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:


The System of General Social Book-Keeping as a System of Control Over the Economic Process


1. The Method of Control by Subjective Administrative Decision

Among the various functions of the system of general social book-keeping, we have named up to now the registration of the stream of products; the determination of the Remuneration Factor, or Factor of Individual Consumption (FIC); and the issuing of labour certificates. Now we will also draw into its general sphere of competence the function of control over production and distribution.

It is obvious that the form assumed by this means of control stands in close association with the foundations of the economy as a whole. In the case of State communism, in which the whole of economic life is subjected to regulation by means of subjective norms and on the basis of statistics, control also appears as a function of administrative decision. In a system based upon the Association of Free and Equal Producers, with labour-time computation as the basis of production and in which the distribution of all products is determined objectively by the process of production itself, the processes through which control is implemented also assume an exact form. Such a system of control takes into account all the separate elements represented by production, reproduction, accumulation and distribution, and proceeds to a certain extent automatically.

In his book Die wirtschaftspolitischen Probleme der proletarischen Diktatur, Varga provides us with a description of how control is implemented under the system of State communism. He writes:

"It will be a part of the sphere of responsibility of the centrally organised management to exercise control over the works administration and the day-to-day management of affairs in respect of state property, a problem which has caused a great many difficulties in Russia. ..."

"The frivolous treatment of state property, of the disappropriated property of the bourgeoisie, derives above all from the capitalistically egotistical tendency endemic in society as a whole, a tendency which is due at least in part to the fact that moral awareness has been especially undermined as a result of the long duration of the war. However, an additional factor which plays a role here is the widespread prevalence of a lack of clarity concerning the new property relations. Those proletarians to whom has fallen the task of administrating the disappropriated factories are only too prone to adopt the belief that the factories are their own property, not that of the whole of society. This makes a smoothly functioning system of control all the more important, since it simultaneously represents an excellent means of education ..."

"The problem of social control found an excellent solution in Hungary. The inspectors, who previously had served the capitalists, underwent an increase in numbers through the training for this function of judges and middle-school teachers, and these, as employees of the state, were brought together into a special section under the Peoples' Economic Council. This section was divided into professional groups, so that the same inspectors were made permanently responsible for factories belonging to particular branches of industry. The spheres of control extended not only to financial dues and taxes on materials, but also concerned themselves with the correct deployment of the labour force, investigations into the causes of poor performance or of unsatisfactory results generally. The inspector responsible carried out his inspections at regular intervals and on the spot, both in respect of the industrial establishment itself and its associated book-keeping and other offices, and drew up a report which consisted not only of the failings which had been brought to light, but also proposals for possible reforms. The inspectors themselves possessed no rights of disposal whatever over the factories allocated to them, but merely submitted their reports to the competent organisational authorities. In the meantime, there soon arose forms of cooperation between the Inspectors, the Commissars of Production and the Works' Councils. The recommendations of the inspector were often quite spontaneously complied with. A journal was even published The Inspectors Gazette, which was distributed to all the disappropriated factories and made a considerable contribution towards clarifying organisational problems of works management amongst the workers themselves. The structure of systematic control extended not only to the factories but also into the sphere of competence of all Peoples' Commissariats." E. Varga Die wirtschaftspolitischen Probleme der proletarischen Diktatur pages 67-68.

What Varga here terms "control over production" is in fact the result of combining under one heading two completely separate functions. The one relates to control in the book-keeping sense - control over the account books. This is merely a matter of debit and credit. On the other hand, it also relates to the question of technical control; this concerns itself with the continual and ever-increasing rationalisation of production throughout all stages, with which is associated the achievement of the highest possible degree of efficiency in each productive establishment. With Varga both these fundamentally different functions are united in the one control authority, which for a communist economy is fundamentally wrong. This becomes self-evident - incidentally revealing the true character of the Hungarian Soviet Republic described by Varga - when it is considered that the system of control over the production process is clearly shown to consist of a combination of two disparate functions: on the one hand, rationalisation measures and, on the other, the recording of the results of those measures in book-keeping form. Control card systems, time-clocks, the Taylor system and an ever faster-moving production line form the milestones marking the progress of this system of rationalisation which is simultaneously a system of control - but one which serves a superior power to make effective its control over the labour which has been placed at its disposal. Under these conditions control of production means control over the producers, to determine if the results of their labour are sufficiently profitable, if they yield a sufficient surplus for the purposes of the commanding authority which lords it over the economy. This form of control bears the character of a system of domination over the producers.


