P.I. Popov

BALANCE SHEET OF THE NATIONAL ECONOMY

AS A WHOLE

1. CHARACTERISTICS OF PRODUCTION AS A WHOLE

In its most general outline the national economy of the Soviet Republics in 1923/24 can be described by the data on the dimensions and structure of the output which comes into the national economy from its individual branches and is distributed among the separate branches and classes of society. [See Table 1.]

According to the role they may play in production and personal consumption, i.e., according to their function, all the products are divided into four categories: (1) products used by the ultimate consumer; and (2) raw materials, (3) fuel, and (4) tools of production. Actual consumption introduces certain changes, not in the classification of products, but in their distribution among the aforementioned groups; thus some products, which can be used as means of subsistence, are also used as means of production, and some raw materials, conversely, are used as products of personal consumption. The distribution of products into groups 1, 2, 3, and 4 according to their designation and actual consumption cannot, therefore, coincide. [See Table 2.]

...The aforementioned distribution, characterized by a definite equilibrium between means of subsistence and producer goods, is especially interesting in that it underscores with the utmost clarity the view to which Marx was so emphatically committed, namely, that products used for productive purposes cannot be included in the personal income of the population, i.e., income consumed personally by the population, and accordingly, that a substantial share of the produis of annual national production is used for productive purposes and neither does nor can accrue to the population for personal consumption....

The total product mentioned above (minus imports and reserves) was produced by the primary branches of the national economy in the proportions indicated in the table (see table 3 : Production for 1923/24)....

1. Distribution of Output in 1923/24
(in millions of gold rubles)

2. THE BRANCHES OF THE NATIONAL ECONOMY AS THE PARTS OF A SINGLE WHOLE

From the point of . view of the balance sheet of the national economy, each branch of the national economy performs determinate social functions. The character of these functions is defined on the one hand by the character of production in a given branch, and on the other by the range of social needs which this or that branch of the national economy satisfies.

Social needs break down into those entailed in the reproduction of the social economy and those required to satisfy the wants of the population.

2. Distribution of Products

Let us examine the social functions which each of the major branches of the national economy performs.

Every one of the branches in the national economy acts one moment as a consumer, the next as a supplier, of products.

Agriculture is a supplier: (a) of human labor power for all branches of the national economy; (b) of raw materials and fuel for itself and for industry, transport, and construction; (c) of foodstuffs for its own population and for the population engaged in all other branches of the national economy Consequently! it supplies both means of production and means of subsistence, as well as human energy.

Agriculture performs the functions of a supplier by (1) providing the city with the human energy of its excess population, by making temporary workers available (seasonal work), and (2) by directly supplying produce for the market.

As a consumer, agriculture performs its social functions by (a) utilizing the skilled manpower of the city (the labor of teachers, doctors, office workers, and mechanics and drivers who handle the tractors and are involved in other operations requiring technical personnel), (b) utilizing the tools and means of production supplied to agriculture by industry, (c) utilizing the produce of transport, and (d) consuming manufactured consumer goods.

The table offers an idea of who receives the products which agriculture produces, and in what amounts (see table 4.)

Of an aggregate volume of production^1. of 10,651 million gold rubles at distribution prices, 39 per cent is accounted for by foodstuffs, 51 per cent by raw and other materials, 7 per cent by fuel, and 3 per cent by tools of production. Of the aggregate volume of means of subsistence, agriculture consumed 73.2 per cent within the confines of its own economy, and 26.8 per cent it sent outside its own economy-2 per cent to industry, 24.2 per cent to the city, and 0.5 per cent to the world market. Of the total volume of products comprising raw and other materials, it consumed 68.8 per cent in its own economy and supplied 31.2 per cent to other branches of the national economy-19 per cent to industry, 5.9 per cent to the world market, 2.7 per cent to construction, and 3 per cent to the city.

