E. A. Preobrazhenskii

ON PRIMARY SOCIALIST ACCUMULATION

...In order that capitalist accumulation might begin, the following preconditions were essential: (1) the preliminary amassment in particular hands of sufficient capital for a more advanced technique or higher stage of the division of labor to be adopted with the same equipment; (2) the existence of a contingent of trained hired workers; (3) adequate development in general of a market economy system as the base for capitalist commodity production and for accumulation.

Respecting the first of these requisites, Marx says: “By reason of commodity production, production on a large scale can develop only in the capitalist form. A certain accumulation of capital in the hands of individual commodity producers is therefore a prerequisite for modern industry, for that combination of technique and social relations which we call a special, capitalist type of production or specifically the capitalist mode of production We must thus posit the existence of such accumulation when the transition is made from handicraft to capitalist production. It may be termed primary accumulation, because it is not the historic result but the historic basis of what is specifically capitalist production. Here there is as yet no need for us to explore the way in which it itself originates. Suffice it that it forms the point of departure.”^1.

The question arises as to how matters stand in this regard where primary socialist accumulation is concerned. Does socialism have its prehistory? If so, when does it start?

As we have already seen, primary capitalist accumulation could occur on the basis of feudalism, whereas primary socialist accumulation cannot occur on the basis of capitalism. Accordingly, if socialism has its prehistory, that prehistory can commence only after the conquest of power by the proletariat. Nationalization of large-scale industry actually constitutes the first act of socialist accumulation. It is this act which centers in the state’s hands the minimal resources necessary for organizing the socialist control of industry. But here we instantly run up against another side of the question. By the mere act of socializing large-scale production, the proletarian state from the outset changes the system of ownership of the tools of production, gearing that system to its future moves inthe socialist revamping of the economy as a whole. In other words, the working class acquires through revolution only what capitalism had in the institution of private ownership without any revolutions, even on the basis of feudalism.^2. Primary socialist accumulation, as the period in which the material preconditions are created for socialist production proper, does not begin until the seizure of power and nationalization.

Here is the picture. Capitalist accumulation is accumulation on the basis of a mode of production which differs, economically and technically, from handicraft. The capitalist manufactory was able to demonstrate its advantage over handicraft only to the extent to which it proved economically superior, since the large-scale, as opposed to small-scale, production made possible the fabrication of a unit of output with smaller outlays than in handicraft. But the organization of the manufactory, the construction of the building, the stocks of raw materials, and the expenditure of working capital over the span of the circulation process-all these things, in the absence of the modern system for providing industry with financial credit, necessitated the availability of substantial resources, created not in manufacturing but prior to manufacturing, in small-scale production, and looted from small-scale production by commercial capital. Capital which has been accumulated in advance is even more essential for large-scale machine industry to begin operations. Consequently, for capitalist production to have been able to show its advantage, in the technical and economic sense, over handicraft production, a period of prolonged depredation of small-scale production was

Similarly, socialist accumulation too, in the authentic meaning of the term-accumulation on the technological and economic basis of a socialist economy which is already displaying all the hallmarks proper to it and the advantages proper to it alone-can begin only after the Soviet economy shall have traversed the stage of primary accumulation. Just as it takes a certain minimum wherewithal saved up in advance in the form of natural elements of production for the functioning of manufactories, let alone factories with machine technology, so a certain minimum is essential for the complex of the state economy to be able to exploit all its economic advantages and establish a new technical base as its underpinning.

Here we promptly come across another momentous fundamental structural distinction between capitalism and socialism, to which we shall later return when analyzing the circumstances under which the socialist and capitalist forms of economy compete. For manufacturing to be able to prove its advantage over handicraft, it is quite unnecessary that a tremendous number of manufactories be organized at once. Just one or two, or five, of them can show its advantage over handicraft and trounce it in the competitive race. Consequently, the amount of primary capital accumulated, too, in comparison with the scale of the entire national economy taken en bloc, could be very small. A few enterprises which made up the advanced shock group on the economic front and represented the new economic system could begin pushing forward without waiting for the entire transition to be of a mass and simultaneous character. And though concretely, historically, primary accumulation had made such headway during the period when commercial capital was developing that by the time the manufactories were organized there was no acute shortage of free capital, the whole movement nevertheless bore an unorganized and spontaneous character. Later on, this method of propelling the new form forward also made practicable the export of capital. Capitalist enterprises were able to come into being in petty bourgeois countries where neither the technical nor the economic prerequisites existed for the new mode of production, or where all this existed in potential and a push was required from the outside, from progressive foreign capital.³

Conversely, no partial socialist accumulation of insignificant dimensions is capable of solving the basic problem of organizing a socialist economy. Specifically, insofar as the economy of the Soviet Union is in question, needed here are: (1) accumulation which enables the state economy to attain to the contemporary level of capitalist technology in areas where the gradual transition to a new technological base is impossible; (2) accumulation which makes it possible to change the technological base of the state economy, to organize labor scientifically, and to administer the whole complex of the state economy in planned fashion, which is impossible without large emergency stocks andplanned reserves; (3) accumulation which ensures progression for the entire complex and not just for its separate parts, because the chainlike dependence in the movement of the entire complex altogether precludes uncoordinated forward movement after the method of capitalist planlessness, individual initiative, and competition. We thus establish that not only is the period of primary socialist accumulation not completed by the nationalization of what was accumulated by capitalism but that, on the contrary, it can get into full swing only after the conquest of power by the proletariat and after the first act of accumulation-the socialization of the most important branches of the economy. But if this is the case, can one speak at all of primary socialist accumulation? Is it correct to speak of it at all?^4. Is there any analogy with primary capitalist accumulation? After all, the latter began before capitalist production. Is the former to occur at the same time that the transition to socialist production is initiated and simultaneously with accumulation in the socialist complex itself? We think this term may be kept in a relative sense, because, although primary socialist accumulation is chronologically intertwined with socialist production and partly with socialist accumulation on the basis of production, the economic essence of this process in relation to socialist production is nevertheless the same as that of primary capitalist accumulation in relation to capitalist production.^5. And even if this term were to be judged inapt, it would have to be replaced forthwith by another, because the material substance of what it denotes does not cease to exist. On the contrary, the differentiation of primary socialist accumulation from socialist accumulation proper is of vast and fundamental significance. We shall see below that this differentiation has enormous importance for our economic policy, and to confuse these two processes entails the most egregious mistakes in the practical direction of the economy.

