The Limits of the Mixed Economy. Paul Mattick 1969



Lenin’s Marxism did not express the practical necessities of the modern international, anti-capitalist class struggle, but was determined by conditions specific to Russia. Russia required not so much the emancipation as the creation of an industrial proletariat, and not so much the end of capital accumulation as its acceleration. The Bolsheviks overthrew Czarism and the Russian bourgeoisie in the name of Marx and by revolutionary means, only to become themselves a dictatorial force over the workers and peasants. And this in order to lead them, eventually, by way of intensified suppression and exploitation, into socialism. Lenin’s Marxian “orthodoxy” existed only in ideological form, as the false consciousness of a non-socialist practice.

When dealing with the questions of the socialist organization of the economy, Lenin’s proposals were therefore almost exclusive of a pragmatic type, and no attempt was made to relate them to Marxian theory. Of all the socialists who have written about socialism, Lenin said rightly, none had dealt concretely with the Issues involved. For him, however, “socialism was gazing at us from all the windows of modern capitalism; socialism is outlined directly, practically, by every important measure that constitutes a forward step on the basis of modern capitalism.”[1] Socialism consisted in doing what capitalism was doing for itself, but doing it better and in the interest of the working class.

This required an increase in the productivity of labor and a better organization of production. Thus, Lenin wrote, “although the Taylor system, the last word of capitalism in this respect, like all capitalist progress is a combination of the refined brutality of bourgeois exploitation and a number of the greatest scientific achievements in the field of analyzing mechanical motion during work,” nonetheless “the possibility of building socialism depends exactly upon our success in combining the Soviet power and the Soviet organization of administration with the up-to-date achievements of capitalism. We must organize in Russia the study and teaching of the Taylor system and systematically try it out and adapt it to our ends.”[2] As regards administration, “the foundation of socialism called for absolute and strict unity of will, which directs the joint labor of hundreds, thousands and tens of thousands of people. The technical, economic and historical necessity of this is obvious, and all those who have thought about socialism have always regarded it as one of the conditions of socialism. But how can strict unity of will be ensured? By thousands subordinating their wills to the will of one.”[3] It is for this reason “that all direct interference by the trade unions in the management of factories must be regarded as positively harmful and impossible.”[4] In brief, things should be run as they always have been run in capitalism; only now for “society as a whole,” no longer for the accumulation of private capital. For Lenin the social reconstruction is no longer concerned with social but only with technical issues, such as the revival of industry, the increase of agricultural production, sound financial policies, electrification, and so forth.

Apart from a few general remarks, Marx did not concern himself with the organization of a socialist society. His economic writings were not intended to enrich the “science of economics,” but to lay bare the actual social relations that found their fetishistic expression in political economy. Although political economy “is for the proletariat first and foremost an enemy country,”[5] it has to be entered in order to show that “economic relations” are mere disguises for capitalist exploitation relations, and to reveal the class contradictions in the economic contradictions that beset bourgeois practice and capitalist development. For Marx, the “economic laws” propounded by political economy are irrelevant to socialism which, in fact, will bring them to an end. Instead, there will be conscious regulation of production and distribution by the associated producers themselves, and the instrumentalities to this end will be of a technical-organizational nature.

When planning became a possibility for the Bolshevik state, it nevertheless found its theoretical starting-point in Marx, that is, in his idea of social production as a reproduction process. The planners thought Marx’s schemata of simple and enlarged reproduction, which Marx had developed from the physiocrat Francois Quesnay’s Tableau économique, and which he presents in the second volume of Capital, [6] applicable to all social formations and particularly useful in solving the problems of a socialist economy. It was on the basis of these schemata that Soviet economists constructed macro-economic models depicting the feasibility of a balanced planned economy[7].

Marx’s reproduction schemes serve to show the relationships in the production and exchange process which are required to consummate the process of capital production with respect to both the value and use-value of commodity production. “So long as we looked upon production of value and the value of products from the point of view of individual capital,” he wrote, “it was immaterial for the analysis which was the natural form of the product in commodities. So far as reproduction was concerned, it was sufficient to assume that that portion of the products in commodities, which represented capital in the sphere of circulation, found an opportunity to reconvert itself into its elements of production and thus into its form of productive capital. It likewise sufficed to assume that both the laborer and the capitalist found in the market those commodities for which they spend their wages and surplus value. This merely formal manner of representation does not suffice in the study of the total social capital and of the value of its products. The reconversion of one portion of the value of the product into capital, the passing of another portion into the individual consumption of the capitalist and working classes, form a movement within the value of the product itself which is created by the total capital; and this movement is not only a reproduction of value, but also of material, and is, therefore, as much conditioned on the relative proportions of the elements of value of the total social product as on its use-value, its material substance.”[8] There is no need here to display Marx’s diagrams; it suffices to recall that he divided total social production into two sections one producing the means of production and the other the means of consumption. Each department is composed of constant and variable capital and produces surplus-value. The transactions between the two departments are such as to reproduce the total capital, leaving the surplus-value for capitalist consumption. “Simple reproduction,” Marx wrote, “is essentially directed toward consumption as an end,” and “insofar as simple reproduction is a part ... of annual production on an enlarged scale, consumption remains as a motive accompanying the accumulation of wealth as an end and distinguished from it.”[9] The difference between simple and enlarged reproduction consists in the fact that part of the total surplus-value is not consumed by the capitalists but is turned into additional capital. The shift from simple to enlarged reproduction involves “not the quantity, but the destination of the given elements of simple reproduction ... and this change is the material basis of a subsequent reproduction on an enlarged scale.”[10]

