ECONOMIC - THEORY

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• Collection: General CIA Records
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• Original Classification: C
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: June 28, 2011
• Sequence Number: 516
• Publication Date: May 5, 1949
• Content Type: REPORT

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CENTRAIAVTELLIGENCE AGENCY
INI= AMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADCASTS
b onanie - Theory
Bimonthly periodical
Moscow
May/Jun 1948
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NO. OF PAGES 9
SUPPLEMENT TO
REPORT NO.
THIS IS UNEVALUATED INFORMATION
Production and distribution of the social product are two of the major
items in the balance of the USSR economy. Nevertheless, little has been written
about these subjects. Works defining and evaluating production have been based
prinoipcily upon studies side in separate branches of the economy, primarily in
industry and agriculture. There, however, each separate product was usually
considered as independent and not as an integral part of the social prodn',t.
The result is that the various studies of the social product suffer a lack of
coordination and, moreover, frequently contradict each other, as for instance
those estimating gross production in industry and in agriculture.
The correct definition of the social product In possible only when based
upon the Marxist theory of reproduction. The theory of reps-7oduotion alone sales
it possible to establish the objective features which oharaoterine the content
and the fora of the social product in the UBBB.
Analyzing reproduction in capitalist society, Marx gave the following
4e+iniion of the social product: "Gross reoe,ipts and gross product represent
the whole product which has been reproduced. That part of the fixed capital
which has been advanced but has re=Lined unused haling been deducted, the value
of gross rsoeiptr or gross product 13 expressed by the oooctaut and variable
capitals whioh were used, plus a surplus value subdivided into profit and
interest. Shoals we examine the product of all social capital, and not merely
that of one particular segment of capital, the gross receipts would amount to
the material elements which fora the constant and variable capitals, plus the
material elements of the. surplum product in which profit and interest are
represented (Capital, Vol TIII, 1936, p TOO). In Vol II, Marx defines "0 social product as a market product provided by the society in the course o t
year. In the same book Mai;x status: "The annual product includes booh the
part of a social product which compensates the capital, the social reproduction,
and the uart which forms the ocnmsing resources fur workers and capitalists.
The annual product, therefore, covers both the industrial and the individual
consumption (Capital Vol II, pp 339-340).
CLASSIFICA71ON
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The great number of definitions which the social product has been given results
from the variety of social relations this product involves. The most important
definitions, pertaining to the capitalist economy, implied in the guotetions
above, may be stated as follows:
1. The social product is a market product. Its volume most correspond to
the proceeds from sale realized by the producers or to the total payments made
by the purchasers.
2. The social product Is expressed by the amount of constant capital used
in the process of production, plus a newly created value representing the incomes
of the capitalist society which are subdivided into wages, profit, and interest.
3. The social product represents the material elements of the constant
and variable capital spent in the course of production, plus the material
elements of the surplus product which ind'udes profit and interest.
The definitions above are not mutually contradictory, since they originate
from the general Marxist theory of reproduction and complement each other. Social
products in socialist and capitalist society do not derive from the same principles.
The difference is made apparent by the fact that in a capitalist society trade and
distribution of social products are in a state of anarchy. They are based on the
right of private property for the Paeans of production and operate under the system
of class exploitation of workers by capitalists. In a capitalist society the product
of labor enslaves the people. Periodic crises are characteristic of capitalist
reproduction.
In a socialist society, production is based upon public ownership of means
of production. Production and consumption of the social product are determined
in advance by the society; all the essential phases of the process of reproduction
are placed under Its control, and the process is accomplished according to the
State economic plan in the society's own interest.
Since the socialist accumulation is accomplished for the sake of all the
society, there is no contradiction between the distributed parts of the social
product: the part seeimulated and the part consumed. The feature of the
planned expanded socialist reproduction in the USSR is the accelere.ted growth
of the social product, with the strengthening of the socialist order as a goal.
The cost of the product is a function of the production cost, i.e., its value
is measured by the quantity of labor which is socially necessary for the production.
