3: The "Socialist Market"
3: The "Socialist Market"
Profit is realised, of course, not in the
production of commodities, but in their sale:"Profit is determined on the basis of the goods marketed, and not on the basis of those produced".
(G. Kosiachenko: "The Plan and Cost Accounting", in: "Finansy SSSR" (USSR Finances), No. 12, 1964, in: M.E. Sharpe (Ed.): "Planning, ProfIt and Incentives in the USSR", Volume 1; New York; 1966; p. 245).
Thus, in order to realise their aimed-for profit, enterprises must gear their production of commodities to their assessment of the
market for these commodities:"Under socialism the market is... a sphere for the marketing of products -- means of production and consumer goods manufactured by state and cooperative enterprises".
(L. Gatovsky: "Unity of Plan and Cost Accounting", in "Kommunist" (Communist), No. 15, 1965, in M.E. Sharpe (Ed.): op. cit., Volume 2; p. 88).
Regulation of social production by the profit motive means, in fact,
regulation by the market:"The market mechanism should be resorted to on a larger scale".
(G. Kosiachenko: ibid.; p. 243).
"Without utilising the mechanisms of the socialist market..., it is impossible to ensure the operation of enterprises on the basis of complete khozraschot".
(R. Rakitsky: "Bourgeois Interpretation of the Soviet Economic Reform", in: "Voprosy ekonomiki" (Problems of Economics), No. 10. 1965, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p. 129).
"We must acknowledge that.. the market mechanism.. plays a regulating role in socialist production".
(L. Konnik: "Planning and the Market", in: "Voprosy ekonomiki" (Problems of Economics), No. 5, 1966, in: "Problems Of Economics", Volume 9, No. 8; December 1966; p. 31).
The Soviet market is one where not only prospective buyers of a commodity but also prospective sellers -- the enterprises which produce it -- are in competition with one another -- although most contemporary Soviet economists prefer to speak of "emulation" rather than competition in the case of the "socialist market":
"The enterprise will compete for orders; the competition will be based on comparisons of guarantees of quality, delivery dates and prices".
(E.G. Liberman: "The Plan, Direct Ties and Profitability", in: "Pravda" (Truth), November 21st., 1965, in: M.E. Sharpe (Ed.) op. cit., Volume 2; p. 176).
"An individual or a collective engages in emulation with other individuals or collectives...
The economic reform and the introduction of the sectorial principle of managing industry have created favourable conditions for concrete emulation between enterprises in the same sector".
(V.K. Fedinin: "The Economic Reform and the Development of Socialist Emulation", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 241, 244).
Thus, the forces of the "socialist market" are the economic forces of
supply and "demand" which operate in an orthodox capitalist country:"Market demands... are a major factor in determining proportions in the national economy....
Ruble control by the customer... is an effective economic lever in the struggle for better consumption properties and efficient inexpensive output....
The market is characterised at each given point in time by a definite correlation between demand and supply....
Under socialism, since commodity production exists, the objective economic law of demand and supply (of their mutual conformity) operates....Disregard for the law of demand and supply exerts a negative effect on the economy".
(L. Gatovsky: ibid.; p. 85, 88, 89;
"Without utilising the mechanism of the socialist market and such of its categories as the current business situation,... supply and demand, it is impossible to ensure the operation of enterprises on the basis of complete khozraschot"
(B. Rakitsky; ibid.; p. 129).
"Today it is generally acknowledged that the problem of marketing and of market fluctuations continues even in the planned socialist economy".
(L. Konnik: ibid.; p. 25).
Contemporary Soviet economists claim, like their counterparts in orthodox capitalist countries, that these market forces, operating through the profit motive, regulate social production in such a way as
to satisfy -- as far as existing productive resources at a particular time will permit -- the requirements of the people:"Increase of profit under socialism is one of the means for the achievement of the aim of socialist production -- to satisfy most fully the requirements of the people".
(L. Gatovsky: "The Role of Profit in a Socialist Economy", in: "Kommunist" (Communist), No. 18, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 92).
"Under socialism, profit.. is an economic instrument for developing socialist enterprises and materially stimulating their activity..
The main object of socialist production is to satisfy the people's requirements....
Measures reinforcing the role of profit...are socialist measures aimed at developing the economy and building communism".
(Editorial: "Economic Policy and Work for Communism", in: "Pravda" (Truth), January 14th., 1966, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p.11).
Echoing
Charles Wilson's famous dictum: "What's good for General Motors is good for the United States", contemporary Soviet propagandists claim that "what is profitable for each enterprise must be good for society":"What is profitable to society as a whole will also be profitable to each production collective".
(E.G. Liberman: "Planning Production and Standards of Long-term Operation", in: "Voprosy ekonomiki" (Problems of Economics),No. 8, 1962, in: M.E. Sharpe (Ed.) op. cit., Volume 1; p. 66-7).