Whatever the methodological merits of Marx’s reproduction schemes, they cannot be construed as a system of general equilibrium akin to bourgeois equilibrium theory. The process of reproduction depicted by them, Marx pointed out, “may take place when society controls the material requirements of its own production. But in capitalist society it is an element of anarchy.”[11] The control of the material requirements of society’s own reproduction presupposes the abolition of the value aspect of capitalist production; for it is the contradictory movement between value and use-value production which accounts for capitalism’s anarchy, i.e., its inability to organize production and reproduction rationally. “The fact that the production of commodities is the general form of capitalist production,” Marx wrote, “implies the role which money is playing not only as a medium of circulation but also as money capital, and creates conditions peculiar for the normal transactions of exchange under this mode of production, and therefore peculiar for the normal course of reproduction, whether it be on a simple, or on an enlarged scale. These conditions become so many causes of abnormal movements, implying the possibility of crisis, since a balance is an accident under the crude conditions of this production.”[12]

The “equilibrium” of the reproduction scheme, in which both value and material production are in harmony, illustrates the essentials of a frictionless capitalist reproduction process. This “equilibrium” is possible in theory but not in practice; like the equality between supply and demand, or value and price, it will exist only by accident. Russian economists, in basing their models of a socialist economy on Marx’s reproduction schemes, conceived these models in strictly material, not value, terms. The relationships of production and distribution, it was said, “must be studied in their material representation, that is, as the sum of concrete products in their concrete movement from producer to consumer.

. . . Since the balance studies the relationships of production and circulation in material terms, it must consider the social economy as a kind of natural economy measuring production as the sum of materials and things produced in the course of the year and exploring the distribution of products in their material expression.”[13] Even if money “must play the role of yardstick, a means of reducing the assorted fruits of social production to a common denominator ... the balance studies the relationships in the production and consumption of products as a material process.”[14]

The actual organization of the Russian economy was, indeed, a planning in material terms to realize economic goals set by the government. These goals emphasized economic growth and the development of industry, or, in bourgeois parlance, the accumulation of capital. With wages and prices administered, it can be approximately but directly determined what portion of the total social product shall fall to the producers as consumption goods, how these goods shall be distributed among the consumers, and what portion of the total shall serve to enlarge the productive apparatus. Wages and prices are here media for bringing forth and distributing a social product in accordance with a central plan conceived in physical terms, as material production. The authorities determine production and distribution in those proportions which they deem necessary or desirable.

According to Marx, the “measure of work is time. Only because products require labor can these products be measured by labor time.”[15] In capitalism, however, “price is not the equivalent of value and the value-determining element – labor-time – cannot be the element which expresses prices.”[16] Because in capitalism “labor-time as a measure of value exists only ideally, it cannot serve as the element for the comparison of prices.”[17] Yet it has often been said that the indirect regulation of the whole of the capitalist system by the law of value, as assumed in Marx’s value scheme of capital development, can be the basis of the direct regulation of production in the socialist system. Supposedly, this will be achieved by a kind of “re-transformation” of prices into values; though these values are no longer indirectly established through market competition but are instead set by socialist planning agencies. The possibility of such a “re-transformation” is, for instance, implicit in Sweezy’s claim that “Marx’s value theory has the great merit, unlike some other value theories, of close correspondence to the actual accounting categories of capitalistic business enterprises.”[18] If this is so, then it is of course possible to assume that it is only the imperfect price-form of value, but not value itself, which will disappear in a socialist society. Joan Robinson, for instance, felt it apt to say that while little, if anything, can be done with the law of value in capitalism, Marx may be right in believing that “it would come into its own”[19] in socialism.

Although Marx held no such belief, some Russian economists did indeed express the opinion that the law of value applies to both capitalism and socialism. Value is here equated with cost-of-production; and, it is said, without a knowledge of production costs social planning would be impossible. Other economists, most prominently N. I. Bukharin and E. A. Preobrazhensky, maintained that the law of value was operative only in a market-determined commodity-producing society and not under conditions of socialism, where all the bourgeois categories like money, prices, wages, interest, rent and profits disappear to make room for a direct accounting of economic processes in material terms. According to Preobrazhensky, those who hold that the law of value has general validity merely confuse the regulatory economic processes under commodity production with the regulatory role of labor-expenditure in any system of social production. To acknowledge the law of value as the unique regulator of the economic system of the U.S.S.R. was to deny her socialist character. “We need only try to imagine the law of value as regulator of socialist production,” he wrote, “or the planning principle as regulator of commodity production, to see that we cannot separate the regulatory mechanism from the whole structure of the given society.”[20]

