1964: Ernest Mandel: Mercantile Categories in the Period of Transition

This article article originally appeared in the January 1964 issue of Nuestra Industria, the journal of the Cuban Ministry of Industry, headed by Che Guevara. Ernest Mandel and Charles Bettelheim had been requested by the Cuban government to give their ideas on socialist construction in what became known as "the Great Debate''. This translation was originally published in: Bertram Silverman (ed.) Man and Socialism in Cuba. The Great Debate (1971).

Economic Categories and Historical Reality

Economic categories are the result of the study and understanding of an economic system as a whole. The mercantile categories come about from the unfolding of the system of commodity production and distribution that attains its greatest development under the capitalist mode of production. In this sense, economic categories are indisputably products of historical evolution. Marx stressed that the nature of commodities is not permissive of thorough investigation except in the period during which the commodities have already manifested all their contradictions—that is, during the era of capitalist production.ⁱ

But even though economic categories are products of the historical process, they are also the result of a thought process that has been synthesized from an infinitely complex and diverse historical reality. In order to understand this thought process in its dialectical development, in order to comprehend its law development and the internal contradictions from which it derives, one must begin by abstracting all that is secondary or non-essential in such reality, all that confuses surviving elements of the past with things to come. He may thereby reconstruct the historical reality as a ''grand total of diverse determinations and relationships.''ⁱⁱ

The relationships between economic categories and historical reality are, then, much more complex than they appear to be at first sight. Categories emerge from reality, but reality cannot be reduced to categories. Reality is always richer, more complex, more ambiguous than categories. On the other hand, reality can not be incorporated into theory without the aid of those same categories. In fact, it is the whole dialectical relationship be tween the abstract and the concrete that reappears in the relationships between economic categories and historical reality.

The best-known example used to illustrate this proposition is the capitalist mode of production itself. All students of Capital know that Marx does not analyze capitalism as it actually develops historically in a number of countries—fused with pre capitalist forms of production (semi-feudal, even slave forms, as in the United States until the end of the Civil War). Nor does he consider it as it has developed concretely, enmeshed in the interrelationships of the world market. Rather, he speaks of ''pure'' and ''abstract'' capitalism, which permits him to conceptualize the internal contradictions of commodities, capital, and capitalism developed to their extremes.

In view of the dialectical relationship between historical reality and economic categories, one must avoid two basic methodological errors. He must not confuse complex reality with its simplified reproduction in theoretical thought. In other words, he must not close his eyes to all the intricacies of reality, which is always infinitely richer than theory. He must avoid, however, falling again into eclecticism. He must not refuse to apply abstract categories to concrete reality under the pretext that reality is much richer and more intricate than those categories. Despite its complexity, reality cannot be understood as a whole, in the development of its contradictions, except through abstract categories. Anything else is to substitute understanding of reality with chaotic description, with a juxtaposition of a great number of details that merely prevent one from grasping the internal logic of a phenomenon.

These initial reflections are necessary in order to fathom the methodological error committed by comrade Bettelheim in his article ''On Socialist Planning and the Level of Development of the Productive Forces,'' appearing in number 32 of the journal Cuba Socialista. Although we agree with many of the ideas the author advocates in this article, several of his conclusions are basically invalidated by his failure to apply certain categories to a particular historical reality with the excuse that such categories are not ''purely'' manifest in that reality.

Thus, comrade Bettelheim contends that one cannot really speak of social ownership of the means of production unless [page 47]:

… a single legal entity were actually able to employ all the means of production in an efficient manner, to deter mine how they were used and how their output was distributed.

Moreover, further on he stresses that today, even in the more advanced socialist countries [page 48],

 

 

… expanded social production and reproduction is not yet a fully integrated and internally coordinated process whose various phases are mutually dependent and, as such, able to be completely controlled by society.

Based on this statement, comrade Bettelheim concludes that social ownership of the means of production in the socialist sector is simply a legal phenomenon; that the relationships of production are not entirely consistent with this legal form; that enterprises have some degree of control over the ownership of the means of production; and that the means of production are actually commodities because they change ownership when transferred from one socialist enterprise to another.

A bit further on we will return to the substance of comrade Bettelheim's argument, to wit, the nature of the means of production in the socialist sector during the period of the dictator ship of the proletariat. But first we would like to examine the method of reasoning that led the author to the above conclusions.

 

Forms of Ownership and Mode of Production

The step from private to collective ownership of the means of production goes from the anarchy of capitalist production to the objective possibility of socialist planning. Private ownership of the means of production implies multiple-investment decisionmaking centers and also suggests that investment and economic growth will be directed according to the imperatives of profit (more precisely, according to deviations from average profit). It implies, therefore, competition, the possibility of overproduction, crisis, etc.

Many non-Marxist economists, including those in the midst of the labor movement in the capitalist countries, argue that this thesis is ''dogmatic.'' They assert that in the age of stock-based organizations, in the era of the corporation, it is not so much private ownership that is important but rather the ''actual right to control'' that is in the hands of the managers. They state that trusts have been largely successful in doing away with competition, and that they can put into practice ''forms of planning'' or ''economic programming'' that practically eliminate the anarchy of production. They say, in other words, that the real content of the relationships of production under modem capitalism— the age of monopolies and ''neocapitalism''—no longer corresponds ''completely'' to the ''legal form'' of private ownership.

Thus, they revert to eclectic optimism, forgetting that the capitalist mode of production constitutes an economic infrastructure that has its own laws of development and that these laws remain in force whatever the quantitative changes—how ever important at times—that may occur within this mode of production. If these laws are to be taken out of force, a qualitative rather than a quantitative change is necessary. In other words, both the capitalist mode of production and private owner ship of the means of production must be eliminated.

Just as the relationships of production corresponding to private ownership of the means of production (monopolized in the hands of a single class) are qualitatively different from those that precede or follow the capitalist mode of production, likewise the relationships of production corresponding to collective ownership of the means of production are qualitatively determined and distinct from those of any other social structure. To confuse a new quality with a quantitative change can only hinder one's understanding of economic and social reality.

