Part 1:
The economic management system and its categories

This video will be Economic and Politics in the Transition to Socialism. The video will be taken from the writings of Che Guevara and Carlos Tablada.

The transition to socialism and communism is a synthesis of two inseparable elements that make up the writings of Marx and Engels. The first is economic production, and the second is the social relations in production.

The social relations refers to how people relate to each other inside and outside the production process. In other words how we interact with everyone in our lives.

These two elements were divorced after the Second International. This was one of the most damaging things that happened to Marxist theory. The damage this separation causes can be most clearly seen in practise. It was rescued from Social Democrats by Lenin.

Che used this aspect of Marxism-Leninism as a basis for building a new economic management system from a country that was backwards and had not yet full been through capitalist development similar to China.

Like Maoist China, Che also believed that moral incentives were the main lever for building socialism. However, unlike Mao Che believed that material incentives of a social character could be use to facilitate this transformation.

Che’s writing lead to several questions that must be answered:

1. What exactly is political economy in the transition period?
2. Is there really a need to formulate such a political economy with its own characteristics?
3. What economic policies should be adopted?
4. What relations do these policies have to the political economy of the transition period?

In the writings of Marx there is no “political economy in the transition period”. However Marx did make numerous observations of past transformations of societies into new ones. The “policies” that lead human civilization from tribal communism to feudalism are known. So we aware of the events of other transition periods.

The “policy” that lead us from tribal communism to feudalism was quite simply the invention of private property. First we discovered that if we ceased being nomadic and simply repeatedly planted the same food we could accumulate more than we needed. This event was called the agricultural revolution. At this point people began to own land. This question of ownership lead to landlords and private property.

It was the “policy” of ending the nomadic life and the creation of private property that gave rise to feudalism. This is Marx said that the present is needed to explain the past.

It is using this that we see where we socialists break the history of tradition. When socialism is the establishment of the dictatorship of the proletariat, it is the first time that people consciously take control of society. Previously, all other forms developed of their own accord through an evolutionary process. Although capitalism came about from an evolution guided by the manipulations of the ruling elite. A kind of intelligent design if you will.

Socialism, the dictatorship of the proletariat, is what breaks us from this pattern of “randomness” and manipulation. It is us for the first time we are taking control of our societies and our world; we decide how things are going to be.

The act of the agrarian revolution gave birth to private property. Private property is an inadvertent “policy” that brought us to feudalism. The dictatorship of the proletariat is us consciously deciding what our “agrarian revolution” is going to be. We will decide the policy that will change and facilitate a new forward socialist society.

Now for us to take control of our destiny we need two things, revolution and the dictatorship of the proletariat. With revolution we knock down the bourgeois rule. With the dictatorship of the proletariat we destroy the bourgeois government and create our own government in its place. Control of the new government gives us control of the social forces.

This means the goals of revolution can be brought about by an economic plan. In addition to understanding reality, we now have the ability to affect reality.

From this we can determine that each attempt towards the new society has a similar premise (means of production socially owned) and similar objectives (building communism). Each society that transitioned to socialism had its own set of conditions, thus its political leaders had different responses.

This makes us realize two important things. First, we cannot simply import the economic plan from a past revolution because each revolution has its own concrete problems that require unique solutions. Second, it reminds us that since there was the same goal, we can learn from the experiences of the past revolutions. But only if we see them in their own unique contexts.

So what we need to do is build our own model for transition that corresponds to the general laws of transition (the same goal); and also take into account our own unique situation (socioeconomic and cultural).

What we need is a general conception of how the transition to communism will be carried out. It would have to be an integrated model that included all levels of society (economic, political, cultural) so that they work together.

An important thing to note is that any such general conception is only a tool, and would need to be altered if it was not reaching its intended objective. Meaning (in a Maoist way) we should not be dogmatic about our own writings and plans.

In creating such a model we need to know what roads can be taken. Politics will determine what our goals will be, while scientific analysis will determine the possibilities of reaching them and what roads to take.

The rationality of an economic model must be measured by its social rationality. What this means is a smooth, absolutely efficient economic functioning of the society does not mean it is socially rational. Hitler may have run Nazi Germany efficiently, but that does not mean it is right or that it is good.

What is at issue here is not the quantity or quality of material goods produced, but how they are produced, and the social relations that flow from the way of producing them.