We call socialist accumulation the addition to the functioning means of production of the surplus products which are created within the established socialist economy and which do not go for supplementary distribution among the instrumentalities of socialist production or of the socialist state but serve for expanded reproduction. Conversely, we call primary socialist accumulation the accumulation of material resources in the hands of the state-primarily, or atthe same time, from sources lying outside the complex of the state economy. In a backward peasant country this accumulation is due to play a prodigiously important role, enormously accelerating the advent of the day when the technical and scientific reshaping of the state economy begins and when that economy at long last gains the purely economic ascendancy over capitalism. True, in this period the state economy also accumulates capital on the basis of its own production. In the first place, however, this accumulation too bears the character of preliminary accumulation of means for a genuinely socialist economy and is subservient to that end, and in the second place, accumulation by the first method, i.e., at the expense of the nonstate sector, on the basis of nonequivalent exchange with it, is patently overriding in this period. We should therefore call this entire stage the period of primary or preliminary socialist accumulation. The basic law of our Soviet economy, which is passing through this stage at the present moment, happens to be this law of primary or preliminary socialist accumulation. All the main processes of economic life within the compass of the state economy are subject to this law. On the other hand, this law alters and in part vitiates the law of value and all the laws of a commodity and commodity-capitalist economy, insofar as they manifest themselves and may yet manifest themselves in our system of economy. Consequently, not only may we speak of primary socialist accumulation, but we shall be unable to grasp anything of the essence of the Soviet economy unless we are alive to the pivotal role played in that economy by the law of primary socialist accumulation, which, in the struggle with the law of value, determines the distribution of means of production in the economy, the distribution of manpower, and the extent to which the country’s surplus products are alienated for expanded socialist reproduction.

...In the period of primary socialist accumulation the state economy cannot get along without alienating part of the surplus products of the countryside and of handicraft, without, in short, deductions from capitalist accumulation for the benefit of socialist accumulation. We do not know in what state of devastation other countries in which the dictatorship of the proletariat triumphs will find themselves when they emerge from civil war. But a country such as the USSR, with its ravaged and, in general, retarded economy, will have to pass through a period of primary accumulation, drawing very liberally upon presocialist forms of enterprise as sources. It must not be forgotten that when the civil war is over the period of primary socialist accumulation is the most critical period in the life of the socialist state. In this period the socialist system is not yet in a position to develop all its organically inherent advantages, but at the same time it is bound to nullify a number of the economic advantages inherent in a well-developed capitalist system. It is a matter of life and death for the socialist state to traverse this period as quickly as possible, and as soon as possible arrive at the point where the socialist system unfolds all of its natural advantages over capitalism. At least this is now the issue for the USSR and will perhaps for a time confront a number of European countries in which the proletariat will have been victorious. In these circumstances to bank solely on accumulation within the socialist domain is to gamble with the socialist economy’s very existence, or interminably prolong the period of primary accumulation, and that, moreover, does not depend upon the pleasure of the proletariat. In the part of this work which is devoted to concrete matters, to the industry and agriculture of the USSR, we shall cite some numerical estimates of how long we should be obliged to wait for our industry to be restored even to prewar proportions if we relied in this matter only on the surplus products of industry itself. At all events the notion that the socialist economy can develop on its own, without touching the resources of the petty bourgeois, including the peasant, economy, is assuredly reactionary petty bourgeois utopianism. This is a case where it behooves the socialist state to take more, not less, from the small-scale producers than capitalism took-from the even greater income which will be assured the small producer by the rationalization of the country’s entire economy, including small-scale enterprise, on the basis of industrialization and of the intensification of agriculture.

Taxation on private capitalist profit, i.e., systematic deductions from capitalist accumulation, mây be another source of socialist accumulation. Resources of this sort may vary in nature, but it goes without saying that in the final analysis what is involved here too is accumulation which comes out of the labor of the workers, on the one hand, and of the peasants on the other. When the state collects big taxes from private capitalist enterprises, it puts back into the socialist accumulation fund part of the surplus value which would have accrued to the state as surplus products if, all other things being equal, it were the state itself which were running the given enterprises. Here the capitalists perform the same role vis-a-vis the socialist state as was performed by the feudal landowners vis-à-vis the knights of primary accumulation. By the same token taxation of the class of village kulaks employing hired labor means in the final count accumulation which comes out of the labor of hired farm hands. Conversely, to the extent that the socialist state taxes tradesmen, buyers-for-resale, capitalists, and kulaks, who also derive part of their income from the peasantry engaged in independent farming, here too we shall have accumulation at the expense of the peasant household; the aforementioned personages will represent vehicles of capitalist accumulation on the one hand, and on the other an intermediate stage at one of the poles of socialist accumulation.^6.

The role of state loans, which have served as a most important channel for primary capitalist accumulation, is different in the period of socialist accumulation. Here a distinction must be drawn between two fundamentally different systems of loans. Our semicompulsory loans, such as the first and second lottery loans, must be considered part of the system of accumulation out of tax sources, i.e., accumulation using methods of extra-economic pressure. Credit operations of the normal loan type, which are the practice in the bourgeois system, are an altogether different proposition. Such loans, say a 30-year loan at 7 per cent from British capitalists, cannot be regarded as one of the direct sources of socialist accumulation, because the Soviet state will be paying interest on the loan out of its income and will thus itself be an intermediate stage of capitalist accumulation and an intermediary in the capitalist exploitation of the toiling masses of the Soviet Union by the foreign bourgeoisie. But these loans may on the other hand serve as a most potent stimulus to socialist accumulation, resulting in greater interest accruing to the socialist accumulation fund than to the capitalist. We shall touch upon loans of mistype in another context, when we come to analyze the economic significance of foreign loans and concessions under a socialist commodity economy.

