POLITICAL ECONOMY

A Textbook issued by the Economics Institute of the Academy of Sciences of the U.S.S.R

First published : Russian edition, 1954

Source: From the English translation of second revised and enlarged Russian edition Printed by Lawrence & Wishart, London, 1957

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This textbook on Political Economy, prepared by the Economics Institute of the Academy of Sciences of the U.S.S.R., was first published in the U.S.S.R. in 1954. Regarding political economy as the science of the laws of development of the relations of production in human society, it deals not only with the capitalist economic system but also with pre- capitalist economic relations and, in considerable detail, with the economics of socialism. In their Foreword the authors stress that their aim is not dogmatic but scientific, and that they would welcome discussion and critical comments by all readers.

Contents

Foreword to the First Edition

Foreword to the Second Edition

Introduction

Part One : PRE-CAPITALIST MODES OF PRODUCTION

Chapter 1. The Primitive Communal Mode of Production

Chapter 2. The Slave-Owning Mode of Production

Chapter 3. The Feudal Mode of Production

Part Two : THE CAPITALIST MODE OF PRODUCTION



A. PRE-MONOPOLY CAPITALISM

Chapter 4. Commodity Production. Commodities and Money

Chapter 5. Capitalist Simple Co-operation and Manufacture

Chapter 6. The Machine Period of Capitalism

Chapter 7. Capital and Surplus-Value. The Basic Economic Law of Capitalism

Chapter 8. Wages

Chapter 9. Accumulation of Capital and Impoverishment of the Proletariat

Chapter 10. Rotation and Turnover of Capital

Chapter 11. Average Profit and Price of Production

Chapter 12. Merchant Capital and Merchants’ Profit

Chapter 13. Loan Capital and Loan Interest. Circulation of Money

Chapter 14. Ground-Rent. Agrarian Relations under Capitalism

Chapter 15. The National Income

Chapter 16. Reproduction of Social Capital

Chapter 17. Economic Crises



B. MONOPOLY CAPITALISM-IMPERIALISM

Chapter 18. Imperialism-The Highest Stage of Capitalism. The Basic Economic Law of Monopoly Capitalism

Chapter 19. The Colonial System of Imperialism

Chapter 20. The Place of Imperialism in History

Chapter 21. The General Crisis of Capitalism

Chapter 22. The Aggravation of the General Crisis of Capitalism after the Second World War

ECONOMIC DOCTRINES OF THE CAPITALIST EPOCH



Part Three : THE SOCIALIST MODE OF PRODUCTION

A. THE TRANSITIONAL PERIOD FROM CAPITALISM TO SOCIALISM

Chapter 23. Main Features of the Transitional Period from Capitalism to Socialism

Chapter 24. Socialist Industrialisation

Chapter 25. The Collectivisation of Agriculture

Chapter 26. The Victory of Socialism in the U.S.S.R.

B. THE SOCIALIST ECONOMIC SYSTEM

Chapter 27. The Material Production Basis of Socialism

Chapter 28. Social Ownership of the Means of Production-The Foundation of the Production Relations of Socialism

Chapter 29. The Basic Economic Law of Socialism

Chapter 30. The Law of Planned Proportional Development of the National Economy

Chapter 31. Social Labour in Socialist Society

Chapter 32. Commodity Production, the Law of Value, and Money, in Socialist Society