The assertion of the validity of the law of value in socialism led to much discussion, which was authoritatively terminated by Stalin himself. Wherever commodities and commodity production exist, Stalin wrote, “there the law of value must also exist. In our country, the sphere of operation of the law of value extends, first of all, to commodity circulation, to the exchange of commodities through purchase and sale, the exchange, chiefly, of articles of personal consumption. Here in this sphere, the law of value preserves, within certain limits, of course, the function of the regulator. But the operation of the law of value is not confined to the sphere of circulation. It also extends to production. True, the law of value has no regulative function in our socialist production, but it nevertheless influences production. In this connection, such things as cost accounting and profitableness, production costs, prices, etc., are of actual importance in our enterprises. Consequently, our enterprises cannot, and must not, function without taking the law of value into account.”[21]

What does it actually mean to take the law of value into account? According to Stalin it means, first of all, “to train business executives to count production magnitudes ... to improve methods of production, to lower production costs, to practice cost accounting, and to make enterprise pay.”[22] Although in Marx’s definition the labor theory of value refers exclusively to capitalist production and the concept of surplus-value to labor exploitation, in Stalin’s definition value theory need not be in contradiction with the requirements of socialism. All that is necessary is to discard “certain concepts taken from Marx’s Capital, such as ‘necessary labor’ and ‘surplus labor,’ ‘necessary’ and ‘surplus’ product, ‘necessary’ and ‘surplus’ labor time.”[23] Stalin found it rather strange “to use these concepts now, when the working class is not only not bereft of power and means of production, but, on the contrary, is in possession of power and controls the means of production. Talk of labor power being a commodity and of ‘hiring’ of workers sounds rather absurd now, as though the working class, which possesses means of production itself, sells its labor power to itself. It is just as strange to speak of ‘necessary’ and ‘surplus’ labor; as though, under our conditions, the labor contributed by the workers to society for the extension of production, the promotion of education and public health, the organization of defense, etc., is not just as necessary to the working class, now in power, as the labor expended to supply the general needs of the workers and their families.”[24]

In its essentials, Stalin’s position on the problem of value in socialism still prevails in post-Stalinist Russia. There have been discussions since 1956 as to whether or not the law of value has only partial or general validity, that is, whether it applies only to the consumer market, or to the totality of goods circulating in the whole of the economy. Voices have been heard which deny the commodity character of production in the U.S.S.R., and, in consequence, wish to apply the law of value in the sense of Marx’s “economics of time” as the objective criterion for measuring, economizing, and allocating the social product. Contrariwise, it is held that just because the Russian economy is considered to be a “planned form of commodity production” it should be “based on the law value and commodity-monetary relations.”[25] This general bewilderment is further confounded by economists who want to avail themselves of the marginalism of bourgeois theory and wish to deal with factors of production other than labor, as well as with the application of linear programming and computer techniques in economic planning. Bourgeois economists, for their part, celebrate these events as the abandonment of Marx’s labor theory of value by the “Marxists” themselves; as if the theory of value had actually been the theory of Russian economic practice, or could be the economic theory of socialism.

The confusion which surrounds the labor theory of value does not reflect the theoreticians’ muddled thinking alone; it results from their attempt to describe a non-socialist system of production and distribution as a socialist society. They do so because, by their definition, socialism is state-control over the means of production and centrally-planned determination of the national economy. It seems to them then that planning which fits the social needs and economic necessities, is planning in accordance with the law of value. Under capitalism, it is said, “the law of value acts as an elemental law of the market, inevitably linked with the destruction of productive forces, with crisis, with anarchy of production. Under socialism it acts as a law of the planned administration of the national economy, under the conditions of the development of an economy free from crises.”[26]

To say that the law of value underlies economic processes is to say that there is some definite regulation of social production de spite the lack of concern for, and the practical impossibility of, such regulation under private property relations. The “regulation” is brought about by way of market competition and crises. But if there is no private ownership of capital, no competition, no private accumulation; if production is centrally planned; if prices and wages are regulated, and the expansion of production consciously determined – then there cannot arise those results of competition and crises which manifest the operation of the law of value. To apply the law of value “consciously” in socialism could only mean to incorporate the effects of competition and crisis into the p fling mechanism – in other words, to re-institute the market and private property, which is obviously nonsense.

It is perhaps for this reason that Stalin spoke of a law of value “strictly limited and placed within definite bounds,” i.e., one which fully operates only in the sphere of circulation confined to personal consumption, and which “influences” the sphere of production only because the latter cannot disregard the principle of profitability, even though this principle is modified by conscious decisions on the part of the planning authorities. But even though the “modified” law of value presumably affects production and regulates distribution, Stalin saw no social division between value and surplus-value, and none between necessary and surplus labor, because by definition the whole social product belongs now to all of society.

In the U.S.S.R. the planned total output is expressed either in physical terms or in terms of money-values. Although prices, wages, and profits are still economic categories, they no longer play an independently active part: they are merely expressions for aggregate physical magnitudes that are directly determined by the decision-makers. Resource allocation here has nothing to do with price relations; rather, prices, wages, and profits are used to assure the allocation of resources required by the plan. As this is, practically, a difficult task, the plan comprises only rough approximations, subject to continuous change. Thus far, all economic planning has been, so to speak, makeshift planning, and has been attempted under conditions not very susceptible to over-all control of the economy. Planning has been used in industrially under developed countries whose foremost need is the rapid accumulation of capital. Forced industrialization by political means proceeded from government direction to direct government control and, in the process, created the conditions for a planned economic development. The plans reflected the general backwardness; they could not be any better than the conditions they tried to alter.

