Are there economic laws of socialism?

Harry Magdoff

The Bolsheviks believed that by overthrowing capitalism they were acting in harmony with a scientific law of history. Buty they were equally aware that, apart from general principles, there was no science of how socialism was to be constructed; nor were there preconceived laws of socialist economic development. As Leim saw it,

A transformation must, by historical necessity, take place along a broad line, that private ownership of the means of production had been condemned by history, that it would break, that the exploiters would eventually be expropriated. This was established with scientific exactitude. We knew it when we raised in our hand the banner of socialism, when we declared ourselves socialists, when we founded socialist parties, and when we set out to transform society. We knew it when we seized power in order to embark on socialist reorganization. But the forms of transformation and the rapidity of the development of the concrete reorganization we could not know. Only collective experience, only the experience of millions, can give decisive indications in this respect.

Although there were no specific advance scenarios on how to construct a socialist society, leading Bolshevik theoreticians nevertheless took for granted that the economic laws of capitalism, in fact political economy itself, would no longer apply. For Bukharin this was axiomatic:

Indeed, as soon as we take an organized social economy, all the basic "problems" of political economy disappear: problems of value, price, profit, and so on. Here "relations between people" are not expressed as "relations between things," and the social economy is regulated not by the blind forces of the market and competition, but by a consciously followed plan. In this case, there can be a certain system of analysis on the one hand, or a system of norms on the other, but there will be no room for a science which studies the blind laws of the market, since there will be no market. Thus the end of a commodity society will also see the end of political economy.

This formulation, appearing in a book published in Moscow in 1920, seemed to fit not only the preconceptions about an ideal socialist future but the period of War Communism as well. The shift from War Communism to NEP, however, brought about the reintroduction of capitalist commodity markets and with it the recognition that capitalist laws of economics were again operating, if only during the state of reconstruction of an economy ruined by a devastating civil war and during the early stages of transition to a planned society. Thus the influential economist Preobrazhensky discussed in his New Economics the existence of a conflict between the law of value and the element of planning, noting at the same time that the law of value would die out the further Russia advanced toward socialist planning.

General propositions about the role of economic laws and the conflict between market and planning, however, were not of much help when the time came to work out concretely--for the economy as a whole and for the first time in history--a system of socialist planning. It is hardly surprising that there was no unanimity on how to proceed. Differences in judgment on analytical and organizational matters were intermingled with differences in political and clas perspective. Out of this grew an unusually lively and open debate among Soviet economists throughout most of the 1920s. In general two types of theoretical and practical recommendations emerged, which came to be distinguised as the genetic versus the teleological approach.

The geneticists emphasized the prevalence of economic laws or "regularities." Effective planning, they argued, would have to rely primarily on predictions of the future course of the objective tendencies inherent in the economy, which in turn would set the limits on what the plan could accomplish. The economists of this "school" stressed the role of market forces, profitability, scarce resources, and the need for balanced growth; they were especially conscious of the backward state of agriculture. The teleologists, on the other hand, favored the establishment of ambitious goals, envisioning planning as a deliberate program to change the economic structure and maximize growth. The geneticists' reliance on the economic laws of capitalism was rejected; planning itself would become the "law." The advocates of this approach attached less importance to agriculture and the peasantry, stressing instead the goal of rapid industrialization. They did of course recognize the existence of constraints, but these, they insisted, were physical rather than market limitations.

The lines between these two approaches were not always hard and fast. The need for purposeful direction of the economy was acknowledged by the geneticists, while the teleologists understood the uses of prediction based on the behavior patterns of the economy. As Carr explains,

The issue partly turned on the character of the period. So long as policy was directed primarily to the task of recovery, to a restoration of a level of production and efficiency already attained in the past, the "genetic" approach satisfied practical requirements.

But so soon as the period of recovery gave place to a period of fresh advance, the need for a "teleological" conception of planning became difficult to refute.