Che created the general conception by which such an economic model would be drawn up:

“A socialist economy without communist moral values does not interest me. We fight poverty but we also fight alienation. One of the fundamental aims of Marxism is to eliminate material self interest, the factor of ‘individual self-interest’ and profit from man’s psychological motivations.

Marx was concerned with both economic facts and their reflection in the mind, which he called a ‘fact of consciousness.’ If communism neglects facts of consciousness, it can serve as a method of distribution but it will no longer express revolutionary moral values.”

What Che was saying is that the New Man will come about as a result of revolutionary effort and as a product of the conditions inherent to the structures created by the revolution.

The social forces become controlled by the masses through the dictatorship of the proletariat. It is the involvement of the masses which create the economic model and thus the masses elevate themselves to a higher being. Political power will not just be popular, it will be a political power of the people.

Marx and Engels made the same point in The German Ideology:

“Both for the production on a mass scale of this communist consciousness, and for the success of the cause itself, the alteration of men on a mass scale is necessary, an alteration which can only take place in a practical movement, a revolution; the revolution is necessary, therefore, not only because the ruling class cannot be overthrown in any other way, but also because the class overthrowing it can only in a revolution succeed in ridding itself of all the muck of ages and become fitted to found society anew.”

We need to understand as Che did that we need to put as much effort into the development of the new social consciousness as there is in developing the material existence, that being the economic plan and social policies. We cannot follow the old Soviet line of failing to do enough to build the new consciousness.

Now a lot of Marxist believe in the spontaneous emergence of working class consciousness in a revolutionary event. I believe that this is true to a certain degree, however this also requires a good deal of guidance to make sure it doesn’t slip into the old evils, like nationalism, racism, sexism and all the other nasty aspects of human nature.

The socialist society must be built by those who want out of the bourgeois way of thinking. these people must no give in to the old bourgeois motivations and ways of thinking. The old ways and the new ways must be combined in a dialectical way.

Che saw the difference between the following concepts:

1. Material base and economic wealth
2. Development of the productive forces and development of production
3. Social relations of production and economic relations
4. The production and reproduction of material life and The production and reproduction of consumer goods

It is the very nature of Marxism that does not allow our ideology and its goals to fit into the economic categories of capitalism. The dynamic nature of our social theory cannot fit into the history of bourgeois economic thought. It is the social relations of production that matter, not purely the economic relations.

Bourgeois economic thought is concentrated on what policy is the most efficient and profitable for an enterprise. The social relations in capitalist society spontaneously emerge from these policies. In Marxism, we strive for planning the economy with an economic plan that deliberately affects our social relations. Bourgeois economics does not have categories that take into account the effects it has on the social consciousness. As a result we cannot use their categories and terms, we must invent our own, with their own unique context.

What we need to rethink is, or create a new definition for is, what constitutes economic rationality? We begin to answer this question by asking what objective is being reached for? If economic development is all that is being sought after, then it hardly matters what policies achieve it. However if the objective is a new social consciousness, we then have to acknowledge a link between social goals and economic management.

The role of economic rationality becomes the plan for social rationality.

As put by Che:

“If material incentives are counterpoised to the development of consciousness, but are a great lever for increasing production, does that mean that giving priority to the development of consciousness retards production? In comparative terms, in a given period, that may be, although no one has made the relevant calculations. We maintain that in a relatively short time, however, the development of consciousness does more for the development of production than material incentives do. We state this based on the overall development of society towards communism, which presupposes that work will cease to be a tedious necessity and become a pleasant duty.”

We must therefore acknowledge that any policy we create doesn’t simply determine the efficiency of production, but the material and social relations that occur inside that production. What this means is that state ownership of the means of production is not enough to make the mode of production socialist.

This is what needs to be examined to determine socialist production:

1. How the management apparatus of the state is structured
2. The nature of incentives
3. The forms of property that may or may not coexist (and to what extent)
4. The existence and functioning of the market and/or the plan
5. The existence or not of generalized commodity production

It is these elements that give shape to a specific mode of production, mode of activity and mode of living for individuals.

When Marx and Engels wrote The German Ideology, they laid out how the economic structure of a society determined and shaped the ideological relations. This gave rise to the social science: historical materialism.

