Does the existence of nationalized industry prove that
the capitalist law of value has been abolished?

Preobrazhensky--ideologist of
state capitalism (Part 2)

by Joseph Green
(from Communist Voice #18, August 1, 1998)

--List of subheads (complete text follows afterwards)--

Part One
(Part one of this article appeared in CV, vol. 4, #2, Apr. 20, 1998.)


I. The debate on industrialization
The state sector as socialist in and of itself
The growth of state industry will automatically bring socialism
The commodity-socialist economy
Political consequences--support for Stalinist state capitalism
Preobrazhensky reconsiders

II. Economic categories and the state sector
The state sector acts as a unified whole
Stock issued by state enterprises
Commodity production
The working class can't exploit itself

Part Two

About Part One

III. The Trotskyist Opposition and the Soviet state sector

IV. The law of value in the "commodity-socialist system"
The law of value and monopoly capitalism
The law of value and mid-19th century capitalism
State action as outside the sphere of the law of value
Preobrazhensky, Stalin and Mandel in agreement

V. Evolution of the law of value
Historical periods in the growth of commodity production
The revenge of the law of value
The fight against the market

VI. Perfect planning
The law of value and perfect foresight
"Natural units" and the labor-hour
Value and the labor-content
The labor-content as an irrational measure

VII. Primitive socialist accumulation
Primitive capitalist accumulation
The origin of the term
Exploitation of the peasantry
Peasant producer coops (collectivization)
Reducing the transition period to primitive socialist accumulation


. The ideas set forward in Preobrazhensky's book The New Economics (1926) about the transition period between capitalism and socialism are still influential today. Part One of this article pointed out that Preobrazhensky advocated that, provided the former capitalist owners were dispossessed, the state sector of a country was inherently socialist. He could not see that a new bourgeoisie could arise on the basis of its power over the state sector. Thus, despite Preobrazhensky's misgivings about the Stalinist regime that eventually took over the Soviet Union, he held that the Soviet Union was moving towards socialism. He measured the distance that a country had moved towards socialism solely on the basis of the size of the state sector relative to the rest of the economy.

. If Preobrazhensky were right, then all the repressive regimes that built up state-capitalist economies in the name of Marxism or communism, such as those in China and Cuba today and Eastern Europe yesterday, would all be socialist ones. Such a "socialism" has no ability to inspire the proletariat, and in fact is one of its oppressors. The rise of a new communist world movement of the working class can only take place on the basis of opposing these regimes as well as the free-market ones. Preobrazhensky turned out not to advance Marxism, but to lay the foundations for state-capitalist ideology.

. His main economic work was done in the "industrialization debate" of the 1920s in the Soviet Union. The Bolshevik revolution of 1917 overthrew the bourgeoisie and ushered in the first major attempt of a revolutionary working class to run the entire economy itself. But Civil War and foreign intervention, as well as the destruction already wreaked by World War I, had devastated the Soviet economy. It also scattered the working class and blunted the energy of working class organizations. In 1921, as a result in part of these difficulties, the Soviet Union turned to Lenin's plan of a "New Economic Policy" (NEP). Lenin recognized that the state could not yet direct the entire economy; the working class was not fully in possession of the state apparatus; and the peasantry could only gradually be drawn to large-scale production. A gradual transition to socialism was needed, during which commodity production and capitalist methods could not yet be dispensed with. A protracted period was required in which the working class increased its ability to direct production; private capitalism was ousted; and the peasant economy was transformed. Even learning how to administer the already nationalized sector of the economy was still a major task. Moreover, all this had to be accomplished while rebuilding the productive capacity of the economy. It would require a major struggle to recover the pre-World War I production level, and yet it was necessary to vastly surpass this level. Russia had been predominantly a peasant country and was industrially backward. Although originally formulated with respect to Russian conditions, it was soon realized that the overall concept of NEP raised important questions about how the transition towards socialism should be visualized in general.

. The 1920s saw an ongoing debate inside the Soviet Communist Party over the nature of NEP and how to industrialize the country. Much of this centered on the pace of industrialization, with Preobrazhensky, Trotsky and the so-called "Left Opposition" calling for faster industrialization, while Bukharin worried about industry outpacing the development of agriculture and believed in the possibility of spurring on the peasant market. By the latter 1920s, the pre-war level of production had basically been reached and further increases in industrial production required massive new construction, and not just restoring former factories and enterprises. At this point Stalin and the majority of the party also turned to faster industrialization, ushering in the breakneck pace of the First Five Year Plan and the forced collectivization of agriculture, and replacing NEP with a consolidated state-capitalist system.

. But almost all of the participants in the "industrialization debate" shared some common views about the nature of the Soviet economy. They had lost the insight of Lenin, who had pointed out that the capitalist methods used by the state sector during NEP affected its relationship to the working class. They also paid little attention to his views concerning the need to transform the social nature of peasant agriculture during NEP. Lenin only developed these ideas to a certain extent, and then died in 1924 after a long illness. In the main, these ideas died with him.

. Preobrazhensky's New Economics reads like a polemic against these views of Lenin. Preobrazhensky, and all party leaders of the time, recognized that NEP had a mixed economy, with a state sector, a private capitalist sector (which was particularly strong in trade and commerce), and a vast petty-bourgeois peasant economy. But for him, the state sector was by definition under working class control, because it was the state sector. So the only real issue for Preobrazhensky was the pace of industrialization. Industrial development was indeed a vital necessity for Russian communists, because socialism could only be based on large-scale industry and modern technology. But history would show that there was also an issue of which class would guide and control industrialization. The overthrow of the old bourgeoisie didn't answer this question, because a new bourgeois could, and did, arise. Arising on the basis of the Soviet state sector, it controlled the Soviet Union not through Western-style private ownership, but through the power of the interlinking state, party, and economic bureaucracies. The state-owned enterprises and ministries were run on the basis of the scramble for individual enrichment and privileges by the Soviet executives. To deal with this issue required paying attention to Lenin's views about the effect of NEP on class relations between the state and the working class and developing them further. Instead Preobrazhensky and others closed their eyes to the social nature of the system growing up under NEP.

. As a result, Preobrazhensky and many other Trotskyists attempted a reconciliation with Stalin during the First Five Year Plan; they sought to gain leadership positions in the Stalinist regime.In adopting rapid industrialization, Stalin had carried out the central demand of the "Left Opposition". Preobrazhensky and company believed that their other differences with Stalin would automatically tend to be resolved with the development of more industry. This led them to try to become advisers to the Russian state-capitalist regime built up in the 30s, not organizers of an independent proletarian trend. Although Preobrazhensky and many other oppositionists were murdered by the Stalinists in the mid-30s, their theorizing survived. Trotsky didn't agreed with the extent of Preobrazhensky's maneuvers, but to his death he held that the existence of nationalized industry in the Soviet Union, no matter what else was wrong with it, made it into a workers' state, even if a degenerated one.

. Thus the heat of the fight in the 1920s over certain pet formulations of Preobrazhensky--and the blood spilled in the 1930s--shouldn't blind one to the common assumptions shared by the contending parties. The main gist of Preobrazhensky's thesis that the state sector was automatically socialist, a thesis that led to his support for Stalinist state capitalism, is common to him, most Trotskyists, the Stalinists, etc. Preobrazhensky wasn't the only to have these ideas, nor would the Stalinists have gotten these ideas from his work. But he provided one of the most detailed elaborations of these ideas, and his views on these issues are influential among people who wouldn't think of taking these ideas from Stalin or official Soviet sources.

. The way Preobrazhensky put it was that there was a "commodity-socialist system" in the Soviet Union. By itself, this term could mean many things. After all, there was commodity production in the Soviet Union and there was an attempt to move towards socialism. But what Preobrazhensky meant was that the commodity production that obviously still existed was completely divided off from the state sector, which was supposedly free from commodity production and already socialist. Instead of examining what was actually happening in the state sector, he relied on rhetoric like "the working class can't exploit itself". He didn't see that the nationalized sector of the economy was itself a transitional form of economy. He did mention "transitional relations" a few times in his book, but for him the transitional aspect of the Soviet economy was simply that the state sector hadn't gobbled up the rest of the economy yet.

. In accord with this viewpoint, he set out to show that various categories of capitalist economics, such as profit, interest, rent, and commodity production, didn't really exist in the state sector. He was faced with the problem that these categories clearly did exist under NEP. So, on the plea that the role of economic theory was to penetrate below appearances, he argued that the continued existence of profit, interest, and commodity transactions in the state sector of the economy were really just "fictitious" surface appearances, a mere "imitation" of capitalist forms which would quickly and automatically vanish as the Soviet planners gained more experience in running the economy. He emphasized that the purpose of his book was not to discuss or analyze particular policies followed by, or proposed for, the Soviet economy, but to elaborate a general theoretical picture of the economy. On this pretext, he dismissed unpleasant realities about the state sector, regarding them as simply the result of mistaken policies or a lack of experience on the part of state planners. He thus built up a picture of the Soviet economy based not on what was actually happening to it, but on his hopes, wishes, and dreams about what it might yet turn out to be. He called such a method "anticipat(ing) the tendency of development" and studying the possibilities "which are objectively embodied in our system".

. Part One of this article analyzed in detail his arguments about a number of economic categories. For example, it dealt with his argument that buying and selling didn't really exist between different state enterprises because the prices inside the state economy were just an administrative convenience. He claimed that while it looked like state enterprises were buying and selling things to each other, actually these transactions were "purely formal" in character and could be replaced by mere bookkeeping. Preobrazhensky closed his eyes to the fact that when one state enterprise sold something to another state enterprise, the resulting bookkeeping affected whether the enterprise could make another transactions, whether it would continue to exist, whether it could provide more benefits for its workers, and so forth.


. Preobrazhensky's idea that the state sector was inherently socialist, and that its problems were simply due to bad planning or inexperience, reflected the general views of the "Left Opposition" in general and Trotsky in particular. A widespread mythology has been created about Trotsky's stand in the 1920s, in which Trotsky supposedly opposed the Stalinist degeneration of the revolution step by step. In fact, Trotsky never grasped the danger of the growth of a new bourgeoisie based on the state sector, and never distinguished between the nationalization of industry and the control of industry by the working class.

. Trotsky's view was that since the communist party had taken power, the interests of the working class and those of the government were identical by definition. There is no doubt that, in a socialist revolution, the working class must devote systematic attention and relentless effort to building up its own state. But any truth can be turned into error by stretching it too far. Trotsky didn't see that building up a truly workers' state was an entire process and that contradictions and frictions between the workers and the state sector were inevitable. He tended to see the relationship between the workers and the state from an administrative point of view, or even a military point of view.

. This appeared in the argument he used in 1922 in defense of a plan he set forward for greater deductions from the workers' wages as the main source of the resources needed to speed industrialization. In reply to those who thought his plan would exploit the workers, he responded not by defending the level of sacrifice he called for, but by arguing that state exploitation of the workers was impossible in principle because the workers and the state were identical. His view was that anything the workers gave to the state, they had really given to themselves. Anticipating Preobrazhensky's argument that "the workers can't exploit themselves", he argued that anything the workers gave up to the state sector was at most "self-exploitation" by the working class. He didn't give any concrete assessment of what the state in 1922 was, and how to ensure that it would grow closer to the working class. Even Isaac Deutscher, his adoring biographer, characterizes Trotsky's views as follows:

". . . At the worst, he [Trotsky] said, he might be accused of trying to argue them [the workers] into 'self-exploitation', for he called the workers to make 'sacrifices' and to give their 'blood and nerves' for their own proletarian state and their own socialist industry.
. "This was not the first time that Trotsky rested his case on the identification of the working class with the state. In 1920 and 1921 he had argued in the same terms against the autonomy of the trade unions. The workers, he had said, had no interests of their own to defend against their own state. Lenin then replied that the proletarian state invoked by Trotsky was still an abstraction. . . The workers were bound in duty to defend their state, but they should also defend themselves against it. When Trotsky now again claimed that the interests of the working class and of its state were identical he laid himself open to the same criticism."(1)

. His one-sided view of the nature of the state after the old bourgeoisie is overthrown went hand-in-hand with his one-sided belief in administrative methods. One of the key factors in the strength of a revolutionary class is whether it can develop sufficient cohesion and discipline to act collectively and effectively. But Trotsky tended to believe that administrative methods would solve all problems if only they were carried out brilliantly and enforced through discipline, discipline, and yet more discipline. Deutscher himself points out that "After as before the promulgation of N.E.P., he was indeed one of the sternest disciplinarians", and that well into 1922 "Trotsky still spoke primarily as the Bolshevik disciplinarian".(2)

. It was not until Trotsky felt power slipping away from him and saw that he might end up mainly on the receiving side of this discipline, rather than being the wielder of discipline, that he became interested in democracy in the communist party and started to talk about the fight against bureaucracy. Even then, he still didn't see that this affected whether the state sector was really in the hands of the working class. Trotsky gave varying explanations of where the danger of bureaucracy came from, but he never saw its connection to the way state industry was organized under NEP. At one time or other, Trotsky connected party bureaucracy to an insufficient rate of industrialization, the influence of rich peasants and NEP-men, careerism, the spoils of office available after the revolutionaries win power, the degeneration of old Bolsheviks, the admission of hordes of new party members, etc., and he generally seemed to identify bureaucracy with anyone who disagreed with him. But Trotsky always argued that the bureaucracy could never be a new bourgeoisie so long as it defended state ownership of the economy.

