Evgeny Pashukanis

Economics and Legal Regulation


Ekonomika i pravovoe regulirovanie, Revoliutsiia prava (1929), no.4, pp.12-32 and no.5, pp.20-37.
From Evgeny Pashukanis, Selected Writings on Marxism and Law (eds. P. Beirne & R. Sharlet), London & New York 1980, pp.132-64.
Translated by Peter B. Maggs.
Copyright © Peter B. Maggs. Published here by kind permission of the translator.
Downloaded from home.law.uiuc.edu/~pmaggs/pashukanis.htm
Marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

Introductory Note

In his General Theory of Law and Marxism, and elsewhere, Pashukanis had developed a theory of the legal form which contained the provocative proposition that the state was a derivative concept. Indeed, the adamant denial of this proposition had been asserted by Stuchka at least since 1919. By 1929 the Party had set its uneasy course for industrialization and collectivization, the first Five Year Plan had been launched in pursuit of this goal, and Stalin had consolidated the supremacy of his own political line at the expense of other possibilities available with the demise of the New Economic Policy. At the April Plenum of the CPSU CC, Stalin demanded the intensification of the class struggle and the consolidation of the dictatorship of the proletariat. In effect, both demands seemed to require the increased use of state and administrative agencies. No longer merely the politics of academic discourse, but now the politics of Soviet law required that Pashukanis, the pre-eminent figure within Marxist jurisprudence, adapt his thought to the new Party conception of Soviet state and law, His response was a lengthy essay, translated below, on the necessary role of the state in times of economic and political crises. The superficial object of his inquiry is the character and meaning of the economic intervention and regulation exercised by the German and English states during the 1914-1918 war. But the reader quickly learns that Pashukanis uses this [sentence incomplete]



In starting work on this theme, I experienced a misgiving of the following nature. The main problem amounts to the so-called reflexive effect of superstructures on the base. It may be asked, what new can be said in this respect other than positions long since stated and justified? Does this not invite the danger of repeating in one’s own words truth long known to all? This abuse occurs rather often among us and, moreover, physiology teaches that the monotonous repetition of one and the same irritation merely reduces the receptivity of the nervous system.

Therefore, first of all I posed the following question for myself. what is new on the subject of the problem before us? And indeed, after the most cursory survey of the literature a great deal appeared to be new. Finally I had to worry about something else, namely that in a brief essay I could hardly succeed in covering all those separate aspects and details of the problem which stands before us.

The influence of the state upon the economy – and legal regulation is merely a special form of this influence – must now be considered in the light of the experience of the imperialist stage of capitalist development, particularly in the light of those attempts at control and regulation of the national economy which took place at the time of the World War. Those attempts generated a whole literature which, it must be said, is still insufficiently studied among us. While, for instance, the experience of Germany is more or less well known and studied, the no-less interesting attempts at the control and regulation of the national economy conducted by the English government are significantly less known among us. I, at least, would have difficulty in naming even one work devoted to the regulation of the English economy during the war, although no small number of such works were published abroad. Another fact of colossal significance is our construction of socialism. Here we can observe the deepest influence of the superstructure upon the base, which is accompanied by the fact that a superstructural organization – the state – is becoming part of the base. The planning of the national economy is a combination of conscious and volitional elements, scientific prediction and purposeful arrangement. This gives a new aspect to the problem and imparts to it a richness of nuances that earlier eluded attention. In our literature these problems must be considered in the light of various attempts to define the limits and nature of the operation of the law of value in our economy. A controversy arose around the statements of Preobrazhensky, who put forth the concept of the law of primitive socialist accumulation, contrasting it with the law of value. [1*] The acuity of the arguments was undoubtedly caused by the fact that t he matter related to the most urgent problems of economic policy. However, very weighty reproaches were heard from both sides at the purely methodological level. In particular, Preobrazhensky saw among his opponents a tendency to deny historical materialism and to slip into the position of Stammler.

As will be apparent from what follows, two other discussions, which have developed among Marxist economists, will also have a bearing on the problems with which we are dealing. These are the discussion about the subject of theoretical political economy, and the continuing discussion unfolding on I.I. Rubin’s book, Essays on Marx’s Theory of Value.

In bourgeois economic literature we have a whole series of works dedicated to the interaction between economic laws and so-called social influences. The urgency of this problem began to be felt even before the World War and before the expansion of state regulation. A decisive part was played both by the intensification of the class struggle inherent in the Imperialist period, and by the growing role of state organization. The bourgeois economists felt the need to turn to the study of the social element in economic phenomena. Characteristic, in this respect, is the statement of one of the shining representatives of the individualist, subjective-psychological

approach in political economy, the leader of the Austrian School, Bohm-Bawerk. In his work, Power or Economic Law, written on the eve of the 1914-1918 war, Bohm-Bawerk stated that there was a gap in economic science precisely in the area of the study of social influences.

This gap [we read in his work] has been always felt as such; but during the past decade it has become particularly noticeable, because the intervention of factors of social power has been continually growing in our most recent economic development. Trusts, cartels, pools and monopolies, on the one hand; workers’ organizations with coercive methods in the form of strikes and boycotts, on the other – exercise pressure forcing their way into price formation and distribution; and we still have not even spoken of those fast-growing artificial influences which proceed from state economic policy. [1]

In recent decades in the bourgeois (primarily the German) economic literature, a whole school has taken shape, firmly emphasizing the significance of social regulation as a factor which must be considered in the study of economic phenomena. Karl Diehl belongs to this trend; its most outstanding representatives include Stolzman, Ammon, Oppenheimer, Spann and others. The productivity of this trend has not weakened but, on the contrary, has grown stronger during the post-war years. The problems of the social and economic relationship have begun to interest even the more or less orthodox marginalists; I will point out merely the work of Strigl. [2] A series of chapters of Max Weber’s Essays on Social and Economic Organization are dedicated to the same theme [3]; Dobretzberger gives a summary of the various theoretical views on the. question of the relationships between economy and law. [4]

Finally, as a new element, it is necessary to take into account that our revolutionary practice and the Marxist criticism of the theory of law has created an image of the specific features of the legal superstructure, and one much clearer than before. Thus, for instance, while in the pre-Soviet period one often met the assertion that socialism would result in the uncommon development of the legal superstructure, now, of course, none of the Marxists would agree with this. For us it is now indisputable that the growing significance of the conscious regulation of economic processes, and generally the development of a conscious collective will on the basis of historical materialism and the basic features of socialist society, are in no way equivalent to the expanding role of law. But on the contrary, they are accompanied by its inevitable withering away.

In its most general formulation, the problem economics and law – or, more broadly, economics and social-regulatory influences – represents and represented an arena for the struggle for the materialist understanding of history. It is along these lines that Marxism must defend its position from attack from all possible varieties of philosophical idealism. The social trend in political philosophy, which was discussed above, has an undoubted ideological affinity with the philosophy of neo-Kantianism, in particular with the philosophical constructs of Rudolf Stammler. Of course, Stammler has tried to refute the materialist understanding of history, declaring legal regulation to be a logical premise of economic processes. The following is one of the formulations which most vividly communicates his basic thought:

At the basis of all studies of political economy, and hence of all study of the national economy, lies a definite legal or conventional regulation in the sense that this concrete legal ordering is a logical condition of the given concept or principle of political economy. If we ever intellectually discard this defined, necessarily assumed regulation, we would be left with nothing from that economic concept or principle. [5]

The unsatisfactory nature of solutions based upon philosophical idealisms does not, of course, eliminate the problem. Its essence is expressed in the following. A series of spontaneous and entirely objective regularities in the economic order, finding their expression in economic categories, are given; on the other hand, on the basis of these economic regularities, more or less subjectivist factors develop in the form of the interference of organized class forces, pre-eminently the state as the most all-encompassing organization of the ruling class. It may be asked, how must one conceive of the relationship between the elementary laws of economics and the forceful intervention of social organization? Above all, it is indisputable that the economic and the non-economic should be regarded as a kind of unity. Social forces do not encroach upon the economic process, tangentially, or deus ex machina. The social, as Bukharin properly emphasized in his polemic with Tugan-Baranovsky, is the alter ego of the economic. It is absurd to regard, as does Bohm-Bawerk, the economic and the social as pure opposites. However, it is also wrong to limit oneself to emphasizing the element of their unity, thus transforming them into an identity. It is impossible to be complacent about the fact that the class struggle is already included in economic categories. The dialectical method requires the consideration of social and economic phenomena as the unity of opposites. Economics not only includes elements of class struggle, but also assumes them outside itself, as basic, as opposed, comprised of the same unity. Economics achieves its potential through the non-economic (“politics is concentrated economics”); it not only determines its alter ego, but in its turn is also determined by it. Socio-political processes not only reflect completed changes in the economic base, but also anticipate future changes. Such is the significance of the proletarian revolution and the dictatorship of the proletariat.

