If “deregulation” was the buzz word of the 1990s boom, “supervision” looks set to be the received wisdom of the turn of the 21st century recession. Whether it is the European Union trying to make its economies converge for monetary union or the G7 responding to the Asian crisis by suggesting that the World Bank and International Monetary Fund should oversee international flows of capital, the need to control the anarchy of the market is evident to big business and bourgeois politicians alike.
We can predict that when the next recession hits the major economies, and the threat of militant working class resistance becomes apparent, the political parties that represent the “left wing” of the bourgeoisie will take up the call for the state to step in to counteract the spontaneous operation of the market. Whether this takes the form of counter-cyclical investment programmes, subsidies or even a return to state ownership of fundamental economic sectors, they will hope by such measures to neutralise and divert militancy away from the fundamental questions of who ultimately controls the economy
Revolutionaries will respond to such developments by explaining how they leave capitalist control intact, using taxation to compensate bankrupt companies or to modernise obsolete industries.
They will demand expropriation and argue for the creation of organisations of workers’ control as a step towards the socialisation of the entire economy and its subordination to the interests of the working class.
In the past, revolutionary propaganda has largely concentrated on this political aspect.
Quite rightly, Trotskyists have emphasised that the creation of organisations, democratically based upon the workforces and fighting to impose control over management, was a crucial growth point for workers’ councils which themselves will be the foundation of the workers’ state.
This was one practical expression of the whole political method of Trotsky’s Transitional Programme.
Less attention has been paid to the economic aspects of workers’ control, how “opening the books” or “control over hiring and firing” relate to the revolutionary programme for the transforming the economy. Yet, such attention is vitally necessary.
Recognition of the need to go beyond workers’ control in the factory, to the democratically planned control of the entire economy by the working class, is no more a spontaneous product of the economic struggle than is consciousness of the need to destroy the state and replace it by workers’ councils.
Indeed, it could be argued that, in the aftermath of revolution and civil war, the lack of programmatic clarity on this question contributed to the emergence of bureaucratic planning in the Soviet Union in the 1920s.
Worse still, the key characteristics of Stalinist planning – the attempt to subordinate the entire economy to planning at a stroke, isolation from the world economy, exclusion of the direct producers from the development of planning targets and subordination of consumption to the maximum rate of growth in heavy industry, are widely considered to be the “classic” model of economic planning.
In reality, it was the very antithesis of the revolutionary concept of planning advanced by Marx and Engels, Lenin and Trotsky.
Although the economic aspect of the revolutionary programme has been too long neglected, or traduced, today’s revolutionaries can build on a rich tradition of theoretical principles and practical experience bequeathed to us by the founders of Marxism, by Lenin and by the Left Opposition of the 1920s.
On that basis, we have the duty to develop a clear, coherent and scientific exposition of the political economy of socialism, not as some idealistic blueprint, fabricated out of our imaginations, but as it will be built out of the dialectical negation of the dominant trends within modern capitalism.
We begin, therefore, with a brief reprise of this revolutionary tradition, emphasising Marx’s fundamental proposition that the socialist economy develops out of the womb of capitalism and bearing its birthmarks.
This means not only the physical proportions and disposition of the means of production and established economic linkages, but also the techniques of regulation, control and even planning that capitalism creates and recreates in its attempt to stabilise itself in the face of its own crises.
Marx and Engels on socialism
Just as the socialist economy has its material roots in capitalism, so Marx and Engels’ theoretical insights into the political economy of socialism developed out of their understanding of the contradictions that drove capitalism forward, making it both dynamic and unstable.
The first and most general of these was that between the increasingly social character of production and the continued private ownership of the means of production: that is, the private appropriation of what was produced, including the “surplus product”.
This was inherent in any system of commodity production because, by definition, a commodity is privately produced not for consumption by the producer but for sale on a market.
With the development of capitalism into a global system, the actual direct producers number many millions and, in that sense, production is “social production”, but ownership of production and, therefore, decisions over what is to be produced, remains private. However, whether there will be a market for the goods produced is always, ultimately, unknown.
Two years ago, highly successful South Korean corporations were confidently planning further increases in production.
Today, their economy is in ruins. In order to safeguard what they can of their own wealth, the private corporations lay off the workforce, destroying the lives of millions. Thus, private ownership conflicts with social production.
The second great contradiction of capitalism results from the commodification of labour power, the human capacity to work. As Marx showed, capitalist profit originates in the difference between the cost of employing a worker for a period of time and the value of the products that can be produced in that period of time.
In order to maximise profit, each capitalist tries either to make workers work harder and longer, to which there are physical limits, or to increase output per worker through the introduction of improved technology.
As a result, output and productivity are increased but the fundamental source of profit, the employed workforce, tends to decline. Consequently, while the mass of profits may increase, the rate of profit tends to fall.
Where, for example, investment of £1 million once generated a profit of £100,000, the same profit needs £10 million invested. As fewer workers operate more productive technology, the numbers of the unemployed swell, wasting society’s most important resource.
In their attempts to combat this, capitalists not only drive forward production by introducing new technologies, new processes, new products, new ways of organising production and opening up new markets, they also take measures to negate important aspects of capitalism’s own character.
In place of many competing firms they centralise and concentrate capital into huge corporations, instead of individually owned capital they try to spread the load by a degree of “socialisation” in the form of joint stock companies, pension funds and banks which channel private savings into investments the world over.
As the corporations grow bigger they even try to offset the key characteristics of the market economy itself by monopolisation, sophisticated market research and forward planning.
Lastly, because capitalist profit is rooted in exploitation, capitalist society is permanently characterised by class struggle and periodically convulsed by open class war.
This too exacts a cost on society ranging from interruptions and limitations to production, right through to the catastrophes ol mass unemployment, famine and civil war.
Marx and Engels considered that the revolutionary overthrow of capitalism could overcome all these defects by making labour “directly social”.
That is to say that by taking all production into social ownership the activity of the entire workforce could be co-ordinated and integrated, instead of each particular production unit being related to others only indirectly via the lottery of the market:
“From the moment when society enters into possession of the means of production and uses them in direct association for production, the labour of each individual, however varied its specifically useful character may be, becomes at the start, and directly, social labour.