. Far from opposing each step towards Stalinism, Trotsky's economic analysis shared much in common with Stalin's. They both argued that the state sector in itself was inherently socialist;and both buried Lenin's recognition of the contradictions that inevitably arise between the working class and a proletarian state during the transition towards socialism. Trotsky, to the end, never recognized the class basis of the eventual Stalinist dictatorship. His main objection during most of the 20s to party economic policy was simply the speed of industrialization.

. Pathfinder Press collected the main works of Trotsky and some related documents in a three volume anthology, The Challenge of the Left Opposition, covering 1923 through 1929. Let's see how Trotsky's one-sided view of the state sector and failure to see the possibility of a new bourgeoisie arising from within the state sector manifested itself in some of the key articles on economic policy.

. * "The Platform of the Forty Six" was issued on October 15, 1923, but was not allowed to appear in the press at the time. Forty-six prominent members of the party issued this statement, which, according to Deutscher, "echoed Trotsky's criticisms so faithfully" that one "could not but suspect that he was their direct inspirer, if not the organizer of their protest."(3) Faced with the difficulties of the first years of NEP, it held that the country faced immediate economic ruin due to lack of proper administrative direction by the party leadership. Such ruin did not take place. It did not raise the issue of whether the working class was gradually losing control of the state economy, something which did take place in the 1920s.

. It also denounced a suppression of discussion and a "factional dictatorship" (of the dominant party leadership) within the communist party, which it said came into existence after the 10th Congress. There is no discussion of any aspect of working class activity other than inner-party problems, and it mainly wants a change of party leadership, as it fears that the present leadership's "inadequacy" and "absence of leadership" was leading to economic disaster. Its only suggestion for how to solve the current problems was "to call a conference of members of the Central Committee with the most prominent and active party workers, provided that the list of those invited should include" a number of dissenters. It should be noted that just about everyone who signed the declaration had reservations about this or that part of it, which they appended to the statement, and only the proposal for a conference was agreed to by all of the 46 signers.

. * The "New Course Resolution" of December 5, 1923 is not a document of the opposition, but a "Resolution of the Central Committee and of the Central Control Commission Concerning Party Structure", carried unanimously at a joint meeting of the Politbureau of the CC and the Presidium of the CCC. Trotsky was one of the signers, although he regarded it as the resolution of his opponents in the party leadership in reply to the "Platform of the 46". It made numerous promises to improve inner-party democracy.

. * Trotsky wrote a series of articles in December 1923 commenting on "The New Course" resolution. It mentioned this and that but never the issue of the nature of the state sector. For example, the first article said that "the question of party democracy rose up first of all as a question of relations between the generations." Here the problem is the old leaders, although of course no Trotskyist has ever hesitated to praise an old leader who spoke in their favor as a hero of the revolution and organizer of the workers' victory. By the fifth article the problem was "conservative traditionalism".

. The second article pointed out that the "the participation of workers in the state, cooperative, and other apparatuses implied a weakening of the factory cells and an excessive increase of functionaries in the party, proletarian in their origin or not." But its immediate solution laid stress on students, claiming that Lenin proposed "to rely upon the students in order to combat bureaucratism".

. * Trotsky appended to his sixth article on "The New Course", a one-page proposal he had made to the Central Committee in February 1920 on "The Fundamental Questions of Food and Agrarian Policy". He claimed that this proposal to eliminate the system of requisitioning surplus food without compensation, then turned down by the CC, "represented a fairly complete proposal to go over to the New Economic Policy in the Countryside" (and there is no discussion anywhere in these articles of the profound affects of NEP on the state sector). Actually, he claimed that his proposal of Feb. 1920 was the origin of the entire NEP. In his autobiography written in 1929, he wrote that he had proposed that "war communism must be abandoned" and had anticipated the whole NEP.(4) What this suggests is that Trotsky usually identified NEP with only one important aspect of it, the abandonment of the requisitioning of surplus food in the countryside.He did not see the changes in state industry made by NEP as of major importance, but only as an administrative accompaniment to NEP due to a temporary lack of managerial experience. He did see the part of NEP that involved a struggle of the state sector with external market pressures, particularly from the countryside or from foreign trade. To handle this pressure, as well as to take care of any problems with the state sector, he saw the main need as simply a comprehensive plan for the development of state industry. Such a picture of Trotsky's tendencies is corroborated by the way NEP is treated in a number of his other writings as well.

. In fact, Trotsky's proposal of 1920 was limited in its scope. Moreover, even Deutscher admits that Trotsky abandoned his own proposal and decided that the problems of war communism could be solved simply with discipline and yet more discipline. Indeed, Deutscher finds it really admirable--as a proof that Trotsky was far superior to the ordinary run of human being--that Trotsky advocated contradictory policies. He writes that, as the crisis of war communism deepened,

"Trotsky advanced the idea of complete state control over the working classes. His alert, restless, experimenting mind boldly sought a way out in contradictory directions. In each direction it moved to the ultimate limit, while the main body of Bolshevik opinion marked time. He proposed the New Economic Policy [referring to the proposal of Feb. 1920--JG] when the party was still rigidly committed to war communism. Then his thought switched in the opposite direction, explored it to the end and reached the alternative conclusion: that the only remedy for the ills of war communism was cast iron discipline of labor."(5)

. It is notable that in Deutscher's 1500 pages of biography of Trotsky, with hundreds devoted to the 1920s, there is relatively little on the general conception of NEP, and so far I haven't found him refer anywhere to the adoption of commercial accounting in state industry (called in Russian "khozraschet"). He sees NEP simply as competition between the state sector and the private sector, especially the peasant market, but doesn't talk about how the internal nature of the state sector itself is affected. This is not just a quirk of Deutscher's: Trotsky's reduction of NEP to his proposal of Feb. 1920 was no accident.

. * In "Toward Capitalism or Socialism" (August 28, 1925), Trotsky set forward in positive form his views on the critical question of in which direction the Soviet economy was moving.The article displayed throughout an enthusiasm for the figures of economic growth as proving that the economy is moving toward socialism, something that will appear again and again in Trotsky's writings. These figures were "the accompaniment to the mighty historical music of the progress of socialism". (Ch. I) The main issue for Trotsky was "the increasing predominance of the socialist state", and this determines the relationship between classes.(Introduction)

. The role of the state sector and the growth of the economy were indeed major issues of first-rate importance. If the working class cannot successfully direct the economy and foster its growth, then the socialist revolution is doomed. But there was no recognition in the article that there also was a question of whether the working class actually controlled the state sector. Trotsky downplayed the significance of capitalist methods in the state sector. For example, he did not discuss the relationship of the workers to the managers in state industry, or to the mass organizations which speak in the workers' name. And when he discussed the large wage differentials, he merely remarked, no sweat, "Wage diffferentials, great as they may be, do not introduce social differentiation among the proletariat: the workers remain workers for the state enterprises". He recognized a danger of class differentiation among the peasantry, but he saw state industry as automatically socialist.

. Thus Trotsky didn't directly discuss the self-financing system that NEP brought to industry.Moreover, he went out of his way to describe the shifting of cash reserves from place to place as a "socialist" method, provided only that it is carried out by the state. He wrote that:

"Freed from the fetters of private property, the state--by means of the state budget, the state bank, the industrial bank, etc.--could at any moment pump cash resources to the point where they were most needed for the preservation or the rebuilding or development of the economy. This advantage of socialist economic methods has saved us in the last few years." (Ch. 6: "Accomplishments of Socialism in Industry")

Money and financial manipulation -- socialist measures! It is one thing that financial methods are absolutely essential in the transitional period, another to describe them as already socialist --moreover, to do so in an article whose subject was whether the Soviet economy was moving towards socialism or capitalism! This was part of the blind eye Trotsky turned to the profound effects of NEP on the class character of the state sector. Instead, Trotsky saw only the technical and administrative issues facing the state sector.

. For Trotsky, the key question was reduced to the rate of industrial advance. He wrote that: "For, as a matter of fact, the rate of advance is precisely the decisive element." But, he said, there was something else as well. Was he going to mention ensuring the proletarian class nature of the state sector? No. It was that "far more important is the relation of the rate of our total development compared with the development of the world economy." (Ch. 7)

. Trotsky did recognize that there was a question of "What is the social form in which the development of the productive forces is taking place . . . ? Are we proceeding toward capitalism or toward socialism?" (Ch. 3, emphasis as in the original) But this was simply a question of whether there had been "a weakening or a strengthening of the nationalization" of the economy, a question which could be answered by looking at "Gosplan's general table" of the economic activity in the country.

. * Trotsky's private note "A 'bloc' with Zinoviev (for a diary)" (December 9, 1925) discussed the issue of where "state-capitalism" might exist in the Soviet economy. Trotsky couldn't see any tendencies towards state-capitalism in the "state industry", nor did he see the use of any state-capitalist methods there. It's not that he wanted to use another term for the capitalist methods used in the state sector, but that he didn't see any capitalist tendencies to watch out for in the state sector. The state sector was simply "the socialist economy under construction", and that's that. He felt that "state-capitalism" could only refer to state-regulated private industry, such as "the mixed companies, concessions, leasing, etc.)", and this was only a tiny sector of the Soviet economy.

. Moreover, while he saw state-regulated private industry as state-capitalist, he argued that state-regulated commerce is not. Discussing the consumer cooperatives in the countryside (this was not a discussion of producer coops or collective farms), he said that they were regarded as state-capitalist at the beginning of NEP because it was expected that they would be distributing goods from state-regulated private industry. But as they were actually distributing "goods obtained chiefly through state trusts", they were instead "becoming part an parcel . . . of a socialist economic apparatus in the process of formation..."

. Also recall that he had found the financial methods used by the state banks as "socialist methods". Putting this all together, his views on state-capitalism were almost identical to what Stalin said a week or two later at the Fourteenth Congress of the Bolshevik Party.(6)

* In "Party Bureaucratism and Party Democracy" (June 6, 1926), Trotsky defended the formulation "dictatorship of the party" as the real meaning of the dictatorship of the proletariat.No doubt the working class must work hard to develop its own party if it is to act as a consistently revolutionary force. Such a party plays a central role in directing and focusing the proletariat's efforts. But in order to do so, the party must remain linked with the class and must act to build up rule of the class. When Trotsky equated the dictatorship of the party with the proletarian dictatorship, he made the same error as when he equated the state sector as inherently socialist, no matter what its relations with the working class.

. Trotsky insisted on the "dictatorship of the party". This formulation was even included in one of the most important documents of the "United Opposition", a document which was written collectively, The Platform of the Opposition: The Party Crisis and How to Overcome It of September 1927. (See Chapter. 7, "The Party"). If Stalin hypocritically opposed the formulation of "the dictatorship of the party" in order to appear democratic and hide what he was actually doing, Trotsky supported it out of his habit of being the administrative disciplinarian.

. * Trotsky's "Speech to the Fifteenth Conference" (November 12, 1926) was part of a bitter debate against Stalin and other opponents. Yet once again Trotsky defended state industry as inherently socialist. He stressed that "We have disagreed on the rate of industrialization . . ." (emphasis Trotsky's) There was no recognition that the workers' control of the state sector was in doubt--and that self-financing, other capitalist methods in the state sector, and the problems in the workers' organizations took their toll on the class nature of the state sector. Instead Trotsky quoted one of his previous statements, which emphasized that all a worker in the state sector had to do was work well, and this would amount to the growth of socialism: "'In the Soviet state a conscientious and good worker, whether he cares to do it or not (in case he is not in the party and keeps away from politics) achieves socialist results and increases the wealth of the working class.This is the doing of the October Revolution, and the NEP has not changed anything in this respect'..."(7)

. What had NEP changed? According to Trotsky, it basically concerned only relations with the peasantry. "The NEP has been a process of shunting onto a new track, precisely for the establishment of correct relations between the proletariat and the peasantry." No doubt, this was an important part of it. But Trotsky again failed to see NEP's relation to the internal functioning of the state sector.

