The Socialist Economy Is a Planned Economy
Return to Fundamentals of Political Economy
16. The Socialist Economy Is a Planned Economy
Planned and Proportional Development of the National Economy 1
Any social production involves a problem of regulating social labor, that is, the allocation of manpower (live labor) and material resources (embodied labor) among various production sectors. The regulation of social labor and production follows certain laws. To correctly identify and make use of the economic law regulating socialist production and to differentiate it from the economic law regulating capitalist production is very important for the development of socialist production with greater, faster, and better results at lower costs.
The Law of Planned Development Regulates Socialist Production
The Law of Planned Development Is the Opposite of the Law of Competition and Chaotic Production
In any large-scale social production, there exist close relations of mutual dependence among various production departments. For example, the textile industry needs agriculture to supply cotton and the machine-building industry to supply spinning and weaving machines; the machine-building industry needs the iron and steel industry to supply a variety of rolled steel; and the iron and steel industry needs the coal industry to supply raw coal and the machine-building industry to supply extracting and digging machines, refining equipment, rolling equipment, and so forth. All these industrial and mining enterprises need agriculture to supply the means of living, the power industry to supply electricity, and the communications and transportation departments to transport raw materials and finished goods for them. These relations of mutual dependence among various departments and enterprises demand that they maintain proper proportions among themselves and supply what they produce to others to satisfy each other’s needs. Otherwise, social production will be obstructed or even disrupted.
The capitalist society is a society with a high degree of social production. What regulates the allocation of social labor among various production departments in this society? It is regulated by the law of competition and chaotic production and the law of value. The purpose of capitalist production is not to satisfy social needs but to realize value-augmentation to obtain profit. To go after bigger profits, the capitalists are engaged in a life and death struggle among themselves. Like flies going after filth, the capitalist shifts his capital around in response to the spontaneous movements of market prices to expand commodity production first in this and then in that department. Under these conditions, the required proportional relations among production departments are often violated. Only after spontaneous adjustments through the destruction of production capacities can the violated proportional relations be temporarily restored. Lenin’s statement that “capitalism must establish a balance which is regularly violated through crises” 2 exactly describes this situation.
After the socialist system replaces the capitalist system, economic conditions are fundamentally changed. Socialist production is based on a public ownership system of the means of production, and its purpose is to satisfy the needs of the socialist state and the whole laboring people. Under the socialist system, on the one hand, social production is further developed. It is all the more necessary to allocate social labor according to certain proportions and to maintain a proper balance among various production departments. On the other hand, the socialist public ownership system of the means of production turns the laboring people into the masters of production. Their basic interests are identical. This eliminates the conflicts of interest among various departments and enterprises which are inherent in capitalism. Thus, the socialist state, which represents the interests of the proletariat and the whole laboring people, can allocate labor power and the means of production among various departments of the national economy under a unified plan in accordance with the needs of the state and the people to enable the various departments of the national economy to develop in a proportional and balanced manner. It is exactly these economic conditions relied on by socialist production that eliminate the law of competition and chaotic production from the historical stage and render the law of value useless in regulating social production. They also give rise to a new economic law, namely, the law of planned development of the national economy, to regulate social production and the development of the whole national economy. These inevitable changes after the replacement of capitalism by socialism were foreseen scientifically by Engels. He once pointed out, “Once society possesses the means of production, …the internal chaotic conditions in social production will be replaced by planned and conscious organization.” 3 The Planned Economy Demonstrates the Superiority of the Socialist System
The replacement of competition and chaotic production by a planned development of the national economy is an important aspect of the superiority of socialism over capitalism.
