Reproduction

The process of production viewed in continuous motion and renewal. It includes the reproduction of material goods, the reproduction of the work force, and the reproduction of production relations.
Reproduction differs under different historical conditions. A distinction is made between simple reproduction, in which the process of production is renewed on an unchanged scale, and expanded reproduction, in which it is renewed on an ever-increasing scale. Simple reproduction was typical of precapitalist formations.
==Capitalist reproduction==
Under capitalist conditions, reproduction involves not just the reproduction of material goods but also the reproduction of capital and of surplus value, and the moving force is the pursuit of surplus value, or profit. This pursuit of surplus value and competition motivates capitalists to carry out expanded reproduction or accumulation of capital. Under capitalist conditions, reproduction of the work force is characterized by its reproduction as a commodity: hired workers, consuming the essentials of life— which they have bought with their wages—renew their ability to work in order to sell it to the capitalists again and again. Because the exploitative relations are renewed in capitalist society between the class of hired workers and the class of capitalists, there is also reproduction of capitalist production relations.
Simple reproduction, not being characteristic of capitalism, is nonetheless a real element and a very important component of expanded reproduction. It takes place within the framework of an individual capitalist enterprise (that is, the reproduction of individual capital), as well as in all of capitalist society taken as a whole. Under conditions of commodity production, reproduction represents the unity of the processes of production and circulation.
===GLOBAL SOCIAL PRODUCT AND CONDITIONS OF ITS SALE.===
The starting point for analyzing the reproduction of social capital is a two-part division of the gross social product— by value and by physical form. By value the entire social product, just like the product of a particular enterprise, is divided into three parts: constant capital (c), variable capital (v), and surplus value (m). By physical form it consists of two parts: means of production (created in subdivision I) and consumer goods (produced in subdivision II). The two sub-divisions (I and II) are distinguished from one another primarily by how their products are used: the output of sub-division I is used for production, whereas the output of subdivision II goes for personal consumption.
Marx explained the conditions of the sale of global social product by means of schematic numerical examples (see K. Marx and F. Engels, Soch., 2nd ed., vol. 24, pp. 394-596).
In the process of selling, one part of output is sold within the framework of its own subdivision, whereas the other part is sold by exchange between the subdivisions. As Marx showed, the main conditions for sale of social product under simple reproduction are I (v + m) = II c—that is, where the sum of the variable capital and surplus value of I is equal to the sum of constant capital consumed by subdivision II; I T = Ic II c—that is, the value of the annual output of subdivision I is equal to the sum of constant capital of both subdivisions; II T = I (v + m) + II (v + m)—that is, the value of the annual output of subdivision II is equal to the sum of the incomes of workers and capitalists in both sub-divisions.
The sale of global social product is only possible when there is a certain proportionality between the subdivisions. However, if this proportionality is violated (which is inevitable with the anarchy of capitalist production), full sale of social product becomes impossible and the entire reproduction process is disrupted. Proportionality among different sectors of production within each of the subdivisions is also essential for normal sales and reproduction.
Exchange of goods between the subdivisions and within them is implemented through the mediation of money. The starting point from which money enters circulation is the monetary accumulation of the capitalists (monetary capital). The capitalists spend part of the money to buy work force. The money spent by the capitalists of subdivision II to pay wages to workers returns to them when they sell consumer goods to the workers, but the money spent by capitalists of subdivision I to pay wages goes first from the workers of subdivision I to the capitalists of subdivision II (when the workers buy consumer goods) and then returns to the capitalists of subdivision I when they sell means of production to the capitalists of subdivision II. Part of the money circulates only among the capitalists of both subdivisions; capitalists of subdivision I buy consumer goods from the capitalists of subdivision II, whereas the latter in turn acquire means of production from the capitalists of subdivision I. As a result, money leaves the hands of the capitalists and returns to them.