. * Trotsky's "Theses on Revolution and Counterrevolution" (November 26, 1926) were written soon after the Fifteen Conference. Here he saw the danger to the revolution coming solely from the peasantry. "The NEP revived the contradictory petty-bourgeois tendencies among the peasantry, with the consequent possibility of a capitalist restoration." (pt. #13) He saw the state sector and the party, no matter how poorly they were run and what social relations existed inside them, as solely socialist forces. Thus, aside from "the muzhik's fear that the landlord would return with the capitalist", he saw "the elements militating against any [capitalist] restoration" as "(b) the fact that power and the most important means of production actually remain in the hands of the workers' state, though with extreme deformations; (c) the fact that the leadership of the state actually remains in the hands of the Communist Party, though it refracts within itself the molecular shifting of class forces and the changing political moods." (pt. #28)

. * Now let's jump forward to Trotsky's famous book "The Revolution Betrayed: What Is the Soviet Union And Where Is It Going?" written in 1936, long after the Stalinists had begun bloody repression against the Trotskyists. Trotsky's attitude toward the Soviet regime had hardened considerably. Yet the book still starts, reminiscent of "Toward Capitalism or Socialism" written a decade earlier, with boasting of the economic growth in the Soviet Union and calling it a victory of socialism. True, now Trotsky referred to the fierce disproportions in the economy in order to condemn the Stalinist leadership, but he still identified the growth as the victory of a "workers' state". He wrote that

"Socialism has demonstrated its right to victory, not on the pages of Das Kapital, but in an industrial arena comprising a sixth part of the earth's surface--not in the language of dialectics, but in the language of steel, cement and electricity. . . . thanks solely to a proletarian revolution a backward country has achieved in less than ten years successes unexampled in history."(8)

. The book is full of contradictions: its attempt to describe what is actually happening conflict with its theoretical conclusions. On one hand, in order to criticize the regime, Trotsky finally had to debunk the view that the state sector is owned by the workers. On the other hand, he still reasoned about the nature of Soviet society on the basis that the state sector was the revolutionary conquest of the proletariat. He wrote that

"The nationalization of the land, the means of industrial production, transport and exchange, together with the monopoly of foreign trade, constitute the basis of the soviet social structure. Through these relations established by the proletarian revolution, the nature of the soviet union as a proletarian state is for us basically defined." And so, he concludes, "the social revolution, betrayed by the ruling party, still exists in property relations . . ."(9)

True, the bureaucracy, through its control of the state, in effect owns the state sector. But it "enjoys its privileges under the form of an abuse of power. It conceals its income; it pretends that as a special social group it does not even exist." And, said Trotsky, "In civilized societies, property relations are validated by law." So Trotsky, in the final analysis, judged the state sector not by what it actually was, but by what it legally was and by what Trotsky would have liked it to be.(10)

. Trotsky in effect denounced that the bureaucracy can determine who is rich and who is poor, and set all the policies, but held that this is unrelated to the system of production. He wrote of the "contrast between forms of property and norms of distribution", between "the bourgeois norm" of distribution and "the socialist property system."(11)

. It is also notable that Trotsky didn't have much discussion of the basic ideas motivating NEP, nor of what happened to them in practice, in his historical account of the USSR. Nor did he dwell on the importance of the idea of the transitional stages between capitalism and socialism, although this is one of the key issues brought before the world proletariat by the experience of the Russian revolution. This also meant that he didn't see all the dangers and contradictions involved in this period. In particular, he still didn't see how the self-financing and other capitalist methods used in the state sector under NEP had any serious effect. He did briefly remark that "industry itself, in spite of its socialized character, had need of the methods of money payments worked out by capitalism". He deduced this solely from the expediency of having "the play of supply and demand" serve as a "material basis" for planning for a lengthy period. But he had no discussion of how this affected the class nature of the state sector or what dangers it posed, and he still saw in NEP only the danger from the rich peasants.(12)

.* Now let's move on from Trotsky to some latter-day Trotskyists. Ernst Mandel's "Marxist Economic Theory" was written in the 60s, long after Trotsky was murdered and after much more experience with the Soviet regime. Yet the Trotskyist Mandel still held basically to the same view of the state sector as Trotsky. Due to the extensive state sector, he held that the Soviet economy was "noncapitalist". It didn't matter that there was "bureaucratic management" of the economy and the entire society, and the workers didn't rule. This was supposedly only a matter of "norms of distribution" and didn't affect the fundamental nature of the social system. He wrote, in words reminiscent of The Revolution Betrayed, that

"Soviet economy is marked by the contradictory combination of a non-capitalist mode of production and a still basically bourgeois mode of distribution."(13)

. Mandel too had little to say about NEP and especially about its effects on the internal organization of the state sector. He didn't consider why the state sector had to use cost-accounting and various other capitalist methods, and what this meant for the tasks of the working class.

. * Tony Cliff's State Capitalism in Russia, whose first edition appeared in 1948, differs from classical Trotskyism in that it declared that there had been a capitalist restoration in the Soviet Union and that the Stalinist bureaucracy was a class. But it had just as hard a time analyzing the state sector as Trotsky or Mandel. It held that the state sector would have been fully planned and acted in a unified way except that the Soviet Union had to compete on the world market. It had no understanding of the competing interests among the Soviet bourgeoisie and how they developed.

. Also notable is that Cliff's State Capitalism had little to say about NEP one way or the other. He could contrast the Soviet Union to a fully socialist system, but couldn't deal with the process of transition towards socialism. The state sector was not only a stumbling block for Trotsky, but it remains one for most current Trotskyists. This is one of the reasons why a repudiation of Preobrazhensky's views on the nature of the Soviet state sector remains relevant today.


. Part One of this article showed that, Preobrazhensky to the contrary, profit, rent, interest, and other categories of commodity production were important features of the Soviet state sector. Since Preobrazhensky put special stress on arguments concerning the law of value, it might seem odd to have put off dealing with the law of value until now. But discussions about whether the law of value applied to the Soviet Union have often ended up floating in clouds of vagueness and abstraction. To avoid this, it was important first to establish the basic economic features of the state sector in a concrete way. It was also important to note that the measure of whether the Soviet Union was moving towards socialism was whether the working class itself was controlling production more and more, and not just whether the state sector was growing and becoming more dominant. We are now prepared to deal with the overall question of the law of value.

. Nevertheless, since activists differ dramatically on what the law of value says, and especially on what happens to the law of value under monopoly capitalism, there will no doubt be disagreement as to how Preobrazhensky's views on value relate to his apology for the state sector. I will present my views concerning the law of value by way of contrast to Preobrazhensky's, but I do not mean to imply that one has to say the opposite of what Preobrazhensky says on every issue, or else one is a revisionist. (For that matter, I agree with Preobrazhensky on at least one key point--that whether the law of value applies is the same question as whether commodity production is taking place.) Instead, the point is to further develop discussion concerning what the transitional economy looks like, and how commodity production is overcome.

The law of value and monopoly capitalism

. The law of value is identified by many socialist activists with capitalism, so that overcoming the law of value means overcoming capitalism. Thus the argument about whether the law of value holds in the state sector is, for most, an argument about whether the state sector has become socialist. That is indeed Preobrazhensky's interest in the law of value--it serves as a summation of his contention that categories like profit, rent, interest and so forth don't really exist in the state sector.

. However, Preobrazhensky held that the law of value was already partially overcome by capitalist monopolies and state-capitalism. Indeed, this was part of his argument that the law of value was overcome in the Soviet state sector. He stressed that

"we have to deal with the law of value in our economy in an historical epoch when this law has been considerably undermined in bourgeois society itself, owing to the powerful development of monopoly tendencies in present-day capitalism, . . ."(14)

. His view was that wherever monopoly appears, the law of value fades away, because prices deviate from what they would be in a competitive, free market. He applied this both inside a national economy, and internationally. If was cartel is formed to dominate a product, he held that, to this extent, the law of value was superseded. He wrote that:

"Restriction of freedom of competition leads also to restriction of the working of the law of value, in that the latter encounters a number of obstacles to its manifestation and to some extent is replaced by that form of organization of production and distribution to which capitalism can in general attain while still remaining capitalism. In the sphere of regulation of prices by the law of value a change occurs in the following sense. When there is trustification or syndication of important branches of production within a certain country, prices systematically (though not necessarily always) deviate from value in the upward direction. When 'dumping' takes place, prices systematically deviate from value downwards on the foreign market and upwards on the home market. The equalizing of the rate of profit between the trustified branches of production is rendered almost impossible . . . It is very important for the future to note here that economic necessity imposes itself in these circumstances in a way which is significantly different from what happens under the law of value, so that political economy opens a new chapter when it analyses these forms, in so far as a transformation begins in that very concept of 'law', with which we are concerned when we study free competition."(15)

. Preobrazhensky thus identified the law of value as only operating when prices are normal--if prices deviated for any reason from what one would expect from a straightforward application of the law of value, then the law of value to that extent had been obliterated. I think this is mistaken. The law of value does not mean prices are always near a certain level, but that there are consequences when they aren't. Preobrazhensky, for example, gave the example of dumping. Since the firms doing the "dumping" sell their product at an artificially low price abroad, this meant to him that the law of value hardly applied anymore. And since the firm sold its products in the home market at higher prices than normal, this reinforced his idea that the law of value has been superseded. But it seems to me that his example shows the opposite. If selling goods at an artificially low price abroad went along with selling them at higher prices than otherwise in the home market, this would show that the law of value was still active. The way the law of value works had become more complicated, but it still applied. However, for now, let's see where Preobrazhensky's reasoning lead.

. Preobrazhensky gave examples of capitalist countries in which the law of value is dying out. He said that in imperialist German, during World War I,

"Production which formally remained commodity production was transformed de factointo planned production in the most important branches. . . . the working of the law of value in many respects was almost completely replaced by the planning principle of state capitalism."

He said that, to a lesser extent, this occurred in wartime Britain. He also said that the

"the autocracy of America in world economy", which was seen after World War I, "inevitably entails a further restriction and transformation of the working of the law of value; now, however, not within the separate national economies . . . , but in the arena of the world market as a whole."

True, he said, the law of value can't die out altogether in the capitalist world: "Not a single capitalist country can, without ceasing to be capitalist, break away from the operation of the law of value, even in its changed form." Nevertheless, he held that, in the capitalist world,

"The law of value is passing into the phase in which it is transformed and gradually dies out, also on the basis of the law of value."(16) He argued that ". . . in the monopolistic period of capitalism the law of value has already been partially abolished, along with all the other laws of commodity production which are connected with it."(17)

. Preobrazhensky used his analysis that the law of value was dying out in the capitalist world to show that the same thing was true in Soviet state economy. He argued that the prevalence of "exchange of goods for money" didn't really show that the law of value existed in the Soviet state sector, because one could see that even in monopoly capitalism, the law of value was already partially abolished.

. But a theoretical analysis has to be argued consistently. If he were right that the law of value was dying out under capitalism, then it would follow that one couldn't prove that the Soviet state sector was inherently socialist by showing that the law of value was dying out there. Instead, all this would show is that the Soviet state sector was monopolistic, something which is already evident. It would not show whether the Soviet Union was state capitalist or making a transition towards socialism, because in his analysis, the law of value would be fading away in either case.

The law of value and mid-19th century capitalism

. Preobrazhensky's view of the law of value led him to hold that it, and the general laws of commodity production, could only apply in full to mid-19th century capitalism. He felt that for the law of value to hold, there must be laissez-faire capitalism; there must be no monopolies; there must be the free movement of capital between different fields of the economy; there must be no tariffs or other impediments to free competition on the world market; no landlords impeding investment in agriculture by charging rent; etc., etc. etc. He himself says that there never was a situation in which all these conditions were met. He wrote:

. "For the fullest manifestation of the law of value it is necessary that there should exist complete freedom of commodity circulation both within a country and between countries on the world market. It is further necessary that the worker be a free seller of labour-power as a commodity, and the capitalist a buyer of it who is himself in no way constrained. It is necessary that the interference of the state in the production process and the number of state-owned enterprises be kept to the minimum, and also that there be no regulation of prices by the monopolist organizations of the entrepreneurs themselves, and so on. Such ideal conditions for free competition on the scale of world economy have never existed, because tariff barriers between national economies, interference by the state in the production process, and also the impossibility of free investment of capital in agriculture without paying tribute to private owners of land have all meant a definite limitation on freedom of competition. However, a comparatively ideal period for free competition on the scale of world capitalist economy, and so a period as favourable as possible for the working of the law of value, was the epoch of classical capitalism, before its transition into the imperialist stage." (Underlining added)(18)

. Thus, Preobrazhensky identified the law of value with prices being set according to perfect free-market criteria. As a result, he took the law of value as applying in full only to that ideal free-market situation dreamed about in contemporary neo-liberal economics textbooks. He saw any development beyond the free-market as a retreat from the law of value.

. Ironically, a similar argument is made by a number of reformists. They argue that yes, in the dog-eat-dog capitalism of the mid-19th century, the Marxist critique was correct. But unions and welfare legislation on one hand, and monopolies and a public sector on the other, are alleged to have tamed the law of value.

State action as outside the sphere of the law of value

. The general theoretical discussion of the law of value by Preobrazhensky reduced to the following practical consequence: state action was taken as going outside the law of value, or restricting it. According to his theory, to escape from the law of value, it was not necessary to eliminate buying and selling for money, but only to ensure that the prices differed from free-market ones. When the state manipulated prices, Preobrazhensky didn't take this as proof that commodity production had yet to be overcome, but instead took it as proof that commodity production was dying away.

. Take the question of agricultural production. In general, Preobrazhensky saw individual peasant production as commodity production. But all it took was for the state to be able to dominate the market for the agricultural goods, and Preobrazhensky believed that the law of value has been, to that extent, overcome. Thus he wrote that the

"The law of value operates very powerfully in the exchange of foodstuffs of animal origin--meat, butter, eggs--and of such raw materials as hides, sheepskins, and wool . . . It has less influence in market relations where exchange of other, technical raw materials is concerned, such as hemp, flax, and especially cotton. . . . Finally, to a very great extent the state is the master of the situation as regards prices in the grain trade."(19)

. So he held that in 1926, even though individual peasant production was continuing, and there had not even been collectivization (which itself is only a step towards fully socialist agriculture), the law of value was fading away if only the state could dictate the prices. The same type of individual peasant production may produce eggs and grain--they may sometimes even be produced on the same farm by the same peasant. But there supposedly is a fundamental difference concerning whether the egg or the grain is part of the "commodity" or the "socialist" part of the "commodity-socialist" economy, depending solely on how far the state dominated the prices.

. His view was that only when the economy is utterly "spontaneous" does the law of value operate.(20) Without spontaneity, he saw prices as merely something "formal". Any interference with free-market forces, whether by the Soviet state sector or by "the planning principle of state-capitalism" eliminated spontaneity, and to that extent, eliminated commodity production. Hence, in his theory of "commodity-socialist system", planning and state action are in themselves socialist, outside the law of value, and the commodity part is restricted to the private production (and then only if the products are sold on the free market).

