exchange value under socialism

FS300131 at Sol.YorkU.CA FS300131 at Sol.YorkU.CA
Sun Nov 6 10:58:45 MST 1994

I read Hans Ehrbar's comments with great interest, since the question
of value under socialism is a tricky one, but nevertheless crucial as
I discovered working as an engineer in Poland some years ago.
I asked for a cost analysis on each of five sizes of an instrument
transformer that the factory was producing so I could see where savings
were possible. The transformers ranged in size from 5 amps to 1000 amps,
with amounts of copper the corresponded to the size. At that time
copper was in such short supply that we engineers could not include
copper in our design without approval from a special commission in the
factory (aluminum was the usual substitute). The technological department
gave me identical figures for all five transformers!
This problem of establishing the cost of products is the most difficult
problem that socialist economies face. But a quantative association
is absolutely necessary before questions of technological innovation
can be approached. Moreover a planned economy must have quantitative
data on the resources that can be embraced by the planning.

In a fully planned economy, what is produced is produced for consumption
or use, not for exchange. Nevertheless, what is produced is produced in
commodity form for accounting purposes. Therefore the concept of
exchange value cannot be discarded. The exchange value under socialism
is the same as the exchange value under capitalism in quantative
terms. Similarly, investments made in the means of production cannot
be made arbitrarily. These investments provide the source of expanded
producition and employment for those entering the labor force. The
surplus product under socialism is not appropriated privately but is
the property of the population as a whole (in the state sector) and
therefore the accounting process requires the concept of profitability
on investment, since the organic composition of capital also must be
considered. In other words, a socialized economy with economic planning
must also distinguish between price and exchange value in a manner that
parallels a capitalist economy even though exploitative relations
of production no longer exist.  In my experience, the severest
problem is that of price formation in a planned economy, where
the market factor is absent.  In Eastern Europe and the USSR the
overcentralization of economic planning in practice meant that
prices for transactions between enterprises were set in the state
planning commissions without reliable information on the actual
costs of production. The central planning offices were too far
removed economically from the produces and furthermore did not
trust the data the producing enterprises provided, so to a large
extent the prices were set arbitrarily at what the planners
guessed was related to the cost of production.

Of course, this raises the question whether the problem of price
formation can be solved without unleashing market forces, that is,
without what the Chinese call a socialist market economy. In
theory, it should be possible. I think the problem was that
the transition to a fully planned economy was attempted before
the theory was developed so that market forces were removed
before an adequate subtitute was put in place.


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