2. The Economic Laws of Capitalism Are Starting to Operate Again

“Socialism is a social order in which the essential means of production are not the private property of individuals, but the common property of all the working people. Necessary prerequisite for this social order is that the working class holds state power, that a dictatorship of the proletariat exists, which wrests the means of production from the capitalists and administers the socialized means of production in the interests of the working people.” (Willi Dickhut, The Restoration of Capitalism in the Soviet Union, p. 61)

As a result of the socialization of the means of production these cease to be capital in the hands of capitalists, and the workers in the factories are no longer exploited as in capitalism. Capitalist competition and with it the anarchy of production are abolished as well as economic crises, which are unavoidable in capitalism.

Unlike under the rule of capitalist private ownership of the means of production, the purpose of production in the system of socialist ownership no longer is to obtain the highest possible profit for individual persons, but to satisfy the growing requirements of the whole people.

The highest form of socialist ownership is public ownership of the means of production. In Peking Review, No. 51, 1972, the Workers’ Political Economy Study Group of the Shanghai No. 4 Hosiery Factory describes socialist property in China as follows:

“In China today, the socialist state owns all the mines, waterways, forests and other natural resources as well as part of the land. Railways, postal and telegraph offices and banks also belong to the state, and the state runs factories, farms, shops and other enterprises and owns their products. It is imperative that the proletariat, after seizing state power, should transform capitalist private ownership into socialist public ownership and build up its own economic foundations. Only thus can the proletarian dictatorship be consolidated.” (p. 5)

But apart from public ownership there is yet another form of ownership, the cooperative or collective ownership by the people’s communes, as well as, to a lesser extent, private ownership (private plots and private livestock of the peasants, private craftsmen and a small private market). After all, the agricultural sector is not yet able to produce all the necessary agricultural products through collective ownership only. Therefore, the commune farmers own small parcels of land to make agricultural products for their personal use and to a very small extent also for the private market.

The base – also for economic accounting – is currently still formed by the lowest level, the production team. The further development of the building of socialism requires a transition to higher forms of collective ownership and finally to socialist public ownership, since small-scale production remains a material basis for a possible restoration of capitalism, as Lenin warned in 1920:

“Small-scale production engenders capitalism and the bourgeoisie continuously, daily, hourly, spontaneously, and on a mass scale.” (“‘Left-wing’ communism – an infantile disorder”, Lenin, Collected Works, Vol. 31, p. 24)

As there are still the two different forms of socialist ownership in the countryside and in the cities, public ownership and cooperative ownership, the means of production (agricultural machinery, construction material, fertilizers) cannot simply be allocated to the people’s communes; neither do the commune farmers simply deliver their products to the state without pay. The same applies to the relations of the people’s communes between each other. The exchange of products between the respective owners is still made according to the principle of commodity production.

Commodity production in socialism, however, differs fundamentally from commodity production in capitalism. The economic relations are no longer relations between exploiting capitalists and exploited workers; the anarchy of production is replaced by central planning and steering of the economy; the sphere of commodity exchange is restricted. But in the sphere of distribution and exchange of commodities the principle of exchange of equal values persists.

In the dictatorship of the proletariat, the working class must exercise political control over the use of the means of production and the management of the enterprises, narrowing step by step the scope of bourgeois right. If the working class fails to do so, those capitalist evils, against which our Chinese comrades warned in 1975, will occur:

“If bourgeois right in distribution and exchange is developed and extended at will, capitalist ideas of amassing fortunes and craving for profits will spread unchecked; such phenomena as turning public property into private property, graft and corruption, theft and bribery, and speculation will arise, and there will be a change in the nature of the system of ownership in certain departments and units which follow the revisionist line.” (Peking Review, No. 22, 1975, p. 12)

In socialism, too, the price of commodities is calculated by the law of value. The law of value says that the value of a commodity is determined by the labor time socially necessary for its production. Only commodities comprising the same amount of social labor time can be exchanged at an equal value.

The new leadership in China wants to determine the production of the enterprises with unrestricted validity and extension of the law of value. Profitability thinking ranks first. The enterprises are expected to develop according to how profitably they can manufacture their products; the higher the earnings the better. Hu Qiaomu (Hu Chiao-mu), President of the Chinese Academy of Social Sciences, explained at a session of the State Council in July 1978:

“A fair price for a particular product will bring greater profit to its production units, otherwise, there will be less profit. This is why we say that price is an important instrument in our planned economy.” (Peking Review, No. 46, 1978, p. 18)

The scholarly remarks of the Honorable President show clearly where unrestricted validity of the law of value immediately leads: to an increase in prices for the Chinese working population.

The following statement from Beijing Review, No. 14, 1979, shows clearly how much the capitalist law is already in effect in China today:

“Therefore, if we should ignore this spontaneity [of the law of value], we would be at the mercy of the law of value and the result would be anarchism in production.” (p. 16)

In other words: The law of value is to be allowed to take effect without restriction.

At the Second Session of the Fifth National People’s Congress in June 1979, even further-reaching “reforms in the economic structure” were discussed. They are nothing less than the orientation of production towards the laws of the capitalist market:

“To do away with the abuses in the existing economic structure in a thorough-going way, it is necessary to carry out reforms. For instance, we must change the system of unified purchasing and marketing of products and integrate adjustment of plan with regulation of the market. The state should make planned adjustment of the production and distribution of products that have most important bearing on the national economy and the people’s livelihood. In other words, production and distribution of these goods will have to be carried out according to state plan. The production and marketing of goods not belonging to this category may be carried out according to market demands and adjusted accordingly.” (Beijing Review, No. 26, 1979, p. 19)

That means for the state enterprises:

“In the current reforms in the economic structure, we must be determined to expand the administrative power of the enterprises. All enterprises have the right to work out their own production and marketing plans according to the needs of the state and the market.” (ibid.)

Production for the market does not orient itself towards the needs of the working population. Market laws are the rules of capitalist competition. The enterprises do not produce jointly according to an overall plan but in mutual competition to make higher profits than the others. Obviously, with the implementation of the capitalist market the individual enterprises also have to be entrusted with the authority to conduct personnel planning:

“All enterprises must have not only a certain amount of autonomy in production, supply and marketing but also a certain amount of independent discretion in deciding on personnel and financial affairs and in handling materials. Whether an enterprise is well run is directly connected with its development and with the material interests of the workers and staff members.” (ibid.)

If the individual enterprises are free to decide on personnel and financial affairs and if at the same time the enterprises are run on the principle of profit, the factory directors will have the power to carry out rationalization measures and also to dismiss workers. An army of unemployed people will be the consequence. We reported about first signs of this capitalist evil above.