Frugality Is an Important Principle in the Socialist Economy
Return to Fundamentals of Political Economy
18. Frugality Is an Important Principle in the Socialist Economy
Practice Frugality and Economic Accounting 1
The socialist production process is one of planned allocation of labor time and striving to economize on labor time. To practice frugality and economic accounting in all enterprises and in managing the national economy is the essential condition for building socialism with greater, faster, and better results at lower costs.
Frugality Is a Necessity in Socialist Economic Development
The Significance of Frugality to Socialist Economic Development
What frugality means here is the economizing of manpower, materials, and funds. Economizing manpower means to save live labor; economizing materials means to save embodied labor; and economizing funds means to save live and embodied labor manifested in currency circulation. Therefore, all frugality is in fact the economizing of live and embodied labor, or the economizing of labor time.
In socialist society, saving labor time assumes an immense significance. Marx pointed out:
“All saving is ultimately the saving of time. Every person should rationally allocate his own time in order to gain necessary knowledge or to satisfy the various requirements governing his activities. Similarly, society should also allocate its time in order to achieve production that satisfies its total requirements. Therefore, the saving of time and the planned allocation of labor time in various production sectors become a primary economic law of collective production. This is even a very advanced law.” 2
The goal of socialist production is to satisfy the needs of the state and its people. Frugality in labor time and planned allocation of labor time over the whole society in order to produce the maximum possible amount of use value with the minimum amount of labor expenditure is a basic path to guaranteeing to the greatest extent the satisfaction of the ever-increasing needs of the state and its people. It is also in line with the objective requirement of the basic economic law of socialism. To violate the law of frugality is to violate the basic requirement of socialist economic development and to violate the basic interests of the proletariat and the laboring people. Therefore, whether frugality is enforced is primarily an issue of whether the objective law of the socialist economy is accepted and an issue of whether the basic interests of the proletariat and the laboring people are valued.
To practice frugality is an important way to increase accumulation through self-reliance in the socialist country. To engage in large-scale economic construction, the socialist country requires a large amount of capital funds. Where do the funds come from? Unlike capital imperialism and social imperialism, the socialist country cannot exploit its own people, engage in external aggression and plundering, demand war damages, or sell national resources to develop its economy. The socialist country can only rely on the diligent labor of its whole laboring people and internal frugality for accumulation. On the one hand, the production unit saves as much manpower, materials, and funds as possible, rationally allocates funds, and continuously expands the scale of production. On the other hand, non-production units such as state organs, military units, schools, and people’s organizations must economize and eliminate waste in order to minimize the share of non-production expenditure in the state budget. This way, a large amount of capital funds can be accumulated for economic construction. The socialist country must practice frugality and oppose waste in order to accelerate socialist construction and better satisfy the ever-increasing needs of the state and the people.
To practice frugality is especially important to China’s socialist construction. China is a big country but is also an economically backward and poor country, a developing country. Chairman Mao pointed out: “We must engage in largescale construction. But China is still a very poor country. This is a contradiction. To practice frugality totally and steadily is one of the methods that will resolve this contradiction.” 3 Therefore, Chairman Mao called upon the whole people: “To run factories with diligence and economy, to run shops with diligence and thrift, to run all state enterprises and cooperative enterprises with diligence and economy, and to run all other enterprises with diligence and thrift. The principle of diligence and economy must be applied to everything. This, then, is the principle of frugality.” 4 The broad workers and poor and lower-middle peasants fighting at the forefront of production pay close attention to Chairman Mao’s instructions. They understand the major significance of frugality. The laboring masses put it nicely, “Diligence without economy means pure waste of effort.” Only through diligence and thrift can the laboring masses create wealth and play the greatest possible role and can China soon be developed into a big and strong socialist country.
To practice frugality is also necessary if a socialist country is to discharge its obligations related to internationalism. Only by saving more can we contribute more to world revolution.