"he social product runs through even; phase of social reproduction and,
in each phase, aequ!rea a particular aspect. Thus, upon release from production,
the social product appears as finished goods. Later, finished goods in the form
of commodities accomplish a circuit which is completed by distribution among
consumers. In the Sands of consumers the social product turns into basic and
turnover oomsodity stocks in industry, and into consumer goods in the field of
individual or general consumption. When the social product is oocpa.ed in the
various phases of social reproduction, the result achieved in every phase must
be the same. Consequently, correct eetimete and calculations of the volume of
the social prod.:'c', can be achieved through analyzicg production, distribution,
and final utilization. This cannot be achieved on the basis of data from any
one phase of reproduction alone.
Tha USSR economy is bassi upon a dual principle of ownership of means of
produotion: the State (All-liatkm1)property and kolkhoz cooperative property.
However, the basic socialist form coexists with the following forms of owner-
ship* (1) private properties of the kolkhoz workers, on the provision that
there is nu exploitation of another'slabor; this private property represents
e subsidiary element of the klokhoz property; aid (2) small private properties
of individual peasants and craft workers, the right to which is bared upon the
personal labor of the ovne'-c.
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(09FIN, At
The social product is the result of the work accomplished by the USSR
population in the sphere of material production. This sphere covers the
following fields: industry, construction, agriculture, freightage,
oommanioations which accommodate the sphere of production, trade and also
small industries which are not included in the categories above, firewood
supply for personal needs, hcnting, fishing, etc.
The bulk of the social product is represented by market goods. How-
ever, nonmarket goods, which we shall study first, also form a part of the
social product. Nonmarket goods are produced in the following Soviet enter-
prises:
1. In kolk zoo vliore they represent the part of production which is
distributed among kolkhoz workers as a oompensation for their labor and which
is utilized in kind for personal consumption or accumulation. Nonmarket goods
are represented also by the part of production which is used to form the
accumulation of basic and turnover stocks in kolkhozes.
24 On the subsidiary farms of kolkhoz workers, as any other workers or
employees.
3. On the farms of individual pearoants.
In the last two kinds of enterprises, aonnarket goods are those which
are to be need in kind for personal consumption or accumulation.
the part representing nonmarket goods in the social product reflects
operations which are not directly integrated in the economic turnover. This,
however, does not imply, that nonvarket goods have no part in the process of
social reproduction. The following will show that nonmarket goods belong to
the social product not as a result of some mechanical incorporation, but as
an integral component of it.
1. All kolkhot production is based upon the relations in socialist
production and in the social division of labor. A socialist enterprise, in
this case the kolthoa, reoord3 and evaluates the production as an integral
part of the social product.
2. The distribution of the product to ko lkhoz workers, is based upon
the principle of an allocation equivalent to the amount and quality of work
done. It should be kept in mind that a certain amount of the production
representing he compensation of labor is actually sold on the kolkhnz markets,
hence becoming a market commodity.
3. The accumulation of production reserves and basic stocks, both of
which are achieved at the expense of the current koikhoz production and repre-
sent nonsarket goods, are based upon the principle of social distribution of
production and fora an important phase of the etpaadwd socialist reproduntion
of the kolkhoz economy.
4. The part of nonaarket pods in the subsidiary properties, (,ogetable
gardens, small oaotle-retsing enterprises) represents a product additional to
that of the eooialint enterprises, and satisfies certain social needs; there-
fore, it is also a part of the "Lai product.
5. the nonmarket goods produced by individual peasants also represents
a part of the social pr.,odnoti inasmuch as it overs a part of their requirbments.
Production which would cover strictly personal needs and which would be
very loosely connected with the principle of social diviaiona of labor (clothes
and shoes repaired at home, repair of household articles) is not included in the
social product.
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Nonmarket social production can be computed as the sum of nonmarket products
used for personal consumption or accumulation, when they belong to the following
categoriest (a) products received as compensation proportionate to the number
of working days or produced by kolkhoz workers on their subsidiary properties;
(b) those produced on subsidiary properties by workers and employees; and (c)
those produced by individual peasants.
