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List of Chapters
30: The Concentration and Centralisation of Capital

Marx holds that the economic laws of capitalism lead to the concentration of capital, of means of production, in increasing amounts in the hands of individual capitalists:

"The specifically capitalist mode of production... causes.. an accelerated accumulation of capital...

Every accumulation becomes the means of new accumulation. With the increasing mass of wealth which functions as capital, accumulation increases the concentration of that wealth in the hands of individual capitalists...

Concentration of the means of production... is identical with accumulation".
(K. Marx: "Capital", Volume 1; London; 1974; p. 585, 586).

 This process of concentration of capital takes place, of course, in the contemporary Soviet economy, where it is actively encouraged by the state: "The work of concentrating production... was continued during the economic reform". (N.Y. Drogichinsky: "The Economic Reform in Action", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 209)

"The 24th Congress of the CPSU considered it necessary to carry out a series of measures to improve economic management... The most important of these measures are aimed at concentrating production".
("Soviet Economy Forges Ahead"; Moscow; 1973; p. 233).

"Besides the general laws inherent in the socialist economy as a whole, there are a number of regularities.. determined by general economic laws. Among them the following may be mentioned:
a) the concentration of socialist production, i.e., the increase in size of enterprises".
(S. Kamenitser: "The Experience of Industrial Management in the Soviet Union"; Moscow; 1975; p. 19).

 The changing distribution of Soviet enterprises according to gross output is shown in the following table:

                                                                                 1960      1963           1968
Enterprises with a gross output:

Under 100,000 rubles:                                           12.0%     9.0%        9.0%
From 101,000 to 500,000 rubles:                           26.2%    20.2%    16.9%
From 501,000 to 5,000,000 rubles:                        50.9%    55.0%    52.1%
From 5,001,000 to 50,000,000 rubles:                   10.1%    14.6%    20.0%
Over 50,000,000 rubles:                                            0.8%      1.2%     2.0%
("Soviet Economy Forges Ahead"; Moscow; 1973; p. 176).

Thus, the proportion of enterprises with an output in excess of 500,000 rubles rose from 61.8% in 1960, to 70.8% in 1963, to 74.1% in 1968, while the proportion with an output of 500,000 rubles or less fell from 38.2% in 1960, to 29.2% in 1963, to 25.9% in 1968 .

The changing distribution of Soviet enterprises according to number of workers employed is shown in the following table:

Enterprises employing:                                                             1960      1963           1968

Less than 200 workers:                                         63.6%    55.9%    56.4%
From 201 to 1,000 workers:                                 29.3%    34.4%    33.7%
From 1,001 to 3,000 workers:                                 5.5%     7.3%     7.5%
From 3,001 to 10,000 workers:                                1.4%     2.1%    2.1%
("Soviet Economy Forges Ahead"; Moscow; 1973; p. 176).

Thus, the proportion of enterprises employing more than 1,000 workers rose from 7.1% in 1960 to 9.7% in 1963, to 9.9% in 1968, while the proportion of enterprises employing 1,000 workers or less fell from 92.9% in 1960 to 90.3% in 1963, to 90.1% in 1968.

It must be noted that the change in distribution over these years of enterprises according to gross output is much more marked than that according to number of workers employed. For example, the proportion of enterprises employing over 3,000 workers remained stationary at 2.4% between 1963 and 1968, despite an increase in the proportion of enterprises with a gross output of more than 5,000,000 rubles from 70.8% to 74.1%. This was the result of modernisation of technical equipment, permitting an increase of output without an increase -- or even with a decrease -- in manpower:

"New large-scale enterprises equipped with advanced plant and machinery no longer require a large labour force. What is more, some of these enterprises are in the bottom league in terms of the number of employees and the number of such enterpises is growing"
("Soviet Economy Forges Ahead"; Moscow; 1973; p. 177). Concentration of capital has already reached, in the contemporary Soviet Union, a much higher level than in the most advanced orthodox capitalist countries, as the following comparative table for 1967 shows:


 

Number of enterprises

USSR:                       41,226
West Germany:    102,162
Britain:                 195,161
France:                 272,944
USA:                     334,400
Japan:                  563,327

 

Proportion of enterprises employing more than 100 workers

USSR:                 70.2%;
West Germany: 13.0%;
USA:                     8.4%;
Britain:                 7.7%;
France:                 3.1%;
Japan:                   2.2%;

 

Proportion of enterprises employing more than 500 workers
 

USSR: 24.4%
West Germany: 1.8%;
Britain: 1.5%;
USA: 1.4%;
France: 0.5%;
Japan: 0.3%.