Chairman Mao pointed out:
“Our 600 million people must all increase production, practice frugality, and oppose ostentatious display and waste. This is not only economically significant, but also politically significant.” 5
Diligence and frugality have always been the virtue of the proletariat and the laboring people. Under the guidance of Chairman Mao’s revolutionary line, the broad masses of China practice diligence and frugality. It has developed into a common habit. Ostentatious display and waste are the poison of the bourgeoisie and all exploitative classes. Like their master Confucius, the Liu Shaoch’i and Lin Piao clique were all people who “never worked with [their] four limbs and [who] could not distinguish the five cereals.” Extravagance and waste are the innate nature of the exploitative class. They hated the policy of “building the country with diligence and economy” formulated by Chairman Mao. In capital construction work, they went after “the big, the foreign, and the glamorous” projects. In resource management, they resorted to what was nominally known as “generous budget but tight expenditure.” In fact, it was “generous budget and generous expenditure” In operation and management, they even clamored that “money will not escape abroad even if accounts are not reckoned for three years” Their criminal intent was to corrode those people among the revolutionary ranks who were irresolute, waste national resources, undermine socialism, sabotage proletarian dictatorship, and restore capitalism. Therefore, to practice frugality and oppose waste will not only accelerate socialist construction, but will also represent a powerful political struggle against people like Liu Shaoch’i and Lin Piao. It is also a thorough criticism and repudiation of traditional concepts and established influence. We must consciously resist the corrosion and attacks of bourgeois ideology and extend the glorious tradition of the proletariat to establish new enterprises with ardor and to practice diligence and economy.
“We must make all youths realize that our country is still very poor and that it is not possible to fundamentally change this condition in a short time. We must rely on the youth and the whole people to unite and struggle during several decades and create a rich and strong country with our own hands.” 6
The Socialist System Opens a Broad Avenue to Frugality
In socialist society, there is not only a need for practicing frugality, but also a possibility for rationally and widely achieving frugality with respect to live and embodied labor on various battlefronts and in each individual sector of socialist production. This is chiefly because the laboring people in socialist society have become their own masters. The ultimate purpose of saving as much manpower, material resources, and funds as possible in order to provide more accumulation for the state and the collective and to better expand reproduction is to serve the interests of the proletariat and the laboring people. Therefore, practicing frugality is a conscious objective of the broad masses of laboring people. Once the socialist activism of the masses has been mobilized, all methods for frugality are employed: Warehouses and storehouses are inventoried to tap potential material resources; technical innovations are made in a big way to tap the potential of unused equipment; labor organization and methods of operation are improved to tap labor potential; and comprehensive utilization is unfolded to turn “waste” into valuable items and transform “the useless” into the useful. For example, the main plant of Northeast Pharmaceuticals mobilized the masses to unfold comprehensive utilization. The broad laboring masses and technicians all taxed their brains to find ways to use “solid waste,” “fluid waste,” and “gaseous waste.” As a result, several tens of new products were added. The main distillery in Peking formerly produced only liquor. After unfolding a mass movement to increase production and practice economy, several tens of important products were produced from the “three wastes” of the plant. It developed a comprehensive enterprise, turning out a great variety of products. The broad laboring masses are concerned with frugality and practice it in thousands of ways. This is not possible in a capitalist society. Under capitalism, the capitalist practices frugality in his own enterprise. The purpose is to minimize costs and extract maximum surplus value. The essence of frugality is to increase the exploitation of hired labor. Marx pointed out: “Capitalist production economizes the labor that is realized and embodied in commodities. But capitalism is more wasteful of man and live labor than any other production method. It not only wastes blood and flesh, but also mind and brain.” 7 The working masses are extremely resentful of the so-called frugality practiced by the capitalist and will resolutely resist and rebel against it.