“The quantity of social labour contained in a product need not then be established in a roundabout way: daily experience shows in a direct way how much of it is required on the average … it will still be necessary for society to know how much labour each article of consumption requires for its production. It will have to arrange its plan of production in accordance with its means of production, which include in particular its labour power. The useful effects of the various articles of consumption, compared with one another and with the quantities of labour required for their production, will in the end determine the plan.”
Social ownership of production, therefore, immediately implies planning.
The plan is a conscious instrument employed by society to “establish a relation between the volume of social labour-time applied in producing definite articles, and the volume of social want to be satisfied by these articles.” Unlike capitalism, socially owned production is driven and regulated by the changing structure and expansion of the needs of society rather than the thirst for private profit.
From this conception further consequences follow.
First of all, products cease to take the form of commodities since they are no longer exchange values, that is goods and services whose socially necessary labour is determined only in the act of exchange itself. Rather, this decision is taken in advance, goods are produced because there is a social need for them.
Secondly, money loses its specific character as a universal equivalent of all exchange value. Instead:
“Society can simply calculate how many hours of labour arc contained in a steam engine, a bushel of wheat at the last harvest, or a hundred square yards of cloth of a certain quality.
It could therefore never occur to it still to express the quantities which it will then know directly and in their absolute amounts, in a third product, in a measure which, besides, is only relative, fluctuating, inadequate, though formerly unavoidable for lack of a better one, rather than express them in their natural, adequate and absolute measure, time … Hence, on the assumptions we made above, society will not assign values to products.”
If the profit motive, the desire to accumulate more and more surplus value, is no longer the guiding principle in the collective economy, and no longer the spur to innovation and increased productivity, what is? Marx argues that it is, “economy of time, to this all economy ultimately reduces itself.” since “the less time the society requires to produce wheat, cattle etc., the more time it wins for other production, material or mental.”
Freed from the compulsion to increase surplus labour (that is to say labour over and above what is necessary to maintain the workforce) society will be able to reduce working time and extend disposable, free time.
Necessary labour will be reduced to a minimum and with this the separation of people into “mental” and “manual” workers will be overcome.
Finally, Marx and Engels recognised that communism would not arrive all at once or overnight.
Whilst they recognised that, historically, the socialist revolution represented a “leap from the realm of necessity into that of freedom” this did not mean that a fully socialised classless society could be proclaimed on the morrow of this revolution.
Economically speaking, there would continue to be a situation of relative scarcity for some time.
Hence, society would need to adopt a mechanism for deciding on the distribution of the fruits of labour amongst the members of society.
They argued that under socialism (the lower phase of communism) each member “receives a certificate from society that he has furnished so much labour … and with this certificate he draws from the social stock of means of consumption as much as costs the same amount of labour” after certain deductions have been made.
These deductions would include: “replacement of the means of production used up … additional portion for expansion of production … reserve or insurance funds to provide against accidents … general costs of administration not belonging to production … that which is intended for the common satisfaction of needs, such as schools … funds for those unable to work.”
Some social inequality would be inherited from capitalism and would have to be consciously reduced over time. Only under communism would the criteria for distribution change.
Instead of “from each according to their ability, to each according to their work” society would be able to adopt “from each according to their ability, to each according to their needs”.
A superabundance of all necessary material goods and services would obviate the need for any form of rationed access to the products of social labour.
This is as much as Marx and Engels established about the political economy of socialism.
It would be rational, planned, democratic.
It would overcome the anarchy and disproportionality of capitalist production.
It would release humankind from the oppressive effects of alienated labour and allow for the development of rounded individuality which, in turn, could only take place in a society which guaranteed freedom from want and oppression.
It would overcome the under-utilisation and waste of labour.
It would avoid the needless over- exploitation of nature and end the destructive antagonism between town and country.
On taking power
Marx and Engels’ insights, as suggestive as they are, do not exhaust the matter of economic construction under the political rule of the working class.
It fell to the next generation of revolutionaries to extend their conceptions in the light of the experience gained alter the Bolshevik Revolution.
At the time of the Revolution itself, the Bolsheviks’ ideas on the economics of the transition period did not extend much beyond the legacy of Marx and Engels.
Lenin’s writings, such as the “Impending Catastrophe” (September 1917) clearly draw on this tradition, arguing that the experience of state regulation of a modern economy such as Germany’s held important lessons for Russia’s future.
The fact that he was simultaneously writing State and Revolution, with its emphasis on the destruction of the bureaucratic state and its replacement by the rule of the soviet “semi-state” already points to a qualitatively different conclusion from that of the reformists.
In the course of the revolution itself, various organs of workers’ control, most importantly factory committees, were established and their right to veto management and owners’ decisions was recognised by the soviet state.
As the class struggle grew into civil war so these committees asserted their right to expropriate enemies of the workers’ state and the majority of plants were, thereby, nationalised.
However, although this gave the state the means to allocate resources, its objective in these early years was survival and military victory ,not the construction of a socialist economy.
It was in the 1920s that the most important gains in the study of the economics of the transition period were made.
The first of these concerned the relationship between the economy of the workers’ state and still existing capitalism.
In the Soviet Union this meant, above all, the internal rural economy but the same basic considerations will hold true for a workers’ state in relation to a world market still dominated by capital.
Unlike Bukharin, who argued that the tempo of development in the state economy had to be based on that of the still more powerful market economy, or the Stalinists who concluded that all links with the external market should be broken and the internal market should be liquidated, Trotsky explained the need to establish a regulated relationship with the market.
On the one hand, this meant protecting the fledgling workers’ economy by enforcing a state monopoly of foreign trade but on the other it meant utilising the market as a source of necessary goods and as a criterion against which to judge progress in the workers’ economy.
To do this it would be necessary to maintain many of the mechanisms of the market, most importantly, a stable currency and prices which reflected accurately the costs of production.
Within the state sector, however, although it was essential to have accurate data on materials, workforces, productivity and the other key indicators of performance, production was not dominated by the law of value.
There were very real physical limits to what could be done and economic proportionality had to be maintained but, within those constraints, the state could allocate resources according to political priorities.
At first, the benefits of state control were felt principally in the sphere of distribution.
The elimination of unnecessary expenditure on the aristocracy, Church and Tsarist system and concentration on production of essentials rapidly brought living standards back to pre-war levels.
