The following essay was of central importance in the process of the formation of a market economy in the Soviet Union and the majority of the people’s democracies under Khrushchev.

Under Stalin neither labour power nor the means of production nor the implements of production produced by the socialized sector were considered commodities in the Soviet Union.

This was evident in the November 1951 discussions on the 1951 Draft of the Political Economy Textbook where such ideas were promoted by isolated economists.

Two minor economists, Mikolenko and Merzenev in their presentations suggested that labour power was a commodity in the Soviet economy. They were subjected to official criticism by P.F. Yudin in his evaluation of the situation in the social sciences.¹

In his last work, Economic Problems of Socialism in the USSR, Stalin criticized the leading economist A.I Notkin for suggesting in the November 1951 discussions that the means of production and the products of Soviet industry were commodities.²  Notkin had extensive experience in the field of political economy and economic policy having been associated with Gosplan, Moscow State University and the Institute of Economics.

Ostrovityanov interestingly does not mention Notkin in his essay. He does not refer to Venzher and Sanina who advocated the sale of the Machine Tractor Stations to the collective farms, thereby placing farm machinery in the sphere of commodity circulation. The name of Yaroshenko is absent whose Bogdanovist theories downgraded the relations of production and elevated the forces of production under socialism. The entire economic discussion which took place after the November 1951 was sought to be ignored.

Naturally it followed from this that the concerns of the economists who denied after the Twentieth Congress of the CPSU that labour power and the products of socialized means of production were commodities also were not addressed. Their names were eradicated from all the discussions on the political economy of socialism.

The omission of the name of Notkin is perhaps the most astounding as the theoretical views of Ostrovityanov are entirely rooted in the views of the economist as put forward seven years previously.

Lenin in May, 1921 two months after the promulgation of the New Economic Policy had emphasised that the product of the socialist factories was 'not a commodity in the politico-economic sense' and that it was already 'a commodity ceasing to be a commodity'.³  In the interwar period the sphere of the operation of the law of value was restricted further with the inception of centralized directive planning under Gosplan, the massive expansion of socialist industrialization, the introduction of the collective farms and the formation of the state-owned machine tractor stations which controlled the agricultural means of production. Each advance of the socialist offensive was sought to be stymied by rightist forces such as Groman, Bukharin and the supporters of Trotsky.

Yet we find in the post war period both Notkin and Ostrovityanov expressing the view that the implements of production produced by the nationalized state sector were commodities.

In his critique of the views of Notkin, the Soviet leader argued that the means of production certainly could not be classed as commodities. Commodities were products which could be sold to any buyer and after sale the buyer became the owner of the commodity. Such was not the case with the Soviet means of production where no sale took place of the means of production but they were allocated to various enterprises. The state retained ownership of the means of production. The directors of enterprises who received means of production acted as state representatives who utilized them within the framework of the state plan.

Stalin further continued that Soviet economists spoke of the value of the means of production and their price for the purposes of calculation to determine whether enterprises were paying or running at a loss and to check and control the enterprises. Sales of the means of production abroad were commodities but they were not such domestically where means of production cease to be commodities. They were then outside of the sphere of the operation of the law of value. Stalin spoke of the necessity of distinguishing between the socialist substance of an economic process and the capitalist form which has remained.

Notkin suggested that the law of value regulated prices of agricultural materials. Stalin denied this saying that agricultural prices were fixed by the plan as were the agricultural goods. Moreover the state owned the implements of production which were utilized  by the agricultural sector.

Stalin pointed out the outwardly the categories of the capitalist economy remained but the content of socialism dominated.

At the centre of the argument of Ostrovityanov – continuing the views of Notkin - is the assertion that the products of the means of production are commodities: ‘the means of production produced and circulated within the state sector also have commodity character.’ The political leadership at the time of Notkin detailed the errors of this view. But the new leadership of Khrushchev reversed the earlier views of the Stalin period.

Arguably the period between 1953 and 1958 saw the development of generalized commodity production in the Soviet Union. It is in this context that the views of Ostrovityanov presented here may be evaluated.

The evidence of the Gosplan archives in the Economic Archives illustrates the changes in these years. After the defeat of the rightist economists in the late 1920s centralized, directive planning became the ‘law’ as it were of the Soviet economy. This was reversed in the period 1953 to 1955 by the establishment of a new ‘co-ordinated planning’ which reduced the powers of Gosplan in a number of ways by dividing the organization into two parts and compelling it to negotiate with government departments and union republics in the formation of the plans. The sphere of influence of Gosplan was further narrowed by extending the powers of Directors of the enterprises.

A few months prior to the publication of the discussed article of Ostrovityanov on 22nd May 1957 under Resolution number 555 of the Soviet Council of Ministers the planned allocation of the products of Soviet industry was terminated and a score of sales organizations was established under Gosplan to vend the industrial implements produced by Soviet industry. Complementing this programme in industry was the extension of commodity production and circulation in the agricultural sector. Stalin in the Economic Problems had defended the system of allocation of agricultural machinery to the Machine Tractor Stations (MTS) as part of the state-owned sector and opposed the sale of the agricultural machinery to the collective farms as advocated by Venzher and Sanina in the November 1951 economic discussions. Before the liquidation of the MTS in 1958, in July 1957 the allocation of agricultural machinery was ended under Prikaz number 663 of Gosplan. In its stead an organization was established Glavavtotraktorsbita which had the function of vending the agricultural machinery required by the collective farms.

The conversion of the means of production into commodities is evident. It is also even more pronounced by the resolution number 1150 of the Council of Ministers of the USSR of September 1957 by which the enterprises were expected to operate on the basis of profitability.

Ostrovityanov in this article –unlike Notkin seven years previously – was describing a real situation where the products of Soviet industry were in actuality, commodities.

