Group of International Communists

Fundamental Principles of Communist Production and Distribution


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.

Table of Contents:


Average Social Production Time as the Basis of Production


1. Kautsky's Definition

Leichter's text has served a particularly useful purpose in that it has been instrumental in carrying out an examination which demonstrates that the average social Labour-Hour can under communism be thoroughly and consistently implemented as a unit of social regulation and accounting control, even in cases in which the labour-hours actually expended are not taken as the basis for distribution. At least in respect of the question of the unit of social regulation and accounting control to be adopted, he shows himself to be far in advance of his colleagues, the 'Marxist' economic experts, Neurath and Kautsky. In his book La Theorie Marxiste de le Monnaie,[1] Block, as a bourgeois economist, characterises the attempt to abolish money under communism as naive, and comes to the conclusion that a more thorough examination of the theory of social regulation and accounting control according to labour-time expended would be superfluous (page 215). Kautsky, on the other hand, considers labour-time accounting control as possible in theory, but impossible to implement in practice, since money cannot be dispensed with "as a measure of value in maintaining accounting control of exchange relationships in a socialist society", whilst simultaneously it must "continue to function as a means of circulation".[2] Kautsky, who up till now has presented the capitalist conception of value as "an historical category" (that is to say, one which must disappear along with capitalism),[3] has been thrown into such a state of confusion through Weber's bourgeois criticism and the practice of the Russian revolution that he now swings to the opinion that the value concept must be enshrined for all eternity!

The effect wrought upon Kautsky by the criticism of communism, particularly that it necessitates the introduction of a unit of regulation and accounting control, was that of luring him out of his theoretical hiding-place; it was now impossible for him to remain attached to the old general formula which states that 'value' disappears along with capitalism, and was now compelled to seek the truth as he saw it. In actual truth, a unit of regulation and accounting control did show itself to be necessary. And if Marx had maintained that, in the case of a communist economy, "it is at first money capital which is eliminated", then it becomes necessary to subject to a closer examination the concept of the unit of accounting control, which Engels in Anti-Dühring and Marx in Capital and the Marginal Notes (Critique of the Gotha Programme) had shown to be the average social hour of labour. We now know to what result his researches led, and it will now prove worth our while to unravel the source from which Kautsky's idea that a system of regulation and accounting control is a practical impossibility actually derives.

We have already indicated that the conception of the development towards communism which was then widely current was that capitalism would dig its own grave by virtue of its inherent tendency towards concentration. Hilferding examined the consequences of a total concentration of economic establishments on the basis of the assumption that the entire economy would be organised in one single giant trust, a general cartel. Within this imaginary cartel there is no market, no money and no prices. The economy without money would have been realised.

Within this trust, production would have become a closed system. In the course of their transformation from natural materials to the finished product, the products move through the most varied industrial installations. For instance, coal and iron ore make their way to the smelting ovens, (and as their product), iron and steel move to the engineering works, this then provides machinery to the textile factories, where finally the textile commodities appear as the end product. In the course of their movement from one economic installation to another, thousands and tens of thousands of workers from all possible branches of industry have played their role in fashioning the products, in order finally to create the end product. Exactly how much labour does this final product contain? It is thus that Kautsky's famous puzzle is formulated and, in the face of such a super-human task, he sadly buries his head in his hands. Yes, in theory there must be a solution to the problem. But, in practice? No, it is impossible "to calculate for each product the total amount of labour which represents its costs, from its first beginnings right up to the final finishing operations."[4] "An evaluation of commodities according to the labour (sic) contained in them is, even assuming the most colossal and technically perfect statistical apparatus", quite impossible (K. Kautsky: ibid., page 321).[5]

Yes, indeed, Kautsky is completely justified in saying that by this method a computation of labour-time expended in the production of commodities is quite impossible!