As Che began looking for ways to change the society in the beginnings of Revolutionary Cuba, he looked at literature from all standpoints and ideologies concerning the transition period. What he found was that none of them clearly dealt with how new economic organization and social relations would condition the forms of social consciousness.

Che found that in the literature he read, the question of the transition is approached from two main points:

– the establishment of the dictatorship of the proletariat per se is taken as a guarantee of the increasing emergence of communist consciousness;

– the economy is treated as something independent of the super structural forms that accompany it.

These approaches both fail to understand the Marxist-Leninist view of the social base and the superstructure. As a result, it leads to many serious errors in both the theoretical realm and the practical realm.

Classical Marxism says the dictatorship of the proletariat is a period during which power has been taken away from the bourgeois, and the capitalist social relations of production are replaced by socialist ones.

What this means is that the dictatorship of the proletariat implies the formation of communist consciousness. This is only the decoration of the desire to build a new consciousness, not the act of doing so. Whether or not the communist consciousness is attained is dependent on several factors.

The initial revolutionary victory only makes it possible for the social change to take place, it does not guarantee that it does take place. The vanguard must organize to create a government/economic policy that facilitates the creation of the communist consciousness in the newer generations. This is a very complex and delicate process that cannot happen spontaneously. You do not construct an office building by simply throwing all the materials into a pile on a construction site.

The second approach treats the economy of the transition period as something separate from the ideological relations between people. This leads to serious errors, and has lead to the down fall of the Soviet Union and other socialist states that never came to be.

This is where bourgeois economics fails to explain the social phenomenon that take place in society. Bourgeois economists see everything in a technical and academic way. Economics is treated completely separate from politics, ideology and philosophy. To them, mixing these with economic formulas somehow invalidates the “scientific nature” of economics. This is horribly flawed position for anyone to take.

Che pointed out that this flawed position makes possible “the danger that forest will not be seen for the trees”. Creating an economic development using “the dull tools left to us by capitalism” will only damage and destroy the possibility of creating the new consciousness. This makes revisionism inevitable.

The way that economic policy and economic plans affect the social relations between ordinary people is the main subject of study when looking at the transition period. Che understood that what is economically rational cannot be used as a way of determining whether or not a revolutionary transformation is successful.

When investigating the causes of certain tensions that pop up, (natural or caused by enemy action), a narrow ideological stand point is adopted. Blame is placed on bad political methods, lack of connection between the masses and the leaders and other factors.

What is almost never included is an analysis is the economic structure. Usually it is not looked at because it is considered to be “above suspicion” because of its declared socialist character. We have to keep in mind is that the economic structure was created by people, people who are not perfect. The economic structure may have a defect that may cause distortions in social relations of production. These distortions of social relations open the door for revisionism and sending the social consciousness backwards instead of forwards.

This is the dialectical relationship that Che was referring to when he spoke of using market-economy in socialism. Just using the laws of markets, incentives and materialism will force the capitalist relations between people on society. This is why a proper application of market-economy can be used to create the new social relations.

Lenin also noticed this when he put forward the New Economic Policy. This is why he called for a return to fighting capitalism. Unfortunately he died before he could work out a new strategy.

What is needed is a model for transforming the capitalist structures and advancing towards communist consciousness and forms of production.

All of this becomes one large problem. How do we work out the theory for a transition that does not yet exist? How do you conduct a scientific analysis of something that does not exist? The solution can only come out of the transformation conditions, in the framework of a general conception of the goals being pursued.

“In this way, the steps taken would be consistent with the overall conception they aim to advance. That would give them the status of a system, whose model would be established by the general conception. This conception in turn would function as a theoretical premise, readjusted as necessary on the basis of information fed back by the model.”

The general conception establishes the objective: new social relations that run against capitalism.

This is not some kind of utopian dream. It is obvious that the creation of a new consciousness must be the objective in the first social system constructed in a conscious way.

It is a matter of fact that the New Man (as Che called him) cannot be precisely defined. What we do know is what we do not want him to be. The New Man is the antithesis of the model of people in capitalism. This is a long road of struggle and suffering to give the world a new face that Marx was talking about.

It will replace selfishness and personal ambition with a new type of motivation: The desire to create a new consciousness and actively seek to shape future generations in a better way.

This is what makes socialism and communism different from all other political and economic ideologies. It consciously directs the evolution of social consciousness and human relations, not indirectly the way all other forms of society has.