This necessitated the recasting of the textbooks of political economy on the lines of a market economy. The draft political economy textbooks drafted by L.A Leontiev in the 1940s and the 1951 draft textbook as well as the draft prepared in March 1953 were written on the basis of socialist and communist construction. New drafts were required corresponding to the new reality. Ostrovityanov accomplished this in the second and third editions of Textbook of Political Economy of 1958 and 1959, which were published in millions of copies in Russian and international languages.⁴

The third edition of the Textbook of Political Economy which was edited by Ostrovityanov in 1958 reflected the new system and stated that the means of production circulated within the state sector were commodities.⁵

In the new circumstances the categories of capitalism which were considered remnants of a previous system required for the purpose of calculation now had a new substance which reflected a newly developing generalized commodity system. Stalin had considered commodity production to be of a special type in the Soviet Union. There were no capitalists, commodity production was concerned with the goods of associated socialist producers, the state, the collective farms, the cooperatives and was confined to items of personal consumption which could not develop into capitalist production. Commodity production and the money economy served the consolidation of socialist production. But with the ‘economic reforms’ of 1953-1958, Soviet commodity production lost its specific nature. Marx had argued that the basic cell of capitalism was the commodity which was the embryo of contradiction between wage-labour and capital. The logic of the new situation in the Soviet Union was that there would develop in an unbridled way such categories as labour-power, surplus value, capitalist profit and the average rate of profit.

The historical approach to the analysis of economic processes and phenomena is one of the most important requirements of Marxist-Leninist methodology. This applies entirely to the analysis of the categories of commodity production and the law of value under socialism. In works devoted to this problem, the Marxist principle of historicity, unfortunately, is not always applied with due consistency. Some economists pose the question as if commodity-money relations arise anew under socialism and have no genealogical connection with the commodity-money relations that developed in pre-socialist formations. In reality, the socialist revolution finds a system of commodity-money relations already formed in the depths of capitalism, just as it finds a certain level of development of the productive forces. This fact should be taken as a starting point when analyzing commodity production in a socialist society. The task is to investigate how commodity-money relations, inherited from capitalism, change as a result of the establishment and development of socialist production relations.

The classics of Marxism-Leninism considered the social division of labor with historically determined forms of ownership of the means of production and products of labor to be a necessary condition for the emergence and development of commodity production. This is the methodological starting point of Marxism in the analysis of commodity production that existed in various social formations. There are no grounds for abandoning this methodological position when analyzing commodity production in a socialist society. There are, however, economists who consider it possible to abandon this approach. One of the main arguments they put forward is that the social division of labor will be preserved even at the highest stage of communism, when there will be no commodity production. In this regard, we recall the position of K. Marx that the social division of labor is possible without commodity production, but commodity production is impossible without the social division of labor. Marx pointed out that the social division of labor is manifested in the aggregate of heterogeneous consumer values and diverse specific types of useful work. Consequently, without the social division of labor it is impossible to understand not only the emergence of commodity production, but also to explain the economic categories associated with the law of value, in particular the dual nature of labor both under the conditions of a commodity-capitalist economy and under socialism. At the same time, it must be borne in mind that the social division of labor cannot explain anything in commodity production if it is considered in isolation from those forms of ownership within the framework of which it develops.

There is an opinion that the classics of Marxism-Leninism supposedly considered only private ownership of the means of production as a necessary condition for commodity production. This opinion is incorrect. K. Marx devoted his main work, Capital, to the analysis of commodity production under capitalism and, in his analysis, naturally, proceeded from the social division of labor and private ownership of the means of production. However, this does not mean that he recognized private ownership alone as a necessary prerequisite for commodity production. As shown in Capital, commodity relations initially arose on the basis of communal ownership of the means of production. Marx wrote that “the exchange of commodities begins where the community ends, at the points of its contact with foreign communities or members of foreign communities. But once things have become commodities in external relations, they become commodities within the community by reverse action” (Capital, Vol. 1, 1955, pp. 94-95).

Thus, historically, commodity relations arise within the decaying primitive society on the basis of the social division of labor and communal ownership of the means of production, when communities confront each other as owners of various products, as commodity owners. Commodity production reaches its highest development under capitalism, where there exists a broad social division of labor and private capitalist ownership of the means of production dominates.

The question arises: what happens to commodity production and the law of value in the transition period from capitalism to socialism and at the stage of socialism? As is known, Marx and Engels believed that with the establishment of public ownership of the means of production, the commodity and all value categories associated with it will die out and the accounting of social labor will be carried out directly in worktime. Characterizing the first phase of communism - socialism - in the "Critique of the Gotha Program", Marx proceeded from the premise that in a socialist society the principle of distribution according to labor will be implemented without trade and money, with the help of receipts on which the number of hours worked will be indicated.

Engels also developed similar ideas. He wrote that with the socialization of the means of production, commodity production is eliminated, and the labor of each individual, no matter how different its specific useful character, becomes directly social labor. In order to determine in this case the amount of social labor contained in the product, there is no need to resort to an indirect method, that is, to express it in a third product. The amount of social labor expended on the production of the product will then be determined in a natural, adequate, absolute measure -- in time. "People will then do all this very simply, without resorting to the services of the celebrated "value" (F. Engels "Anti-Dühring", 1951, pp. 293-294). Let us recall that in the past, before the socialist revolution in Russia and the experience of building socialism in the USSR, all Marxists held the view that with the establishment of public ownership of the means of production, commodity-money relations would be overcome and in a socialist society there would be no commodities, no value and no money. Thus, A. Bebel wrote in his brochure "The Future Society" that in a socialist society, what will be produced will be not "commodities" to "buy" and "sell", but items for basic needs, and money will be replaced by a certificate denoting the amount of labor time worked. In exactly the same way, G. Plekhanov wrote that trade under socialism will be like "torn boots" or "the fifth wheel on a cart".