2. Leichter's Definition

However, such a mode of production exists only in Kautsky's fantasy or in that of the 'natural economists', who would like to see the economy managed by a central authority. In addition, they conceive the monstrous idea that each separate factory, the parts of the whole, would not have responsibility for maintaining exact accounting control over the process of production in their factory! The parts of the trust, however, produce as if they were to some extent independent, for the simple reason that otherwise planned production would prove impossible. Indeed, even in the interests of securing rational operation, this is now more than obligatory. It is for this reason that as exact a method of accounting on the basis of a unit of social regulation and accounting control as can be achieved is an absolute necessity for moneyless exchange within a single trust:

"There exist relations between the separate production installations, and these relations will remain for so long as the division of labour exists, and the division of labour in this higher sense will continue to develop further with the progress made in the development of technique."[6]

"All impersonal prerequisites for production, all half-finished materials, all raw materials and auxiliary materials delivered by other productive establishments to those destined to work them up further, will indeed be placed to their account, i.e., will be factorised."[7]

"The cartel magnates or - in a socialist economy - the managers of the entire economy, will not permit the various industrial establishments responsible for the same production programme to produce according to different methods and different costs. Under capitalism, this in many cases also forms an incentive for the weaker concerns to permit themselves to be "swallowed" willy-nilly by some giant agglomerate, in the hope that now for their factory also the form of organisation recognised to be the most efficient - the best manufacturing methods, the most diligent officials - will be drawn into the task of raising the productivity of the factory. For this to be a success, it will however be necessary to show under separate headings the results of all other factories and productive installations, and also to manage matters - whether in a capitalist or in a socialist economy is irrelevant - as if each factory had its own independent proprietor who wished to have at his disposal exact data concerning the economic results of production in his establishment. For this reason extremely strict accounting control is maintained within the cartel, and any idea that within the cartel commodities may be embezzled without further account being taken - in short, that within the separate industrial installations the keeping of a clear account as to the distinction between 'mine' and 'thine' will not prevail - belongs in fact to the world of popular misconceptions concerning capitalism, as indeed of socialism also."[8]

Seen from this point of view, the alleged impossibility of calculating the amount of labour which lies embedded in a particular product appears in a different light. To determine that which Kautsky, from his central economic headquarters, cannot determine, namely, how much realised labour-time a product has absorbed during its long journey from one partial operation to another in the course of the production process - that task, the producers themselves can now be seen to be fully capable of performing. The secret lies in the fact that each factory, managed and administered by its "factory organisation", functions as an independent unit, exactly as in capitalism:

"At a first glance, one would assume that each separate productive establishment were more or less independent, but upon making a closer examination one would see quite clearly the umbilical cord joining the individual factory to the rest of the economy and to its administration."[9]

In the chain of partial processes, each factory has its final product, which can then be introduced into other factories as means of production. And, furthermore, each individual factory is perfectly capable of calculating the average labour-time used up in producing its products by application of its production formula (p + c) + L. In the example of the shoe factory mentioned above, 3.125 Labour-Hours were found to be the "unit cost" of a pair of shoes. The result of such a unit calculation for an individual factory is a factory average, which expresses how many Labour-Hours are contained in a pair of shoes, a tonne of coal or a cubic metre of gas, etc.


3. Some Comparative Evaluations

Thus the production factors are seen to be fully accurate (with the exception of possible false estimations in the early period of communism). The final product of a factory, assuming it is not a consumption article, moves on to the next factory, where it serves as means of production ( p or c ). This establishment, of course, likewise controls its production by means of applying the same unit of regulation and accounting control. In this way each factory obtains a completely accurate method of accounting control over its final product. The fact that this procedure is valid for not only industrial installations which produce a mass product, but is also applicable to the most varied products of a complex productive organism, soon becomes generally excepted, especially since this particular branch of the "science of cost accounting" is already so highly developed. The labour-time taken up by the last finished product is in reality nothing other than the average labour-time contributed by the last factory in the chain which, by application of the standard formula ( p + c ) + L, simultaneously takes up and includes in its computation the total sum of all the separate labour-times attributable to each participating establishment, from the beginning of the production chain to the finished product. The computation of this final total is built up out of all the partial processes and lies fully in the hands of the producers.