In today's capitalist regime, private ownership of the means of production does not actually exist in ''pure'' form. The owners of the means of production by no means ''completely'' control ''all'' the means of production. Some of them—particularly the small stockholders of the large trusts—control practically nothing. The large stockholders and directors of financial groups, of the large monopolies, are the ones who willfully take control of another's property and extract State subsidies—profit guarantees hidden beneath thousands of forms. In exchange, they yield some of their ''control'' over the means of production to the bureaucracy of their own enterprises as well as that of the State. Nevertheless, the mode of production corresponds, in effect, to the ''legal form'' of ownership. We are dealing with the same old capitalism, which determines its own laws of development.

During the period of transition, the State, the society, does not really ''control'' all the means of production in the socialist sector—at least not completely. But this is not the problem. Actually, the relationships of production correspond to the legal form of socialist ownership of the means of production from the moment that socialist planning by means of a single economic plan becomes really possible, once investments cease to be made according to the imperatives of gain and begin to be made according to the priorities of the plan. This is to say, once regular economic growth is possible, it overcomes the contradictions and laws of development of the capitalist mode of production.ⁱⁱⁱ

Comrade Bettelheim quotes a passage from Lenin describing the conditions for real socialist planning: the society's actual ability to calculate and distribute the productive forces (Lenin takes great care not to add ''completely''). This definition obviously is correct. In other of his writings, Lenin also defines the source of this ability: large-scale industry, industrial centralization brought about by banks and bank concentration, a large-scale transport system, etc. The problem must be posed in light of this definition: In a country such as Cuba, is it possible to ''calculate and distribute efficiently''—that is, to plan the use of machinery, raw materials, and labor in the country's few thousand industrial enterprises? The answer is obviously affirmative. Doubtless, it is at first done in an imperfect, partial, inadequate manner. The problem then, however, is not the level of development of the productive forces but organizational deficiencies and lack of experience. These can and must be corrected gradually, through practical experience, through development of cadres, through control, and through the creative initiative of the masses, etc. In fact, any other conclusion places doubt on the success of every socialist revolution in an underdeveloped country.

The passage quoted by Bettelheim in which Lenin distinguishes between nationalization and socialization really concerns the bourgeois or petty bourgeois sectors of the economy. We agree entirely with his point of view: The ''nationalization'' of tens or even hundreds of thousands of small, mutually in dependent peasant, handicraft, or commercial enterprises whose technique has not yet effectively socialized labor, and whose technological base (for example, agricultural mechanization) is inadequate to permit such socialization, is evidence of harmful voluntarism.^iv

But Lenin never denied that large-scale modem industry was ''mature'' for socialization in Russia or in a country like Cuba. To argue otherwise is to condemn the October Revolution as a utopian, voluntaristic undertaking.

We should add as well that the idea that society will some day ''completely'' control ''all'' the socialized means of production as well as ''all'' products is disputable. Here, comrade Bettelheim emphasizes the importance of industrial integration to arrive at some semblance of ''complete control.'' But he seems to forget that the growth of the productive forces produces a contradictory result: the integration of one part and the growing diversification of another. At the risk of provoking the anger of the admirers of electronic machines, we frankly doubt the possibility of achieving ''complete control'' over all the nails produced in an industrial country as highly developed as the United States or the U.S.S.R. (This is not to speak of a completely developed communist society.) We cannot support the thesis that the ''effective distribution'' of the means of production ''by a single economic entity'' is easier when there are 250,000 enterprises than when there are no more than 3,000. The Soviet experience has proved this in any case. It is precisely the colossal development of the productive forces that would today make rigid central planning much less operable, much less efficient, and much more detrimental to the optimum development of the productive forces than in the period of the first five-year plans. This was why changes were made in the Soviet industrial administration system during the 1 950s.

The important thing to understand is that we are actually dealing with artificial planning. ''Complete control of the means of production'' down to the last nail is a somewhat mechanical and technocratic approach and in no way the end goal of socialism. The nature of social ownership of the means of production does not reside, in the last analysis, in making such ''complete control'' possible, but in sufficient ''control'' to eliminate the action of the motive forces of capitalism and to assure economic growth according to other economic laws, those of a socialized and planned economy.
 

Relationships of Production and Level of the Productive Forces

Comrade Bettelheim makes a similar mistake in method when he deduces from the famous central passage of the ''Prologue'' to A Contribution to the Critique of Political Economy that the development of the productive forces determines the nature and transformation of the relationships of production in a direct, mechanical, and almost quantitative fashion. But here is the entire passage:

 

In the social production which men carry on they enter into definite relations that are indispensable and independent of their will; these relations of production correspond to a definite stage of development of their material powers of production. The sum total of these relations of production constitutes the economic structure of society—the real foundation, on which rise legal and political superstructures and to which correspond definite forms of social consciousness. The mode of production in material life deter mines the general characters of the social, political, and spiritual processes of life. It is not the consciousness of men that determines their existence, but, on the contrary, their social existence determines their consciousness. At a certain stage of their development the material forces of production in society come into conflict with the existing relations of production, or—what is but a legal expression for the same thing—with the property relations within which they had been at work before. From forms of development of the forces of production these relations turn into their fetters. Then comes the period of social revolution. With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed.^v

 

We may draw the following conclusions from this quotation:

1. Marx is using the notion of relationships of production in a very broad sense, practically identical to the notion of mode of production and economic structure, because he requires that ''the sum total of these relations of production constitutes the economic structure of society.'' The phrase that follows, ''mode of production in material life,'' is used as a synonym of ''the sum total of these relations of production.''

2. Marx establishes no direct correlation except between the relationships of production taken in this sense as economic structure (mode of production) and a certain phase of development of the productive forces; or, to put it another way, between a certain phase of development of the productive forces and the qualitative nature of the relationships of production, rather than a stricter and more mechanical correlation between every quantitative increase in the productive forces and quantitative changes in the relationships of production (that is, changes that do not conduce to the advent of a new mode of production).