 

Average number of workers employed per enterprise

USSR: 565;
West Germany: 83;
USA: 48;
Britain: 45;
France 18;
Japan 17.
Khasha: "Concentration of Production and Small-scale Industry", in: "Voprosy ekonomiki" (Problems of Economics), No. 5, 1967, in "Problems of Economics", Volume 10, No. 10; February 1968; p. 13).


 

The concentration of capital proceeds unevenly, not only in different countries, but also in different enterprises, industries and regions of the same country:

"Uneven economic... development is an absolute law of capitalism".
(V.I. Lenin: "The United States of Europe Slogan", in: "Selected Works", Volume 5; London; 1935; p. 141). and Marx points out that it is a feature of a capitalist economy that small enterprises are unable to compete successfully with their larger competitors: "The battle of competition is fought by cheapening of commodities. The cheapness of commodities depends, other things being equal, on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller".
(K. Marx: ibid., Volume 1; p. 586). Contemporary Soviet economists admit that smaller enterprises in the Soviet Union suffer precisely the disadvantages described by Marx: "Small enterprises are faced with difficulties. Since their economic stimulation funds are not big, they are not always able to build cultural and service establishments and houses and also to undertake measures for the development of production because the size of the funds does not allow them to do this in one or two years...

Economic stimulation funds can be better utilised in cases where they are set up by big enterprises...

Small enterprises, as a rule, have higher labour inputs and lower labour productivity, a larger share of ancillary personnel and bigger fluctuations in the growth rates of output sold and profit".
(N.Y. Drogichinsky: ibid.; p. 217, 218-9).

"There are still too many small enterprises which are unable to raise their engineering standards on their own".
("Soviet Economy Forges Ahead"; Moscow; 1973; p. 233).

 As a result, as Marx points out, the economic laws of capitalism lead to the centralisation of capital, of means of production, that is, their concentration in the hands of a decreasing number of capitalists: "Competition.. always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish....

As soon as the capitalist mode of production stands on its own feet,... that which is now to be expropriated is no longer the labourer working for himself, but the capitalist exploiting many labourers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralisation of capital. One capitalist always kills many".
(K. Marx: Ibid., Volume 1; p. 587, 714).

 This process of centralisation of capital occurs, of course, in the contemporary Soviet economy, where it is actively encouraged by the state.

The "economic reform" itself was carried out in a way advantageous to larger enterprises, which were, in general, transferred to the "reformed" system before their smaller rivals.

In 1967 7,200 enterprises, accounting for 37% of industrial output and 50% of industrial profit, were already operating under the "reformed" system.

In 1968 a further 19,650 enterprises, accounting for 35% of industrial output and 30% of industrial profit, were transferred to the "reformed" system.

In 1969 a further 9,150 enterprises, accounting for 12% of industrial output and 11% of industrial profit, were transferred.

In 1970 a further (unstated) number of enterprises, accounting for 8% of industrial output and 5% of industrial profit, were transferred.  (N.Y. Drogichinsky: ibid.; p. 197, 200, 202).

Marx draws attention to the fact that the process of centralisation of capital is stimulated by the role of the banks:

"The credit system... becomes a new and terrible weapon in the battle of competition and is finally transformed into an enormous social mechanism for the centralisation of capitals". (K. Marx: ibid., Volume 1; p. 587). The state banks of the contemporary Soviet Union play precisely the role described by Marx in this connection. As has been shown in the section entitled "Credit and Interest", their policy is to grant more favourable credit terms to more profitable enterprises -- and this means, in general, the larger enterprises.

Furthermore, the larger enterprises are less dependent on bank credit than the smaller enterprises.

As in orthodox capitalist countries:

"The liquidation of an enterprise will be carried out either by a liquidation commission appointed by the superior body or by the director of the enterprise on orders from this body...

The time limits for the submission of claims by creditors to the enterprise being liquidated will be fixed by the body that has decided to liquidate the enterprise, but cannot be less than a month.

The liquidation commission.. will publish in the official press organ of the given region, territory or republic, an announcement on the liquidation of the enterprise and the time limit for the submission of claims by creditors...

Claims against the enterprise being liquidated will be met from its property on which, by law, execution may be levied...