Under the conditions of socialist public ownership, the law of frugality not only plays a role within various enterprises; more importantly, it plays a role in the whole national economy. The socialist economy is a planned economy. “The social and planned allocation of labor time regulates the proper proportion among various labor functions and various needs.” 8 The socialist country can, through the national economic plan, rationally use manpower, material resources, and funds, centrally organize production and circulation, unfold socialist cooperation over the whole country, and combine the frugality of individual enterprises with the frugality of the whole society. Under capitalism, because of competition among enterprises and chaotic production, it is basically not possible to practice frugality in a systematic manner throughout the whole society. This is especially so because of the serious waste of manpower, material resources, and funds connected with the periodic occurrence of business cycles. Marx pointed out:
“The capitalist production method forces individual enterprises to practice frugality. But its chaotic competitive system results in substantial waste in social means of production and labor power.” 9
Frugality and waste constitute a unity of opposites. The process of practicing frugality must inevitably be the process of opposing waste. To practice frugality, it is first necessary to strengthen the masses’ and cadres’ edu284 cation concerning ideology and the political line, continuously unfold the struggle against waste, and establish the idea of building the country with diligence and economy and arduous struggle. The Party’s ideological and political work is the basic guarantee that the consciousness of the masses and the cadres to practice frugality will be raised and the policy of running enterprises with diligence and economy will be carried out. To combine ideological and political work with meticulous economic work, a rational system must be established. To strengthen economic accounting in the national economy and in various enterprises and to run the enterprises on the basis of economic accounting is a very important system.
Economic Accounting Is an Important Means to Develop the Socialist Economy with Greater, Faster, and Better Results at Lower Costs
Use Economic Accounting to Realize Greater, Faster, and Better Results at Lower Costs
Economic accounting is the analysis of economic activities through bookkeeping. In the production struggle, people learned a long time ago the importance of economic accounting. In the primitive commune of India there was a bookkeeper to record agricultural accounts and all events connected with them. 10 Marx borrowed the story of Robinson Crusoe, popular among bourgeois economists, to explain the necessity of bookkeeping in the production process. Marx pointed out:
“For Robinson, who lived on an isolated island, “however simple his life, he had to satisfy his various needs. As a result, he had to engage in a variety of useful labor, such as making tools, furniture, raising goats, catching fish, and hunting animals.” “He had to force himself to precisely allocate his time for various activities.” “His accounts recorded various things that he possessed, various activities required to produce these things, and finally the average labor time expended to make these quantities of products.” 11
“The more social the production process becomes, the greater the necessity for economic accounting. “Bookkeeping is more necessary to capitalist production than to the decentralized production of handicraftsmen and peasants. It is more necessary for production under public ownership than for capitalist production.” 12
Under different social systems, the content, format, and social consequences of economic accounting are different. In capitalist society, the capitalist uses economic accounting to extract the greatest possible amount of surplus value with the smallest possible amount of capital. The stricter this economic accounting, the more capital is saved, the crueler is the exploitation of hired labor, and the poorer the laboring people become. In socialist society, economic accounting no longer reflects capitalist production relations. Rather, it reflects socialist production relations. Through economic accounting, the proletariat and the laboring people consciously employ the law of saving labor time to develop socialist production with greater, faster, and better results at lower costs and to better satisfy the needs of the state and the people.
Greater, faster, and better results at lower costs are important characteristics of socialist production. Socialist economic accounting is an important means to realize greater, faster, and better results at lower costs. Looking at it from the whole national economy, greater, faster, and better results at lower costs are inseparable. In production, if frugality is practiced to reduce consumption of raw materials, fuel, labor, and costs, the same amount of manpower, material resources, and funds can produce more products. At the same time, meticulous calculation, diligence and economy, the rational choice of raw materials, and the substitution of cheaper and better raw materials for more expensive and poorer quality raw materials can also lead to an increase in production by raising the quality of products and improving the durability of products. The manpower, material resources, and funds thus saved can be used to develop production of other items to accelerate socialist construction.