We find an extremely valuable indication of how Marx himself viewed economic categories, in one of his letters to Engels, of October 10th, 1868:

By chance I found in a little bookshop the book Report and Evidence about the Irish rent law of 1867 (House of Lords). This was a real find. At a time when gentlemen economists are considering the dispute about whether ground rent is payment for natural differences in the soil or if it is merely interest upon capital invested in land, a purely dogmatic dispute, here we see a practical life-and-death struggle between the farmer and the landlord – to what extent rent should also include, beside payment for the different qualities of land, interest upon the capital invested in the land not by the landlord, but by the tenant. Political economy can be transformed into a positive science only in this way, by replacing competing theories with competing facts and the real contradictions forming the hidden basis of the former. [6]

What can be inferred from this letter? First, that Marx proposed searching out the class struggle in a place where the doctrinaires saw merely the task of delimiting economic categories. Secondly, the economic result, and the degree to which one category or another is embodied purely, will depend upon the practical result of the class struggle. The abstract categories of political economy indicate only general and rather broad limits. The more concrete regularity is that of the class struggle and may be established only by taking into full account all the conditions of the latter. It seems to us that Marx’s thoughts have still not been sufficiently mastered by the economists. Although there is a discussion of conflict in the more or less abstract economic studies, this, nevertheless, is usually understood to mean market competition, competition between similar enterprises, in which one defeats another by higher labour productivity or higher technology; in a word, by lower costs and lower market prices. However, in fact, market competition is just one and by no means the only form of economic struggle. In The Economics of the Transitional Period, Bukharin distinguishes “vertical, horizontal, and combined competition”. Only in the case of horizontal competition, i.e. when we have the struggle between similar enterprises for a market, does the method of lower prices find its full application. But this method is inapplicable in those cases when the struggle is over the division of secondary surplus value among enterprises located in a vertical relationship (raw material, semi-finished commodities, final products). The same is true with respect to the struggle between large- and small-scale agriculture for land, and with respect to the struggle between monopolistic organizations for sources of raw material and for areas of capital investment. Although all these phemonena are undoubtedly reflected in prices and, accordingly, are in one way or another connected with the market, this does not nevertheless make them market phenomena.

The overwhelming majority of bourgeois economists is characterized by the attempt to remain in the sphere of market competition and to concentrate exclusively upon the laws of price formation. These laws are considered as the specific subject matter  of “pure” economic theory. The Austrian School is based on the derivation of these laws from the simplest assumptions: the importance of demand for, and supply of disposable wealth gives a completed form to an economic theory which chooses to have nothing in common with reality and its laws of development.

As one of the examples in which one may see the difference between Marxist theory and the “pure economic” theories of bourgeois scholars, we direct attention to the problem of imperialism. On the one hand we have the economic theory of imperialism as Lenin formulated it, a theory which includes a whole series of very concrete elements: the degree of concentration of production, the transformation in the role of banks, the export of capital, the monopolistic division of the world etc.; while on the other hand we have, for example, the conclusions of such a prominent bourgeois economist as Schumpeter, who proposes that the concentration and centralization of capital is economically profitable only up to certain rational limits – if it goes beyond these limits, this is because causes not of an economic nature are added to purely economic causes:

If nevertheless giant enterprises and trusts arise, which dominate the industries of whole countries [he writes] and even more – if the economy of free competition increasingly gives way to struggle between huge monopolies, then for this there are other, not purely economic causes. Above all, this is the influence of nationalist, military, imperialist instincts of struggle, which cannot be entirely explained by the economic condition of our period. In other words, a state policy of force has transformed the economy – by means of protective tariffs, the dumping of commodities and capital – and has made our world economy something other than what would have been achieved as the result of the egoistic economic calculation of isolated individuals left to themselves. [7]

Thus, Schumpeter refuses to use economic regularities in the explanation of the most important phenomenon in capitalist development. His economic theory stops short of this point.

Another representative of the Austrian School – Strigl – goes much further. He simply denies the social element as having any significance whatsoever for economic theory.

It is clear that such an economic theory is incapable of explaining anything of the economic processes which occur in reality. But it does not even propose to do this. The conclusions of Strigl demonstrate to use that the methodology of the Austrian School is a reductio ad absurdum. Pure economic laws turn out to be quite useless. This is certainly not the key opening the door to the cognition of reality, but, as Comrade Stepanov expressed it, “simply the key of a gentleman-in-waiting which the bourgeoisie awards the priests of its science”.


Every economic theory worthy of the name must have its basis in some sociological conception. Only from such a theory is it possible to anticipate an answer to our question of the relationship between economic and non-economic elements. Bourgeois political economy, as we saw, was not in a condition to deal with such a task. It attempted either to wrench economics from its social context and to construct economic laws abstracted from social production, or to introduce social elements, which immediately lapses into idealism and naive teleology.

The colossal advantage of Marxism lies in the fact that its economic theory rests upon the solid foundation of historical materialism, constituting a single whole. Economic categories, from the Marxist perspective, are the reflection of a specific system of production relations. In every antagonistic society class relationships find continuation and concretization in the sphere of political struggle, the state structure and the legal order. On the other hand, the particular irreducible quality of economics – as the totality of the social relationships of production – eliminates neither the unity of these relationships nor the material process of production as a process between man and nature. The qualitative and quantitative characteristic of this process, which we find in the concept of productive forces, is decisive in the final analysis. Economics, therefore, must be considered in its dialectic relationship both with the very material process of production and with the superstructural relations in which its potential inheres. Thus, while the primarily Kantian methodology of the bourgeois economists and political scientists seeks relationships of formal logical conditionality, the Marxist dialectic must reveal the real dependence, the real movement of things themselves.

This is by no means such a simple task, for real relationships are much more complex than a priori dependencies. One should not be surprised, therefore, that our Marxist theory had to devote no small amount of attention to certain preliminary questions. Instead of immediately realizing those undoubted scientific advantages which the Marxist theory of political economy enjoys, it was necessary to debate how in fact these advantages should be used. We will presume to intervene in this debate only because the problems dealt with are by no means special, but instead have a general methodological nature and are linked in the closest manner with our own theme.

The point of departure for the discussion was the Bogdanovian conception, which for a long time was recognized as a model discussion, from the perspective of co-ordinating the Marxist theory of political economy with historical materialism. For this reason, The Short Course in Economic Science was, in its time, so highly valued by Lenin. “The outstanding virtue of Mr. Bogdanov’s Course”, wrote Lenin, “consists of the fact that the author has consistently adhered to historical materialism.” [8]

Nevertheless, a further step in the development of Marxist economic science here could be made only by way of criticizing and surmounting Bogdanov’s conception. For, while at first the connection between the anti-Marxist philosophy of Bogdanov and his understanding of the basic questions of economic theory was not sufficiently obvious (the more so since the philosophical views of Bogdanov at the end of the 1890s had still not taken shape in that finished anti-materialist system in which they were moulded in the period of Empirio-Monism and Tectology) [2*]; nevertheless, later no doubts could remain in that regard. It is impossible to construct and develop a Marxist theory of political economy by rejecting both materialism and the dialectic. The anti-dialectical and vulgar mechanistic conception of Bogdanov in the area of political economy above all influenced his understanding of the category of value. In Bogdanov, the special quality of this category corresponding to specific social relationships, disappears; value loses its historically conditioned and transient nature; it is equated with physiology and energy. Such a concept cannot be described as anything other than a vulgarization and distortion of Marx’s economic theory.