Before we move on to the forms taken by primary accumulation on an economic basis, we have yet to mention a source of state income, and ipsofacto a source of primary accumulation under the Soviet system, Which should more properly be reckoned among taxes but which outwardly, formally, has not normally been considered such in the theoretical literature of economics. I refer to the emission of banknotes. In my pamphlets “Paper Money in the Era of the Proletarian Dictatorship” and “Reasons for the Drop in the Exchange Value of Our Ruble” I showed that under a system where the rate of exchange is dropping, emissions are a form of taxes. At this point I want merely to state that emissions are also a method of primary accumulation. In the corresponding period in the history of the bourgeois economic system, emission did not play the role of an ancillary factor of primary accumulation. The debasement of the coinage, in which the feudal princes and our tsars engaged, and the issuance of paper money in the ensuing period constituted state taxes on the entire populace, which, in a measure, meant taxes on the monetary capital of the bourgeoisie as well. But when the state is at once the agency of national administration and the proprietor of a mammoth economic complex, emission serves plainly and simply as a channel for socialist accumulation. This accumulation comes either out of the income of petty bourgeois and capitalist elements, or out of a reduction in the emoluments of industrial, office, and professional workers.

...The difference between the period of preliminary socialist accumulation and the period of primary capitalist accumulation is, first of all, that socialist accumulation must come not merely out of the surplus products of small-scale production, but also out of the surplus value of capitalist forms of enterprise. In the second place, the difference derives from the fact that the state economy of the proletariat comes in historically on monopoly capitalism’s back and consequently has at its command means of regulating the total economy, and economic ways of redistributing the national income, such as were inaccessible to capitalism in its infancy.

Let us start with railroad tariffs. This mighty lever of economic regulation, wholly in the hands of the Soviet state, has been employed precious little in the interest of such regulation and not at all as a tool of primary socialist accumulation. The system of reduced tariffs for certain freight (coal, oil, salt) is for the time being rather a means of redistributing state resources than an indirect assessment on the nonsocialist preserve of the economy. Similarly, those few privileges enjoyed by state and cooperative, as compared with private, shippers are for the time being of negligible importance. The use of this lever of primary accumulation is still wholly a thing of the future. Only when transport has ceased to operate at a loss and become profitable will it be possible, by structuring railroad tariffs appropriately on the basis of the differentiation of state from private freight, to levy a systematic assessment on private producers and merchants and from that end dock part of private capital’s profit. It should be plain to see, furthermore, that all this will constitute one of those blows at the law of value which make the economic system of the period of socialist accumulation a time of gradual alteration, limitation, and to some extent nullification of that law.^7.

The second mighty lever of primary accumulation is the monopoly of the banking system. In the period of primary capitalist accumulation usury is a device for redistributing national income from the hands of the feudal lords to those of a bourgeoisie on the rise and gaining strength. Credit, as a tool for mobilizing society’s uncommitted funds and distributing them through the channels of expanded reproduction, was either lacking in this period, or existed only in the germinal state. Conversely, in the period of preliminary socialist accumulation which thé economy of the USSR is going through-at its first stages, that is- the state’s credit system has greater effect inthe redistribution of the country’s uncommitted funds than in the redistribution of national income. This may seem untrue, since the interest exacted by the bank on loans (apart from the period of rapid decline in the rate of exchange) is tremendous when compared with normal capitalist rates, while depositing is rather negligible. But at the same time we must not for a single moment forget the real economic source which makes practicable the emission of ruble notes and the bank’s loan operations with that emission as their source. If the bank issues 60 million in ten-ruble notes without causing the rate of exchange to fluctuate, the economic implication is that national commodity assets worth that amount have, through certain channels and at various times, become available to the State Bank. If one considers that this “loan from circulation” is apportioned between the state sector and the private sector proportionally, say, to the extent to which each of them participates in the country’s commodity circulation in money terms, whereas the money from this loan goes to finance state and cooperative industry and trade almost exclusively, then we have here the process of socialist accumulation proceeding with great rapidity. ..

As for the redistribution of the national income through the medium of the credit system, the main developments are yet to come. If the State Bank takes a high interest from state enterprises obtaining long- or short-term loans, what we are seeing is not the process of accumulation in the state sector but primarily the process whereby funds are routed within it. Redistribution from the private economy to the socialist sector can take place directly only when the funds belonging to the private economy and accumulated by the banking system through the intake of deposits are distributed within that same private economy on the basis of loans bearing a higher interest, and the difference between the sum total of what the bank pays out on deposits and what it takes in as loan interest and other forms of remuneration for its services accrues to the socialist accumulation fund. We shall have the same situation if state moneys are loaned on interest through the extension of credit to the private economy. However, given the general deficiency of capital in the country and above all in the state sector, this last operation, while continuing in a formal sense to be a source of accumulation, is at present plainly disadvantageous because at the present stage it turns into an obvious tool for capitalist accumulation out of state credit. This operation can take place only if provision is made for it through the more profitable transaction of extending credit to state enterprises, because this last process guarantees not only banking interest but the accumulation of capital in the state enterprises on the basis of production. Under these circumstances, to extend credit to private trade and industry, thus yielding the bank, say, 10 per cent interest annually, is less advantageous than to provide credit to state industry, which may pay the bank, say, 8 per cent for the loaned capital, but on the basis of production is itself the recipient of 15 per cent on the loaned capital. In this case for the State Bank as such it is more rewarding to provide credit for private industry and trade, whereas from the standpoint of the state complex as a whole and of socialist accumulation throughout that complex, and not just in its State Bank precinct, such an operati is plainly unprofitable. This explains why the State Bank is presently extending next to no credit to private trade and industry notwithstanding their readiness to pay more than the state enterprises, and is extending credit almost exclusively to the latter. From the point of view of the tasks involved in socialist accumulation, this is the only correct policy.

But in the future the situation in this area is due to change, and there may come a time when the provision of credit to the private economy will become one of the paramount tools for redistributing the national income in the interest of the state economy and one of the key devices for rendering it economically subservient to the regulating centers of the state economy. The credit system of the USSR can play an especially large role in this respect, granted the development of long-term agricultural credit-specifically, if we can manage to negotiate large loans abroad and the State Bank acts as the distributor of these loans in pouring foreign funds into the economic organism of the USSR.

From what has been said we see, therefore, that our whole credit policy is at the present time ancillary to the law of primary socialist accumulation, and cannot be otherwise.

...Here we must distinguish: (1) exchange within the purview of the state economy itself; (2) exchange within the private economy; (3) exchange between the state and the private sectors of the economy.