The socialist planned economy indicates the beginning of man consciously creating his own history. In the capitalist society characterized by competition and chaotic production, things rule man, rather than man ruling things. The laborer cannot control his own fate; nor can the capitalist free himself from the blind manipulation of those objective economic laws that operate behind people’s backs. In socialist society, the system of public ownership of the means of production has been realized, and the laboring people have become masters of society. They control their own fate and consciously begin to make use of the objective law to create their own history. These conscious activities to create history are manifested in the process of practice as gradually identifying the objective law, formulating plans based on the objective law to transform Nature and society, and realizing anticipated results through organized activities. Chairman Mao hailed the conscious activities of China’s laboring people to transform the world under the leadership of the Party and pointed out: “Human development has been going on for hundreds of thousands of years. In China, the conditions for a planned development of her own economy and culture have been obtained just now. With these conditions, the outlook of China will change year after year. There will be a greater change every five years. An even greater change will occur after several five-year periods.” 4
The superiority of the socialist planned economy over capitalist competition and chaotic production does not lie in its guarantee that the proportional relations among various production sectors can be absolutely balanced all the time. There is nothing in the world that can develop in an absolutely balanced manner. In the development process of the socialist economy, balance is only temporary and relative. Imbalance is permanent and absolute. Because of the ever-changing conditions between the advanced and the backward among various enterprises, various sectors, and various regions, the obstruction and disruption of bourgeois influence, the change in natural conditions, the limitation of people’s understanding of objective things, and so forth, conditions in which balance and the proportional relations are upset will still arise regularly. But, in socialist society, this kind of imbalance among various production sectors can be overcome continually through people’s conscious activities and regulation by the socialist state plan. Compared with the blind groping associated with competition and chaotic production, the continual overcoming of imbalance and the establishment of relative balance through regulation by plans permits the prevention of much wasted manpower, material resources, and funds so as to achieve a more rational and full utilization of social labor and to guarantee a rapid development of socialist production. Chairman Mao pointed out:
“The objective, long-term existence of the contradictions between social production and social needs requires the people to regulate them frequently through state plans. In China, there is an annual plan which arranges for a proper proportion between accumulation and consumption in order to achieve a balance between production and needs. Here, balance refers to a temporary and relative unity of contradictions. After one year, speaking as a whole, this balance is upset by the struggle within contradictions, and this unity is changed. Balance turns into imbalance; unity becomes disunity. A second year’s balance and unity are required.” 5
Those viewpoints which regard the planned development of the socialist economy as being free from contradictions and as balanced development are metaphysical. The correct attitude should be to conduct scientific analysis of imbalances in the national economy to find out their different conditions and to prescribe treatment accordingly. After the appearance of imbalance, we must treat it with a constructive attitude. We cannot rigidly pull down the high to suit the low. Instead, we must in good time pull up the backward sectors to establish a new balance according to the needs and possibilities. Thus, the change from balance to imbalance and from imbalance to balance in the development process of the socialist economy implies the breaking down of the old proportional relations and the establishment of new proportional relations at a higher level of development. This is precisely the concrete manifestation of the superiority of the socialist economy.
The Proportional Relations in the National Economy Must Be Handled Correctly
The socialist economy requires people to regulate the various mutually dependent sectors in the national economy with plans in order to make them develop proportionally. What then are the objective proportional relations among the various sectors of the national economy?
Proportional relations in the national economy are numerous and complex. The main proportional relations are as follows:
First, the proportions between agriculture and industry. Agriculture and industry are the two basic mutually dependent production sectors. The staff and workers of the industrial sector require agriculture to supply them with food grains and various non-staple foods. Light industry requires agriculture to supply it with raw materials. Both light and heavy industry need the agricultural sector as an important market for their products. On the other hand, the rural population needs industry to supply industrial products for daily use. Agricultural production needs industry to supply it with chemical fertilizers, insecticide, agricultural machinery, electricity, and other means of production. That part of the agricultural products not retained by the agricultural sector also needs industry and the urban population as a market. Because of the existence of these mutually dependent relations between agriculture and industry and because the relations between industry and agriculture are, in fact, relations between the worker and the peasant and between the state ownership system and the collective ownership system, it is a key issue in a planned development of the national economy to maintain a proper proportion between industry and agriculture in order to make them promote one another in the development process of the socialist economy. This issue will be discussed in greater detail in the next chapter.