The nonmarket production is an element of social reproduction for which
the law of cost operates in a modified form. It has, therefore, a value,
although this value was not expressed in the form of a price. The evaluation of
nonmarket production expressed in rubles, besides its conventional significance
in statistics, also reflects the fact that nonmarket goods were actually pro-
duced to satisfy social requirements.
The portion of the social product of the USSR represented by market goods
fall Into the following categories, both as to the cost of production and the
value to the consumer: (1) the cost of means of production which labor tx sfere
to the prodmct in'the oeaase of p 'lttetion; this poet aepresemte a fund; for the
rep1 os t of the no= of jwoduotSoa,,whish had bean used; stud (2) the new
visite arsited' representlaig the emtl?Ial income and subdivided into funds of
3Mjwidtla1!conersptim, social nmproduotive consumption and accumulation.
By making possible the replacement in value and kind of the means of pro-
duotion used in the manufacture of the social product, the transferred value
represents an element of simple reproduction; however, on the expanded repro-
duction-it has mq dtrebt et?set,- 1bg mmeferred most participates is,the proe-
esap"df orpsi" t+ep tautens Mix` do the,:~fsast that wimple repzredmotionfeme
alipayl of the latga$*d reprobwtiom. Jhs expasdedi reproduction,; Le,, the.in-
asaass of iasis MA ;dsai~ge~.t>!ds!.of ,wed tis;4,tls made,posstk4e by the matic4al.
izodm Avd,his no othst a nscb?-tbm* this:ASrly. orated. vmlme^
The transferred cost is the expression of the cycle of operations Which the
means of production have passed through during the process of production. The
growth of transferred cost increases the s ioial product, but also increases
the expenses incurred by the society for the manufacture of this product. In a
certain sense, the final expression of the transferred cost represents several
times its actual value, since in the final expression are included overlapping
transferred costs acquired by the product and accounted for in every previous
.stage of sawifaoture. If, for example, we consider the production of a spinning
shop as social product, the cost of this product will appear as expenses for
yarn in the weaving shop, later in the production of a dyeing shop, the cost of
the anianing and weaving shops' productions will be repeated again, etc.
However, the stages of production where the social product may be entered
in the record are not to be determine.! arbitrarily. The choice depends on the
actual conditions of economic organization of production and on the system of
social division of labor.
In studies on evaluation of groan production, an erroneous theory has been
diffused. This theory states that the variuus methods of avaluatiag production
are equivalent and ind'pendent of the unit of estimate me'-acted. Thus, for
example, it the production estimated is that of every shop, the result would be
the grove turnover; if the reprocessing by a factory of itr own production is
subtracted from the gross turnover, the result is the gross production of the
fact,:ry, by eliminating reprocessing in a main administration the result is the
Amin administration's gross production, etc. All, theae estimates are considered
as tieing equivalent to eac4a other, although tae values of production arrived at
A. I. Rotehtein in Problems of USSR Industrial Statistics writes: "Gross
production is consistent with the unit of observation to which it is related;
therefore, the expression gross production as suo!i, bears no indication as to
the statistical characteristics of the phenomenon it expresses. The term
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groed production must be followed 'uy indications as to the method applied for
its evaluation and to the units of the estimate. 't'hus, the differentiation
of gross production is made according to the method applied: the factory
method where the indivisible unit is a se-irate enterprise, or the trust,
branch, oblast and national economy methi,," (p 134). Th- Ai:thnr bAlleves
that "the gross turnover represents one of the methods of evaluatlAgprodnetion."
Gross turnover he understands to be the sum of the productions of each auop.
In works on statistics, the prevailing idea is that gross production Is
a statistical index which is only partly derived from definitions of the
process of reproduction, the rest of the index being determined by statistical
research. Therefore, the author does not seek from reproduction itself the
conditions defining gross production.
Comrade Rotshtein and others who have dealt with the problem of gross
production usually disregard completely the fact that the product is a
market product. They overlook also that this is neither a casual nor a
secondary element among those characterizing the process of reproduction.