The total social income in the U.S.S.R. is supposed to equal the total value of the total material product, which equates with the sum total of the final selling prices of material goods – aside from the amortization of fixed capital. Social demand is controlled through the control of personal incomes, as well as through control of the allocation of productive resources. Prices are supposedly based on the average costs of production of all enterprises producing identical commodities. Retail prices for all goods and services are fixed to match the level of personal incomes. These prices move in relation to supply and demand for consumption goods that enter the market. Money-wages are manipulated by pricing policies. Profits fall to the government mainly through a turnover tax which is derived from the difference between retail prices and actual costs of production.

With wages and prices administered, it can be approximately but directly established what portion of total social production shall fall to the workers and in what particular commodity form. Consumption goods may be priced in such a way that the workers’ choice of commodities is practically limited to what the government thinks their choice should be, and scarce commodities can be made even scarcer by a pricing policy which reserves them for the privileged layers of society. The necessity of keeping the laboring population alive and working prevails in all forms of continuous social production; in capitalism, it is expressed in the value of labor-power, which determines and limits the surplus-value or surplus- labor time extractable out of a given laboring population. But if necessary- and surplus-labor is at once the common property of the socialized producers, it is quite pointless to speak of a law of value as the regulator of social distribution and of the effect of this regulation upon the process of production. If the total social product is the common property of the whole of society, its compartmental division into consumption, reproduction, and expansion could just as well be expressed in direct labor-time quantities, which would refer no longer to value relations but to strictly technical arrangements enabling the social production and reproduction process to function properly.

There is only one compelling reason for retaining the law of value in its Russian definition, and that is to give the conditions of inequality, such as prevail in the state-capitalist economy, the semblance of an “economic law.” Because “Marxism” is here the State-enforced ruling ideology, it is not only necessary to explain that production implies reproduction, and that progress means enlarged reproduction, for which purpose present consumption must be restricted to assure a better future consumption; it is also necessary to explain that the wage differentiations between the workers, and the income differentiations between the workers and the administrative layers of society are not arbitrarily instituted by the whims of a new ruling class, but are determined by an “economic law” which gives each his due in accordance with his particular contribution to society. As there are nominally none but productive people in Russia, their different living standards must be explained by differences in their productivity, and by the economic necessity to take these differences into account – at this historical stage of development, at any rate.

Rewarding labor in accordance with its productivity means that skilled labor receives more than unskilled labor. Because of training expenses, the reproduction costs for skilled labor are higher than those for unskilled labor. Income differentiations may thus be explained by the different productivity of different kinds of labor, and by the varying intensity in the performance of a particular type of labor. Because actual work is unequal, equal in comes would imply the “exploitation” of more-productive by less-productive labor. In the Bolshevik as well as in the bourgeois mind, this would destroy the incentive to prepare for and engage in more skilled and therefore more productive activities, to the detriment of the whole of society. There is then a social need for income differentiations as the inescapable requirement of social development.

We will here recall that in Marx’s value theory all labor is reduced to abstract simple labor. The concept of value refers to abstract social aggregates of necessary labor time and surplus labor time. This allows for the consideration of skilled labor as multi plied simple labor, just as it allows for the identity of value and price. Both wages and prices deviate from labor-time values. To say that the capitalist law of value applies to the planned economy could only mean that here, too, it refers to the social aggregates of abstract necessary and surplus labor, which are now, however, no longer unknown quantities but data given through a social inventory in terms of labor-time units, or expressed in money representing these units. This would not reveal the concrete contribution of individuals, or categories of individuals, to the total mass of products incorporating the total quantity of labor-time expended on their production. It would, however, reveal, through the changing relationship between the social aggregates of necessary labor-time and surplus-labor time, whether the exploitation of labor-power is increasing or decreasing. This increase or decrease of exploitation would be an observable phenomenon in the state-controlled economy, though it is not in the competitive private-enterprise economy. The latter discovers it only through market movements from prosperity to depression, but the former could – in theory – rearrange social aggregates as it sees fit by political decisions, to either speed up or slow down the exploitation process.

According to Marx, social labor-time in general determines value. The value of commodities refers not to the specific quantity of labor contained in them but to that relative portion of the general social labor-time which they represent. It follows from this that it is not possible to separate the economy into a value-determined sphere and another sphere not so determined. Either the whole of the economy is regulated by the law of value or it is not. It is not possible to say with Stalin, for instance, that the law of value regulates the sphere of consumption but not the sphere of production; either it regulates the whole of the economy or it regulates none of it.

The abstract value of labor-power does not explain actual wages and their differentiations. Marx showed no interest in the actual supply and demand determination of one or another wage. The wage differentials encountered in reality relate roughly to different reproduction costs of different types of labor. But these differences disappear in the equation of skilled as multiplied simple labor used to analyze the social aggregates of value and surplus-value and their changing relationship in the course of capital accumulation. The abstract value concept is quite useless in the determination of individual wages and to deal with the latter as actual entities is to accept them simply as historically-given facts.