The bourgeoisie tries its best to extract the greatest possible amount of surplus value by using the smallest amount of capital. Soviet revisionism regards the pursuit of profit as the highest principle of economic accounting. Profits in the enterprises of Soviet revisionist state monopoly capitalism are a transformation of surplus value. Economic accounting in capital imperialism and social imperialism is the economic accounting of the exploitative class. It is diametrically opposed to socialist economic accounting.
The Laboring Masses Are the Masters of Economic Accounting
The position of the laboring masses in socialist economic accounting and capitalist economic accounting is entirely different. Because economic accounting in the capitalist enterprise serves the bourgeoisie but is fundamentally opposed to the interests of the laboring people, economic accounting is the business of only a few experts employed by the bourgeoisie. Socialist economic accounting serves the interests of the laboring people and is in line with their basic interests. Therefore, economic accounting in the socialist enterprise is not merely the work of experts, but should and can become an economic activity which has the conscious participation of the laboring masses.
Economic accounting in China’s socialist enterprise combines the laboring masses and the experts. China’s experience demonstrates that to do a good job in economic accounting, the masses must participate. Economic accounting by experts must be based on mass accounting. Because the broad 286 laboring masses have rich practical experience gained from fighting a long battle on the production forefront, they are familiar with their own production conditions. They know clearly where waste exists and where frugality can be further increased. They know very well how to improve techniques to raise efficiency, and how to calculate labor costs, material resources, and funds in order to achieve greater, faster, and better results at lower costs. Group accounting, organizations for economic supervision, and conferences to analyze economic activities in China’s socialist enterprises are some of the better forms of economic accounting activities resulting from the masses taking control of financial management and the combination of the laboring masses and the experts. In the socialist enterprise, the masses, as their own masters, participate in group accounting, analysis of economic activities, and financial management. This way, not only does economic accounting play a greater role in realizing greater, faster, and better results at lower costs, but it also presses the leadership personnel and the broad cadres to act according to the Party line and general and specific policies so that the enterprise will advance along the socialist road.
In socialist economic accounting, it is also important to exercise the role of the experts. Keeping in touch with the various workshops and departments in the enterprise makes the experts more familiar with the situation of the economic activities of the whole enterprise and facilitates the leadership and organization of the various economic activities. Of course, the experts must also go down to the production forefront, fully rely on the masses, strengthen investigation and research, respect the creativity of the masses, and promptly solve problems of economic accounting arising in the process of production. Only thus can their proper role be fully exercised.
The System of Economic Accounting Is a Management System of the Socialist Enterprise
The System of Economic Accounting Embodies the Relations between the State and State Enterprises and the Relations among Enterprises
After the socialist country establishes a socialist state economy, how should the state enterprise be managed?
The socialist state economy based on the socialist state ownership system is the property of the whole laboring people. The socialist state possesses and manages the state economy as the representative of the whole laboring people. The socialist state stipulates production and operational plan assignments for the state enterprise and centrally allocates the output and earnings of the state enterprise to meet the needs of the state and the people.
Does state management of the state economy imply that there is no relative economic independence in the many state enterprises? Does this mean that all means of production and compensation for personnel are provided free to the state enterprise, that all products of the state enterprise are passed on to the state without any compensation, and that there is no independent accounting of profit or loss in the state enterprise? This kind of management system existed in history and is called the free supply system in enterprise management. In the 1918 to 1920 period of military communism in the Soviet Union, this system of management of state enterprises was adopted. It was necessary under the special historical condition of military communism. But it is not practicable under the general conditions of building socialism. Under the condition of a free supply system, the absence of an independent accounting of profit and loss would make it difficult to detect where efficiencies or waste existed in the process of production and operation. Thus, it would be unfavorable to mobilizing the operation activism and strengthening the responsibility of the working personnel of the state enterprise. This would be in contradiction to the law of frugality.