3. Comrade Bettelheim has deduced from this passage, for no reason, that a mechanical correlation exists between the evolution of the productive forces during the transition period and the successive forms of production relationships that remain qualitatively undifferentiated. He assumes, at any rate, that once capitalism has crumbled there are no different modes of production and different economic structures that succeed one another in the march toward socialism.

4. Even the most determinant correlation between a specific phase of development of the productive forces and a specific quality of the relationships of production would not be valid except on a broad historical scale inappropriate to the short run and would become even more unrealistic for the ''periods of social revolution'' because such periods are obviously supported on two different economic structures, on two 'sum totals of relations of production''—the old, which does not die easily, and the new, which clears the path to victory with a varying number of difficulties.

Now, we are living precisely in this ''period of social revolution'' today, or, more succinctly, since the victory of the October Socialist Revolution. The struggle between capitalism and socialism—between a dying system that will not give up easily and a system that is just emerging and experiencing thousands of difficulties, imperfections, partial defects, and temporary set backs—is a worldwide struggle embracing an entire historical epoch. It is impossible during this period to determine at a specific moment, or for the short run, whether the level of development of the productive forces ''corresponds'' or ''does not correspond'' to the relationships of production brought about by the socialization of the means of production. And it is even more inconceivable to do so on a world scale rather than within the sphere of the particular country.

One of the characteristics of this period as a whole is, in fact, that the level of development of the productive forces ''corresponds'' to the struggle between capitalism and socialism. Capitalism may still survive even though it now obstructs the development of the productive forces. Even though the socialist revolution has not yet triumphed on a world scale, it can come to victory in several countries and in these introduce new relationships of production that are qualitatively different from those of capitalism. There is practically no specific correlation in any country between the precise level of development of its productive forces and the feasibility of introducing such new relationships of production.

This is so true that, as Lenin sensed so clearly, the imperialist chain breaks first at its weakest links. The series of victorious socialist revolutions from 1917 to 1959, from Czarist Russia to semi-colonial Cuba, has affected almost exclusively those countries in which the level of development of the productive forces is grossly inferior to that of the more developed capitalist countries.

This in no way contradicts the general laws of historical materialism formulated by Marx in the ''Prologue'' to A Contribution to the Critique of Political Economy. It simply means that the ''certain stage of their development [when] the material forces of production come into conflict with'' the old capitalist mode of production, with the antiquated capitalist economic structure, should be understood as the worldwide development of productive forces achieved since the First World War. Its concrete configuration explains particularly why imperialism is such an enormous obstacle to the continued development of the productive forces in colonial and semi-colonial countries. Thus, the victory of the socialist revolution is objectively possible even in those countries called ''underdeveloped.'' Socialized relation ships of production may be introduced into these countries, especially because such countries already possess or can rapidly acquire industrial sectors based on the highest level of con temporary technology, which implies a high degree of effective labor socialization.^vi

It is true that new contradictions between the level of development of the productive forces and the relationships of production may arise after the victory of the socialist revolution and that these contradictions will finally be resolved by changes in the relationships of production. But there neither is nor will be a mechanical correlation between each important phase of development of the productive forces and changes required in the relationships of production. And most important, such changes will be quantitative. They will affect neither the nature of the already socialized relationships of production nor the social nature of the large-scale means of production that evolve out of the changes themselves. The only qualitative change in the relationships of production will be determined by the extinction of the mercantile categories and the broad social automation of industry.


The Historical Conditions Leading to the Extinction of the Mercantile Categories

Although we have criticized several of comrade Bettelheim's positions, we agree with him completely in rejecting Stalin's theory that the basic reason for the survival of the mercantile categories in the Soviet economy is ''the existence of two forms of socialist ownership: ownership by the people (that is, the State) and ownership by more limited social groups (essentially the kolkhozy).'' Bettelheim rejects this reasoning because it ''would be equivalent to explaining economic categories by a particular legal superstructure.'' In the final analysis, the survival of mercantile categories corresponds to the inadequate development of the productive forces. This prohibits the distribution of consumer goods according to the maxim ''from each according to his ability, to each according to his needs.'' Thus, the portion of consumer goods produced that go back to each worker should be measured exactly, which implies its exchange for a given quantity of labor (according to the Marxist theory of value, different qualitative types of labor can be quantified).^vii

It follows that the historical reason for the survival of the mercantile categories during the period of transition is to be found in the level of development of the productive forces that is still inadequate to ensure the distribution of consumer goods according to need. The above implies that the historical factors conducive to the process by which the mercantile categories are extinguished— following the victory of the socialist revolution—have to do mainly with the development of the productive forces. Such development assures the abundance of consumer goods.

The new program of the CPSU, approved by the XXII Congress, incorporated this idea as set forth in our Traité d''Economie Marxiste.^viii

By the same token, the CPSU implicitly rejected Stalin's thesis regarding the ''ever-growing needs of the people'' under socialism—unless the thesis is limited to the phase during which the mercantile categories still survive. A moment of reflection will lead one to realize that to assume the ''limitless'' expansion of ''needs'' and individual consumption is actually to deny the feasibility of communism. Material abundance would be impossible, and the mercantile categories, which in fact correspond to a state of semi-scarcity of goods and economic resources, would survive.

In our Traité d''Economie Marxiste, we described in detail the concrete mechanism through which the mercantile categories will be extinguished. The development of the productive forces will enable the society to satisfy progressively a number of needs for goods and services. The elasticity of demand for these goods and services will evolve toward zero and may even become negative. This means that distribution according to need without the medium of money will engender only insignificant risks of waste,^ix that can be eliminated by means of education, propaganda, social control, etc.

It also implies significant economies in means of circulation and costs of distribution. The higher the level of development of the productive forces, the greater the number of goods and services that can be distributed in this way and the greater the portion of each citizen's consumption that is provided free by the society rather than attained as a result of individual reward. We mean free to the individual, of course. The society must al ways expend a certain amount of labor—that is, some fraction of available labor power and economic resources—on satisfying these needs. Thus, it ''charges'' the satisfaction of such needs to its general budget.

