism is certainly not the same as “planning” or “nationalization”, and cannot be reduced to this. Socialism does start from the nationalization of the means of production, but at the same time one clearly cannot speak of the significance of planning or nationalization in isolation from the class character of the state. Only “nationalization” under a true proletarian state can have significance as the starting point of the real socialization of the means of production, and provide nationalization a socialist character. The historical experience of the nationalization of the means of production or the “planned economy” in bourgeois states (both economically advanced as well as “developing countries”) demonstrates that this cannot have socialistic significance. In fact, these methods were used to intensify bourgeois rule. The living reality of the USSR and China clearly shows that nationalization and the “planned economy” under workers’ and peasants’ states (people’s states) cannot achieve true socialist content.

Of course, under certain conditions “planning” does become an essential moment of socialism, and there can be no such thing as socialism which is not a “planned” system. But planning in socialist society is one of the outcomes of social production being under the conscious control of human beings, and so socialism certainly cannot be dissolved into the concept of a planned economy. Socialism is, first of all, a social relationship between working people, and is more than just the functional character of society. This should be clear from the fact that most bourgeois states today talk about the “planned economy”. To identify socialism with a planned economy, or with a planned economy under commodity society, leads to terrible confusion among the workers who are fighting socialism. This view is essentially bourgeois and reactionary.

Nevertheless, Stalinists, and to a large extent Trotskyists, identify socialism with “nationalization” and “planning”. They either forget or ignore the fact that if a state that carries out nationalization and planning does not have the class character of a true proletarian state, then this nationalization and planning will not have socialist content. Instead, they make “nationalization” and “planning” the criterion for judging whether or not a country is a proletarian state or socialist society. Even if commodity production generally operates and production for “profit” is developed, they still insist that countries like the USSR and China are socialist (or at least workers’ states) because they have a “planned economy”. Nevertheless, as long as “planning” in the Soviet Union and other countries takes place upon the foundation of a commodity society, this does not signify socialism and certainly will not in the future.