All this could not but affect the position of Soviet economists, who for a long time underestimated the importance of commodity production and the law of value in the socialist economy. This applies first of all to the period of war communism. At that time, many utopian assumptions appeared, presuming that the time has already come to move from accounting in money terms to accounting of labor directly in work time using labor units, man-machine hours, or time rubles.

Vladimir Ilyich Lenin wrote about this particular trend of the period of war communism: "...we made the mistake of deciding to attempt a direct transition to communist production and distribution. We decided that the peasants would give us the amount of grain we needed under food requisitioning, and we would distribute it among the factories and enterprises, and we would have communist production and distribution" (Works, Vol. 33, p. 40). Lenin, with his characteristic integrity and depth, exposed the mistakes of the period of war communism and raised the question of the need to expand trade, strengthen the monetary system, credit, and finance. From all of Lenin's statements that relate to the period of the introduction of the New Economic Policy, it follows that he certainly recognized the need for commodity production and circulation for the Soviet economy, and thereby the operation of the law of value, since one cannot exist without the other.

He believed that commodity exchange is "... a test of the correct relationship between industry and agriculture, as well as the foundation of all work to create a more or less efficiently functioning monetary system" (Works, Vol. 32, p. 362). According to Lenin, it is impossible to abolish money at once; significant technical and, especially, organizational developments are needed to eliminate money; it is necessary to establish the organization and distribution of products for hundreds and millions of people. He recognized the great role of gold in our economy, primarily for the development of trade relations with foreign countries and for strengthening our currency. Already in 1918, he had outlined the contours of the monetary reform that was later carried out after the introduction of the NEP.

Lenin associated the need to introduce cost accounting with the transition to the new economic policy and the development of commodity-money relations, and strongly emphasized the role of the factor of material interest in socialist production. He had put in place socialist methods of management in which great importance was given to such factors as material interest and commodity-money relations, in other words to the law of value and the economic categories associated with it.

However, from these absolutely clear statements of Lenin, as well as from the practice of socialist construction during the years of Soviet power, economists did not draw the conclusion that it was necessary to creatively reconsider the question of commodity production and the law of value under socialism. Here dogmatic interpretations of the statements of Marx and Engels prevailed.

Marx and Engels raised the question of the withering away of commodity production and the law of value in a general form, proceeding from the assumption of the simultaneous victory of socialism in all countries and having in mind the complete socialization of the means of production. This forecast, correct for the highest phase of communism, was not justified for the stage of socialist development of society. Lenin, proceeding from the law of uneven economic and political development of capitalist countries in the period of imperialism, proved the possibility of the victory of socialism initially in a few or even in one, separate country. The practice of the victory of the socialist revolution and the construction of socialism in the USSR confirmed the correctness of Lenin's brilliant forecast. And the experience of communist construction in our country and the construction of socialism in the countries of people’s democracy testifies that commodity production is preserved at the stage of socialism. On the issue of commodity production and the law of value under socialism, Soviet economists at one time had to endure a severe struggle with bourgeois economists - supporters of the restoration of capitalism, social democrats, Trotskyists and right-wing opportunists. Bourgeois economists, social democrats, Trotskyists, and right-wingers tried to carry over the laws and proportions of development of social reproduction, characteristic of capitalism, to Soviet economics. In essence, they denied the possibility of planning, attributed the role of regulator of production to the law of value, treating value as an extra-historical category.

The unconditional merit of Soviet economists is that they criticized these bourgeois-restorationist attitudes and demonstrated that the law of value is not a regulator of the planned development of the Soviet economy. But in the process of this struggle they went too far in the other direction and denied the operation of the law of value in the conditions of the Soviet economy, although they recognized the existence of trade, money, credit, finance, etc.

A major role in the development of economic theory was played by the 1951 discussion on the draft textbook on political economy. It revealed the differences of opinion among our economists on the question of the law of value under socialism. As a result of the discussion, the so-called accounting-distribution concept was criticized, and most economists agreed that when explaining the need for commodity production in a socialist society, it is necessary to proceed from the forms of ownership.

J. V. Stalin deserves much of the credit for developing the issue of commodity production and the law of value under socialism. Even in a conversation with economists in 1941 regarding one of the layouts of a textbook on political economy, he subjected to fair criticism the incorrect and contradictory position of economists who recognized commodity-money categories but denied the operation of the law of value. Stalin drew attention to this contradiction and put forward the idea that the law of value operates in the Soviet economy, since without value there can be neither cost price nor money.

In his work “Economic Problems of Socialism in the USSR,” Stalin, relying on Lenin’s works, put forward the proposition that commodity production under socialism must be derived from two forms of ownership. This was, undoubtedly, a step forward in the study of the problem of commodity production under socialism. In fairness, it should be noted that this idea had been put forward in print by individual economists long before the discussion and had been defended by some participants in the discussion itself, but this idea had not been consistently implemented.

However, Stalin's work also contains scientifically unsubstantiated statements that are inconsistent with the facts. These include the assertions that the means of production retain only the outer shell of a commodity, that the law of value affects production only through wages, that commodity circulation is already beginning to conflict with the task of building communism and that it is necessary to gradually move to product exchange. These erroneous assertions were criticized in the discussions of issues related to the elimination of the harmful consequences of the personality cult in economic science, at meetings of university departments, academic councils of research institutes, and at conferences of economists convened to review the second edition of the textbook on political economy.

At the same time, in the course of these discussions, some economists attempted to take the path of revising the correct positions established as a result of the economic discussion of 1951: a tendency appeared to revive the so-called accounting-distribution concept. The supporters of this concept try to explain the necessity of commodity production and the law of value at the stage of socialism, proceeding from the differences in the nature of social labor at this stage and from the principle of distribution according to work.

The accounting-distribution concept arose in the period when economists generally denied the law of value in our economy but accepted the existence of commodity-money categories. The entire problem was reduced to accounting for labor: why, in the Soviet economy, is the accounting of the social labor carried out in monetary form? The answer was: because at the stage of socialism there are differences in the nature of social labor and the principle of distribution according to labor is implemented. The complete inconsistency of such a primitive and, in essence, incorrect point of view was revealed in particularly clear terms when the existence of commodity production and the law of value in the socialist economy was established.