Clearly, at a certain point in this evolutionary process, it will become irrational to increase individual money income because such income can then be used to buy only a small and declining portion of available goods and services. Society will recognize that there is a growing possibility of eliminating the mercantile categories and will drastically cut back money income. Money will be ''cornered'' in increasingly marginal areas of economic and social life, becoming more and more removed from the consciousness and habits of the people. It will eventually become a mere unit of account and will then finally be replaced by direct calculus in units of labor (which is facilitated by the development of electronic calculating machines).

Obviously, it would be a mistake to believe that the process by which the mercantile categories are extinguished is conditioned solely by the progress of the productive forces. Indeed, the productive forces play the principal role in this evolutionary process, which is actually the most significant revolution ever witnessed by man. But the process itself is dialectical in nature and is conditioned as much by changes in society's productive forces as by changes in man's conscience and current behavior.

Man has lived under the system of the 'struggle for individual survival'' for millennia. To paraphrase Lenin, social practice had proved that a man's choice was between being the thief and being robbed. The antisocial habits of individual behavior en gendered by such experience cannot be eliminated immediately after the revolution. A long and difficult job of education must be done to overcome such behavior. Here, voluntary work plays a particularly preponderant role.^x

But all the revolutionary drive and all the socialist enthusiasm will not be enough to purge the masses of the old ideas handed down by ''the man of the past who has not yet completely emerged from the animal kingdom.'' This is true so long as daily life contradicts and neutralizes in part the effects of socialist education; so long as the productive forces are not sufficiently developed to satisfy the basic needs of all the people; so long as equality is not total; so long as greater individual effort may still result in appreciable individual advantages; and so long as those who obtain such advantages may live better and better satisfy their needs than those who lack them.

Only when ''free'' distribution of goods and services makes it possible to completely satisfy the people's basic needs; only when the first generations of socialist man come of age, man who has never known thirst or hunger or cold or lack of shelter because society has guaranteed him the automatic satisfaction of all his needs; only when man has actually been liberated from the slavery of ''material need'' and become fully conscious of the ''miracle'' he has just lived, and when this consciousness creates a second habit, a second nature. . . . Only then will it become normal for man to contribute his labor to society in complete accordance with his ability and with no expectation of a greater or precisely measured reward because he has received from society beforehand all that he needs. And only then will the communist consciousness have definitively triumphed in the masses (although it is essential to begin communist education and practice immediately following the socialist revolution's victory).


Concrete Mechanisms of Survival of the Mercantile Categories

We already know that the survival of the mercantile categories into the period of transition manifests, in the last analysis, the low level of development of the productive forces existing at the time the socialist revolution comes to victory. We must now determine through what mechanisms the deficiency enables these categories to survive and define the exact sphere within which they operate during the period of the dictatorship of the proletariat.

A first category of commodities, which undeniably exists during the period of transition, relates to the whole of private peasant and handicraft production, which is by definition small mercantile production. Everything not consumed by the producer in this sector is commodity production. The same is with true regard to production and sales cooperatives insofar as there is a clear change of ownership when the cooperative sells goods to the people or to the State.

A second category of commodities derives automatically from the existence of the first: It relates to all the means of production and exchange sold by the state sector to the private or co operative sector: machines, fertilizers, agricultural tools, transportation equipment, commercial devices, handicraft tools and equipment, etc. Here, again, the commodity nature of the goods cannot be doubted because they are clearly exchanged, that is, they change ownership. Obviously, the same is true of all means of production that are exported.

A third category of commodities poses more theoretical than practical questions. All consumer goods sold by the socialist sector to private consumers (including imported consumer goods) constitute commodities, because there is an evident change of ownership. Idle enough discussions are possible as to whether the exchange of wages for commodities (consumer goods) is an actual act of exchange depending on the degree to which wages are no longer classic ''wages,'' that is, the price of labor power. Such arguments have root in another regarding whether the 'sale of labor power'' still takes place during the period of transition (Bettelheim, following Soviet authors, says no).

We contend that these discussions are fruitless because, in fact, nobody denies that consumer goods sold to individual consumers are commodities, nor that the ''distribution of a portion of the social product'' to the worker: (a) is effected by a precise and strictly calculated method (the 'social wage'' does not, up to this point, play more than a marginal role in socialist countries); (b) is effected solely in exchange for labor (social security payments, as in the advanced capitalist countries, can be considered an integral part of the ''price of labor power'' that extends over the life of the worker, and must, in particular, guarantee the reproduction of the proletariat); and (c) continues to be an economic obligation rather than an expression of consciousness and habit deriving from the fact that work has been transformed into a natural and social need.

If these three characteristics are admitted—and we do not see how they can be denied—it is useless to argue whether labor power is sold, because the real economic content of the sale is already admitted. The objection that one cannot refer to the sale of labor power ''because producers are no longer separated from their means of production and . . . are, to the contrary, collective proprietors'' appears to us to stem from a simple misunderstanding: Why cannot a member of a collective enterprise, a co-proprietor of the enterprise, sell individually owned property to that enterprise? The crux of the matter is that labor power is still private property, while the means of production are already (in essence) collective property. To abolish private ownership of labor power before the society can assure the satisfaction of all its people's basic needs would actually be to introduce forced labor.

But the essence of the debate hinges on still a fourth category of commodities: the means of production within the socialist sector. In our opinion, these are not commodities because there is neither exchange nor substitution of ownership. The transfer of means of production from one State enterprise to another is at bottom no more than the transfer of a product from one factory to another within a large capitalist trust. Certainly, it presents the appearance of a mercantile operation because it occasions a ''price'' for the purpose of economic calculus and control. But this apparent form does not imply real mercantile content: Means of production that are not removed from the socialist sector are not true commodities.

Comrade Bettelheim's attempt to refute this thesis constitutes the central nerve of his article. He basis himself chiefly on two arguments, which are discussed below.
 

Are the Means of Production of the Socialist Sector Commodities?