Claims that have not been ascertained or submitted during the liquidation period, as well as claims that have not been met owing to the insufficiency of the property of the enterprise being liquidated, will be regarded as extinguished".
("Statute on the Socialist State Production Enterprise" in: M.E. Sharpe (Ed.): "Planning, Profit and Incentives in the USSR", Volume 2; New York; 1966; p. 314-5).

 Most relatively unprofitable enterprises are, however, not liquidated, but "reorganised", that is, merged with one or more other enterprises to form a new, larger enterprise: "Reorganisation... of the enterprise will be effected by decision of the body authorised to set up such enterprises.

In case the enterprise is merged with another enterprise, all property rights and obligations of each of them will pass over to the enterprise resulting from the merger.

In the event that one enterprise is joined to (i.e., merged into -- WBB) another, the latter will assume all the property rights and obligations of the former. (ibid.; p. 313-4).

"Within industries a network of cost-accounting amalgamations is being set up".
(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.

"Small enterprises are being enlarged, reorganised into big ones".
(A.M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 17).

 The process of centralisation of capital has led to a considerable reduction in the number of Soviet capitalists: "The Ministry of Machine-tool and Instrument-making, during the 1969-1970 period alone,... released more than 12,000 employees from the managerial apparatus and curtailed annual managerial expenditure by 24.5 million rubles".
(B. Gubin: "Raising the Efficiency of Socialist Economic Management"; Moscow; 1973; p. 107).
31: Soviet Monopoly Capitalism

Lenin held that, as a result of the operation of the economic laws inherent in the capitalist economy, competitive capitalism gave way, at a certain stage of its development, to monopoly capitalism or imperialism, in which a relatively small number of capitalist groups with monopolistic power dominated the economic life of society:

"Imperialism emerged as the development and direct continuation of the fundamental attributes of capitalism in general. But capitalism only became capitalist imperialism at a definite and very high stage in its development... The fundamental economic factor in this process is the substitution of capitalist monopolies for capitalist free competition...

Imperialism is the monopoly stage of capitalism...

Imperialism is capitalism in that stage of development in which the domination of monopolies and finance capital has established itself".
(V.I. Lenin: "Imperialism, the Highest Stage of Capitalism", in: "Selected Works". Volume 5; London; 1935; p. 80-1).

 In the section entitled "The Concentration and Centralisation of Capital" the process of development of Soviet capitalist enterprises into extremely large conglomerates of capital has been described. But, with the active encouragement of the Soviet state, these extremely large enterprises have been further combined into even larger groupings with monopolistic power -- called by contemporary Soviet economists "production associations": "Besides the general laws inherent in the socialist economy as a whole, there are a number of regularities.. determined by general economic laws... Among them the following points may be mentioned:..

b) the process of combination as a vital trend for securing the comprehensive use of raw materials;..

d) co-operation as a form of association of a group of enterprises for producing some finished product".
(S. Kamenitser: "The Experience of Industrial Management in the Soviet Union"; Moscow; 1975; p. 19).

"Small enterprises are being enlarged, reorganised into big ones. Production associations of several types are increasingly spreading".
(A. M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 17).

"The systematic establishiment of production associations is a necessary requisite for improving the organisation of production and management which ultimately facilitates a rise in the efficiency of social production. The need for setting up production associations (combined works) was emphasised in the 24th. CPSU Congress decisions".
(N.Y. Drogichinsky: "The Economic Reform in Action", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 221-2).

 By 1973 about 5,000 "production associations" had been brought into being.

(B. Gubin: "Raising the Efficiency of Socialist Economic Management"; Moscow; 1973; p. 86).

Active encouragement of the formation of monopolies on the part of the state on the scale of that which took place in the Soviet Union, occurred previously only in Nazi Germany, where, on July 15th., 1933, a

"...cartel statute was enacted, introducing compulsory cartelisaion. The Federal Minister of Economics was given the power to create compulsory cartels, to compel outsiders to attach themselves to existing cartels".
(F. Neumann: "Behemoth: The Structure and Practice of National Socialism"; London; 1942; p. 218). Soviet "production associations", like monopolies in orthodox capitalist countries, may take the form of "trusts" (that is, cartels, in which the enterprises within the "production associations" retain their managerial independence), or of "firms" and "combines" (in which the enterprises within the "production association" have a single managerial apparatus which is normally that of the largest enterprise within the "production association", with the smaller enterprises functioning as its subsidiaries): "Associations... may include enterprises which fully preserve their independence or enterprises which have been turned into subsidiaries".
(S. Kamenitser: ibid.; p. 37). Again, Soviet "production associations", like monopolies in orthodox capitalist countries, may be classified into two types:

Firstly, horizontal "production associations", which embrace enterprises involved in production of the same kind; where such horizontal "production associations" take the form of cartels, they are called by contemporary Soviet economists "trusts"; where they embrace enterprises with a single managerial apparatus, they are called by contemporary Soviet economists "firms":

"Specialised associations... have become widespread in the form of firms. There is now talk of establishing in the country a network of even larger economic organisations, which would unite the enterprises of a definite branch or field in a given area, an area that in some cases would extend beyond the borders of a region, territory , or even a union republic".
(L. Gatovsky: "Unity of Plan and Cost Accounting", in: "Kommunist" (Communist), No. 15, 1965, in: M.E. Sharpe (Ed.): "Planning, Profit and Incentives in the USSR", Volume 2; New York; 1966; p. 83).

"There are ... sectoral or territorial associations of one type. They are in the nature of trusts". (A.M. Rumyantsev: ibid.; p. 17).

"Soviet associations of the 'trust' type incorporate, as a rule, enterprises manufacturing products of the same kind...

An association of the 'firm' type incorporates, as a rule, enterprises of one industry, connected by relations of co-operation in manufacturing products of the same kind".
(B. Gubin: "Raising the Efficiency of Socialist Economic Management"; Moscow; 1973; p. 89-90).

"Industrial firms are, as a rule, amalgamations of enterprises within one branch, in which other enterprises.. are subordinated... to the largest and organisationally and technically most advanced enterprises...
Trusts are quite widespread in the extractive and some other industries of the Soviet Union. They are set up according to the branch principle".
(B. Zabelin: "Industrial Management: Soviet Experience"; Moscow: n.d.; p. 57-8).

 Secondly, vertical "production associations", which embrace enterprises involved in a sequence of operations leading to the production of a particular end-product; these generally have a single managerial apparatus which is normally that of the largest enterprise within the "production association", with the smaller enterprises functioning as subsidiaries; such "production associations" are called by contemporary Soviet economists "combines": "At times associations include enterprises linked by consecutive production.. They, in effect, are a form of enlarged enterprise".
(A.M. Rumyantsev: ibid.; p. 17).

"Associations of the 'combine' type incorporate enterprises connected by the sequence of operations in processing raw materials and manufacturing end products".
(B. Gubin: ibid.; p. 90).

"Combines... are multi-branch enterprises including factories and plants connected by similar technical and production features.

A combine usually unites enterprises of different production branches according to the following criteria: combination of successive processing stages of the same source material; utilisation of waste and by-products".
(B. Zabelin: ibid.; p. 57).

"Production associations" have, of course, great advantages over even large individual enterprises in the sphere of profit-making. Most of them have their own design, research and development divisions and are financially completely self-sufficient:

"A production association headed by a big enterprise offers a number of advantages.. The advantages of the associations have been particularly displayed under the new system of planning and economic stimulation".
(N.Y. Drogichinsky: ibid.; p. 220, 221).

"Large scale production amalgamations embracing not only enterprises but also design and research and development organisations have everything they need for a rapid introduction of new developments in science and technology."
("Soviet Economy Forges Ahead"; Moscow; 1973; p. 234).

"Whatever the structure of industrial associations, the income they derive from the marketing of their products is sufficient, in most cases, not only to meet current production costs but also to meet the costs of research, design and other operations concerned with technological progress. It also covers to a considerable extent the capital investments needed for expanding production... In the associations, fullest expression is given to the principle of financial self-reliance as the basic principle of cost accounting".
(B. Gubin: ibid.; p. 105).