From the point of view of Marxist-Leninist methodology, it is completely wrong to look for the reasons for the existence of commodity production in the sphere of accounting for labor costs and distribution of consumer goods. As is known, the distribution of consumer goods in society depends primarily on the distribution of the means of production, that is, in other words, on the form of ownership of the means of production. Only on the basis of an analysis of this form can we explain the system of distribution of material goods existing in a given society. In addition, the distribution concept is completely unable to explain the nature of the means of production as a commodity, since under socialism only consumer goods are distributed according to work.

It is also incorrect to deduce the necessity of commodity production directly from the qualitative differences between specific types of labor: this is the same as deducing it from the social division of labor without taking into account existing property relations. The proponents of this conception explain the necessity of reducing the various types of social labor to abstract labor not by the existence of commodity production, but by the existence under socialism of fundamental differences between mental and physical labor, skilled and simple, between the labor of a worker and a collective farmer. However, they forget that the necessity of such a reduction arises only under the conditions of commodity production. As already stated, the various types of concrete labor are based on social division of labor, the forms of which are extremely diverse. Moreover, as Lenin noted, the dynamics of development “consists in transforming into a special branch of industry the production not only of each individual product, but even of each individual part of the product; and not only the production of the product, but even individual operations in preparing the product for consumption” (Works, Vol. 3, p. 15). It is completely incomprehensible why the explanation of the dual nature of labor under socialism and the need to reduce concrete types of labor to abstract labor is linked only to the above-mentioned differences in the nature of labor. Under the conditions of commodity production and circulation, all types of concrete labor need to be reduced to abstract labor.

At the highest stage of communism, as is known, the essential differences in the nature of social labor will disappear, but the inessential differences between mental and physical labor, between industrial and agricultural labor will remain. If we deduce the necessity of commodity production from the differences in the nature of social labor under socialism, then we must admit that even at the highest stage of communism some inessential commodity production and an inessential law of value will remain.

This does not mean that in studying goods and value we can ignore the nature of social labor. On the contrary, it constitutes a direct object of scientific analysis. But in such an analysis we reveal the special features and social content of value categories in a socialist economy and not the cause of commodity production.

The supporters of the accounting-distribution concept turn the real interrelations between the various categories of commodity production on their head when they derive value from the differences in the nature of social labor, and from value they derive the necessity of commodity production. We must take the opposite path: first explain, based on the social division of labor and the property relations of the means of production and the products of labor, the necessity of commodity production and circulation under socialism, and then analyze the features of the dual nature of the commodity and the labor that creates it. Such categories as concrete and abstract labor, use value and value are generated by the conditions of commodity production and exist only as long as commodity production exists.

In the draft textbook on political economy, which was discussed at the economic discussion of 1951, the necessity of the commodity and value was justified by four factors: the heterogeneity of labor, the socialist principle of distribution according to labor, economic calculation, and two forms of ownership. This formulation of the question was the result of a compromise, an attempt to unite all the different opinions and suffered from obvious eclecticism, for which it was subjected to a sharp but fair criticism during the discussion. To return to these positions means once again to depart from the Marxist-Leninist methodology, from the original Marxist position explaining the existence of commodity production by the presence of a social division of labor and property relations in the means of production and in the products of labor.

Let us consider the changes that occur under socialism in the very conditions that determine the existence of commodity production, that is, in the social division of labor and in the relations of ownership of the means of production. The social division of labor during the transition period from capitalism to socialism and at the stage of socialism is further developed and becomes a planned process. A planned division of labor is carried out between industry and agriculture, between individual branches and enterprises within industry and agriculture, specialization and cooperation of production between enterprises and economic regions expands. The new international division of labor between the countries of the world socialist system is increasingly developing. Along with this, there is a social division of labor between socialist and capitalist countries.

Under socialism, the property relations of the means of production and the products of labor, the relations that underlie commodity production and circulation, are radically changed. Private ownership of the means of production and the products of labor is replaced by public socialist property in its two forms: state (public) and cooperative-collective farm. Workers' personal ownership of consumer goods and personal property of collective farmers in the subsidiary farm of the collective farm household are also established in place of private property.

Already in the transition period, the socialist system takes over the commanding heights of the economy, as a result of which the sphere of commodity production and the operation of the law of value is limited. The law of value ceases to be a regulator of production, yielding this role to the law of planned, proportional development of the national economy. With certain limitations, the law of value played the role of a regulator of production only in the small-scale and capitalist sectors.

 Relying on public ownership of the means of production in all two forms, the socialist state gradually takes over commodity-money categories such as value, money, and credit and transforms these instruments of the planned management of the national economy. As a result of the establishment and development of socialist production relations, profound changes have occurred and continue to occur in commodity production in the conditions of operation of the law of value as well.

In analyzing these changes in the conditions of development of commodity production and circulation under socialism, we must proceed from the socialist forms of ownership of the means of production and the products manufactured. It is necessary first of all to study the relations arising between the two forms of ownership, and along with this to examine the commodity-money relations between enterprises of the state sector, the commodity-money relations between collective farms within the collective farm sector, the commodity-money relations arising between the two forms of socialist ownership, on the one hand, and personal ownership of consumer goods, on the other, as well as the interconnection and interdependence of all forms of ownership both within a given socialist country and between socialist countries, as well as between countries belonging to the two opposite world systems, socialist and capitalist.