Then, is it all right to let state enterprises be independently responsible for their profits and losses? This is even less practicable. If this were the case, the socialist state ownership system could exist only in name and would degenerate into an enterprise ownership system, a small group ownership system, and ultimately a private ownership system. The economic law of capitalism would certainly exert itself.
In socialist society, the economic management of enterprises by the state objectively requires a system such as the system of economic accounting. What is the economic accounting system? In simple terms, it is an economic management system which guarantees the central leadership of the state and at the same time permits the relatively independent operation of enterprises.
As early as 1942, Chairman Mao brought up the principle of “centralization in leadership, and decentralization in management” in his directive to establish an economic accounting system in all state sectors of the economy. Centralized leadership means planned management of state enterprises according to centralized lines, directives, and policies and, in the light of concrete conditions, assigning enterprises various production targets including variety, quantity, quality, product value, labor productivity, costs, and profits to be turned over to the state. The enterprise must be responsible for the state plan and fulfill the various targets assigned by the state. Decentralized management means state allocation of funds to state enterprises according to their production and operational needs. Enterprises use funds allocated by the state and organize production, supply, and marketing activities according to the plan assignments set up by the state. Every state enterprise possesses some relative independence. It is responsible for its own profit and losses and relies on its own income to pay for its expenses and to furnish accumulation to the state. Decentralized management under centralized state leader288 ship requires, on the one hand, that the state enterprise improve management of production and operation, strengthen economic accounting, and guarantee the fulfillment of the state plan. On the other hand, the state must create the necessary conditions for the state enterprise to improve production and operation, such as the prompt announcement of production plans and the proper organization of raw materials supply and production cooperation. The management of the state enterprise by the state through the economic accounting system guarantees centralized leadership by the state over state enterprises and also facilitates the enterprise’s exercise of socialist operational activism. It both avoids excessive control unfavorable to enterprise economic accounting and prevents excessive enterprise independence which may lead to the capitalist tendency of free operation.
Under the system of economic accounting, the characteristic feature of the economic relations among state enterprises is joint cooperation but independent accounting. State enterprises are the property of the proletariat and the whole laboring people. They belong to the same owners. They are related not only by the division of labor, but also by the fact that their identical basic interests require them to coordinate and closely cooperate on their own initiative. They are fundamentally different from capitalist enterprises based on the private ownership system. However, under the system of economic accounting, state enterprises are all units with relatively independent accounting and independent operation. Economic transactions and cooperation among them must be recorded to facilitate the calculation of economic benefits. The exchange of manpower, material resources, and funds among enterprises must therefore be inspired by the cooperative style of communism and follow the principle of equivalent exchange.
The above-mentioned relations between the state and state enterprises and among state enterprises under the system of economic accounting enable the state enterprises to fully exercise their operation responsibility and activism under the centralized leadership of the state. Lenin once pointed out:
“The purpose of establishing enterprises on the basis of an economic accounting system is to make them responsible, and totally responsible, so that the enterprises will not run at a loss.” 13
Some people wonder, since all state enterprises are state property, why it is necessary to have such a refined accounting system among them. This idea, which negates the system of economic accounting, violates the socialist principle of frugality. In socialist society, increases in production and the practice of economy rely primarily on the Party’s ideological and political work to raise the consciousness of the cadres and the masses. But it is also necessary to establish a system of responsibility with respect to operation and management. If the system of economic accounting were not implemented, it would not be favorable to strengthening the operational responsibility of the management personnel, and substantial waste of manpower, material resources, and funds would result.