 The formation of "production associations" has enabled the rationalisation programme -- with its attendant large technological "releases of labour" -- to be intensified: "Great savings were effected by the organisation of associations in the oil-refining industry. As a result of setting up the 'Kuibyshevneft' association, the managerial offices of 7 oil-drilling enterprises, 11 oilfields and 51 oil-producing and drilling sections were abolished. This enabled the release of over 1,000 workers and a saving of 1.3 million rubles in the annual labour remuneration fund".
(B. Gubin: ibid.; p. 108). The formation of firms and combines has also, of course, further reduced the number of Soviet capitalists: "The experience of the Likhachov Motor Works, which actually is a production association, is of interest..
A considerable saving in managerial expenses is effected. Thus, at the Likhachov Works there is no special apparatus for managing the branch factories and the relevant activity is handled by the staff of the head works".
(N.Y. Drogichinsky: ibid.; p. 220-1). One of the principal advantages possessed by a monopoly is its ability to maintain its prices (and so its rate of profit) at a higher level than would obtain under conditions of competition. Thus, contemporary Soviet economists admit that the formation of such monopolies in the Soviet Union has led to a "dangerous" tendency for prices to rise: "There is the danger that the prices will constantly rise... From time to time, such trends have arisen in the course of economic reforms carried out in the German Democratic Republic, the Polish People's Republic and the Czechoslovak Socialist Republic, where the various economic units have striven to increase their income (profit, gross income) by the easiest avenue -- by raising the sale prices on their output".
(P. Kuligin: "Improvement of Price Formation under the Economic Reform", in: "Nauchnye doklady vysshei shkoly: Ekonomicheskie nauki" (Scientific Reports of Higher Schools: Economic Science), No. 4, 1969, in: "Problems of Economics", Volume 12, No. 6; October 1969; p. 33).

"Our experience points to the existence of a dangerous trend towards arbitrary price rises".
(L. Maizenberg: "Improvements in the Wholesale Price System", in: Voprosy ekonomiki" (Problems of Economics), No. 6, 1970, in: "Problems of Economics", Volume 13, No. 10; February 1971; p. 63-4).

"A special place in the development of wholesale trade and in the application of the price mechanism belongs to economic associations -- modern integrated enterprises that conform to the present dimensions of the market for the means of production. On the one hand, as large producers and customers, these associations have a broader economic base for developing permanent direct relations and for exerting greater influence on the entire price formation process. On the other hand, they possess the economic conditions for influencing production through the system of contractual and economically substantiated accounting prices...

The producer dictates the price... and frequently uses the existing shortage for a given group or type of resources to bring pressure to bear on the customer".
(V. Budagarin: "The Price Mechanism and Circulation of the Means of Production", in: "Nauchnye doklady vysshei shkoly: Ekonomicheskie nauki" (Scientific Reports of Higher Schools: Economic Science), No. 11, 1971, in: "Problems of Economics", Volume 15, No. 3; July 1972; p. 81-82, 83).

"Under new guidelines issued yesterday, coffee rose from 4 roubles a pound to 20 roubles (£6.75), and petrol prices doubled, from 30 pence a gallon to 70 pence..

Repair and servicing of private motor cars jumped 30% and chocolate increased an average 30%".
("Coffee in Moscow", in: "The Guardian", March 2nd., 1978; p. 9).

 Furthermore, as in orthodox capitalist countries, Soviet monopolies frequently use their control of production of a particular commodity to create artificial shortages for the purpose of inflating their prices and profits: "Certain forms of the existing system of distribution of the means of production frequently lead to an artificial shortage".
(N. Fedorenko: "Current Tasks of Economic Science", in: "Voprosy ekonomiki" (Problems of Economics), No. 2, 1974, in: "Problems of Economics", Volume 17, No. 8; December 1974; p. 24).

"With coffee prices up fivefold, suppliers released rare stocks into the store".
("Coffee in Moscow", in: "The Guardian", March 2nd., 1978; p. 9).

 As a result of all these factors, Soviet monopolies have succeeded in significantly raising their rates of profit: "The Sigma association in the instrument-making industry drew up for 1967 a plan ensuring an increase in... profit by 34.8%. The level of profitability was set at 47.3% as against 33.7% attained in 1966".
(N.Y. Drogichinsky: ibid.; p. 191-2).

"The 'Elektrosila' association in Leningrad in the 1966-1969 period.. increased.. profits by 110%". (B. Gubin: ibid.; p. 108).

 Contemporary Soviet sociologists recognise that in orthodox capitalist countries, management personnel benefit from the above-average profits reaped by monopolies in the form of "enormous" salaries and bonuses: "Executives.. reap a sizeable share of the monopoly profits in the form of enormous salaries and bonuses".
(N. Bogomolova: "Human Relations' Doctrine: Ideological Weapon of the Monopolies"; Moscow; 1973; p. 55). But in the Soviet Union too, management personnel in "top category" enterprises benefit from the monOpoly position of these, not only by higher bonuses, but also by higher salaries: "Higher salaries are set for executive, engineering and technical personnel working in enterprises in the top category".
(Y.L. Manevich: "Wages Systems", in: "The Soviet Planned Economy"; Moscow; 1974; p. 252).
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GO TO:  Chapters 32 to 34
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