Part 2:
The Marxist conception of politics as concentrated economics and its importance in economic management under socialism

When constructing a model of building socialism it must take into considerations the general characteristics of the current transitory period. Simply put, you have to work with what you have and your model of building socialism should reflect that.

Any system of economic management under consideration for a revolutionary society must work towards the revolution’s objective: the communist consciousness and the new social order.

The battle to build socialism goes hand-in-hand with the battle against poverty. To ensure the new society eliminates poverty as a goal, there must always be a link between the operation of the economy and the leadership of the society.

The capacity of an economic model to harmonize economic and social rationality would be measured by the degree to which it achieved the goals in the plan for the transition.

Any economic plan for a socialist society would have to demonstrate success on two important levels:

1. From a technical standpoint is would have to show an efficiency for administration and management. Meaning it would have to operate smoothly and without too many problems.

2. From a structural stand point is would have to be able to work with the political and ideological goals in the transition period. In other words, how it facilitates and promotes the new communist consciousness.

Economic successes are determined by final results and how they were obtained. They’re “successful socialist character” will be judged by how well they developed communist social relations and aided the creation of the new consciousness.

This is the most important point to keep in mind when judging a socialist economic system. It is not based solely on how efficiently it uses resources and/or by the amount of revenues generated by the enterprises involved. Pure economic rationality will not create a new society, doing so will only perpetuate the old bourgeois one.

It is more important to judge it by how it improves economic management through communist education. It must be judged by its ability to harmonize social and economic rationality.

Che never lost sight of the fact that under socialism you cannot use economic rationality as a measure of how socially rational a plan is. The formulation of the new communist consciousness is always the main objective of every plan and policy that is used. Those plans and policies can be judged as negative or positive to the degree in which they aided or retarded the the emergence of the new consciousness.

If we strive for purely economic gains we will end up using capitalist economic policies that will negatively affect the true goal of changing society. Sure it will increase profits and be more rational economically, but it will kill the emergence of the new consciousness. This is exactly what will open the door for revisionism and capitalist restoration.

This is how Che described it:

“A complete education for social labour has not yet taken place in these countries, and wealth is far from being within the reach of the masses through the simple process of appropriation. underdevelopment, on the one hand, and the usual flight of capital to the ‘civilized countries’, on the other, make a rapid transition without sacrifices impossible. There remains a long way to go in constructing the economic base, and the temptation is very great to follow the beaten track of material interest as the lever with which to accelerate development.

There is the danger that the forest will not be seen for the trees. the pipe dream that socialism can be achieved with the help of the dull instruments left to us by capitalism (the commodity as the economic cell), profitability, individual material interest as a lever, etc.) can lead into a blind alley. And you wind up there after having travelled a long distance with many crossroads, and it is hard to figure out just where you took the wrong turn. Meanwhile, the economic foundation that has been laid has done its work of undermining the development of consciousness. To build communism it is necessary, simultaneous with the new material foundations, to build the new man.”

In another statement he put it more simply:

“It is not a matter of how many kilograms of meat one has to eat, or how many times a year someone can go to the beach, nor how many pretty things from abroad you might be able to buy with present-day wages. It is a matter of making the individual feel more complete, with much more internal richness and much more responsibility.”

What Che is saying is that economic rationality is how efficiently resources are used to develop the social consciousness and the communist education.

In building communism the measure of the success of economic achievements is on one hand, and raising consciousness is on the other.

“Socialism is not a welfare society, nor is it a utopian society based on the goodness of man as man. Socialism is a system that arises historically, and that has as its pillar the socialization of the basic means of production along with equitable distribution of all of society’s wealth, in a framework of social production.

In our view communism is a phenomenon of consciousness and not solely a phenomenon of production. We cannot arrive at communism through the simple mechanical accumulation of quantities of goods made available to the people. by doing that we would get somewhere, to be sure, to some peculiar form of socialism.

But what Marx defined as communism, what is aspired to in general as communism, cannot be attained if man is not conscious. that is, if he does not have a new consciousness towards society.”

This conception was summed up by Che at a ceremony honouring outstanding Cuban workers and some visiting workers from the German Democratic Republic:

“Productivity, more production, consciousness-these are the foundations upon which the new society can be built.”