Commodity production and circulation under socialism are based primarily on the social division of labor between town and country and the relationship between the two forms of socialist public ownership of the means of production: state (public) and cooperative-collective farm. Since in state enterprises the means of production and the products of labor constitute the property of the state, and in collective farms the means of production (agricultural equipment, working and productive livestock, farm buildings, seeds, etc.) and the manufactured products constitute group cooperative-collective farm property, the economically necessary form of connection between industry and agriculture is the exchange of goods through purchase and sale. Collective farms and collective farmers can receive funds for the purchase of industrial products only by selling the commodities produced to the state, cooperatives, or on the collective farm market. In the same way, the state purchases food for the population of cities and industrial centers and raw materials for industry from collective farms and collective farmers by means of procurement and purchases.

Lenin's position cited above that commodity exchange between the city and the village is a test of the correct relationships between industry and agriculture, the working class and the peasantry, and the basis of a properly functioning monetary system, retains all its significance for the socialist stage of development of society.

 Commodity production and circulation at this stage cover the entire mass of consumer goods produced by state enterprises and collective farms for sale to the urban and rural population. In this case, goods are transferred from state and cooperative ownership or the personal ownership of collective farmers to the personal ownership of workers and employees. Collective farmers also use their cash income to buy the goods they need through the system of state or cooperative trade.

Until now, when explaining the commodity nature of consumer goods, the importance of personal property regarding these has been underestimated due to the fact that personal property will be preserved even in the highest phase of communism. However, in a socialist society, the personal property of workers, employees and collective farmers has its own specific features, as it exists in the within commodity production and circulation, which will not exist at the highest stage of communism.

The commodity nature of consumer goods is determined by the relationship between state and cooperative-collective farm ownership, as well as the relationship between public socialist ownership of the means of production and products of labor in its two forms, on the one hand, and the personal ownership of consumer goods by citizens, on the other.

Personal property under socialism also differs from personal property in the highest phase of communism in that it is linked to the economic law of distribution according to labor. This law requires a certain equivalence between the labor that workers give to society and the payment they receive, minus the portion of the surplus product that goes to the needs of the society as a whole. And in the presence of commodity production and circulation, equivalent exchange is carried out in commodity-money form.

The situation is more complicated with the explanation of the commodity nature of the means of production. Some of the means of production are created by state enterprises for the purpose of sale to collective farms, industrial cooperatives and collective farmers. An ever-increasing portion of the means of production is created at state enterprises for the purpose of sale to foreign countries, primarily to countries of the socialist camp, as well as to capitalist countries. In all these cases, there is a change of ownership of the goods being sold and purchased.

However, the majority of the means of production produced by state enterprises circulate between enterprises of the state sector, which belong to a single owner -- the entire people, represented by the socialist state. Nevertheless, the means of production produced and circulated within the state sector also have commodity character. This is due primarily to the interrelation between state property and other forms of property existing within the country.

The socialist economy is a single whole in which industry and agriculture, the production of means of production and the production of consumer goods are interconnected and dependent on each other. Means of production, tools, raw materials, and auxiliary materials are ultimately created in order to produce consumer goods. The value of the means of production is added to the value of the consumer goods created with their help. In turn, the value of consumer goods affects the level of real wages of workers and employees in those industries that create the means of production. Due to the unity of the socialist economy, the means of production that are produced and circulate within the state sector also acquire the character of commodities, although the exchange between state enterprises does not involve a change in the owner of the product. In this case, it is necessary to take into account the economic interrelations of socialist countries, as well as the economic relations of the countries of the two camps, socialist

The commodity nature of the means of production is determined not only by the interrelationship of state property with other forms of property, but also follows from the characteristics and internal needs of the development of state property itself at the stage of socialism. State, public property at the socialist stage of development presupposes such a way of connecting the labor force with the means of production, in which the material interests of each worker engaged in the production sphere and of the collectives of enterprises in the results of their labor and the resulting principle of equivalent compensation by society to each enterprise for its labor cost becomes the basis of the relationship between the state and the enterprises belonging to it, as well as between the state enterprises themselves.

The material interest of workers in the results of their labor is conditioned by public socialist ownership of the means of production, by the fact that people work not for exploiters, but for themselves, for a socialist society, the purpose of which is the most complete satisfaction of the growing needs of all members of society. The nature of labor also changes: under socialism it is transformed from forced labor, from a heavy burden into a public matter, a matter of honor and valor, but at the same time it does not yet become the primary vital need for everyone, as it will be under communism, and therefore requires material incentives.

The material interests of workers is one of the driving forces of the development of socialist production. Therefore, such an economic form of interrelations is required, in which the state transfers the means of production to enterprises for use and disposal so that each enterprise compensates for its production costs by selling products on the basis of the principle of equivalence. And equivalent compensation to enterprises for the costs of living and embodied labor under the conditions of commodity production and circulation is inevitably carried out through commodity exchange. The commodity-money form of production activity of state enterprises in the economic relations between them makes the material position of each enterprise dependent on its work and thereby stimulates rational management, saving of funds and an increase in the profitability of the enterprise. This formulation of the question is based directly on statements by Lenin, who repeatedly emphasized the need to build a socialist economy on the foundation of material interests.

At the same time, one should not underestimate the essential differences between the means of production and consumer goods as commodities. These differences are as follows: firstly, as a result of the purchase and sale of the means of production circulating within the state sector,only the enterprise into whose use the means of production are transferred changes, while the socialist state continues to be the owner. Secondly, the commodity circulation of the means of production is carried out mainly according to plans for material and technical supply, unlike consumer goods, which are the object of free purchase and sale. Thirdly, state enterprises - factories, plants, mines, power plants with all their basic production assets cannot be the object of sale and purchase as they are transferred from one state organization to another by decision of the relevant government bodies.

Some economists, when analyzing commodity production, propose to proceed only from state ownership of the means of production, since it plays a leading role in the socialist economy. Such a methodological approach is incorrect. State ownership is the highest form of public ownership, the closest to the future communist ownership, and in its development inevitably gives rise to a movement towards withering away of the commodity, towards transformation of the commodity into a product.