The laws of the expanded reproduction typical of capitalism were revealed by Marx in the following model, first year:
These initial quantities of the model of expanded reproduction differ from the model of simple reproduction in that I T>I c + II c and I (v + m) >II c. These are essential prerequisites for expanded reproduction, since it is only possible on the condition that the value of means of production produced in a year be sufficient not only to replace expended means of production but also for expansion of production. In his analysis of expanded reproduction Marx assumed that in subdivision I half of the surplus value is used for the personal consumption of the capitalists, whereas the other half is capitalized. He further assumed that the organic structure of capital remains unchanged in subsequent years (in subdivision I, c:v = 4:1 and in subdivision II, c:v = 2:1). In such a case the value of the output of sub-division I during the transition from the first year to the second will be I (4,000 400)c + (1,000 100)v 500m = 6,000, where 4,000 and 400 signify the initial and surplus constant capital respectively, 1,000 and 100 are the initial and surplus variable capital, and 500 is the part of surplus value that goes for the personal consumption of capitalists in subdivision I. Of all means of production, a part equal to 4,400 is sold within subdivision I. The remaining part, equal to 1,600, which includes initial and surplus variable capital (v) and personally consumed surplus capital, is sold through exchange with subdivision II. It follows from this that the constant capital of subdivision II should increase by 100 and reach 1,600 since only on this condition will subdivision II make a demand on subdivision I for the full sum of its output subject to sale outside subdivision I. If the constant capital of subdivision I increases by 100, then (where c:v = 2:1) variable capital should increase by 50. Therefore, the value of the output of subdivision II during the transition from the first year to the second will be II (1,500 + 100)c + (750 + 50)v 600mn, where 1,500 and 100 are initial and surplus constant capital (c), 750 and 50 are initial and surplus variable capital, and 600m „ is the part of surplus value (750-150) that goes for personal consumption by capitalists of subdivision II.
The selling process will take place in the following manner: Within subdivision I (4,000 + 400)c—that is, 4,400—is sold; within subdivision II (750 + 50) 600mn = 1,400 is sold; and on an exchange basis between the two subdivisions, means of production worth 1,600 (l,000v + 100v + 500mn) and consumer goods worth 1,600 (l,500c 100c) are sold.
With these premises and the assumption that the norm of surplus value is invariable, the output of both subdivisions for the second year will be
The dimensions of production for subsequent years are calculated similarly. The number of hired workers increases along with the growth in social product—that is, the proletarian class and the actual exploitative relationship of hired labor by capital will be reproduced on an expanded basis.
The following proportions are essential conditions for the sale of global social product under expanded reproduction: I (v + Δv + mn) = II (c + Δc). That is, the sum of initial variable capital (v), surplus variable capital (Δv), and personally consumed surplus value (mn) of subdivision I is equal to the initial constant capital (c) and surplus constant capital (Δc) of subdivision II; I T = I (c Δc) II (c + Δc)—that is, the value of annual output of subdivision I is equal to the sum of constant capital of both subdivisions; II T = I (v Δv mn) II (v + Δv + mn—that is, the value of annual output of subdivision II is equal to the sum of variable capital and personally consumed surplus value in both subdivisions.
Among the laws of capitalist expended reproduction are the internal relationship between both subdivisions and also between expanded reproduction and the growth of the internal market. Expanded reproduction in subdivision I also determines expanded reproduction in subdivision II, since the latter receives surplus means of production from the former. The expansion of production causes growth in the internal market, since growth in constant capital leads to an increase in demand for means of production, whereas growth in variable capital and personally consumed surplus value leads to an increase in the demand for consumer goods.
An important law of expanded reproduction is the law of faster growth in production of the means of production than in the production of consumer goods. As a result of technological progress, the constant capital in capitalist society is growing faster than variable capital, and since the elements of constant capital are produced in subdivision I, it grows at a faster rate than subdivision II.
Deep antagonistic contradictions are inherent in capitalist reproduction. The principal contradiction of capitalism— between the social nature of production and the private capital form of acquisition—is growing more acute. The mechanism of capitalist expanded reproduction ensures that private capitalist owners will acquire the largest, and at the same time an ever-growing, part of the products of public production.