Comrade Bettelheim's first argument (and by far the most important): If in determining whether there is commodity production one bases himself on the legal form of ownership alone, he is committing a serious methodological error, in fact determining phenomena of the economic structure by those of the superstructure rather than the contrary. For Marx, the production and exchange of commodities merely manifest a fundamental phenomenon of the economic structure, that is, that labor contributed by commodity producers is not yet direct social labor. Producers do not agree on a plan of production; rather, they find themselves in an anarchic market. Only after exchange operations have been established, regulated by the ''invisible hand'' of the law of value, can one ascertain whether labor expended on the production of commodities has been socially necessary labor.

Marx expressed this difference succinctly in a letter to Kugelmann on July 11, 1868:
 

… that the mass of products corresponding to the different needs require different and quantitatively determined masses of the total labour of society. That this necessity of distributing social labour in definite proportions cannot be done away with by the particular form of social production, but can only change the form it assumes, is self evident. No natural laws can be done away with. What can change, in changing historical circumstances, is the form in which these laws operate. And the form in which this proportional division of labor operates, in a state of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products.^xi

Let us now pose the following question: Are the society's labor power and material resources divided among the different socialized factories that manufacture the means of production during the period of transition according to ''private exchange among these factories'' (that is, according to the law of value)? Or are they divided, on the contrary, according to a plan pre-established by the society? Obviously, they are divided according to the plan; were it otherwise the anarchy of capitalist production would be in full reign. There is not, therefore, true exchange among these factories, nor production of commodities in this sector.

Now, as regards consumer goods, the situation is completely different. A production plan exists; but as consumers are free proprietors of their wages, and as they actually exchange their wages for the consumer goods they choose to buy (within their possibilities), there is doubtless an important element of anarchy present in this sector. In the final analysis, the market (and consequently ''the law of value'') determines the ''interconnection'' among individuals. Brusque changes in preferences, tastes, and priorities on the part of millions of consumers, even a ''consumer strike'' (to protest high prices, poor quality, or inadequate product mix), may completely change the ''provisions of the plan.''

In this concrete way, the nonmercantile nature of the socialized means of production (in which no ''private exchange'' intervenes because there is no private ownership) becomes apparent in practice, as does the mercantile nature of consumer goods (which concern consumers who clearly are ''private owners'' of their wages, and in this sense engaged in ''private exchange'' operations).

How does comrade Bettelheim define the nature of direct or indirect social labor under the regime of the dictatorship of the proletariat? He writes [page 51]:

 

… although the plan fixes the amounts of labor that should be expended in the different branches of production, it can do so only approximately. One can know only ex post what portion of the labor expended on different products is socially necessary labor.

The existence of mercantile categories and money in the midst of the socialist sector means, in effect, that the socialization of labor takes place partly through the market.

This analysis, which on the whole is correct relative to consumer goods, is wrong with regard to the means of production. In order to demonstrate this difference, we will state a practical problem: One can determine only on an a posteriori basis (that is, as respects the market) whether commodities contain more labor than is socially necessary. But how does this fact become concretely apparent? Clearly, by the possibility of overproduction. Commodities may remain unsalable, and this unique quality is what demonstrates in practice that the labor time expended on their production has been, from society's viewpoint, wasted.

Can consumer goods produced by socialist industry remain unsalable? Without any doubt, and one can ennumerate many cases in which this has actually taken place.^xii Can the means of production of the socialist sector remain unsalable? Can there be ''overproduction'' of the means of production in the socialist sector? Obviously not. If, by ''accident,'' production of machinery and equipment exceeds the figures of the plan or surpasses its technological provisions, there is nothing to stop socialist industry from using the surplus to go on to a succeeding stage of expanded reproduction, either at once or in the future.^xiii Thus, the means of socialist production, never being ''unsalable,'' cannot contain 'socially unnecessary labor.'' The means of production, then, immediately and automatically crystallize social labor; it is unnecessary for them to go through the medium of exchange to determine that condition. The means of production, therefore, are not commodities.

This does not mean that they cannot have been produced at a cost greater than the measure of the social productivity of labor or greater than the cost provided for in the plan, etc. The crux of the question is that even in this case they are not ''unsalable'' or lost to the society, because their division is effected according to the needs of the society as established by the plan, and not according to their ''mercantile value.'' There are successive degrees of efficiency in socialist planning; but even the lowest degree of planning implies a greater degree of economy in the use of society's labor time than is possible in the capitalist economy.

As the interdependence among the various ''units of production'' corresponds to a certain level of development of the productive forces, the lack of integration among these units reduces the real economic content of social ownership of the means of production, and the means of production, therefore, may belong to the enterprise. Thus, the circulation of the means of production among State enterprises clearly constitutes a process of ex change because to a degree there is transfer of ownership.

Here comrade Bettelheim confuses two notions—that of technical integration of the production process and that of social integration, which does not automatically derive from the first, but rather, in essence, from the levels at which 'strategic'' decisions regarding the enterprise are made: investment and price policies.

Let us take an example from today's monopoly capitalism. In the 1920s the Lever Bros. Unilever trust came (for reasons we need not enter into here) into simultaneous control—that is, to possess in the sense of actually controlling the means of production—of soap factories, plantations producing raw materials for the factories, paper, fishing, engineering and construction enterprises, etc.^xiv

No one could seriously claim that there was then—or could be today—any degree of actual technical integration among these different enterprises. But their financial integration—including numerous ''compensatory operations''—was a very real phenomenon, bound together with ready money. And if the manager of a factory belonging to the trust had dared to consider the factory's means of production as belonging ''to a degree'' to the factory rather than to the trust, he would have found himself not only unemployed but possibly imprisoned.

Under the capitalist regime, such ''integration'' does not eliminate the mercantile nature of the means of production produced under these conditions, because it is only partial. In other words, ''integration'' encompasses only a small sector of the economy that is still regulated by the anarchy of production. During the period of transition to socialism, financial integration —including the possibility of ''compensatory operations''—en compasses industry as a whole. Under these conditions, to allege the absence of technical integration in order to characterize production as mercantile, to deny that labor expended on the production of machinery and equipment is direct social labor, makes no sense. Simply knowing the complexity of the decision-making process—to what degree minor decision-making must be centralized or decentralized in relations among the various enterprises—is merely a problem of organization and not ''proof'' of the mercantile nature of the means of production during the period of transition.