However, Trotsky argued that it would be the application of socialist economic principles to the sphere of production, via planned development of industry, that would allow rates of growth higher than those of capitalism to be achieved and sustained.
The actual techniques of planning: what to plan, how to plan, on what scale, over what periods of time, were also first investigated by the Left Oppositionists.
Again, the differences from the bureaucratic system actually imposed could not have been greater.
Perhaps the most fundamental difference was in the conception of all plans as hypotheses, not orders from above that could not be amended, let alone criticised.
For Trotsky, “The checking of a plan of production is one of the most important points in its realisation.”
Although the first experience of planning was gained from the reconstruction of specific sectors, such as railway transport, Trotsky recognised from the early 1920s the need for industrial planning to be integrated across a range of sectors.
In relation to Lenin’s famous call for an electrification programme, for example, he argued that, “the orientation plan of electrification is entirely subordinate to the orientation plans of the fundamental branches of industry, transportation, finance and, finally, agriculture.
All these partial plans must first be harmonised with each other on the basis of the data we have at our disposal about our economic resources and possibilities.”
Planning, however, did not mean aspiring to move directly to a plan for the whole national economy.
On the contrary, it meant identifying strategically important projects and then planning their integrated development so that proportionality could be maintained between the different sectors if the economy and, vitally, the living conditions of the workers themselves could be improved in step with the economy as a whole.
Similarly, rather than a strictly delimited “Five Year Plan” during which all projects should be completed, the Left Opposition’s conception was of “rolling planning” in which particular projects would naturally have a planned completion date hut the overall plan would move forward year by year.
This approach would have avoided the absurdities of bureaucratic planning which created disproportionalities by concentrating investment in the early years of each planning period.
Lastly, but perhaps most importantly, Trotsky recognised the necessity and potentiality of harnessing the creative power of the workers themselves in the building of their economy.
In the Twenties this meant not only ensuring a systematic improvement in living standards but the revolutionising of education by its integration into production and the subordination of managements to the democratic decision-making of the workers.
As a necessary corollary of this, Trotsky envisaged debates over the best priorities for the plan becoming the principal substance of political argument, even to the extent of faction formation over the rival claims of supporters of different priorities.
What is clear from even a brief survey of the classical Marxist writers, then, is that between the overthrow of the capitalist class and the construction of socialism there lies a whole period of transition from a world economy dominated and regulated by the market to one of abundance in which labour is so productive that it guarantees all workers most of their material and cultural needs as of right.
During this transition period, the organs of workers’ power, created initially in class struggle, have to take control of production and re-order it according to planned priorities.
As Trotsky put it in 1925, the aim is to “spread the planning principle to the-entire market, thus swallowing and eliminating it”.
This very way of posing the question suggests that the market cannot be abolished over night.
Rather, for a whole epoch, it will be necessary to manipulate the market mechanisms (e.g. money, prices) in such as way as leads to their withering away.
Immediate economic tasks
On the day of its victory, the socialist revolution will transfer all political power to the semi-state institutions of the proletariat (soviets, workers’ militia) and initiate radical economic measures.
It is possible that a new workers’ state will not immediately expropriate all the means of production. It will start with the expropriation of the big banks, large factories and trading organisations.
Simultaneously, the state will begin to construct an economic administration and planning agency that will broaden its sphere of operation over time.
The time taken to nationalise the great mass oi the means of production will depend on the level of development and the degree of working class control established in the class struggle prior to the revolution.
Through the process of expropriation and socialisation, class exploitation will be progressively removed and the private appropriation of surplus labour will be abolished.
From the outset of the transition, the bulk of the surplus will belong to society: that is, to the democratic association of direct producers.
The worker’s labour will not become social through the act of private exchange in an anonymous market: it will be immediately and directly social since its content and form will be the subject of democratic discussion and debate.
Equally, the workers will not be alienated from the process of labouring.
They will no longer be subject to oppression at work, subject to the tyranny of the clock and the manager. The machine will not dictate the pace of work to the machinist but vice-versa.
In addition, workers will not be confined to one type of work throughout their entire lifetime. Access to training and education will not bear the stamp of class origin, still less access to private sources of wealth.
Such training will produce diverse skills which can be put to use during each person’s lifetime and therefore one will no longer “be” what one “does”.
A society which is building socialism will ensure that each person’s natural and acquired abilities are detected and nurtured to the fullest extent, free from the oppression that currently arises from class origin, gender, ethnicity or sexual orientation.
As much hazardous, exhausting, dreary and repetitive labour as possible will be automated. All the producers will learn the theoretical, technical and organisational aspects of the production process as a whole. The division between mental and manual forms of occupation will progressively be overcome.
The goal will be to progressively break down the distinctions between “labour”, “education” and “recreation”, and replace them with general human creativity in all aspects of life.
Will there be enough?
Every school student studying economics for the first time is appraised of “the economic problem” that all human societies have to confront: namely, how to satisfy a relatively limitless range of needs and desires with relatively scarce economic resources? How will production and consumption be reconciled when exploitation of the mass of human labour by a minority of private property owners has been overthrown? Democracy and empowerment are not sufficient conditions for the advance towards socialism in the economic sphere.
Economic life will have to be regulated in the transition to socialism by the conscious application of a series of laws of development that govern production and consumption, laws that guarantee both equilibrium and expansion.
In this process the market will no longer be a decisive factor but it will be a factor, nonetheless.
In industrially backward countries, with a high level of private agriculture, commodity production and exchange, the dictatorship of the proletariat will have to adapt elements of the programme of the Left Opposition in the 1920s, seeking to accumulate resources for industrialisation in part through taxing a largely private agricultural sector so long as the technological or political basis for voluntary collectivisation of agriculture does not exist.
This situation is unlikely to trouble the domestic economy of any OECD country.
There is unlikely to be any significant commodity production outside the provision of certain personal services which do not involve hiring wage labour.
However, the transition to socialism in its early stages, even in these countries, will involve some exchange of goods and services between workers’ states and capitalist countries.
Capitalism, then, will have an impact on the workers’ states in several ways.
First, it will affect the choice of whether to invest resources into producing the presently imported goods or continuing to import them.
Secondly, if the workers’ state seeks to compete for markets with capitalist rivals in order to gain export earnings this will compel the socialist-oriented industry to raise its productivity up to, or maintain it at, world market levels.