Corresponding with the duality in the socialist production process, the state enterprise must, in its process of economic accounting, calculate output, variety, and quality in light of their use value. It must also calculate costs, prices, profits, and so forth in light of their exchange value. Plan targets assigned by the state-to-state enterprises in its management through the system of economic accounting include product variety, specifications, quantity, quality, and other material targets as well as the value targets such as costs, output value, and surrendered profits. Material targets and value targets are complementary and necessary. But, the existence of value categories indicates the existence of commodity production and the existence of contradictions between use value and exchange value in commodities. The proletariat must develop production to satisfy the needs of the socialist state and the people according to the requirements of the basic socialist economic law. They must correctly handle the contradictions between use value and exchange value and realize greater, faster, and better results at lower costs throughout the whole economy. The agents of the bourgeoisie in the socialist economy will certainly exploit the contradictions between use value and exchange value to push the revisionist line of “producing more if profits are high and less if profits are low; don’t produce if there are no profits” and conspire to restore capitalism. Therefore, the process of implementing the system of economic accounting will be full of the struggle between the two classes, the two roads, and the two lines. To win victory in this struggle, we must correctly understand and use the various value categories in the system of economic accounting.
Correctly Use the Value System to Do a Good Job in the System of Economic Accounting
Capital funds, production costs, profits, and other value categories in the socialist economic accounting system reflect socialist production relations. They are essentially different from capital funds, production costs, profits, and other categories in the capitalist economy.
Capital funds in the socialist state enterprise are state property and are fundamentally different from capital in the capitalist enterprise. Capital is created by surplus value and reflects the exploitative relations of capital over hired labor. Capital funds in the socialist state enterprise are that part of the accumulated state wealth used for production and operation. The use of these funds by the enterprise to engage in production and operational activities follows the requirements of the basic socialist economic law and serves to expand reproduction and satisfy the ever-increasing needs of the state and the people. The rational use of capital funds has tremendous significance in developing the socialist economy.
The production funds of the state enterprise can be classified as fixed capital and working capital according to the nature of their circulation in the production process. The material form of fixed capital funds is manifested by machines, plants, and so forth. The full exploitation of fixed capital assets is equivalent to the expansion of production capacity with a given amount of fixed assets. The state must stipulate a rational depreciation method and depreciation rate for fixed assets for the state enterprise (including visible and invisible depreciation) in order to ensure a continuous replacement of the fixed assets of the enterprise and permit necessary technical innovation. This is a necessary economic condition for the enterprise to maintain simple reproduction and a certain degree of expanded reproduction. The state also allocates to state enterprises a certain amount of working capital for their own use. If their needs exceed their allocated quota, they can borrow funds from the state bank. This is instrumental in urging the enterprises to accelerate the turnover of working capital and continuously reduce the ratio between production and funds (the amount of working capital funds required for each 100 yuan of production) through the correct calculation of the inventory quota of various materials and goods and the consumption quota of raw materials and fuel per unit output, and reduction of the production cycle, the improvement of production and marketing work, and other means.
The production cost of socialist products and the production cost of capitalist products are two essentially different economic categories. Capitalist production cost is capital consumption. The reduction of production costs in a capitalist enterprise indicates capital saving and the intensification of labor exploitation. Production costs in a socialist enterprise are expenses connected with the production of a certain number of products. Because enterprises under the economic accounting system have to depend on income from the sale of products to pay for their expenses and to obtain profits, the continuous reduction of production costs indicates the saving of labor time and higher labor productivity. More accumulation is thus available to the state or the collective. The role of cost reduction in socialist construction can be gauged by the following figures: According to 1972 data, every 1 percent reduction in total costs in China’s industrial enterprises amounted to enough capital investment for three Yangtze River bridges in Nanking.
Profits in socialist state enterprises are essentially different from profits in capitalist enterprises. Capitalist profits consist of transformed surplus value expropriated by the capitalist. Profits in socialist enterprises are the net social income created by the laboring masses. They are concentrated in the hands of the state through surrendered profits and taxes and are mainly used to expand socialist production and improve the people’s livelihood.