The Law of Value During the Period of Transition

We have come to the heart of the debate and to the point at which the relationships between theoretical analysis and the political economy of the State during the transitional period become clear.

Because mercantile production continues to exist, the law of value will continue to operate to some extent. Mercantile production precedes and follows the capitalist mode of production. It precedes it during the whole period of small mercantile production and follows it up to the point at which the distribution of consumer goods can be effected according to the needs of the people under conditions of abundance. In a sense, then, the law of value plays a role before the advent of capitalism, during capitalism, and after capitalism. But such a statement is empty until the law's sphere of operation is defined relative to each successive form of social organization.

Under petty mercantile production as, for example, in classic feudal society, the law of value actually regulates nothing except commodity exchange. Moreover, it regulates exchange in a direct way, because the quantity of social labor necessary to produce most commodities is known and is unchangeable over a long period of time. The law of value does not essentially regulate the division of available labor power among the various sectors of the economy. This still depends on the feudal structure, especially the serf's bondage to the soil.

In capitalist society, the law of value regulates commodity exchange as well as the division of labor power and economic resources among the various sectors of the economy. But it now regulates indirectly rather than directly through capital competition and deviations from average profit. Capital flows into sectors where profits are above average and out of sectors where profits are below average. Enterprises whose technology enables labor productivity to rise above the average, which economize on socially necessary labor time, are rewarded in the market by above average profits. Enterprises whose technology holds productivity to below the average waste social labor and are ''penalized'' by below average profits, etc., etc.

Let us now return to the main problem. What is the function of the law of value during the period of transition? We know that production retains a monetary form during this stage (for the reasons already indicated) even though the form varies in content according to the product categories under study. This monetary form itself implies, however, the strategic nature of economic decisions in the areas of investment and prices.

Can the ''law of value'' guide socialist investment? This would not only put an end to all real planning, but, even more, would condemn the underdeveloped countries—and all countries engaged in the process of building socialism that until now have been underdeveloped, with the exception of Czechoslovakia and the GDR—to remain underdeveloped for a long time, if not indefinitely. Clearly, in an underdeveloped country, agriculture is more ''profitable'' than industry, light industry is more ''profitable'' than heavy industry, small-scale industry is more ''profitable'' than large-scale industry, and, above all, the importation of industrial goods from the world market is more profitable than their manufacture domestically. To permit investment to be governed by the law of value would actually be to preserve the imbalance of the economic structure handed down from capitalism.^xv

The same is true relative to a whole system of prices. If the means of production are priced according to their inherent values during the initial phase of industrialization, they will, of course, be dearer than the same products manufactured abroad. Were enterprises left ''free'' to select their own suppliers so as to maximize profits, they would provision themselves from abroad. But if this is not the objective, if one recognizes that foreign trade is monopolized and that control over imports and exports is in the hands of the State, then he must realize for the same reason that the law of value's sphere of operation is restricted by the State foreign-trade monopoly.

Does this mean that one can ''negate the law of value?'' Obviously, this is an absurd way to state the problem. We are concerned with a tough, long-term struggle between the principle of conscious planning and the blind operation of the law of value. During this struggle, the planner can and must consciously use the law of value to an extent so as to deal with it more effectively in an overall way. In particular, this suggests:
1. The need for objective, serious, and controlled cost calculus in all socialized enterprises, beginning with the producer's goods sector.
2. The need for a new awareness of what constitutes an over all price policy. Basically, there are only two possible methods: 'subsidization'' (the sale of a commodity at a price below production cost) and ''indirect taxation'' (sale at production cost plus an arbitrary tax). Once the funds retained for socialist accumulation and other budgetary costs have been taken into account, avoiding double entries caused by use of gross indices, the sums of these two operations must balance out. (Only the ''accountable value'' that has been created can be distributed.)
3. The need to avoid price distortions, particularly with regard to consumer goods. In other words, commodities should be priced according to the amounts of labor expended on their production. One commodity should not be priced higher than another that has required more labor to produce—unless there is a conscious desire to reduce consumption of the item.
4. The need to constantly compare production costs with average world-market prices. This enables one to make the most propitious changes in import/export plans, as well as to calculate the actual net revenues that exports can add to the country's accumulation fund. Such comparison also allows one to establish a number of medium and long-term labor productivity goals: to obtain per-unit costs equal to or below world-market prices.
5. The need to stimulate production by small proprietors (especially in the agricultural sector) by offering them industrial commodities in exchange for their products under conditions that do not appear too unfavorable (avoiding the 'scissors'' formed between agricultural and industrial prices that could ''cut'' the worker-peasant alliance in two).
6. The need to design a policy whereby prices would revolve around values in the consumer-goods sector (within the limits set by resource availability and accumulation policy). Raising the producer's standard of living is a major way to stimulate output and raise labor productivity. Under certain conditions, when consumer goods of industrial manufacture are costly and in short supply on the domestic market, it may be advisable to import them on a large scale in order to bring about an increase in domestic output. A scarcity of consumer goods severly restricts the use of ''material incentives,'' as workers have no long-run interest in merely accumulating paper money.

Consumer goods acquired by producers could, moreover, be considered as ''indirect means of production,'' above all in the underdeveloped countries. Their stimulating effect on current production has been proved.^xvi

In light of the above, let us examine the following passage from comrade Bettelheim's article [page 52]:

 

This leads to the impossibility of satisfactorily, that is, efficiently, carrying out an integral a priori distribution of the means of production and products in general, and to the need for socialist commerce and commercial State agencies. Here lies the reason for the role of money within the very heart of the socialist sector. The role of the law of value and a price system must reflect not only the social cost of the different products but must also express the relationship between supply and demand for these products. It must assure, eventually, a balance between supply and demand when the plan has not been able to do so a priori and when the implementation of administrative measures to bring about this balance would compromise the development of the productive forces.
 