Here it is appropriate to recall Lenin's formulation of the question of the dialectic of the transformation of a commodity into a product. In the "Instruction from the STO (Labor and Security Council) to local soviet agencies, Lenin wrote “state produce -- the product of the socialist factory, exchanged with peasant food produce, is not a commodity in politico-economic sense, in any case it is not only a commodity, it is no longer a commodity, "stops being a commodity..." (Works, Vol. 32, p. 362). This was written at a time when Lenin allowed for the possibility of a transition from the requisitioning system to the so-called product exchange. Soon, generalizing the practice, Lenin recognized the need to move not to product exchange, but to expanded trade. The question of the non-commodity nature of the products of socialist industry, exchanged for peasant products, was dropped. But the very formulation of the question of the dialectic of the transformation of a commodity into a product, given by Lenin, is scientifically deeply fruitful and indicates the correct path of evolution of a commodity into a product during the transition from socialism in its highest phase to communism.

The means of production produced and circulated within the state sector, being commodities, at the same time already bear some features of their future transformation into products. As the prerequisites for the transition to the highest stage of communism are created, the transformation of a commodity into a product will first of all begin with the means of production that are in state public ownership. That is why, when explaining commodity-money relations, one cannot proceed from state ownership of the means of production alone, but must take into account the entire set of property relations between the means of production and the products of labor in a socialist society, and above all the relations between the two forms of socialist property: state and cooperative-collective farm, as well as the interrelations between the various forms of ownership in the international arena.

At the same time, it must be emphasized with all force that until the preconditions for the transition to the higher phase of communism are created, commodity-money relations in all spheres of the economy, including in the branches that create the means of production, must be developed in every possible way and employed to raise the level of socialist production.

Commodity production is distinguished by a number of features. A specific feature of social labor that creates goods is its dual nature. In capitalist society, the dual nature of labor reflects the contradictions between private and social labor and results from private ownership of the means of production and the social division of labor. But under socialism, labor is of a directly social nature, that is, it is organized in a planned manner on a national scale. This is due to the presence of social ownership of the means of production and the law of planned, proportional development of the national economy. Concrete labor and abstract labor under socialism are two sides of the directly social labor.

The directly social character of labor at the stage of socialism differs significantly from the directly social labor at the higher phase of communism. In state enterprises there is a higher form of socialization of labor compared to cooperative-collective farm enterprises. In addition, the labor expended by collective farmers in subsidiary farming is not directly social, but represents a specific form of personal labor.

Since under socialism commodity production and various types of directly social labor exist, the latter requires indirect expression and commensurability with the help of value and its forms. The planned distribution of social labor between branches of the national economy and individual enterprises does not exclude the need for equating one commodity with another in the process of exchange, checking and identifying to what extent planned production and distribution of goods, especially consumer goods, correspond to the needs of society in a socialist economy, there is a non-antagonistic contradiction between the consumer value created by concrete labor and the value created by abstract labor. A socialist economy makes it possible to establish correct relationships between use value and value, to fulfill production plans and to sell products both in kind and using money. However, this possibility is realized through overcoming the contradictions between use value and value that arise in the practice of economic construction and reflect the driving contradiction of a socialist society between the achieved level of socialist production and the growing needs of society.

For example, as a result of growing needs, there may be a delay in the sale of goods that do not meet the demand of the population. The gap between the achieved level of production and the growing needs of the masses may lead to the fact that individual enterprises, in pursuit of producing more profitable products, will begin to violate the plan in terms of variety and quality. The high cost of some consumer goods may make their sale difficult and not stimulate the expansion of their production.

In a socialist society, it is possible, through planned management, to promptly identify these contradictions and eliminate them through further expansion and improvement of production, improvement of product quality and reducing the cost of manufactured goods.

The value of a commodity, as is well known, is determined by socially necessary time, that is, the average working time spent on the production of goods by enterprises producing the bulk of the output of a given branch of production. Some economists argue that socially necessary time under socialism corresponds to progressive standards, in other words, it is determined by the conditions of production at the best enterprises, and not by average conditions. One cannot agree with this point of view.

If socially necessary time were determined by conditions at the best enterprises, then while selling goods, society would not be able to recoup the actual labor costs and would produce at a loss. Socially necessary time is not a conditionally normative, but a real, objectively existing category. Progressive norms influence socially necessary time in the direction of its planned reduction, encourage enterprise leaders and the masses of workers to seek ways to rationalize production, introduce advanced technology, increase labor productivity, and reduce costs. Progressive norms play this stimulating role until they begin to coincide with socially necessary time, that is, until they are mastered by the majority of enterprises producing the bulk of output. Then there arises the need to establish new norms based on the experience of advanced enterprises.

As is known, the value of a commodity created by social labor in the production process is expressed in monetary form by equating it to a monetary commodity in the exchange process. Under the influence of Stalin's work on "Economic Problems of Socialism in the USSR", which underestimated the effect of the law of value in the sphere of production of means of production, some economists began to argue that money does not fulfils the function of ensuring universal equivalence. This position turns out to be absolutely incorrect. Firstly, because the means of production within the state sector, as elaborated, continue to retain the features of a commodity. Secondly, because the unified nature of Socialist economy, the close relationship between the various branches of the national economy and individual enterprises, a single measure of expression and measurement of social labor expended on the production of goods is required. Therefore, it should be strongly emphasized that in a socialist society, money is a universal equivalent in the national economy as a whole and in all its branches. If under capitalism money serves as an instrument for the spontaneous accounting of social labor, an accounting that takes place behind the backs of commodity producers through market fluctuations, then in a socialist society, money is an economic instrument of planned management of the national economy, serving the purpose of production and distribution of the social product.

Before the economic discussion of 1951, a significant number of economists denied the linkage between Soviet money and gold. After the discussion, the overwhelming majority began to recognize that in the Soviet Union and other countries of the socialist camp, gold plays the role of a universal equivalent. However, even now there are attempts, under the guise of formal recognition of gold as a universal equivalent, to essentially reject it.