Of the total volume of fuel produced by agriculture, 57.2 per cent was consumed within its own economy and 42.8 per cent supplied to other branches of the national economy: 24.7 per cent to the city, 14.3 per cent to industry, and 3.8 per cent to transport. Agriculture consumed within its own economy 99.4 per cent of the tools of production that it produced and sent 0.6 per cent outside. As a whole agriculture consumed within its own bounds 70.6 per cent of the total volume which it produced, and sent 29.4 per cent outside, catering, to one degree or another, to the city and the world market.

3. Production for 1923/24^a

4. Agriculture as a Supplier^a

Out of its produce agriculture used 40.7 per cent of the consumer goods, 49.6 per cent of the raw materials, 5.7 per cent of the fuel, and 4 per cent of the tools of production to supply its own needs. It provided construction exclusively with raw materials and fuel; it supplied the city with 74.3 per cent of the foodstuffs, 13.6 percent of the fuel, and 12 per cent of the raw materials which the urban population used as food products and feed for its livestock. It supplied 5.8 per cent of the food products and 94.2 per cent of the raw materials going to the world market.

This was the role which agriculture played as the supplier of the products that it produced.

The point has already been made that while agriculture catered to industry and other branches of the national economy, as well as to the world market, in the capacity of supplier, along with this it acted at the same time as a consumer, and could not but have acted so.

Agriculture as consumer consumed assets ofallkinds amounting to 10,146 million gold rubles, i.e., roughly the same amount as it supplied to other branches [see table 5: Agriculture as a Consumer].

Of the total volume of products which it consumed, 50 per cent were consumer goods and 49.6 per cent means of production.

Of the goods which it consumed for personal use 59.8 per cent were products of agriculture itself and 40.2 per cent were products of industry and construction-34.6 per cent products of industry and 5.6 per cent of construction.

Of the total volume of means of production used, it found 88.6 percent within its own economy and acquired 11.4 percent from industry and construction; of the total quantity of tools of production it needed it found 40.9 per cent within the bounds of its own production and obtained 59.1 per cent from industry and construction. As a whole it drew 74.1 per cent of what it consumed from its own production and obtained 25.9 per cent from industry and construction.

5. Agriculture as a Consumer

6. Industry as a Supplier

Agriculture’s traffic with industry, growing out of the relations of agriculture as a consumer, is expressed in the fact that of the total volume of industrial output consumed by agriculture, 82.5 per cent was consumer goods and 17.5 per cent tools and means of production.

From construction agriculture obtained 58.6 per cent of its consumer goods and 41.4 per cent of its tools of production.

Thus, in its capacity as consumer of products which it itself produced, agriculture was absolutely independent of the other branches of the national economy, but it was wholly dependent on industry in its capacity as consumer of industrial consumer goods as well as of the tools and means of production turned out by industry, and on transport in its capacity as consumer of transport’s services.

In its consumption of the tools and means of production which are fashioned by agriculture itself, it was, of course, dependent on no one.

In speaking below of the social functions performed by industry, we shall spell out agriculture’s traffic with industry in greater detail, but now let us move on to describe the social functions which industry performs in the national economy.

As we see in table 6, Agriculture as a Supplier, agriculture consumed 70 per cent of its produce within the bounds of its own economy and around 30 percent it sent outside. Industry in turn shows a very close similarity. The city, including industry, transport, construction, the urban population, and the world market, consumed 74.4 percent of the total volume of industrial output and supplied 25.6 per cent to agriculture.

Speaking of the separate categories of products, industry supplied 3Ì.9 per cent of its consumer goods to agriculture and consumed 64.1 per cent within its own bounds, i.e., the bounds defined by industry, transport, the city, and exports, the city consuming 54.1 per cent out of this 64.1 per cent. Of the total volume of means of production produced by industry, agriculture was given only 10.9 per cent while 89.1 per cent was consumed by industry, transport, construction, exports, and the urban population; of the total volume of tools of production 43.9 per cent was supplied to agriculture and 56.1 per cent consumed by industry, transport, and construction.

Thus agriculture on the one hand and the other branches of the national economy on the other enter into economic relations with one another in the national economy, apportioning around one-third of their output for this nexus.