In state-capitalism the law of value could have validity only with respect to the social aggregates of constant capital, variable capital, and the surplus-value brought forth in production, and their changing relationships in the course of capital formation. Under conditions of competitive private capital accumulation, the physical expansion of capital can only proceed as the accumulation of exchange-value. In state-capitalism where all means of production are centralized, this need not be so. Such a society can choose between measuring its increasing wealth in the abstract form of added capital values, and organizing its social production and distribution in real, physical terms, without regard to value relations.

Marx did not foresee the emergence of state-capitalist systems such as are presently recognized as actualizations of “Marxian socialism.” For him, socialism was, first of all, the end of value production and thus also the end of the capitalist relations of production. “Within a co-operative society based on common ownership of the means of production,” Marx wrote, “the producers do not exchange their products. Neither does the labor employed on the products appear here as the value of these products, as one of their material qualities – since now individual labors are directly component parts of the total labor, and not indirectly, as in capitalist society.”[27] In Marx’s view, no real social change – as regards the conditions of the working class – was possible unless it involved a change in the social relations of production. “The distribution of the means of consumption at any period,” he wrote, “is merely the consequence of the distribution of the conditions of production themselves ... Capitalist methods of production for example depend on the condition that the material conditions of production are distributed among non-workers under the form of capital and land ownership, while the masses are only owners of the personal conditions of production, i.e., labor-power. If the elements of production are so distributed, then the contemporary [capitalism] distribution of the means of consumption results automatically. But if the material conditions of production are the collective property of the workers themselves, then, naturally, a different distribution of the means of production from the present one will result.”[28]

According to Marx, then, the mode of distribution depends or the mode of production. In a society in which the workers have no control over the means of production but sell their labor-power to others who have this control, the system of distribution will be as antagonistic as are the relations in the production process between the producers and the appropriators of surplus-labor. The state-capitalist system neither is capitalistic in the traditional sense nor represents the socialism of Marx’s vision. From the point of view of private capitalism, it may be described as state-socialism simply because it centralizes capital in the hands of the state; but from the point of view of working-class socialism, it must be described as state-capitalism, since it retains the capitalistic division of the conditions of production between workers and non-workers. Both terms can be used interchangeably since they denote identical conditions.

For Marx, the law of value “regulates” market capitalism but no other form of social production. To speak of a law of value as the “regulator” of the economy in the absence of specifically capitalistic market relations can only mean that the terms “value” and “surplus-value” are retained though they express no more than the relation between labor and surplus-labor. In capitalism, labor-power is a commodity like any other, and because all commodities are socially interrelated only by means of the exchange process they must be realized as exchange-value before they can become articles of utility. In the centralized state-economy, however, capital and labor can be allocated apart from market relations and value considerations by a direct regard for social utility as under stood by the controlling authorities. If this is partly done and partly not done, it is because the state-capitalist system refuses to acknowledge itself for what it is, namely, a system of exploitation based on the direct control of a ruling minority over the ruled majority.

What distinguishes capitalist exploitation from every previous form of exploitation is the extraction of surplus-labor in the absence of direct coercion. Deprived of the means of production, the workers have no choice but to sell their labor-power to the capitalists at the prevailing market prices. Social production is carried of by way of buying and selling. Thus the social life process appears dependent on market relations. Short of changing the whole of society, this is, of course, true. Within the frame of this, society, the workers will accept the conditions of inequality as determined by market relations, and they will not necessarily recognize the fact of their exploitation. They will attempt to utilize the market relations for their own ends, in the competition for lucrative jobs and in the struggle for higher wages. It is the market, and – within definite limits – the competitive utilization of the market, which assures a more subtle extraction of surplus-labor than direct physical coercion. The more subtle way is of course also the more advanced, even for the workers; since wage-labor is generally preferable to forced labor. Neither willing nor able to end the system of labor exploitation, the state-capitalist system too prefers wage-labor to forced labor and for that reason adopts the mechanism of the market economy wherever possible.

It is the semblance of capitalistic market relations within the state-controlled economy which suggests the continued validity of the law of value under the now modified conditions of capital production. Actually, however, the law of value cannot be “operative” because the market relations are artificial, not real. The planning authorities merely orient their plans on the model of the capitalist market economy, for they cannot organize production and distribution in accordance with socialist principles, and they no longer dare to deal with the realities of exploitation and capital accumulation in open forms such as characterized the first period of the Russian state-socialist regime. During that period – later to be denigrated as the externally-enforced period of war-communism – the whole of commodity production with its categories of value, price, profit and wages was to be replaced by a centralized natural economy administered in terms of physical necessities and possibilities with respect to both production and distribution.