Profits in the socialist economy can also be looked at from the viewpoint of the whole national economy. Under certain conditions, the socialist state can allow some enterprises to just break even or even to run at losses. For example, some interior and local industrial enterprises established to affect a more rational geographical distribution may not be making profits for the time being because of unfavorable conditions. But, the development of these industries is favorable to the long-term interests of the national economy and the establishment of a strategic, strong, and stable hinterland. Therefore, even though these enterprises do not make any profit for the time being, the state still supports their development. Another example is that some enterprises producing certain products, especially new products, new materials, and products which support agriculture, may run at losses within a certain period of time. But the development of these products is instrumental in industrial construction and agricultural production. Temporary and planned losses can be allowed for the interests of the whole national economy and to consolidate the worker-peasant alliance. Needless to say, the enterprise must mobilize the masses to actively reduce production costs by improving production techniques and labor productivity and change losses into profits. These profits from the viewpoint of the whole national economy are called “advanced profits.” These advanced profits embody the superiority of the socialist system. Of course, this does not mean that profits in industrial enterprises and sectors are no longer important and losses can be legitimately made because of poor operation on the part of individual enterprises. Profits of the whole national economy are ultimately based on profits from individual enterprises and sectors. Therefore, enterprises suffering temporary losses should try hard to improve operation, reduce production costs, reduce losses, and turn losses into profits to provide more accumulation to the state.
Profits from socialist state enterprises are the main source of socialist accumulation. The socialist enterprise must criticize and repudiate putting “profits in command” on the one hand and oppose erroneous ideas that pay no attention to costs, profits, and increasing accumulation for the state on the other.
Having “profits in command” puts the achievement of the highest possible profits in the primary position. Production is guided only by profit. Production plan assignments from the state are ignored. This is a capitalist principle of operation and must be criticized and repudiated. Under the socialist system, because of different production conditions and supply demand conditions, state plan prices may not always be identical with the value of products. Other things being equal, when the product price is higher than the value, profits are higher. If the reverse is true, profits are lower. If state enterprises violate plan targets set by the state with respect to quantity and variety and expand production of products with high production value and high profits and reduce production of products with small production value and low profits, this is a manifestation of putting “profits in command.” The “total economic accounting system” implemented by the Soviet revisionist renegade clique to put profits in command is an important measure to restore capitalism. The essence of the “total economic accounting system” is the thoroughly capitalistic principle of profits. In the ’’total economic accounting system,” “the most important summary indicators of enterprise finance are profits and the profit rate.” To a very large extent, the enterprise can determine the variety and quantity of production according to the size of expected profits. To increase profits, the enterprise can dismiss workers and increase labor intensity to “reduce production costs.” This “total economic accounting system” that puts profits in command is an exploitative system imposed on the laboring people of the Soviet Union by the Soviet revisionist bureaucratic monopoly bourgeoisie.
The socialist state enterprise must also make profits. But there is no similarity to having profits in command. The socialist state enterprise only allows socialist profits to be increased by following the Party’s line and general and specific policies, fulfilling the assignments specified by the state plan, and increasing production and practicing economy with proletarian politics in command.
Through increasing production and practicing economy, the socialist state enterprise increases profits and provides more accumulation to the state. In this way, it contributes to socialist revolution and socialist construction. Revenue from state enterprises (surrendered profits, taxes, and so forth) represents more than 90 percent of the revenue in China’s state budget. If the enterprise cannot actively increase accumulation for the state, or even suffers unnecessary losses, revenue in the state budget will be reduced, thus adversely affecting socialist revolution and construction and the discharge of the obligations to internationalism.
In summary, the state’s implementation of management by means of the economic accounting system in state enterprises is for the purpose of better realizing this directive of Chairman Mao:
“Any socialist economic enterprise should pay attention to utilizing manpower and equipment as fully as possible, improving labor organization as much as possible, improving operations and management and raising labor productivity, economizing all manpower and material resources that can be economized, and adopting labor competition and economic accounting to reduce costs and increase personal income and accumulation year after year.” 14
Strengthen Management with the Economic Accounting System in the Rural People’s Communes
The means of production and labor power under the socialist collective ownership system belong to individual collective organizations of the laboring people. Each collective economic organization is an accounting unit. It organizes production under the direction of the state plan and sells commodities according to prices set by the state. It operates independently and is responsible for its profits and losses. Production and income distribution are carried on within the collective. At the same time, accumulation is provided to the state through taxes. The socialist national economy is a unified whole.