7. Industry as a Consumer

Industry as such, in the precise meaning of the word, consumed 3,681 million rubles’ worth of products, of which 13.8 per cent was consumer goods which it used as raw materials in the productive process and 86.2 per cent was tools and means of production. It must be noted that of the total volume of consumer goods which industry used, some 17 per cent was supplied by agriculture and 83 per cent came from industry’s own output; of the total volume of tools and means of production used by industry, roughly 36 per cent was produced by agriculture, 60 per cent was turned out by industry itself, and 3 per cent by construction; industry as a whole, in its capacity as consumer, took 33.7 per cent of the output of agriculture, 63.7 per cent of the output of industry, and 2.6 per cent of construction

Accordingly, we see that in its capacity as a consumer industry is linked on the one hand with agriculture and on the other with its own branches, with each of which it contracts an economic tie; the output of some branches is the raw material and semimanufactured goods for others.

Closely tied in with industry is the urban population, which provides industry and trade with manpower and the state with white-collar workers; on the other hand, the city acts as a major consumer....

8. Construction as a Supplier

Of the total volume of consumer goods, construction supplied 60.5 per cent to the rural population and 39.5 per cent to the urban; of the total volume of tools of production, it supplied some 53 per cent to agriculture, 25 per cent to industry, and 22 per cent to the city. [See table 8.]

As a whole construction, as a separate branch of the national economy, is linked with agriculture to the extent of 57 per cent of its output and with industry and the city to the extent of 43 per cent; it establishes its connection with agriculture through rural construction, and with industry and the city through urban construction. Organizationally, urban and rural construction are entirely independent of one another and stand on their own.

Let us proceed to describe construction as a consumer.

Construction, in its capacity as consumer, uses exclusively means of production, of which 31.5 per cent is supplied by agriculture and 68.5 per cent by industry, agriculture furnishing lumber, and industry furnishing products of the extractive industries as well as of the brick, glass, metals, and other manufacturing industries.

9. Construction as a Consumer

In the national economy transport is, like the other branches, both a supplier and a consumer.

As a supplier, transport offers its output (the output of transport represents the conveyance of products from the producer to the consumer) (a) to agriculture, (b) to industry, the city, and the world market.

As a consumer, it uses the tools and means of production supplied by agriculture and industry.

According to approximate calculations, transport supplies products amounting to 653 million rubles.

As a consumer, transport took goods worth 447 million rubles, of which consumer goods comprised 2.4 per cent, raw and other materials in the strict sense 47.9 per cent, fuel 30 per cent, and tools of production 19.7 per cent.

10. Transport as a Consumer

The total volume of consumer goods which transport received was made up solely of industrial products which it used as means of production; of the total volume of raw and other materials which it consumed, 10 per cent was agricultural and 90 per cent industrial raw material.

Agriculture supplied transport with 21.4 per cent of its fuel, and industry 78.6 percent; the tools of production were supplied to transport exclusively by industry.

Such is the connection which transport has with agriculture and the other branches, established in the performance of those social functions which transport discharges as an independent branch of the national economy.

Proceeding to a more detailed analysis of the interrelations between agriculture and the separate branches of industry, we find them to be extremely interesting [see table 11: Consumption of Agricultural Products by Industry].

Of the aggregate output of agriculture consumed by industry, the food industry took 61.8 per cent, the textile industry 15.4 per cent, the branches processing solid products of organic origin 12.3 per cent, and the wood-processing branches 6.7 per cent. These four branches consumed 96 per cent of all the products supplied by agriculture, the rest of the industrial branches only 4 per cent. Thus, as a supplier of raw materials and fuel, agriculture is linked mainly with the four branches indicated above....

There can be no room in the national economy, therefore, for pitting against each other the interests of two distinct economic organisms-agriculture and industry-but an opposition does exist between the interests of these two parts of the same whole, the unitary national economy. Our inferences are further corroborated by the data on the distribution of industrial output [see table 12: Distribution of Agricultural and Industrial Products by Categories of Consumers].