Under the conditions prevailing in underdeveloped capitalist nations, centralized administration must make the expansion of production, and therewith the formation of capital, its first concern. If this is to be accompanied by the destruction of market relations, both production and consumption must be determined by governmental decisions with or without the consent of the population thereby affected. The productive resources are allocated by decree and dictatorially enforced. Wage-labor becomes force labor and, for better or worse, the conditions of production and distribution are determined by the deliberations of individuals social power positions. And thus, while the change from the market to the planned-economy is undoubtedly an advance, the methods by which this advance is attained are regressive. But as Leon Trotsky wrote, “we can have no way to socialism except by the authoritative regulation of the economic forces and resources of the country, and by the centralized distribution of labor-power in harmony with the general State plan. The Labor State considers itself empowered to send every worker to the place where his work is necessary. And not one serious socialist will begin to deny to the Labor State the right to lay its hands upon the worker who refuses to execute his labor duty.”[29]

Moreover, according to Trotsky, “the principle of compulsory labor has just so radically and permanently replaced the principle of free hiring as the socialization of the means of production has replaced capitalist property.”[30] We will “retain, and for a long time retain, the system of wages. In the present difficult period the system for wages is for us, first and foremost, not a method for guaranteeing the personal existence of any separate worker, but a method of estimating what that individual worker brings with his labor to the Labor Republic. Consequently, wages, in the form of money and goods, must be brought into the closest possible touch with the productivity of individual labor. Those workers who do more for the general interest than others receive the right to a greater quantity of the social product than the lazy, the careless, and the disorganizers ... All these measures must assist the development of rivalry in the sphere of production.”[31]

But what is an objective measure of the productivity of individual labor? Trotsky neither raised nor answered the question. In practice, differences in reward for different types of labor were analogous to the wage differentials in capitalism, even though wage-rates were set by government and not by the labor market. However, complete regimentation of labor proved to be an impossibility and was soon replaced by a combination of market relations and government planning, indirect and direct methods of control, and money an measurements, all of which freed the social production and distribution process from regulation by the law of value without, however, leading to a value-free socialist economy.

With wages administered and strikes excluded, with prices set to stimulate the consumption of some commodities and discourage that of others, with the rate and trend of accumulation consciously determined, it is merely a question of convenience whether to command labor into certain occupations or to induce workers to choose these jobs of their own free will by differential valuation of various types of work. In the latter case there is a limited freedom of choice of occupation. To be sure, as in the capitalism of old, the choice of occupation is more the exception than the rule. Obviously, it does not include such large-scale transfers from agricultural to industrial pursuits as were brought about by the enforced collectivization and modernization of agriculture. Various administrative hurdles placed in the way of individually-desired changes from one job to another discourage such changes – not to speak of wage-rates so low as directly to forbid both mobility and individual initiative. However, since the industrializing society is an expanding economy, it does offer opportunities to acquire skills, prepare for new professions, reach for high positions, and to compete for better jobs. The social climate of competition deliberately fostered by a hierarchical income-structure is indistinguishable from that in capitalism.

To sum up: The state-socialist society neither is “regulated” by the law of value nor orders its economic relationships on the basis of the law of value. But even if it “leaned on the law of value,” as Stalin asserted, in order to assure rational cost and profit calculations and a method of social book-keeping for the proper allocation of resources, this still would not justify its designation as socialism. In any case, the law of value cannot he made operative in either the capitalist or the socialist society. In capitalism it asserts itself like a “natural law” because private exchange relations exclude the conscious social organization of production; and in socialism, where this proportioning of the social labor is done consciously and directly, the law of value no longer determines social conditions.

As value analysis of capital production considers the general need for rationality in the social production process in the specific form in which this general need expresses itself in capitalism. Even so, the value analysis does not deal with the concrete capitalist exchange relations, but with the disregarded and actually unknowable realities underlying these exchange relations. Because “in the analysis of economic forms,” Marx wrote, “neither microscopes nor chemical reagents are of use, the force of abstraction must replace both.”[32] Labor-time value is the “scientific expression” of the economic relations of capitalism. It is not an empirical description of these relations, but it is an abstraction from them; and it is only by way of abstract thought that the concrete situation becomes comprehensible.

This does not mean, however, that labor-time value could actually become the organizational principle of a non-capitalist, or socialist, system of production and distribution. In criticizing the Ricardian socialists[33] and, notably, Proudhon for advocating an exchange system of private producers based on labor-time value, Marx pointed out that products which are produced as commodities can only be exchanged as such, that is, in terms of prices; they cannot be exchanged according to labor-time values. Of John Gray’s proposed theory of labor-time as the direct measure of money, Marx wrote that it is based on the illusion “that commodities could be related directly to each other as products of social labor. But they can relate to each other only in their capacity as commodities. Commodities are the direct products of isolated independent private labors, which have to be realized as universal labor through their alienation in the process of private exchange. That is to say, labor based on the production of commodities becomes social labor only through universal alienation of individual labor. But by assuming that the labor-time contained in commodities is directly social labor-time, Gray assumes it to be the common labor-time or labor-time of directly associated individuals. Under such conditions a specific commodity like gold or silver could not confront other commodities as the incarnation of universal labor, and exchange value would not be turned into price; but, on the other hand, use-value would not become exchange-value, products would not become commodities and thus the very foundation of the capitalistic system of production would be removed.”[34]

To put this in a slightly different way: If the labor-time contained in the social product is the common labor-time of directly associated producers, these products do not take on the character of commodities. They do not need, then, to be transformed into products of universal social labor (which they are already), nor do they require a definite money-commodity to express their social nature in the form of prices. If labor-time, Marx asked, “is the intrinsic measure of value, why should there be another external measure side by side with it?”[35] The fact that there is the measure of price indicates that social products (as commodities) are not directly part of the common social labor but can only become part of it via the exchange and money relations in a market economy of disassociated producers. The theory of value, as the theory of bourgeois society, Marx told Proudhon, cannot become “the revolutionary theory of the future.”[36]