The end of the struggle with Bogdanovism, in the area of economic theory, is usually considered to be the discussion on the subject of political economy which took place in 1925 within the walls of the Communist Academy. But, as often happens, the end of the struggle served as the start for a new, no less heated discussion, kindled in the ranks of Bogdanov’s opponents. [9] One must assume one of two things: either Bogdanov’s mistakes and his anti-dialectical aims still continue to nestle somewhere among the Marxists or, that in the course of struggling with these mistakes, new mistakes and deviations from the Marxist method were in turn committed, and which required prompt correction. I must say that, in my view, it is the latter version which is correct, the version put forward by Rubin’s opponents, although even they do not thoroughly think through certain positions to the end. To put it more clearly, I consider that the so-called Rubinite conception, with all its shortcomings, is a logical conclusion from the position according to which the subject of theoretical political economy is exclusively the category of commodity capitalist economy and the corresponding production relations. And, on the contrary, I affirm that the struggle for a Marxist, i.e. for an historical understanding of the categories of value, by no means requires a truncated understanding of the subject of political economy. [10]

Thus, despite the most categorical statement that the question of the subject of political economy has been decided once and for all, and that in a limited sense this decision is confirmed by the signatures of all the Marxist authorities, I consider it possible and necessary to pose this question anew – precisely in the interest of the Marxist dialectic to which so much attention has been given among us. For it is very good when a vulgar mechanistic conception gives way to the materialist dialectic, but very bad when bourgeois economists, such as Ammon, become the guides for Marxists in the struggle against Bogdanovism, economists for whom the unit of their scientific subject is not the result of the material unity of the phenomena being studied, but is constructed from the unity and synonymity of logical assumptions.

In fact, it is the concept of the historical specificity of the categories of value that requires of the Marxist dialectician not only the ability to deal with them in their final form, but the ability to show their historical origin, and consequently to show the connection of the commodity-money and the commodity-capitalist economy with the previous economic formations. Economic theory may in no way decline this task if, according to the views of Marx, it must study economic phenomena in their movement and development, i.e. establish the laws of movement from one form to another, from one system of relationships to another. What does it mean, for instance, to study the capitalist system in its origin, development anddecline? Does this mean to be limited to the abstract analysis of the forms of value? No, for the forms of value themselves, in their full development, already assume established capitalism. “For the abstract theory of capitalism”, wrote Lenin, “there exists only fully developed and established capitalism, and the question of its origin is removed.” The same relates, of course, to the decline and destruction of the capitalist order.

Further, when Marx affirms that the concept of ground rent reveals to us the essence of the feudal metayage and tithe, how can this be if the subject of political economy is only the objectified (i.e. the value) form of social relationships? In natural economy this form is in fact absent. Why then is it necessary, perhaps, to state that Marx had in mind not the economic essence of metayage and tithe but something else? But what? One can hardly find a satisfactory answer to this question. Certain authors, it is true, make attempts to contrast economic regularities (relating only to commodity production) with general sociological laws effective in pre-exchange and post-exchange formations. But it occurs to us that such a contrast accords badly with Marxism in general, and with historical materialism in particular.

In general, it is in the example of this category, i.e. the category of exploitation, that the distortion of a limited treatment of the subject of political economy can be seen clearest of all. No one would dare deny that exploitation is an economic concept, and also no one dares deny that relationships of exploitation are in general not restricted by the limits of the form of value. Until now we have thought that Marx’s contributions consisted both of the fact that he showed the specific nature of the capitalist form of exploitation, and that he established its connection with other forms (slavery, serfdom). And now, you can see that they teach us that Marxist economic theory ends where the analysis of the particular features of the value form ends, and that every attempt to go beyond the limits of objectified relationships and to identify the natural and the commodity-capitalist economy as two phases of development, threatens to fall into Bogdanovism and portends the physiological and energy-oriented treatment of social relationships.

Let us pause on still another consideration, which was expressed by Comrade Osinsky in a discussion with I.I. Skvortsov-Stepanov and was formulated thus: “To the extent that exchange does not exist, a national economy does not exist, and to that extent political economy also does not exist.” [11]

Thus, the concepts of social relationships and exchange relationships are declared coincident and isomorphic with one another. In fact the first, of course, is broader. Any system of natural exploitation in the ancient Egyptian state, or in the state of the Incas, combined significant human masses with an economic relationship, although this was not a relation through the market, or through exchange. Thus, in the first place, the statement that only exchange creates the concept of a national economy does not correspond to historical reality. In the second place, when exchange is introduced as a concept “constituting” the subject of political economy it by no means bears the features of an historical phenomenon which passed a determinate path of development, which is connected with the natural economy by a thousand different transitions, which have gradations from the exchange of surpluses and of particularly rare products to developed commodity exchange; no, it is taken as something always equal to itself, as a complex of completed formal characteristics, as the logical condition for the development of the theoretical problems of political economy.

If we approach exchange from an historical perspective, then we cannot confine ourselves to the limits of the category of value, for we must study the process which first creates this category. If exchange is treated as a logical basis, constituting the unit of the subject of theoretical economy, then we risk imperceptibly sliding into the formal logical conception of bourgeois economists of the type of Diehl, Ammon and others. For the latter, for example, the premise of the theoretical problems of economic science is the individual freedom of those engaging in exchange.

If we imagine the absence of this freedom (the freedom of determining the quantitative exchange relationship of the objects exchanged) and in its place a definite ratio of exchange established for individuals by the social order, and the fixing of prices independent of its individual regulation; then, properly speaking, the theoretical problem of political economy, the problem of price, is destroyed by this. [12]

Linked with the tendency toward the restrictive interpretation of the subject of political economy stands the oversimplified contrast between the organized (pre-exchange and post-exchange) and unorganized (exchange) economy, oversimplified in the sense that in the organized economy all relationships and all development are depicted as entirely and fully subordinated to a collective or other ruling will. And from this the conclusion can be drawn that no objective laws of the development of organized society can exist in general, and that the task of cognition in this case is reduced to pure description plus the assertion of some system of norms.

With respect to pre-exchange society, i.e. primitive forms of natural and semi-natural economy, it is entirely incomprehensible why, in studying the transition from these forms to the more complex, we must be limited to the descriptive method and may not rise to generalization (it is possible not to speak of a “system of norms”, for hardly anyone undertakes to affirm that, for instance, the decay of natural economy was the projection of some earlier established norms).

There remains, accordingly, only one thing that is true: the corresponding regularities are not embedded in the form of the law of value, for this form had still not taken shape. If we take the economy of the transitional period to socialism, then no one will be likely to deny the presence of objective regularities in the economic order, which again are by no means confined to the form of the law of value. Finally, under developed socialism, the relationships of production will be maximally determined by the conscious will of the collective. Therefore, there is every basis to say that social technology is the science of the future. However, it would be naive to imagine that social technology is entirely capable of replacing the science of the objective laws of social development. For every technology is nothing other than the application, in practice, of the laws of some science – physics, chemistry, biology etc. One may ask how can social technology develop if it is not accompanied by the powerful development of the science of society? And, on the contrary, how can one imagine the development of a social experiment (and technology is nothing without experiment) which would not involve a deeper, more detailed, and more exact comprehension of objective relationships and connections? It seems to certain comrades that these objective regularities should receive the name “general-sociological”.