Where the first category is concerned, needless to say, there can be no positive tasks here for socialist accumulation. The economics of exchange resolves itself here into the economics which prevail under a system of exchange, into the trimming of costs in the distribution process. These costs represent an outright deduction from the surplus product of the state economy, and in the event that private middlemen are involved in the exchange between state enterprises, the net effect is not only a deduction from the socialist accumulation fund but an addition to the fund of “secondary” capitalist accumulation. As the gods of Epicurus nestled in the pores of the universe, so private middlemen sought, in the initial period of the state trusts’ emergence into the free market, to accommodate themselves not only in the channels of private trade but in the pores and interstices separating one state enterprise from another, and there they collected the “costs of distribution.” The rationalization of state trade spells the systematic ousting of these leeches of capitalist accumulation from the socialist sector and not only leads to reduced costs for the state economy in the process of distribution but to the organization of distribution itself through the state economy’s own powers.

Insofar as the second category is concerned, i.e., exchange within the private economy, here socialist accumulation is, on the contrary, practicable. We have already referred to the extra-economic method of accumulation from this source, i.e., taxes on trade in the output of the private sector. Accumulation of another description, i.e., on the basis of commercial exchange, is not only possible but is even now in a measure occurring and will doubtless grow.⁸ As an example of such accumulation one may take the purchase from the peasants of grain and of foodstuffs in general by the All-Union Company for Trade in Grain and Farm Produce and their sale to private consumers in the city markets. The commercial profit thus derived is to all intents and purposes a deduction from the income of producers selling their commodities to the state agency for disposal. When the state trading agencies and the cooperatives sell to private consumers the output not only of peasants, but of handicraftsmen, artisans, and private entrepreneurs, and in the process derive a profit, this part of the profit of state trading and of the cooperatives constitutes the source of socialist accumulation which we are considering. From the standpoint of socialist accumulation the contest waged in this sector of exchange by cooperatives and state trade against private trade has positive, not negative, purposes. What is taking place here (thus far in small measure, unfortunately) is accumulation out of the fund of one system oí economy for the benefit of the other. All other things being equal, what is wrested from private trade will to some extent or other be gained for the fund of the state economy. I say “all other things being equal,” because it is conceivable to have a trade policy which would further not socialist accumulation but the interests of the petty bourgeois producers, aiming at the trimming of deductions from their proceeds. Whether or not such a policy is expedient hinges on which, at the moment, is more important for the state economy-to lower the prices of goods on the market and edge out private capital or to accumulate capital in the sphere of distribution. Economically such a policy can, under certain conditions, unquestionably mean a reduction inthe socialist accumulation fund and a boon to private production-a boon which is the harder on the state economy the poorer that economy is in capital and the less advantageous it is for it to tie up in trade part of the capital of which there is a deficiency in production itself, instead of intensifying the mobilization of the small producers’ own funds for the development of cooperative turnover. At the present stage of its development, though, state trade manages its affairs less well than private trade and for the time being its most pressing problem is to cut costs, at least to the level of private trade. But it is important for us here that we formulate the entire problem in correct theoretical terms because we are concerned not with the policy of the moment but with understanding fundamental processes throughout the whole span of socialist development. Further on we shall see what enormous difficulties stand in the way of state trade in its efforts to compete with private capital and how these difficulties turn on the basic problems of socialist development in general. Here we should only observe that on account of the country’s dire poverty in capital and with commodity circulation developing at a pretty rapid pace, commercial profit is attaining vast proportions, proportions reminiscent of the situation in the period of primary capitalist accumulation. In these circumstances this sector of accumulation is assuming towering importance: here the gains of private capital constitute a very powerful drag on the influx into the socialist accumulation fund of funds from the petty bourgeois milieu and are eating up part of the surplus product of the state economy itself.

The third category, i.e., exchange between the state economy and the private, represents a point where socialist accumulation faces purely negative tasks, as in the case of exchange within the state economy’s own purview, as well aspositive tasks, i.e., to nurture the state economy at the expense of the nonsocialist milieu. Looking at it this way, we should deal with the disposal of state industry’s output outside the socialist sector separately from the disposal of the private economy’s output inside the state sector.

Let us start with the first process, i.e., the movement of the mass of state industry’s commodities into the nonsocialist environment. From the standpoint of socialist accumulation the objectives here are negative both where the state economy is bent on cutting the distribution costs of its own agencies, i.e., simply engaging in trade with the very least outlays on the machinery of trade, and where it is a matter of forcing private trade off the road followed by the commodities of the trusts as they move from the factory to the ultimate link, i.e., the consumer.

As for the first of these objectives, the point here is to improve organization within the set-up of the state economy itself. The second objective is far more important, because it is tied in with the struggle between the two inimical systems for the surplus product of the state economy. Here we come close to finding the enemy in our own house. It is essential to note here the fundamental difference which exists between the interrelations of commercial and industrial capital in the period of primary capitalist accumulation, on the one hand, and the interrelations of private commercial capital and state industry inthe period of primary socialist accumulation on the other. If, in the era of capitalist accumulation, commercial capital appropriates from private industrial capital more of the surplus value created in industry, this is simply a matter of a different distribution of surplus value within one and the same economic system. What commercial capital has today accumulated in excess from the surplus value of industry is tomorrow returned to industry; the process whereby the redundant capital of commerce passes to industry is a continuous one, occurringfrom the very inception of capitalist production. It is quite a different story when the bulk of industry is in one system while the machinery of trade belongs to another system which is hostile, as inthe case under scrutiny. Then the accumulation of private commercial capital is an outright and irrecoverable deduction from the surplus product created by the workers in state industry. If we assume that the total worth of the new commodity assets created in state industry in a year, and being turned over in trade, comes to one billion when sold by the trusts wholesale, while this mass of commodities is sold at retail for 1.5 billion, then 500 million is an outright deduction from industry’s surplus product for the benefit of the machinery of trade. If four-fifths, or 400 million is appropriated by the private machinery of trade, then that machinery becomes a most perilous breach at the very source of socialist accumulation, and not just of accumulation but even of simple reproduction in the system of state economy. What is happening here is the expropriation by private capital not of the surplus product of small-scale production, on the basis of which capitalism develops historically and which it never thereafter ceases to exploit, but the expropriation of the surplus product of socialist industry-a phenomenon new to economìe history. The struggle with private capital in this area is for the state economy a battle against the plundering of assets which it has itself created. It is perfectly proper that the contest with private capital be shifted to this very area, just as it is perfectly proper to be eager to move on from accomplishment of easier tasks to harder ones, i.e., to start by first of all gaining control of wholesale and wholesale-retail trade in the products of state industry.