Kautsky indeed recognises very well the necessity for calculating the average social labour-time of the products, but he conceives of no possibility of realising this conception completely and in practice. No wonder that he is unable to make the slightest sense out of any of the various problems associated with this category! For instance, he already runs aground when he tries to consider the question of variations in productivity between individual factories, and, of course, the problem of the determination of the 'price' for each product. Although it may seem superfluous for us to concern ourselves further with these objections - since we have already uncovered Kautsky's principal errors - we may nevertheless find it expedient to follow his views further, since this may assist us in achieving by negative example a more concrete formulation of the category of average social labour-time.

Let us begin with the concept of 'prices' of products. The point must be made at the outset that Kautsky speaks quite unreservedly about the 'prices' of products as if these still have validity under communism. He is of course entitled to keep faith with his own terminology since, as we have seen, 'prices' continue to function in the Kautskyian brand of 'communism'. In the same way as, for this 'Marxist', the category of value is attributed with everlasting life and just as, under his 'communism' money also continues to function, in the same way prices also are assured an eternal life. But what kind of communism is it in which the same economic categories continue to have validity as exist under capitalism? Marx and Engels at least refused to have anything to do with this brand of 'communist' economy. We have already shown how, according to them, value and price are eliminated and subsumed in the category of average social labour-time. It is for this reason that the producers calculate "how much labour each useful article requires for its production". (F. Engels: Anti-Dühring). Kautsky pronounces this calculation to be impossible. In order to give substance to this judgement, he directs our attention to the fact that not all factories would be equally productive, with the labour-time actually expended being in one case, above, in another, below the social average - so leading to chaos in prices. He says in this connection:

"And what quantity of labour should one actually take into account? Certainly not that which each product has actually cost. If this be done, the various articles of the same kind from different establishments would throw up differing prices, those produced under less favourable conditions being higher than those of others. That would of course be absurd. It would be necessary for them all to have the same price, and this would be calculated not according to the labour actually expended, but on the basis of the average social labour. (Sic - trans.) Would it in fact prove possible to determine this for each separate product?"[10]

Here Kautsky demands with justice that the "prices" of products must agree with the socially necessary labour and not with the labour[11] which has actually been expended upon that product in that particular factory, since, (not all factories being equally productive), the labour-time actually expended will in one case lie above and in another case below the social average for that industrial group. The solution to the problem resides, of course, in a procedure in which the producers themselves, by means of their own factory organisations, calculate the average social labour-time, and not Kautsky. That which his economic headquarters is not capable of achieving, the factory organisations themselves, the Workers' Councils, are perfectly capable of realising, in this way simultaneously imparting to the category of average social labour-time its concrete form.


4. The Mode of Operation of the Formula (P + C) + L

The fact that the individual productive establishments have determined the average labour-time necessary for their product does not mean that the Marxist concept of a social average has been attained. To achieve this, all productive establishments operating in the same sector of production must enter into cooperation with one another. In our example, for instance, all shoe factories must determine the total average out of all the various individual factory averages. Where one factory arrives at an average of 3 hours per pair of shoes, another at 3.25 hours and yet another at 3.5, then the average labour-time would lie at 3.25. (This is, of course, only an approximation; for the accurate formulation, see Chapter 9 of this work).

Thus we can see that the need to calculate the average social labour-time is already leading to a horizontal coordination of productive establishments. This however is not being carried out by a bureaucratic apparatus controlled by the state, but grows out of the factories themselves from below. The whys and wherefores of the system are completely clear and understandable for every worker, whilst at the same time the necessity for open book-keeping brings everything under public control.