But one may ask, how can any general social regularities remain with the disappearance of economic regularities? For to the extent that social relationships – in their character and changes – are subordinated to some necessity, then, of course, first, they are subordinated to that necessity which is included in joint production, in the labour relationship. If all objective laws disappear in this area, then, it may be asked, in what manner can any general social regularities be preserved? The whole issue consists in the fact that Engels’ “leap from the kingdom of necessity to the kingdom of freedom” is understood too simplistically, too literally. [13]

The broadest, most consistent rationalization of the national economy nevertheless cannot eliminate the fact that the unification of people in society is not the product of their free conscious decision, as Rousseau proposed, but is compelled by the conditions of their existence; these conditions prescribed even the form of this union for them. If this necessity ceased to be blind and was clearly recognized by people, then it would not entirely disappear because of this-no recognition of objective laws destroys their effect. Thus, even under developed socialism there will remain, or rather will grow, the necessity of a science which studies the objective laws of the movement and development of the social relationships of production-which are at the base of all social development as a whole. If the study of economic regularities is reduced exclusively to the abstract analysis of the categories of value, then the very succession of economic forms will be entirely incomprehensible for us. At the same time Marx’s economic theory will be deprived of all its dynamism. Take for instance such facts as the expropriation of small producers, which constitutes a premise for the development of capitalism, or the development of monopoly capitalism. Is it really possible to derive them from the abstract analysis of the categories of a commodity-capitalist economy? Incidently, Rosa Luxemburg attempted to construct an economic theory of imperialism on the basis of an analysis of abstract schemes of reproduction, and she suffered complete failure. On the contrary, Lenin’s “description” revealed the essence of the growth of pre-monopoly capitalism into monopoly capitalism.

The law of value is in general given disproportionately great significance among us. Thus, for instance, the construction of a theory of the economy of the transitional period was almost entirely reduced to the problem of the limits of the effectiveness of the law of value in our economy.

The methodological question of the fate of the categories of a commodity-capitalist economy in the conditions of our economy grew disproportionately and pushed everything else into the background. The correct resolution of this question has, of course, very great significance, but nevertheless it does not reveal for us the actual regularities of the development of the Soviet economy. They can be established only after having studied and generalized concrete material involving such questions, for example, as the increased labour productivity under our conditions, and the methods of this increase; the increase in demand by the working masses, and its influence on the economy; the new interrelationship between the so-called popular and the so-called state economy; the economics of co-operation and collectivization etc. Unfortunately, both Bukharin and Preobrazhensky merely promised us a second, substantive part of their studies. Meanwhile it will only be possible to establish the actual laws of the development of the economy of the transitional period in this substantive part.

Disputes over the significance of the law of value for the Soviet economy were raised in connection with the well-known work of Preobrazhensky. There we encountered a problem which has great importance also for us jurists. I will cite just the testimony of Professor Venediktov:

In the seminar on economic law at the Economic Faculty of the Leningrad Polytechnic Institute [he writes], we made an attempt to analyse jointly with the participants in the seminar the problem “Plan and Law” in direct connection with the problem of value in the Soviet economy. This attempt revealed all the difficulty of the legal analysis of this problem in the presence of sharp disagreements on the question of “regulators” of the Soviet economy in the economic literature.

Preobrazhensky, as is well known, put forth the concept of the law of primitive socialist accumulation, which, in his opinion, would be in effect throughout the period when the socialist sector of our society was not yet sufficiently strong to struggle with the private economic sector under conditions of full freedom of competition. This law, in his expression, “dictates, with external coercive force, definite ratios of accumulation for the Soviet state”, contrary to the law of value and in conflict with it. This conception of Preobrazhensky includes a series of vague points and ambiguities. In the first place, the struggle with the law of value could mean the full liquidation of the historical form of the objectification of social relationships, i.e. the final victory of planned, collectivized economy over the market economy; in the second place it could signify the distortion, from one or another side (by state intervention or with the help of monopolies), of those exchange ratios which would be established under free competition. In the former, one is speaking of extirpating the roots of capitalism, of the liquidation of small commodity production which “produces and cannot but produce capitalism”. The full unlimited effectiveness of the law of value signifies the unleashing of competition, the merciless struggle of private interests, as a result of which the group of small commodity producers sides partly with the proletariat, and partly with the capitalists. The main policy of the Soviet government is directed towards transforming the development of the peasant economy from the capitalist road to the socialist road. But this process clearly is not embraced by the formula “primitive socialist accumulation”. It would be senseless, for example, to affirm that the organization of collective farms is a phenomenon of the law of primitive socialist accumulation. This term relates to another aspect of the matter and the struggle with the law of value has another sense here. It is a matter of measures for the achievement of the maximum level of accumulation in the socialist centre, which would be impossible under conditions of free competition, i.e. the centre of gravity here lies not in the collision between the planned base and the form of value as such, but in the influence on concrete exchange ratios, i.e. in price policy. This influence is encountered at every step in the practice of capitalist states, for nowhere in the world does the redistribution of surplus value take place on the basis of the law of value even in its complex form of prices of production. The true dynamics of the development of each new economic formation is always reflected in the violation of “customary” normal ratios of reproduction. This violation occurs because of the pressure of organized class forces, primarily of the state (politics is concentrated economics). Capitalism, while developing, financed itself most generously. The matter was by no means reduced to the fact that the bourgeoisie struggled against the fetters and constraints of the feudal-guild order. In the USA, for instance, waging such a struggle was almost unnecessary (if one does not count the defeat of the Southern states in the 1860s). However, the struggle in the area of money circulation, credit, customs policy and railroad policy, consisted specifically in the creation of particularly favourable conditions for large-scale capital at the expense of all the remaining classes and social groups. Capital, or the means of production, never flowed from one sector to another in those ratios which would have derived from the pure effect of the law of value, even in the forms of prices of production; heavy industry, for instance, always achieved a privileged position for itself It is sufficient to recall budgetary investment in the form of governmental directives, protectionism, bonuses, tariff policy etc.

Thus, the spontaneity with which the law of value acts is entirely sufficient for the constant reproduction of capitalist relationships in the area of small commodity production. However, this spontaneity is insufficient to ensure capitalism a swift and final victory, it is insufficient to strengthen the domination of the leading branches of industry, of powerful industrial and financial capital. The inherent economic potential and concentrated economics always come to the aid in this case, i.e. the policy of the ruling class and the state which is at its disposition. The struggle with the law of value in this sense is something entirely routine in the practice of capitalist states. In Preobrazhensky it appears as if a change in the ratios of accumulation by a definite policy is possible only in the interests of the growth of the socialist sector. This is by no means the case it has been applied and is being applied by large-scale capital for its own benefit.

The struggle between the collective and private sectors cannot therefore be equated with the struggle against the law of value, for the transfer of assets does not take place only through the market.

Imagine that certain economic wealth moves from the collectivized sector to the private economic sector, but not in the order of market exchange and apart from any law of value. Obviously this would be just as undesirable a phenomenon for us, and would threaten us with the same danger of the restoration of bourgeois economic relations. The problem, it appears, is by no means restricted to the effect of the law of value. One might say that in this case I have in mind simple abuses, while Preobrazhensky had in mind economic laws, but this is nothing other than the fetishization of economic laws. In fact everything is reduced to the pressure which the proletarian dictatorship experiences from those first manifestations of capitalism which are inevitable with the presence of small commodity production. And it is enough to imagine that the dictatorship of the proletariat became somewhat weakened, to agree that the inevitable result of this would be the transfer of all sorts of social funds into the hands of private businessmen, kulaks etc.

There are no grounds for separating the policy of the protection of collective assets from the policy of supporting the more rapid growth of the socialist sector. However, in the first instance we are dealing with measures which are not connected with interference in exchange ratios, but most often consist of the total removal of the specific objects from circulation (nationalization of land). Thus, undoubtedly, those comrades who objected to Preobrazhensky were more correct, who proposed to speak not of the struggle between the law of primitive socialist accumulation and the law of value as the basic phenomenon of the economy of the transitional period – but of the struggle between the socialist and the private capitalist sectors. Then the policy of collectivization and co-operative formation would also be included here, a policy which likewise is by no means exhausted by interference in spontaneously established exchange ratios.

We are not touching, in this connection, upon the basic error of Preobrazhensky’s conception, an error which consists in the fact that he depicted the contradictions of our economy as capitalist contradictions, not taking into account the elements of unity included in it, the expression of which is the union of the working class and the peasantry (hence from here to the peculiar similarity of the peasant economy to colonies etc.).

Speaking generally, the whole “law of primitive socialist accumulation” comes down to the need of preserving, for a certain time, non-equivalent exchange between the city and the country. But along with this necessity there exists no small number of laws which are just as imperative: for instance, the necessity of increasing labour productivity; the necessity of raising the annual wellbeing of the working people; the necessity of protecting collectivized assets etc. It is entirely incomprehensible why the whole sum of objective conditions, with which it is necessary to build socialism, must be embodied in the necessity of non-equivalent exchange and in this alone.