In the course of reproduction the contradiction between capitalist production and consumption by the popular masses is growing more acute. In the pursuit of maximum surplus value the capitalists accumulate more and more capital and increase production, but the trend toward unlimited expansion of capitalist production stands in opposition to the limited consumption of the working class. Moreover, with growth in the organic structure of capital its accumulation engenders an industrial reserve army, and, influenced by unemployment, wages have a tendency to drop below the value of work force. In turn, the limited consumption of the working class creates difficulties in selling the goods, which as a result of expanded reproduction are being produced in larger and larger quantities.
The conditions of capitalist exploitation and the conditions for selling the results of this exploitation do not coincide. The scale of exploitation is limited by the number of hired workers employed in the production process and by the degree of their exploitation, which is determined mainly by the productivity of public labor. However, the sale of goods demands correspondence between the dimensions of production and the solvent demand of society’s members; further, it requires that there be proportionality among different spheres and sectors of capitalist production. However, capitalism cannot ensure such correspondence and proportionality. Growth in the production of consumer goods exceeds the limited solvent demand of the toiling masses. At the same time, because of contradictions between the organization of production at particular enterprises and the anarchy of capitalist production in society, the proportionality between subdivisions I and II and also within them is inevitably violated. Therefore, the normal course of reproduction is disrupted and interrupted by crises from time to time.
===V. I. LENIN’S ELABORATION OF THE MARXIST THEORY OF CAPITALIST REPRODUCTION===
In a number of his works (“Concerning the So-Called Question of Markets,” “A Description of Economic Romanticism,” “The Development of Capitalism in Russia,” and others) Lenin creatively developed Marx’ theory of reproduction. Lenin gave an analysis of expanded reproduction, taking into account the law of growth in the organic structure of capital, and pro-posed new models in which the organic structure of capital would increase from year to year. As a result of this, in Lenin’s model subdivisions I and II do not grow at the same rate; the production of means of production grows more rapidly than the production of consumer goods. Proceeding from the law of faster growth in production of the means of production, Lenin showed that growth in capitalist production and therefore also in the internal market occurs more through means of production than through consumer goods.
Within subdivision I, Lenin singled out production of the means of production for subdivision I itself and production of the means of production for subdivision II. He empha-sized that the first part of subdivision I grows more rapidly than the second and that the latter in turn grows more rapidly than subdivision II. The development of capitalist production and therefore also of the internal market primarily through means of production was evaluated by Lenin as a contradictory process because this development reflects not only technological progress but at the same time the limited nature of personal consumption by the popular masses because of their proletarian condition.
Lenin investigated the question of the formation and development of the internal market under capitalism, clarifying the role that the decline of small-scale commodity producers played in this process. He showed that stratification of the peasantry creates and expands the internal market for capitalism in a double sense. First, the impoverished small peasants stop managing independent semi subsistence farms; they begin to sell their labor and buy consumer goods with the money earned from this; in this way the market for the output of subdivision II grows. Second, the top level of the peasantry, which becomes wealthy, is transformed into an agricultural bourgeoisie; they expand their farms and buy agricultural implements, machinery, fertilizers, and other products on the market; in this way the market for the output of subdivision I grows.
===REPRODUCTION UNDER THE CONDITIONS OF PRESENT-DAY CAPITALISM===
The general crisis of capitalism has left its mark on reproduction, leading to a decrease in the rate of expanded reproduction. The causes of the retardation in rates are intensified brakes on growth in production applied by the monopolies in order to maintain high monopoly prices; increase in the percentage of unproductive (in particular, military) consumption in national income; aggravation of the market problem; decline of imperialism’s colonial system; and intensified discrepancy between production and solvent demand in the capitalist countries. However, retardation in the rate of expanded reproduction is not a permanent process. Within the framework of the general crisis of capitalism, the lowest rates of growth in production in the capitalist countries occurred in the 1930’s. The period after World War II (1939-45) shows higher rates than this period. This is explained by the modern scientific and technological revolution, which has led to extensive replacement of fixed capital, economic crises of less severity and length, and intensified state stimulation for expanded reproduction.