This is even more true now than in the Twenties, given the highly integrated international character of modern capitalism.
The attempt at economic autarky in the Soviet Union added massively to the costs of industrialisation but for any modem, industrially developed workers’ state to try to withdraw totally from the world market would be catastrophic.
Thirdly, it may be necessary for some period to allow foreign-owned concessions to exploit labour in return for a portion of the profits or the output, rather than allow the under-utilisation of resources.
Money too has to be used and manipulated in the transition to socialism.
Under capitalism, money prices revolve around the values of commodities, that is, the amount of socially necessary labour time they contain. But they only indirectly express this value.
In the transitional economy of the workers’ state, the abolition of private property in the main means of production immediately introduces important changes in the use of money and prices: but they are far from being “abolished”.
On the contrary, as inherited instruments from capitalism they have to be used so long as commodity production and exchange exist either within the workers’ state or between it and capitalist countries.
Markets and money in the first phases of the dictatorship of the proletariat are the only methods of measurement and thus remain the basis of calculation.
At the start of the transition to socialism, planning has to compare its results with market standards and for this a sound monetary system will be needed.
Trotsky argued that planning will be a real test “of an a priori calculation with the help of a universal equivalent, a thing that is unthinkable without a stable money system.”
Nonetheless, from the outset, there will be changes in the function of money.
Market prices under capitalism indicate the ratios at which alternative goods are exchanged in the market. This conveys a very narrow range of information.
Private commodity producers are not interested in a range of external (i.e. social) costs, nor are they interested in the long run effects of their decisions.
What the workers’ state needs are prices which express the cost of alternative uses of social labour.
Without such prices, it would be impossible to measure productivity improvements or make rational judgements between alternative investment choices.
Genuine cost prices can take into consideration various social costs (e.g. environmental damage) that lie outside the scope of the individual firm.
While the prevailing costs of production in the technologically developed capitalist world should provide a bench-mark fur cost prices in the transition, post-capitalist society will need to construct cost prices for goods and services that reflect these social costs in the short and long run.
Modern information technology has already simplified the task of drawing up spread sheets to indicate the effect on real cost prices of a number of variables (such as changing rates of investment in different sectors over time) which capitalist market prices are incapable of reflecting.
Such a system not only differs from the way money prices are constructed under capitalism but also from the use of prices under the bureaucratically planned economies.
Attempts there to construct artificial prices (e.g. for bread) to affect demand should be rejected. Not only docs this not accurately signal the real costs to society but it encourages waste in the use of certain products.
Although in the initial stages, the workers’ state will consciously influence demand for some consumer goods and services through taxation or targeted benefits, it will still need to be able to accurately measure the real labour time costs of those goods and services.
Clearly, even such subsidies will become superfluous to the extent that an egalitarian income structure prevails.
Naturally, as a means of exchange, the use of money will diminish during the transition to socialism.
In the first instance, many commodities will be recognised by society as necessities and will be distributed as a right, and paid for out of social taxation (i.e. a minimum level of housing, clothing and food goods).
There will be no need for these to be bought and sold, a transaction requiring money.
Under capitalism, most people only consume a few thousand different types of commodities in the course of a lifetime.
Over time, more and more of these goods will be distributed automatically as a recognised social entitlement.
As the productivity of labour improves, the price of such goods (accurately reflecting a diminishing portion of social labour) will dwindle towards zero: they will become “too cheap to meter” and be added to the list of non-monetary exchanges.
As communism approaches – a classless and stateless society – the role of money as an independent physical expression of different amounts of social labour will disappear and be replaced by mere accounting devices such as units/hours of social labour.
The building of a planned economy necessarily implies the conscious allocation of resources to achieve identified objectives.
Lenin’s aphorism, “Politics is concentrated economics” will be transparently the case in a workers’ state.
Decision making over the priorities of the plan will be a primary concern of the workers’ councils and, no doubt, the subject of party conflict as the demands and interests of different sectors are weighed both against each other and against the long term priorities of socialist construction, nationally and internationally.
Laws guiding planning
Social production must seek to raise labour productivity over time through optimum (not necessarily maximum) use of all the factors of production.
An optimum level of output is a level that is compatible with other goals such as shortening the working day and increasing the amount of time available for education and leisure as well as allowing for rational use of non-renewable raw materials and planned reproduction of renewable resources.
Without a progressive increase in disposable time it will prove impossible for workers to develop themselves as rounded individuals.
Education and the pursuit of a range of cultural activities will be essential pre-conditions for active participation in the massively increased process of decision-making that will be a feature of the transition.
Taking collective control of one’s life, at work, in the local community and over the multifarious economic and political decisions will require time and study.
It flows from this that society may wish to concentrate productivity improvements in the industries responsible for consumer goods in order to reduce the amount of necessary labour-time required to reproduce labour.
The aim in reducing necessary labour time is not, as it is under capitalism, to maximise the length of surplus labour time. It is to increase disposable labour time.
Once the length of the working day has been established and the amount of disposable time set by the plan, then there remains naturally the extent and structure of material production.
The goal of production is not now production for its own sake, nor for profit maximisation. Rather, production must serve final consumption, the needs of the democratic association of producers.
Under capitalism, the only “needs” recognised as legitimate are those that appear through a market exchange and the ability to pay (or “effective demand” as the economists revealingly call it).
This is so even if food is exported from famine-stricken areas or houses stand empty because they cannot be sold while thousands of people are homeless.
By contrast, a rational “need” from a socialist standpoint is one related to guaranteeing provision of food, shelter, clothing, and access to recreation and education for all.
In order to achieve this, a massive increase in the level of the productive forces will be necessary. In this sense, production is governed by the law of socialist accumulation.
It will be necessary to raise the rate of accumulation (especially of modern industrial investment) at the same time as raising the volume of consumption. This can be done through various means.
First, a reorganisation of the international and national division of labour will produce increased economies of scale and new efficiencies: these would include the gains to be made from an elimination of costly trade barriers and the rational dissemina-tion of technological innovations throughout industry, now no longer prevented by private property.
Secondly, a drastic reduction in unproductive expenditures (e.g. weapons, specifically capitalist bureaucracy, marketing costs of most consumer goods, wasteful and socially harmful “luxury” spending) will allow for a redirection of social labour to productive uses.
