Schrödinger’s Capital: What can the defunct Soviet Union tell us about value, exchange value, prices and money

by Jehu

NOTE 23: What can the Soviet-era rouble tell us about the inconvertible fiat dollar?

For one thing, it tells us that sometimes it is very difficult to look at a category like value in isolation and assess what about it is necessary and what is purely contingent.

To clarify what I mean, let me use two analogies, both drawn from evolution science:

At some point a feathered flying creature emerged that was no longer a dinosaur but not yet a bird. At another point an upright walking ape emerged who was no longer simply an ape, but not yet human. In either case, what we have learned by studying the fossil record is that the creatures were both specific forms of life and, at the same time, transitional forms to new forms of life.

We encounter a similar difficulty when trying to ascertain the significance of categories of capitalist society. Which of the phenomenon we observe are necessary and which are purely transitory expressions of the movement of society.

To show how this might be significant to the problem of value, exchange value, and money, it might help to do what Marx did: compare present society to social formations that had none of these categories.

This brings me to two questions posed by non-commodity producing social formations:

a. Is every commune communist?
b. Is labor in a capitalist regulated by the law of value, i.e., is a capital itself capitalistically organized?

With regards to the first question:

In the 19th century a number of commune-type producer communities emerged in the United States that tried to break with the larger commodity producing community. These forms might be considered local communisms — a term Marx and Engels used to describe them in the German Ideology. Marx and Engels also predicted they would fail as the mode of production developed. Communism, they asserted, could only happen all at once and together, in the most advanced countries and required a universal form bound up with the world market. I just wonder if the Soviet Union might not just have been something similar to this.

With regards to the second question:

Taken by itself, internally, a capital — that is, a single capitalist firm — internally has no apparent commodity relations and its labor time is not directly determined by the law of value. There is no commodity production within the capital and the products of labor do not appear anywhere within the firm as values. Production is carried on within the capital according to a plan, however despotic this plan might be. The capitalistic nature of a capital is only expressed in the final product of the whole firm, which takes the form of a commodity for sale in the market.

Thus, both forms, the commune and the capital, can be thought of as forms of directly social production carried on according to a plan. They are not of themselves forms of commodity production but forms of directly social production as might be found under a future communist society.

Could the Soviet Union and the 19th century communes be telling us something about the transition between a commodity producing society and communism? In the attempt to nail down the classification of economic categories like value, are we not missing a bigger question?

What might the commune-type form tell us about capitalism?

Once I began to think about it, the thing that struck me about the Soviet Union was how similar it was to an American company town. In Illinois and other places a single capitalist enterprise grew up and dominated over all local political relations. Everything was controlled by the company: not just the main factory, but stores, homes, public infrastructure, even public officials. For instance, you used the company’s scrip, shopped at the company’s stores, rented your housing from the company. The company provided stores, churches, schools, markets and recreation facilities, etc. Moreover, in many cases, these ‘privileges’ only extended to you so long as you or a family member was an employee of the company. A wife and her children who lost their husband/father were forced to leave the town.

I think that in trying to dethrone the SU as a workers’ paradise, communists may be overlooking more relevant aspects of that society for our analysis. Certainly the SU was never the sort of socialism any of us might want to live in, but this does not mean it can’t teach us some things about socialism. More relevant for our purposes here, however, I think the SU can teach us something about the US that perhaps we might otherwise ignore.

The idea that capitals are not themselves capitalistic internally, is something I have seldom seen noted by communists as a significant feature of the form. No capitalist firm has commodity production internally nor does the law of value directly determine production relations within it. The Soviet Union’s experience is significant because it proved the absence of commodity relations characteristic of a capital can extend to the entire economy of a nation.

Assuming I am right, here is the thing: although a production in the SU was conducted according to a plan, they had ‘money’, the rouble. However this ‘money’ did not express the values of commodities for which it was exchange. Now, the reason why the currency did not express the values of the products of labor was not because it was a worthless piece of company scrip. Rather, ‘money’ could be paper because the values of the product of labor was not expressed.

Why weren’t the values of commodities expressed? According to Marx, in a commodity producing society the exchange value or prices of commodities express the value of commodities because the combined productive activities of the producers are not planned. In a passage from Capital that is often cited by value-form school writers, Marx makes this statement:

“Political Economy has indeed analysed, however incompletely, value and its magnitude, and has discovered what lies beneath these forms. But it has never once asked the question why labour is represented by the value of its product and labour time by the magnitude of that value. These formulæ, which bear it stamped upon them in unmistakable letters that they belong to a state of society, in which the process of production has the mastery over man, instead of being controlled by him, such formulæ appear to the bourgeois intellect to be as much a self-evident necessity imposed by Nature as productive labour itself.

In Capital, Marx called exchange value (prices) a material manifestation of the unplanned character of commodity production. By contrast, production in the Soviet Union was centrally planned as a whole and thus could employ a money that was nothing more than a piece of paper. The values of commodities were not expressed as exchange value because planning took the place of the law of value.

Which means, I argue, the Soviet-era rouble tells us everything we need to know about the post-1971 dollar. Although no one admits it, in an economy where paper currency is money, it is probable that state planning has taken the place of the law of value.

This argument is, of course, circumstantial, but there is direct evidence in the historical record to support it.

In her essay, The Long Road to 1989, author Johanna Brockman argues bourgeois simpletons regularly borrowed from the Soviet experience to craft their own version of fascist state managed production. According to Brockman, all sides in the debate over economic policy in the 1930s, “including the Austrian School at the time and later the Chicago School — shared the neoclassical economic approach built from a socialist model.”

According to Brockman:

“During the 1930s, many neoclassical economists came to the conclusion that socialism in fact provided the necessary institutions for the realization of perfect market competition as envisioned by neoclassical economists. British socialist and economist H. D. Dickinson wrote, “The beautiful systems of economic equilibrium described by Bohm-Bawerk, Wieser, Marshall, and Cassel are not descriptions of society as it is, but prophetic visions of a socialist [sic] economy of the future.” To Oskar Lange, only a socialist system [sic] could attain free competition as described by economists and could maximize social welfare because it did away with private property in those areas that lack competition and thus removed the obstacles to free competition. Lange soon afterward moved to the United States and began to teach neoclassical economics at the University of Chicago. He and the former president of the AEA Fred M. Taylor — who, as quoted at the beginning of this section, found it worthwhile to study any problem “from the standpoint of a socialist state [sic]” — then published their famous On the Economic Theory of Socialism. In “A Cautious Case for Socialism,” Kenneth Arrow, future Nobel laureate and American neoclassical economist, remembered his time at Columbia University in the early 1940s: “Socialism was the way in which the ideal market was to be achieved. This doctrine was held by many.” Socialist economists in Austria, Great Britain, Germany, and the United States at this time agreed that socialist institutions [i.e., fascist state management] would make economic reality approximate neoclassical models.”

To put this in terms that might be more comprehensible to Marxists, neoclassical economists studied the experience of the Soviet Union in an effort to understand how the principles of state management could be used to manage their own capitalist economies. In either case, once planning took hold in the economy, money itself (as defined by Marx in Capital) would have become superfluous.