Under conditions of the general crisis of capitalism the process of reproduction is characterized by chronic under-utilization of the production apparatus of capitalist industry and chronic mass unemployment, which causes enormous damage to the capitalist economy.
Structural changes are taking place in reproduction. As a result of the scientific and technological revolution, the growth rates of production in the key sectors that determine technological progress (machine building, electrical engineering, electronics, chemicals, and others) are significantly greater than growth rates of production in the old sectors; as a result, the share of key and new sectors in all industrial production is increasing, whereas the share of the old sectors is dropping.
The law of faster growth in the production of means of production continues to operate under the conditions of present-day capitalism. However, there are also factors that run counter to it, including decrease in the cost of means of production because of growth in labor productivity in subdivision I and more effective and economical use of means of production.
One of the structural changes in present-day capitalist reproduction is the change in the ratio of the production and nonproduction spheres in favor of the latter. Between 1940 and 1966 the following increases were observed in the size of the gainfully-employed US population working for hire: from 25.2 million to 30.6 million persons (a gain of 19 percent) in physical production; from 16.1 million to 35.6 million persons (a gain of 121 percent) in the nonproduction sphere. In 1948, 44.3 percent of the value of global final product was sold in the nonproduction sphere, whereas in 1962 the figure was 54.4 percent.
One characteristic of present-day reproduction is that reproduction in the imperialist countries is greatly influenced by the militarization of the capitalist economy. Militarization exerts a contradictory influence on the reproduction process and deforms this entire process. In the short run, militarization of the economy creates a high military-inflationary situation and gives impetus to production growth. In the final analysis, however, by increasing the unproductive use of labor and physical resources and the national income, militarization leads to a decrease in the rate of expanded reproduction. At the same time it intensifies disproportionality in capitalist production, leading to enormous bloating of military production and to relative, and in certain periods also absolute, reduction in civilian production.
E. IA. BREGEL’
==Socialist reproduction==
Under conditions of socialism reproduction is a planned process which ensures constant renewal of all elements of socialist production and of the entire economic structure of socialism on the former scale and on an expanded scale. Socialism joins together a number of characteristics: the continuous renewal and expansion of productive capital collectivized by socialism; the reproduction of the work force of laborers in socialist society, who are free from exploitation, and the raising of their standard of living and cultural level and the development of their creative capabilities; the systematic growth in the gross and net product of socialist society; and the reproduction and development of socialist production relations, which is the moving force of this process. To implement reproduction under socialism, use is made of civic and material stimuli, economic levers, and commodity-money, financial, and credit relations in order to receive the largest possible physical volume of net social product (national income) as the source for satisfying the growing needs of the popular masses and for further development of socialist production. With public ownership of the means of production and where production and reproduction are carried out in a planned manner and serve the interests of satisfying the growing needs of society, their value forms act as a means of material stimulation for obtaining the largest possible amount of use values of the proper composition and quality with minimum expenditures of social labor. Unlike capitalist reproduction, reproduction under socialism does not suffer from periodic crises, depressions, and recessions; it ensures the possibility of continuous economic growth. Encompassing the entire national economy, it is carried out through the reproduction of individual enterprises, sectors, and all elements of the social division of labor according to a national plan and is mediated by economic accountability relationships among enterprises. The main features of reproduction are common to all the socialist countries. At the same time, differences in the level of economic development and in the structure of national economies and foreign trade explain the particular characteristics of reproduction in each of these countries.
