Pravda, 16 September 1925

Achieving pre-war levels, not only in terms of quantity but also quality, would represent a huge success given the current historical conditions. Our first chapter was devoted to this issue. But this achievement brings us only to the “start” of our actual economic competition with world capitalism.

The concluding lines of the explanatory notes of the State Planning Commission formulate the following general task: “To hold on firmly to the conquered positions and to move forward consistently every year, at least one step closer to socialism, wherever economic conditions permit.” Taken literally, these lines might lead to false conclusions. To advance towards socialism every year “one step at a time” may be taken to mean that the pace of development is almost irrelevant—once the resultant force is directed toward socialism, we will reach our goal anyway. Such a conclusion would be fundamentally wrong, and the State Planning Commission, of course, did not mean to imply this in any way. As a matter of fact, the question is decided precisely by the pace of development. Only the superior pace of development of state industry and trade over private industry and trade ensured a “socialist” resultant over the past period. The same ratio of the pace of development must be maintained in the future. But even more important is the pace of our development as a whole as compared to the pace of development of the world economy. The explanatory notes of the State Planning Commission have not yet touched on this question. We therefore consider it necessary to dwell on it in detail, since this new criterion will serve to measure our successes and failures in the coming era to the same extent that the criterion of the “pre-war level” served to measure the successes of the recovery period.

It is quite obvious that our entry into the world market brings not only opportunities but also dangers. The basis for these dangers remains the same: the fragmentation of peasant farming, our technical backwardness, and the enormous productive advantage that world capitalism currently has over us. This simple acknowledgment of what is does not, of course, contradict the fact that the socialist mode of production is immeasurably more powerful than the capitalist one in terms of its methods, tendencies, and possibilities. A lion is stronger than a dog, but an old dog may be stronger than a lion cub. The best insurance for a young lion is to grow up and to have strong teeth and sharp claws. This only requires time.

What is the most important advantage of old capitalism so far over young socialism? It is not because of the riches it possesses, nor the gold it keeps in cellars, nor the volume of accumulated and stolen wealth. Past accumulations of wealth may have their importance, but they are not decisive. A living society cannot exist on old reserves; it feeds on the products of living labor. Despite all its riches, ancient Rome could not withstand the onslaught of the “barbarians” when the latter became the bearers of a higher productivity of labor than that of the decaying régime of slavery. The bourgeois society of France, roused by the Great Revolution, simply looted the wealth accumulated from the Middle Ages by the aristocratic town communities of Italy. Were the productivity of labor in America to fall below the European level, the United States would not be helped by the 9 billion in gold stored in bank vaults. The main economic advantage of bourgeois states is that capitalism still produces cheaper goods of better quality than socialism. In other words, the productivity of labor, so far, is still much higher in countries living by the inertia of old capitalist culture than in a country which has only just begun to apply socialist methods under conditions of inherited cultural backwardness.

We know the fundamental law of history: ultimately, the régime that provides human society with a higher level of economic development will prevail. The historic struggle is decided, not immediately, not with a single blow, by the comparative coefficient of the productivity of labor.

The whole question now is in which direction and at what pace the relationship between our economy and the capitalist economy will change in the coming years.

Our economy can be compared with a capitalist economy in various ways and along various lines. Capitalist economies themselves are extremely heterogeneous. Comparisons can be static, i.e., based on the current economic situation, or dynamic, based on a comparison of the different paces of development. We can compare the national income of capitalist countries with ours. We can also compare production growth rates. All such comparisons and contrasts will have their significance, some more, some less; we only need to understand their connection and interdependence. We will give a few examples below—merely to illustrate our point, nothing more.

In the United States of America, the capitalist process has reached its peak. To measure the material superiority of capitalism over socialism, it is instructive to consider this superiority in its most extreme form.

The Council of American Industry recently published a table from which we have taken some data. The population of the United States, which forms about 6 percent of the world’s population, produces about 21 percent of the grain, 32 percent of other cereals, 52 percent of the cotton, 53 percent of the wood products, 62 percent of the cast iron, 60 percent of the steel, 57 percent of the paper, 60 percent of the copper, 46 percent of the lead, and 72 percent of the oil. The United States accounts for a third of the world’s wealth. It owns about 38 percent of the world’s hydraulic power, 59 percent of telegraph and telephone lines, 40 percent of all railways, and 90 percent of automobiles.

The capacity of public power stations in our Union will reach 775,000 kilowatts next year; in the United States, this capacity already reached 15 million kilowatts last year. As for the generating power of our electrical stations for industrial supply, the 1920 census determined their total capacity in our country to be almost one million kilowatts; in the United States for the same year, it was 10,500,000 kilowatts.