Second, the proportions within agriculture. This includes the proportions among agriculture (crop growing), forestry, animal husbandry, sideline production, and fishery, as well as the proportions among food grain, cotton, vegetable oil, bast fibers, silk, tea, sugar, vegetables, fruit, herbal medicines, and miscellaneous foodstuffs within crop growing itself. In the whole of agricultural production, the production of food grains occupies the most important position. Therefore, food grains must be insisted on as the key link when the proportional relations within agriculture are handled. The development of cash crops, forestry, animal husbandry, sideline production, and fishery cannot be divorced from the key link of food grains. However, this does not imply that the development of other items of agricultural production can be neglected. Take forestry as an example; it not only directly supplies products to society, but also serves an important function in conserving water and soil. “Without trees on the mountain, water and soil cannot be retained; having a lot of trees on the mountain is as good as building dams.” The importance of forestry to agricultural development can thus be seen. The development of animal husbandry, sideline production, fishery, and cash crops cannot be neglected either. The development of forestry, animal husbandry, sideline production, and fishery is vital to national construction and the people’s living. It can also promote the further development of food grain production by accumulating capital funds and increasing fertilizers. The policy “take food grains as the key link and ensure an all-round development” formulated by Chairman Mao pointed out a direction for the correct handling of the proportional relations within agriculture. This policy requires, under the precondition of taking food grains as the key link, a consideration of the characteristics of different regions and an overall arrangement for agriculture, forestry, animal husbandry, sideline production, and fishery as well as food grain, cotton, oil, bast fibers, silk, tea, and so forth in order to make them promote one another and develop as a whole.
Third, the proportions within industry. These include the proportions between light and heavy industry, the raw materials industry and the processing industry, national defense industry and foundation industry as well as the proportions between major machines and minor machines and between whole machines and spare parts within various industries. The proportional relations within industry are even more complex than the proportional relations within agriculture. But in the complex relations, there is still a key link. This key link is steel. With steel, we can make machines, and with machines, we can develop various industries. This key role of steel in industry reflects a major aspect of the proportional relations within industry and illustrates that the development of the various sectors of industry must be based on the development of the iron and steel industry. In addition, other proportional relations must also be correctly handled. In the relationship between 248 heavy and light industry, we must not neglect light industry when we give priority to the development of heavy industry. In the relationship between the raw materials industry and the processing industry, the leading aspect of the contradiction is the raw materials industry. To develop the raw materials industry, especially the mining industry which is of decisive significance in the raw materials industry, it is important to unfold socialist construction through independence and self-reliance and to maintain a balance between the raw materials industry and the processing industry. In the relationship between national defense industry and foundation industry, priority must be given to the development of foundation industries. Without the development of such foundation industries as the metallurgical industry, chemical industry, machine-building industry, electronic instruments and meters industry, and so forth, national defense industry cannot go very far. Only by closely linking the development of national defense industry with the development of foundation industry and by maintaining a relative balance between national defense industry and foundation industry can national defense industry and industry as a whole be developed faster. In the relationships between major and minor machines and between whole machines and spare parts within industry, it must be noted that without the complement of minor machines, major machines simply cannot operate. With whole machines but without spare parts, whole machines have to stop operation once some parts are worn out. Therefore, we must overcome the tendency of emphasizing major machines at the expense of minor machines and whole machines at the expense of spare parts in order to maintain a proper proportion.
The proportional relations within industry, within agriculture, and between agriculture and industry are three very important proportional relations in the whole national economy. This is because among the economic links of production, exchange, distribution, and consumption, production is the determining link. And agriculture and industry are also basic production sectors. Agriculture and light industry basically produce means of livelihood. And heavy industry basically produces means of production. Once these three proportional relations are properly handled, the proportional relation between the two categories of social production (means of production and means of consumption) is basically arranged.