The fact that the individual productive establishments arrive at a differing average is an expression of their differing productivity's, which would have its cause in, in the one case a more efficient, in the other a less efficient operation of either the objective means of production or of the living labour making up the production system of each separate factory. In the meantime, our "shoe cartel" calculates for all footwear factories in combination 3.25 hours as their average labour-time, which then becomes the cipher against which shoes enter into individual consumption. A factory which is unproductive, that is to say which operates below the average level of productivity and which therefore, in spite of its best efforts, cannot produce a pair of shoes in less than, say, 3.5 hours, must of necessity operate at a loss. It is unable to reproduce at the socially adequate average rate its ( p + c ) + L for the next production period. As against this, there will be other factories which are overproductive, which operate over the average level of productivity. Taking once again our example, these can produce a pair of shoes in 3 hours. As their product enters into general social consumption, they are able to reproduce their ( p + c ) + L and show additionally a plus increment. Since the social average has been calculated from the averages of all the individual productive establishments, the losses and the surpluses within a cartel must cancel each other out.

What we see here, therefore, is a system of regulation within the production group, and indeed one which has been brought into operation by the productive establishments themselves. It is not a mode of regulation which depends upon "mutual aid" but, on the contrary, is an exact method of calculation. The productivity of a particular productive establishment can be determined accurately, and by this act the limits are exactly fixed within which the losses and surpluses must lie. Productivity thus becomes an exact factor and can be expressed in a single cipher, the Productivity Factor. This factor defines accurately just how large or small the plus or minus figures of a given productive establishment will be.

Although it is not possible to provide a general formula on the basis of which computations within a particular 'cartel' must proceed, since this will necessarily vary with the type and size of the productive establishments comprising of it, we are nevertheless concerned here with an exact quantity. Productivity is determined not only by the quantity of the manufactured product, but is also determined by the relation between the quantity of product produced and the degree to which ( p + c ) + L has been used up in its production. In cases in which a particular productive establishment is under-productive, this means that its ( p + c ) + L has been assessed at too high a value in relation to the quantity of product produced. Put the other way round, ( p + c ) + L has too low an intrinsic or actual value, and the degree to which that value lies below the average is measured by the extent of the deviation from the social average. In our example, our shoe factory computes a factory average of 3½ hours for a pair of shoes, whilst the social average lies at 3¼ hours. In this case, the actual productivity realised stands in inverse relation to the required level, which means that the level of productivity of this particular factory lies in a ratio of 3¼ to 3½ equivalent to 13:14. The factory calculation must therefore always make itself correspond with the social average by application of the formula 13/14ths of ( p + c ) + L, and it is this which must always be applied when calculating its production time for so long as its production remains at that level. Thus the increment which the "cartel" always restores is 1/14th of ( p + c ) + L.

It should be understood, of course, that all this is only by way of example. Since the entire production accounting control stands on the firm ground of labour-time computation, many roads can lead to the same end. What is of fundamental significance is that administration and management always remain in the hands of the producers themselves, whilst each industrial establishment retains full control over its means of reproduction.

Thus the distinction between average social labour-time and the individual factory or works average does actually exist, but is equalised and eliminated through the "production cartel" or "guild", or whatever term one may wish to apply to the grouped industrial establishments of a particular industrial sector in combination. The elimination of this distinction also destroys another argument used by Kautsky against the method of labour-time regulation and accounting control. Following immediately upon his above-mentioned statements of view, he continues:

"Would it in fact prove possible to determine this (the socially necessary labour-time - the Authors) for each separate product?" (K. Kautsky: ibid., p. 319)

" We would in such a case obtain a double answer. The remuneration of the workers would need to take place on the basis of the labour-time actually expended. The prices of the products, on the other hand, would need to reflect the socially necessary labour[12] required for their production. The total of the labour-hours socially expended would need to be the same from one computation to the next. But that would almost never be the case." (K. Kautsky: ibid., p. 319)

Would it be possible to determine the average social labour-time for each product, asks Kautsky? Our unhesitating reply is: Yes! - since each industrial establishment and each sector of production is fully able to apply the production formula ( p + c ) + L. Kautsky is unable to make anything of this, because he lacks any tangible or concrete conception of the term average social labour-time, and this again has its basic cause in the fact that he perceives all problems purely from the point of view of the central administration. The average social labour-time is calculated from the combined productivities of all the member industrial establishments. From this it is possible to see at a glance to what extent each has deviated from the social norm of productivity. In other words, its Productivity Factor is established. Even though the individual industrial units may deviate from the social average in their individual factory accounting, these deviations are exactly known and their aggregate total is equal to nil. Throughout the production group, as a whole, production takes place according to the formula ( P + C ) + L, which is equivalent to the average social labour-time.