. There is no doubt that governments (and monopolies) can affect prices. But if the law of value could be surmounted by just any state action--tariffs, taxes, grants of special economic privilege to various individuals and corporations, etc.--then this law would have relatively little significance in history. All through the history of the development of capitalism, state action has played a substantial role in molding the economy. Sometimes it succeeded in accelerating development; sometimes it retarded development; it frequently was ineffective; and it always served as a lucrative source of milking the economy for the ruling class. The rise of political economy presumably reflected a growing realization that state action would not necessarily have the results that it desired, and that objective economic laws were more powerful than the intentions of ministers and governments. State action might have powerful effects one way or another, but if one wanted to know what effects these would be, one had to realize what underlying economic laws were in operation. In a commodity economy, state action might alter the prices of goods, but the law of value and other laws of commodity production would dictate the effects of these changes. Economic laws are "spontaneous" in that they act despite the will of human beings, whether ministers or slaves, not because the acts of human beings don't actually affect history. Even in the case of administered, planned prices, the effect of these prices might well be "spontaneous".

Preobrazhensky, Stalin and Mandel in agreement

. Preobrazhensky's view that state action showed that the law of value had been restricted or partly abolished is widely held. Many activists and politicians of various trends have advocated it. For example, Stalin advocated a similar position in his famous pamphlet Economic Problems of Socialism in the U.S.S.R. (1952).

. Of course, Stalin was writing about an economy which had a more extensive state sector and a more complete state capitalism (which he called "socialism") than the Soviet Union of 1926.Partially for this reason, his terminology differed from Preobrazhensky: he didn't talk of a "commodity-socialist system" but of a "socialism" which still had the law of value, but not as a "regulator of production". But his proof that the law of value didn't regulate production was fully in Preobrazhensky's spirit. He wrote:

. "Totally incorrect, too, is the assertion that under our present economic system . . . the law of value regulates the 'proportions' of labour distributed among the various branches of production.
. "If this were true, it would be incomprehensible why our light industries, which are the most profitable, are not being developed to the utmost, and why preference is given to our heavy industries, which are often less profitable, and sometimes altogether unprofitable.
. "If this were true, it would be incomprehensible why a number of our heavy industry plants which are still unprofitable . . . are not closed down, and why new light industry plants, which would certainly be profitable . . . are not opened. . . .
. "Obviously, if we were to follow the lead of these comrades, we should have to cease giving primacy to the production of means of production in favor of the production of articles of consumption. And what would be the effect . . .? The effect would be to destroy the possibility of the continuous expansion of our national economy."(21)

. By way of comparison, Preobrazhensky argued that it was obvious that the law of value was being displaced from state industry, because otherwise state industry wouldn't exist. He argued that the law of value had been largely pushed out of the "socialist" sector of the "commodity-socialist system": otherwise, under the influence of the law of value,

"pressing both from inside and outside, state industry necessarily would have been in process of dissolution in the waters of NEP, if not already quite dissolved by now; the state monopoly would have had to become more and more fictitious, enterprises working at a loss would have had to be closed down, leaving only the profitable ones in being, and so on. In particular, transport and metal-working would have had to be left in the hands of foreign capital, or handed over to it, and so on." He added that this showed that "state industry is developing and becoming consolidated in opposition to the operation of the law of value".(22)

. One might note that many indubitably capitalist governments have fostered heavy industry. From the U.S. government in the 19th century to the South Korean government more recently, protectionism, subsidies and other steps have been used to build up industry much more rapidly than the undisturbed free market would have. Should these countries too be described as having build up industry through the partial abolition of the law of value?

. Well, as we have seen, Preobrazhensky was by no means averse to declaring that various monopoly capitalist economies had partly gone beyond the law of value. A number of other trends also feel that way (perhaps in regard to some non-monopoly capitalist countries as well).Such dependency theorists as Samir Amin hold that "delinking" lets a country go against "the worldwide law of value" and is even part of a transition towards socialism.(23) But any theory that holds that the law of value can be restricted in this way and yet rejects the reformist interpretation that these countries have gone beyond capitalism has before it the theoretical task of explaining what general laws of capitalism are left if commodity production is supposedly on the way out.

. In any case, both Stalin and Preobrazhensky held that the state action in itself proved that the law of value had been restricted in the Soviet Union, although they expressed this in somewhat different ways. Preobrazhensky said that the law of value was only one of two regulators of production in the Soviet economy of 1926, while Stalin held that it later had lost its role as a regulator altogether in the Soviet Union. Stalin's formulation was that the means of production were outside the sphere of commodity production, but that the law of value applied to consumer goods. (24)

. Mandel, in his book Marxist Economic Theory, held a similar view of the Soviet economy. Despite the prevalence of financial transactions, buying and selling, money, etc., he believed that the law of value was restricted to petty production of consumer goods. He wrote that "The law of value . . . does not apply in a 'pure' way except in petty commodity production" and that there was "a non-capitalist mode of production" in the Soviet Union. The proof of this was the existence of the state plan.(25)

. Mandel claimed that what he was saying was quite different from Stalin's views. He argued that

"The official Soviet thesis, according to which the construction of socialism has been finished in the U.S.S.R. since 1936, though the categories 'commodity, value, money' still obviously apply there, represents a revision of the Marxist theory of socialist society. The Textbook of Political Economy published in August 1954, adopting the theme of Stalin's article on 'Economic problems of socialism in the U.S.S.R.', defends this same revisionist view."(26)

But, ironically, Mandel agreed with much of Stalin's analysis of the law of value and commodity production in the Soviet Union: Mandel's disagreement was that he wanted to label the Soviet Union a "postcapitalist society" moving towards socialism, rather than a fully socialist society.

. In the course of seeking to prove that the law of value wasn't the regulator of production in the Soviet Union, Stalin argued that the means of production were no longer commodities in the Soviet Union, although consumer goods were.(27) Mandel basically agreed with this, holding that most means of production (except those intended for the collective-farm market) are not commodities, while most consumer goods (except those taken by the state for its own uses, mainly for export or for the use of the armed forces) are commodities. To show that commodity production doesn't exist in the state sector, Mandel argued:

". . . the means of production and exchange which are produced in these nationalised enterprises lose their character as commodities and are no longer anything but use-values.Even if these use-values are formally 'sold' by one state enterprise to another this is a mere matter of accounting and general checking on the execution of the plan, for the economy as a whole and for each economic unit."(28)

When Mandel was refuting Stalin, he indignantly referred to the "obvious" existence of money, buying and selling, and similar categories; but when Mandel was elaborating his own theory about Soviet "postcapitalist" society, he shrugged off these categories and said that money

"loses a series of fundamental functions which were characteristic of it in capitalist economy."(29)


. Preobrazhensky's discussion of the law of value was actually a discussion of whether commodity production still existed. He identified how far the law of value applies with the applicability of "all the other laws of commodity production which are connected with it". In this I think he was correct. The basic issue is the continued existence of commodity production, which brings along with it a series of consequences. What is at stake is precisely how far commodity production continues to exist, and how to eliminate it.

. However, his limited conception of the law of value glossed over the significance of the continued existence in the state sector of profit, buying and selling, and other features of commodity production. This was based on his identification of commodity production with normal pricing. He identified any deviation from normal pricing, and any transformation in the law of value, as a distortion or a fading away of the law of value. But in fact, the way law of value has manifested itself with regard to pricing has been continually changing. Several major historical periods can be distinguished.

Historical periods in the growth of commodity production

. * There is so-called "simple commodity production", that is, small-scale production by laborers who own their own means of production, for example, artisan production. So long as this type of production dominates the market, then commodities tend to be sold directly at their value. So, Engels says, the validity of the Marxist law of value in its most straightforward form

"holds generally, as far as economic laws are valid at all, for the whole period of simple commodity-production, that is, up to the time when the latter suffers a modification through the appearance of the capitalist form of production. . . . for a period lasting from the beginning of exchange, which transforms products into commodities, down to the 15th century of the present era."(30)

This was a period of thousands of years.

. * There is free-market capitalist production, reaching its height in what Preobrazhensky called "the classical epoch of capitalism". Under conditions in which capital can flow easily from one branch of business into another, there is the formation of a general rate of profit. This affects prices, which now begin to deviate systematically from their value in a way which is described in volume III of Capital, which calls the new prices "prices of production". There are many intermediate steps between the value of commodities and observable relations in the economy. Indeed, Marx said that

"The science consists precisely in working out how the law of value operates. So that if one wanted at the very beginning to 'explain' all the phenomena which apparently contradict that law [the law of value--JG], one would have to give the science before the science."(31)

This is quite a different approach from supposing that any deviation of prices from what one might expect by analogy to earlier periods shows that the law of value is fading away.

. * There is monopoly capitalism, which begins at the end of 19th century and dominates capitalism throughout the 20th century. Here pricing is again changed, this time with the widespread appearance of monopoly pricing. Such pricing reflects the economic power of the monopolists, and thus includes an arbitrary element which cannot be calculated from any numerical laws of pricing. This perhaps is what Preobrazhensky is referring to when he says that "a transformation begins in that very concept of 'law'".

. * There is the state capitalism of the revisionist countries, such as Stalinist Russia. Here many of the ordinary mechanisms of Western capitalism, such as the stock market, may be gone altogether. The state dictates prices and economic transactions to an extent far beyond that of Western monopoly capitalism, and there is a far greater element of arbitrariness in pricing.

. Thus prices have diverged from free-market prices for some time. Moreover, the free-market prices of "the classical epoch of capitalism" themselves diverged in a complex way from value. Preobrazhensky was aware that the law of value has gone through several major stages (and he took the final phase as "the state capitalism of Germany in 1918-18, and the very strong tendencies in the same direction in the economy of the Entente countries during the war", where he believes that there was only "formally" commodity production). Yet Preobrazhensky asserted without proof that "the fullest manifestation of the law of value" takes place in the "classical epoch". This was his rationale for asserting that any deviation of prices from the "classical" ones showed that commodity production itself was fading away. Yet capitalism has manifested many new features since the "classical epoch": periods of national growth rates much higher than the old free-market capitalism; global economic crises differing from the old business cycles; changes in the way the bourgeoisie is organized, such as the development of joint-stock companies and eventually multi-national companies; etc. These developments show that commodity production has been unfolding further than it did in the 19th century, which did not see its fullest extent.

. Preobrazhensky held that

"the law of value can be theoretically photographed best of all in the pure form in its native spontaneity, that is, in the period of capitalist free competition, a task which Marx carried out in Capital."(32)

Actually, the pure form took place in the period of simple commodity production, when prices were closest to the value. It had already been transformed quite a bit by the time the period of classical free competition arrived. Ironically, just for that reason, this period saw a fuller manifestation of the law of value, and it is quite important to "photograph" capitalism in this period, as Preobrazhensky said, and to analyze and understand its laws. The basic structure of capitalism so revealed remains relevant today, and well as providing an important benchmark against which later developments can be measured. But it is completely arbitrary and anti-historical to regard that the real law of value is stuck in the mid-19th century. It is a mistake to identify subsequent modifications of the way the law of value operates with the negation of this law, as Preobrazhensky did.

.At one time it may have been believed that monopoly capitalism would only last a short time, and rapidly be supplanted by socialism. However, as history would have it, monopoly capitalism has lasted over a century. It has lasted longer than the classical period of free competition. It has given rise to numerous economic and political forms unknown to the period of capitalist free competition. It itself is the model of capitalism today.

. Moreover, one of the key tasks of the 20th century communist movement is to distinguish the road to socialism from state-capitalism. To do this, one cannot be satisfied with reiterating all those ways in which state-capitalism and the transition period are similar. It is essential to emphasize those ways in which state-capitalism and the transition period differ.

. Preobrazhensky cited Capital as his authority for taking mid-9th century free enterprise as the model of capitalism. But Capital, like all of Marx's work, is distinguished from bourgeois political economy in insisting on the historical character and constantly changing form of economic categories. Marx analyzed not only the capitalism of his day, but the historical forms leading up to it. And in volume III of Capital, there are number of comments by Marx and Engels concerning the new forms which capitalism was taking on at the end of the 19th century. Following the example of Marx and Engels, one of the key tasks of today's Marxist economics is to show how the basic laws of commodity production continue to manifest themselves in the state capitalism that has played such a major role in the 20th century.

The revenge of the law of value

. It is especially state dictation of prices and direction of economic transactions that gives the impression to many activists that the law of value has been breached. But are there clear signs that the laws of commodity production still exist in the state capitalist economies? If the state can dictate prices and production as it wishes, but this dictation results in crises and disproportions, then this is the revenge of the law of value. Even in free-market situations, prices vary from value or the "prices of production", but there are consequences when this happens. It is the existence of consequences for deviations that is the main way in which the law of value manifests itself in monopoly capitalism and state capitalism.

. Thus in the state-capitalist countries, black markets have appeared and played a major role for decades on end. This is not just an imperfection of the system. These black markets are signs that commodity production still exists, and that the ministries are not all-powerful but subject to its laws. They can, for example, set the price of some commodity very low, even while providing few resources for producing the commodity. This definitely goes against the ordinary laws of commodity production, in which you generally have to provide a commodity in abundance for the price to fall. But the result in the state-capitalist countries has been the development of a black market. Indeed, the black market often becomes so pervasive that it is accepted as an ordinary part of the system's functioning, sometimes being described as a "grey" market, because it may not be legalized, but it is tolerated (and used) by the authorities.