2. Objective Methods of Control

The method of production control applicable in a society of free and equal producers is a fundamentally different one. There also measurements pertaining to work processes and mechanisation of the labour process, such as production lines, will exist, but now these will be technical measures for achieving and implementing the best working methods, desired and applied by the workers themselves in their respective productive establishments. This is the case, because, behind these measures, there stands not the whip wielded by the central commanding authority, which is motivated by the aim of achieving the greatest possible surplus, but the autonomous interests of the workers themselves, who with every increase in the productivity of labour simultaneously increase the total stock of useful articles available for society as a whole, to which stock all workers have an equal right. And it is here that the tasks discharged by the establishment responsible for social regulation and control over production begin. The system of social book-keeping, which of course is the clearing-house for all incomings and outgoings of the separate productive establishments, must keep watch over the incoming and outgoing stream of products, to ensure that these correspond with the productivity norms which have been determined for each respective productive establishment. Since under communism there can be no economic secrets, and since accordingly the reports issued periodically by the office of social-bookkeeping make publicly known the production situation at each separate productive establishment, the question of control is thereby solved. It simply ceases to be a problem.

Which organisations are responsible to intervene in the case of failures of, or departures from, the established procedures, and which decide the measures to be applied in such cases, represents a question in its own right; it properly belongs in the sphere of technical-organisational methods.


We will now attempt to show by means of a schematic representation the precise form which the system of accounting control will take. Let us consider to begin with a process of production based upon average social production time. We have come to understand the concrete realisation of this category as a horizontal coordination of similar productive establishments. If we number the separate productive establishments belonging to a particular production group as Factory 1, Factory 2, Factory 3 ... and so on, to Factory N, and take the total of their production = t, then the following sum gives their total productivity:

Factory 1 ... (p1 + c1) + X1 kg. Product
plus Factory 2 ... (p2 + c2) + X2 kg. Product
plus Factory 3 ... (p3 + c3) + X3 kg. Product
plus Factory n ... (pn + cn) + Xn kg. Product


Total Productivity (Pt + Ct) + Xt kg. Product

The average social production time per kilogram of product is thus:

Average Social Production Time = (Pt + Ct) + Lt divided by Xt Kg Product.

Even in those cases in which a single productive establishment produces a variety of products, these can be readily calculated by means of the production cost factor applicable to each such product.

Thus the unit of Average Social Production Time (ASPT) is valid as the unit measure of productivity, and the productivity factor applicable to each establishment is determined by the degree of deviation from the average production time (see Chapter 4). Much other data can also be derived from the above formula, such as, for instance, the average social usage of P, C and L, which in itself already permits a certain amount of leeway in the comparative evaluation of the accuracy of the separate productivity factors. In this respect, therefore, the production group has no need of a State controller or auditor, because the factors requiring to be investigated lie within the sphere of competence of the united producers themselves. The unit of Average Social Production Time thus proves to be in itself a perfectly capable instrument of control at the disposal of the production cooperative as a whole.

The question must now be asked as to whether or not, when a production cooperative is formed, the producers must inevitably lose their right of control over production; in other words, whether or not a centralised group authority must as a matter of course arrogate to itself all power over production. Without doubt dangers are lurking here, since at any given moment there remain powerful tendencies inherited from the capitalist mode of production making for the concentration of powers of control in a central authority. In the instance of the production cooperative, for instance, attempts will almost certainly be made to vest authority over the application of the accumulation fund in the hands of a central management body. Should this ever actually come about, the separate productive organisations would no longer have any decision-making authority. It is also possible that an attempt will be made to establish such a central authority for each production group, which would then dispose of the right to distribute the incoming production tasks amongst the various associated establishments, as well as to hold control over the final product. The indigenous factory or works organisations would then become no more than the executive organs of the central administration, which would mean that for them only the maintenance of the system of book-keeping internal to the establishment would remain as their sole necessary task. To what extent matters might come to this would depend upon the degree of insight and energy brought to bear by the producers themselves. Certain it is that no progress will be possible without a sharp struggle against these tendencies. Whatever fine-sounding slogans may be bandied about, independent administration and control remain the mandatory demand from which the free producers must on no account depart.

Thus the productive establishment appears as an independent unit which cements its relations with other productive establishments and consumer cooperatives. In this way the producers hold full responsibility in their hands, and the necessary leeway is given within which independent initiatives may move and breathe, and for the creative energies springing from the liberated working masses to enjoy full scope. The significance of the system of horizontal coordination is thus no more than a matter of accounting control which is necessary for determining Average Social Production Time and, in association with this, the degree of productivity of the separate productive establishments comprising the cooperative. However, matters must not be permitted to remain static at that stage of development, but a process of mutual technical interpenetration and interdependence must also come to be established. However important in itself this process may be, it must nevertheless remain subordinate to the decisive and principled demand for independent control. And this is a matter concerning which we can agree with Leichter in affirming: "At first glance one will assume that each separate productive establishment is more or less independent; a moment one looks a little more closely, however, one will recognise quite clearly the umbilical cord which joins each separate productive establishment ... with the rest of the economy." However, the universal, all-regulating bond which in reality unites "each separate productive establishment with the rest of the economy" is the formula for production and reproduction. It is this which places all industrial establishments on the same foundation; production for the purpose of securing the conditions necessary for the reproduction of the economy represents the common foundation uniting all productive establishments.