The process of socialist reproduction cannot be understood if one does not
keep in mind that material links among enterprises composing the Soviet
socialist economy are based upon commodity-money exchange. The turnover of
social product in the process of reproduction is accomplished under the
aspect of conmodity-money exchange. Comrade Stalin pointed out that money
will remain for a long time, until the socialist stage of development,
which in the first stage of Communism, is completed (Stalin, I., Problem a of
JjggL m, 11th edition, p 462). This means that in our socialist society the
social product is a market product.
In The Military Soonbiav of the USSR During the Patriotic War, Comrade
Voznesenskiy writes: The product exchange among the socialist enterprises
of the USSR is an exchange of market values. However, each socialist enter-
prise has a consumer which is provided in advance by the plan. The sale of
products is asscred and capitalist competition is replaced by rational
cooperation and competition (The Military Soonomy of the USSR During the
Patriotic War, p: 149). The State leonomio Plan .,f the US3R outlines the
extent and the pace of the development of the national economy and its sub-
divisions. Vozneeenskiy states: "The State Plan, being based on the authority
and the ezperiene of all the Soviet people organized as a State, has the force
of law in the economic development."
Economic lave of our economy are applied to carry out the provisions of
the plan. Toznesenskly writes: "The elementary law of production cost and
product distribution is the modified law of cost of the Soviet economy."
The coat of the social product in the USSR finds its expression in sale
prices. if the nature of the market good, the main part of the Soviet social
product, is not overlooked, the problem of evaluating the social product, is
not overlooked, the problem of evaluating toe social prouot finds a very pre.,
ores and objective solution, Allowing only the exoeptions vhi3h have been
mentioned, the social product mast be oonsidsred as a market product. Trans-
fers from one shop to another in the course of production, having no connection
w th ooi er.6141 c7~"atioue, mast not be antorod as social product. Likewise,
_t is wrong co eliminate from tb- social product any turnover which bears a
commercial character and takes place within a main administration or a branch.
A eo'.id basis for an estimation of social product cap be established only by
relying uron this principle.
Still more amazing is th? fact that Comrade Botshtein and other economists
oone'dar the nature of "market product" as unimportant, e^en when the gvalnation
of social product concerns a capitalist country.
When Comrade Potnhtein characterized the structure of who' Marx called
the "yetarly product," he wrote: "In the yearly product of the national economy
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C rIAL
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as q whole (o+v+ m), the value 'C' is not represented by the product trans-
ferred from one enterprise to another, such a repeated accounting having been
discontinued, but by all the product of the previous year, carried forward an
an 'incoming reserve' over the beginning of the given year during which it is
reprocessed, and also by the portion of the basic fund of the national economy
consumed in the production" (pp 160-167).
Rotshtein states that the "Q" in the social ,product does not include the
production transferred from one enterprise to arether. In other words,
according to Rotshtein? "C" dose not iavalie tpi?oileeot of the
Society for the current year. This has been written after Marx had stressed,
from the first page of Capital to the last, the fact that In a capitalist
society the product is specifically a market one. Tenin wrote that, according
to Mars, the main characteristics of capitalism." are?:'(l) market production as
the general form; the product acquires each a character in various social uro-
duotion organisms, but only under capitalism is such an aspect general rather
than exceptional; and (2) that the market character is not only acquired by the
product of labor, but by lab= itself,i.e., by the labor power or a man.:
(lenin, HMkFj Vol-I, .PP 30D-321)..
According to Rotshtein, "C" in the social product represents the product
of the preceding years, which has been carried forward as an "Ibooming
reserve over the beginning of a given year and reprocessed during this year,
plus the portion of basic funds of the national economy used for production.
Thus, Rotshtein eliminates from the social product the portion of the real
social product performing the cycle of eociPl reproduction, and includes It iaekead.the purl aocanktdsg.astggeg.y of "inoo0ag remainders.' This being
a purely accounting category, it bears inevitably an arbitrary and oonv+sntional
character, since It to not specifically determined by the social reproduction.
