VALUE IN RELATION TO SELF-MANAGEMENT AND INVESTMENTS
IN THE ECONOMY OF THE WORKERS STATES
Some Remarks on the Discussion in Cuba
By. E. Germain
The Cuban magazine Nuestra Industria -- Révista Economica, organ of the Ministry of Industry, published two polemical articles in issue No. 3°- (Oetober 1963) of great interest, one written by Ernesto Che Guevara and the other by Comandante Alberto Mora, minister of Foreign Trade, This"*polemic testifies to the vitality of the Cuban Revolution in the field of Marxist theory, too. It deals with a number of questions of the utmost importance in the construction of a socialist economy: role of the law of value in the economy during the epoch of transition; autonomy of enterprises and self-management; investments through the budget or by means of self-investment, etc, Involved in these issues is the problem of the ideal model for the economy in the epoch of transition from an underdeveloped country, a problem of absorbing interest to the Bolsheviks during the 1923-28 period and which arose again, even if on.a rather low theoretical level, in Yugoslavia, Poland and even the Soviet Union in recent years,
The Law of Value in the Economy During the Epoch of Transition
The -question of the “application” of the theory of value in the planned and socialized economy of the epoch of transition has been subjected to the worst confusion, mainly because Stalin, in his last work, posed_it in a both gross and simplistic way: "Does the law of value exist [sic] and does it apply in our country?. .. Yes, it exists there and it applies there." This is an evident truism, To the extent that exchange occurs, commodity production survives, and exchange is thereby objectively governed by the law of value. ‘The latter cannot. disappear until. commodity production withers away; that is, with the production of an abundance of goods and services. Oo
But this does not answer the concrete question around which turns the fundamental discussion begun in 1924-25 between Preobrazhensky and Bukharin and which has continued to develop, with ups and downs, among Marxist economists and theoreticians up to now: to what exact degree and in what Sphere does the law of value apply in’the economy during the epoch of transition? ‘ .
Stalin himself, while muddling the problem, had to admit a fact which the Khrushchevist economists are nevertheless beginning to bring into ques~ tion; namely, that in the "socialist" economy, the law of labor=value cannot be the regulator of production, that is,.cannot determine investments.
In developed capitalist economy, the law of value determines production through the play of the rate of profit. Capital flows toward the sectors where the rate of profit is above the average and production increases there, Capital recedes from the sectors where the rate of profit is below the average, and production decreases there (at least relatively). When the.means of production are nationalized, so that there is neither a
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market for capital nor its free entry and withdrawal, nor even the formation of an average rate of profit with which the rate of profit of each particular branch can be compared, clearly there is no longer a possibility for the "law of value" to be directly the "regulator of production,"
If in an underdeveloped country which has carried out its socialist revolution the "law of value” were to regulate investments, these would flow preferentially toward the sectors where profitability is the highest in relation to prices on the world market, ..But it is precisely because these prices determine a concentration of investments in the production of raw materials that these countries are underdeveloped, To escape from underdevelopment, to industrialize the country, means to deliberately orient investments toward the sectors that are least "profitable" for the time being according to the law of value, but more profitable according to the criterion of the long-term economic and social development of the country © as a whole. When it is said that the monopoly of foreign trade is indispensable for industrializing the underdeveloped countries, this means precisely that it cannot be accomplished until these countries are able to “pull the teeth" of the law of value,
- But perhaps this qualification applies only to the “law of value on the world market"? Cannot the law of value at least alter investments on the national scale, once world prices are left aside? This is wrong again. The industrialization of an underdeveloped country cannot be carried out rapidly and harmoniously except by deliberately violating the law of value, (1)
In an underdeveloped country, and precisely because of its under~ development, agriculture tends from the beginning to be more "profitable" than industry, handicrafts and small industry more "profitable" than big industry, light industry more "profitable" than heavy industry, the private sector more "profitable" than the nationalized sector, To channel invest~ ments according to the "law of value," that is, according to the law of supply and demand of commodities produced by different branches of the economy, would imply developing monoculture for the export trade by
(1)"Planned economy in the transitional period, while founded on the law of value, violates it nevertheless at every step and establishes relations among. the different economic branches, and between industry. and agriculture in the first place, on the basis of unequal exchange, The state budget plays the role of a lever for forced accumulation and planned distribution. This role must be increased in accordance with the latest economic progress. Credit financing dominates relations between the coercive accumulation of the budget and the fluctuations of the market, insofar as thé latter enter in. . .- If the domestic Soviet merket is ‘freed! and the monopoly of foreign trade suppressed -~ exchange between the city and the countryside will become much more equal, the accumulation of the village (I refer to the capitalist accumulation of the farmer, the 'kulak!) will follow its course, and it will soon be seem that Marx's formulas likewise apply to agriculture, Once on this road, Russia would rapidly become a colony that would serve as the base for the industrial development of other countries," (Leon Trotsky: "Stalin, Theoretician." Available in French in Ecrits. 1928-1940, Tome I, p. 106.)
priority; it would imply preferential construction of small shops for the local market rather than steel plants for the national market.. The construction of comfortable lodgings for the petty-bourgeois or bureaucratic. layers (an investment corresponding to "effective demand") would have priority over the construction of low-cost homes for the people which clearly-must be subsidized, In short all the economic and social evils of underdevelopment would be reproduced despite the victory of the revolution.