3. Control by Means of the Registration of the Stream of Products

It is now necessary that we return for a while to the question of the social control of production:
With the revolutionary transformation of social relations, private property in means of production is eliminated and these come into common ownership. The legal relationship of the industrial organisations then becomes one in which the former then accept control over means of production in an administrative capacity. This means that the industrial organisations disclose their inventories and then indicate how they propose to deploy their means of production; what this amounts to is that they submit to the Office of Social Book-keeping a production budget drawn up in the form of (p + c) + L = X kg. product. The marxist demand for a system of social book-keeping then finds its realisation in the form of the totality of the production budget: "Their stock-book (i.e., society - the Authors) contains a list of the objects of utility that belong to them, of the operations necessary for their production; and lastly, of the labour-time that definite quantities of those objects have, on an average, cost them." (K. Marx: Capital, Vol. 1)

If the total social inventory is given in the form of the totality of the various production budgets, by this means it then becomes obvious that the various participating establishments are therewith brought under social control. Production in an industrial establishment is a continual process. On the one hand, as input, various products flow into the establishment (this includes labour-power), in order that, on the other hand, they may leave the establishment in a new form (output). Each such transformation of material values, however, is registered in the system of general social book-keeping, in the form of an entry of product exchange, and by this means a survey of incomings and outgoings, the debit and credit of any particular establishment, is readily available. Everything which is consumed by the establishment, such as means of production, raw materials or labour certificates, appears as an ingoing entry, and everything which is transferred to society appears as an outgoing. As continuous streams these two must correspond fully with each other, must cancel each other out. By this means an immediate check is at any time available as to whether or not, and to what degree, production is proceeding smoothly.

Should, for instance, an untoward surplus arise in any particular section of production, the office of social book-keeping is able at any moment to make an immediate report to the appropriate control instance (perhaps a joint production commission). It is not possible for the surplus to have arisen as a result of the relevant industrial establishment, at the time of the delivery of the product, having calculated more than the correct Average Social Production Time, since the latter has been made public knowledge. It must therefore be due to an error in the production budget. Should it be verified that it is indeed here that the error actually lies, then the fact has simultaneously been ascertained that the establishment concerned has been operating at a higher level of productivity than had been estimated in the production budget; its productivity factor will consequently be revised in an upwards direction.

The opposite can also occur. The system of social book-keeping reveals a deficit in the output of a certain industrial establishment. This leads in exactly the same way to a revision of the productivity factor and the separate production elements, p, c or L of this establishment. The extent to which these may work against the wider interests of society can be determined by means of the formula:

(pt + ct) + Lt

in association with the establishment's production budget.

Out of this simple system of control based on social book-keeping, which proceeds quite automatically as a necessary consequence of the production process itself, there arises yet a further agency of control which is quite remorseless and inflexible in its operation: the reproduction process. If we assume a case in which a productive unit has calculated its Average Social Production Time at too low a level, then we have a situation in which the over-productive establishments are able to make reproduction effective, but they are not in a position to make good the deficit of the under-productive ones. These latter, then find themselves unable to carry through reproduction, and it becomes necessary that society intervene and make good the missing resources out of the GSU budget for the period during which the true figure for Average Social Production Time is being newly computed from the available data.

Conversely, should a surplus arise in one or a number of establishments as a result of the application of too high a figure of Average Social Production Time, no very considerable passage of time will be needed before such an error is brought to light; on the contrary, it will be revealed relatively speedily, precisely because the system is one in which two opposite streams, an ingoing and an outgoing, an input and an output are measured in relation to one another. Over periods of time of given duration, these two must exactly correspond and cancel each other out, whilst over shorter periods this is so only within certain limits - limits which may be relatively easily determined through practice; in all cases, however, the system of automatic control is brought into play through the system of reproduction.

Insofar as we have through these observations carried out an examination showing how it is possible for the system of social book-keeping to have at its command an immediate general survey of the production process, we will now proceed to gain an insight into the means whereby it is able to place under its control the other distinct categories of the production formula also.