In reality, the conditions of social reproduction do not in the least imply that
the social product can be estimated for a period of one year only. The annual
cycle of production has greater industrial significance the lower the techni-
cal level and the greater the part agriculture plays in the process of social
reproduction. The modern process of reproduction can undoubtedly be subdivided
into quarters and even months. If the method suggested by Rotshtein were to
be considered seriously, the monthly evaluations of the social product vouid
not correspond to those of a quarter and the total quarterly evaluation would be
larger than that of a whole year. Therefore, according to Rotshtein, the
amount of social product has no objective value, but only a conventional one
whioh depends on the 'methodology" applied. Rotshtein must explain why raw
material bought on 31 December is to be included in the "C" of the social
product, while that bought on 1 January is not.
Rotshtein Interprets the Marxist doctrine of social reproduction as
follows; "$peaking of the cost of the yearly produot, sod comparing it to
the newly created coat,' Aarx indicates that 'the latter represents the
product of the elapsed year only. The cost of the yearly product includes, more-
over, all the elements of co,-,t. consumed in the production of the yearly pro-
duct but which were produced during the previous year and partly during the
preceding years, i.e., it includes all the means of production whose root only
reappears and which.... were neither produced nor reproduced by the labor used
during the present year.'"
in the first place, it should be pointei out that Rotshtein,. as the
ellipsis indicates, has omitted the following words, "as to their cost" after
the word "which". Therefore, Rotshtein has altered the meaning of Marx' state-
meat.
Marx wrote that only the cost of roods which have been used in production
has not been produced during the current year, while Rotshtein by deleting the
words "as to their coat" attributes to Mari the idea that, in a general way,
'eduots manufactured during the current year are not included in the "C" of the
social product. This erroneous conclusion, however, belongs to Rotshtein and
Vlot to Mari.
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of capital transfers to the pr not the cost multiplied by the number of
turnovers, i.e., generally a larger cost than that of the constant capital.
Marx, however, did not elaborate on this problem, considering that one year
created during previous years can accomplish several turnovers; this portion
and "gross receipts." Finally, Motehtein has disregarded the whole Marxist,
doctrine based upon the analysts of the "market" character of the social
product,
In the process of reproduction a part of the cost of constant capital
which were produced only during the previous year. This was stated by
Rotehtein who in quoting Marx not only has altered this statement, but
ignored a number of others where Mari calls the social product "market product'
capital's coat which has been produced in the previous years.
'Actually, Marx stated that the cost of "C" represents the turnover of
the constant capital's cost created during the previous year. Therefore,
according to Marx the cost of "C" of the social product includes the constant
The evaluation of the transferred cost in the USSR social product, to he
freed from conventionality, must rely upon the objective fact that the social
rrmu4k is a "market product." Transfers of the product from one shop to
another cannot be considered an operation equivalent to transfers from one
process of social reproduction. Disregard of the fact that the social product
oirsulate from shop to, i}qp or*tn fits diffezsat pr motion stwass.. These
transfers are not of the "market" type. The social product refle^ts the
transferred coot of market products only.
The percentage of the transferred cost in the total cost varied in the
different. branches of the national economy. In initial processinr, branches,
this percentage is lower than in reprocessing branches, since the production
cost of reprocessing includes that of the initial prcoees. This peculiarity
is to be kept in mind when comparing the social product in different branches.
The whole social product is composed of products in kind, but this does
not mean that the social product can be evaluated as the sun of the coats of
the different products.
The social product does not include the transferred cost of products which
production under a socialist system can [,e defined only if based upon an
analysis Gf the market social product.
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In order to make each an evaluation possible, a nomenclature of manu-
factured goods would have to be established. This nomenclature can be only
arbitrary since, for many goods, production stages are not clearly delimited.
The more production stages in which the social product has been accounted, the
larger w be'the,paxt~,of expenses. or the transfs.p.d east at mash enbsequemt
stage of production. Since detailing of production stages or, what amounts to
the same, enlargement of the nomenclature of products is by no means limited
and, to some extent, arbitrary, an estimate of the social product which will
follow from this method will have a purely accounting, or conventional value.
Such an estimate will have no connections with the elements of social repro-
duction, since it will reflect operations derived from the organization of
work within p'_,-ntz.