===GROWTH RATE OF THE GROSS AND NET PRODUCT OF SOCIALIST SOCIETY===
Under socialism the satisfaction of the needs of the popular masses depends above all on the dimensions of gross and net social product, the dimensions and essential structure of the accumulation fund (the main part of net product), and rates of their growth. The rates of growth play a large part in accomplishing internal tasks and also in the economic competition between socialism and capitalism in the world arena. The advantages of the socialist economy make it possible to achieve continuous economic growth at a high rate. In the period between 1951 and 1968 the USSR national income increased at an average of 8.8 per-cent a year, whereas for Bulgaria (1948-68) the figure was 8.3 percent, for Hungary—5.6 percent, for the German Democratic Republic—7.6 percent, for Poland—7 percent, for Rumania—9.7 percent, and for Czechoslovakia—6.1 percent. At the same time, this figure in the United States was 3.8 percent, in Great Britain 2.9 percent, in France 4.2 percent, and in Italy 6.7 percent. Rates of reproduction depend on increase in the number of persons employed in physical production and, most importantly, on the raising of labor productivity. The extensive type of expanded reproduction, or development in breadth, takes place on the former technical basis through additional labor and natural resources and additional fixed and working capital. However, the extensive type of expanded reproduction cannot ensure a fundamental increase in national income per capita of population, and thus it should be increasingly replaced by intensive reproduction. This type of reproduction is achieved primarily on the basis of growth in labor productivity. In the USSR between 1951 and 1968 the index of growth in labor productivity in physical production surpassed the index of increase in number of persons employed in such production by a factor of 2.27. The dominant role of labor productivity in growth in gross and net social product also exerts an increasing influence on the development of socialist production relations, demanding a rise in the level of technological culture and skill of the working people, an increase in their wages, and expanded and deepened education, while promoting the gradual overcoming of social differences between people engaged in physical and mental labor. Increasing labor productivity in physical production makes it possible to employ a large share of the work force in the nonproduction sphere; to develop education, public health, science, and art more rapidly; and to increase the working people’s free time.
Two forms of intensive reproduction are distinguished: capital-intensive reproduction, in which growth in labor productivity is achieved on the basis of ever-faster increase in expenditures of physical productive capital per unit of output, and capital-conserving reproduction, in which increase in labor productivity is accompanied by the economizing of a substantial amount of productive capital per unit of output. In the case of the second form, growth in gross and net social product is achieved with smaller expenditures of productive capital per unit of output. Under socialism also net social product is divided into essential (v) and surplus (m). However, here the division does not express relationships of class exploitation; it results from the need for additional production to satisfy the entire society’s needs for education, public health, social security, defense, and administration, as well as for the further development of public production.
By economizing expenditures on materials the net social product (by physical volume) increases more rapidly than gross social product. Thus, in the USSR in 1960-68 gross social product (in current prices) increased by a factor of 1.81, whereas net product increased by a factor of 1.68; in unchanged prices these factors were 1.71 and 1.73, respectively. With labor productivity growing faster than wages in physical production, there is also an increase in the share of surplus product in national income (47 percent in 1959 and 47.6 percent in 1966).
===DISTRIBUTION OF THE GROSS AND NET PRODUCT OF SOCIALIST SOCIETY AND THE FORMATION OF REPRODUCTION FUNDS===
The gross product produced by socialist society is initially distributed to pay for expenditures for materials, for wages (with extra charges), and for different types of income through surplus product (profit, turnover tax, and so on). In this way the primary incomes of the working people, of socialist enterprises, and of the state are formed along with replacement funds. Redistribution of these incomes through prices and the financial system leads to the formation of secondary incomes in the nonproduction sphere and influences the dimensions of sales of net product produced in different sectors of the national economy, in different social sectors (state, kolkhoz-cooperative), and in individual republics. As a result of distribution and redistribution, the following reproduction funds are formed: the replacement fund of means of production expended; the public consumption fund; nonproduction accumulation capital; and the accumulation of productive capital and reserves necessary to maintain high rates of reproduction and proportionality in it. The public consumption fund (in the USSR in 1969 it made up about 72 percent of the national income) encompasses both essential product, including the part of social insurance capital spent for subsidies to the workers, and the part of surplus product spent through the state budget for education, public health, physical training, and social security (including part of the social insurance capital). Accumulation of productive and nonproduction capital and reserves and expenditures for defense and state administration are carried on out of surplus product.