In the matter, therefore, of gaining mastery over the process through which its own products are exchanged, the state economy seeks to accomplish for itself a task of a negative character, i.e., to keep from private capital what essentially belongs to the socialist sector itself-in its own fund, created on its own productive basis.

An altogether different picture obtains with respect to the process whereby assets move from the private economy into the sphere of the state economy. Here the contest between the state trading agencies and private capital is in large part a struggle for the surplus products of the private economy. When, for example, it is private capital that effects the procurement of raw materials for industry on the peasant market and the entire route from the raw material producer to the trust is sectioned off to private middlemen, the difference between the price at which the materials are purchased from the peasant and the price at which they are sold to the trust represents in the main a deduction from the earnings of the peasant household. If, on the other hand, we assume that the state agencies do their own raw material procurement, then everything deducted from the income of the peasantry accrues to the state sector of the economy. At this stage of primary socialist accumulation it is both technically more difficult and of less importance to combat private capital than it is to combat the plundering of the state economy’s own surplus products by private capital. On the other hand, if this latter struggle were successful, i.e., if private capital were driven out of trade in the output of state industry, this would doubtless lend impetus to the shift of private capital into private industry-a process which, given the rapid growth of the state economy, is by and large economically advantageous, and is not dangerous.

...Let us move on now to foreign trade and the system of socialist protectionism (Comrade Trotsky’s term). The foreign trade monopoly is an institution of surpassing importance in the whole socialist economic system. First of all it is itself one of the instrumentalities of socialist accumulation. In the second place, it is one of the most important agencies for safeguarding the accumulation process itself, in all its guises and forms, and by virtue thereof is one of the most important leverages with which to combat the law of value of the world capitalist economy. Thirdly, this institution is one of the most important tools for regulating the entire economy of the Soviet Union.

We shall in this instance dwell on the foreign trade monopoly only as a tool of socialist accumulation.

As agriculture’s marketable yield increases and as commercial ties develop between the economy of the USSR and the world economy, exports grow in extent. In the sum total of exports the output of our industry figured less importantly before the war than did farm products, and with the recovery of agriculture one should expect a very considerable expansion in the export of farm products as compared with what it is now, if not the restoration of the old proportions in the breakdown of exported commodities. All of this means augmented possibilities for socialist accumulation out of the peasant household’s income. The more products the countryside exports, the greater its economic dependence upon the agency which links the peasant’s farm with the external market. The foreign trade monopoly not only makes small-scale production dependent upon the state for the disposal of surpluses, but is an important instrument for deriving additional profit on the external market. There are spheres of world trade in which the state economy of the USSR is well-nigh a monopolist. Suffice it to mention trade in platinum and furs, to some extent flax, etc. True, the state monopoly over commerce in exported goods still does not by any means signify that the full difference between the internal and external market prices ends up in the hands of the People’s Commissariat of Foreign Trade. The State Forestry Trust of the Northern White Sea District may, for instance, by disposing of timber without middlemen, end up in possession of its total surplus product, but not nearly always does the state move export goods through all the stages as they are forwarded to the foreign market. If, for example, grain is purchased directly from the peasants by The All-Union Company for Trade in Grain and Farm Produce and sold abroad by the People’s Commissariat of Foreign Trade, the full difference between the purchase price and the selling price passes through the state’s hands. Conversely, where procurements are made through representatives of private capital and particularly when the state trading agencies buy up goods for export from private wholesalers, the slate’s commercial profit is very heavily pared down in favor of private capital. On the other hand, even when the export products are procured and moved by the state trading agencies themselves, it by no means signifies that the People’s Commissariat of Foreign Trade is in the given instance the recipient of the maximum profit. With our utterly wretched and costly mechanism of exchange, the total difference (which percentagewise is often tremendous) between the purchase prices and the sales prices in the foreign market in almost every case goes entirely into overhead costs, the net profit equaling zero. But not nearly always does socialist accumulation, especially in the initial phase of that accumulation, mean an increase in industry’s production capital. The establishment of a network of agencies for the trade we have been discussing as well as the construction of all the facilities required as a minimum for catering to the needs of the state economy and ensuring that private capital is forced out of the key positions in the economic struggle—this, too, is in itself socialist accumulation, only in a different form. As we shall see below, the narrowly commercial view of all the processes within the state economy, a view induced by observation of the ways of private capitial, militates most powerfully against an understanding of the very essence of the socialist form of economy at its initial stages and, in practical terms, often leads one totally astray. Because of the imperfection of this or that mechanism people frequently fail to perceive the tremendous importance of that mechanism in the system of state economy as a whole. In this particular case the extremely unprofitable nature-fromthe commercial standpoint-of a number of our state trading agencies argues the need to rationalize this operation, not to replace these agencies with “more profitable” private ones. They are more profitable if the disadvantages of socialism at the opening stage are viewed from the standpoint of capitalism, instead of the “advantages” of capitalism (among which depressions, wars, etc. must needs be listed) being appraised from the socialist standpoint even when, in a particular area, the capitalist form has the edge.^9.

In the preceding analysis we took as our starting point the assumption that the prices on the products of state industry represent a given magnitude. Now we must take up the extremely important question of the role which price policy plays in socialist accumulation. We shall here survey, first, the policy of prices on exported goods, i.e., the principles of our customs policy and its results, and second, the price policy of our trusts and state agencies in general.

Let us begin with the customs policy. We refer here to customs duties on imported goods, because the assessment on commodities exported by state agencies and by the Commissariat of Foreign Trade represents not a new source of accumulation but merely another way of distributing aggregate trade profit or trade-turnover proceeds among the various state agencies (between the People’s Commissariat of Finance, for instance, and the Supreme Economic Council with its trusts).^10. The USSR’s customs policy, with its well-nigh prohibitive rates on the products of foreign light industry and its high duties on products of the machine-building industry, represents a stout barrier guarding the country’s domestic trade turnover from the workings of the world law of value and keeping our socialist industry, puny when it comes to capital and retarded when it comes to technology, from going down under the buffeting of foreign competition. We shall consider this role played by Soviet protectionism, as well as the role of the foreign trade monopoly, when we come to analyze the clash between the law of socialist accumulation and the laws of value. In this instance, we merely refer to the customs policy as a source of socialist accumulation.