It is very important to clarify here what Che was talking about when he said it. Revisionist theories about the transition period use technocratic formulas used by bourgeois social theorists to claim Marxism-Leninism is outdated.

The revisionist theories separate the economic from the political-ideological considerations of a transition economic model. Their aim is to maximize profits and completely disregard the purpose of revolution. that is how revisionism gets its foot in the door to destroy the revolution.

We need to know that there is no relationship between abundance and communist consciousness. All one has to do is simply look at US consumer society to see there is no consciousness available.

This is how Fidel Castro put it when speaking to the Forth Congress of the Union of Young Communists:

“Marxism-Leninism must continue evolving every day in actual practice in a revolutionary sense. We have yet to see a revolution that regresses while correctly applying the principles of Marxism-Leninism, creatively applying them and, above all, if the principal of applying the principals is applied. Because little problems start cropping up when principles are not correctly applied, a fact so widely exploited by the enemies of socialism, by the capitalists, in their bid to resuscitate their decrepit, inhuman, and prehistoric system.

This is the task we revolutionaries have to tackle. For it is easy to make a mistake and mistakes are often made. Often they are the result of a lack of serious, in depth analysis, the result of a lack of collective analysis, which is also one of the fundamental principles of Marxism-Leninism…

Nevertheless, we’ve had to adopt a number of specific measures imposed by necessity, by reality. these measures help in many ways, they develop the economy. And the development of the economy makes for greater resources which, in turn, makes for greater possibilities for the development of society and of society’s wealth. If there is not wealth there will be very few tings to distribute. That is reality, and in correcting its idealistic mistakes the revolution had the courage to adopt the pertinent measures.

But contradictions do arise. And we must guard against allowing socialist formulas to compromise communist consciousness. We must prevent socialist formulas from compromising our loftiest objectives, our aspirations, our communist dreams. We must not allow ourselves to be diverted from our goal of ideology or a lack of understanding of these truths…

No, no one can expect communist consciousness to be based solely on an abundance of wealth.

The way I see it, in the development of communist society, wealth and the material base must grow hand in hand with consciousness, because it can even happen that as wealth increases consciousness diminishes… I’m convinced that it’s not only wealth or the development of the material base that will develop consciousness-far from it. There are some countries much richer than ours-there are some. I don’t want to make any comparisons of any kind; that would not be correct. But we do know of revolutionary countries where wealth has advanced more than consciousness, leading to counterrevolutionary problems and things of that sort. But you can have a great deal of consciousness without much wealth…

We must search for socialist formulas rather than capitalist formulas to solve problems, because before we realize it capitalist formulas can begin to corrupt us and contaminate us…”

Che kept these problems in mind when he developed the Cuban economic system, the Budgetary Finance System. He also kept this in mind for the institutional forms, incentive mechanisms and implementing controls.

Ninety miles from the shores of imperialism, Cuban socialism could not allow itself the luxury of not seeing the forest and wandering down the wrong path.

Part 3:
Economic Planning:
its function as principal generator of the socialist economy

Marx and Engels made it clear that economic planning is one of the central concepts of the transition period. They also gave us the the elements that make up what the planned economy in the transition period and communist society.

Economic planning is inseparably linked to anti capitalist revolution and the dictatorship of the proletariat, there is no Marxism without them.

The synthesis of these elements signifies the new way of making society that has never existed before. It is that man actively takes up the task of planning the economy. In all previous history man has been made subject to the forces of society. The planned economy is a tool that people use to acknowledge reality and make decisions about it, thereby making their present and future.

With economic planning people can bring the forces of production under their control. Before communism these productive forces and their effect were beyond people’s consciousness.

This era of not knowing how the productive forces affected our lives and making us subject to them, is what Marx referred to as prehistory. Entering the new stage where we affect the productive forces signifies the evolution of mankind where we control or destiny.

Economic planning is the fundamental element of building communism. This is how Che put it:

“We can therefore state that centralized planning is the mode of existence of socialist society, its defining characteristic, and the point at which man’s consciousness finally succeeds in synthesizing and directing the economy toward toward its goal: the full liberation of the human being within the framework of communist society.”

An important aspect of the economic plan is that it establishes the proportions of goods that are produced for society. Because of this, the economic plan has features similar to the law of value. The difference is that the law of value forces itself on society while the economic plan is a tool that we can deliberately use as we see fit.