As conditions changed, a conciliation of sorts between the two approaches was reached. But this did not matter for very long, since alongside the advance of forced-draft industrialization open debate was terminated by the most extreme forms of repression, including the physical elimination of many, if not most, of the leading participants in the earlier debates. Only one doctrine became official. In the early days of theoretical standardization, the accepted formula specified that the laws of political economy did not apply to a planned economy and that the law of value would gradually disappear. But with time and the further entrenchment of the adopted planning system, a new type of formulation was introduced that became a standard component of economics textbooks in the Soviet Union and subsequently in other countries that adopted the Soviet model. The law of value, it turned out, does after all apply, at least to the market for consumption goods. In addition, various generalizations are included under the rubric of socialist economic laws: the constant expansion of production, planned proportional development, economy of working time, distribution according to work done, and faster growth of the means of production relative to the means of consumption.

The argument we will make here is that this new crop of so-called economic laws of socialism have nothing to do with scientific analysis and are at best merely rationalizations of existing practice. By donning the mantle of laws, these vapid generalizations conceal inter alia the presence of conflicts of interest in the planned societies as well as the plausibility of alternative principles of planning. Thus by obfuscating the real issues they partake of ideology in the sense of false consciousness. But before we expand on this, it will help if we examine what is meant by the economic laws of capitalism.

When applied to natural phenomena, the term "law" refers to a sequence of events that have been observed to occur with unvarying uniformity under the same conditions. Clearly, the term cannot have an identical meaning in the social sciences, since conditions are never the same nor can the sequence of events be reproduced by controlled laboratory experiments. Therefore the laws of capitalism can more accurately be described as tendencies. Yet even though Marx was fully aware that capitalism is an organism capable to change and that its underlying tendencies can only be approximate, modified by a variety of historical developments, he nevertheless asserted that the ultimate aim of Capital was "to lay bare the economic law of motion of moder society." For approximate as these laws may be, they are in essence objective laws independent of the aims and decisions of those active in the economy, asserting themselves as a blind, elementary force, as a natural necessity.

Insofar as the laws of motion of capitalism are objective, Marx maintained, the basic course of development of the most industrially advanced country of his time (England) would prove to be true eventually in the case of the less industrialized countries as well. He therefore predicted in the Preface to the first edition of Vol. I of Capital:

Intrinsically, it is not a question of the higher or lower degree of development of the social antagonisms that result from the natural laws of capitalism. It is a question of the laws themselves, of these tendencies working with iron necessity toward inevitable results. The country that is more developed industrially only shows to the less developed the image of its own future.

And indeed this is that did happen--but only in what turned out to be the core countries of the world capitalist system.

But why this uniformity of basic patterns of development in the core countries? Here we come to what is distinct about the economic laws of capitalism--distinct in the sense that arguably in no other social system are the major aspects of economic operations subject to objective economic laws. (Note that we are here referring only to economic laws.) The reason for this is rooted in the very nature of the capitalist mode of production, in which the generalized production and circulation of commodities, a universal market, and anarchy of production are decisive features. Under these conditions, competition among units of capital enforces certain types of economic behavior independent of the will of the individual capitalist (or corporation). It is competition that impels the self-expansion of capital and makes persistent improvement of the means of production compulsory; future to comply puts the capitalist at risk of losing the enterprise. That is why Marx identifies competition as "the essential locomotive force of the bourgois economy," and notes that "competition executes the inner laws of capital; makes them into compulsory laws toward the individual capital, but it does not invent them, it realizes them."

This is not the place to expand on how competition operates, nor to explore the differences between competition under monopoly capital and in earlier stages. But it is important to understand that at all stages of capitalist development competition is the decisive factor in making the laws work. This is surely so in the case of the laws of value, reproduction, centralization and concentration of capital, the creation of a relative surplus population, and the general tendencies of accumulation.

Obviously none of this holds for planned socialist societies. Markets for consumer goods continue to exist. But although what happens in the market may send signals that influence the deliberations of planning bodies, it is still up to the planners at various levels of authority to make the major decisions on the allocation of resources and the program of accumulation. (Yugoslavia does present some exceptions. Analysis of that model, however, needs separate treatment.) The crucial point is that there are no objective economic forces that compel a specific course of economic development independently of the aims and decisions of those who run the system. Which is not to say that there are no objective factors that circumscribe planning options. But these are in the main concerned with natural and technical limits: the size and quality of the labor force, the supply of raw materials, water, power, transportation, communication facilities, and the like, impose severe constraints on what can be produced and distributed.

