Translated and Edited by Mike Baker: published by the
Movement for Workers' Councils, London 1990.
Marked up by Jonas Holmgren for the Marxists Internet Archive.
Up to this point we have considered only such industrial establishments which supply, through their productive activity, a tangible or measurable product. However, we have already made reference to the fact that in certain establishments no material or physical product is created, whilst at the same time they remain indispensable for social life. We mentioned in this connection the economic and political councils, the education system, the health service, etc. - in general, institutions concerned with cultural and social needs. They produce no tangible product. The result of their activities is that their services are absorbed directly into society, and in their case, therefore, production and distribution are carried out simultaneously. A further characteristic feature of these establishment is that, in a communist society, they supply their services "free of charge". They stand freely at the disposal of all to the extent that they are needed. With this type of establishment the principle "supply according to need" is realised; distribution takes place without economic measure. This type we will name ESTABLISHMENTS FOR GENERAL SOCIAL USE (GSU ESTABLISHMENTS) or simply PUBLIC ESTABLISHMENTS. This is in contradistinction to those establishments which do not produce without compensation and which are here named PRODUCTIVE ESTABLISHMENTS.
It should be clear that this difference in economic function introduces complications into the communist system of economic regulation and control. Were all establishments to produce a tangible product, one would need to say relatively little about communist production. It would only be necessary to organise a correct distribution to the productive establishments in respect of P, C and L, and production would be able to move smoothly forward, whilst each individual worker could receive "the full proceeds of the individual's labour-power", paid in labour certificates at the factory. Labour-time then becomes a direct measure for that part of the social product which is destined for individual consumption.
This, however, does not reflect the realities of the system. Although the GSU (public) establishments consume means of production, raw materials and also consumption goods for the workers who work in them, they contribute no new product to the total mass of products at the disposal of society. All those use-values which the GSU (public) establishments consume must therefore be deducted from the mass of products produced by the productive establishments; that is to say, the workers do not receive the "full proceeds of their labour" paid out at the productive establishments, and that labour-time is not the direct measure determining the part of the social product which is destined for individual consumption, inasmuch as the workers must surrender a part of their product for, amongst other categories, the public (GSU) establishments. This makes it appear as if, in this case, the exact relationship of the producers to the social product had been disturbed, and it is indeed here that the source of the difficulty may be found which has caused the economists so many headaches.
It is now our task to find a final solution to this problem. For all economists concerned with the economic system of communism, this question is a sensitive point. It was, furthermore, from the attempt to solve this anomaly that, amongst other things, Neurath's project for a central authority for producers and distributors first arose, in that it is this central authority which decides what and how much out of the total social product each individual shall enjoy according to "the way of life to which he is accustomed". Others are not quite consistent in their treatment of the problem and attempt to solve it by means of indirect taxes (Russia). But in all these cases the answer to the questions to exactly what and how much should be allocated to the individual worker-producer for individual consumption represents just so much fumbling around in the dark. On one question, however, there is unanimity: in order to solve the problem a central management and administration of the economy is necessary, which then means that there can be no question of establishing an exact relationship of the producer to the product. The fact that "libertarian communism" a la Sebastian Faure is also compelled to grasp at the straw offered to him by an economy administered "from above" means that in this system also the basic motivation may be imputed to the same cause.
Since it can be demonstrated from this that the most significant roots of State communism lie embedded in attempts to solve this problem, it is imperative that we devote especial attention to it. It was indeed only after the onset of the revolutionary period 1917-23 that a solution first became possible, when the marxist principle - as, indeed, the Bakuninist also - that "not the state but the union of free associations of the communist society" represents the positive principle in the construction of communism, crystallised into its first concrete form in the system of Workers' Councils.