We will ignore the ''integral a priori distribution of the means of production and products'' through planning. This was treated above. We will also ignore the ''need'' for socialist commerce, which in no way results from the so-called impossibility of ''integral distribution.'' (During the communist phase, abundant production will by definition be consistent with ''integral a priori distribution.'' Though only because of the existence of considerable stocks and a degree of free fluctuation of the people's needs, the ''need for socialist commerce'' will have disappeared a long time ago.) Rather, it results from an inadequate supply of consumer goods, that is, relative scarcity. The crux of the problem is price policy and the law of value's influence on investment policy, which cannot be based on comrade Bettelheim's general formulae.

What exactly does he mean by saying that prices should reflect not only the social costs of the different products but also the relationships between supply and demand? Are we perhaps dealing with all prices, all consumer goods, and all producer's goods? If the answer is yes, then, in an underdeveloped country engaged in industrialization, would not this imply that the entire price structure would systematically rise to extremely high levels, which would in turn compel the country to heavily subsidize imports (frequently in disproportion to actual production costs)? What would be gained by such a ''bookkeeping operation''? The law of value would be ''respected'' in one area and openly violated in another.

Clearly, comrade Bettelheim is not suggesting that the overall price structure be determined ''by market forces.'' This would mean abandoning socialist planning in favor of investment determined by ''effective demand'' as indicated by a scale of ''market prices'' for the means of production. Comrade Bettelheim appears instead to be concerned with balancing excess demand (relative to the plan) with additional supply induced (through hidden reserves) by the incentive of ''market prices.'' In a sense, this would be to legalize and institutionalize the ''parallel market.''

We will not deny that some increase in production can be obtained this way. But one should be aware that:
a. This method could lead to major social injustices to which workers would not easily submit. Under conditions of privation, even rationing would ensure greater equity.
b. The prices formed by this ''free'' market would not coincide with average costs of production, and they would inevitably cause distortions as well as an enormous amount of speculation, which could well disrupt the plan in the area of production. For example, in some world agricultural-product markets, prices are formed according to changes in supply and demand caused by national production surpluses in the large exporting countries; in other words, by an insignificant fraction of world production. This leads periodically to drastic price shifts. Even bourgeois economists see the need to control this chaotic state of affairs in the capitalist economy. Is it really worth considering its introduction into a socialized economy?
c. This method may create additional disturbances rather than bring about the more harmonious operation of socialized industry, because the face-to-face existence of two systems of prices, some low, some high, is a permanent temptation for enterprises to shift some part of the production intended for the regulated market to the ''free market.'' This is especially true if such enterprises operate under the auto-finance system. The logic of a system of ''free'' prices determined by equilibrium between excess demand and additions to supply would exert a growing pressure to have investment priorities determined by the size of unsatisfied effective demand. It is useless to recall that this would mean building luxury apartments before investing in public housing. In other words, it would be to recreate an economic logic nearer capitalism (where investment is determined essentially on the basis of the profit to be derived from effective demand) than socialism (where investment is deter mined by priorities consciously established in accordance with socialist socioeconomic criteria).^xvii


Socialist Organization and Financial Economy of Enterprises

As a whole, the theoretical problems put forward by comrade Bettelheim suggest, in short, some practical options in the area of economic organization. Thus, comrade Bettelhejm advocates ''limited freedom of action'' to each unit of production. According to him [page 531, this freedom of action, with means of production within the socialist sector defined as commodities:

… makes the principle of accounting autonomy meaningful. Economic calculus should be performed at the production unit level, and each unit should be allowed to make use of its potential for auto-financing.
 

Again, this conclusion does more to raise problems than it does to answer questions concerning the organization of the socialist sector during the period of transition. Comrade Bettelheim will certainly admit that the idea of financial autonomy of enterprises^xviii can by no means be used as a general and absolute rule for organizing socialist industry. To argue the contrary would actually be to propose a step backward in relation to monopoly capitalism, for the latter already employs a far greater degree of autonomy in the form of compensatory operations practiced by large holdings, trusts, and financial groups. In fact, the economic progress made possible by socialist planning, as compared to the capitalist economy during the monopoly period, is due largely to the fact that the former goes beyond estimating profits for individual financial units (each capitalist trust already groups together a number of production units) to calculus of the return to the national economy as a whole. The best national return is never the sum of the best returns to the various financial units.^xix

Consequently, if one is to avoid extremes that would erode all socialist planning (extremes leading to, for example, refusal to finance the payroll obligations of an enterprise operating at a -loss, which would assist the birth of phenomena such as 'socialist bankruptcy,'' 'socialist layoffs,'' and 'socialist unemployment''), he cannot really speak of financial autonomy except within certain limits. Rather than argue this question in the abstract, we should examine such limitations empirically and determine the potential for autonomy that they permit.

Now, one comes up against a problem of method when he approaches the problem in this way. A criterion of ''return'' (in common language: ''profit'') is advantageous in that the return comes about, in a sense, from all commercial and economic activities carried out within the sphere of the entity under study (the national economy, industry as a whole, an industrial branch, a group of enterprises, an individual enterprise). But this ad vantage also implies a prerequisite: that those who make the decisions on the part of the entity in question are actually able to manipulate all the levers of economic activity. Once a number of levers are obstructed because they are remote controlled, economic return loses its efficacy as an optimal criterion for guiding that partial economic activity. This is the reason why a giant capitalist enterprise employing tens of thousands of workers does not always use it as a basis for regulating the interrelations among the different shops or factories that compose the trust.^xx

In the socialist sector during the period of transition, however, at least some of each enterprise's essential decisions must be made at long distance. For example, in Yugoslavia, the most decentralized of the socialist economies, large national investment projects, as well as machinery and raw-material prices, are still determined strictly by the central authorities. One may conclude from this that the economic efficiency of the individual profit criterion is quite limited, to say the least.