Chapter 33. Wages in Socialist Economy

Chapter 34. Economic Accounting and Profitability Costs and Price

Chapter 35. The Socialist System of Agriculture

Chapter 36. Trade in Socialist Economy

Chapter 37. The National Income of Socialist Society

Chapter 38. State Budget, Credit, and Currency Circulation in Socialist Society

Chapter 39. Socialist Reproduction

Chapter 40. The Gradual Transition from Socialism to Communism

C. THE BUILDING OF SOCIALISM IN THE COUNTRIES OF PEOPLE’S DEMOCRACY

Chapter 41. The Economic System of the People’s Democracies in Europe

Chapter 42. The Economic System of the Chinese People’s Republic

Chapter 43. Economic Collaboration between the Countries of the Socialist Camp



CONCLUSION

This textbook of political economy has been written by a group of economists comprising: Academician K.V. Ostrovityanov; Corresponding Member of the V.S.S.R. Academy of Sciences D.T. Shepilov; Corresponding Member of the V.S.S.R. Academy of Sciences L.A. Leontyev; Member of the All- Union Lenin Academy of Agricultural Sciences I.D. Laptev; Professor I.I. Kuzminov; Doctor of Economic Sciences L.M. Gatovsky; Academician P.F. Yudin; Corresponding Member of the V.S.S.R. Academy of Sciences A.I. Pashkov; and Candidate [Master] of Economic Sciences V. I. Pereslegin, Doctor of Economic Sciences V. N. Starovsky took part in the selection and editing of the statistical information included in the textbook.

In connection with the drafting of the textbook a large number of Soviet economists made valuable critical observations and contributed numerous useful suggestions concerning the text. These observations and suggestions were taken into account by the authors in their subsequent work on the book.

Of very great importance for the work on this textbook was the economic discussion organised in November 1951 by the Central Committee of the Communist Party of the Soviet Union. In the course of this discussion, in which hundreds of Soviet economists took an active part, the draft for a textbook of political economy submitted by the authors was subjected to a thorough critical examination. The proposals worked out as the result of this discussion for improving the draft of the textbook were an important source of improvement in the structure of the textbook and of enrichment of its content.

The final editing of the textbook was carried out by comrades K.V. Ostrovityanov, D.T. Shepilov, L.A. Leontyev, I.D. Laptev, I.I. Kuzminov and L. M. Gatovsky.

Being fully aware of the importance of a Marxist textbook of political economy, the authors intend to continue to work on further improvement of the text, on the basis of critical observations and suggestions which readers may make when they have acquainted themselves with the first edition. In this connection, the authors request readers to address their comments and suggestions on the textbook to the following address:

Institute of Economics,

U.S.S.R. Academy of Sciences,

14 Volkhonka,

Moscow

The first edition of the Political Economy textbook, published at the end of 1954 in over six million copies, was rapidly sold out. Besides the Russian original, there were versions in many of the languages of the peoples of the U.S.S.R., and the book was also published in a number of foreign countries.

The need has arisen for a second edition of the textbook. In preparing this edition the authors have made it their task to strengthen the text with new propositions and facts reflecting the steady growth of the socialist economy of the U.S.S.R. and the countries of People’s Democracy and also the further intensification of the general crisis of capitalism.

The authors have endeavoured to take into account as fully as possible the experience gained in using this textbook in higher educational institutions, in Party schools and study- groups and for purposes of individual study. During the past year the book has been discussed in many university departments of political economy, and these have sent in their comments and requests. The authors have also received a large number of letters from readers, containing suggestions regarding the text. Broad conferences of economists were held in March and April 1955 to discuss thoroughly the first edition of the book, these being attended by research workers, teachers and business executives in Moscow, Leningrad, Kiev, Minsk, Riga, Tallinn, Vilnius, Tbilisi, Erevan, Baku, Tashkent, Ashkhabad, Stalinabad, Alma-Ata and Sverdlovsk.

The authors have carefully studied all the critical observations and proposals regarding the textbook which have been made at conferences of university departments of political economy, at meetings of economists and in readers’ letters, and have tried to use all of these that made for improving the book. At the same time they have maintained as their point of departure the need to keep to the present type of textbook, intended for the general reader, and not to allow its size to be enlarged to any considerable extent.

The final editing of the second edition has been carried out by comrades K.V. Ostrovityanov, D.T. Shepilov, L.A. Leontyev, I.D. Laptev, I.I. Kuzminov and L. M. Gatovksy.

Comrade V.N. Starovsky took part in the selection and editing of the statistical information contained in the book.