According to Kautsky, however, even the development of technique becomes a hindrance standing in the way of regulation and accounting control on the basis of labour-time. After having declared it to be an impossibility "to calculate for each product the amount of labour which it has cost from its first beginnings right through to the final finishing processes", he proceeds further: "And should one ever complete the task, one would have to begin all over again, since in the meantime the level of technology would have changed in many sectors".

Now isn't that a shame! After Kautsky, looking down from his command post on high, where all the various lines of production come together, has exactly observed all the various partial processes, he finally completes a mammoth calculation which really does reveal exactly how much labour-time is contained in the final social product. At last that's done, thank goodness! And then along comes this devil called technology and throws all his endless calculations into confusion! What a nonsensical conception of production some people have! Production in the real world is such that industrial establishment has an end product which already bears within it the measure of labour-time. When an advance takes place of technology, or its productivity increases for any other reason, the average social labour-time required for this partial process falls. Should the product in question happen to be a final product destined for individual consumption, then it moves into the sphere of consumption with a reduced average, and therewith the matter is concluded. However, should it move on into the sphere of other industrial establishments and enter into their production budgets as means of production, then for the relevant factory the rate of which ( p + c ) is used up falls, that is to say, the costs to this factory are reduced, and as a consequence the average social labour-time embodied in its product also falls. The variations which are caused thereby within the production group ("cartel") are compensated by revising the Productivity Factor.

The Kautskyian objections to the method of labour-time computation all have their basis in the fact that he can conceive of no possible way in which the concept of average social labour-time can be given a concrete form. This concrete form it receives, however, only when management and administration of production lie in the hands of the producers themselves and are implemented through the Association of Free and Equal Producers.

It was out of the very practice of the revolutionary class struggle itself, which created the system of Workers' Councils as its instrument, that simultaneously the concept of average social labour-time as a concrete formulation was born.


Table of Contents



[1] The Marxist Theory of Money.

[2] K. Kautsky: Die proletarische Revolution und ihr Programm, page 318.

[3] K. Kautsky: Karl Marx' Oekonomische Lehren, page 21.

[4] K. Kautsky: Die proletarische Revolution und ihr Programm, page 318.

[5] K. Kautsky: Die proletarische Revolution und ihr Programm, page 321.

The same observations apply here in respect of modern computer technology as were made above.

[6] O Leichter: Die Wirtschaftsrechnung in der sozialistischen Gesellschaft, page 54.

[7] O Leichter: Die Wirtschaftsrechnung in der sozialistischen Gesellschaft, page 68.

[8] O Leichter: Die Wirtschaftsrechnung in der sozialistischen Gesellschaft, page 52 - 53.

[9] O Leichter: Die Wirtschaftsrechnung in der sozialistischen Gesellschaft, page 100.

[10] K. Kautsky: Die proletarische Revolution und ihr Programm, page 319.

[11] "... and not with the labour... ".

Kautsky's intended meaning here, of course, is not labour, but labour-power. The shades of Smith and Ricardo live on! - but see also Note 1 of chapter 12.

[12] Quotation from K. Kautsky: Die proletarische Revolution und ihr Programm, page 319: "The prices of the products, on the other hand, would need to reflect the socially necessary labour... ".

Kautsky is caught here in the confusion of concepts as between "socially necessary labour" and "average social[ly necessary] labour-time". Refer to Note 1 of Chapter 12.