It turns out that of the sum total of industrial output agriculture (including rural construction) consumed 23.2 per cent-4.8 percent productively, as means of production, and 18.4 per cent personally, as means of subsistence.

It is primarily the following branches of industry which supply agriculture:

Agriculture is therefore linked as a consumer with all branches of industry supplying it either with means of production or with consumer goods. Though the nexus with certain branches is stronger than with others, all branches of industry are drawn into this interrelation.

11. Consumption of Agricultural Products by Industry

Accordingly, whereas agriculture was linked as a supplier primarily with four branches of industry, as a consumer it is linked with an enormous number of industrial branches, the products of which find their consumer in agriculture, in its productive operations and in its population.

Let us elaborate on the production link between agriculture and industry. This connection, as indicated above, is expressed in the consignment of means of production (raw materials and fuel) by agriculture to industry and, conversely, the consignment of means of production (raw materials, fuel, and tools of production) by industry to agriculture.

The statistics in the table, Production Connections of Industry with Agriculture, on pages 76-77 lead to the following conclusions:

(1) Industry receives 35.6 per cent of its means of production from agriculture and 64.4 per cent from its own branches, while of the sum total of means of production turned out by industry it delivered 13.2 per cent to agriculture and consumed 86.8 per cent within the confines of its own productive activity. Taken en bloc, therefore, industry constitutes a vast market for raw materials and fuel, a market seven or eight times as great as the one created by agriculture’s consumption.

(2) The greatest tie between industry and agriculture shows up in the industrial branches processing raw materials which originate in agricultural activities; in the food industry, for instance, 71 per cent of all means of production are supplied by agriculture, and in the wood-working branches 62.8 per cent of all means of production come from forestry. The industrial branches processing solid products of organic origin obtain 41.9 per cent of their raw materials and fuel from agriculture, principally from animal husbandry. Agriculture supplies 33 percent of all the raw materials and fuel used by the industrial branches engaged in the processing of minerals. The textile industry’s link with agriculture is not as strong: 18.8 per cent of its fuel and of the raw material which it processes comes from agriculture; this needs qualifying, however, in the sense that agricultural raw materials which have been through preliminary machine processing figure in the textile industry as industrial raw materials. In the case of the chemical industry, agriculture supplies roughly 12 per cent of all the raw materials.

12. Distribution of Agricultural and Industrial Products by Categories of Consumers
(in percentages of the sum total of distribution)

13. Production Connections of Industry with Agriculture

(3) The importance of agriculture as a consumer of means of production produced by industry is especially great in the following branches of industry: wood-processing-49.4 per cent, metals-32.2 per cent, the food industry-14.3 per cent, processing of materials of organic origin-13.8 per cent. The remaining industrial branches have relatively weak ties with agriculture.

(4) Farming sends those of its products which go to industry mainly to the food industry-89.2 per cent-and to the textile industry-10.8 per cent.

(5) Of the products which animal husbandry supplies to the industrial branches which refine these products, 50.1 per cent goes to the leather industry, 31.0 percent to the textile industry, and 16.6 per cent to the food industry.

(6) Forestry, as a fuel supplier, caters for all branches of industry; as a raw material supplier, it sends 42.3 per cent of its output to the branches engaged in wood processing.

(7) Fishing and hunting cater for the food industry (91.7 per cent) and for the leather and fur industry (8.3 per cent).

(8) Industries supplying their products to agriculture are metal-working (48.9 per cent), wood-processing (19.8 per cent), food (12.9 per cent), leather (9.8 per cent), and textile (4.5 per cent) of all products supplied.

Thus, of the industrial branches linked with agriculture, some supply their products to agriculture while others consume the products of agriculture, several branches concurrently playing the role both of major suppliers and of major consumers. For example, the industrial wood-working brancies obtain from agriculture 62.8 per cent of all the raw materials and fuel required by them, while at the same time sending 49.4 per cent of the means of production produced by them to agriculture.

The branches of the national economy are tíus interlinked by productive ties, and it follows that these ties are of an organic and not a mechanical character.