The authors express their thanks to all the comrades who helped in the preparation of the second edition of this textbook through their critical comments and suggestions. The authors intend to continue to work on the improvement of the textbook, and in this connection request readers to send their comments and suggestions to the following address:

Institute of Economics,

U.S.S.R. Academy of Sciences,

14 Volkhonka,

Moscow

September I955

Political economy belongs to the category of the social sciences.[1]. It studies the laws of the social production and distribution of material wealth at the various stages of development of human society.

The basis of the life of society is material production. In order to live, people must have food, clothing and other material means of life. In order to have these, people must produce them, they must work.

Men produce the material means of life, i.e., carry on their struggle with nature, not as isolated individuals but together, in groups and societies. Consequently, production is always and under all circumstances social production, and labour is an activity of social man.

The process of producing material wealth presupposes the following factors: (1) human labour; (2) the subject of labour; and (3) the means of labour.

Labour is a purposive activity of the human being in the process of which he transforms and adapts natural objects so as to satisfy his own requirements. Labour is a natural necessity, an indispensable condition for man’s existence.Without labour human life itself would be impossible.

Everything to which man’s labour is directed is a subject of labour. Subjects of labour may be directly provided by nature, as, for example, wood, which is cut in the forest, or ore, which is extracted from the bowels of the earth. Subjects of labour which have previously been subjected to the action of labour (e.g., ore in a metal works, cotton in a spinning mill, yarn in a weaving mill) are called raw materials.

Means of labour consist of all those things with the aid of which man acts upon the subject of his labour and transforms it. To the category of means of labour belong, first and fore- most, the instruments of production, together with land, buildings used for production purposes, roads, canals, storehouses, etc. The determining role among the means of labour is played by the instruments of production. These comprise the various kinds of tools which man uses in his working activity, beginning with the crude stone implements of primitive man and ending with modern machinery. The level of development of the instruments of production provides the criterion of society’s mastery over nature, the criterion of the development of production. Economic epochs are distinguished one from another not by what is produced but by how material wealth is produced, with what instruments of production.

The subjects of labour and the means of labour constitute the means of production. Means of production in themselves, not associated with labour power, can produce nothing. For the labour process, the process of producing material wealth, to begin, labour power must be united with the instruments of production.

Labour power is man’s ability to work, the sum total of the physical and spiritual forces of man, thanks to which he is able to produce material wealth. Labour power is the active element in production, which sets the means of production in motion. With the development of the instruments of production man’s ability to work also develops, his skill, habits of work, and production experience.

The instruments of production, by means of which material wealth is produced, and the people who set these instruments in motion and accomplish the production of material values, thanks to the production experience and habits of work which they possess, constitute the productive forces of society.

The working masses are the basic productive force of human society in all stages of its development.

The productive forces reflect the relationship of people to the objects and forces of nature used for the production of material wealth. In production, however, men act not only upon nature but also upon each other.

“They produce only by co-operating in a certain way and mutually exchanging their activities. In order to produce, they enter into definite connections and relations with one another and only within these social connections and relations does their action on nature, does production, take place.” (Marx, “Wage-Labour and Capital”, Marx and Engels, Selected Works, 1950, English edition, vol. I, p. 83.)

The definite social connections and relations formed between people in the process of the production of material wealth constitute production relations. Production relations include: (a) forms of ownership of the means of production; (b) the position of the various social groups in production which result from this, and their mutual relations; (c) the forms of distribution of products that follow from the ownership of the means of production and people’s position in production.

The character of production relations depends on who owns the means of production (land, woods, waters, subsoil, raw materials, instruments of production, buildings used for production, means of communication and transport, etc.)whether they are the property of particular persons, social groups or classes, which use these means of production in order to exploit the working people, or whether they are the property of society, whose aim is the satisfaction of the material and cultural requirements of the masses of the people, of society as a whole. The state of production relations shows how the means of production are distributed among the members of society and, consequently, how the material wealth produced by people is distributed. Thus, the determining feature, the basis of production relations is one or another form of property in the means of production.