To begin with, control over the category labour-power, represented by the letter L in the production formula, is made effective by very simple means. The issuing of labour certificates is accepted by the industrial establishment in question only in respect of that labour-power which has been directly expended on its own behalf. If we consider that the production budgets are also maintained by the office of social book-keeping, then the following points are immediately revealed: 1) whether or not the amounts revealed as having been expended in respect of labour certificates issued lie within the limits imposed by the budget; or 2) whether or not the relationship of the labour certificates issued to the quantities either of raw materials consumed or of end-product delivered corresponds with that indicated in the production budget. It is, for instance, already known how many tonnes of, say, coal will be produced per miner, that is to say how many directly expended labour-hours accrue to any one unit of production.

Effective control over means of production is in some degree more difficult, because in this case a distinction must be made between fixed and circulating means of production. It is a well understood principle that the circulating means are absorbed fully into the product whilst the fixed means are absorbed only partially at any given time. Exactly the same use-values can however in the one case appear under the category p and in another under the category c. In a case in which a productive establishment has consumed certain use-values, then the question arises for the office of social book-keeping as to whether that particular entry should have been placed under category p or category c. It would not be appropriate to indicate here just how this question should be solved, since the solution belongs in the sphere of specialised book-keeping technique. The difficulty would, for instance, be eliminated if it were to be adopted as a rule that, a note were to be attached to the order indicating whether the item in question was to be entered under p or c, in much the same way as, at present, it is customary to indicate with cheque payments or money transfers the purpose for which the transfer has been made.

This, however, is not our concern but that of the office of social book-keeping. For our purposes it is sufficient that the categories comprising the production formula (p + c) + L may be given their appropriate registration smoothly and without hindrance, so that in this way each may be supervised and controlled separately whenever necessary. The category c in particular moves only within the limits set by the production budget and must stand in correct relationship to the category L as well as to the end product produced. Any wasteful expenditure of raw materials can thus be uncovered, not only by the production sector concerned, but also by the system of social book-keeping.

If we now consider the category p, we find that it is here that we encounter a difficulty. Such items as machinery, buildings, etc., are absorbed into the product only after a period of some 10 to 20 years, whilst at the same time they are maintained during this period in a utilisable condition by means of maintenance work, repairs, etc. If we assume an average depreciation period of ten years, then a tenth of the total production duration is written off each year; that is to say, it is entered each year into the formula (p + c) + L. After delivery of the finished manufactured product, L and c once again enter fully into the production formula; p however remains to the credit of the industrial establishment concerned. Only after ten years have passed have the fixed means of production been wholly depreciated and become once again due for renewal.

From this it would appear at first sight as if control over p can only be made effective after 10 years, that it is only then that it can be determined whether p has been evaluated at too high or too low a level. This however is only the appearance. The actual production process is characterised, amongst other things, by the fact that the various machines and other plant have differing depreciation periods, and also by the fact that the precise moments in time at which they were placed into service are all different. Thus in any given year old means of production are being replaced by new ones at differing times. For this reason it is not only the categories L and c which move as a continuous stream through the productive establishment, but also p, even if at a slower tempo. In this way it is shown that each productive establishment will need to have employed in one year approximately the full amount of p which has been written off as depreciation.

If we now consider briefly the character of the system of social control, then it is to be noted that, as far as the productive establishments are concerned, in respect of a number of different categories, production in fact controls itself. In the first place, the fact as to whether or not the production budget (p + c) + L has in general been correctly computed and as to whether or not each separate category has moved within the limits designated by the budget represent indices that can be immediately ascertained. In the second place, control is exercised over the quantity of products produced; the result manifests itself as a control over the average production time effective in the production establishment concerned, and also over the average production time applicable in society as a whole. Out of the ratio of the former to the latter there thus also arises yet a further integer: in this case one providing control over the productivity factor.

The entire process of control therefore consists in nothing other than that of the various transfers of use-values and the acceptance of labour certificates for issue, that is to say the objective process of production itself, provides a check upon, and so controls, the production formula. Next we have the end product produced, the result of the objective process of production. This subjects the individual factory or works average, the overall social average and the resultant indicated productivity to open scrutiny by the whole of society. In addition to this, an effective control is brought to bear upon each of the categories separately making up the formula (p + c) + L, as a result of the entry into account of quantities representing labour certificates issued and transfers of use-values produced - that is to say, through the objective course of the production process itself. Finally, the reproduction process (extended accumulation), which represents and embraces objective production as a whole, maintains an accurate final or subsequent means of control.

In those cases in which Average Social Production Time has been calculated at too low a level, the production cooperative concerned will be unable to carry through reproduction; in those cases, on the other hand, in which it has been calculated at too high a level, surpluses will be revealed which it will not be possible to absorb through current production.


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