It is only the economic plan that is the tool the allows us to create new productive forces, create the new man and finally reach the stage of communism.

Che said an economic plan embraces material relations as a whole. For that reason the plan should incorporate and unite two elements:

1. Creating the basis for economic development of the new society as well for the economic regulation and controls;

2. Creating a new type of human relations, a new man.

For us to understand Che’s economic thought it is useful to go back to Marx’s theory of value in Capital. His view of value is completely different from all others. He saw value as a combination of quantitative relations between products and the historically conditioned relations between producers. All bourgeois economists and economic thought was to treat these two things as separate phenomenon.

In the first chapter of Capital Marx tells us that a commodity has a use-value and an exchange-value. That means it has a value in how it can be used, and its value in what it can be exchanged for. What Marx saw was that value as had in it an expression of social relations given the historical moment.

The continuation of social relations that happen as a result of commodity production are not universal. They do not have to happen, they are a result of social relations that developed, but in economic planning they can be altered.

For Marx, the categories used to describe the capitalist mode of production “are forms of thought which are socially valid, and therefore objective, for the relations of production belonging to this historically determined mode of social production, i.e., commodity production.”

What sets Marxist theory apart is that the social character of economic categories is what important to an analysis of value. In history these categories determined the relationship between people. Under capitalism these social relations takes on the appearance of relations between commodities. But really, it is still relations between people covered up by exchange.

This is revealed by Marx’s work “The Fetishism of the Commodity and its Secret”. It shows that the relations between commodities is really a cover for relations between people.

“The mysterious character of the commodity-form consists therefore simply in the fact that the commodity reflects the social characteristics of men’s own labour as objective characteristics of the products of labour themselves, as the socio-natural properties of these things. Hence it also reflects the social relations of the producers to the sum total of labour as a social relation between objects,a relation which exists apart from and outside the producers. Through this substitution, the products of labour become commodities, sensuous things which are at the same time supra sensible or social… It is nothing but the definite social relation between men themselves which assumes here, for them, the fantastic form of a relation between things…I call this the fetishism which attaches itself t the products of labour as soon as they are produced as commodities, and is, therefore inseparable from the production of commodities.

As the foregoing analysis has already demonstrated, this fetishism of the world of commodities arises from the peculiar social character of the labour which produces them.”

The law of value explains how an equilibrium of capitalism can exist. The equilibrium is achieved by the amount of commodities produced, the extent to which they are exchanged, how labour power is apportioned among different sectors of economy, and the distribution of resources among these sectors.

This is the structure of the capitalist system which is normally hidden from our eyes.

To sum up the idea that pulls together the questions that have been discussed and that is present throughout Marx’s theory, we quote the following passage from Capital:

“Political economy has indeed analyzed value and its magnitude, however incompletely, and has uncovered the content concealed within these forms. but it has never once asked the question why this content has assumed that particular form, that is to say, why labour is expressed in value, and why the measurement of labour by its duration is expressed in the magnitude of the value of the product. these formulas…bear the unmistakable stamp of belonging to a social formation in which the process of production has mastery over man, instead of the opposite…”

Che’s position on the law of value and the use of this law and other capitalist categories-both in economic management during the transition period and in the creation of a theory of the construction of communist society-can be summed up as follows:

– rejection of the law of value as the guiding principal in the period of transition to communism;

– the distinction between acknowledging the existence of a series of capitalist relations that necessarily persist during the transition period (including the law of value, given its character as an economic law-that is, as an expression of certain economic tendencies); and affirming tje possibility of managing the economy by the conscious use of the law of value and the other categories that go along with it;

– rejection of the view that the period of transition to communism, even in its first phases, has to unfold in accordance with the law of value and the other categories of commodity production implied by its use;

– rejection of the view that not only recommends use of the law of value and monetary-commodity relations in the transition period, but also asserts the need to develop these capitalist relations as a vehicle for reaching communist society;

– rejection of the inevitable use of “the commodity category in relations among state enterprises,” and instead considering “all such establishments to be a part of the single large enterprise that is the state”;

– the need for economic policies that tend toward the gradual withering away of the old categories, including the market, money (so long as its functions are distorted), and thus the lever of direct material self-interest; or, more accurately, policies that tend toward the elimination of the conditions that give rise to these categories;