The relations of production determine also corresponding relations of distribution. Distribution is the connecting link between production and consumption.

The products which are produced in society serve either productive or personal consumption. Productive consumption means the use of means of production to create material wealth. Personal consumption means the satisfaction of man’s requirements in food, clothing, shelter, etc.

The distribution of the objects of personal consumption which are produced depends on the distribution of the means of production. In capitalist society the means of production belong to the capitalists, and in consequence the products of labour also belong to the capitalists. The workers are deprived of means of production and, so as not to die of hunger, are obliged to work for the capitalists, who appropriate the products of their labour. In socialist society the means of production are public property. In consequence, the products of labour belong to the working people themselves.

In those social formations in which commodity production exists, the distribution of material wealth takes place through exchange of commodities. Production, distribution, exchange and consumption constitute a unity, in which the determining role is played by production. The particular forms of distribution, exchange and consumption so determined exert in their turn a reciprocal influence upon production, either facilitating its development or hindering it.

The sum total of the

“relations of production constitutes the economic structure of society, the real foundation, on which rises a legal and political superstructure and to which’ correspond definite forms of social consciousness.” (Marx, “Preface to a Contribution to the Critique of Political Economy,” Marx and Engels, Selected Works, 1950, English edition, vol. I, p. 329).

Having come into existence, the superstructure exercises in its turn a reciprocal active influence on the basis, hastening or hindering the development of the latter.

Production has a technical aspect and a social aspect. The technical aspect of production is studied. by the natural and technical sciences: physics, chemistry, metallurgy, engineering, agronomy and others. Political economy studies the social aspect of production, the social-production, i.e., the economic, relations between people. “Political economy”, wrote V. I. Lenin, “is not at all concerned with ‘production’ but with the social relations between people in production, the social system of production.” (Lenin, “Development of Capitalism in Russia”, Works, vol. III, pp. 40-1.)

Political economy studies production relations in their interaction with the productive forces. The productive forc6S and the production relations as a unity constitute the mode of production.

The productive forces are the most mobile and revolutionary factor in production. The development of production begins with changes in the productive forces-first of all with changes and development in the instruments of production, and thereafter corresponding changes also take place in the sphere of production relations. Production relations between men, which develop in dependence upon the development of the productive forces, themselves in turn actively affect the productive forces.

The productive forces of society can develop uninterruptedly only where the production relations correspond to the nature of the productive forces. At a certain stage of their development the productive forces outgrow the framework of the given production relations and come into contradiction with them. The production relations are transformed from being forms of development of the productive forces into fetters upon them.

As a result, the old production relations sooner or later give place to new ones, which correspond to the level of development which has been attained and to the character of the productive forces of society. With the change in the economic basis of society its superstructure also changes. The material premises for the replacement of old production relations by new ones arise and develop within the womb of the old formation. The new production relations open up scope for the development of the productive forces.

Thus an economic law of the development of society is the law of obligatory correspondence of production relations to the nature of the productive forces.

In society based on private property and the exploitation of man by man, conflicts between the productive forces and the production relations are expressed in the form of class struggle; In these conditions the replacement of an old mode of production by a new one is effected by way of social revolution.

Political economy is an historical science. It is concerned with material production in its historically determined social form, with the economic laws which are inherent in particular modes of production. Economic laws express the essential nature of economic phenomena and processes, the internal, causal connection and dependence existing between them.

The laws of economic development are objective laws. They arise and operate on the basis of definite economic conditions independent of men’s will. Men can understand these laws and utilise them in society’s interests, but they can neither abolish nor create economic laws.

The utilising of economic laws in class society always has a class character: the advanced class of each social formation makes use of economic laws to serve the progressive development of society, while the moribund classes resist this.

Each mode of production has its own basic economic law.

This basic economic law expresses the essence of the given mode of production and determines its main aspects and line of development.