. These black and grey markets weren't just for consumer goods. In the Soviet Union, for decades there had been black and grey markets in means of production. There was a special type of Soviet supply agent whose role was to scrounge up, outside the state plan, means of production for factories through trading, deals, influence-peddling or whatever. The Russians called this unofficial but omnipresent businessperson the "tolkach" or pusher. He was a living manifestation that the Soviet state sector was engaged in commodity production.(33)

. Preobrazhensky was of course aware that crises and disproportions existed in the NEP economy. Thus he wrote eloquently that "A goods famine [severe shortages of manufactured goods--JG] is a warning to the state which guides industry, it is a demand that proportionality be established, a demand which is screamed out by the country's entire economic organism." Here indeed is the revenge of the economic laws, which "scream" out for change. But Preobrazhensky regarded this mainly as the results of bad planning. He perhaps saw bad planning as opening a crack through which the law of value would seek to establish itself, but it didn't strike him that this was only possible if the state sector were in fact engaged in commodity production. He noted that (under the conditions of NEP) prices will indeed go up throughout the Soviet Union as a result of the "goods famine". But since the state sector wouldn't increase production of goods unless it decides to do so, he said that there was "an inhibited reflex of the law of valuewhich did not pass from the sphere of distribution to the sphere of production."(34) Since the increase of production wouldn't take place "spontaneously", since price increases couldn't themselves force the state to increase production (if the state was willing to stop up its ears and let the economic screaming continue), Preobrazhensky concluded that the law of value "is half-abolished". Of course, if the state doesn't increase production, the goods famine will continue. Nothing will inhibit this revenge of the law of value. This "screaming" that went on for decades on end in state-capitalist countries is one of the dramatic proofs that commodity production remained in force in the state sector.

The fight against the market

. It was common in Preobrazhensky's time to talk of the fight of socialist planning versus the market. Preobrazhensky insisted that what should actually be talked about is the fight of "the law of primitive socialist accumulation" versus "the law of value". All this raises the issue, what is a fight against the law of value?

. Even under an outright capitalist government, the working class may succeed in obtaining laws for universal education (or health care, or whatever). Universal and free public education achieves a result which is different from that of the free-market, where every parent has to purchase schooling for the children. In that sense, the state action is a fight against the market. But of course, the public education system doesn't actually go outside the bounds of commodity production. This is revealed by the heavy taxes which the working masses pay to finance this system, and by the profits which textbook companies, construction firms, and other capitalists make off the public schools. The action of the law of value hasn't actually been eliminated or half-abolished; it simply manifests itself in another way. As we have seen, the law of value has appeared in many different forms in capitalism. This doesn't mean that public education is of little value to the masses; it is of tremendous value. But it doesn't shake capitalism.

. To abolish the law of value requires eliminating commodity production. The working masses must actually control all production. All actions by the state which facilitate this thereby prepare conditions for the elimination of the law of value. But it is not the mere fact of state interference that constitutes the blow against the law of value; it is the fact that the working class is gaining more and more ability to control the entire economy. By itself, state interference only constitutes a blow against the free-market manifestation of the law of value.


. One of the most important features of the socialist economy is that it is a planned economy. The anarchy of production under capitalism is replaced with harmonious relations between the different workplaces, which don't exchange commodities but send supplies to each other according to plan. The possibility of a plan arises because society as a whole owns the means of production.

. But societal ownership is not simply state ownership. The fairly complete system of state-ownership that developed in the Soviet Union in the 30s masked the existence of private interests, with each executive seeking his or her own enrichment. Competing interests multiplied in the state sector, between executive and executive, between executive and the ministries, between the ministries, and even between different cliques inside an individual ministry. No matter how much the ministries tried to bribe the executives to do what they want, the objective logic of the state-capitalist system frustrated the will of the planners again and again.

. The planning that takes place under socialism is radically different from that in Stalinist state-capitalism. This is because it is not based simply on ministries and executives, but on the conscious participation and initiative of the mass of the population. It is only when the mass of workers are involved in the plan, ensure that their workplace follows it, have room for their own initiative and innovations, and really are the final authority for the plan, that a real social planning can exist.

. In the 1920s the Soviet Union faced a situation where planning was limited by many factors. The state sector still faced competition from private production. The planning agencies were still working out the methods of getting a picture of the economy as a whole, to say nothing of directing it. The workers were increasingly being sidelined by the development of bureaucracy, with the executives becoming the chief agents of the plan at the workplaces. The peasants at best tolerated the NEP economy. And so forth.

. But Preobrazhensky only saw the problems of the growth of the state sector and the perfection of the planning techniques used by ministries and executives. His view that the state sector was automatically socialist blinded him to the significance of the passivity of the workers. He might regret the bureaucracy imposed on the workers, but he didn't see its economic significance, and believed that the growth of the state sector itself would solve the problem. He didn't see that the role of the workers was essential not just as a factor for production, but as active planers and controllers of the economy. Similarly, he was blinded to the significance of the buying and selling and financial measures used in the state sector: instead of seeing that these measures affected planning itself, he believed that the existence of some type of planning rendered these measures merely "formal".

. Preobrazhensky's theories about the law of value didn't help him correct this problem. His view was that "The law of value is the law of spontaneous equilibrium of commodity-capitalist society."(35) He meant this literally. Whether it was "the planning principle of state capitalism" or the planning agencies in the Soviet state sector, he believed that the existence of planning meant, to that extent, that the law of value and commodity production was abolished, as he held that they basically were in imperial Germany during World War I.

The law of value and perfect foresight

. There is no doubt that developing planning techniques was a serious problem for the Soviet regime. But by and large this problem was surmounted. The Soviet executives learned how to run enterprises, and the ministries learned a good deal about how to get an overall picture of the economy. It was the class issues that festered in the Soviet Union, gradually converting the party and the executives into a new ruling class based on the state sector. True, there was a constant discussion in the Soviet Union, right up to its dissolution, about how to reform the planning system. Each few years another system of planning, another way of estimating plan fulfillment, another way of calculating bonuses for the executive was introduced. But this was because the Soviet ruling class naturally wouldn't concede that the class relations in the Soviet Union were the problem, and looked for solutions in technical and administrative improvements. So there was the search for the Holy Grail of the better mathematical system of planning that would magically cure the Soviet state-capitalist regime of its ills.

. Preobrazhensky's theorizing preceded this search and provided an ideological rationale for it. For example, he developed the idea that anticipating everything was "precisely the first characteristic feature of the new, socialist production". He discussed this in the light of statisticians calculating figures ahead of time. On one hand, this allowed him to prettify the existence of commodity production in the state sector: it didn't mean anything if there was buying and selling between state enterprises, provided that the statisticians anticipated everything beforehand. On the other hand, he failed to mention that this planning can never be perfected until it goes beyond statisticians and involves the entire working class as its guarantor. And he failed to mention a number of features of practical importance for social planning of production, such as the need for constant checkup on what had been done, for constant feedback and modification of the plans in accord with unexpected events, and for wide initiative and innovation at the base.

. Let's look at one of Preobrazhensky's statements on planning that emphasizes the need for perfect foresight. He considered, for example, the problem of producing the proper amount of shoes. He insisted that

"The statisticians of socialist production will have calculated it, substantially, beforehand, through the methods of calculating mass demand which will be worked out under this form of production. . . . It is not prices on the market after production but columns of figures of socialist book-keeping before production that sound the alarm and enter the consciousness of the planning centres; they inform the guiding economic centres of the growth of new demands, and thereby of an economic necessity to which they must adjust themselves. This anticipation of regularity constitutes precisely the first characteristic feature of the new, socialist production, distinguishing it from the old."(36)

. In the course of explaining this, Preobrazhensky referred to a number of important things, such as the ability to consider the growth of population, and the need to consider the consequences of shoe production on other branches of production. Nevertheless, he went too far when he suggested that all corrections and "alarms" take place ahead of time, and that all checking of production against demand afterwards requires prices. Why can't a socialist society keep track of the demand for shoes, of which of the shoes being produced meet the approval of the people and which are left on the shelves of the distribution points? If it finds it is producing too many shoes of a certain type, it can now produces less. And if certain shoes are being demanded in excess of production, then more can be produced. Instead he emphasized perfect foresight, in which even the "alarms" about planning problems all come in advance.

. Of course, if he had other statements that brought up the neglected issues of working class control, feedback, flexibility, etc., then it wouldn't make sense to be too critical of the statement above. But he didn't have such statements in The New Economics or the other materials I have seen from him.

. Note too that the only example Preobrazhensky gave of checking on production after the fact is through market methods. He talked of scarcity resulting in a rise of prices. But the difference between commodity production and socialist production with respect to checking on the level of production is not that socialism assumes that its production plans and before-the-fact calculations are perfect. It's not that socialist planners don't need to verify their results by what actually happens after production, but that socialism can check on the results without using prices. The constant combination of before-the-fact calculation and after-the-fact verification is necessary to produce excellent planning.

. No doubt that in conditions of scarcity, such as NEP, a mistake in the original production plan has much more severe consequences than in a society which has abundant resources. Resources are stretched so thin that providing adequate resources in one place meant asking another place to do without. And no doubt that the working class, to provide overall direction of production, needs to be able to develop overall planning figures. But all planning figures have to be checked by their results.

. Let's look at it another way. Why are there overproduction crises? Is it solely because of miscalculations, and so a fully socialist society must be able to calculate perfectly in order to avoid them?

. No, there is another factor involved. If there is a general glut of commodities on the capitalist market, it starts a chain reaction. Some commodities can't be sold; plants shut down; their suppliers also face financial difficulties; the stock market falls; loans are called in; and an economic crisis ensues (the exact way it proceeds differs from crisis to crisis). By way of contrast, under fully socialist production, it is possible to simply cut back on production. This doesn't give rise to a chain reaction. It doesn't eliminate anyone's livelihood, and if it turns out that there is only need for fewer hours of work, it just leaves more time for the rest of people's lives. Of course, because socialism can get accurate figures more easily than capitalism (due to the lack of commercial secrecy, the lack of profit to be made by giving false figures, etc.), and because readjusting production doesn't harm anyone interests (unlike in capitalism, where cutting back on production affects profits, employment, etc.), it is unlikely that a glut will be allowed to develop too far. This is an example of the fact that a certain amount of give-and-take in production is natural and causes no problem under socialism. Unless miscalculations are large and persisted in despite all experience, or concern an especially important factor (causing, say, widespread ecological disaster or a mass poisoning), they are not likely to cause much of a problem, but will simply give rise to adjustments.

. The superiority of socialism with respect to overproduction crises thus isn't simply a matter of better mathematical planning techniques. It is instead based on the social differences between a class-divided society which runs on exploitation and a classless society.

"Natural units" and the labor-hour

. In a fully socialist society, money will not exist and economic calculations will take account directly of the amount of labor, raw materials and machinery needed to produce things. This has often been expressed by saying that "natural units" will be used--not the dollars or francs, but hours of labor, tons of steel, etc.

. But Marxism also showed that the value of commodities is the amount of socially-necessary labor-time needed for its production. This includes also the labor-time needed to produce the raw materials required and to replace the wearing-out of machinery, etc. The socially-necessary labor-time, if expressed in hours or days or whatever, appears to be a natural measure: not an expression of social relations like money is, but the measure of a real material fact about the commodity. This has led many theorists, including Preobrazhensky, to believe that the essence of commodity value is that it is expressed in money (dollars or pesos or whatever), while if it is expressed directly in labor-hours, it is a natural measure (which I will call the "labor-content").The idea is that capitalism is irrational because it is governed by money and value, but fully socialist society will be rational because it is governed by the labor-content of products instead of their value.

. Preobrazhensky expressed this idea (which did not distinguish him from his polemical opponents like Bukharin) in a number of places throughout The New Economics. He wrote that:

". . . in the sphere of economic reality, the commodity of the capitalist mode of production is replaced in planned economy by the product, value by the measurement of labour time, . . ."(37) And . . . the regulation of the economy by labour-expenditure . . . will exist under planned society too, but it will be effected in another way, that is, on the basis of direct calculation of labour-time."(38)

. The idea seems to be that production will always be "regulated" by the labor-expenditure. Under capitalism, this is done indirectly by value, but under socialism it will be done directly in units of labor-time. Capitalism measures each product by a single number, its price (ultimately representing the value), and he apparently thought that socialism would also measure products by a single number, but a more accurate and directly meaningful one. Under capitalism, profit calculations based on the price determine what is produced, and it is thought that under socialism the labor-time will replace the price or value, and comparing the labor-time to the use-value will replace calculating profits. Preobrazhensky did not seem to consider the possibility that under socialism the comparison of the economic resources needed to make a product and its use-value will not be able to be done via comparing two numbers.

. It did not strike Preobrazhensky or the other advocates of this theory that the labor-content of an object is not a natural measure, but is simply another expression of value. Can w labor-hours of expended effort = x tons of steel = y tons of wheat = z hours of educational instruction be considered a rational equation expressing a material fact? It is only exchange that creates this equality. In this respect, the marketplace does far better than the philosopher's stone, sought unsuccessfully in the Middle Ages as a way to convert lead to gold or silver. It's not just lead that can be exchanged for gold: any one commodity on the marketplace can be converted into another. Indeed, not only can one material object be turned into another, but material objects can be turned into non-material commodities, like schooling. But in a society without exchange, these equations become irrational.(39) Steel and wheat and education are qualitatively different things. The amount of labor needed to produce steel or to tutor a student represents only one aspect of these things, even with respect to economic calculation.(40)

. I will shortly go into some examples to show why the labor-content can only have a partial use in economic calculations in fully socialist society. Labor-content taken as the overall "regulator" of socialist society, as Preobrazhensky does, is an irrational measure; it would mean regulating socialist society according to the law of value. First, however, let's see how Preobrazhensky denies this.