– rejection of the practice of using capitalist categories. If capitalist categories such as “the commodity as the economic cell, profitability, individual material interest as a lever, etc.” are used in building the new society, they will rapidly take on an existence of their own, in the end imposing their own influence on relations among men;

– acknowledgement that the free play of the law of value in the period of transition to communism implies the impossibility of fundamentally restructuring social relations, since it means perpetuating the “umbilical cord” that ties alienated man to society; and that it leads instead in the direction of a hybrid system in which a fundamental transformation of the social nature of man and society will not occur;

– the construction of socialism and communism is a question, simultaneously, of both production and consciousness. As Che put it:

“In our view, communism is a phenomenon of consciousness and not solely a phenomenon of production. We cannot arrive at communism through the simple mechanical accumulation of quantities of goods made available to the people. By doing that we would get somewhere, to be sure, to some peculiar form of socialism.

But what Marx defined as communism, what is aspired to in general as communism, cannot be attained if man is not conscious. That is, if he does not have a new consciousness toward society”

The very natures of the law of value and economic planning make it impossible for them to coexist in the period of transition to communism. Their coexistence can only exist in the first phase of the transition where the law of value still exists as left over from capitalism.

The law of value continues to exist from the destruction of the bourgeois state to the transfer of the means of production to the revolutionary state.

As the means of production are transferred to the revolutionary state, new relations of production begin to emerge. Because of this new change a new conception of inner workings and goals are needed. It also requires new management, organization and incentives.

However during this phase some means of production will remain in the hands of capitalists and small producers, both private and cooperative.

While commodity production still exists as a sector of production, the law of value will not govern in a “pure” form. As the revolutionary government tackles social problems, this will inevitably distort the way the law of value functions.

These social measures include lowering rents for housing, providing medical care and social assistance for free or below prices set by the market in order to combat counterrevolutionary ideology and policies.

At this time policy would also bring under control foreign currency, foreign trade and domestic wholesale trade, to bring people previously marginalized into economic life. Meaning, it is an effort to end the problem of unemployment

The law of value no longer has the power to do these things. The law of value doesn’t have the power to determine how commodities are distributed. It can’t decide how labour power and resources are allotted, because they are used according to need, not profit. In doing this, prices are no longer set according to market fluctuations, they become part of the economic plan.

At this point the leadership of the revolution determines distribution according to the political program, the law of value. This is done according to the revolution’s goals and military strength, with central planning the objective.

When dealing with the productive forces of society, it is the overall profitability that is important. This means that when we look at the profitability of the entire economy, we can lower or raise the costs of commodities so long as the entire economy can be kept profitable. This gives socialism a unique ability to set prices above or below the market as needed, an ability capitalism does not have.

Economic equilibrium is non unique to socialism, every society must consume less than it produces or it would cease to function. What is different about socialism is that this consumption is not determined by the law of value.

Economic equilibrium in capitalism (and other societies) is established spontaneously through the law of value. In socialism economic equilibrium is established consciously through economic planning. This is how socialism allows people to determine their fate, by planning it, not subjecting it to the market.

The great criticism of the planned economy is that it is tiresome unnecessary work. One of the major critics that made this argument was Czech economist Ots Sik. He argued that state planning commissions would have to make millions of mathematical calculations, which could all be made without effort using the law of value.

However what he and all the other critics of the planned economy fail to understand is that simply planning the economy is not the point. The point is to consciously build a new society, that is accomplished by the distribution of commodities and other resources.

Once the prices of products are no longer regulated by supply and demand, but consciously planned, we can say that the law of value no longer dominates.

Even if there is still private producers (and/or cooperatives) of commodities, the law of value still does not control their exchanges with state enterprises. The money that changes hands in these transactions is not a measure of value. The exchange is not of equal amounts of socially necessary labour, because the prices are not determined by supply and demand. The prices and quantities of such commodities are regulated by the state in accordance with the economic plan.

Part 4:
The role of money, the banking system, and prices

During socialism and more specifically the transition to socialism, the role of money is altered to serve the new social and economic relations of the society.

Money came about as a result of commodity production, therefore it also expresses certain relations of production. As a result, money is therefore conditioned by those relations. To begin the process of eliminating commodity relations money must take on a new form to facilitate this elimination.