Political economy

“must first investigate the special laws of each separate stage in the evolution of production and exchange, and only when it has completed this investigation will it be able to establish the few quite general laws which hold good for production and exchange as a whole”. (Engels, Anti-Dühring, 1936, Lawrence & Wishart edition, p.165.)

Consequently, the development of the various social formations is governed both by their own specific economic laws and also by those economic laws which are common to all formations, e.g., the law of obligatory correspondence of the production relations to the character of the productive forces. Hence social formations are not only marked off one from another by the specific economic laws inherent in each given mode of production, but also are linked together by a few economic laws which are common to all formations.

Political economy studies the following basic types of production relations which are known to history: the primitive-communal system, the slave-owning system, feudalism, capitalism, socialism. The primitive-communal system is a pre-class system. The slave-owning system, feudalism and capitalism are different forms of society based on the enslavement and exploitation of the working masses. Socialism is a social system which is free from exploitation of man by man.

Political economy investigates how social production develops from lower, stages to higher stages, and how the social orders which are based on exploitation of man by man arise, develop and are abolished. It shows how the entire course of historical development prepares the way for the victory of the socialist mode of production. It studies, furthermore, the economic laws of socialism the laws of the origin of socialist society and its subsequent development along the road to the higher phase of communism.

Thus political economy is the science of the development of the socialproductive, i.e., economic, relations between men. It elucidates the laws which regulate the production and distribution of material wealth in human society at the different stages of its development.

The method of Marxist political economy is the method of dialectical materialism. Marxist-Leninist political economy is built up by applying the fundamental propositions of dialectical and historical materialism to the study of the economic structure of society.

Unlike the natural sciences -physics, chemistry, etc.- political economy cannot make use in its study of the economic structure of society of experiments or tests carried out in artificially created laboratory conditions which eliminate phenomena that hinder examination of a process in its purest form. “In the analysis of economic forms neither microscopes nor chemical reagents are of use. The force of abstraction must replace both.” (Marx, Capital, vol. I, Kerr edition, p. 12.)

Every economic system presents a contradictory and complicated picture. The task of scientific research consists in revealing by means of theoretical analysis the deep-seated processes and fundamental features of the economy which lie behind the outward appearance of economic phenomena and express the essential character of the particular production relations concerned, abstracting these from secondary features.

What emerges from such scientific analysis is economic categories, i.e., concepts which represent the theoretical expression of the real production relations of the particular social formation concerned, such as, for example, commodity, value, money, economic accounting, profitability, work-day, etc.

Marx’s method consists of gradually ascending from the simplest of economic categories to more complex ones, which corresponds to the progressive development of society on an ascending line, from lower stages to higher. When such a procedure is used in investigating the categories of political economy, logical investigation is combined with historical analysis of social development.

Marx, in his analysis of capitalist production relations, singles out first of all the everyday relationship which is the simplest of all and the most frequently repeated-the exchange of one commodity for another. He shows that in the commodity, this cell-form of capitalist economy, the contradictions of capitalism are laid up in embryo. With analysis of the commodity as his point of departure, Marx explains the origin of money, discloses the process of transforming money into capital, the essential nature of capitalist exploitation. Marx shows how social development leads inevitably to the downfall of capitalism, to the victory of communism.

Lenin pointed out that political economy must be expounded in the form of the characterisation of the successive periods of economic development. In conformity with this, in the present course of political economy, the basic categories of political economy -commodity, value, money, capital, etc.- are examined in the historical order of succession in which they arose at different stages in the development of human society. Thus, elementary concepts concerning commodities and money are presented already when pre-capitalist formations are being described. These categories are later set forth in fully developed form when capitalist economy, in which they attain their full development, is being studied. The same order of exposition will also be employed when socialist economy is dealt with. An elementary notion of the basic economic law .of socialism, of the law of planned, proportional development of the national economy, of distribution according to work done, and of value, money, etc., will be given in the section devoted to the transitional period from capitalism ‘ to socialism. An expanded treatment of these laws and categories will be given in the section “The Socialist System of National Economy”.