Practical obstacles inevitably arise at every level of decision making; merely to list them would take pages upon pages. But what is important is that these obstacles have to do with the technology of production, infrastructure requirements, efficiency of planning, and the consequences of past investment policies. Even more important for the purpose of the present discussion, these inhibitors do not exist behind the backs of the decision makers, as is the case with objective economic laws: they are potentially knowable and can be consciously dealt with.

In addition to the restrictions just noted, economic constraints are also present: for example, problems associated with controlling the supply and distribution of money, credit, and reserves of foreign exchange. Interference with the operation of the plan can arise where widespread private markets and/or extra-legal economic operations are especially influential. Finally, the more a socialist relies on trade with capitalist countries, the more the laws of capitalist economics may encroach. Foreign trade can of course be necessary for countries needing outside sources of raw materials, energy, and technology. Yet here too, how much foreign trade is engaged in (and foreign debt used to finance this trade) depends on the strategy of development chosen by the ruling authorities.

The idea that objective economic laws are not present in a socialist economy was, in fact, orthodox doctrine in the Soviet Union up to the early 1950s. That was the point of view projected in Lapidus and Ostravityanov, Political Economy, where it was claimed that the law of value was in process of dying out and a clear distinction was made between the spontaneous working of a capitalist system and deliberate socialist planning. First published in 1928, this book became the standard text used in Soviet schools for many years thereafter. (It was subsequently translated into many other languages and used extensively as an educational tool in Communist circles around the world.) The conventional wisdom took a 180-degree turn to a completely opposite theory after 1951. In 1952 Stalin's booklet, Economic Problems of Socialism in the USSR, was published. There he pronounced that economic laws must be taken into account in planning, and ever since the official canon has included a list of such laws, which have become standard ingredients in the economics and planning textbooks of the Soviet Union and other socialist countries.

We can do no more than speculate on what lies behind the changeover in doctrine. It may perhaps be associated with the transformation in the ruling ideology from the early view of Soviet society as one that is in transition to socialism, when class struggel is rampant, to the postwar vision that a full-blown socialist system, with harmonious class and sectoral relations, had finally arrived. An established society needs establishment laws, preferably ones that partake of the character of inevitable natural laws. Thus, the director of the Institute for World Socialist Economy of the USSR Academy of Sciences, declares:

In the transition period from capitalism to socialism and in a fully socialist society, planning in a form of economic management by the state, based on the knowledge and utilization of objective socialist economic laws, independent of personal wills or desires. Given the necessary material prerequisites for planned economic development, the effectiveness of any plnanning depends on how correctly state bodies apply the basic economic laws.

But what are these overriding laws? The following overview of the so-called laws, noting especially what is included and what excluded, reveals, we believe, a great deal about the ruling ideology of a good part, if not all, of today's socialist world.

1. The basic Economic Law of Socialism. This "law" has become a standard fixture of textbooks and scholarly publications in socialist countries. Here is a typical formulation:

The motto of social production is to produce everything for the sake of man, for the benefit of man. This cardinal feature of socialist production is scientifically expressed in the basic economic law of socialism. Its essence is that the direct object of socialist production is the ever fuller satisfaction of the constantly growing material and cultural requirements of all people through continued development and improvement of social production based on the highest technology.

How can this possibly be considered an economic law? At best it is a policy guide that allows a variety of interpretations. If it were a "basic law" then it would have to govern in all stages of growth, in all countries that eventually turn to socialism.