Finally, the last, but by no means the least insignificant misunderstanding, befell Comrade Preobrazhensky with the law of proportional distribution of labour expenditures. Initially, the very mention of the existence of such a law, although it was accompanied by an exact citation to Marx, brought forth sharp accusations of Bogdanovism, of failure to understand the historically transient nature of the category of value etc. However, it proved impossible to solve this problem by means of clamour, and therefore we have an attempt at an explanation in the publication of the second edition of The New Economics. It turns out that Preobrazhensky’s opponents reveal a

naturalistic, a historical conception of the law of value, when they confuse the form of regulation of economic processes with the regulatory role in the economics of social labour expenditures in general, and of the role these expenditures played and will play in every system of social production. [14]

Thus we sum up: the law of labour expenditures exists, moreover, it functioned and will function in every system of social production. But what the relation of this law to the law of value is, remains nevertheless unclear. One must return to Marx. In the letter of Marx to Kugelmann of July 11, 1868, we read:

As for the Centralblatt, the man is making the greatest possible concession in admitting that, if one means anything at all by value, the conclusions I draw must be accepted. The unfortunate fellow does not see that, even if there were no chapter on “value” in my book, the analysis of the real relations which I give would contain the proof and demonstration of the real value relation. All that palaver about the necessity of proving the concept of value comes from complete ignorance both of the subject dealt with and of scientific method. Every child knows, too, that a nation which ceased to work, I will not say for a year, but even for a few weeks, would perish. Every child knows, too, that the masses of products corresponding to the different needs require different and quantitatively determined masses of the total labour of the society. That this necessity of the distribution of social labour in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance, is self-evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labour asserts itself, in a condition of society where the interconnection of social labour is manifested in the private exchange of the individual products of labour, is precisely the exchange value of these products. [15]

Thus, Marx states, absolutely clearly, that the law of value is a form of expression of the more general law of the ratios of labour expenditures. Does this mean that the concrete quantitative ratios which we establish in our plan between separate branches of the economy must necessarily repeat-and moreover in the purest form-those ratios which would have been established on the basis of the law of value, i.e. in conditions of free competition? Of course not. This is not subject to any doubt. But how do we connect this with the indisputable proposition that the law of proportionality of labour expenditures was in effect in each social formation, is in effect now, and “in general cannot be eliminated”? This question is unanswered by Preobrazhensky, but the answer is clear. The law of proportionality of labour expenditures shows only the most general conditions of equilibrium; it provides broad bounds, within which divergences are possible from one side to the other. By virtue of its generality this law is totally inadequate for the determination of concrete quantitative ratios which are established by one method in the mechanism of market value, and by another method in the plan of socialist construction. To explain how we understand the relation between these “regulators” we will use the following analogy. The process of nourishment is basically conditioned by the necessity of occasionally renewing the energy expended by the organism. The feeling of hunger is the form in which we feel a given physiological necessity. Finally, in terms of quantity, quality and time, the conscious regulation of nourishment is another superstructure. All these things by no means correspond to each other. There are instances of absence of appetite during biological hunger; there are instances of false hunger. The objective law and the form of its appearance may diverge from one another, just as the conscious regulation of nourishment by no means must deal exclusively with the manifestation of subjective feelings. Finally, within the bounds of general physiological laws, the conscious regulation of nourishment may be exercised in different ways, varying in the qualitative and in the quantitative aspect, and with respect to time.

In our economy we have just as complex a picture. The law of proportional distribution of labour expenditures marks the most general conditions of equilibrium; within these limits concrete exchange ratios are determined under the powerful and many-sided influence of the economic policy of the proletarian state. Finally, value, as a specific form of the manifestation of the law of labour expenditures, will be in different phases of withering away in relation to the successes of the development of the socialist planned economy. However, there is no basis whatsoever for reducing this complex picture to the simplified form of the struggle between the law of value and the “law of primitive socialist accumulation”.


A grandiose experiment in the regulation of the national economy was made by the capitalist states during the war. The study of this experiment has not yet been presented properly in the USSR. In fact it has not only a great theoretical, but also a profoundly practical interest. There is no doubt that in the imminent world conflicts the problem of the organization of economic life will again rise to the fore, and its more or less successful solution will be one of the most important conditions of victory. Only the German experience has been more or less well studied here; there are suitable works and the German literature has been studied. The experience of England is much less well known, but it is just as, if not more, significant. The regulation of economic life in England was in a certain respect more successful than in Germany. Supply in England was never reduced to such a low level as that in Germany. The whole world market of raw materials and food remained at England’s disposal. This is why England was not in such a desperate position, and it was for this reason that it was much easier to organize regulatory measures, in particular for food rationing, and the fixing of stable prices. On the other hand, its greater effectiveness of regulation is explained by the fact that England obtained four-fifths of her food and almost all her raw material by sea, which, of course, greatly facilitated supervision.

In every instance the conclusions that we made on the basis of the German experience were too hasty. Thus, for instance, Bukharin, in his Economics of the Transitional Period, depicts the breakdown of fixed prices by speculative commerce as an unavoidable phenomenon. However, all of the authors testify to the fact that in England fixed prices were commonly observed, and that regulation maintained its effectiveness with the energetic support not only of the population, but also of the businessmen themselves, each of whom conformed to the actions of his competitor.

There is another question which deserves no less attention-the fate of regulation after the war. In the same Economics of the Transitional Period, Bukharin painted a rounded picture of state capitalism as it developed from war regulation. Reality has refuted this picture. After the war we see the rapid and decisive destruction of all forms of supervision and intervention by state power in economic life. However, we should not stop at the fact that we are said to have exaggerated the potential of state capitalism. The process of destruction of “the coercive economy” must be studied in all its details, both from the perspective of the arguments which were offered for and against, and from the perspective of the interests hidden behind these arguments and, finally, the essence of this dispute. Again, we mainly know the German literature, in particular the literature dedicated to questions of socialization, where the problem of the systematic organization of economic life is directly linked to the solution of the problems of the fate of the organization that was created during the war. Moreover, much that is interesting in this regard can also be found in the English literature. [16]

Thus, the absolute statement of the proposition, which was heard before the war, that state power is not able to regulate prices, gives way to a relative statement of the proposition: regulation is possible, but only within certain limits; these limits must be sought out empirically in each separate case.

The English government, in its supervision of industry, made wide use of the support of all sorts of official and semi-official organizations – councils, committees etc. Some of these organizations were occupied exclusively with negotiations and, so to speak, bargaining with the state; others appeared in a consultative capacity; still others undertook the function of appellate consideration of the various conflicts between the government and individual enterprises, and yet others, finally, directly undertook administrative functions, the distribution of raw materials, orders etc. Through these organizations the imperialist bourgeoisie involved the upper stratum of the working class, providing a place for the representation of trade unions. The bourgeoisie tried to perform this experiment here, organizing military-industrial committees with the participation of workers’ representatives. In the period of the war, organized supply and distribution in many respects merely copied on a broader scale the practice which was also used earlier by large monopolies, For instance, commerce in oil products, tobacco and milk products in England, was organized even earlier in such a way that the distribution of commodities was made on the basis of a statistical calculation of the demand in different markets. There was a delivery plan for each district; the commodities were distributed with set prices which could be raised by small merchants only under penalty of cessation of supply.