In reality, the decisive meaning of this. victory, of the nationalization of the means of industrial production, of credit, of the transportation system and foreign trade (together with the monopoly of the latter), is precisely to create the conditions for _a process of industrialization that escapes from the logic of the law of value. Economic, social and political priorities, consciously and democratically chosen, take the lead over the law of value in order to lay out the successive stages of industrialization, Priority is placed not on immediate maximum returns, but on the suppression of rural unemployment, the reduction of technological backwardness, the suppression of the foreign grip on the national economy, the guarantee of. the rapid social and cultural rise of the masses of workers and. poor peas. ants, the rapid suppression of epidemics and. endemic diseases, etc., etc.
That is why the industrialization of the workers states follows a different road from that of the capitalist countries where industries are built bestinning with. the sectors that will most easily satisfy Neffective demand,"
To violate the ‘lew of value is one thing; to disregard it is something else again. The economy of a workers state can disregard the law of value only at the price of losses to the economy which could be avoided, of useless sacrifices imposed on the masses, as we shall later demonstrate.
What does this mean? . In the first place that the whole economy must be carried on within the framework of a strict calculation of the real ‘costs of production. These costs will not determine investments; these . will not automatically go toward "the least costly" projects, But to know the. costs means to know the exact amount of subsidies which the collectivity grants the sectors which it has decided to develop by priority. In the second place that it is necessary to have a stable yardstick for these calculations; without stable money, no rigorous planning. In the third place that ell sectors where economic or social priorities do not dictate any preference are’ to be actually guided by the "law of value" (for example, different crops aiming at the domestic market). In the fourth place, so long as the means of consumption remain commodities, and aside from the. commodities and services deliberately subsidized or * distributed free by the state (pharmaceutical products, school and training materials, books, etc,), the preferences of the consumers will freely operate on the market, the Law of supply and demand will affect. prices, and the plan will adapt its projected investments to these oscillations (within the limits of whet is available in finances, equipment, raw materials, ete.).
In the light of these initial remarks | we can consider the importance of the two problems raised in the Guevara-Mora-polemic: What is value? Are means of production commodities in the transitional epoch? Mora affirms that value is not essentially abstract human labor; that it is "a
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relation existing between the limited disposable resources and the growing needs of man." (p.15.) Still better: he holds that value is a “category created by man under certain conditions and for certain [i] ends." (p. 15.)
It. is clear that we are faced here with a subjective deformation of the Marxist concept of labor-value, of which Marx Specified the essence to be abstract human labor. It is not by chance that Mora refers to the "neo- Marxist’ Soviet economists(2), who have been attacked, in the USSR itself, and rightly so, as wanting to introduce surreptitiously the marginal theory of value. His conception, according to which the "law of value is the economic criterion for regulating production" in the epoch of transition (p. 17). -- while he affirms that it is not. the. only regulator -- necessarily involves the notion according to which “exchange of the means of production" occurs even when these are completely nationalized, that "sale of commodi- .. ties" occurs even when these means of production pass from one nationalized enterprise to another, and that the "contradictions" between the state. enterprises justify the assertion that a "change in ownership" occurs at the time of these exchanges (p. 19). All these affirmations are contrary to the reality and to Marxist theory. On all these questions, Che Guevara is entirely right against Mora.
Mora states that if in investments, one leaves aside the law of value, one must. pay "the price"; in doing this, you automatically limit the social resources available to satisfy other needs. This is true, and we, likewise, underline the necessity for strict calculation of production costs in all fields. But in limiting oneself to this economic truth, the social content of the epoch of transition is done away with; that iis, in abstracting from the class struggle, Mora leaves out a whole important side of the problem,
. in fact, it is impossible to operate in the economy of the epoch of -transition -- any more than in any other economy containing different ~ social classes -- with aggregates like "social revenue," "social costs," "social price of investments," without at the same time posing the question, "Who is to pay this price to whom?"
The society of the epoch of the transition from capitalism to socialism is not homogeneous. In conducting an appropriate policy of investments, of prices, wages, foreign trade, etc., the workers state can act in such a way that the social benefits of priority investments (numerical reinforcement of the working class; elevation of its standard of living, skill, culture and consciousness; reinforcement of its leading role in the state and economy; accentuation of its.participation .in political life, etc., etc.) are paid economically by other social classes: the residue of the former owning classes; imperialism; the small commercial entrepreneurs and independent peasants. In an expanding economy, this economic price, paid
(2)Among others Novochilov, Kantorovitch and Menchinov. This question likewise underlies the famous debate on the possible use of profit as the sole criterion in carrying out the plan. In reality these economists are the spokesmen of the economic bureaucracy, who demand increased rights for the directors of enterprises -- particularly the right to freely dispose of a part of the “indivisible funds" (fixed equipment).