The first to have brought this problem closer to its solution was Otto Leichter, for the simple reason that he was the first to have placed the communist economy upon the material foundation of "cost accounting". Nevertheless his work did not reach a satisfactory conclusion, because in the final outcome he did not know how to apply consistently the category of average social labour-time to both production and distribution. Leichter's conception of the whole economy is that of a giant trust, Hilferding's "universal cartel". For him the question then resolved itself into that of deciding wherein the source from which he might derive the general public accounts (what we have termed the GSU services) might lie. He turned his face against the method of indirect taxes and sought other means. He even found them ... but, in doing so, he let fall the category of average social labour-time. When Kautsky failed, having placed himself in an anomalous situation through being unable to perceive the difference between the factory average and the social average, Leichter also failed to solve this same problem. But, in his case, he did not permit this to lure him away from the method of labour-time computation completely. Instead of calculating the social average for the entire "guild" or sector of production, he determined a "price" for each product according to the productivity of the least efficient (or most expensive) establishments, thus compelling the remaining industrial establishments to operate at a profit, which profit then flows into the general treasury of the whole of society. Concerning these profit-making installations he writes:
"These will then throw up a differential plus amount, or - expressed in capitalist terms - a surplus profit which, of course, should not be left to accrue to this or that individual factory alone but - once again expressed in capitalist terms - must be eliminated through taxation."
Although Leichter finds that it is most frequently convenient to apply a method of control over the stream of products according to "the socially necessary labour-time therein specifically expended" (page 38), he does not, as we have already noted, carry this through to its logical conclusion. Above all, he does not recognise the crucial role played by the category of average social labour-time. As we shall see, he attempts to compensate for this later, but nevertheless he has in this way drawn the first veil of confusion and obscurity over his analysis.
... In the meantime, this "source of income" is found to be an inadequate device and, to be quite blunt, not fundamentally essential to Leichter's system. In the course of his later examination of the problem, he attempts to formulate it more exactly and in doing so achieves a fundamental advance over and against all other work in this field of which we know. The first step in his scheme is to combine all public costs under one heading and then to determine how many labour-hours per year have been expended by all producers to achieve this (it is obvious that this requires a general system of social book-keeping). In this way he obtains two values which, when brought into relation with one another, produce a difference-amount. Since the entire calculation rests upon the computation of labour-time, he has by this means uncovered an integer which indicates how many labour-hours must be contributed per head of population on account of GSU or public works. And thus he has also uncovered how much of the labour-power directly expended in the productive establishments must be added to the prices of products in order to cover the "costs" of these GSU (public) social expenditures:
"Each productive establishment will thus have responsibility, each year when the overall production budget for society as a whole is drawn up, for introducing into its specific works or factory budget a category relating to the entire social production system (p. 65). The total sum thus arrived at for all the various economic headings - which then become, of course, a charge upon the entire production system - is then aggregated to form some final amount, presumably one related to the total number of labour-hours performed in the spheres of both production and distribution. The difference-amount thus arrived at is then added to the sums paid out for individual remuneration of labour ("wages") when the origination costs of all social ("public") expenditures are summated, so that an element representing the general costs of society is included in the costs of goods. It would, of course be equivalent to an injustice, and would have almost the same effect as an indirect tax, were one to add the same increment for general social costs to all commodities, to the most staple as to the most luxurious, to the most necessary as to the most esoteric. Amongst the important tasks of the Economic Parliament or Supreme Economic Administration will therefore be that of determining for each branch of industry or for each individual product the correct increment category to be applied for general social costs, always fixing these in such a way that the total non-productive costs of society are included. In this way the possibility is also obtained of influencing price policy in accordance with the viewpoint of a central authority ..." (O. Leichter: ibid.; p. 66)
This conception of Leichter's is remarkable indeed. In order to avoid the accusation of adopting the method of indirect taxes, he proposes that the costs of education, the health service, distribution, etc. not be borne equally by all members of society. It is apparently his intention that a comparatively heavier burden should be borne by those with larger incomes, as compared with those "poorer" workers whom the statisticians and subsistence physiologists consider should be advantaged. We, however, must openly declare our view; namely, that such measures would, by precisely these means, acquire the character of indirect taxation. What we are considering here is precisely the category of those costs needed to maintain the GSU establishments. Why should it be considered necessary that the "rich" should contribute more in this respect than the "subsistence workers" whose needs have been assessed according to so-called "scientific" sociological methods based on the statistical art? Could it be the case here that it is Leichter's guilty conscience which here speaks up on behalf of an antagonistic mode of distribution of the social product?