Soviet money not only maintains a historical, successive connection with gold, but also has a gold content. Planning bodies, equating the value of commodities to money, thereby express it in gold, systematically establishing prices for goods. We accumulate gold as a monetary material. We need gold reserves to ensure the stability of Soviet money and as a state reserve fund for international currency. As our economic relations with socialist countries, as well as with capitalist countries, expand, the connection of Soviet money with gold is increasingly strengthened.

Since commodity production exists under socialism, the law of value continues to operate, requiring that the production and sale of goods be carried out on the basis of socially necessary labor costs. In contrast to capitalism, where the law of value as an elemental force dominates people, in a socialist economy the operation of the law of value is recognized, taken into account, and used in the practice of planned management of the economy.

In a socialist economy, the operation of the law of value is limited. Some economists contrapose the use of the law of value to its limitation. They say that it is not necessary to limit the operation of the law of value, but to use it in every possible way. This position is incorrect. Limitation is the reason for the full use of the operation of the law of value in the interests of construction of communism. If under capitalism this law is a regulator of the distribution of labor and means of production between the branches of the national economy, then under socialism the distribution of labor and means of production is carried out on the basis of the law of planned, proportional development of the national economy in accordance with the requirements of the basic economic law and taking into account the operation of the law of value.

In a number of cases, we did not make sufficient use of the economic levers for raising socialist production, which were connected with the operation of the law of value. This was explained to a large extent by historical reasons. The Soviet people had to overcome the most severe devastation caused by the imperialist and civil wars. The situation of economic devastation, civil war and intervention gave birth to war communism with its characteristic sharp restriction of commodity-money relations. Then began the industrialization of the country and the collectivization of agriculture, a radical reconstruction of the entire national economy. The socialist restructuring of the entire economy meant the elimination of capitalist elements and was accompanied by a sharp intensification of the class struggle, sabotage and disruption. Overcoming the difficulties of the reconstruction period in a number of cases necessitated restrictions on trade, the introduction of a rationing system, etc.

The young Soviet state had to endure the Second World War, the most difficult of all wars. It caused colossal damage to our economy, led to the introduction of a rationing system, to systematic violations of the requirements of the law of value in determining prices, especially for the products of heavy industry. This gave rise to a system of state subsidies to cover industrial losses and prevented the strengthening of cost accounting. As a result of the war, there was some depreciation of currency.

In modern conditions, when the above-mentioned obstacles to the effective use of the law of value for the growth of socialist production have disappeared, this becomes one of the most urgent problem. The solution of the main economic task of the USSR in the shortest historical period, the creation of the material and production base of communism, the grandiose technical revolution taking place before our eyes, through the automation of production and the use of atomic energy, require more and more new capital investments in production. Billions of rubles have already been invested in our national economy. There is a need to use both these enormous capital expenditures and new investments as rationally and effectively as possible.

In this connection, the development of methods for determining the effectiveness of capital investments and the economic justification for the application and use of new technology acquires enormous national economic significance. The solution to these issues has a direct and immediate connection with the operation of the law of value in the sphere of production of means of production.

Until now, the law of value has been clearly underestimated in elaboration of the problem of capital investment efficiency. This was due to Stalin's erroneous position that the law of value does not operate in the sphere of production of the means of production. The journal "Problems of Economics", summing up the discussion on the efficiency of capital investments that was conducted on its pages, wrote in the editorial article: "... as a result of the discussion, it was established that under socialism the law of value and the profitability of individual enterprises cannot be considered as a criterion for the economic efficiency of capital investments. The economic efficiency of capital investments lies in their compliance with the requirements of the basic economic law of socialism and the law of planned, proportional development of the national economy."

This formulation of the question is fundamentally incorrect. The problem of the effectiveness of capital investments and the introduction of new technology cannot be solved without taking into account the cost of construction and the profitability of production. Underestimation of the action of the law of value in the sphere of production of means of production has led to the denial of depreciation and other erroneous propositions that have hurt the practice of our economic development.

Socialist enterprises, state and cooperative, operate on the basis of cost accounting. Cost accounting is a method of planned management, based on the use of the law of value. Some economists argue that cost accounting is not a method, but an objectively existing category. However, cost accounting, as a method of planned management of a socialist enterprise is also, at the same time, an objectively existing category. determined by the action of the law of planned, proportional development of the national economy and the law of value.

 The importance of economic calculation increases enormously in connection with the restructuring of management in industrial and construction segment. In order to solve the most important task of restructuring – to make better use of material and financial resources, to increase the profitability of enterprises, to increase internal savings, to eliminate unproductive costs and losses, it is necessary to decisively turn the attention of our personnel to the economics of production, to effectively use all economic levers associated with the operation of the law of value, to comprehensively develop and constantly implement cost accounting at enterprises. For these purposes, the cost accounting rights of production associations and enterprises are being extended. Along with the volume of social production, profitability and utilisation of production assets are established as the main indicator for planning and evaluating the economic activity of enterprises and construction projects. Measures are being taken to ensure that the formation of enterprises' own working capital, the financing of capital construction, expenses on personnel training and other expenses are made to a significant extent at the expense of enterprise profits. In our financial resources, the share of turnover tax is being reduced and the share of profit deductions is being increased.

The use of the law of value is important for the implementation of the requirements of the economic law of distribution according to labor. This is achieved with the help of money wages. The money form of payment for labor is more flexible. It makes it possible to more consistently differentiate the payment for labor depending on its quantity and quality and to better satisfy the diverse needs of workers and employees.

The task set by the party and the Soviet state to achieve a steep rise in agriculture, to catch up with the USA in the production of meat, butter and milk per capita requires the use of cost accounting in collective farms. This means that in collective farms the costs and results of economic activity must be measured in monetary terms, expenses must be reduced, the cost price of production must be reduced and profitability increased, and the growth of savings must be ensured.