The total productivity of labor is expressed in the national income, the calculation of which, as we know, presents great difficulties. According to the figures of our Central Statistical Board, the national income of the Soviet Union for the year 1923–24 averaged 100 rubles per capita; in the United States of America the average is 550 rubles per capita. Foreign statisticians, however, put the figure not at 550, but at 1,000 rubles. This means that the average labor productivity, determined by equipment, organization, skills, etc., is 10, or at least six times higher in the United States than in our country.

However important these facts may be, they do not in any way predetermine our defeat in the historical struggle: not only because the capitalist world is not limited to America; not only because powerful political forces, generated by all previous economic development, are involved in the historical struggle, but also because, above all, the future curve of economic development in America itself is a great unknown. The productive forces of the United States are far from being fully utilized, and a reduction in the load means a reduction in the productivity of labor. The United States is not at all secure in its markets. The problem of selling is increasingly apparent and acute for them. It is quite possible that in the near future the comparative coefficient of labor productivity will be equalized on both sides: by increasing ours and decreasing America’s. This is even more likely to happen in Europe, whose level of production is currently much lower than that of America.

One thing is clear: the superiority of capitalist technology and the capitalist economy is still enormous; the ascent before us is steep; the tasks and difficulties are truly vast. Finding and verifying a path forward is only possible with the measuring instruments of the world economy in our hands.

The comparative coefficients of the world economy

The dynamic equilibrium of the Soviet economy cannot in any sense be conceived as the equilibrium of a self-contained and self-sufficient whole. On the contrary, as time goes on, the domestic economic equilibrium will become more and more dependent on export and import. This circumstance must be fully examined, and every possible conclusion drawn from it. The more we become part of the international division of labor, the more directly and immediately will elements of our domestic economy such as prices and the quality of our goods become dependent on the corresponding elements of the world market.

Up to the present day, we have been developing our industry with an eye to its pre-war levels. For all comparisons and the determination of values of our production, we use the price lists of 1913. But now that the early reconstruction period, when such a comparison, very imperfect, we might add, but admissible, is coming to an end, the whole question of measuring our economic development has moved on to a new plane. Henceforth, we must know definitely at any given moment to what extent our production, in quantity, quality, and price, lags behind the production of the European or world market. The end of the reconstruction period will definitely permit us to throw aside our own 1913 catalogues, and to arm ourselves with the present-day catalogues of German, English, American, and other firms. We will have to focus on new indices, expressing the comparison of our production, both in quality and price, with the production of the world market. These new measurements, these new coefficients, not on a national but on a world scale, will be the only ones entitled to characterize the different stages of the process described by Lenin in his formula—“Who [beats] whom?”

* * *

In the antagonistic conditions of the world economy and world politics all depends on the pace of our development, that is to say, the pace of the quantitative and qualitative growth of the product of our labor.

Today our backwardness and poverty is an undoubted fact, which we do not deny, but, on the contrary, emphasize in every way. Systematic comparisons with the world economy will therefore only bear this out in plain figures. Is there not a danger in the near future, when we are still far from reaching our full potential, the world market will crush us by the colossal material superiority of its resources? There can be no indisputable, let alone statistical, answer to this question, just as there can be no indisputable answer to the question of whether, for example, farmer-capitalist (“kulak”) tendencies threaten to draw in the middle peasantry, paralyze the influence of the proletariat in the countryside, and create political obstacles to socialist construction? Similarly, it would be impossible to give a categorical answer to the question as to whether capitalism will succeed—if its temporary and very relative stability continues–in mobilizing serious armed forces against us and, by means of a new war, slow down our economic progress. Such questions cannot be answered in the form of a passive prognosis. Here, we are talking about struggle, where creativity, maneuvering, energy, etc., play an enormous and at times decisive role. A study of these questions is not the task of the present work, in which we are attempting to determine the internal tendencies of economic development, abstracting them as much as possible from other factors.

In any case, when asked whether the global market could overwhelm us with its economic superiority, the answer is that we are not completely defenseless against the global market; our economy is protected by certain state institutions that apply a comprehensive system of socialist protectionism. But how effective is it? The history of capitalist development can teach us something in this regard. For long periods, Germany and the United States lagged behind England in industrial terms by a distance that might have seemed insurmountable. Taking advantage of natural and historical circumstances, these backward countries were then able, under the cover of protective tariffs, to catch up with and even overtake the leading country. State borders, state power, and tariff systems were powerful factors in the history of capitalist development. This applies to an even greater degree to a socialist country. A carefully conceived, stable, and flexible system of socialist protectionism is all the more important for us as our ties with the capitalist market become more extensive and complex.