But this sort of policy guide might be woefully inappropriate for an industrialized society where productive forces are already highly developed and where waste of human and natural resources are major impediments. In industrialized countries the objective might be more rational use of human effort, productive capacity, and natural resources. Conceivably, after the basic needs of the population have been met, the masses might choose more leisure and greater opportunity for individual creative effort rather than "satisfaction of the constantly growing material requirements ... [and] continued development and improvement of social production." Endless expansion of material consumer goods, stimulated and encouraged by the social environment and business strategy, is precisely what capitalists seek and is an essential ingredient of capitalist culture. Bourgeois economists add ideological support by basing their theory on the assumption that consumer wants are insatiable and that consumer sovereignty rules the roost. It is important to recognize, however, that consumer requirements are to a large extent socially influenced, as Paul Baran maintained:

But neither do all wants stem from man's biotic urges or from a mythical eternally unchanging "human nature"; that concept is metaphysical obscurantism which flies in the face of all historical knowledge and experience. The truth is that wants of people are complex historical phenomena reflecting the dialectic interaction of their physiological requirements on the one hand, and the prevailing social and economic order on the other. The physiological requirements sometimes must be abstracted from for analytical purposes because they are relatively constant. And once the abstraction is explicity made and firmly borne in mind, the make-up of human wants can (and must) be legitimately thought of as being "synthetic," i.e., determined by the nature of the economic and social order under which people live.

Needless to say, thus far social revolutions have occurred in countries where an enormous increase in production forces has been required to supply the most basic physiological needs of the people: food, clothing, shelter, medical services, etc. In addition, attention had to be paid to creating a capacity for armaments production. That being the case, a prolonged and intensive drive to industrialize and to modernize agriculture had to be a top priority. But it is quite another matter to elevate what was and remains necessary in existing post-revolutionary societies to the level of a "basic law." That merely serves as a justification of current practices and at the same time distracts from what should be major concerns about the nature of a truly socialist society.

The fact is that the planning decisions made at the earliest stages of industrialization have a bearing on the composition of future consumer wants and needs. The design of cities, the choice of technology, the location of plants, which consumer goods are given precedence when expanding capacity--these, along with political structure and practices, are bound to influence the sociocultural environment and the nature of consumer requirements. Moreover, material consumption is sure to be circumscribed in the long run by the exhaustion of nonrenewable natural resources, while in the short run as well the scarcity of domestic natural resources needs to be considered if excessive dependency on foreign trade is to be avoided. In short, the proclamation that fulfillment of endlessly rising consumer material requirements is the basic law of socialism is little more than empty propaganda and has nothing to with scientific analysis.

2. The law of Planned, Proportional Development. What this "law" consists of is a number of injunctions about keeping a proper balance between interdependent economic sectors that planners must seek to obey--between, for example, agriculture and industry; output of producer and consumer goods; investments in different regions; availability of trained workers, engineers, technicians, etc., and production capacity; raw materials, intermediate products, and final manufacture. All in all, these precriptions are no more than platitudes or the most obvious requirements of realism when national plans are drafted. Thus by way of explanation one of the textbooks points out that the labor, metal, and machinery used in the production of internal combustion engines will be wasted if at the same time not enough gasoline is produced to fuel cars, tractors, and airplanes. This, believe it or not, is offered as an illustration of the "objective connection between the processes of economic development that, independently of man's will, demands the planned establishment of definite proportions and is expressed in the law of the planned, proportional development of the national economy.

In the category of required proportions there is, however, one injunction that, if valid, might bear some resemblance to an economic law. Repeated throughout the literature is the proviso that in a socialist society Department I (the production of means of production) must grow more rapidly than Department II (the production of consumer goods). In an essay on this precept, Maurice Dobb comments as follows on its historical background:

There are two reasons in particular why this is a peculiarly Marxian notion (at least in the sense of something that comes naturally to mind one using Marxian categories of thought). In the first place it is a fairly obvious application of Marx's famous two-departmental schema in the second volume of Das Kapital. Secondly, Lenin had advanced this view, in the course of his controversy with the Narodniks, that capitalism had developed the production of means of production faster than that of means of consumption: that this had, indeed, been an essential part of capitalism's "historic mission"--"production for the sake of production." If this had been done by capitalism, then it surely followed for any Marxist that this must a fortiori be the aim of a socialist economy, especially in the situation in which the Soviet Union found herself in the 1920s.