Let us however now delete from his analyses everything which is in any way superfluous and pose concretely the question: how does Leichter arrive at his figure for general social costs? We then see that there can only be one answer: On the one hand from the surplus produced by the productive establishments and on the other hand from indirect taxes. Indeed, he evokes the appearance of wishing to add a specific increment to the prices of all products, but in practice his solution resolves itself into one in which the specific amount is fixed "for each sector of industry or for each product". Precisely which products those are to be can be determined only through the antagonistic power-relations underlying the Leichterian class society. And this, in its turn, can be determined only by the degree of force which the workers are able to bring to bear in their struggle against "their" supreme administration. It is for this reason that we arrive at the conclusion that Leichter is unable to solve the problem. His "exact relationship" finds its practical end in total bankruptcy.
It was, however, quite unnecessary, even in a situation in which such a solution by means of an antagonistic mode of distribution of the product is posed, to take this road of indirect taxes and a price policy. In the main, the problem was correctly formulated in the first place. The general social costs can only be borne by the directly expended labour-power. This becomes immediately apparent if we take, so to speak, an aerial view of the entire economic process in all its simplicity. Reduced to its most simple terms, this may be formulated as follows:
Society in its productive activity turns out products in thousandfold form. These products have stamped upon them how many hours of average social labour-time have been used up in their production. Out of this mass of products it is the productive installations which first of all renew their used up means of production and raw materials. Next it is the GSU (public) installations which carry through the same process. Finally, the remaining products are consumed by all workers. With this, the entire social product has been consumed by society.
At the first stage, therefore, the productive establishments take out of the product mass what they have used up in p and c. This means nothing more than, that all installations, each one taken separately, which have calculated the quantities of p and c they have used up and which have adopted these into the cost computations of their products, now also renew all those products in exactly those quantities determined by the relevant cost computation. If we set down once again the production schematic for the total of all productive installations, taken together, we have:
(P + C) + L = Mass of Products
100 million + 600 million + 600 million = 1300 million Labour-Hours
In this case all these installations taken together would have consumed a total of 700 million labour-hours (for P and C). These are accordingly withdrawn from the total social product, so that a mass of product remains which embodies 600 million labour-hours.
From this remaining mass of products the GSU (public) establishments now take out what is required for the renewal of their means of production and raw materials. What then remains is available for individual consumption.
In order to formulate this mode of distribution concretely, it is necessary that the total consumption of the GSU (public) establishments be a known quantity. If we term the means of production required for these installations Pu, the raw materials Cu and the labour Lu (the index u stands for "universal", i.e. public) then we can formulate the total budget for all GSU establishments as follows:
(Pu + Cu) + Lu = Social Services, or
8 million + 50 million + 50 million = 108 million Labour-Hours
By this means we have made a further advance. From the 600 million labour-hours of product accountable to the productive establishments, 58 million are at first withdrawn to cover the (Pu-Cu) of the GSU establishments, so that 542 million remain for the individual consumption of all workers in total. The question then becomes: what is the quantity accruing to each individual worker? In order to provide an answer to this question, we must first determine what proportion of the total yield of labour-power has been consumed by the GSU (public) establishments. Having achieved that, the problem is solved.
In the case of the productive establishments, 600 million labour-hours were expended by the workers working in them, and in the GSU establishments 50 million. For all workers taken together this amounts to 650 million labour-hours. For individual consumption, however, only 542 million out of the total yield of labour-power is available, that is to say a ratio of 542:650 = 0.83. At the place of work itself, therefore, it is not the full yield of labour-power which can be paid out, but only 0.83 of it, or 83%.
The figure thus obtained, which indicates the proportion of total labour-power which is available to be paid out at the separate industrial establishments as labour certificates, we name the Remuneration Factor, or Factor of Individual Consumption = FIC. In our example it amounts to 0.83, from which we can calculate that a worker who has worked for 40 hours will receive from that the equivalent of only 0.83 x 40 = 33.2 labour-hours in labour certificates, indicating the worker's share in total social product available according to choice.