Replacement of expended means of production and accumulation of productive capital are conditions for reproduction of public ownership of the means of production in its two forms: public ownership and kolkhoz-cooperative ownership. Rational distribution of the growing consumption fund between the city and the countryside and between workers and kolkhozniks is one of the most important conditions for raising labor productivity and for reproduction of the work force and the entire aggregate of production relations of a socialist society. The policy of bringing the standard of living and culture in the city and countryside and in certain republics closer is a typical feature of reproduction under socialism.
===REPLACEMENT AND ACCUMULATION OF PRODUCTIVE CAPITAL===
The replacement fund serves for the reproduction of productive (fixed and working) capital and socialist ownership of the means of production on their former scale; in comparison, the production accumulation fund is designed to support high rates of expanded reproduction of productive capital and socialist ownership of the means of production. (In 1968 the production accumulation fund had a 21 percent share of the national income.) Raising labor productivity demands the accumulation of means of production to increase the capital-worker ratio for at least part of the employed work force and, as a rule, a higher capital-worker ratio for the predominant part of additional work force. Between 1950 and 1968 the productive fixed capital of all sectors of physical production in the USSR grew by a factor of 5.1, whereas the capital-worker ratio increased three times. This means that the accumulation of productive fixed capital serves primarily to increase the productivity of public labor. Since the achievement of higher labor productivity under socialism is accompanied by an increase in wages, with intensive expanded reproduction consumption funds should increase more than the size of the work force. There is a direct relationship between the rate and dimensions of accumulation and its share in net product: the larger the share of savings in net product (or the norm of production savings), the higher the growth rate of gross and net social product where the efficiency of savings does not vary.
The level of return from productive capital or the capital-output ratio influences the relationship between the norm of production accumulation and the growth rates of gross and net product. Although the norm of production accumulation remained at a high level in 1959-68 (19.5-22 percent), the average annual growth rate of gross and net product was only 7.2 percent and was lower than in the preceding period. The primary cause was the drop in return on capital and the increase in the opposite quantity, the capital-output ratio. Increase in the capital-output ratio of the national income of a socialist society should be paid back through growth in labor productivity and decrease in the public costs of production.
===REPRODUCTION OF THE WORK FORCE===
The high rate of reproduction under socialism actually ensures universal employment of the able-bodied population. Determining the need for a work force with appropriate qualifications and specializations, training such a work force, and distributing it by sectors of the production and nonproduction spheres is one of the most important tasks of national economic planning. Resources for covering fluctuations in the work force include the natural movement of the able-bodied population, transfers from the private to the public sector, and, in the nonagricultural sectors, the influx of able-bodied population from agriculture to these sectors. With the modern scientific and technological revolution and the intensified role of scientific research, the level of education and qualification among workers acquires an especially large role in reproduction of the work force. Reproduction of the work force is implemented and encouraged by material stimulation through the socialist system of paying wages on the basis of quantity and quality of labor and through public consumption funds.
===RELATIONSHIP BETWEEN PRODUCTION ACCUMULATION AND CONSUMPTION===
Socialist accumulation, which ensures universal employment, a rise in labor productivity, and growth in national income, creates the material basis for increasing real personal incomes, raising the people’s standard of living and cultural level, and satisfying the growing needs of the popular masses. The law of socialist accumulation can be formulated as the law of optimally combining production accumulation and popular consumption while ensuring universal employment of the able-bodied population.
An optimal combination is achieved when the proper rate of accumulation has an impact on consumption not only over the short run but also for an extended reproductive period in the national economy (for example, ten years), ensuring economic growth from year to year and securing an increase in real personal incomes beyond the limits of the period being planned. Replacement and accumulation of nonproductive fixed capital play a large role in raising the standard of living and cultural level of the working people.
Reserves are very important for ensuring proportionality of reproduction. Accumulation of reserves makes it possible to overcome gaps that occur in various sectors during fulfillment of plans and to eliminate the consequences of natural disasters. The accumulation of reserves also serves to strengthen the country’s defensive capability.