Thirdly, the expropriation of private property in the means of production will allow for the full employment of labour and other resources and thereby massively increase goods and services.
Fourthly, it can be expected that a significant increase in the productivity of labour would come from the removal of the oppressive character of waged labour.
New scope for the initiative and inventiveness of collective labour will be possible.
Fifthly, a revolutionary programme of land reform in many countries would lead to increases in production.
Production must expand in such a way as to ensure that different types of goods and services are produced in the necessary proportions (including between producer goods and consumer goods) to ensure equilibrium between different sectors of production and between production and consumption.
This must include decisions about the pattern of final demand by consumers as well as the rate and structure of investment.
The pattern of final demand will determine the mix of producer and consumer goods and the investment decisions will include whatever level of current consumption is willingly deferred in order to guarantee future consumption.
Planned over-production will necessarily be part of these calculations in order to cater for sudden demands not anticipated at the stage of initial plan formulation.
In making these decisions there will be objective economic criteria to be taken into account.
A transitional economy would aim to increase its investment programme in the means of production up to the point where no further gain in productivity would result and where total net output should be used for current consumption.
The rate at which investment should take place depends on the conditions existing at the time the transition is undertaken.
Certainly, the present cannot be sacrificed for the future by squeezing current consumption and using all resources for investment.
It may be necessary to devote output in the short-term to raising the standard of living even at the expense of a less rapid rate of increase in the more distant future.
On the other hand, a compromise may have to be made between this desire and investment demands where a country suffers from a low level of industrialisation, since a minimum level of industrialisation would be essential for establishing a centralised plan for the whole economy.
A federation of several workers’ states, and even more so a world federation of soviet socialist republics, would aim at the rapid equalisation of levels of industrialisation between them.
This implies to a certain extent a shift of resources to the “Third World” countries to compensate for the situation that prevailed under imperialism.
This does not mean that the standard of living of the more developed countries will deteriorate during this phase. It would only grow more slowly than it would without undertaking this act of international co-operation.
Secondly, the tempo of industrial development in former colonies and semi-colonies must not be so high that the population could not adjust its culture without disruptive instability.
The identification of the necessary balance between such competing demands on resources will be a fundamental task of revolutionary politics within the framework of workers’ democracy.
Calculation by labour-time
A rational reorganisation of production and consumption will only bring about the first gains.
As the transition progresses towards its goal of socialism, productivity will have to be systematically enhanced, production must be more efficient.
At this point, Marxists confront the first challenge laid down by the earliest critics of socialism.
Marxists have established that the aim of reducing the length of the working day and increasing disposable labour time is sufficient motive for efficiency strivings.
But various critiques have insisted that, having abolished market regulation, socialism would have no effective method of measuring economic progress.
The Austrian school (von Mises, Hayek) argued that socialism, lacking a system of market derived prices, would have no mechanism for calculating rationally how to distribute productive resources between various uses.
Of any two methods of production it would be impossible to say which was the “more economic” because any comparison of costs against their value-productivity would be impossible.
It is true that, in order to make a comparison between the efficiency of alternative uses of resources, qualitatively different goods must be reducible to quantitative terms.
It is wrong, however, to believe that only market prices can produce this calculation.
What is true is that reference to the movement of prices of intermediate and final goods is the only way that decisions over resource allocation can be taken in an atomised and individually competitive economy.
Enterprises are forced to respond to these externally imposed conditions.
However, as we have seen above, market prices express only a very narrow range of actual costs and, therefore, decisions taken on their basis are not by any means necessarily the best decisions that could be taken.
In the transition to socialism, the reduction of qualitatively different goods to a common quantitative standard will be done via the calculation of the labour-time embodied in the differing products and services.
All opponents of Marxism (including market socialists) insist that this is not possible.
Von Mises, Tugan Baranovsky and Bohm-Bawerk rejected the labour theory of value as a whole and, therefore, also as a means of calculation according to embodied labour-time.
Even Karl Kautsky believed that in practice it was impossible to calculate the amount of socially necessary labour time in a given commodity.
In contrast, Marx argued that under socialism: “labour-time would … play a double part. Its apportionment in accordance with a definite plan maintains the correct proportions between the different functions of labour and the various needs of the associations. On the other hand, labour-time also serves as a measure of the parts taken by each individual in the common labour and his share in the part of the total product destined for individual consumption.”
Labour-time provides the common basis for the calculations of costs involved in the allocation of social labour to different spheres of production as well as determining the distribution of means of consumption to the population.
Consider the allocation of resources to social production, It is necessary to establish what sort of labour time is being referred to.
Under capitalism there is a distinction between concrete and abstract labour.
The act of exchange itself under capitalism reduces all concrete labours to so much abstract human labour-value.
This value in turn can only appear in the form of a rate of exchange (exchange-value) between a definite quantity of one commodity and a definite quantity of another.
Money is an independent representation of this exchange value.
Under capitalism, as a result of the constant experience of market exchanges and competition, a clear idea of what constitutes labour of average intensity for any given industry emerges, that is, socially necessary labour.
In the transition to socialism, the abolition of commodity production eliminates the “blind”, after the event, calculation of socially necessary labour.
This calculation is now made consciously by society.
What counts as an averagely intense unit of labour time will be decided by workers’ democracy and supervised and checked by workers’ committees.
The discussion of such standards will obviously consider capitalist comparisons but will not slavishly copy them.
Scientifically established standards of labour intensity would have to include both a physical and a psychological component in their evaluation of stress and exertion.
If a specific type of work leads to a particularly high level of exertion and exhaustion this should not be seen as producing more value: rather, the concrete labour should be made to correspond to labour of average intensity by compensating rest periods, which become incorporated into the calculated work time.
The calculation of how much labour-time specific products represent will be the task of the workforce itself.
For this, the workers simply have to add up the hours that their brigade or team is expending and add this figure to the sum that they received in the form of raw materials and initial products.
They add an all-inclusive figure for wear and tear, energy and water etc.
and compare the resulting total with the equivalent figures for all enterprises that produce the same product.
The average amount of labour time necessary represents the social labour-value, which may differ from the individual labour-values in both directions.
During the transition period, education, training, job rotation and the general raising of the cultural levels of the workforce, will tend to make units of labour time commensurable across all areas of production.