The USSR’s customs receipts break down into two distinct categories which are of differing significance from the standpoint of accumulation. The customs receipts from the assessment on the means and tools of production imported for equipping state industry are in no wise an instrument of accumulation! Indeed not. If, say, the textile syndicate makes purchases in Britain of new machines worth 30 million rubles for textile factories and pays 10 million in duties, we are confronted merely with a simple redistribution between the textile industry and the People’s Commissariat of Finance of what are still state funds. If there were no duties whatsoever on textile machinery, or if they were turned back to the textile syndicate, the sum total of the state’s funds would not change by a single kopeck. The objection may be heard, it is true, that if the cost of equipment for the textile industry increases this will cause the trusts to raise their depreciation rates and, accordingly, boost the sales prices on their articles. But this demurrer is spurious, because in the given instance the textile syndicate is merely a pump of the People’s Commissariat of Finance, sucking the sum of 10 million rubles from the consumers, and for the substance of the case it is a matter of complete indifference whether the syndicate extracts this sum by boosting sales prices to meet additional costs of wear and tear or simply raises these prices so that it may pass them on to the People’s Commissariat of Finance as profit from state enterprises, and imports 30 million rubles’ worth of equipment duty free. Which is technically more convenient is another matter, and that is just what the question boils down to. With the prices given and all other things being equal, the accumulation fund of the textile industry, as that of any other, is a constant magnitude. If customs duties fall on part of that industry’s fund and are not shifted to the consumers, this constitutes redistribution of one and the same fund within the state bailiwick. If a price increase occurs, a fund increase occurs too, but does so in consequence of the price increase and not of customs policy. The possible extent of that increase is determined by a number of concomitant economic circumstances and not by the magnitude of the customs assessment rates. And whether it is a good idea altogether to tax the consumers of a given industry under the pressure of the assessment imported for that industry, or whether it would be a better idea if the price policy and the terms for deducting the profit of state enterprises for the till of the People’s Commissariat of Finance were correctly framed, is a matter of technique of accumulation and does not affect the origin of the income itself.

The taxation of tools of production imported for state industry, therefore, constitutes the transposai of assets from one state pocket to another, from the capital equipment stock of state industry to the till of the People’s Commissariat of Finance. The assessment on raw materials for industry is of quite the same nature. Here too, with a given price level, it all comes down to the redistribution of state means within that same state bailiwick, even though this taxation may be expedient for other reasons as well.

The situation is entirely different as regards the assessment of tools of production imported for private industry, and the importation of consumption products. Here the assessment in its entirety constitutes a deduction from the income of the mass of consumers or from private industry’s capital equipment stock. In point of fact, if the Commissariat of Foreign Trade imports sugar, footwear, etc., from abroad, the output of domestic productive facilities being inadequate, the difference between the prices on the internal market and the purchasing prices abroad will be paid by the consumer and accrue to the state trading agencies. Even though it may be the worker who pays this difference we shall have an increase in the state’s income and its accumulation, albeit accounted for by a shrinkage of the real consumption budget of the working class.

This is the picture if the imported consumption products merely make up the shortage of domestic output and are sold at home-market prices. This import operation does not in the least inhibit the process of accumulation and reproduction at other points in the state economy. The case is somewhat different when the goods imported, taken in conjunction with domestically produced products, are more than the market is in a position to absorb and when these goods are sold cheaper than the domestic. In that event accumulation in the sphere of trade and through the instrumentality of customs assessment is purchased at the price of a partial cutback in home production, i.e., at the price of cessation, in one sector, not only of accumulation on the basis of production, but even of simple reproduction. If the quantity of products imported is not beyond what the market requires, but they are sold cheaper than domestically produced products, the gain at one pole will be attended by a loss at the other. Such a policy may be advantageous if the losses are offset by the gain, and the fall in prices results in the enlargement of demand and is in the final count beneficial for industry. The practical decision one way or another will be determined in this case by the results of a simple numerical calculation.

...Let us move on now to the policy on the products of industry. This policy is of enormous consequence not only for socialist accumulation but for the normal course of production in general, even in its unaugmented dimensions; it has immense importance for the peasant household; finally, it affects the political relations of the proletariat and the peasantry. For the moment we shall touch on this policy only from the viewpoint of primary socialist accumulation.

The fundamental theoretical question which needs to be settled here at the very outset is whether equivalent exchange between the state economy and the nonsocialist element is possible. Here one can envision three cases:

(1) When the values received by the state economy from the nonsocialist element are of lesser magnitude. We shall in that event be dealing with the persistent disintegration of large-scale socialist production and the gradual disposal of its output at prices below cost. This disintegration may take the form of the disposal of industry’s not-fully-renewed capital stock at prices below cost while wages remain constant, or of the sale for next to nothing of the industrial proletariat’s manpower, or, finally, of both together. At the opening phase of the NEP we had a number of cases where industrial output was priced this way, which meant that both capital stock and the proletariat’s labor power were disposed of for a song.^11. Were such a price policy to become the rule, it would unquestionably spell the progressive fractionalization of large-scale industry and the triumph of small-scale production over large. The reader will find concrete examples in the section on the economics of industry. This case must on no account be confused with another, where, with prices competing, supplementary provision is made for the depreciation of capital stock but the renewal of capital stock does not in fact occur, because the respective sums cleared go either for raising wages or into reserves of raw materials, i.e., go to swell circulating capital. Such temporary borrowing from the capital equipment stock for more pressing needs has figured heavily in the life of Soviet industry This process was inevitable, given state industry’s dire poverty in working capital, and frequently occurred even when prices were fairly high-not lower than reconstruction prices.