In order to express this in more universal form, we will now compile a formula for FIC. First of all we take the value for L. From this we subtract (Pu + Cu), so that there remains L - (Pu + Cu). The remainder is divided by the number of labour-hours represented by L + Lu, from which we see that each worker obtains for his or her individual consumption:
L - (Pu + Cu)
L + Lu
If now, for the sake of clarity, we replace the symbols in the formula by the actual figures in our example and re-term the remuneration factor as the Factor for Individual Consumption (FIC), we then obtain:
FIC = 600 million - 58 million
600 million + 50 million
0.83 or 83 percent
This calculation has been made possible because all industrial establishments have maintained an exact record of their consumption of p, c and L. The system of general social book-keeping, which registers the stream of products by means of a simple system of exchange accounting control, disposes directly over all data necessary for determining the Remuneration Factor. These are expressed through the symbols L, Pu, Cu and Lu, and can be obtained by means of a simple summation in the exchange account.
With this system of production and distribution the proportion of total social product placed at the disposal of any individual is not "allocated" subjectively by any agency. What we have here is not a system of distribution decided arbitrarily by officials; on the contrary, distribution takes place on the basis of the objective exigencies of the system of production itself. The relationship of the producers to the social product is objectively embodied in that system, and precisely for this reason no subjectively motivated authority holds the responsibility for "allocating" anything. This then also explains the "mystery" of how it comes about that the role of the State apparatus in the economy becomes redundant. The whole economy, both production and distribution, stands on objective foundations, because precisely through this relationship the producers and consumers are given the power to administer and manage the whole process themselves.
In various meetings and discussions which were held on the above theme, anxiety was sometimes expressed in various quarters that the system of general social book-keeping could under certain circumstances develop into a new organ of exploitation, because it is empowered with the task of determining the value of FIC. It could for instance calculate this factor at too low a value.
It should, however, be borne in mind that there now no longer exists any basis whatsoever for exploitation. The entire communist economy is made up of only factory or works organisations, and they alone "govern" it. Whatever function these may fulfil, they do so only within the limits of their budgets. The organ of general social book-keeping is itself just such an industrial organisation (GSU-type) and it also can only operate within the defined framework. It cannot exercise any power over the economic apparatus, because the material basis of the economy has placed control over the economic system fully in the hands of the workers, who now constitute the whole of society. On the other hand, however, any economic system which is not founded on an exactly defined relationship of the producer to the product, and in which this relationship is determined subjectively by officials constituted in official bodies, must inevitably develop into an apparatus of oppression, even if private ownership of means of production has been eliminated.
Whilst continuing our observations concerning the Remuneration Factor, we would now like to introduce into the field of our discussions a further question, one which is directly related to it. This question is concerned with the process of growth in the direction of the higher stage of communism.
We have seen that one of the most characteristic features of the GSU (public) establishments lay in the fact that in their case the principle "to each according to his needs" is realised. Here the measure of labour-time plays no role in distribution. With the further growth of communism towards its higher stage, the incidence of this type of economic establishment becomes more and more widespread, so that it comes to include such sectors as food supply, passenger transport, housing, etc., in short: the satisfaction of consumption in general comes to stand on this economic foundation. This development is a process - a process which, at least as far as the technical side of the task is concerned, can be completed relatively rapidly. The more society develops in this direction and the greater the extent to which products are distributed according to this principle, the less does individual labour-time continue to act as the measure determining individual consumption. Although at any given moment individual labour-time does continue to fulfil this function in some degree, as the development towards communism proceeds, to an ever increasing extent does this destroy from under its feet the very ground from which it sprang. Here we are reminded of what Marx had to say concerning distribution:
"The way this division is made will vary with the particular kind of social organisation of production and the corresponding level of social development attained by the producers. We shall assume, but only for the sake of a parallel with the production of commodities, that the share of each individual producer in the means of subsistence is determined by his labour-time." (K. Marx: Capital, Vol. 1; p. 172)
What we have shown in our observations is that the road towards the higher form of distribution is clearly and comprehensively indicated. Whilst the mode of distribution becomes progressively ever more socialised, labour-time remains the measure only for that part of the social product which remains governed by individual norms of distribution.
The process through which distribution is socialised does not take place spontaneously, but is associated with initiatives taken by the workers themselves. Opportunities also exist in plenty through which these initiatives may be expressed. Should the production process as a whole be so far advanced that a particular branch of it which produces an end product destined for individual consumption is operating completely smoothly and without disturbances, then nothing stands in the way of integrating that sector of the economy into the sphere of fully public (GSU) establishments. All accounting procedures in these establishments remain the same. Here the workers do not need to wait patiently until it pleases their Excellencies the state officials to decide that control over a particular branch is sufficiently firmly consolidated in their hands. Because each productive establishment or complex of productive establishments represent a self-sufficient unit for the purposes of the control budget, the producers themselves are fully able to carry through the process of socialisation of distribution.