“It is important to point out, for reasons we will come to later, that money reflects the relations of production; it cannot exist without a commodity society. We can also say that a bank cannot exist without money and, for that reason, that the existence of banking is dependent on commodity relations of production, however developed they may be.”

Marx laid out the five functions that money perform in commodity production. And according to Marx only two of these forms should continue in the transition period:

– money of account, that is, money as a measure of value

– money as a medium of circulation and/or distribution – between the state and the remaining small private proprietors, and between the state and individual consumers.

As Che explained:

“Another difference is the way money is used. Under our system, it functions only as money of account, as a reflection, in prices, of an enterprise’s performance that can be analyzed by the central bodies in order to review its functioning. Under they system of economic accounting, money serves not only this purpose but is also a means of payment that acts as an indirect instrument of auditing and review, since it is these funds that permit the production unit to operate. The production unit’s relations with the bank are similar to those a private producer maintains with capitalist banks, to whom it must thoroughly explain plans and prove its solvency. Naturally, in such cases decisions are not arbitrary but are subject to a plan, and these relations take place between state bodies.

Consistent with the way in which money is used under the budgetary finance system, our enterprises have no funds of their own. At the bank there are separate accounts for withdraws and for deposits. The enterprise may withdraw funds in accordance with the plan from the general expense account and the special wage account. But its deposits automatically pass into the hands of the state.

In the majority of the fraternal countries, enterprises have their own funds in the banks, which they can add to with bank loans for which they pay interest. But it must not be forgotten that the enterprise’s ‘own’ funds, as well as the loans, belong to society, and their movement reflects the enterprise’s financial situation.”

In Capital we read:

“There is a contradiction immanent in the function of money as the means of payment. When the payments balance each other, money functions only nominally, as money of account, as a measure of value. But when actual payments have to be made, money does not come onto the scene as a circulating medium, in its merely transient form of an intermediary in the social metabolism, but as the individual incarnation of social labour, the independent presence of exchange-value, the universal commodity.”

This idea of using money as a means of accounting was so useful it began showing in the the most developed capitalist monopolies. They began using a variation of this technique for their subsidiaries.

Using money in this way, as a measure of value in the form of prices, can be used to measure how well a state enterprise is being managed. This way money of account can be used to analyze it. This allows the state planning body to evaluate the functioning of the enterprise.

Socialism takes every enterprise and makes it one big enterprise. This way none of them need their own money. Under this system the enterprise has separate bank accounts for deposit and withdrawal:

“Once the means of production are socially owned, through the state, and once this financial system is applied to transactions between the socialist enterprises, it becomes possible within the state sector to convert the buying and selling of commodities on the market into simply the mutual delivery of products. It also becomes possible to limit the function of money as a mans of payment, reducing it to a measure of value; and to eliminate the function of accounts payable and accounts receivable as credit instruments, transforming them conceptually into simple administrative or accounting acts. These acts take the concrete form of payment orders, whose sole purpose is to maintain accurate banking records.”

The banking system will disappear over the long run in the transition to communism. It will only survive during the time in which commodity relations still exist, because banking requires commodity relations in order to exist.

“In the periods of building socialist society, all previous concepts of the political role of the banking system change, and other ways must be sought to put its experience to use.”

As a result of the new socialist order the bank no longer has a dominant role in the economy. The bank in socialism, unlike in capitalism, does not own any of its own capital. Because of this, the bank remains the property of the state which is used to carry out economic functions.

Part 5:
Conclusion

This is in no way a complete work on economics in the transitional period from capitalism to socialism. Obviously it is much larger and complex than I have laid down from the works of Che Guevara and Carlos Tablada. This is only meant to give you a kind understanding.

Hopefully form this you will learn enough to go out and investigate your own understanding of how a society plans its change from capitalism to socialism. There are many great works out there worth reading and I think you should study them closely.

Just keep in mind these points when doing so:

1. The goal is to change the social relations of production. Don’t just use economic rationality as a way of measuring success. You have to measure the social progress of the society as well.

2. Economic policy should serve the social goals of society, not just the bottom line.

With that being said I thank you for watching the whole video. I know it was really long so I appreciate it. I hope you enjoyed this video. I spent a hell of a lot of time and effort making it. I hope this helps on your path to understanding socialist economics better. Because that was my intent. Thanks for watching.