The unified national economic plan drawn up by the state includes the state economy as well as the collective economy.
It is necessary to practice economic accounting not only in the management of state enterprises but also in the sector of the collective economy because it will strengthen the economic accounting system and consolidate and promote the development of the collective economy.
China’s socialist economy under the collective ownership system of the laboring masses exists in agriculture, industry (including the handicraft industry), transportation, and commerce. But it is most important in agriculture. Here we are mainly concerned with the problem of strengthening management by means of the economic accounting system in the collective economy of the rural people’s commune.
China’s rural people’s commune at present uses the three-level ownership system of the commune, the production brigade, and the production team. The commune, the brigade, and the production team are all accounting units which operate independently and are responsible for their profits and losses. Financial transactions among the commune, the production brigade, and the production team and the allocation of material resources and labor power must be based on the principle of “equivalent exchange on a voluntary and mutually profitable basis.”
In the economy of the rural people’s commune under the collective ownership system, management by means of the economic accounting system is implemented in commune-operated enterprises by the commune and in brigade-operated enterprises by the brigade. The commune and the brigade exercise unified leadership over their respective enterprises, allocate a certain amount of capital funds to each enterprise, demand that they use these funds in a responsible way to fulfill the production plan assignments given to them by the state, the commune, and the brigade, and require them to discharge their expenses with their incomes and fulfill or over-fulfill the accumulation assignments set by the commune and the brigade. With the development of commune and brigade-operated enterprises and with the development of the collective economy at various levels, more and more units within the people’s commune are adopting management by the economic accounting system, and management by the economic accounting system must be further strengthened.
The production team is a basic accounting unit which operates independently. The collective fund of the production team is not allocated by the production brigade or the commune. It comes from the contribution and accumulation of the members. The commune and the brigade should lead, help, and support the production team to develop the collective economy. They cannot use the funds of the production team to develop the commune or brigade economies. Between the production brigade and the production team, there does not exist a relationship of management by the economic 294 accounting system. This is to say, the production brigade is not ultimately responsible for profits or losses incurred by the production team. The teams themselves are responsible for their own profits and losses.
Although there does not exist a relationship of management by the economic accounting system among the commune, the production brigade, and the production team, the production team must also adopt economic accounting. Economic accounting in the production team consists primarily of calculating the annual consumption of embodied and live labor in production, accounting for annual income and expenses, reducing expenses and costs, avoiding non-production labor and other expenditures, and firmly opposing careless expenses and waste. Especially important is the establishment of a sound system of financial management. All financial expenditures must be subject to the required approval procedure. Democracy in financial matters must be practiced. All incoming and outgoing items must be announced monthly to the members. People must have separate responsibilities for food grain, material resources, money, and accounts to prevent excessive consumption, theft, and losses. Once economic accounting is strengthened and the system of financial management is improved, production costs can be reduced, the accumulation of production funds and members’ income can be increased, and the broad members will love the collective economy all the more and will struggle for further consolidation and development of the collective economy and oppose spontaneous capitalist tendencies.
Major Study References
Marx, Engels, Lenin, and Stalin on Communist Society , Chapter 7.
Chairman Mao, “Comments on ‘To Run a Cooperative with Diligence and Economy.’“
Chairman Mao, “On the Correct Handling of Contradictions among the People,” Section 11.
Review Problems
- Why do we say that only socialist society is capable of practicing total frugality?
- What are the effects of adopting management by the economic accounting system on building the socialist economy with greater, faster, and better results at lower costs?
- How can the issue of profits in the socialist economy be correctly handled?
14 Footnotes