Generalizing from the analytical data, one must come to several conclusions which are momentous for resolving the problems entailed in the organization of a planned economy. To the extent that individual branches of agriculture are suppliers of raw materials and fuel for industry, industry has an enormous capacity to influence the way in which the respective branches of agriculture organize their production. This influence is reinforced by the fact that large-scale industry is almost wholly in the hands of the state and consequently impinges on agriculture not as an atomistic but as a unitary consumer in a position to display a united will, to be a kind of monopolist in the area of consumption. Like any monopolist, it has the economic power to lay down a number of conditions-in the given instance for agriculture-as to the way production is organized in those branches the products of which it consumes as raw materials and fuel. Consequently, state industry as a consumer - monopolist is, theoretically, able to dictate the production plan to several branches of agriculture.

However, agriculture too, to the extent that it is itself a monopolistic supplier of fuel and raw materials to industry, is similarly able to place industry in a state of dependence upon it; but this theoretically enormous dependence is virtually nullified by the fact that agriculture is fragmented, comprising 23 million farms lacking a coherent economic policy. Hence agriculture, strange as it may seem at first glance, itself ends up by being decent upon the procurerais. When it comes to marketing, farmers are interested primarily in only one thing, the level of prices of raw materials and fuel, and are not directly interested in bringing up questions of how industry is organized; for no individual farm has any direct relationship with industry as a whole....

3. THE SYSTEM OF DISTRIBUTION

The balance-sheet data provide all the elements needed to envisage the process of reproduction of the Soviet economy.

As we have seen above (p. 55), material assets amounting to 17,856,400,000rubles at production prices came into the national economy in 1923/24. But this sum does not exhaust the assets which the national economy has at its disposal: in the first place transport, by moving products from where they are produced to where they are consumed, has created additional assets amounting to 652,800,000 rubles; and besides that, part of the value created in production but not taken into account by production prices has been recovered through marketing and distribution, amounting to 2,900,900,000 rubles. The total sum, therefore, of the assets which came into the national economy for distribution was 21,410,100,000 rubles, of which 46.9 per cent was consumer goods and 53.1 per cent raw materials, fuel, and tools of production.

BALANCE SHEET OF THE NATIONAL ECONOMY
(1923/24)

Consumer goods and means of production almost balanced each other, especially when allowance is made for the fact that a part of the raw materials and fuel is consumed by the population as means of subsistence and not as means of production, while a part of the consumer goods is used as raw materials and semimanufactured goods. Of this over-all total of consumer goods, agriculture supplied 49.8 per cent and industry 50.2 per cent. Of the over-all total of means of production, agriculture supplied 50.6 per cent and industry 49.4 per cent.

This aggregate amount was consumed in the national economy as follows: 40.2 per cent was used up in production; 50.4 per cent was consumed inside the country as means of subsistence; and 9.4 per cent was exported or in reserve. [See table 14: Balance Sheet of the National Economy 1923/24.]

If we stop to realize that the bulk of the exports as well as the reserves consisted of means of production, the total output of the national economy breaks down into two equal parts: 52.8 per cent of the output went for personal consumption, and 47.2 per cent for productive consumption.

It was in this way that equilibrium was established in the national economy.

If 100 units of output (in value terms) are to be consumed as means of subsistence, another 90 value-units must be produced for investment in production as producer goods. This is the law of the Soviet economy, as it is precisely in this form that equilibrium is expressed-equilibrium in the production of the two basic categories of products, means of subsistence and means of

According to the Balance Sheet (pages 80-81), the bulk of the material assets which entered the national economy for distribution comprised output turned out in the country in the course of the year covered; reserves and imports occupied a relatively small place, as the following figures show:

The national economy of the Soviet Republics in 1923/24 therefore represents an economy of a type in which social needs -both for production and personal consumption-were satisfied from domestic sources. The national economy had only slight ties with the economies of other countries; the small percentage of reserves shows that economic and personal needs alike were taken care of by the productive activity of the population in the current year. The negligible nature of reserves and the resultant necessity of basing the development of the economy almost exclusively on the current year’s production are serious drawbacks, since the slightest fluctuation in output, or fluctuations in general in the industrial or agricultural picture, have immediate repercussions on the state of the entire national economy, lead to distortions of the economic plan, and make our economic policy unstable. This is the inference we must logically draw. The accumulation of reserves is therefore an essential prerequisite for the socialist development of the national economy.