Fourth, the proportions between industrial and agricultural production and the communications and transportation industry. Marx classified the transportation industry as the fourth material production sector, coming after the extractive industry, the processing industry, and agriculture. Large scale social production requires that the various sectors and enterprises receive their supply of raw materials, processed materials, and fuel in good time and that they ship their products to points of consumption in good time. Without a corresponding development in the communications and transportation industry, industrial and agricultural production will be greatly hindered.
Fifth, the proportion between cultural and educational construction and economic construction. Cultural and educational construction serve economic construction. Economic construction also promotes and restricts the development of cultural and educational enterprises. To construct a socialist country with modern agriculture, industry, and national defense, the development of modern science and culture is indispensable. The development of economic construction requires a corresponding development of cultural and educational construction in order to facilitate the continual supply of educated laborers who have a socialist consciousness.
Sixth, the proportions between increases in production and the development of cultural and educational enterprises and increases in population. A planned development of goods production and cultural and educational enterprises objectively requires a planned increase in population, namely, family planning. Family planning is not only a basic precondition for the reproduction of labor power, but also a necessary condition for a planned arrangement of people’s livelihood, the protection of the health of the mother and the baby, and a planned development of socialist construction. Blind population increase will certainly interfere with a planned and proportional development of the national economy. In capitalist society, population propagation is as chaotic as the production of things. Family planning applied over the whole society is inconceivable. Only under the condition in which the proletariat and the laboring people are the masters can it be possible to have a planned regulation of population increase simultaneously with a planned regulation of goods production. Family planning is a result of having the proletariat control its own destiny and is a manifestation of the superiority of the socialist system.
Seventh, the proportional relations between accumulation and consumption. Because socialist products possess varying degrees of commodity characteristics, in addition to the above-mentioned primarily material proportional relations, there exists a proportional relationship based on value between accumulation and consumption. If this proportional relationship is not properly handled, the development of the whole national economy will be hindered. This problem will be discussed in greater detail in Chapter 20.
Finally, the proportional relations among various regions, namely, the rational distribution of production capacities. The socialist society develops from the capitalist society. Distribution of production capacities in the capitalist society is formed under competition and chaotic production and embodies many irrational factors. Take the example of the early period after liberation in China in which the total value of industrial production in the seven provinces and two municipalities along the coast accounted for 73 percent of the total value of national industrial production. In the iron and steel industry, 80 percent of its production capacity was distributed along the coast. There was almost no iron and steel industry in Inner Mongolia, the 250 northwest, or the southwest where material reserves were abundant. In the textile industry, more than 80 percent of the spindles and more than 90 percent of the weaving machines were distributed along the coast. There were very few textile factories in the cotton-producing area and the interior. Therefore, after the proletariat seized political power, it faced the task of geographically reallocating production capacities. A rational geographic distribution of production capacities must be such that it is conducive to consolidating and strengthening national defense against possible aggression and threats from imperialism. It must be favorable to strengthening the unity among the laboring people of various nationalities, to utilizing various resources in the most rational manner, and to building socialism with greater, faster, and better results at lower costs. The key issue in a rational distribution of production capacities is to achieve “a distribution of large industries over the whole country with the highest possible degree of balance.” 6 In the more than twenty years after the establishment of the Republic and under the guidance of Chairman Mao’s theory on the correct handling of the relations between maritime industry and interior industry, China’s interior industry has developed rapidly. The newly established industrial bases are beginning to take shape. Former industrial bases in the provinces and municipalities along the coast have also been fully utilized and rationally developed.
The Law of Value Still Affects Socialist Production Planning Is Primary, and Pricing Secondary
Socialist production is direct social production, and yet, to a certain extent, it is also commodity production. As commodity production, it has its own laws of operation. “Wherever there are commodities and commodity production, the law of value prevails.” 7 Thus, both the law of planned development of the national economy and the law of value govern socialist production.
The substance of the law of value is: (l) the value of commodities is determined by the socially necessary labor time expended on their production; (2) commodity exchange must be based on equivalent values. These objective requirements of the law of value will assume different forms and produce different effects on production under different social systems.