===CHANGING THE REAL AND ESSENTIAL STRUCTURE OF GROSS AND NET PRODUCT===
Under socialism the necessary dimensions of subdivision I are determined in a planned manner, depending on the necessary dimensions of the fund for replacing expended means of production and accumulation of productive (fixed and working) capital, which includes growth in reserves of means and subjects of labor. The more means of production are accumulated in the form of active productive capital, the higher the rates of technological progress and expanded reproduction can be. The scale of production of consumer goods by subdivision II and their import and accumulated stocks determine the dimensions of consumption by the working people of the city and countryside.
Rapid increase in the capital-worker ratio makes it necessary to rapidly expand the production of implements of labor and the energy that sets them in motion; this leads to relatively accelerated development of the production of objects of labor, from which implements of labor are manufactured.
At the same time, factors limiting faster growth in production of the means of production are also operating in the national economy. The primary ones are economizing the use of means of production and achieving large volumes in subdivision I. Under present-day conditions when the share of expenditures on materials in gross product is very high (55.8 percent in the USSR in 1968, 62.1 percent in Poland in 1967 [actual prices]), economizing of the use of means of production may have a certain effect on the ratio of growth in both subdivisions of public production. However, because this economizing requires additional expenditures of means of production, its influence on faster growth in subdivision I is much less than the influence of growth in the capital-worker ratio and in labor productivity. The achievement of large-scale production of the means of production, surpassing the scale of replacement of expended productive capital, makes it possible to implement expanded reproduction in the entire national economy within certain limits, even while maintaining the former dimensions of subdivision I, and in turn restrains its faster growth. As a result of the action of all these factors, there has been a trend toward decrease in the coefficient of faster growth in means of production.
In industry in recent years (1968-70) group B has developed faster. In accordance with the Directives of the Twenty-fourth Congress of the CPSU for the ninth five-year plan, growth rates of 41-45 percent were planned for group A and rates of 44-48 percent were planned for group B.
The internal proportions of development in subdivisions I and II are also very important for national economic planning. Within subdivision I the most general proportions are the proportions between the production of means of labor and objects of labor and between production of the means of production for subdivisions I and II. The ratio between production of means of labor and objects of labor is related to the rate of expanded reproduction of fixed productive capital. The more the dimensions of replacement and accumulation of fixed capital surpass the achieved volume of production of means of labor, the higher the rate of expansion of its production should be. Since technological progress expresses itself primarily in the development of implements of labor and these wear out or become obsolete rapidly, within the production of means of labor the highest growth rates are for production of implements of labor and production equipment. Production of objects of labor expands in direct proportion to growth in fixed productive capital, with a correction for structural shifts and change in the coefficients of return on capital and expenditures of objects of labor per unit of social product.
General proportions within subdivision II are the ratios of growth in the production of food and nonfood goods, modern conveniences, housing and social and cultural construction, and municipal services. To a significant extent this ratio is determined by the dimensions, growth, and differentiation of personal incomes. Under socialism this ratio is influenced by the state policy of improving public well-being through public consumption funds.
One of the most important conditions for increasing public consumption is proportionality in the development of industry and agriculture. The largest share of agricultural output is produced by kolkhoz production; the development of kolkhoz production within the overall system of socialism and the raw material-production links between industry and agriculture, their mutual exchange of goods, and the relative equivalency in this exchange (considering agricultural participation in national expenditures) are very important conditions for the development of the two forms of socialist ownership into a single communist form and for the development of the alliance between the working class and the kolkhoz peasantry.
Under conditions of the contemporary scientific and technological revolution, the share of the industrial sectors in gross and net product is increasing. Because the share of output manufactured from industrial raw material (metal, timber, polymers, and so on) is increasing in the industrial sectors that produce consumer goods, where other conditions are equal the growth rates of the raw-material sectors of agriculture are naturally lower than the growth rates of industrial sectors in group B, although the rate of development of agriculture and the growth of group B may come very close in certain periods when the lag in agriculture is overcome. Between 1950 and 1968 in the USSR the output of group B in industry increased by a factor of 4.6, whereas agricultural output increased by a factor of 2.1; between 1964 and 1968 the corresponding figures were 1.38 and 1.16. Achievement of high, stable growth rates for agriculture is one of the most important tasks of reproduction in the current phase.