The key here is the "situation in which the Soviet Union found herself in the 1920s," a predominantly agricultural country that had to cope with a weak and underdeveloped industrial base and the threat of destruction by aggressive capitalist powers. Even so, the choice of an effective road of development was far from obvious. In fact, the active debate during the 1920s mentioned above focused primarily on this issue. In the end, though, the decision was made to invest primarily in the expansion of heavy industry in the belief that thereby unusually rapid growth, higher consumption levels in the long run, and more reliable self-defense would be obtained. Whether with hindsight one can say that this was the optimum solution is not the issue here. What is important to recognize is that it represented a conscious choice at a given historical juncture by the ruling group of the first country aiming to construct a socialist society. Appealing to Marx and Lenin may have given the desicion-makers greater confidence in the choice they made, as well as serving to gain popular support for it. But in the final analysis what was at stake was a political decision in a specific context.

The proposition that Department I must grow more rapidly relative to Department II at all stages of socialist development and in all socialist countries is a matter of faith, not logic, and surely not an independent, objective law. Building a strong industrial base is of course essential to meet the needs of the people and to reach independence. But so is the expansion of agricultural output. There can be no uniform prescription for an ideal balance between agriculture and industry and between the two departments, since much depends on the prevailing conditions in industry and agriculture, the relative size of the labor force (whether a surplus or shortage), the choice of technology affecting the capital-output ratio, and the dependence on foreign trade. Within the bounds of technical considerations, the final decision on the relative rates of growth of producer and consumer goods is political in nature--one that in a truly socialist society would not be predetermined but arrived at democratically based on the advice and information provided by specialists.

3. The Economic Law of Distribution According to Work. Underlying this "law" is a fundamental socialist tenet: if distribution of consumer goods is to be based on work performed, then unearned income is eliminated. But a great deal more is meant, for the "law" commands that higher pay be granted to skilled workers, more efficient producers, and those engaged in more difficult work (e.g., in steel making and coal mining). Since this may seem like a contradiction to the socialist ideal of equality, Marx is called upon the doctrinal support. In his Critique of the Gotha Program, Marx states:

We are dealing here with a communist society, not as it has developed on its own foundations, but on the contrary, just as it emerges from capitalist society. In every respect, economically, morally, intellectually, it is thus still stamped with the birth-marks of the old society from whose womb it has emerged. Accordingly, the individual producer gets back from society--after the deductions [to replace the means of production used up, to provide for the expansion of production, and to build an insurance reserve in case of accidents]--exactly what he has given it. What he has given it is his individual quantum of labor.

While Marx's warning arises from his concern for realism, the ideologues go much further by incorporating practice into an absolute law. They go so far as to insist that equal distribution is incompatible with the first stage if communism. At every stumbling block in the advance of production, they cry out for even greater pay differentials as a spur to productivity. If, however, Marx is to be the guide, then his additional observations should also be heeded. He proclaims an eventual goal of equal distribution.

in a more advanced phase of communist society, when the enslaving subjugation of individuals to the division of labor, and thereby the antithesis between intellectual and physical labor, has disappeared; when labor is no longer just a means of keeping alive but has itself become a vital need; when the all-around developmend of individuals has increased their productive powers and all the springs of cooperative wealth flow more abundantly.

Clearly, this ideal is a long, long way off. But if it is ever to be approximated, it won't be done overnight. The higher phase of communism cannot be inaugurated on a given day. If the enslaving division of labor is ever to be abolished, if the antithesis between intellectual and physical labor is ever to be overcome, if labor itself is to become a vital need, then it can only come about in an evolutionary process, slow as that progress may have to be. If, on the other hand, distribution according to work, and the other features of the production system that go along with the enforcement of that rule, are to remain an inalterable commandment, the evolutionary process can never begin. The reason given for the continuation of inequality is the practical inability to ignore the capitalist inheritance. But to the extent that the practice of inequality in pay (and the distribution of goods and services by nonmonetary means to privileged elite) becomes entrenched in the operations of existing socialist societies, supported by the insistence that it is in accord with an objective law that dare not be violated, the economic, moral, and intellectual aspects of capitalist inheritance are reinforced and continually reproduced.