The system of autonomous administration ensures that the productive system is extremely flexible - a factor which tends to accelerate its unhindered growth. It is, for instance, self-evident that the development of the process of socialisation of distribution will proceed at various speeds in the different sectors and localities, for the simple reason that in one establishment the demand for cultural amenities will assume a more powerful expression than in another. The inherent flexibility of the productive system makes it perfectly possible to accommodate these differences in rates of growth. If for instance the workers in one particular district wish to build a greater number of public libraries, they dispose in full of the power to do this without hindrance. New organs are then built into the system of GSU establishments which provide for a greater degree of local initiative, so that the necessary expenditures must also then be borne by the district concerned. In the case of such a district, the value of FIC will be modified, without any infringement of the fundamental relationship of the producers to the social product. In this way the workers acquire the power to mould their own social life in all its thousandfold variety.
The process of growth of the system which we have termed "consumption according to need" moves and develops within defined limits and represents a conscious process adopted by society as a whole; whilst the rate of that growth will in the main be determined by the level of social development reached by the consumers themselves. The quicker and sooner they learn to administer the social product economically, i.e. not to consume it wastefully, the quicker will it be possible to achieve socialisation in distribution. For the purposes of the control budgets which regulate the totality of production, it is a matter of little import whether the number of GSU establishments in operation is large or small. As soon as a productive establishment which previously surrendered its product for individual consumption against labour certificates transfers itself into the GSU sphere, the total GSU budget becomes that much larger and the sum of labour certificates to be provided to enable the relevant means of life to be consumed in that form becomes ever smaller. The Factor of Individual Consumption (FIC) thus becomes ever smaller in a degree proportional to the growth of communism.
It would seem, however, that a Remuneration Factor in the form of a Factor of Individual Consumption (FIC) can never disappear completely, because it lies in the very nature of social consumption that only those productive establishments which supply goods satisfying general needs will be amenable for transformation into the GSU type of establishment. A little thought will reveal that it will hardly ever be possible to include in the system of fully socialised distribution those many and varied articles and goods which reflect the special tastes dictated by various individual human interests of a specialised kind. Whatever view may be held concerning this, however, the matter is not one of principle. The main point is that the road leading towards a fully socialised mode of distribution is clearly indicated. The official "marxists" describe the above observations as "pure utopia" which have nothing to do with Marx. Just how matters stand with this "utopia" will be examined in our epilogue. As regards the relevant views held by Marx, however, we can say with complete certainty that our perspectives coincide fully with his. Referring to the "higher stage of communism" which we have termed fully socialised distribution, he writes:
"In a higher phase of communist society, after the enslaving subordination of the individual to the division of labour, and therewith also the antithesis between mental and physical labour, have vanished; after labour has become not only a means of life but life's prime want; after the productive forces have also increased with the all-round development of the individual, and all the springs of the co-operative wealth flow more abundantly - only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe upon its banners: "From each according to his ability, to each according to his needs!" (K. Marx: Critique of the Gotha Programme; Progress Publishers, Moscow; 1978; pp. 17-18)
Here however, it is also Marx's view that this must be the result of an entire process of social development:
"What we have to deal with here is a communist society, not as it has developed on its foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. Accordingly, the individual producer receives back from society - after the deductions have been made - exactly what he gives to it. What he has given to it is his individual quantum of labour. For example, the social working day consists of the sum of the individual hours of work; the individual labour time of the individual producer is the part of the social working day contributed by him, his share in it. He receives a certificate from society that he has furnished such and such an amount of labour (after deducting his labour for the common funds), and with this certificate he draws from the social stock of means of consumption as much as costs the same amount of labour. The same amount of labour which he has given to society in one form he receives back in another." (K. Marx: ibid; p. 16)
Our observations concerning the remuneration factor, or factor of individual consumption (FIC) rest on the basis that the productive industrial establishments are fully capable of carrying out their own reproduction, whilst the investment needs (input) of the GSU (public) establishments are borne by the labour-power of the productive establishments. It was for this reason that we devised our formula L - (Pu + Cu) as expressing the quantity of labour-hours available for individual consumption. As further development towards the higher stage of communism takes place, however, this formula must undergo modification, since there must inevitably come into operation many economic establishments which produce in part for individual consumption, but also in part in order to satisfy the needs of the further development of socialised production towards communism. Consider, for instance, the example of the electricity power stations. Light and heat are required to satisfy the needs of individual domestic consumers, but the product, electricity, is also consumed as light and power in the form of a raw material for industry, to satisfy further production. Should society have reached a sufficiently mature stage of its development in both productive and social respects as to make the adoption of an uncompensated supply of electricity for individual needs possible, then with the achievement of this step a new type of economic establishment will have come into being, one which belongs in part to the sphere of productive establishments and in part to that of GSU (public) establishments. These we term Mixed Industrial Establishments. The further the process of socialisation of distribution develops, the greater is the role played by this type of mixed establishment.