It has been remarked above that assets at production prices do not include, first, the assets created by transport, and second, the assets which, though created in production, can be disclosed only through marketing and distribution transactions. The difference in the amount of assets at production prices and at consumption prices adds up to 3,553,700,000 rubles and consists of:

...Moving on to describe the distribution of material assets which entered the national economy, we should note that 40.2 per cent of the total was used for productive purposes as means of production, 50.4 per cent was consumed by the population as means of subsistence, 2.5 percent was exported, and 6.9 per cent remained in reserve; of the latter, 4.9 per cent was means of production and 2.0 per cent means of subsistence.

Specific consumption was as follows:

Of the aggregate national output which entered the national economy, agriculture received 48.5 per cent (19.0 per cent in means of production and 29.5 per cent in means of subsistence), while the other branches, plus reserves, plus the world market, received 51.5 percent (28.2 per cent in means of production and 23.3 per cent in means of subsistence). Of the total distribution 47.2 per cent was means of production and 52.8 per cent means of subsistence.

Thus, the national economy is a combination of two systems of consumption almost equal in dimensions: (1) the consumption of agriculture (48.5 per cent) and the consumption of the branches technically and organizationally dissociated from it-industry, transport, etc. (51.5 percent); (2) consumption of means of subsistence by the population-52.8 per cent, and consumption of means of production in production-47.2 per cent.

This is the form of equilibrium between agriculture and the other branches of the economy as it appears in the area of consumption.

The following, not counting reserves, are the categories, in the order indicated, of consumers of goods used in production:

Agriculture retains first place in consumption of output intended for productive purposes both in the total amount of output consumed and in consumption of agricultural products, but it is second in consumption of industrial products. Industry holds first place in the consumption of its own produce, second place in consumption of products of agricultural origin, and second place likewise in the total amount of products consumed. Construction is in third place in the total amount of products and in fourth place in agricultural and industrial products. In consumption of agricultural produce the world market moves up to third place, while it holds sixth place in consumption of industrial products and fifth place in consumption of total output. The consumption of trade is in last place.

In total consumption of products transport is in fourth place, of agricultural products in fifth place, and of industrial products in third place.

This is the order in the interrelations of consumers, established economically in their consumption of means of production (i.e., of products of productive consumption).

Thus 47 per cent of the products distributed in the national economy are consumed as means of production. Part of these cannot be consumed on a personal basis by virtue of their physical properties (ore, unfinished iron, etc.). The other part has physical properties which would allow of their being consumed personally by the population-for example, meat, milk, grain, etc-but emerges in production as raw materials or half-finished goods; it cannot, economically speaking, be consumed on a personal basis as such consumption would signify a reduction of means of production which would entail a reduction of products of subsistence as well.

The creation of a disequilibrium, therefore, in the consumption of part of the products destined for production would forthwith be reflected in a reduction of consumption.

The products of personal consumption (means of subsist -ence-the personal income of the population), comprising 53 per cent of the total produce which came into the national economy for distribution, consists almost equally of agricultural and industrial products (49.8 per cent and 50.2 per cent). We arrange the consumers of means of subsistence in order of their significance as consumers.

The farm population has the same standing in the consumption of means of subsistence as agriculture occupied in the consumption of means of production, i.e., first and second places.

The nonfarm population has the same standing in the consumption of means of subsistence as industry occupied in the consumption of means of production, i.e., second and firstplaces.

Collective consumption is in third place, and the world market in fourth.

This, in general outline, is the system of production and the system of distribution corresponding to it. These are the forms which equilibrium assumes in the system of production and distribution as it is established in the national-economic processes....