In a communist society, Marx wrote, “money-capital would be entirely eliminated, and with it the disguises which it carries into the (economic) transactions. The question is then simply reduced to the problem that society must calculate beforehand how much labor, means of production, and means of subsistence it can utilize without injury for such lines as, for instance, the building of railways, which do not furnish any means of production or subsistence, or any useful thing, for a long time, a year or more, while they require labor, and means of production and subsistence out’ of annual production.”[37] Although the “economics of time” and the planned distribution of labor-time over the different spheres and branches of production are still an economic necessity, this has nothing to do with labor-time value, that is, with the exchange value of labor-power or its products.

As regards individual labor, it is impossible to measure specific contributions to the total social product and divide the latter accordingly in both socialism and capitalism. The labor of different individuals in identical occupations, and the work between diverse occupations, differs quantitatively as well as qualitatively. Because there exists no actual common denominator for different types of labor, Marx saw their only possible common denominator in labor-time. With respect to specific kinds of labor, quantitatively different accomplishments during a given time (as in piece rate systems) do, of course, reveal productivity variations of individuals. But such differences are rather small and present no real problem either with regard to wage differences, or with respect to entrepreneurial calculations, which concern themselves with the average productivity of the working force in terms of the total wage bill.

Since it takes time to acquire a skill, the production costs of skilled and simple labor differ. But as costs of learning are ascertainable, it is not difficult to account for them in actual wage-rates. In fact, differences between wages for simple and skilled labor are not wide enough to throw doubt upon labor-time as the common denominator of the value of labor-power. Great income differences exist only within and between occupations in which it is practically impossible to measure differences of productivity or special contributions to the general social wealth. Objections raised to labor-time as the common value-denominator for all types of labor are, then, rarely related to wage differences within the labor force, but to types of work and services performed by non-working-class people, most often to payments received for activities that have nothing at all to do with the social production process.

The productivity of different types of labor is inseparably connected with the productivity of total social labor and changes in the social production process. In capitalism, of course, this problem is approached not from a social but from an individual point of view because of the commodity character of labor-power and the capitalistic division of labor, which includes the division between mental and manual labor or, rather (since mental and manual labor cannot really be divorced), between office and factory, science and industry. Specialization in one-sided activities has been found profitable; but whether it is socially more productive than interchangeability of occupations remains to be tested. Meanwhile, the differing evaluations of mental and manual labor, skilled and simple work, in terms of prices established by supply and demand relations on the labor market, are taken quite seriously; they divide the laboring population into different income groups, blurring the dominance of social relations by capital-labor relations.

According to Marx, the individual’s labor is a necessary component of the total social labor because labor has become socialized labor, indirectly in capitalism, and directly in socialism. In socialism, kinds of labor will be differentiated only with respect to their utility, and this utility will not find expression in an attached exchange-value. Although bourgeois society propounds the principle of equality in exchange, Marx views this as an unrealizable principle in capitalism as well as in socialism. Because the classical value concept had given rise to the idea of an exchange of equal labor-time quantities, which assured all producers the whole proceeds of their labor, Marx pointed out that the existence of a non-working population (children, aged, sick, etc.), the necessity of unproductive activities, and the requirements of social development in general prohibited the appropriation by individuals of the whole proceeds of their labor. The proceeds of labor, Marx wrote, could only be part of its product, “even if what is taken away from the producer as a private individual is given back to him directly or indirectly in his capacity as member of the co-operative commonwealth.”[38]

After these necessary deductions, however, the individual could get back “what he has given society in his individual amount of labor. For example, the social working-day consists of the sum of the individuals’ hours of work. The individual working-time of the individual producer is that part of the social working-day contributed by him, his part thereof. He receives from society a voucher that he has contributed such and such a quantity of work (after deductions from his work for the common fund) and draws through his voucher on the social storehouse as much of the means of consumption as the same quantity of work costs. The same amount of work which he has given to society in one form, he receives back in another.”[39] In this way equal quantities of labor-time would “exchange” for equal quantities of labor-time, and “the right of the producers would be proportional to the amount of labor they contribute; the equality consists in the fact that everything is measured by an equal measure, labor.”[40] But this “equal right” to the proceeds of labor would actually be an unequal right for unequal work, due to unequal personal situations. “It is therefore a right of inequality in its content, as in general is every right.”[41]

If labor-time is adopted as a measure to determine the distribution of the returnable part of the social product destined for consumption, there would arise an equality of remuneration, for, in fact “it is in the nature of large-scale industry that working hours should be equal for all.”[42] Yet personal situations, such as the marital status of a worker or the number of his dependents, would turn this equal share of consumption goods measured by his labor-time contribution to the social product into an inequality of living standards. To achieve real equality in this respect the right to the proceeds of labor would have to be unequal.