Cost accounting has its own characteristics in collective farms, which are related to the nature of cooperative-collective farm property: the collective farm is the owner of the means of production and the products produced. State machine and tractor stations participate in the production of collective farm products. Collective farmers receive income not in the form of wages, but in the form of in-kind and cash payments for the workdays worked.

Cost accounting requires a monetary valuation of the entire gross output and its components. Meanwhile, the greater part of the collective farm's gross output goes to production and personal consumption in kind. But the commodity part of the output does not have one single monetary valuation either. A Collective farm output is sold at different prices: procurement, purchase, contract, collective farm market prices, etc.

All this complicates the application of cost accounting in collective farms. The question arises: at what prices should the collective farm account for its products? Some economists suggest that when calculating collective farm products in money terms, we should proceed from conventional normative values, in particular, when determining the amount of wages, we should proceed from the wages of workers on state farms. However, conventional norms do not give us an idea of the real cost of production and the profitability of production on a given collective farm, and can only serve as an auxiliary means when calculating the cost of collective farm products. Obviously, the commodity output of collective farms should be calculated on the basis of its the actual average sale price.

The cost price of collective farm products should include the costs of past labor, the natural and monetary wages of both collective farmers and MTS workers, and the difference between the cost price and the actual selling price of these products will constitute net income.

At present, considerable experience has already been accumulated in various methods of monetary accounting of products and the application of cost accounting in collective farms. The task is to develop the most rational and effective forms of application of cost accounting in collective farms on the basis of studying and generalizing this experience.

Taking into account the operation of the law of value is a necessary condition for economically sound planning of prices for industrial products. Pricing policy based on taking into account the operation of the law of value should be oriented towards socially necessary labor costs. Underestimation of the operation of the law of value when planning prices for industrial products, focusing on the individual costs of individual enterprises weakens the stimulating effect of the law of value, slows down the reduction of production costs and the increase in production profitability, and harms the national economy.

At a discussion on the use of the law of value under socialism, organized by the Institute of Economics of the USSR Academy of Sciences, some economists put forward the position that the law of value is our regulator of production and that prices must be planned in strict accordance with the requirements of the law of value. This idea is also promoted in a number of discussion articles included in a collection published in Warsaw on the subject of the law of value. One of the authors of the collection, the Polish economist Brus, compares the attitude to the operation of the law of value to that of a gate that is first slammed shut, then opened slightly, but never opened completely. in his opinion, the gate must be opened completely. Brus proposes that the state should plan prices in accordance with the conjunctural fluctuations in market prices for consumer goods and, depending on this, change production plans: when prices rise, production must expand, and when prices fall, it must contract.

Economist Kurovsky in his article "Democracy and the Law of Value", speaking out against centralized planning, asserts that it carries out the function of adapting production to consumption with the help of orders-directives, without using the action of the mechanism of objectively existing economic laws. On the contrary, the law of value, in his opinion, itself represents the adaptation of the social distribution of labor to the structure of objectively existing, historically formed social needs, transfers sovereignty in the national economy to the consumer. It is the market that is most democratic since it is the most universal economic parliament of the country, which operates continuously. The principle of proportionality is supposedly a formal principle. Only the law of value can give it social content. The role of the plan under these conditions is reduced to correcting the processes of adapting production to consumption, which are carried out in accordance with the law of value, in order to prevent disproportions and crises.

Such attitudes essentially mean a rejection of one of the main advantages of a socialist economy - the planned development of the national economy. The idea of the law of value as a regulator of socialist production gave rise to objections from some economists in a discussion organized by the Institute of Economics of the USSR Academy of Sciences.

The principle of proportionality, which follows from the requirements of the law of planned, proportional development, is by no means a formality, lacking social content. Lenin pointed out that planned nature means constant, consciously maintained proportionality. National economic proportions in a socialist economy are established on the basis of the law of planned, proportional development in accordance with the requirements of the basic economic law of socialism and by taking into account the operation of the law of value.

However, the task is not to give unlimited scope to the law of value and to transform it into a regulator of socialist production, but to use this law as the most important economic lever of planned management of the national economy. The socialist state, in the process of planning prices, must proceed from the value of the commodity. But this does not mean that it is obligatory for prices to coincide exactly with the value in all cases. Guided by national economic considerations, planning bodies can establish prices with certain deviations from their value and use part of the income created in some industries for the more rapid development of other industries that play a leading role in the construction of communist society.

The regulation of production through the mechanism of fluctuations of market prices around value presupposes that the planning bodies will restore the disturbed equilibrium each time. Thus, the essence of planning is reduced to predicting how the law of value will operate automatically, and the plan turns into a forecast plan. With such planning, the industrialization of the countries of the socialist camp, the preferential development of heavy industry and the continuous growth of production on the basis of better technology would be impossible, since this does not follow in any way from the requirements of the law of value.

The idea of the law of value as a regulator means unleashing the elements and anarchy of production, with all the ensuing consequences, and fundamentally contradicts the very nature of a socialist planned economy based on public ownership of the means of production.

The socialist economic system contains more powerful incentives for raising production compared to capitalist competition and the pursuit of profit. The essence of the question is to skillfully and in accordance to a plan, use the possibilities and the driving forces of the socialist economy. To do this, it is necessary to familiarize cost executives to the economics of production and economic theory, and economists dealing with the theory to the practice of socialist construction.

At present, the entire Soviet people are captivated by the inspiring prospect opened by the programme of major endeavours adopted by the 20th Congress of the CPSU and specified in subsequent decisions of the plenary sessions of the Central Committee of the CPSU. It is the duty of Soviet economists to help use the enormous possibilities of developing socialist production in order to accelerate the solution of the main economic task of the USSR and thereby bring closer the achievement of our cherished goal of building a classless communist society.

Kommunist, Number 13, pages 85-100, 1957.  Translated from the Russian by Tahir Asghar

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