(2) The second case. Prices on the products of state industry are so calculated that the exchange of that industry’s output for the products of the private sector means the exchange of equivalents, i.e., neither of the two economic systems exploits the other. Such a situation is by and large possible only as an episode of the briefest duration. To regard such a state as normal is to suppose that the socialist system and the system of private commodity production, comprised by the one system of national economy, can exist alongside one another on the basis of absolute equilibrium between them. Such an equilibrium cannot long endure, for one system must dispossess the other. Either degradation or development is possible here; standing still is not. Speaking in this context of capital as a process of movement, Marx wrote: “The conception of capital as a spontaneously growing value takes in not only the idea of class relations and of a distinct character to society deriving from the fact that labor exists in the hired form. Capital is by the same token movement, the process of a cycle, a process which traverses various stages and itself in turn comprises three different forms of the cycle process. Capital, therefore, is conceivable only as movement and not as something quiescent.”¹² If capital in its circulation in some individual enterprise and, inasmuch as we are taking the capitalist system as a whole, in its relationship to the precapitalist environment, represents movement, then just how can the socialist form, in its relationship to the presocialist environment, be “something quiescent?” And what does movement mean in this case?It means one of two things: either the capitalist form is rapidly eating away the monolith of the state economy, which was formed during the October Revolution and the Civil War, or the socialist form is developing both on what it itself is accumulating and at the expense of the nonsocialist milieu, nurturing itself on the latter’s juices, too. If capitalism is movement, socialism is still faster movement. And for the speed lost in the period of primary accumulation in that, thanks to its dire poverty in capital, it is developing its technical and economic base, it is forced to compensate by intensifying accumulation at the expense of the nonsocialist element. One of the paramount devices for that accumulation, aside from those described above and the method to which reference will be made below, is the nonequivalent exchange of values with the nonsocialist milieu. The only way this exchange can occur so that the socialist mode has a favorable balance is through an appropriate policy of prices on the products of state industry.

(3) We come, therefore, to the third case, which is not only possible but inevitable in our circumstances, i.e., to a price policy deliberately calculated to alienate a definite part of the surplus product of private enterprise in all its varieties. This policy is possible because the proletariat’s state economy comes in historically on the foundation of monopoly capitalism. The latter, in consequence of the elimination of free competition, brings about the establishment of home-market monopoly prices on the products of its own industry, secures surplus profit by dint of exploiting small-scale production, and thereby paves the way for the price policy in the period of primary socialist accumulation. But the concentration of all the country’s large-scale industry in the hands of a single trust, i.e., in the hands of the workers’ state, adds enormously to the possibility of following a monopoly-based price policy which will be merely another form of taxation on the private economy. The obstacles which the state economy encounters on this path consist not in its lack of economic strength with which to pursue this policy, but primarily in the necessity of coupling this policy with a policy at trimming prices, something which is feasible only if costs are brought down at an even faster pace. And this in turn assumes the need to re-equip industry as soon as the rationalization of production with the old plant stock has reached its limit. Another difficulty derives from the fact that the state is not a monopolist in all industries. The price policy must accordingly be planned in such a way that state accumulation does not automatically entail private capitalist accumulation. Finally, I make no mention here of difficulties of a political character, which stem from the interrelations of the working class and the peasantry and necessitate frequent allusion to equivalent exchange, though with the socialization of large-scale industry in an economically backward country equivalent exchange is even more Utopian than under the hegemony of monopoly capitalism.

Accumulation through the intermediary of an appropriate price policy has its advantages over other types of direct and Indirect taxation of small-scale economic activity. Paramount among these advantages is the extreme convenience of collection, which requires not a single kopek for special tax machinery.

The objection that taxation on the basis of a definite price policy will impinge upon the wages of the workers and the village poor is altogether picayune. (I deliberately avoid saying “on the basis of rising prices” because taxation is not only possible with falling prices but, in our country, will take place when prices are indeed falling or, at times, when they are stationary. This is possible because with prime product costs being reduced the price cuts will affect less than the sum total of the reduction, the balance going into the socialist accumulation fund and to raise wages.) The village poor are not the prime purchasers of our industry’s products. What they lose in the process they may recover from the state in the form of credit, in the form of enforced accumulation of capital stock for their economic activity, etc. As for the workers, this objection is quite as flimsy as is the objection to indirect taxes. The burden of such taxes may be shifted entirely off wages. Here is a statistical example. If, owing to a particular price policy, the working class, in company with the rest of the population, pays out 50 million rubles to the state, the state can easily return that sum by raising wages, whereas the amount obtained from the bourgeois and petty bourgeois consumers will not be returned to them but will go to increase the socialist accumulation fund. In the chapter on the economics of industry we shall revert to this problem and, armed with the figures, treat it in greater detail.

...Thus, when socialist accumulation is just getting under way the state engages in production even though it is unprofitable and aspires merely to minimize the loss in the economy as a whole and not nearly always the loss entailed in the choice of enterprises to be brought into operation (otherwise the first thing it would have to do would be to bring transport to a halt). From this basic factor distinguishing socialist from capitalist accumulation flow a number of differences of a derivative character. But even when the zero mark in the area of accumulation has been passed and the state economy as a whole is outwardly carrying on the same policy of accumulation as the individual capitalist enterprise, we observe a vast difference between primary capitalist and primary socialist accumulation.

This difference lies not only in the fact that the principles of accumulation in the separate state enterprise and principles of accumulation in the complex en bloc are two different things, which is a matter of extreme importance for the economic policy of the particular trusts. Another difference is that capitalist enterprises were from the very start technically superior to, and economically stronger than, the individual enterprises of the mode of production which they were to dispossess and reduce to subservience, i.e., small-scale production; but socialist production has to pass through a period in which it is accumulating material resources, during which a particular enterprise of the state economy will inevitably be technically inferior, not superior, to and economically weaker, not stronger, than a contemporary capitalist enterprise in an advanced bourgeois country. The whole of the state economy will in this period be entirely and unavoidably geared to the task, on the one hand, of the speediest possible accumulation of resources adequate for revamping the technical base of industry on the basis of electrification, and of its economically practical territorial distribution, and, on the other hand, of protecting this new economy from the still strong capitalist economy.

In this sense the period of primary socialist economy with the laws peculiar to it will be inevitable not only for retarded peasant countries such as the USSR, but partly, the chances are, for the socialist economy of Europe too, inasmuch as the present European economy (even without the devastation in store for it in civil war) is economically and technically weaker than the economy of capitalist North America. Only in the more advanced industrial countries will primary socialist accumulation be based to a far greater extent on the surplus product of the workers than on resources obtained from presocialist forms of production in Europe and the colonies.