This is an important basis for the planning authorities.
“Labour certificate” entitlement’ will be derived from the individual amount of hours expended, but economic calculations will have to be based on social labour-value figures.
Such calculations (and thus the decisions based on them) will be highly transparent for all workers as they will be expressed in units of labour time.
This system will provide the basis for cost calculations and the allocation of resources to alternative uses.
The “price” of goods and services will be measured in units of labour time.
Producer goods and consumer goods will be priced according to their cost of production (i.e. raw materials, dead labour transferred from machinery), and the agreed price of labour (again, as measured in units of labour time needed to make the goods that reproduce labour to an acceptable standard).
The amount of surplus labour time (or mark up) added to cost price will be set by society according to the agreed rate of investment.
Once a scale of priorities is drawn up by the direct producers themselves as a result of collective debate, the actual productivities of the resources in various uses needs to be calculated.
It is necessary first to discover the “costs” of resources and then find out their relative productiveness.
Planning bodies would need to know how many hours of labour time would be necessary (stored up in machinery and labour itself) to produce an extra n yards of linen, compared to how many extra cars could be produced by the allocation of the same amount of hours.
It would be possible to arrive at an idea of which, out of a range of alternatives, would result in the greatest net productivity.
In addition, comparisons with the immediate past would be used.
Such detailed comparisons could be made from the national macro-economic level right down to the enterprise level (and even departmental level) depending on the technical level of the information system.
The “monetary” or “price” expression of these relative productivities is entirely secondary and the only consideration is that it be stable and consistently applied to all parts of the economy.
The distribution of goods
The principles governing the distribution of the social product among the workers will be a matter for the society of direct producers themselves to work out.
As mentioned earlier, Marx and Engels suggested that the principle would be that the worker receives a “labour certificate” equivalent to the work done minus the portion for insurance, investment and other agreed deductions.
Marx adopted this principle because he recognised that it would be impossible to leap to a society without generalised scarcity and hence there would be a need to regulate access to limited resources.
But he was already aware that the slogan of “from each according to his abilities” was adopted “only for the sake of parallel with the production of commodities” and that the concrete method and norms of distribution of consumption goods will depend on the degree of development of the social forces of production.
The more developed the economy at the start of the socialist transition, the more will the needs of the general population be the starting point.
It is likely that in the industrially developed imperialist democracies, the socialist transition will start from a fairly high level of guaranteed access to consumption goods, irrespective of individual abilities.
Although this would immediately be applicable to goods which can be simply given away by the state because productivity in that sphere is already so high that free distribution will not raise demand above possible production.
it should not be expected that this will be possible for a majority of goods within any foreseeable time.
If we think of socialism in world wide terms, demand (i.e. need, not ability to pay) will be so enormous that for decades it will be beyond the possibilities of production, even it we assume an accelerated growth of productivity under most phases of the workers’ state.
The fact that “labour certificates” will be calculated according to how much work an individual has carried out, implies that there will be a degree of social inequality in the transition.
This inequality will reflect, among other things, the need to provide social incentives to undertake unsocial tasks or normal tasks during unsocial hours or work in remote and inhospitable conditions.
In other cases, workers will prefer to trade-oil increased disposable time against labour certificates.
Definite limits must be established to this inequality and, where possible, other measures must be found for accomplishing the same ends by different means.
For example, regular rotation of jobs, based on multi-skilling over a lifetime, may make it feasible for all workers to undertake certain tasks, in turn, as a social duty, hence eliminating the need for a permanent minority of workers to have to be induced to carry them out.
Marxists reject out of hand the idea that workers should receive wage bonuses according to the improvements in productivity registered by their enterprise, a proposal put forward by “market socialists” such as Alec Nove.
In the first place, differing productivity levels of separate enterprises should not in general be the basis for differential reward since it will generally be a product of macro-economic investment decisions taken by society as a whole.
The benefits of increased productivity should not fall to individual workers or plants but to society as a whole in the form of lowered prices and increased quality and diversity of goods.
Every worker will thus have the same interest, a collective interest, in ensuring the maximum efficiency of production to achieve the most rapid fall in prices.
Workers as consumers will benefit directly from the achievements of workers as producers.
The problem of skilled labour All forms of concrete human labour, whether skilled or unskilled, arc qualitatively different from each other and not measurable by a common standard as concrete labour.
That is why, under capitalism, all concrete labour, including skilled labour, is reduced to abstract human labour, in the process of exchange.
Marx considered skilled or “complex” labour to be only a multiple of unskilled labour.
Does this mean it should receive higher wages under socialism or that it creates more value than unskilled labour?
Under capitalism, where the costs of training and reproducing skilled labour are borne privately, skilled labour receives higher wages.
This will decrease during the transition to socialism.
As Engels said; “in a socialistically organised society these costs are borne by society and to it, therefore, belong the fruits, the greater ‘values’ produced by compound labour”.
So the remuneration for skilled labour must be the same as for all labour: egalitarianism must be the guiding principle.
There are no grounds for challenging this with the view that skilled labour involves any greater physical or mental exertion than unskilled.
Nor does skilled labour create more value during the course of an hour.
This would be to confuse the exchange value of labour power with its use-value.
Its “exchange-value” may be higher due to the higher costs of reproducing it but it does not have any mysterious higher power of creating more value.
However, the higher reproduction- value must be recognised in the planning and accounting process during the transition.
Take a project which requires 100 workers (or ten days of whom ten workers must possess special training and this training embodies 200 working days in total.
In this case, society has to account for these 200 days and thus the project would embody 1.200 days not 1.000.
Hence, skilled labour in this sense, while it does not create more value than unskilled labour, does, like constant capital under capitalism, embody a certain proportion of stored labour that is transferred to the value of the final product.
The information problem
The problem of how changes in consumer demand would be dealt with in any socialist system of distribution invites the charge from bourgeois economists (especially Hayek) that no socialist planning agency could ever acquire the necessary complete picture of all the fragmented knowledge of consumer needs that exists in order to arrive at creative solutions to changing desires.
In response, we first have to say that in the first stages of the transition where “constructed prices” are necessary.
these prices can easily be used to reflect certain fluctuations in consumer demand.
Here, changes in inventories are managed by: (a) price movements which can match short-term disequilibrium in supply and demand and (b) changes in the respective production schedules.