It goes without saying, however, that protectionism, the highest expression of which is our monopoly of foreign trade, is by no means all-powerful. It can restrain the pressure of the volume of commodities from capitalist countries by regulating it in accordance with the requirements of domestic production and consumption. In this way, protectionism can provide socialist industry with the time it needs to raise its production level. Without a monopoly of foreign trade, our reconstructive process would be impossible. But, on the other hand, it is only our actual productive achievements which allow us to maintain the system of socialist protectionism. And in the future, the monopoly of foreign trade, while safeguarding our domestic industry from foreign shocks that are still too much for it to withstand, will not be able, of course, to replace the development of industry itself, which must now be measured by coefficients of the world market.

Our current comparisons with pre-war levels are made solely from the perspective of quantity and price. A product is taken, not for its composition, but for its name. This, of course, is wrong. Comparative production coefficients must also cover issues of quality. Without this, they may become a source or instrument of self-deception. In this regard we have had some experience in connection with price reduction, which in some cases were offset by a decline in quality. When the quality of the same product, ours and foreign, is equal, the comparative coefficient is determined by the difference in production costs. When the cost is equal, it will be determined by the difference in quality. Lastly, given a different cost and quality, a combined assessment of both is required. To ascertain the production cost is a matter of industrial calculation. The quality of a commodity is determined, as a rule, only with the help of several factors. A classic example is the electric lightbulb, the quality of which is determined by the length of time it serves, the amount of power it uses, and the evenness of its light distribution, etc.

The establishment of definite technical norms and productive standards, including standards of “quality,” considerably facilitates the development of comparative coefficients. The relation between our standards and the standards of the world market will be a constant quantity for each given period of time. All we need to know is whether our product comes up to the established standard. As for value comparisons, once the relative qualities have been determined, the question is easily solved. The combined coefficient is arrived at by means of simple multiplication. If some commodity of ours were to be twice inferior to a foreign commodity and one and a half times more expensive, the comparative coefficient would be one third.

To say that we do not know foreign cost prices is true, but is of secondary importance to the matter under consideration. It is enough for us to know the price: it is printed in catalogs. The difference between the production cost and the selling price is called profit. A reduction of our own cost prices will enable us to match our selling prices with those of the world market, irrespective of foreign production costs. This will essentially be the solution to the main issue in the near future, after which—albeit not so soon—a third period will begin, the task of which will be to defeat capitalist production on the world market with products from the socialist economy.

*****

Pravda, 17 September 1925 

People sometimes object that the number of commodities is extremely large and that the development of comparative coefficients is an “insurmountable” task. To this we may give a two-fold reply. First, all commodities, no matter what kind, are calculated and recorded in books and catalogs, and there is nothing insurmountable in such work, despite the large number of commodities involved. Second, it is possible to limit ourselves in the beginning to only the most important articles of mass consumption and, so to speak, the key goods for each industry, assuming that the remaining goods occupy intermediate places in the system of comparative assessments.

Another objection is based on the difficulties of measuring or even defining quality. Indeed, what determines the quality of cotton fabric? Is it the durability, the weight of cotton per square arshine, the fastness of the dye, its visual appeal? The difficulty of measuring the quality of most goods cannot be denied. Nevertheless, the problem is not insoluble. All that is necessary is that we should not approach it with arbitrary or absolute criteria. With regard to cotton fabric intended for the peasants and workers market, durability of the fabric takes first place, and fastness of the dye the second. If we measure these two elements—and it is possible to do this by strictly objective methods—we obtain a basic characterization of quality expressed by a number. It is even easier and simpler to give an exact, that is to say, numerically expressed, comparative coefficient for our plow, our threshing-machine, our tractor, and similar machines of American manufacture. This question will, in the next few years, be as important for agriculture as the renewal of fixed capital for industry. In the buying of a horse or a cow, the peasant himself determines–and with remarkable accuracy!–all the necessary “coefficients.” In the buying of a machine, he is almost helpless. Having been burned by a bad gear, he passes on his fear of buying machines to his neighbors. A peasant should be quite sure what kind of machine he is buying. A Soviet threshing machine should have its product passport, which should form the basis of the comparative coefficient. The peasant would then know what he was buying and the state would know the relation between our production and the American.^[1]