Value and the labor-content

. He cited a passage from Engels which affirmed that exchange according to labor-content was precisely the law of value, and yet Preobrazhensky concluded that Engels was arguing in favor of the labor-content. What Engels said is as follows:

. "The 'exchange of labour against labour on the principle of equal value,' in so far as it has any meaning, that is to say, the exchangeability against each other of products of equal social labour, that is to say, the law of value, is precisely the fundamental law of commodity production, hence also of its higher form, capitalist production. It manifests itself in existing society in the only way in which economic laws can manifest themselves in a society of individual producers: as a law of nature inherent in things and in external conditions, independent of the will or intentions of the producers, working blindly."(41)

. The "exchange of labor against labor on the principle of equal value" is an example of economic calculation according to the number of labor-hours involved, and Engels directly called this the law of value. This wouldn't seem to depend on whether labor-hours or money is used as the measure of the amount of labor represented by an object. And he was referring not just to capitalism, but also to would-be anti-capitalist plans like the "socialitarian" society of Professor Duhring. Duhring said that "The significance which the so-called natural costs of production . . . have for value and price today, will be provided [in the socialitarian system] . . .by the estimate of the quantity of labour required." Engels pointed out that this is Duhring's attempt to establish "true" or "absolute value" and that

"To seek to abolish the capitalist form of production by establishing 'true value' is . . . equivalent to attempting to abolish catholicism by establishing the 'true' Pope, or to set up a society in which at last the producers control their products by the logical application of an economic category which is the most comprehensive expression of the subjection of the producers by their own product."(42)

. True, Engels also stressed that, under capitalism, the labor-content is determined indirectly. One reason for being particularly concerned with this was that in the 19th century there were several attempts to solve the ills of capitalism through labor-exchange societies which tried to buy and sell goods exactly at their labor-content. Marx and Engels wanted to show the reason for the collapse of these endeavors. But however the market zigzags in determining the labor-content of a product, what it is determining is in fact the value. As we have seen, in Duhring's scheme, the labor-content is estimated rather than determined by the market. This didn't save it from criticism by Engels.

. Preobrazhensky, however, believed that throwing out the labor-content as the overriding regulator of socialist society meant denying that socialist society is subject to any objective laws at all. He instead advocated that if only the labor-time weren't calculated indirectly, blindly, then it wouldn't really be the value, but something else. He wrote:

. "Now, one must ask, what is changed in this connexion after the transition of society to completely organized, planned, socialist production? Is the activity of human being here subject to necessity, does regularity prevail here too in the sphere of social relations? Of course. To suppose otherwise would signify repudiating the entire theory of dialectical materialism and substituting for it a conception of the world based on a relapse into the philosophy of free will . . . Law 'asserts itself' under planned economy in a different way from under unorganized commodity economy. But there is regularity, conformity to law, . . ."(43)

. After continuing on this theme for some time, Preobrazhensky got to the point. His answer, essentially, was the point about foresight we have discussed earlier, that socialist society will determine the labor-time in advance of production, while capitalist society can only determine the value after production. He never considered that capitalism and socialism will be determining something different: capitalism is determining the labor-content, while socialism is concerned with a more rational measure of the economic resources needed for producing something.

. It ends up that Preobrazhensky didn't really demand that the Soviet state sector of the time should calculate in labor-hours. He believed that eventually a socialist society would calculate in labor hours. But he believed that the monetary calculations in NEP Russia were only a surface appearance, provided that the state was determining prices and production plans ahead of production. Some other economists have been more worried about these "surface" appearances, and seriously raised the issue of calculating in labor-hours. Charles Bettelheim has devoted a good deal of thought to the methods of economic calculation used in Stalinist and revisionist regimes, and worried that labor-hours weren't used:

. "According to Engels' propositions, the categories of value and price do not have to intervenein the calculations necessary for socialist planning. These calculations must be based upon the comparison of the 'useful effects' of use objects in themselves and in relation to the quantities of labor necessary for their production. We know that this expectation of Engels is apparently unrealized in any of the present-day socialist economies. Economic calculations are not directly made in labor-time in any of these social formations."(44)

. Bettelheim noted that value and money will vanish from fully socialist economics (and incorrectly identified the state-capitalist regimes as socialist economies). But when he discussed how to compare the use-value of an object and the economic effort needed to produce it, he faltered. He seemed to regard this as comparing two arithmetic figures, one for the use-value and one for labor-content. His idea was that "monetary calculations" aren't rational as value and money are artificial, so that socialist regimes need to have a "social economic calculation" (SEC) based on a truly rational arithmetic scale. But he held that no one yet had found a way to carry out such an SEC.

. Meanwhile Bukharin had a similar conception of comparing the labor-content to the use-value.He felt socialist society needed this in order to have, for instance, a "concept of productive powers" of labor which could help judge what is more efficient and productive. As to how this could be carried out arithmetically, he speculated about creating a numerical scale to measure use-values. He suggested that perhaps "energy magnitudes" would serve as a measure of use-values.(45) No doubt, it is the impossibility of seriously measuring use-values this way, and the failure of anyone to come up with a usable alternative, that is one of the reasons that Bettelheim said that there still isn't any way to carry out the "social economic calculation" which he was searching for.

. The conception appears to be that value calculations directly determine whether this or that factory is build under capitalism, and the labor-hour and the numeric scale for use-value will make that determination under socialism. The labor-content won't simply be one of several measures of use for planning, but the overall "regulator" of the economy, as Preobrazhensky would say.

The labor-content as an irrational measure

. But is calculation according to "labor-content" completely rational as opposed to the irrational calculation according to value, or is it really, just as Engels said, basically the same thing? No doubt, the amount of labor needed to produce a product will always be of importance. But is it the sole determining figure? Also of importance for determining what can be produced in a given year is the amount of raw materials needed for production; the amount of machinery needed;even a breakdown of the labor needed into different types of labor. Some of this is taken into account in the labor-content, some isn't. Below I list just a few examples that show that the use of the labor-content as the overall regulator of production is not a "rational" procedure, and that in fact it would tend to duplicate capitalist problems. I leave for a future article a more explanatory treatment of the labor-content.

. * Take the problem of measuring the stockpiles of a global socialist society. Can the total labor-content of the means of production and consumer goods be used for this purpose?

. Well, as more things are produced, the total labor-content would increase, as one would want a measure of the material abundance represented by the stockpiles to do. But what happens if over a few years there is a technical revolution, and everything can be produced with half the effort? This would be a tremendous boon for society, yet it would cut the labor content of everything in half. Buildings that previously had a labor content of x labor-hours, would now have a labor content of x/2 hours. The total wealth would appear to be cut in half, yet in fact society would be prospering as never before.

. This is a strange behavior for a measure of the material wealth of a socialist society. Yet this strange behavior of the labor-content accurately indicates what would happen to the national wealth under capitalism. In fact, under capitalism, the value of existing stockpiles of a nation really would be cut by increases in productivity. If a nation has huge stockpiles of, say, steel, and suddenly technical improvements around the world make it possible to produce steel at half the price, then the existing stockpiles are worth half of what they were before. They can bring only half as much on the market in exchange with other goods. (True, the change in productivity may bring other developments that may compensate for the drop in national wealth. For example, if a nation can triple its production -- say because it is the one which has introduced the technical innovations and so can now undersell its competitors and capture more of the world market--it could end up wealthier than ever. But this doesn't change the fact that the original stockpiles, although they lost none of their use-value, had their economic value cut in half.) Thus the paradoxical fall of the labor-content due to higher productivity is simply a reflection of capitalist conditions. In this respect (and not only this respect!), the labor-content is accurate for capitalist calculations, but not socialist ones.

. * But let's turn from trying to measure total wealth to determining production processes. Can the labor-content serve as the regulating factor for a socialist society in deciding how to produce something?

. One problem is that the labor-content doesn't take into account environmental issues, and yet environmental protection is likely to take up an ever-increasing amount of society's efforts. One might try to account for environmental damage by "improving" the labor-content and adding a correction for how many labor-hours it would take to restore certain damage to the environment done by particular production processes. But only certain environmental problems can be handled this way. The broader problems can't be handled that way. How does one assign a labor-content to a rain forest? To the existence of a species endangered by certain production methods? To the damage done by the emission of greenhouse gases into the atmosphere?

. * Moreover, does the labor-content serve to distribute the existing labor force properly between various occupations? The labor that is expended in a factory is not the total labor-content of the product, since the labor-content includes provisions for the raw material, replacing used-up machinery, etc. But the labor-time needed to replace the used up raw material has to be allocated to a different enterprise, such as the factory that processes the raw materials or the farm that grows them or the mine that takes them out of the earth, and similarly for the labor-time needed to build up new machinery.

. * It might be said that the labor-content doesn't serve to allocate labor to individual factories, but to the whole chain of factories and workplaces that are involved in producing a certain end-product. Thus, in deciding how many shoes can be produced, one has to take into account not just the labor used in the final shoe factory, but also in the farms and processing stations producing leather, etc. But any attempt to use the labor-content to do this will require that the economy be rigidly divided into end-products and subsidiary products, which is not so easy to do. As well, the labor-content doesn't take into account the large initial expenditure of labor and stockpiled materials needed to construct factories in the case of a large expansion of production--it only accounts for the annual "depreciation", so to speak, of these factories.

. This is just a brief indication of some of the problems involved in the use of the labor-content as regulator of socialist production. I hope to be able to devote a separate article to dealing with this question in far more detail, explaining the problems in the labor-content in more detail, showing for what purposes a modified labor-content might be used, describing additional features of socialist planning, etc. The idea of replacing the role of value by labor-hour is taken for granted by so many authors, that it deserves much more attention. Moreover, seeing what is wrong with this idea will be of use for such purposes as showing that the problem of state-capitalist societies isn't that they haven't found the right methods of calculation and administration, but that the class structure of these societies differs from socialist society (or from societies moving toward socialism). The belief that technical means of calculation provide a fundamental difference between capitalism and socialism obscures the real differences between state-capitalism and socialism.


. There is one last subject which needs to be addressed before we can leave The New Economics. Preobrazhensky is probably best known for the phrase "primitive socialist accumulation". The New Economics is devoted in large part to defense of "the law of primitive socialist accumulation", which he believed set forward the policy that the state sector would be forced to take with respect to the private sector and especially the countryside.

. No doubt Preobrazhensky believed that this law showed the need to change the Soviet policies of the mid-20s, accelerate industrialization, and extract more of the economic surplus from the private sector. But he often stated that it meant nothing else but that, in a backward country which is overwhelmingly peasant, the majority of funds for industrialization must come from the countryside:

"Primitive socialist accumulation . . . means accumulation in the hands of the state of material resources mainly or partly from sources lying outside the complex of state economy."(46)

In that generality, it would hardly distinguish between the different policies advocated by the various participants in the industrialization debate. Moreover, sometimes the law of primitive socialist accumulation is expressed as simply that the state sector must dramatically expand. This is why the concrete content of The New Economics is actually found in his conception of the "commodity-socialist system" and his analysis of the state sector. But the term "primitive socialist accumulation" has some striking implications, especially when put forward, as Preobrazhensky did, as the general characterization of the transition period.

Primitive capitalist accumulation

. For one thing, the term was an analogy to the Marxist analysis of the "primitive capitalist accumulation".(47) This gave the term a lot of emotional impact and inflamed the controversy over it.

. Once capitalism is rolling alone, it can expand (accumulate) through the surplus value it exploits from the working class. But where does the original stocks of capital comes from that are necessary to set up capitalist industries in the first place? Marx raised this problem as follows:

". . . the accumulation of capital presupposes surplus-value; surplus-value presupposes capitalistic production; capitalistic production presupposes the preexistence of considerable masses of capital and of labour-power in the hands of producers of commodities. The whole movement, therefore, seems to turn in a vicious circle, out of which we can only get by supposing a primitive accumulation . . . preceding capitalistic accumulation; an accumulation not the result of the capitalist mode of production, but its starting point."(48)

. Capitalist apologists had said that this original accumulation comes from the frugality and hard work of the entrepreneurs. Marx, however, described how the capitalists raped the world in search of wealth. A famous passage in Capital goes:

. "The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of blackskins, signalized the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation. On their heels treads the commercial war of the European nations, with the globe for a theatre. It begins with the revolt of the Netherlands from Spain, assumes giant dimensions in England's anti-jacobin war, and is still going on in the opium war against China, &c."(49)

. If this weren't bad enough, Marx pointed out that capitalism doesn't just need an original source of wealth in order to begin operations, it also needs a supply of potential workers. There must be

"free labourers . . . free in the double sense that neither they themselves form part and parcel of the means of production, as in the case of slaves, bondsmen, &c., nor do the means of production belong to them, as in the case of peasant-proprietors, . . . The capitalist system presupposes the complete separation of the labourers from all property in the means by which they can realise their labor. . . . The so-called primitive accumulation, therefore, is nothing else than the historical process of divorcing the producer from the means of production."(50)

. Marx described in detail this process in England in such chapters of Capital as the "Expropriation of the Agricultural Population from the Land" and "Bloody Legislation against the Expropriated, from the End of the 15th Century. Forcing down of Wages by Acts of Parliament". Primitive accumulation, to those familiar with Marxist economics, brings to mind some of the most savage and bloody chapters in the history of capitalism. It refers both to the rape of the world for the sake of forming hoards of wealth, and to ruining the mass of independent peasants and artisans in order to convert them into wage-slaves.

The origin of the term

. The idea that socialism might be achieved through a process similar to the "primitive capitalist accumulation" would no doubt horrify most socialist activists. It is the opponents of socialism who have presented the societal ownership of all means of production as returning the mass of working people to a new-style serfdom (as in Hayek's Road to Serfdom). Marxists, however, have presented the process of establishing socialism as empowering the working masses.