The law of value would have no role in either case since the higher prices would not be allowed to transform themselves into extra-profits and, thereby, regulate the production process.
Secondly, later in the transition, when socialism approaches and when electronic “labour certificates” are used to regulate access to those residual goods that are not yet available in “abundance”, then the computerised information on stock control will suffice in almost all cases to correct impending shortages well in advance of any shortfall in the provision of goods at the point of sale.
So “price fluctuations” to regulate supply and demand will no longer be necessary.
As to the general “informational problem” as stated by Hayek and others, this is based on the belief that Stalinist bureaucratic planning is the only possible model of a planned economy.
We reply that any healthy workers’ state would not build up a planning system in such a hyper-centralised manner.
The supercentralism and hypertrophy of the planning system in the degenerated workers’ states reflected the needs of the parasitic bureaucracy, above all the imperative to exclude the working class from decision-making, and did not flow from any “principle” of planning.
On the contrary, proletarian planning has to be simultaneously centralised and decentralised.
How can this be arranged? By the organisational principle of democratic centralism.
Proletarian planning implies decision-making at different levels.
Each decision should be taken at the level that is best able to carry it out and which is affected by the decision: in other words, every decision is to be taken at as high a level as necessary and as low a level as possible.
It reflects, and is related to, the system of Soviets and factory/workplace councils.
If it is possible to decide on changes in the product mix of a factory at a local (i.e. plant) level without disrupting the overall pattern, then this should be done and the available local knowledge can inform that decision.
On the other hand, if developments of a technological or ecological character demand certain adaptive changes within the production schedules of a range of factories, then the most effective level of decision-making must reside at a higher level, be that regional, national or international.
In principle, there is no problem with locating decision-making at an adequate level as long as there is no bureaucracy that seeks to monopolise (central) power in its hands and as long as there is no nascent bourgeoisie that wants to decentralise economic decision-making into private hands.
Bettering capitalism’s best
One of the best arguments for planning in the transition to socialism is the experience of capitalism in the twentieth century.
It is well known that monopolies seek to remove as much uncertainty as possible from their economic calculations.
Investment decisions and profit projections are vulnerable to the inherent anarchy of the market and competition from rivals.
By capturing as much as possible of a given market or supply of raw materials, by engaging in “price-fixing” with their supposed rivals, monopoly firms endeavour to inject as much certainly and planning into decision-making as they can.
It is important that we take this experience as our point of departure – real tendencies within the capitalist mode of production itself, developments which prove both the possibility of planning on an ever more inclusive scale and the need to destroy private property in the means of production in order to fulfil the intrinsic possibilities of planning.
The growth of corporate planning has not only meant the attempt to guarantee market sales and hence realise their profits. The labour process itself is being transformed.
One example of this can be seen in the “quality revolution” which in turn has accompanied and made possible “lean production”.
The success of the Japanese during the 1970s with these techniques, and the increasing competitiveness of the world market in the 1980s, forced these new techniques on every producer.
The “quality revolution” is based on giving workers more control of the production process.
Hitherto, the dominant form of production since the 1920s has been the assembly line.
This technique of production reduced workers to simple assembling machines whose activity was governed by the line which brought the work to them.
While this technique boosted productivity enormously, it did so on the basis of low quality of production.
Quality departments had to be set up to correct defects created by this mind-numbing and body-destroying method of production.
With mass line assembly work, workers were reduced to automatons with no say in the production process, let alone the pace of the line.
The “quality revolution” has sought to get rid of some of the alienation of the assembly line.
Workers are now organised in work teams doing a broader range of tasks.
Above all, they are now responsible for quality and that has meant greater consultation and the power to control the immediate work process.
However, giving workers increased control of the work process requires increased loyalty to “their” company lest it become a threat to capitalism itself.
It requires class harmony within production.
In the face of class struggle prompted by economic crisis, this will break down.
Quality production under capitalism comes into contradiction with the competitive and anarchic character of capitalism.
However, the experience of such production systems, coupled with a victorious struggle for workers’ control and revolution, will be a powerful asset to the new workers’ state.
The quality revolution also breaks down the divide between mental and physical labour.
In the past, products were designed with scant regard to the production process.
Designs were then modified by the production engineers to put them into operation.
With “quality production”, workers are consulted at the design stage.
Products are designed to be defect-free from conception, and this is only made possible by the collaboration of all those engaged in the design, development and production phases as a joint team.
The result is that not only has the development cycle of major products been halved, but they are better designed and more worker friendly to produce.
In its most advanced form, this integration takes the form of concurrent engineering which indicates that capitalism is forced to minimise the disruption caused by the social division of labour.
With concurrent engineering, design and production are tackled simultaneously.
As the design progresses, so too does the method of producing it, with the one feeding back into the other.
This requires the integration of design engineering, material sciences and manufacturing technology.
It requires an even tighter co-operation between the design centre, suppliers and supportive services, lust as “quality production” involves increased socialisation of the labour process within a factory or company, so it and “lean production” tend to socialise production between factories, their suppliers and all the contractors who support it.
Manufacturers not only demand defect-free supplies, but the minimum of supplies – Just In Time inventories.
The best factories in Japan operate with only two hours’ worth of parts.
Socialism will relieve humans of much menial work To achieve this level of efficiency, suppliers have to lap into the computer of the producer to determine the flow of production and the requirement, therefore, for their parts.
The next goal for the capitalist labour process is computer integrated manufacturing (ClM) – an automated shop floor, with functions such as purchasing, stock and sales in the retail outlets linked electronically to the factory floor.
Already pilot schemes connecting home shoppers via the internet to superstores and they in turn to suppliers, are up and running in Britain.
The real problem is its complexity and the complexity flows from the anarchy of the market, i.e. the rivalry in profit making, the business secrecy that this necessitates, etc.
If sales could be predicted and planned in advance, then CIM would be practicable.
Its full execution requires the end of the business cycle – an impossibility under capitalism.
Despite the fact that companies spend millions in marketing efforts to discover consumer wants and to improve the usability of their products, the real problem is not what consumers want, but what they can afford to buy, and it is this element that is the most unpredictable of all and lies behind the operation of the business cycle.
The more these changes in the labour process develop, the more their efficient and further development requires the overcoming of the contradiction between private consumption and socialised production.