It is interesting to consider the legal basis which was used by the English government for the regulation of economic life. Special powers were contained in the Act on the Defence of the Realm (DORA). However, it contained only the authority to requisition parcels of land, factories and all other objects necessary for military purposes; the question of prices was left open. At first the form of payment of a fair market price was decided. But such a formulation of the procedure clearly did not limit the increase of market prices. Soon the English government had to worry about finding legal grounds for the setting of prices. For this it used a medieval theory which stated that the Crown has the right to seize any portion of property by virtue of its royal prerogative, and that payment of compensation is a matter of grace. Relying on this doctrine, the English government initiated price regulation but, it must be said, it did this very timidly, beginning by agreement and only gradually moving to the decreeing of prices. The doctrine of the denial for the subjects of the right to compensation was effective throughout the entire war and was recognized by a decision of the Court of Appeal in 1915, in the Shoreham Airport Case. [17] Only in 1920 did a decision of the House of Lords strike a blow at this doctrine. But the results of this decision were annulled by the Bill on Indemnity, also of 1920. During the consideration of this latter Bill, an opinion was stated in the House of Commons that if the decision of the House of Lords was not changed by legislation, then the government would have to deal with suits for hundreds of millions of pounds. A special commission on damages (Defence of the Realm Losses Commission), in accordance with the above-mentioned doctrine, established the principle that suits for compensation were permissible only in those cases where a particular measure was specially directed against an owner; if damages were caused not by some special regulation, but by a regulation of a general nature, then those who suffered losses did not have the right to compensation. The royal prerogative thus played a conspicuous role in justifying the right of intervention. “Only with the help of a doctrine from the age of absolutism”, notes one author “was it possible to overthrow the tyranny of market prices.” [18] The first departure from market prices occurred as a general order, in the so-called Decree 2B of February 1916. There it was established that for a producer, the requisition price was equated with the costs of production plus an average profit; for a merchant it was his purchase price, but (only) if it was not excessive and was reasonable. Moreover, a person who was in possession of commodities not by virtue of his normal operations, could not claim a profit. The right to establish maximum prices was contained in the same decree. The scrupulousness of the English lawyers went so far at that time that they considered it impossible, in one and the same Act, to make requisitions and to establish prices; by virtue of this, in practice two Acts were issued at different times, one of which prescribed the requisition of supplies, and the other immediately established maximum prices for them. Only towards the end of the war was this scrupulousness discarded, and the practice of fixing maximum prices by decree of individual government agencies began to be widely applied. By then the decrees did not give rise to any complaints, and received support in every court. In 1915 such a practice was still considered “unconstitutional and legally impossible”. A further step was the granting. to the government of the right to establish the costs of production by all methods, i.e. up to and including the inspection of books – this was the so-called Decree 7. Thus, commercial and production secrecy was abolished. One should also mention Decrees 30A and 2E. The first contained a general law for the regulation of commerce, and introduced a licensing procedure. It began with commerce in weapons, but was gradually extended to all the remaining branches of commerce. The second gave the right to regulate any branch of commerce or industry, establishing all possible limitations and prohibitions, to make the issuance of licences depend upon conditions, the non-observance of which was punished criminally. On the basis of Decree 2E, a system of commercial regulation in food products was also established.

One must say that the vaunted partiality of Englishmen to legality generally fluctuated strongly during the war. Lloyd, whom we have cited repeatedly, and who in his book dedicated a special chapter to the “legal basis of control”, as a general conclusion expresses the following thought:

In fact in the ‘majority of cases the legality or illegality of what was done had no significance. What was important was the extent to which it obtained general support and was applied impartially and equally to all. [19]

It is interesting to consider the general evaluation of the results of state regulation during the war. Almost no disputes were caused by the proposition that it is unthinkable to wage modern war while maintaining a so-called free economy. The system of state regulation showed its undoubted advantages. In Baker’s opinion, it saved the life of the USA and England. [20] But then a single question arises: why cannot these advantages be used in peacetime? In this regard opinions greatly differed. Gray, whose book was published in 1919, i.e. directly after the war, expresses himself very cautiously:

What the long-term significance of government control will be cannot be foreseen at the present moment ... but that which has been done will serve as a precedent and experience; and for the industrial structure which emerges from the war, this experience may take on a greater significance than we suppose. [21]

However, in the next few years a universal repeal of the various types and forms of state intervention occurred, and therefore even the strong, zealous defenders of organizing the economy for military purposes decided not to recommend it for peacetime. Lloyd, having given a very high evaluation of state intervention during the war, has a most evasive and rather negative position on this question. [22] Baker also tends to link the successes of state regulation with the special conditions of the war, when it was necessary “to lose money to win time”. [23] In the opinion of Briefs, which is similar, the methods of economic organization applied during the war were “extraordinary” and may not be transferable to normal conditions. However, even Briefs admits that “the consolidation of the position of the large enterprise, because of the war economy, and the concentrated mass production with the most economic use of raw material and the working masses, are achievements which cannot be rescinded.” “However”, he proposes, “in both cases it is a matter of the increased manifestation of already-existing or new tendencies, but in any event not of a fundamental reconstruction of the old economic world view.” [24] His point of view may be recognized as typical. The experience of state control during the war was acknowledged by bourgeois economists only “so far”.

On the one hand, faith was undoubtedly shaken in the unconditional and all-saving power of private initiative. Even in England with the traditions of the Manchester School, the usual opinion that a civil servant is said to be incompetent in economics, and that state intervention will entail bureaucratization, encounters criticism in the form of statements that the pure entrepreneurial type also has its negative aspects, and that maximal effectiveness requires a middle road between the entrepreneurs, with initiative, striving for maximum profit, and the state civil servant who is guided by a consciousness of duty and by general considerations of state interest. It is also recognized that the state organization of industry had a very positive influence in the exchange of technical experience, in the setting up of correct commercial calculation, and in the rationalization of supply etc. Even competition, to which the champions of the free economy allocate such a major role, it transpires, is by no means eliminated and may be used within the limits of the regulated centralized organization. In Lloyd one finds the thoroughly sensible thought that the hopeless struggle of some shopowner with a huge commercial firm essentially brings little benefit-for such a small merchant, condemned to bankruptcy and realizing the hopelessness of his position, in fact is not able to introduce any improvement into his business; while if he becomes an agent of the huge centralized firm, as the manager of a store or department working for a bonus, for example, he may develop a very healthy competitiveness which will bring real benefit. [25] However, all these admissions do not prevent the majority of authors from recoiling with horror at the picture of military-state capitalism. Here is a typical statement from the foreword to Lloyd’s book:

I was convinced and am now convinced that the waging of war necessarily involves the replacement of private initiative by collective organization. In this respect I am in agreement with those who consider that the necessity in wartime of establishing control over life, liberty, and property, is an additional argument for the elimination of war. The next Great War will plunge the world into some species of war communism, in comparison with which the control exercised during the present war will seem to be Arcadia. Individual freedom and private property are condemned by the requirements of modern war; and I admit that I have a prejudice towards both. [26]

From the point of view of individual entrepreneurs, the benefits of centralized organization are nothing in comparison with the possibility of appropriating for one’s own enterprise the lion’s share of surplus value. Why should an entrepreneur make a concession, agree to egalitarianism, if the possibility exists of reaping a super-profit for himself at the expense of his neighbour? The same relates even more to a period of depression or crisis when each capitalist entrepreneur strives primarily to escape the consequences by cutting his losses from the crisis as much as possible, dumping them on his neighbour. The fate of state regulation after the war, better than anything else, proves the proposition that the combination of capitalist enterprises and the elimination of competition among them, may take place only by way of coercion or force by the more powerful of the enterprises, 1. e. by the “natural” method of cartels and trusts, and not by the “artificial” method of state action. The period of state control brought many benefits for the monopolies. In the United States the anti-trust legislation, the famous Sherman Act, which even before had no real significance, was now turned entirely into an incorporeal ghost. [27] Many monopolies in English industry trace their pedigree from the councils and committees organized in wartime. Lloyd tells of one curious example, how during the war there was created with the help of the government, and under its supervision, an association of leather factory owners with the purpose of holding the prices of leather raw materials at a certain level. The war passed, but from bitter experience the farmers were convinced that this organization, this “ring”, continued to exist and function, now without any help from the government and without its supervision, holding down the prices on raw leather. Another motive which leads business circles to struggle for the elimination of state control was the fear of a socialist revolution, the fear of socialism. Well-meaning liberal-socialist and pacifist discussions, on the theme that it would be good to apply the gigantic productive possibilities revealed by the war for the elevation of world culture, were greeted with no enthusiasm by capitalist society.