Moreover, Marx pointed out, some excel physically or intellectually and contribute in the same time more labor than others. Yet, “labor, to serve as a measure, must be defined by its duration or intensity, otherwise it ceases to be a standard of measure.”[43] If labor is measured by its intensity it is no longer measured by labor-time but by the diverse productivity of different persons in different occupations. In that case, however, the arising inequalities would not be the result of an equal measure, but the result of measuring unequal individual contributions to the total social labor product. Not labor-time, but the specific product of labor, would be measured. This is probably what Marx meant in saying that the right to one’s particular labor “is still based on the same principle of bourgeois right, although principle and practice are no longer at daggers drawn, while the exchange of equivalents in commodity exchange only exists for the average and not for the individual case.”[44] If the individual’s labor is still seen as embodied in his individual product and not as a component of the whole of social labor, it is still seen from a bourgeois, not a socialist, point of view. It is, then, this distinction between duration and intensity of labor which serves as an apologia for inequalities in the nominally socialist nations.

Because of the vagueness of his formulation, Marx’s position on this issue has been subjected to different interpretations. It can be accepted as meaning that, whether labor serves as a standard of measurement in its duration or in its intensity, in either case there will be inequality in living conditions for unequally-endowed or unequally-situated individuals. To avoid these inequalities, the right to the proceeds of labor would have to be unequal instead of equal, which could either mean that the individual’s contribution to general social labor should be ignored in order to assure an equitable distribution of consumption goods, or that the inequitable distribution of consumption goods is unavoidable because labor is still measured with regard to its duration or its intensity. It does not mean that Marx opposed equality. But it does mean that he realized that the principle of equality based on labor contributions was not a socialist principle, even though it might be the ruling principle in the transitory stages of a socialist society.

Marx thought that the idea of the individual’s right to his labor-product may still dominate the society emerging from capitalism and “in every respect still tainted economically, morally, and intellectually with the hereditary diseases of the old society.”[45] Yet, in his mind, equalitarianism was a question not of remuneration bound to an abstract principle of equality, but of rational social relations that exclude exploitation and promote the free supply of goods and services. In his view, the development of society in the post-capitalist world would find expression not in a rigid and narrow realization of an always greater equality in “exchange” in accordance with the individual’s contribution to the social labor process but in a tendency toward the realization of the principle “from each according to his ability, to each according to his needs.”[46] Sociality is itself a developmental process in which the “narrow bourgeois horizon of private rights” would wither away because of an increasing abundance of consumption goods that would render economic accounting based on individual contributions to production both superfluous and ridiculous.

1. Lenin, Questions of the Socialist Organization of the Economy, Moscow, p. 47

2. Ibid., p. 117.

3. Ibid., p. 127

4.. Ibid., p. 341.

5. K. Korsch, Karl Marx, p. 90.

6. Chapters XX and XXI

7. English translations of some of these endeavors are to be found in N. Spulber, ed., Foundations of Soviet Strategy for Economic Growth, Bloom, 1964

8. Capital, Vol. II pp. 455-56.

9. Ibid., p. 476.

10. Ibid., pp. 591-92.

11. Ibid., p. 546.

12. Ibid., p. 578.

13. P. I. Popov, “Introduction to the Balance of the National Economy.” in Spulber, Foundations of Soviet Strategy for Economic Growth, p. 18.

14. Ibid.

15. Grundrisse, p. 507

16. Ibid., p. 58.

17. Ibid., p. 59.

18. P. M. Sweezy, The Theory of Capitalist Development, p. 63.

19. J. Robinson, An Essay on Marxian Economics, p. 23.

20. E. A., Preobrazhensky, The New Economics, London, 1965, p. 29

21. J. Stalin, Economic Problems of Socialism in the U.S.S.R., p. 18

22. Ibid., p. 20.

23. Ibid., p. 17.

24. Ibid., p. 18.

25. V. Liberman, “The Soviet Economic Reform,” in Foreign Affairs New York, October, 1967, p. 53.

26. Teaching of Economics in the Soviet Union, The American Economic Review, September, 1944, p. 525.

27. K. Marx, Critique of the Gotha Programme, New York, 1933, p. 29.

28. Ibid., p. 32.

29. L. Trotsky, Dictatorship vs. Democracy, New York, 1920, p. 142. Q Ibid., p. 137

30. Ibid., p.137

31. Ibid., p. 149.

32. Capital, Vol. I., p. 12.

33. T. Hodgskin, Labour Defended Against the Claims of Capital, 1825; W. Thompson, An Inquiry into the Principles of the Distribution of Wealth most conducive to Human Happiness, 1824; J. F. Bray, Labour’s Wrongs and Labour’s Remedy, 1839; J. Gray, The Social System: A Treatise on the Principles of Exchange, 1831. A value analysis of capital production considers the general need.

34. K. Marx, A Contribution to the Critique of Political Economy, pp. 104405.

35. Ibid., p. 104.

36. K. Marx, The Poverty of Philosophy, p. 45.

37. Capital, Vol. II p. 362.

38. K. Marx, Critique of the Gotha Programme, P.28

39. Ibid., p. 29

40. Ibid., p. 30.

41. Ibid.

42. K. Marx, The Poverty of Philosophy, p. 77.

43. K. Marx, Critique of the Gotha Programme, p. 30.

44. Ibid.

45. Ibid. p. 29.

46. Ibid., p. 31.