"The 1965 economic reform embodies one of the primary principles of the socialist economy: what is of benefit to society must be of benefit to each enterprise".
(E.G. Liberman: "Plan, Direct Ties and Profitability", in "Pravda" (Truth), November 21st., 1965, in: "The Soviet Economic Reform: Main Features and Aims", Moscow; 1967; p. 50).
"That which is good for society should be economically profitable for the enterprise and offer material incentives for its personnel.. This formula expresses the essence of the economic mechanism of the socialist system".
(L. Gatovsky: "Unity of Plan and Cost Accounting", in: "Kommunist" (Communist), No. 15, 1965, in: M.E. Sharpe (Ed.) op. cit., Volume 2; p. 72)
It is, of course, true that the gearing of production to the market through the profit motive ensures, within the limits of productive resources at a particular time, the gearing of production to the
demand" of the consuming public. But the "demand" to which it is geared is "effective demand", that is, demand expressed in terms of the money which potential consumers are able and willing to expend in the market on commodities.This is admitted by contemporary Soviet propagandists:
"Within the bounds of commodity-money relations, the concept of preference for goods... is changed into the relatively independent form of money demand. The magnitude of any need, expressed on the basis of demand, depends on factors like population income".
(A.M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 28).
Marxism-Leninism holds that unequal distribution of income is inherent in capitalist society, so that this causes "effective demand" to bear little resemblance to real social demand, to the real requirements of the consuming public -- leading, for example, to the building of superfluous office blocks while working people experience a fundamental housing shortage, since the
social demand for houses is overridden by the effective demand for office blocks.That this anomaly exists in the Soviet Union since the "economic reform" is
admitted by some contemporary Soviet economists:"Uneven distribution of incomes between different sections of the population results in that the groups in the lower brackets do not fully satisfy their prime needs, while groups in the higher brackets are able to satisfy less essential needs".
(A.M. Rumyantsev: ibid,; p. 28).
"Up until recently, the living standard was planned for two basic groups: for workers, employees and collective farmers. Today it is also necessary to calculate the rise in the standard of living for population groups with different income levels".
(P. Krylov & M. Chistiakov: "Problems in Improving the Methods of National Economic Planning", in: "Planovoe khoziaistvo" (Planned Economy), No 1, 1972, in: "Problems of Economics", Volume 15, No. 4; August 1972; p. 33).
"Industrial enterprises try to curtail the production of relatively unprofitable and especially totally unprofitable items despite the fact that they enjoy high consumer demand".
"The Ministry of the Meat and Dairy Industry of the Tadjik SSR, in the quest for high profits for its enterprises in 1970 and 1971, reduced the production of inexpensive products that were in stable demand among the population and unjustifiably increased the production of more expensive products. As a result, the enterprises of this Ministry obtained millions of rubles of profit in excess of the plan".
(S. Starostin & G. Emdin: "The Five Year Plan and the Soviet Way of Life", in: "Planovoe khoziaistvo" (Planned Economy), No. 6, 1972, in: "Problems of Economics", Volume 15, No. 10; February 1973; p. 95-6).
"Analysis of trends in the development of the Soviet economy indicates a gradual change in the character of the differential of the population with respect to income level. Inevitably there is a rise in the share of those groups that have relatively high incomes. At the same time, there is a reduction in the share of families for which a comparatively low savings norm is characteristic".
(T. Ivensen: "Problems in Forecasting the Monetary Savingsof the Population", in: "Nauchnye doklady vysshei shkoly: Ekonomicheskie nauki" (Scientific Reports of Higher Schools: Economic Science), No. 11, 1973, in: "Problems of Economics", Volume 17, No. 2; June 1974; p. 66-7).
This question will be discussed in more detail in later sections.
The basing by enterprises of their production plans on their assessment of the market has necessitated the development of such features of orthodox capitalist countries as
market research:"To ensure success in the management of the national economy, it is essential to conduct market research for practical purposes",
(L. Gatovsky: ibid.; p. 88).
salesmanship
:"Business is much better at the stores which have the best trained staffs of sales assistants... The motto there is: 'Not a single customer must leave without a good purchase' ".
(V. Sokolov, M. Nazarov & N. Kozlov: "The Firm and the Customer", in: "Ekonomicheskaya gazeta" (Economic Gazette), No. 1, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 255, 256). and advertising:
"Business is much better at the stores which... advertise best".
(V. Sokolov, M. Nazarov & N. Kozlov: ibid.; p. 255).
"Advertising, by influencing the taste of purchasers, is capable of easing the planning of production and the study of consumer demand... Proper advertising accelerates commodity turnover...
We all have an interest in good advertising. But improvement of its artistic and technical level will require an increase in the money spent on it... Such expenditure will pay for themselves with interest".
(L. Pekarsky & S. Anufrienko: "The Wings of an Experiment", in: "Komsomolskaya pravda" (Young Communist League Truth), June 3rd., 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 299).