The same Baker, to whom the passage cited below belongs, had to recognize that most of the capitalist world turned out to be the most zealous opponents of the preservation of state control, precisely because there seemed to be a danger of socialism in these plans:

Since state control of industry during the war was considered as something opening the way to socialism, the overwhelming majority was unconditionally ready to condemn this control. The revolution in Russia, and the development of Bolshevism there, the heavy wave of economic and social discontent, with its strikes, socialism and anarchism, which spread over Europe and the United States, produced a wave of conservatism, a wave of sympathy towards law and order which was so apparent in England and the United States. This conservative mood did not have the patience to investigate which of the 57 varieties of socialism was represented by wartime state control, and which could in general be classified as socialism in the real sense. The conservative mood went to the limit in its demand for the abolition of state control, and did not want to examine those positive achievements which it had accomplished. [28]

The experience of wartime regulation clearly shows to what extent, and to what degree, monopoly capitalism prepares the transition to socialist production, and to what extent it does this against its will. For the realization of socialism, leaps are necessary, the dialectical transformation of quantity into a new quality. The most farsighted bourgeois economists, for example Schumpeter, clearly understood this. In his article, Socialist Possibilities of Today, Schumpeter writes:

In principle socialization is possible from that moment when huge and giant enterprises have appeared, when the processes of rationalization of the national economy have been clearly revealed, when the machine and calculation have started to transform the psyche. Although this age has no identifiable starting point, nevertheless it is undoubtedly true that it lies far behind us. [29]

Schumpeter thus does not share the reformist dogma concerning capitalist society’s unreadiness for the transition to socialism. He considers that the period when socialism has become possible in principle lies behind us, and that therefore the decisive steps to the realization of socialism will be, as he expresses it, “a matter of will and chance”.

Alongside such open enemies may be placed the true doctrinaires who have thought of the transition to socialism as a purely organizational task, the task of the rational construction of a socialist economy, entirely abstracting this from the political class struggle. Beck, whose works are cited by Bukharin and are well known in our literature, can serve as a good example of such doctrinarism. [30] These people opposed economic “determinism” (which is purportedly inherent in Marxism) and called for active conscious interference in economic life, and saw in this interference an antidote to the chaos of revolution.

Thus, under the conditions of the post-war crisis of economic dislocation we see, on the one hand, the petit bourgeois, frightened by war and its calamities, thirsting above all to return to peacetime conditions of existence; in their imagination these peacetime or normal conditions are connected above all with the abolition of state control. On the other hand, there are the doctrinaires who come forward with plans for the organization of a planned socialist economy, but who turn their back on the most urgent political tasks, the tasks of class struggle; finally, the commercial bourgeosie, defending capitalism tooth and nail, comes out against any attempt to preserve and strengthen the system of state control, using at the same time the achievements of the war period for strengthening the position of monopolies and for the process of capitalist rationalization.

This conclusion presents nothing new for us: the subject of the transition to a planned economy can only be the proletariat led by the Communist Party, the proletariat which has set itself the task of destroying the bourgeois state and establishing its own dictatorship.


Moving to the regulation of the economy under Soviet conditions, we must first of all note that this is not merely the technical task of the rational structuring of the national economy, the achievement of proportionality among the separate branches of production; this is not just the task of compilation of an exact balance of the national economy as a whole. This is above all a political task, the continuation of the class struggle, the founding of a socialist economy despite the resistance of hostile strata, despite the still intact ideology of private property; and by means of making many sacrifices. Our regulation has a definite purpose the fastest possible creation of the technical and cultural base for socialism. Our plans must include and do include a particular guiding principle, and are not a simple mechanistic adjustment of demand and supply.

Our regulation is further distinguished by the fact that it is based on nationalization. We did not stop before the sanctity of private property, and we opened up the path of directly influencing the production process. In fact this was considered impossible by bourgeois theorists. Regulation by capitalist states began in the sphere of distribution, and was essentially limited to it.

What changes in the area of law derive from the fact of regulation of the national economy? The first and most important is the merger of legislation with administration. We proclaim the unity of legislative and executive power as the basic principle of our state structure, but the principle penetrates especially deeply into practice just as soon as we move to regulated and planned activity. It is sufficient to cite such examples as the approval of production and financial plans in individual branches of industry, approval of plans of export and import, plans of delivery, plans of construction-in all these cases the creation of a general norm is inseparably merged with individual concrete acts of administration. In all these cases one cannot think of two agencies of which one solely legislates, while the other only administers the laws. Regulation with the help of laws alone, regulation establishing only the general forms in which the economic activity of entirely autonomous entities proceeds – and this is the basic principle upon which every civil code is built – this, in fact, is not regulation. Economic processes that are most varied in their character and tempo may be put into these general forms, starting from simple commodity production all the way up to capitalism, and even up to its higher monopolistic forms. True regulation begins where the activity of the state replaces the so-called economic motive, i.e. the motive of individual profit, the egoistic interest of the isolated economic subject. At the same time, state regulation is characterized by the preponderance of the technical and organizational aspect of content over the formal aspects. Legislative and administrative acts, transformed into operational tasks, preserve only a very weak admixture of legal, i.e. formal, elements. Those executors of operative economic tasks have of course formally delineated powers, and bear formal responsibility as administrators. But these elements assume a lower priority in comparison with economic expediency, both in the task itself and in the methods of its execution. On the contrary, the less the state acts directly as an organization engaged in economic activity (and this must be. according to classical bourgeois doctrine), the greater the acts of administration are occupied by their formal side. The process of curtailment of the legal form undergoes a series of stages, in general corresponding to the disappearance of market relations, of relations of exchange. The interesting studies of Professor Venediktov show us how the transition from commodity-exchange relationships to purely planned relationships transforms the economic agency – from a special subject of law contrasted to other such subjects, and connected with them by contractual relationships – simply into one of the cogs of the state machine.

In this case the trust, as a juridic person, as the bearer of a civil-law mask, disappears; it is no longer a question of its (the trust’s) rights and duties, but simply of the duties of the officials heading the trusts, duties lying on a purely administrative plane. A demand made to the trust, on the basis of a commodity-exchange transaction, is made to it precisely as to a juridic person. This demand proceeds as a rule from the same kind of juridic subject, which has been granted civil legal capacity, the previous agreement of the parties serves as a basis for the demand. A demand made to the trust according to the procedure for redistribution of state property, on the direct order of the planning and regulating agencies, is addressed not to the legal personality of the trust, but to its managers by way of administrative subordination. In this case, no role is played by whether or not another enterprise, which has received the property, has been granted the rights of a juridic person-just as no previous agreement whatsoever is required between these enterprises, and no transaction. The transfer of property itself seems to us (if one excludes the element of administrative subordination of the subordinate organizations or agents to the superior) not a legal, but a technical-organizational act.

However, a brick wall does not exist, of course, between the spheres of commodity exchange and pure planning. These relationships intersect and mutually penetrate one another. A border region is created; a gradual movement occurs from purely commercial forms to mixed forms, and from them to purely planned forms. A typical example of intermediate relationships is general contracts which have long since ceased to be free bilateral transactions, although they preserve the external contractual form. The same may be said of intra-syndicate relations. Acts of purchase and sale within a syndicate have long since been turned into a simple executive-technical act. The content of rights and duties and the very obligatory power of these acts, is not based at all on the corresponding expression of will of the parties, but on the decision of a meeting of delegates adopted in accordance with the charter of the syndicate. The fact that non-fulfilment of the obligation nevertheless still entails civil liability in court, merely shows the intermediate nature of this category of relationships.

This perspective of the development of organizational and technical acts and relations at the expense of formal legal ones, is the perspective of the withering away of law, which is most closely linked with the withering away of state coercion in proportion to the transition to a classless society.

The problem of the withering away of law is the cornerstone by which we measure the degree of proximity of a jurist to Marxism.

The attempt to adopt some sort of neutrality on this question is just as impossible as it is to maintain neutrality in the struggle for socialism, or for the successes of the construction of socialism which we are carrying out in practice. One who does not admit that the planned organizational base eradicates the formal legal basis is, essentially speaking, convinced that the relationships of commodity-capitalist economy are eternal, and that their loss at the present moment is merely an abnormality which will be eliminated in the future.