But capitalism was not confronted with these two tasks in the era of primary accumulation. Some moves were indeed made against handicrafts, but this was a product of intemperance and capitalist zeal rather than an economic necessity for car italism, since under circumstances of complete equality it was in any case trouncing small-scale production. On the other hand, in countries with feebly developed industry even a protective customs policy aimed at protecting a given industry from the competition of a capitalistically more advanced country bears no more than an outward resemblance to socialist protectionism. There it was a matter of defending one industry against another when both belonged to the same economic system. Here, however, we see one mode of production in its feeble infancy being protected against another economic system which is its mortal enemy and which, even in the period of its senile decrepitude, is bound for a time to be economically and technically stronger than the new economy.

Only if one is blithely indifferent to theory can one see a complete analogy between socialist and capitalistprotectionism. There would be point to the comparison only if one socialist country with its own industry feebly developed were to introduce duties to protect that industry from the socialist industry of a more advanced country, instead of behaving like a part of the unitary socialist economic organism of all countries in which the proletariat had triumphed. We should then have customs duties within the same system of economy, as we do under capitalism. But such an absurd situation is unlikely^ever to exist. We might incidentally note that even this example, as is true of all instances where the capitalist economy is compared with the socialist, lays bare a fundamental difference between the two, to wit, that capitalism expands on the basis of the competition and mutual repulsion of its parts, while the method of socialist expansion in the economic sphere (as well as the political) is the mutual attraction of parts, mutual assistance, and a drift toward a single economic complex. This is linked up not only with military but with economic necessity.

...Primary socialist accumulation is a fundamental law which constitutes the mainspring of the whole Soviet state economic system. But this law is probably of universal application, except possibly with respect to the countries which are last to make the transition to the socialist form of economy. Taking what has been said above as our starting point, we may formulate the part of this law that concerns redistribution of the material resources of production, as follows: The more economically backward is a particular country which is going over to the socialist organization of production, the greater the extent to which it has a petty bourgeois, peasant economy, and the smaller the legacy which the given country’s proletariat receives for its socialist accumulation fund at the time of the social revolution-the more, relatively, will socialist accumulation be compelled to depend on the alienation of part of the surplus product of the presocial-ist forms of economy and the smaller will be the proportion of accumulation based on its own production, i.e., the less will it be fed by the surplus products of the workers in socialist industry. Conversely, the more economically and industrially developed is a particular country in which the social revolution triumphs, the larger the material legacy in the form of a highly developed industry and an agriculture organized on capitalist lines received by that country’s proletariat from the bourgeoisie after nationalization, the smaller the proportion of precapitalist forms of production in the given country, and the more essential it is for the proletariat of the country to reduce the nonequivalent exchange of its products for those of former colonies-the more will the center of gravity for socialist accumulation shift to the basis of what is produced by the socialist forms, i.e., rest on the surplus product of its own industry and its own agriculture.^13.

...We say that the law of primary socialist accumulation is the aggregate of the state economy’s deliberate and semispon-taneous tendencies to expand and consolidate the collective organization of labor in the Soviet economy, which dictate to the Soviet state as a matter of necessity: (1) definite proportions which shape up in the battle with the law of value within and outside the country and the objective purpose of which is to achieve optimal expanded socialist reproduction in the given circumstances and maximal capability of defending the entire system in the battle with capitalist commodity production, and (2) definite proportions in the accumulation of material resources for the expansion of reproduction, especially at the expense of the private economy, inasmuch as the need that such accumulation be of definite dimensions is dicated to the Soviet state with compelling force on pain of economic disproportion, the growth of private capital, the weakening of the state economy’s nexus with peasant production, the disruption of the requisite proportions of expanded socialist reproduction for years to come, and the weakening of the whole system in its battle with capitalist commodity production within the country and beyond its boundaries.

Inevitably subject to the law of primary socialist accumulation are: the extent of alienation of the private economy’s surplus product; the wage level in the state economy; the price policy; the reflation of foreign and domestic trade; the customs system; credit policy; the structure of the budget; the framing of import plans; etc....

Novaia ekonomika: Opyt teoreticheskogo analiza sovetskogo khoziaistva (New economics: Attempt at a theoretical analysis of the Soviet economy). Vol. !, Parti. Moscow, Komakadizdat, 1926. Excerpts from pp. 89-94, 98-102, 105-109, 110-125, 133-137, 162.

1. Capital, translation by Stepanov, Vol. I, Part I, p. 640.

2. I ignore here the curbs on the institution of private ownership in the period oi: feudalism. Basically private ownership did exist at the time, despite these infringements.

3. We shall see below that whereas the export of capital is made possible by the very structure of capitalism and the method whereby small-scale production is rendered subservient to capitalism, the socialist pattern can spread only through the export of proletarian revolutions.

4. The term “primary socialist accumulation” comes from one of our most eminent economists, Comrade V. M. Smirnov. We do not essame thing.

5. Nor should it be forgotten that though primary capitalist accumulation on the basis of commercial capitalism precedes capitalist production, the primary-accumulation period as a whole does, however, take in the initial period in the development of capitalist industry.

6. As the context makes clear, for brevity’s sake I refer from here on to socialist accumulation, instead of primary socialist accumulation.

7. Here, as in the entire exposition to come, I refer to the law of value as the spontaneous regulator under the commodity and commodity-capitalist system of production, and not to regulation of the economy proceeding from labor expenditures irrespective of the historically transientform ofthat regulation in an exchange society. Such regulation will obtain undér a planned society too, but will be exercised otherwise, i.e., on the basis of the direct calculation of working time.

8. The increase in rail tariffs on the loadings of private capital which are disposed of within the private sector falls into the category of accumulation from this source.

9. Annotation to the 2nd edition [of Preobrazhenskii’s book]. I am not referring, in this connection, to another most important aspect of the matter, namely, that commercially unprofitable exports maybe highly profitable from the standpoint of the state economy as a whole if the foreign exchange acquired with these exports goes for the importation of machines for industry, machines which for the time being are much more costly to manufacture in our country than abroad.

10. We have already pointed out above that the trading apparatus-income and its profit are entirely different things. Income is calculated from the standpoint of the whole national economy, while profit is gross income minus the expenses of the trading apparatus. The apparatus should enjoy an income, i.e., make deductions from the national income, irrespective of whether it shows a profit or a loss.

11. A striking example of the same thing, this time from capitalist experience, was German industry’s price policy after the World War, in the period of depreciating currency.

12. Capital, translation by Stepanov, Vol. II, p. 81.

13. Needless to say, this law must undergo certain modifications when means of production are transferred from a socialist country which is advanced to a backward one.