The discussion should center on the methods and factors of organization that argue for or against ''centralization'' or ''de centralization'' of this or that concrete decision. The more under developed a country's economy, the fewer able, experienced, and truly socialist technical cadres it will have, and the wiser it is, in our opinion, to reserve decision-making power over the more important investments and financial matters to the central authorities. As the economy progresses and becomes more sophisticated and diversified, the number of able technical cadres grows, and successive moves toward decentralization become appropriate as risks are lowered. But this should take place within the frame of reference described above. In any case, the decentralization of executive functions is advisable when organizational conditions so permit.

The central issue of comrade Bettelheim's argument is, it appears to us, the struggle for increased labor productivity, for higher returns, and the selection of a system of economic ad ministration that most favors such growth. With regard to a system under which prices, basic wages, large investments, and broad planning lines are determined centrally, the issue is reduced to two questions: the enterprise's internal work organization and material and moral, individual and collective incentives.

As to the enterprise's internal organization of work and production, we believe it is essential to pursue the goal of placing administrative responsibility in the hands of the workers them selves (laborers and employees). One cannot conceive of social ism, much less communism, without this ''performance of administrative functions by each worker in turn.''^xxi Once such a goal has been decided on, the steps leading to it must be determined, considering the worker's level of consciousness and technical training, the deficiencies present in organization, the technical imperatives, and so forth. It turns out, then, that in practice the mobilization of the creative and organizational ability of the working class is an excellent way to increase labor productivity provided the working class is closely associated, through ad hoc committees, with enterprise management, and that the same methods of explanation discussion, persuasion, and mobilization of the masses that have had such success in other areas of the Revolution should also be employed in the area of production.

As to incentives, we have previously expressed the reasons why we believe it is impossible to base oneself entirely on moral incentives, on socialist education of producers. Such education must be supported by an economic and social reality that does not largely neutralize its effects.

But this does not justify a preponderant role for any material incentive. A system of such incentives creates, in effect, an economic and social reality that conflicts with the raising of the worker's socialist consciousness. For example, there are incentives that cause division among workers within an enter prise (piecework, stakhanovism) and there are incentives that bring about competition among enterprises, thus bringing the material interests of enterprise administrators (or members of a collective) into conflict with the interests of the economy as a whole.^xxii Clearly, such incentives help to rapidly increase labor productivity. But they also have unhealthy effects, both in the long and the short run, on socialist attitudes toward work and society as a whole, effects that could neutralize any immediate advantages, including economic.

In fact, we must start with a dialectic of ends and means. Some means will not conduce to the intended ends, whatever may be the honorable intentions of those who propose them. The objective results obtained from using such methods tend to put off the proposed goals rather than bring them nearer. From this point of view, it would be advisable to choose material incentives that at the moment are of an educational nature, which would contribute to, rather than detract from, the growth of the worker's socialist consciousness. In this regard, we would suggest an incentive based on progressive levels of training (which stimulates effort toward study) and a collective material incentive based on distributing a portion of additional resources obtained through improved organization and labor productivity (which stimulates, in particular, collective interest in work or ganization and enterprise management).


Mercantile Categories and Mode of Distribution

On the premise that the mercantile categories of distribution survive in all socialist countries, comrade Bettelheim concludes his article by attempting to prove that they also survive in the relationships of production of the socialist sector. Because, he says [page 53]:
 

… It is commonplace in Marxist analysis to recognize that relationships and modes of distribution are determined by the organization of production.
 

Once more, he applies dialectical method superficially. The correlation between the mode of distribution and the mode of production is obviously a ''law'' of historical materialism. But we are dealing with a 'structural'' law, that is, with a correlation that is real only on an historical scale at the level of an economic structure taken as a whole (for example, its progress as a whole). To apply such a 'structural'' law to a transition period is like trying to understand the transition through the categories of formal logic. It can only lead to error.

The classic Marxist theorists unanimously agree that during the period of transition from capitalism to socialism there is no integral correlation among the mode of production, the relationships of production, the mode of exchange, and the mode of distribution; on the contrary, there is a combination of contradictory elements. Theoretically, there can be no doubt that between capital ism and communism there lies a definite transition period which must combine the features and properties of both these forms of social economy.^xxiii

Engels stated the matter even more succinctly (i.e., regarding the relations between the mode of production and the mode of distribution during the phases of transition from one economic structure to another):
 

Distribution, however, is not a merely passive result of production and exchange; it has an equally important re action on both of these. Each new mode of production or form of exchange is at first retarded not only by the old forms and the political institutions which correspond to these, but also by the old mode of distribution; it can only secure the distribution which is essential to it in the course of a long struggle.^xxiv
 

And Karl Marx was still more incisive in speaking of the mode of distribution that would exist during the first phase of socialist society. In the Critique of the Gotha Program, he refers to the 'survival of bourgeois law'' and bourgeois standards of distribution. Comrade Bettelheim, of course, believes that Marx lacked perspective on the matter [page 54]:

… because at the time he wrote there seemed to be a definite possibility that the society would control the entire process of social production and reproduction. But the possibility appeared greater than it really was or, for that matter, is now.
 

Marx made no mistake in denying the feasibility of socialist planning (which eliminates the mercantile categories in the socialist sector) so long as these categories (bourgeois law) survived within the sphere of distribution. The replacement of money by ''labor bonds'' does not imply the replacement of the capitalist mode of distribution by a socialist mode, but simply the substitution of one form of bourgeois distribution by another. Marx specifically states that there is only one possible socialist or communist mode of distribution-that is, which does not correspond to bourgeois standards of distribution: distribution according to need. He even says that the development of the productive forces at the time capitalism is overthrown would be inadequate to support the immediate introduction of the communist mode of distribution. He does not, then, explain the existence of these bourgeois standards of distribution on the basis of phenomena related to the legal superstructure (''a dilemma linked essentially to the ‘survival'' of certain norms of bourgeois law''), as Bettelheim contends, but rather based on the inadequate development of the productive forces.^xxv

In other words, Marx confirms our analysis that the principal contradiction during the transition period is between the non-capitalist mode of production and the bourgeois standards of distribution. Thus, there is no need to search further for the origin and meaning of the survival of the mercantile categories during this period. For those who ignore this at times, Lady Dialectic continues to be the heartless Bella Dama.



NOTES