Political economy, unlike history, does not undertake to study the historical process of society’s development in all its concrete variety. It provides basic concepts concerning the fundamental features of each system of social economy. Besides political economy there are also a number of other scientific disciplines which are concerned with the study of economic relations in the various branches of the national economy on the basis of the laws discovered by political economy-industrial economics, agricultural economics, etc.

Political economy studies, not some transcendental questions detached from life, but very real and living questions which affect the vital interests of men, society, classes. Are the downfall of capitalism and the triumph of the socialist system of economy inevitable; do the interests of capitalism contradict those of society and of the progressive development of mankind; is the working class capitalism’s grave-digger and the bearer of the idea of the liberation of society from capitalism-all these and similar questions are answered differently by different economists, depending on which class’s interests they voice.

That is just why there does not exist one single political economy for all classes of society, but instead several political economies: bourgeois political economy, proletarian political economy, and also the political economy of the intermediate classes, petty-bourgeois political economy.

It follows from this, however, that those economists are quite wrong who assert that political economy is a neutral, non-party science, that political economy is independent of the struggle between classes in society and not connected either directly or indirectly with any political party.

Is it possible in general for a political economy to exist which is objective, impartial and does not fear the truth? Certainly this is possible. Such an objective political economy can only be the political economy of that class which has no interest in slurring over the contradictions and sore places of capitalism, which has no interest in preserving the capitalist order: the class whose interests merge with the interests of liberating society from capitalist slavery, whose interests coincide with the interests of mankind’s progressive development. Such a class is the working class. Therefore an objective and disinterested political economy can only be that which is based on the interests of the working class. This political economy is the political economy of Marxism-Leninism.

Marxist political economy is a very important component of Marxist-Leninist theory.

The great leaders and theoreticians of the working class, K. Marx and F. Engels, were the founders of proletarian political economy. In his work of genius, Capital, Marx revealed the laws of the rise, development and’ downfall of capitalism; and showed, the economic grounds for the inevitability of socialist revolution and the establishment of the dictatorship of the proletariat. Marx and Engels worked out in general terms the theory of the transition period from capitalism to socialism and of the two phases of communist society.

The economic teachings of Marxism underwent further creative development in the works of V.I. Lenin, founder of the Communist Party and the Soviet State, brilliant continuer of the work of Marx and Engels. Lenin enriched Marxist economic science by generalising the new experience of historical development, created the Marxist teaching on imperialism, revealed the economic and political nature of imperialism, provided the initial propositions for the basic economic law of modern capitalism, worked out the fundamentals of the theory of the general crisis of capitalism, created a new, complete theory of socialist revolution, and worked out scientifically the basic problems of the building of socialism and communism..

Lenin’s great companion-in-arms and pupil, J.V. Stalin, put forward and developed a number of new propositions in political economy, based on the fundamental works of Marx, Engels and Lenin which had created a really scientific political economy.

Marxist-Leninist economic theory is creatively developed in the resolutions of the Communist Party of the Soviet Union and of the fraternal Communist Parties and the works of the pupils and companions-in-arms of Lenin and Stalin-the leaders of these parties, who have enriched economic science with new conclusions and propositions on the basis of generalising the practice of the revolutionary struggle and of the building of socialism and communism.

Marxist-Leninist political economy is a powerful weapon of ideas in the hands of the working class and of all working mankind in their struggle for emancipation from capitalist oppression. The living strength of the economic theory of Marxism-Leninism consists in the fact that it arms the working class and the working masses with knowledge of the laws of the economic development of society, giving them clear prospects and confidence in the ultimate victory of Communism.

NOTES

1.The name of this science, “political economy”, comes from the Greek words “politeia” and “oikonomia”. The word “politeia” means “social organisation”. The word “oikonomia” is made up of two words: “oikos”-household, or household affairs, and “nomos”-law. The science of political economy received its name only at the beginning of the seventeenth century.