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particularly by the merchants, artisans and independent peasants can more-_ over be accompanied by a rise in their standard of living, on condition that this rise is less than it would have been in the framework of the "free play of the law of value" (thanks, for example, to a progressive income tax).(3) a
The Law of Value and Foreign Trade
-- All the preceding evidently constitutes only a general framework for replying to the specific problems which the question of economic calculation and the orientation of investments raises in each particular workers state, Here Mora is right when he stresses (p. 18) that in a small country like Cuba, which depends strictly on foreign trade for the current functioning of its industry (spare parts and raw materials) and for the equipment of its new enterprises, the necessity for rigorous economic calculation is imposed with all the more reason than in a big, largely autarchic country like the Soviet Union. :
Exports are made according to. prices on the world market. So that these will not constitute a constant drain on the national economy (they must be met in any case in order to keep industry and industrialization going through imports), it is necessary that the production costs of exported goods should as a whole be below the prices obtained on the world market, It is necessary to fix the objective on progressively suppressing all exports at a loss, so that exports are not only a means of supplying ‘the national economy but in addition an important source of accumulation, a means. of defraying part of the expense of industrialization--a part of the costs of not observing the law of value on the national market! -- from abroad, The tendency for current prices of sugar to rise on the world market creates, moreover, a favorable framework for the success of such a policy. The progressive diversification of exports, to render the Cuban economy independent of future fluctuations of current sugar prices on the world market, must point to the selection of other export products where production costs remain below the prices obtained abroad (that is, average prices on the world market).
But Mora mixes up the need to carry out all these calculations in the > most strict way with the extension of the field of application of the law
(3)From 1924 to 1927, the Stalinist faction violently accused the Left Opposition -- Preobrazhensky in particular -- with wanting "to increase the prices of. industrial products." Preobrazhensky had simply proposed that industrial products be sold "above their value" to the village, which could have been tied in perfectly with a progressive lowering of the sales price in view of the rapid growth of the productivity of labor. But when the Stalinist faction made the turn to accelerated industrialization, it increased the prices of industrial consumers goods through extremely high indirect taxes, While in 1928, the tax on turnover was not above 17.9% of the real turnover of retail trade, it rose to 78.1% in 1932, and in 1936, the nominal turnover of this trade was 107 billion rubles, of which taxes accounted for 66 billion rubles and the real turnover only 41 billion! (L.H.Hubbard: Trade and Distribution in the Soviet Union. )
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of value in the Cuban economy. The two phenomena are not identical; they can even be directly contradictory.
The law of value determines the exchange value of commodities accord ing to the quantity of labor socially necessary to produce them. The concept of “socially necessary" labor is determined in turn by the average level of the productivity of labor in a country, and-by the concept of the. effective demand of society -- which must never be confounded with human needs or social needs from an objective point of view. In an underdeveloped country like Cuba, all production of many industrial branches can correspond to an “effective demand," that is, all labor in these branches can appear as “socially necessary," despite a very low level of productivity. The reference to the law of value, far from thereby resolving the problem of rapid improvement in the productivity of labor, of the technological transformations which these industries must undergo, can only obscure it, Because the law of value will have a tendency to keep alive archaic enterprises, as long as the state of scarcity exists, from the moment there ceases to be free movement of capital and free imports of commodities which could stimulate competition with these enterprises.
Far from being a field of application of the law of value, the dependence of Cuba on foreign trade thus implies the necessity of economic calculation of comparative international costs, which could provide a choice of economic criteria, independently of any rigid "law." The necessity to assure the country's supply of spare parts and raw materials imposes a certain volume of exports, even if these are carried out at a loss. The necessity to-maintain and to develop the existing level of industries dependent .on foreign supplies imposes searching, as quickly as possible, for profitable exports in relation to prices on the world market -- even if this means switching investments toward branches that are already profit-able in relation to the national market (branches that already sell their commodities at their exchange value). The possibility of exporting at a profit, of gaining supplementary resources from exports, of transforming. foreign trade into a constant source of socialist accumulation, will moreover permit just the liberation of the economy from the tyranny of the "law of value," that Is, will permit the development of new industries despite the fact that their production costs at the beginning will be higher than the prices of imported products, without lowering the standard of living or the rate of accumulation in the country. This is an aspect of the real dialectics of the dependence on foreign trade and the play of __. ‘the law of value that is decidedly more complex than Comrade Mora: thoughtt
[To be continued, ]