Considering the process of curtailment of the legal form, however, we must take full account of the fact that, so long as the element of state coercion remains in operation, even in the sphere of relationships having nothing in common with the market and exchange, we will be dealing with legal regulation. Until such time as there ensues the full merger of administration with the economy, as a formal function, that is, with the fulfilment of pure production tasks (i.e. for as long as the state of the transitional period is retained), it will be necessary to preserve the systematization of these formal elements, e.g. the jurisdictional areas of individual agencies, their mutual subordination etc. Consequently, a particular type of legal system, which may be called public-economic or a system of administrative-economic law, will also be retained. Even more of these legal elements will remain in the case of regulation of small economic operations, especially by way of direct regulation. Schematically, the matter may be presented in the following manner: the state modifies or limits the possibility of the economic use of certain means of production or consumption. This may be achieved either by way of direct indications of a negative nature, i.e. prohibitions (for instance the prohibition of distilling, the prohibition of contraband), or by way of positive instructions and prescriptions (e.g. maximum prices, fulfilment of a sowing plan); this may also be achieved indirectly, for instance by way of fiscal legislation. Further, the state may, without addressing itself to the small producer with direct instructions or requirements, create economic incentives (e.g. privileges for collective farms, or planned deliveries of manufactured commodities and bread to Central Asia as a stimulus for the expansion of the planting of cotton), or devise coercive economic conditions by using its monopolistic position. Finally, influence may be formalized in the form of a contract (e.g. procurement), or it may take the form of purely cultural influence, cultural propaganda, propaganda for collectivization, agronomic propaganda, the struggle against the use of alcohol etc. In the evaluation of the purely legal forms of influence, one must bear in mind that the regulation of the economy moves organizational tasks to the foreground as opposed to purely normative tasks. Any broad measures of an economic regulatory nature require, above all, a corresponding and well-adjusted staff that knows its work. Particularly important is the role of staff not of a purely administrative-police nature, but instead an economic operational staff, armed with economic information, using scientific data. The success of regulation largely depends upon scientific research, primarily upon exact and correct statistics. It is particularly necessary to note that the regulatory function of state power will be successful only if it rests upon the support of social class organizations. During the war the imperialist states made very broad use of class organizations, the bourgeois press and all possible types of propaganda among the population. It is the support of the population, as many authors have pointed out, which ensured the success of a whole series of measures. These methods must, of course, be adopted even more extensively, and are adopted in a state where power belongs to the working people. We must consider the experience of our opponents, who openly recognized that the success of a given measure depended much more on the support and sympathy of the population, than on whether or not it was strictly constitutional. Finally, an enormous role is played by the creation of economic motives, the use of economic levers, the creation of the appropriate economic conditions. Only in these conditions can a direct order, or a prohibition with a criminal sanction, be effective.

A general conclusion can be made as follows. If one compares the policy of struggle against usury, attempts to limit interest (which had occurred in the Middle Ages) or the establishment of maximum prices during the time of the great French Revolution, the results of these measures appear inconsequential compared with the effectiveness with which regulation of the economy was conducted by the imperialist states during the war, and in particular with the effectiveness with which it is conducted under conditions of the dictatorship of the proletariat. But at the same time the role of the purely legal superstructure-the role of law-declines, and from this can be deduced the general rule that regulation becomes more effective, the weaker and less significant the role of law and the legal superstructure in its pure form.




1. E. von Böhm-Bawerk, Macht oder ökonomisches Gesetz, Gesammelte Schriften (1924), pp.235.

2. R. Strigl, Die ökonomischen Kategorien und die Organisation der Wirtschaft (1923).

3. Max Weber, Grundriss der Sozialökonomie, in particular Part III, Wirtschaft und Gesellschaft (1925), Tubingen.

4. Dobretzberger, Beziehungen zwischen Rechts- und Staatskategorien, Archiv für Rechts- und Wirtschaftsphilosophie (1927), vol.20, no.4.

5. R. Stammler, Economy and Law (1907), St. Petersburg, vol.I, p.200.

6. K. Marx, Letter to Engels (10th October, 1868), in Marx and Engels: Selected Correspondence (1942), International Publishers, New York, p.249 [eds.].

7. J. Schumpeter, Socialist Possibilities of Today, Archiv für Sozialwissenschaften (1920), vol.48.

8. Moving ahead somewhat, it may incidentally be noted that Lenin’s assessment concurs with the author’s “clear and exact definition” of political economy: “the science which studies the development of the social relations of production and distribution”. Lenin did not object to this definition on the grounds that the subject of theoretical political economy is solely the production relations of commodity-capitalist society, or only production relations which have assumed an objectified form. On the contrary, Lenin proceeds from a conception of political economy as a science which studies not one, but various economic systems, and which explains the laws of transition from one system to another. See V.I. Lenin, Sochinenii, Vol.2, p.371.

9. We have in mind the discussion, which lasted for more than a year, concerning I.I. Rubin’s Essays on Marx’s Theory of Value. – See I.I. Rubin, Essays on Marx’s Theory of Value (1972), Black Rose, Detroit.

10. The developed perspective on the question of the subject of political economy met greater objections within the Section of State and Law, where I outlined it in a talk on the theme Economics and Legal Regulation. It seemed to me that certain places in my The General Theory of Law and Marxism provide a basis for the conclusion that – I myself had earlier held other views on this question. In fact, in the period when this work was written, my attention was exclusively concentrated on the social forms of production relations, because I linked them with the characteristic features of the legal form. It also seemed to me, therefore, that natural economy could not be the subject of political economy as a theoretical science. But during the discussion with Preobrazhensky I was forced to alter my opinion – in the sense that the problems of objectification, and fetishized and defetishized production relations, had necessarily to be included in political economy. Further reflection on this theme has led me to conclude that the attempt to confine economic theory solely to the study of objectified forms threatens to turn Marx’s militant revolutionary theory into a collection of fruitless logico-formal exercises.

11. Herald of the Communist Academy (1925), no.11, p.319.

12. Ammon, Objekt und Grundbegriffe der theoretischen Nationalökonomie, 2nd edition, p.199.

13. ... from the fact that under socialism one specific divergence between the essence and the form of social relationships – a divergence characteristic of a commodity economy – is eliminated, it by no means follows that in general every divergence between the essence of things and the form of their manifestation is eliminated, or even that this elimination occurs in the area of the social relations of production. To expect this would mean that in one area the laws of the dialectic cease to operate, and that instead of movement and development through contradiction, a dead and indifferent calm ensues.

14. E.A. Preobrazhensky, The New Economics (1965), Clarendon Press, Oxford, p.3.

15. K. Marx, Letter to L. Kugelmann in Hanover (July 11, 1868), MESW, vol.2, pp.418-419 [eds.]

16. The following works have generally been used as the basis of discussion: E.M.H. Lloyd, Experiments in State Control (1924), Clarendon, Oxford; C.W. Baker, Government Control and Operation of Industry in Great Britain and the United States during the World War (1921), Oxford University Press, New York; The State and Industry during and after the War, a conference report from Ruskin College (Oxford), held at Manchester in May 1918; H.L. Gray, Wartime Control of Industry (1918), Macmillan, New York ...

17. See E.M.H. Lloyd (1924), op. cit., p.52.

18. ibid., p.52.

19. ibid., p.64.

20. C.W. Baker (1921), op. cit., p.126.

21. H.L. Gray (1918), op. cit., p.xv.

22. E.M.H. Lloyd (1924), op. cit., p.387ff.

23. C.W. Baker (1921), op. cit., p.121.

24. G. Briefs, Kriegswirtschaftslehre und Kriegswirtschaftspolitik, Handwörterbuch der Staatswissenschaften (1926), pp.984-1022, at p.989.

25. E.M.H. Lloyd (1924), op. cit., p.358.

26. ibid., p.ix.

27. C. W. Baker (1921), op. cit., p.119.

28. ibid., p. 124.

29. Schumpeter (1920), op. cit., p. 332.

30. H. Beck, Sozialisierung als Organisationsaufgabe (1919),



1*. This concept is found especially in E.A. Preobrazhensky, The New Economics (1926), Clarendon Press, Oxford, 1965; and in his articles in Vestnik kommunisticheskoi akademii, (1924) – [eds.].

2*. See V.I. Lenin, Materialism and Empirio-Criticism (1908), LCW, vol.14, esp. pp.226-232, and 322-330 [eds.].

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Last updated on 13.5.2004