. Thus the term "primitive socialist accumulation" never occurred in Marx and Engels' writings.They were well aware that, to achieve socialism, much of the wealth created by the workers must go into accumulation. Indeed, this is true in fully socialist society as well (although then the wealth of society will not be measured in money, and the setting aside of goods for consumption will not be regulated by wages). But it never occurred to them to label the setting aside of the accumulation fund as representing "primitive accumulation". This was not because they didn't consider how the transition period between capitalism and socialism differed from full socialism. They pointed to its nature as a revolutionary "dictatorship of the proletariat", and they discussed some of its particular economic features, such as the role of the state (which wouldn't exist in the classless society) in taking over all the main means of production as a prelude to full social control of production.

. The term "primitive socialist accumulation" was introduced in the early 20s by some of the Russian communists. Bukharin, who said he got the term from Vladimir Smirnov, used it in his 1920 book Economics of the Transition Period to refer to a period like "War Communism". The comments Lenin wrote in the margins of his copy of the book were later published; Lenin called Bukharin's use of the term as "extremely unfortunate. A childish game in its imitation of terms, used by adults." (51)

. Trotsky used this term several times in the early 1920s. According to Deutscher, he was referring to the need for extreme sacrifice by the workers in order to build up state industry rapidly. But later "Trotsky himself rarely, if ever, spoke of 'primitive socialist accumulation'."(52)

. Preobrazhensky used the term to refer to the fact that the state sector in the Soviet Union needed to a accumulate a good deal of resources by deducting from the income of the private sector, mainly from the peasants. He called this the exploitation of the peasant economy by the "socialist sector".

. Later, various commentators, seeing the severe hardships endured by the working masses in the Soviet Union during the First and Second Five Year plans in the 1930s, called this "primitive socialist accumulation" or "primitive capitalist accumulation", depending on whether they viewed Stalinist Russia as socialist or capitalist. This term has survived in the discussion of various economists.

. But the term doesn't seem to have survived in the programs of political groups appealing to the masses (and this is hardly surprising). It not only vanished from Trotsky's statements, but more recent Trotskyist theorists generally mention it only in passing, in discussing and defending Preobrazhensky. But as for their own programs, they generally drop the term as a hot potato.

Exploitation of the peasantry

. A major issue facing the Soviet Union during NEP was whether the mass of poor and middle peasants would support the Soviet government and cooperate with its economic measures. They were the majority of the working population. As well, agriculture had to provide not only food for the cities, but surpluses to be exported abroad to finance imports of industrial machinery and consumer goods. Although NEP affected every sector of the economy and served as a comprehensive replacement for "War Communism", it began with ending the system of requisitioning agricultural surpluses without compensation, and replacing it with a tax in kind.This was necessary to placate the peasantry and restore agriculture.

. But Preobrazhensky's theory of "primitive socialist accumulation" directed attention away from the issue of what was necessary to ensure peasant support or transform the countryside. He displayed irritation over the issue of whether the peasantry will continue to support the Soviet government; interpreted it as simply a issue of pandering to the peasants, and said

"I again stress that I am not here concerned at all with what actual concessions the workers' state may have to make to the peasantry. . . . Only if one has a vulgar understanding of the Leninist attitude to the peasantry in the NEP period can one consider that Leninism in this field means maximum concessions to the peasants and only that.. . .After all, a mere repetition of the words 'worker-peasant bloc', without analyzing the real inter-relationship of the economic systems represented by these classes, merely strengthens the vulgar, philistine, petty-bourgeois conception of Leninism on the peasant question, a conception towards which those groups in Soviet society spontaneously gravitate which reflect the pressure of the hundred-million-headed mass of the peasantry in our country."(53)

. And his concrete analysis of the "real inter-relationship of the economic systems"? This led to the view that the relationship of the socialist system represented by the state sector with the countryside was basically exploitation, with major social change in the countryside seen as having to wait until after industrialization and "primitive socialist accumulation" were finished.

. The situation was that a good part of the expansion of the economy (accumulation) had to be financed from the peasantry, especially as the peasants constituted the large majority of the Soviet working people. Preobrazhensky maintained that this constituted the exploitation of peasant economy by the state sector of the economy, such exploitation being the heart of "primitive socialist accumulation" (which was the exploitation of the "commodity" sector of the economy by the "socialist system"). When Bukharin and others denounced him for advocating exploitation of the peasantry, he backtracked in his rhetoric. He dropped the term "exploitation" as much as possible, although without conceding that it was wrong. And he said that he was talking about exploitation of small-scale peasant production, not of the peasants, as if the burden of higher prices for goods needed by peasant production or taxes on peasant production weren't borne by the peasants:

"Others have taken up [in their polemics--JG] this word 'exploitation', but I have already noted that I withdraw this term, though exploitation of one system by another remains, since there is alienation of surplus product from one form of production to another."(54)

. But why did taking of resources for accumulation from the peasants, and not the taking of resources from the workers, amount to primitive socialist accumulation? From a naive point of view, one might have imagined that Preobrazhensky used the term "primitive" accumulation to refer to the extent of the sacrifice that has to be taken from both the workers and peasants in order to finance industrialization in a backward country, but that is not so. If the resources came from the workers of the state sector, then he called it ordinary socialist accumulation (on the grounds that the state sector was supposedly already socialist in character, and hence funds from the state sector were being generated internally by socialism). It was "primitive" accumulation, if it came from outside the state sector (and hence from outside the socialist sector of the "commodity-socialist system"). So the workers weren't exploited by this sacrifice, since the resources went to build up the "socialist" sector of the economy that Preobrazhensky regarded as already completely in their hands. But the peasants were being exploited, as they were being forced to contribute to the state sector of the economy which is external to them.

. Thus the idea was that the peasants were being exploited because part of the economic surplus they generated was going towards supporting a transitional economic system that was foreign to them. No doubt such an idea would have been a disaster agitationally, but even theoretically, it suggested that the peasants were being regarded solely as representatives of the commodity economy. It suggested a good deal of doubt that anything could be expected from the peasants except passive tolerance of the Soviet regime.

. In defending his ideas, Preobrazhensky insisted that the industrialization he supported was in the peasants interest. He wrote:

"How expanded reproduction in our industry contradicts the interests of the peasantry, even if we take for it not only the surplus product of the workers but also the surplus product of the peasants, is absolutely incomprehensible."(55)

But why then did the taking of this surplus product count as "exploitation"?

Peasant producer coops (collectivization)

. One of the most notable features of Preobrazhensky's discussion of the countryside was the lack of interest in the spread of producer coops. An essential part of Lenin's idea for NEP was the gradual spread of collectivization in the countryside; he hope this would provide a way to involve the peasants in moving towards socialism in a way that was comprehensible to them.One of the major failures of Soviet NEP was the small amount of collectivization that actually took place. Preobrazhensky, however, wasn't concerned with this. He ridiculed "co-operative fideism"(56) (religious belief in co-operatives) and blandly said that there is no experience to analyze:

. "This new form of co-operation under the dictatorship of the proletariat, among the varieties of which are, of course, the peasant communes and artels, is still only about to develop. We cannot, therefore, analyse something which does not yet exist but is only about to arise."(57)

And indeed, he made no attempt to analyze what is happening, or can be expected to happen, with respect to them.

. Didn't the lack of collectivization have major consequences for whether the Soviet government would continue to have mass support? Wasn't it a major change from the plan of gradual collectivization as set forth, for example, in Lenin's article On Co-operation? Preobrazhensky doesn't care about such things. He shrugged, and said that he supports the old plan, after all didn't Lenin says that there must be material assistance for collectivization? And, Preobrazhensky said, that assistance couldn't be rendered until after primitive socialist accumulation was over, which would not be for "at least another two decades".(58) He wrote that

"Only when the period of primitive accumulation is completed and industry stands on a new technical foundation, only then can the flow of values from town to country by the channel of long-term credit become a broad river. . . . Thus, that aid to co-operation of which Lenin spoke, and those other forms of financing the country from the town which he did not speak about, will be possible only on the basis of a great progress of accumulation. Until this progress has been achieved, our aid will be on a small scale; often it is more likely to irritate the peasants by the contrast between its scantiness and the inevitably large expenditure on the state machine than to call forth a feeling of gratitude to the class which is granting the credit."(59)

. A similar casual attitude with respect to collectivization can be found in the writings of Trotsky during NEP. Earlier in this article, in section III, we glanced over a number of articles by the Trotskyist Opposition and showed that they failed to grasp the danger of the rise of a new bourgeoisie from within the state sector. But it is also true that they weren't that concerned with the failure of the collectivization plan, and what that meant for the overall plan of NEP.

. * Let's look at Trotsky's articles on The New Course (December 1923). He was quite concerned to prove that he hadn't "underestimated" the peasantry and the need for an alliance between the workers and peasants. And he promoted his proposal of Feb. 1920 as a "fairly complete proposal to go over to the New Economic Policy in the countryside." But he had nothing to say about whether gradual extension of agricultural producer coops was part of the plan for NEP in the countryside, and whether this was possible or not.

. * Toward Capitalism or Socialism? (August 28, 1925) had a section entitled "The NEP and the peasantry". It had nothing about the question of agricultural producer coops. The section entitled "Coordination of City and Country" barely mentioned "collective" agricultural production, but only to say that it was a question of increased industrial production. In its entirety, his comment was that "The problem of a socialist influence on the village by the city--not only through cheap commodities but also through better and better implements for agricultural production, which forces the introduction of a collective exploitation of the land--this problem now faces our industry in all its concreteness and immenseness." It is of course true that the paucity of industrial products was a major problem for collectivization. But Trotsky gave no discussion of what the perspective for coops under NEP is, why the current work with respect to producer coops was unsatisfactory, and what it would mean for the worker-peasant alliance if producer coops couldn't be formed until after industrialization.

. * In "Party Bureaucratism and Party Democracy" (June 6, 1926), Trotsky worried about a number of the economic problems under NEP, but not the lack of peasant producer coops.

. * In Questions and Answers about the Opposition (September 1926) Trotsky mentioned several problems concerning work in the countryside, but not the snail's pace with respect to producer coops.

. * In Speech to the Fifteenth Conference (November 1, 1926), Trotsky denounced the way the consumer and credit cooperatives in the countryside are being run, but said little about the producer coops.

. * In the Theses on Revolution and Counterrevolution (November 26, 1926), the danger of capitalist restoration from the countryside was mentioned, but no mention was made of the continuing failure to do much in the way of peasant producer coops.

. * The Platform of the Opposition/The Party Crisis and How to Overcome It (September 1927), which was the work of several different trends combined into the "United Opposition", was the main document that discussed peasant producer coops and called for "a more rapid development of collective farming." But it also said that there can be "no successful and broad work in the direction of a real collectivization of agriculture" until there a "technical revolution in production methods", more machinery, etc. It had no overall perspective for how long this would take, and in general its lists of "practical proposals" reflect an outrageous bidding war with the dominant party leadership rather than a serious estimate of what could actually be accomplished.

. * The Revolution Betrayed (1936) had relatively little about the collective farms. Trotsky didn't discuss them as part of the general plan of NEP, but concentrated on denouncing zigzags of the Stalinist leadership. He condemned the party leadership of 1926/1927 for putting collectivization "off a few decades in their perspective." To prove this, he cited one party official, Yakovlev, who wrote in 1927 that collectivization "cannot be done in one, two or three years, and maybe not in one decade." But a dozen pages later, after pointing to the inadequate equipment in the collective farms set up by forced collectivization, he quoted approvingly a publication of the "Left Opposition" in 1930 saying that it would take "ten or fifteen years" to obtain the necessary "material-technical" basis for a proper collectivization, which is a longer time frame than he had just denounced Yakovlev for. Make sense of that those who dare.(60)

Reducing the transition period to primitive socialist accumulation

. In the New Economics, Preobrazhensky reduced one task after another of the transitional period to simply accumulating more to allow rapid industrialization. He was irritated with continued talk about the NEP, "because this expression has now become quite meaningless, and below I make a suggestion for replacing it by another."(61) Instead he advocated that "primitive socialist accumulation" was a general plan, not just for Russia, but as a universal law. He wrote that:

. "The fundamental law of primitive socialist accumulation is the mainspring of the entire Soviet state economy. But it is probable that this law is of universal significance, except perhaps for those countries which will be the last to go over to the socialist form of economy."

In particular, he sees this law as likely to apply to

"the socialist economy of Europe, in so far as present-day European economy (even without the devastation threatening it from civil war) is economically and technically weaker than the economy of capitalist North America."

He does note that

"In the more advanced industrial countries, however, primitive socialist accumulation will be based to a very much greater extent on the surplus product of the workers than on resources obtained from pre-socialist forms of production in Europe and the colonies."(62)

In this last statement, he contradicted his own definition of "primitive socialist accumulation", which specified that it comes only from pre-socialist forms of production and does not apply to workers in the state sector. This slip on his part perhaps highlights the fact that the real heart of the theory of "primitive socialist accumulation" was concentrating one's attention solely on the growth of state industry.

. As important as industrialization was, it was a parody of communism to reduce the revolutionary transformation to socialism to simply accumulation. For the development of capitalist industry, accumulating a stock of wealth for capital (plus stripping the independent producers of the means of production) was the main necessity. But for the development of socialism, there are a series of intermediate steps with respect to increasing the consciousness and organizational ability of the workers and rallying the other working people around them. Questions such as the relations between the workers on one side and management, engineers and technical workers on the other can't be reduced to that they work in state industry, as Preobrazhensky did. Nor can the relations between workers and petty-producers of various kinds (of whom the peasantry was far and away the largest section in the Soviet Union) be reduced to simply waiting for industrialization to solve everything. The term "primitive socialist accumulation", even if stripped of the analogy to the savage "primitive capitalist accumulation", reduced the entire social transformation of the transition period to simply the growth of state industry, and it reduced the growth of state industry to simply more funds and more experienced planners. It emphasized those features which are common to state capitalism and an actual transition to socialism. This was one of the ways that Preobrazhensky ended up as an ideologist of state capitalism, who painted commodity production in communist colors.