*e evaluation of the social product as a sum of costs of goods does
not satisfy the definitions derived from the Marxist doctrine. The cost of
means of production consumed, which is to be replaced, could not be precisely
established. The circulation of products from enterprise to enterprise would
be put on the same level as circulation of goods within enterprises. The
material and technical relations among branches would disappear in the turn-
over of goods within enterprises.
Accounting in kind is necessary for the principal products such as basic
fuels, electric power, ferrous and nonferrous metals, machinery, equipment,
principal agricultural products, etc., since otherwise no planning of the
economy would be possible, but a correct estimate of the whole social pro4-
mpt is not possible on the basis of each a system.
D an the social product is computed, it is essential to determine its
value )r.set periods, quarters, years, 5 years. The question arises as to
the cox sot distribution of the social product over the motion pail".
Production periods do not correspond to periods of sales. Some of the
products manufactured during a reported period might be sold during the
following period. On the other hand, during the period reported there might
be products sold, wl:ioh have been manufactured during a' pm11eya_ps4iOd. The
stocks of semifinished. goods produced by the plant and the amount of pro-
duotion remaining uafiaiehed can very. Increases in stocks of semifinished
goods and of unfinished manufacture represent an accumulation; therefore,
these stocks must b-v taken into account in the computation of the social
product. Likewim, decreases in stooks of unfinished production, of finished
goode or of semifinished goods of the fact^ry'e own production are to be
considered as sales, (daring the current period) of pioducte manufactured
during a previous period. Therefore, in order to establish correctly the
social product for a given period, it is necessary to add the cost of the
increases in stooks of finished goods, of semifinished goods produced by the
factory and of unfinished production, to the cost of the production sold. In
case of a decrease, the corresponding value is to be subtracted.
Botshtel.e believes that the evaluation of production in industry and agri-
culture must follow the method applied In the case of a separate period.
'Grose production during a given period is equal to the turnover of gross
production (A+B), after subtracting the cost of tie semifinished goods used
in production (B1) lose the cost of the semifinished goods used in the pro-
duction, but supplied from the stocks of the previous periods (B2), and adding
the unfind zroductioa remaining at the and of the reported period (N2)'
(p 159). /A4-B) - (B1 - B2)+N27,
She gross production during a given period is larger than the average
gross production of the enterprise. The reason is that the first includes the
cost of the unfinished production and the cost of the remaining semifinished
goods, at the bsginning and the end of the period, and not only the increment
of the remaining sewl.finished and unfinished goods.
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The peculiarity of this "production" is that the total of production
estimated for each quarter will be larger than the produoLioa of the year,
and the total of five annual productions will be larger than 5 years' pro-
duction. Estimates of production for separate periods are here based upon
the intraeconomto turnover, and establish only the balance between two con-
secutive periods.
The nonmarket tprnover' within an enterprise is not to be included in the
social product. The "incoming" reserves of semifinished goods and unfinished
production have already been computed in the cost of the market product of the
enterprise during the previous period. Semifinished goods and unfinished pro-
duction carried over to the next period are not be be included in the social
product since they represent for the enterprise a property which existed at
the beginning of the period and was only subject to an intrr?factory turnover._
Tf on the contrary, the cost of the remaining semifinished and finishod goods
increased, in comparison with the initial period, this represents an acctumxlation,
which is to be included in the social product.
The conclusion which results from the study of the basic problems of
determining the social product can be expressed by the following definitions:
The social product of the USSR is the total result of labor wbioh is
applied in the sphere of national production. The social product manufactured
during a reported period is represented by the sum of: (1) the cost of market
goods produced, plus the increase or less the decrease of the cost of unfinished
production or semifinished; goods manufactured by the enterprise itself; and (2)
the cost of the nonmarket product.
These are the general principles upon which statistics of the social product
must be based. If principles of estimating the social product are established
correctly, they also make it possible to evaluate the social product in the
branches. A study of the social product in connection with other indexes of
socialist reproduction is possible only if these principles are observed. All
arbitrary concepts will be than eliminated in computation of the social product.
Sanitized Copy Approved for Release 2011/06/28: CIA-RDP80-00809A000600220516-5