Planning structures
Objections to planning arise from different starting points: some have argued that without competition innovation and efficiency arc impossible.
Others insist that without markets it is impossible to collate the necessary information about consumer preferences since the centralisation inherent in state ownership and direction deters the flow of information and creates a distinct layer of functionaries with separate interests that disrupt the operation of any plan.
This is based on a misunderstanding of the nature of the state in the transition.
This state is a semi-state.
The semi-state retains certain features common to all states: a centralised armed power to defend the revolution from internal enemies and from outside threats.
So long as scarcity and inequalities exist some form of body regulating the sphere of distribution will be necessary.
But this state is no longer “out of the control” of the masses, the weapon of an exploiting class, raised above and against the people.
It is now a state that is rooted in civil society and does not stand opposed to it.
For example, the state functionaries themselves are not a permanent caste of officials, but arc made up of individuals who are trained for this task among others and are subject to rotation.
Moreover, they are accountable and recallable by the genera] population that acts as a check upon the development of any special interests that collide with the mass of consumers and producers.
In short, the process of political and economic negotiation between society and state, between politics and economics is fluid.
Even the market socialists cannot devise a state that is as “democratic” as this.
All market socialists advocate parliamentary democracy and a sphere of “politics”, which is separate from economic management.
It is they who thereby advocate the need for a bureaucracy to mediate between state and civil society.
The structures of the planning apparatus work on the principle of elective representative democracy.
Members of workers’ management committees from places of work together with representatives of consumer associations meet at every level from local, regional to national.
The national planning commissions are responsible for devising broad parameters of aggregate investment and consumption, including the allocation of production into one of several sectors (transport, production, services for example).
These will be passed down for discussion and disaggregation at both a sectoral level and regional/local level.
Management committees of factories, farms and offices will discuss the implications of broad planning targets for them.
At regional and local level, organisations will devise targets for specific industries: including suggestions on product mix for final consumption.
This will then be fed back up the system and the implications drawn out for the targets of semi-finished products and raw materials.
The plan should be as decentralised as possible: that is, binding decisions should be taken as low down the planning scale as possible.
For example, the same amount of prepared timber could have multifarious uses for the consumer: factories receiving it have machinery capable of making numerous end products out of it: the final form of the product, representing a quantity of social labour, should be decided by the ultimate consumer as far as possible.
Clearly, however, final choices have implications for resources back up the line of planning.
Transport, storage and packaging requirements may differ according to the final choice of end use and these will have to be negotiated with the relevant suppliers before final decisions are taken.
The rationale for decentralisation is that the centre is not omniscient and that the necessary information required to make decisions about resource allocation cannot in principle be known by the centre given the nature of the information or the speed with which it must be acted upon.
Even the best of plans carried out with as much free flow of information as possible, free from bureaucratic self-interest and with the best computers in the world, remain rough approximations, provisional hypotheses.
They need constant adjustment and checking.
At the end of the day, the transitional economy is demand driven, that is.
accumulation is guided by the democratic wishes of the mass of workers themselves as consumers of their own products.
The consumer must be judge of the results of the plan.
There are many ways that the plan can be “verified and corrected”, in Trotsky’s words.
Some products will be capable of being adjusted in whole or in part with little technical difficulty in the short run by quality control feedback even on a day to day basis: CIM technology and inventory controls can be used to bring production into line with current demand, even if not in full accord with the original plan projections.
But the market (i.e. exchange of consumer goods with wages) too, will have its place.
This is for two reasons.
First, the consumer makes a range of choices only on a day to day basis (e.g.
many foods). This choice from a range of possible alternatives must continue.
But it will only be possible to plan in broad terms (based on market research and watchful of past trends) in anticipation of some consumer needs.
In essence, the worker has the right to change some demand preferences daily.
In addition, given the time lag between plan formulation and production in the case of some consumer durables, it is likely that consumer preferences may change in the interim.
Moreover, inventory controls and just-in-time techniques for certain products could not alter production in line with demand in anything but the long or medium run.
Given that the plan has predetermined aggregate demand and production schedules there could only be a shift in the structure of demand.
Prices would have to be raised or lowered above or below cost price in order to clear the market.
The results of this process can then be taken into consideration in drawing up revised planning schedules.
These market prices must be market clearing prices: they must not – as for the market socialists – lead to automatic increases in production based on the increased profitability to the enterprise raising output: if allowed, this would have considerable disruptive effects on planning schedules up the chain of resource allocation.
Rather, use-value and social labour considerations will have to be taken together in the next round of planning.
The triumph of socialism
The triumph of socialism – the lower stage of communism – is impossible to achieve in one country and will be attained as a global system or not at all.
It assumes that the satisfaction of an agreed basic level of economic and cultural needs by the world’s population has been reached by the methods outlined earlier.
Under communism, political economy gives way to the administration of things, or social engineering.
There is no need for a separate sphere of politics – democracy itself comes to an end.
Use-values are in such abundance with such minimum application of labour that humans are free to develop their personalities in other forms of creative endeavour.
It has become common on the left to ridicule the Marxist concept of abundance with regard to material goods under communism.
The old argument that human desires and wishes are in principle unlimited and, therefore, can never be fully satisfied is cited as an argument against the notion of communist abundance.
This argument wrongly assumes that socialist society will simply perpetuate capitalist patterns of consumption.
Firstly, labour productivity will be raised to such a high level as to satisfy the basic needs of the entire world population and to provide sufficient reserves to satisfy a reasonable proportion of non-essential desires for everybody.
This will allow human relations to be deepened, new forms of cultural expression to emerge, and the development of the human personality in general to be given more weight in society.
Secondly, the long term changes in social structure will generate a quite different psychology among people under communism.
The end of commodity fetishism, widespread rivalry and the current need for goods as compensation for alienation will relativise the importance attached to material products.
Finally, the conscious regulation of society that is possible under communism allows a long term balance to be struck between humankind and the rest of nature.
It will be obvious to all that for ecological reasons we will have to set some limit to the expansion of industry, at least as it is understood today.
These three elements, taken together, create a situation where material welfare, even if it is not absolutely abundant, reaches a level where economic accumulation ceases to be the motor force of society.
At last, human development will gain an essentially social, cultural and psychological direction rather than an economic one.