The idea of comparative coefficients, which, at first glance, may seem abstract and, perhaps, pedantic, is, in actual fact, deeply relevant to everyday life, and literally permeates all aspects of the economy and even all areas of daily life. Our present comparative coefficients, calculated in relation to the pre-war levels, also possess not only theoretical but practical foundations. Our mass consumer, having no access to statistical tables and price curves, uses his memory of consumption and refers also to that of his family. A statistical table tells of definite percentages in relation to the pre-war levels, arrived at almost entirely from the quantitative side, while the consumer’s memory adds: “In peace-time” (i.e., before the imperialist war), “a pair of boots cost so many rubles, and lasted so many months.” Every time he buys a pair of boots, the comparative coefficient crosses his mind. Every buyer makes that calculation—be it the Leather Trust purchasing machinery from the Voronezh or Kiev machine-building plant, or a peasant woman buying three arshines of printed cotton in the market place, with the difference only that the Trust refers back to catalogs and ledgers, while the peasant woman compared from memory. And it must be admitted that often the comparative coefficients of the peasant woman, based on actual life experience, are sounder than the coefficients of the Trust, calculated hastily, nearly always without regard to quality, and sometimes in a biased manner. Somehow or other, statistics, economic analysis, and the daily work of consumer memory converged on the fact that they were looking for starting points in the conditions of the pre-war economy.

This peculiar national limitation, with an eye always to the past, is now coming to an end. Our connection with the world market is even now sufficient to push us at every step toward a comparison of our goods with foreign goods. And as old comparisons fade away, because memories of pre-war products are fading from memory, especially among the younger generation, new comparisons are becoming more and more vivid, because they are based not on memories, but on the living facts of everyday life. Our economists bring back from abroad offers from certain companies for certain goods, catalogs from various companies, and, finally, their own personal consumer experience. The question of how much a particular product costs abroad and how it differs in quality from ours, which did not exist at all in previous years, now arises at every turn. Trips abroad will become more frequent. One way or another, we must send our trust directors, factory and plant managers, the best engineering students, foremen, fitters, and skilled workers to foreign industry, not all at once, of course, but in the necessary order. The purpose of such trips is to give the main cadre of economic managers and production managers the opportunity to assess every unfavorable “comparative coefficient” from all sides, so that we can better turn it to our advantage.

It would be bureaucratically narrow-minded to think that the process of orientation towards the West is limited to the upper echelons of the economy. On the contrary, it is deeply widespread, affecting the main consumer base in various ways. Smuggling plays a significant role in this regard. It should not be underestimated. Smuggling, although not commendable, is nevertheless a very significant part of economic life, based entirely on comparative coefficients of the global economy, because smugglers import only foreign products that are significantly better and cheaper than our own. The struggle for the improved quality of our products, by the way, thus becomes the surest way of combating smuggling, which is currently draining tens of millions of rubles out of the country. Smuggling feeds mainly on small items, but it is precisely these small items that penetrate most deeply into all aspects of everyday life.^[2]

There is another area where comparisons with foreign countries have never really ceased: agricultural machinery and implements. Peasants were familiar with Austrian scythes and always compared them with ours. They knew the American McCormick, the Canadian Harris, the Austrian Heid, and others. Now that agriculture is developing and there is a new demand for agricultural machinery and implements, these comparisons are reviving with the addition of the fresh comparison of the American Ford with our own make. When a peasant buys a horse-drawn threshing machine and the inferior iron gear wears away in two or three hours before his eyes, he registers the fact in his mind with a three-story-high coefficient which could not be exceeded. As regards the industrial worker, he is confronted with the comparative coefficient, not through the things he produces, but through those he uses for production and in part for consumption. He knows the quality of American and Russian lathes, instruments, cast iron, measuring instruments, etc. Needless to say, highly skilled workers are extremely sensitive to these differences, and that one of the tasks of an industrial education is to make them even more sensitive.

Enough, we think, has been said to show that the comparative coefficients of world production are not figments of our imagination, but a practical question of greatest importance, reflecting the new tasks of our economic development.

Such a system of comparative coefficients today will give us a cross section of our economy in light of the achievements of the world economy. Determining an average coefficient for all products would mean determining the exact degree of our backwardness in technology and production. A periodic measuring of commodity coefficients and the weighted average coefficient will give us a picture of our achievements and measure their pace, both in individual branches and in industry as a whole.

When traveling by cart, distances are measured by eye or by ear; a car has an automatic odometer. In the future, our industry will have to move forward with an international odometer, on whose readings we will base not only the most important economic measures, but also many of our political decisions. If it is true that the victory of a social system is determined by an increase in labor productivity—and this is indisputable for Marxists—then we need accurate quantitative and qualitative measurements of Soviet economic output both for current market tasks and for assessing the next stages of our historical path.