4. The Law of Value. The stress on the validity of the law of value despite the overthrow of capitalism is that commodity production must continue in planned post-revolutionary societies. This is simply and clearly put forth by an economist who at the time of writing was the director of the Institute of Economics of the Hungarian Academy of Sciences:

The law of value is a law of several socioeconomic formations, it prevails in a narrower or wider scope in every society where commodity production plays some smaller or greater role. It expresses the objective tendency for commodities to be exchanged for one another in proportion to the amounts of socially necessary labor used in their production; in other words, that their relative prices develop accordingly.

This proportion is presumed to follow from Marx's analysis. It does no such thing. Marx does of course call attention to the obvious need in every society for social labor to be distributed in definite proportions, but he is quick to add that the way it is done depends on the social formation. Thus, the law of value governs the distribution of social labor and its reproduction when the means of production are privately owned and the interconnection of social labor is achieved by private exchange of the products of labor. Most important of all: the law operates as an objective tendency not because it is a law of nature but because of the discipline of the market. Once the latter no longer controls, the law of value loses its pertinence. For example, if commodities continue to be exchanged according to the socially necessary labor incorporated in them (a prime attribute of the law), how is it known how much labor is socially necessary and how much unnecessary? Under capitalism that determination is made by market competition. But no such mechanism or meaningful substitute for its is available in a planned society. Moreover, if social goals are to dominate economic behavior, then use value must (or should) enter exchange relations in a way that is distinctly different from the operations of a private exchange economy.

There are, to be sure, a host of practical problems associated with price-making in a planned economy. It is clear that the plan cannot regulate every aspect of the economy. Experience with the arbitrary setting of prices has shown that it leads to waste, bottlenecks, and other obstacles to the most effective use of resources. At the same time, there is no simple device that will automatically produce a suitable set of relative prices. The law of value will not do the trick in the absence of the discipline of the market. On the other hand, resort to market discipline ends up in the abandonment or curtailment of such social goals as full employment and meeting the basic needs of the people. All that establishment of the law of value as the objective determinant of commodity prices in socialism accomplishes is to sweep under the rug the substantive and practical issues, implying in effect the absence of contradictions inherent in price policy.

It may be argued that the academics who write the books are far removed from the actual operations of the economy, and that those in charge of the real world know better. Even so, the official doctrine endlessly in textbooks and studies of planning are significant insofar as the reflect the ruling ideology. Ironically, two interrelated features at the heart of the official ideology bear a striking resemblance to those of modern bourgeois economics: the separation of economics from politics and the assumption of a fundamental harmony of interests among all classes and sectors of society.

When the economists in the socialist countries raise the banner of objective laws independent of the will of individuals, they are saying in effect that what is happening in the economy is basically what has to be. Since the economic laws are not subject to change, they are outside the realm of politics. The political component of political economy is thereby relegated to the task of mobilizing the people to carry out the plans that are designed in accord with the objective economic laws.

Politics would of couse become less important if in truth there were a harmony of interests among all sectors of the population. But such harmony is surely a delusion when productive capacity is insufficient to create anything approaching an equal distribution of goods and services. As long as that is the case, the politics behind who gets what is bound to be an essential consideration in the design of the plan. Decisions on the division between investment and consumption, individual and communal consumption, the types of consumer goods given priority, the location of manufacturing and transportation facilities, and many other economic matters--all of these will in one way or another advantage some groups more than others. Since investment decisions have long-run effects, the accompanying advantages and disadvantages tend to congeal along certain lines that produce and reproduce differences between city and country, geographic regions, and various social sectors (intellectuals, workers, farmers, etc.). The assumption of harmony of interests under the guidance of objective economic laws of socialism amounts to a denial of this reality. It is at the same time a denial of real politics and meaningful democracy based on the identification of actual and potential conflicts of interest, open discussion, and a practice that provides for participation of the masses in the debate over major policy decisions.

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