It is self-evident that this development must make its effects felt both in the system of the industrial control budget as also in the determination of the value of FIC. For the purposes of drawing up the system of accounting control the mixed type of industrial establishment must be classified under the heading of one or the other of the two main types: productive or GSU (public). However, under which precisely of these two it is placed is in itself unimportant; for the purposes of accounting control all mixed establishments can be grouped either with the productive or with the GSU establishments; it is also possible to place some under one group and others under the other, as may be found expedient. The system of control budgeting thus forms no hindrance to the flexibility of production and distribution. We will consider first the case in which a mixed industrial establishment has been grouped with the productive establishments, in order to ascertain the consequences this has for the determination of the value of FIC.
In its role as a fully-productive establishment, under the previous system all the kilowatt hours supplied by our electricity generating station were credited to it in the exchange account, and hence it was fully capable of carrying out its own reproduction. With the conversion to "uncompensated individual supply", however, a debit quantity arises in the exchange account which is exactly equivalent to the amount of individual consumption. Those labour-hours which the electricity generating station is required to supply for individual consumption of light, heat and power must therefore be restored to it out of the total quantity of FIC. This debit represents a charge against the total GSU budget and is thus met out of FIC. If we now add together all the debits arising from operations of the mixed establishments, we then arrive at the general or total debits which likewise have to be met out of FIC. Representing this general debit quantity with the letter D, we obtain the following formula:
FIC = L - ( Pu + Cu) - D
L + Lu
Let us now consider the electricity works in its function as a GSU (public) establishment. The GSU establishments have no income and their reproduction needs therefore represent a total charge against the labour-power of the productive establishments. The mixed industrial establishment however receives by way of its supply of means of production or raw materials to other establishments, a credit amount in the exchange account. That is to say, it is partially capable of carrying out its own reproduction; its total consumption of (Pu + Cu) + Lu is not charged against the labour-power of the productive establishments, because it is able to some extent to satisfy its own requirements in means of production and raw materials. If now we apply the letter G (Gain) to represent that portion which arises out of its own reproduction, then there arises as a charge against the labour-power of each productive establishment only (pu + cu) + Lu - g. If now we relate that to the totality of all mixed establishments, then the amount which must be supplied out of FIC is represented by (Pu + Cu) + Lu - G. Thus finally we obtain the formula:
FIC = L - ( Pu + Cu) + G
L + Lu
As the third and final example which will arise out of the actual operation of the accounting control budget, there now remains the task of classifying, for purposes of the control budget, the one type of mixed establishment under the heading of the productive establishments and the other under that of the GSU (public) establishments. Here the mixed-productive establishments have a charge to make against the GSU budget in the amount of D (Debit) labour-hours, whilst the GSU establishments restored to the productive establishments those labour-hours represented by G (Gain). As a charge against FIC there thus remains D - G. The factor of individual consumption thus becomes:
FIC = L - ( Pu + Cu) - ( D - G )
L + Lu
(The above formula represents a simplified form. If it is necessary to carry out further mathematical investigations into problems associated with the accounting control budget, it will be necessary to express G and D in terms of (P + C), an operation which can be carried out without any difficulty).
 O. Leichter: Die Wirtschaftsrechnung in der sozialistischen Gesellschaft.