===CIRCULATION OF GROSS SOCIAL PRODUCT===
The sale of gross social product and all the productive capital that is formed as a result of its distribution is mediated by the process of circulation and exchange among sectors of the national economy and their enterprises. Exchange of products between subdivisions I and II, between industry and agriculture, or between the extracting and processing sectors of industry should, under socialism, be carried out on the basis of relative value equivalency, which compen-sates for expenditures of productive capital and wages and ensures production profitability. At the same time, the process of circulating gross social product is bound up in the capital cycles of particular socialist enterprises that work on the principles of full economic accountability. Through the aggregate of cycles the planned value proportions (and through them also the real and essential proportions) of expanded reproduction are realized.
The circulation of produced means of production is as follows: means of production, which embody the part of the depreciation fund of subdivision I that is used for replacement, and also part of the surplus product going for expansion of the subdivision circulate within subdivision I. Means of production, which embody the wages fund, and part of the surplus product going for consumption by workers in sub-division I should be exchanged for consumer goods and go to replace and expand the fixed and working capital of subdi-vision II. In this way, on a societal scale the wages fund and part of the surplus product of subdivision I, which are exchanged for consumer goods, are embodied entirely in the means of production that go for the production of consumer goods. As a result of this, with a given level of prices there should be a certain balance between the wages fund and the part of surplus product of subdivision I being consumed, on the one hand, and the sum of prices for means of production produced for subdivision II, on the other hand. However, if the wages fund and the consumed part of surplus product of subdivision I exceed (at the given level of prices) the sum of prices for means of production for sub-division II, then there will inevitably be disproportionality in the development of subdivisions I and II and redistribution, in favor of subdivision I, of the part of the surplus product of subdivision II embodied in consumer goods. A significant share of the means of production in which part of the surplus product of subdivision I is embodied goes for reproduction of fixed and working capital in the armaments sectors. They are sold for money that expresses the value of the surplus product withdrawn without equivalent into the state budget.
The circulation of subdivision II output under socialism is a means of realizing the incomes of the working people that are obtained through distribution according to labor and through public consumption funds. Within subdivision II there is circulation of consumer goods and of the part of the surplus product of subdivision II that is at the disposal of the subdivision’s workers. Consumer goods, whose cost embodies part of the depreciation fund going for replacement of fixed productive capital, and the working capital of subdivision II, as well as the part of surplus product accumulated for expanding fixed and working capital of this sub-division, should be exchanged for means of production— that is, they should go into distribution according to labor and for collective consumption by workers of subdivision I. Here it becomes necessary to balance the sum of prices for consumer goods passed to subdivision I through exchange with the sum of prices for means of production received from subdivision I. This balance is just another expression of the above-mentioned ratio between the sum of the wages fund and collective consumption through surplus product of subdivision I with the sum of prices for means of production designated for subdivision II. The consumer goods, which embody other parts of the surplus product of subdivision II, are realized in the monetary funds of net circulation, state administration and defense, education, public health, and social security; these funds are formed by withdrawal in monetary form through the state budget of part of the surplus product created in the sphere of physical production.
This entire process of circulating the gross product of socialist society, which is mediated by outright withdrawals of part of the depreciation fund and a larger part of surplus product, ensures, under conditions of planned management using the law of value, constant reproduction and development of both the production and nonproduction spheres in definite proportions. Concentrating more than half of all national income and the largest part of surplus product in its financial system (through the state budget), the socialist state in the USSR has real opportunities to actively direct reproduction in a planned manner in the interests of further development of socialist society and creating conditions for the transition to communism.
A. I. NOTKIN
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Category:Economics