"We cannot ignore the enormous technical and organisational experience underlying the advertising business in the USA. We must without hesitation take advantage of the best".
(V. Terestchenko: "Psychology and Advertising", in: "Literaturnaya gazeta" (Literary Gazette), February 8th., 1967, in: T.V. Greer: "Marketing in the Soviet Union"; New York; 1973; p. 98).
"Who does not know how felicitous advertising enlivens a city's exterior. And, indeed, it may be the 'zest' of an architectural ensemble".
"Under the new system of planning and economic incentive, ... well-placed advertising also promotes the success of the enterprise... Posters, signs and showcases, as we know, make a city and its streets attractive".
(V. Rusakova & G. Sudets: "Problems and Judgements: Let's Remember Advertising", in: "Pravda" (Truth), February 19th., in: T.W. Greer: ibid,; p. 99, 105).
"Good advertising not only creates favourable conditions for a product or service, but also moulds rational needs on the part of the consumer".
(Y. Kanevsky: "The Effect of Advertising", in: "Pravda" (Truth), April 1st., 1972, in: T.V. Greer: ibid,; p. 100).
"As on television, advertising on Soviet radio is presented only in 'prime time'...An average station includes 15 to 30 minutes of advertising, presented in a few blocks at the convenience of the station but always during the prime time, between 6 and 11 in the evening. A block of commercials varies from 5 to 15 minutes in length".
(T.V. Greer: ibid.; p. 110, 113).
Under the "economic reform", production enterprises are encouraged to pass on the speculative risks of the market to trading enterprises, by concluding
direct contracts with the latter:"
(V. Sokolov. M. Nazarov & N. Kozlov: ibid.; p. 251).
"Direct contracts between manufacturing enterprises and consuming enterprises should be developed more broadly".
(A.N. Kosygin: "On Improving Industrial Management, Perfecting Planning and Enhancing Economic incentives in Industrial Production", in: "Izvestia" (News). September 28th., 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 37).
"The role played by economic contracts will be raised. Permanent direct ties between enterprises, i.e., between the manufacturer and the consumer, will be ever more broadly developed".
(L. Gatovsky: ibid.; p. 77).
"Contractual relations.. should encompass 100% of the enterprises and 100% of the output....
Long-term and stable relations between supplier enterprises and consumers.. are a primary condition for the planned distribution of means of production through wholesale trade".
(N.Y. Drogichinsky: "The Economic Reform in Action", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 215, 216).
"We plan to complete the switch of associations and enterprises engaged in mass and large-volume production to direct and long-term ties, basing their relations on long-term economic contracts".
(A.N. Kosygin: "Guidelines for the Development of the National Economy of the USSR for 1976-1980", 25th. Congress CPSU, Moscow; 1976; p. 40-1).
The Soviet law on contract is now basically similar to that in orthodox capitalist countries in that an enterprise which commits a breach of such a contract (e.g., by failure to deliver commodities of the agreed quality, or by the agreed date) is liable to pay
damages for breach of contract to the enterprise aggrieved by the breach:"
(V. Trapeznikov: "For Flexible Economic Management of Enterprises", in: "Pravda" (Truth), August 17th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 197).
"The failure to meet delivery terms should involve substantial fines".
(E.G. Liberman: "Once Again on the Plan, Profits and Bonuses", in: "Pravda" (Truth), September 20th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 215).
"It is proposed to increase the material responsibility of the enterprise or organisation in cases of non-fulfillment of contract obligations for deliveries of goods so that, as a rule, the guilty party will make good any losses incurred".
(A.N. Kosygin: "On Improving Industrial Management, Perfecting Planning and Enhancing Economic Incentives in Industrial Production", in: "Izvestia" (News), September 28th., 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 25).
"The development of self-sufficiency in industry has also been expressed in increasing the size of fines and in obligating the guilty enterprises to fully compensate for the caused damage with their own cost-accounting resources. The same procedure has been introduced for losses which arise owing to the fault of the transport organisations".
(P.G. Bunich: "Methods of Planning and Stimulation", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 53).
One method by which the state can influence the direction of development of the economy through "economic levers" is, of course, by
participation in the market. Such participation is, however, limited:"A majority of the industrial enterprises do not sell their goods to the state, but to other industrial enterprises or trading organisations. This represents the major part of the internal market".
(B. Sukharevsky: "The Enterprise and Material Stimulation", in: "Ekonomicheskaya gazeta" (Economic Gazette), No. 49, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 212).
Nevertheless, the state has a monopoly in the market for
armaments, and participates on a considerable scale in the market for the construction industry (the commissioning of public buildings, schools, hospitals, theatres, etc.).FOR NEXT CHAPTER ENTITLED: " "4: Payment for Production Assets
". GO TO: Chapter 4 or GO TO INDEX: index.html