(1) The Prophet Unarmed/Trotsky: 1921-19, vol. II, chapter 1, "The Power and the Dream", pp.44-45. (Return to text)

(2) Ibid., pp. 29, 51. (Text)

(3) Ibid., p. 113, with the platform itself being reproduced in The Challenge of the Left Opposition (1923-25), Appendix B., pp. 397-403. (Text)

(4) Trotsky, Leon, My Life, Pathfinder Press, Ch. XXXVIII. "The Transition to the New Economic Policy, and My Relations with Lenin", pp. 463-464. Since then, various Trotskyists have propagated this myth that Trotsky was the real author of NEP, but had to wait a year until the party saw its wisdom. For example, Naomi Allen's editorial note in The Challenge of the Left Oppositionto Trotsky's articles on "The New Course" states that "Trotsky's proposal was not accepted at the time it was made; only a year later . . . did the party adopt a similar program to the one Trotsky had proposed; it was called the 'New Economic Policy' ". (p. 63) (Text)

(5) The Prophet Armed/Trotsky: 1879-1921, Ch. XIV, p. 516. In his analysis of this point, Deutscher even imitated Trotsky's method of going in "contradictory directions". On page 516 he characterized Trotsky as proposing the New Economic Policy in Feb. 1920, while 19 pages earlier, in a footnote, he admitted that "It is not clear, however, whether Trotsky was aware that his proposals, if accepted, would necessarily lead to the winding down of the policies of war communism, including those he himself advocated." Indeed, Trotsky was advocating an intensification of war communism at the same time as his proposal of Feb. 1920.

. In his biography of Trotsky, Tony Cliff repeated the legend of the Trotsky as the originator of the NEP (Trotsky, vol. II, The Sword of the Revolution: 1917-1923, Ch. 11: "War Communism at an Impasse"). Supposedly in February 1920 "it became clear to him that War Communism had exhausted itself" (p. 160), the evidence being the food policy proposal of Feb. 20. But Cliff's account actually shows that not only had Trotsky abandoned his proposal of February 1920 by the Ninth Congress of the Bolsheviks in March 1920, where he "appeared . . . as the government's chief policy-maker and expounded a plan for the next phase of War Communism" (p. 161), but he was actively developing these plans in February as well (pp. 163-5). (Text)

(6) Stalin, J.V., On the Opposition (1921-1927), "The Fourteenth Congress of the C.P.S.U. (B.), December 18-31, 1925, Reply to the Discussion on the Political Report of the Central Committee", Sec. 7: "Concerning State Capitalism", pp. 242-8. (Text)

(7) The quotes from Trotsky in this paragraph and the next can be found in The Challenge of the Left Opposition (1926-1927), pp.133, 139, 149. The emphasis is Trotsky's. (Text)

(8) Trotsky, L., The Revolution Betrayed, Merit Publishers, Ch. 1: "What Has Been Achieved", Section 1: "The Principal Indices of Industrial Growth", p. 8. (Text)

(9) The Revolution Betrayed, Ch. IX: "Social Relations in the Soviet Union", Section 2: "Is the Bureaucracy a Ruling Class?", p. 248 and Section 3: "The Question of the Character of the Soviet Union Not Yet Decided by History", p. 255. (Text)

(10) Ibid., pp. 248, 255, 249-250, 248. (Text)

(11) Ibid., p. 248. (Text)

(12) Ibid, Ch. II: "Economic Growth and the Zigzags of the Leadership", Sec.1: "'Military Communism', 'The New Economic Policy' (NEP) and the course toward the kulak".

. Discussing the need for "the methods of money payment", Trotsky wrote that "A planned economy cannot rest merely on intellectual data. The play of supply and demand remains for a long period a necessary material basis and indispensable corrective." Here Trotsky raised the need for "indispensable correctives", i.e. for checking and revising the economic plan in accord with its actual results. But he identified this checking and revising as possible only through capitalist pricing via "supply and demand". His explanation for why this checking required a capitalist market at that time in Russia didn't point to the current state of class relations in Russia and the need for gradually transforming them, but was simply that the only alternative to the market is relying on "intellectual data". But will it really always require money and a capitalist market for society to keep track of what goods it runs short of and what goods are available in excess, so that the capitalist market can only be dispensed with when absolutely everything can be seen in advance and there is no need for any "correctives" at all? Well, apparently Trotsky saw planning as simply manipulating "intellectual data", which implies a conception of planning as simply the act of a central ministry, isolated from the mass of workers who see how the plan is working out in practice. It might seem odd that Trotsky conceived of planning in this way. But, as we shall see in section VI of this article, Preobrazhensky's idea of socialist planning, which presumably reflected a widespread feeling in Trotskyist circles, was that it meant having perfect foresight of everything in advance. He seemed to have left out any conception of the give-and-take that will exist in a fully communist, classless society: he identified any "spontaneity" in economic life with the capitalist law of value. (Text)

(13) Mandel, Ernst, Marxist Economic Theory, volume 2, Ch. 15: "The Soviet Economy", p.565.(Text)

(14) The New Economics, Ch. III: "The Law of Value in Soviet Economy", section: "The Law of Value and Monopoly Capitalism" , p. 160. (Text)

(15) Ibid., p. 152, emphasis as in the original. (Text)

(16) Ibid., pp. 152-3, 156. (Text)

(17) Ibid., Ch. II, Section: "The Struggle between the Two Laws", p. 140. (Text)

(18) Ibid., Ch. III, Section: "The Law of Value and Monopoly Capitalism", p. 151, underlining added. (Text)

(19) Ibid., Ch. II, Section: "The struggle between two laws", p. 143. (Text)

(20) Ibid., p. 151. (Text)

(21) Stalin, J.V., Economic Problems of Socialism in the U.S.S.R., Ch. 3: "The Law of Value Under Socialism", pp. 22-23. (Text)

(22) The New Economics, Ch. 2, Section: "The Struggle between the Two Laws", pp.138-9.(Text)

(23) See "Dependency theory and the fight against imperialism (part two)" in Communist Voice, vol. 3, #4 (Oct. 25, 1997), in particular the section "Repealing the law of value", pp.46-47.(Text)

(24) He wrote that commodity production in the Soviet Union "is confined to items of personal consumption": ". . . consumer goods . . . are produced and realized in our country as commodities coming under the operation of the law of value". He thought that outside the sphere of consumer goods, there was no commodity production: "Can means of production be regarded as commodities in our socialist system? In my opinion they certainly cannot." (Economic Problems of Socialism in the U.S.S.R., Ch. 2, p. 16; Ch. 3, p. 19; "Reply to Comrade Alexander Ilyich Notkin", p. 53.) (Text)

(25) Marxist Economic Theory, vol. II, ch. 15: "The Soviet Economy", pp. 569, 565. (Text)

(26) Ibid., Ch. 18: "Origin, rise and withering away of political economy", section: "An apologetic variant of Marxism", p. 724. (Text)

(27) He wrote that commodity production in the Soviet Union "is confined to items of personal consumption": "consumer goods . . . are produced and realized in our country as commodities coming under the operation of the law of value". But he said, "Can means of production be regarded as commodities in our socialist system? In my opinion they certainly cannot." (Economic Problems of Socialism in the U.S.S.R., Ch. 2, p. 16; Ch. 3, p. 19; "Reply to Comrade Alexander Ilyich Notkin", p. 53.) (Text)

(28) Mandel, Ibid., p. 567. (Text)

(29) Ibid., p. 568. (Text)

(30) Engels, Frederick, "Supplement to Capital, volume three", Section I: "Law of Value and Rate of Profit", in Marx, Capital, vol. III, Progress Publishers, pp. 899-900. (Text)

(31) Letter of Marx to Kugelmann, 11 July 1868, in Marx and Engels, Correspondence, 1846-1895, p. 246. The same idea is expressed in Capital, vol. I, Ch. XI: "Rate and Mass of Surplus Value", p. 307 (International Publishers edition). (Text)

(32) The New Economics, Ch. III, Section: "The Law of Value and Monopoly Capitalism", p.150. (Text)

(33) See "The anarchy of production beneath the veneer of Soviet revisionist planning" in Communist Voice, vol. 3, #1 (March 1, 1997), especially pp. 14-18. (Text)

(34) All the quotes from Preobrazhensky in this paragraph are from The New Economics, Ch.II.Section: "Commodity, Market, Prices", pp. 177-8, emphasis Preobrazhensky's. (Text)

(35) The New Economics, Ch. III. Sec. "General Remarks", p. 147, emphasis added. (Text)

(36) Ibid., Ch. I, Section: "Political Economy and Social Technology", pp. 53-54, emphasis as in the original. (Text)

(37) The New Economics, Ch. 1. Section: "Political Economy and Social Technology", p.48.(Text)

(38) Foreword to the Second Edition of The New Economics, p. 19. (Text)

(39) Even under capitalism, the ability to convert one commodity to another depends on a well-stocked market. When this condition isn't met, even [capitalist] governments and enterprises have to take into consideration that various resources aren't identical in material terms, whatever their value. This is seen, for example, in war-time, when shortages are a major problem. The capitalist governments resort to rationing to ensure that certain scarce materials are preserved for the war-effort. It no longer suffices to make sure that the government has enough money to cover the value of these resources; the government must keep track of the physical amount of the resources themselves. Another example takes place in Stalinist state-capitalist regimes. Among the various techniques used for planning is the method of "material balances", which keeps track of the physical amounts of the resources. (Text)

(40) Engels at one point said that socialist society "will have to arrange its plan of production in accordance with its means of production, which include, in particular, its labour forces." (Anti-Duhring, Part III. Socialism. Part IV. Distribution. p. 338, emphasis added.) Presumably this indicates that the resources needed to produce a product include not just labor, but several things. Instead of trying to reduce all the means of production to a equivalent in labor, one has to consider each required resource in itself. (Text)

(41) Herr Eugen Duhring's Revolution in Science (Anti-Duhring), at the end of Part III:"Socialism". Ch. IV: "Distribution", pp. 340-1. Also The New Economics, Ch. I. Section "The Method of Studying the Commodity-Socialist System of Economy", p. 49. (Text)

(42) Ibid., pp. 327, 338-9 for both Duhring's and Engels's statements. (Text)

(43) The New Economics, Ch. I. Section : "Political Economy and Social Technology", pp.49-50.(Text)

(44) Bettelheim, Charles, Economic Calculation and Forms of Property, Part I: "Economic calculation and monetary calculation", Chapter 1: "Situating the problem". p. 5, underlining added. (Text)

(45) The Economics of the Transformation Period, with Lenin's Critical Remarks, Bergman Publishers, p. 100. (Text)

(46) Ibid., Ch. II, Section:. "Primitive Accumulation, Capitalist and Socialist", p. 84, emphasis as in the original. (Text)

(47) Preobrazhensky himself referred to it as an "analogy" to primitive capitalist accumulation in the foreword to the second edition of The New Economics, p. 34. (Text)

(48) Capital, Charles H. Kerr & Company, vol. I, Part VIII: "The So-Called Primitive Accumulation." Ch. XXVI. "The Secret of Primitive Accumulation." p. 784, Kerr edition. (Text)

(49) Ibid., Ch. XXXI: "Genesis of the Industrial Capitalist", p. 823, emphasis added. (Text)

(50) Ibid., Ch. XXVI: "The Secret of Primitive Accumulation", p. 785. (Text)

(51) Bukharin, Nicolai I., Economics of the Transformation Period, With Lenin's Critical Remarks, Bergman Publishers, pp. 110-2. (Text)

(52) The Prophet Unarmed/Trotsky: 1921-1929, pp. 43-46, 101. (Text)

(53) The New Economics, Appendix, Section "The Children's Colonies of Comrade Bukharin", p.231, emphasis as in the original. (Text)

(54) The New Economics, Appendix, Section: "Comrade Thalheimer", p. 278. Also see the section "The Worker-Peasant Bloc", p. 242, and the Foreword to the First Edition, p. 2, emphasis as in the original. (Text)

(55) Ibid., Appendix. Section: "Comrades Ksenofontov, Kviring, Bogolepov", p. 280. (Text)

(56) Ibid, Appendix, Section "Other Opponents, p. 273. (Text)

(57) Ibid., Ch. II, Sec. "Primitive Accumulation, Capitalist and Socialist",p, 132. (Text)

(58) Ibid., Appendix, Section: "On the Law of Socialist Accumulation", p. 267. (Text)

(59) Ibid., Appendix, Section: "About the 'Devouring' of Petty-Bourgeois Economy", p.237.(Text)

(60) The Revolution Betrayed, Ch. II: "Economic Growth and the Zigzags of the Leadership", Sec. 1: "'Military Communism', 'The New Economic Policy' (NEP) and the Course toward the Kulak", pp. 27-8, and Sec. 2. "A Sharp Turn: 'The Five-Year Plan in Four Years' and 'Complete Collectivization', pp. 38, 41. (Text)

(61) Ibid., Ch. II, Section: "Primitive Accumulation, Capitalist and Socialist, p. 118, footnote 3.(Text)

(62) Ibid., Sec. "Primitive Accumulation, Capitalist and Socialist", pp. 123-4, 121-2. (Text)

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