Under the capitalist system, social production is carried on under competition and chaotic production conditions. The price of commodities fluctuates with the change in the supply-demand relationship. Sometimes it is higher than the production price and sometimes, lower. When the price is higher than the production price, profit is higher than the average profit. When the capitalist sees this opportunity for higher profit, he is happy to invest his capital in these sectors. In the opposite situation, capital will be withdrawn. It is under these blind conditions that social production develops. These conditions demonstrate that the law of value is manifested as an alien force working behind people’s backs under the capitalist system and is the total regulator of social production.
Under the socialist system, social production is carried on in a planned manner. Prices are based on values and are determined by the state in a unified manner. Prices no longer fluctuate with the change in the supply – demand relationship. The law of value is no longer an alien force governing people. Basically speaking, it is consciously used by people to serve socialist construction. Furthermore, the effects of the law of value on social production have been greatly restricted. Their concrete manifestations are as follows:
First, production in the socialist state enterprise is not subject to fluctuations according to the level of prices and the size of profit. It is not regulated by the law of value, but rather by the national economic plan formulated according to the requirements of the basic economic law of socialism and the law of planned development of the national economy. Based on the needs of the state and the people, the state plan decides what and how much to produce, and the state enterprise must thoroughly carry this out. The enterprise must produce according to the plan regardless of profit. The loss is then made up by planned subsidies. If the leadership of an enterprise disobeys the stipulations of the plan and expands production of highly profitable products of its own accord, it will violate the requirements of the basic economic law of socialism and the law of planned development of the national economy and go astray on the capitalist road.
Second, production in socialist rural collective enterprises is also carried out under the guidance of the state plan. Unlike the state enterprise, the collective enterprise is an economic unit responsible for its own profit and loss. The level of product prices and the size of income directly affect the accumulation of the collective and the income of its members. Other conditions being equal, the collective enterprise generally tends to be willing to produce more of those products which have low costs and command high economic income. In this respect, the law of value affects the production of the collective enterprise more than that of the state enterprise. However, the area sown for food grains, cotton, vegetable oil, and other major crops is decided by the state plan. The collective economy cannot arbitrarily expand the sown area of those crops commanding a higher income. It can only increase the per-unit-area yield of these crops within the sown area specified by the state through more intensive farming, more fertilizers, and better management. Therefore, as for the production of major products in the rural collective economy, the regulating role of decisive importance is still the law of planned development of the national economy. The law of value merely plays a secondary role. Only for products which are not important to the state and the people, not included in the state plan, nor procured through contracts are the level of prices and the size of income of greater importance. Products which command a higher revenue develop easily, while products which command a lower revenue develop only with great difficulty. The law of value performs a certain regulating role only with regard to these products.
As far as the whole of socialist production is concerned, the plan is primary, and the price is secondary. This is to say, in the allocation of social labor among various production sectors, what and how much to produce are regulated by the state plan which reflects the requirements of the basic law of socialism and the law of planned development of the national economy. The state plan plays a primary and decisive role. The law of value is still useful, but it plays only a secondary and supportive role.
The Law of Value Is a Great School
In socialist production, not only are the form and degree of effect of the law of value different from those applicable to capitalist production, but the social consequences are also different.
Under the capitalist system, blind regulation of production by the law of value, on the one hand, promotes advances of production technology. On the other hand, it inevitably leads to an immense waste of social wealth and mass bankruptcy among the medium and small enterprises, and intensifies class contradictions in capitalist society.
Under the socialist system, the proletarian party and the socialist state are capable of identifying the objective role of the law of value and can make use of its constructive effects on socialist production and restrict or eliminate its negative effects.
In the development process of socialist production, the direction of the effects exerted by the law of value and the law of planned development of the national economy is sometimes identical. For example, the law of planned development of the national economy requires the acceleration of production of certain cash crops to meet the demand for raw materials due to a rapid development of some light industries. The prices of these cash crops can also guarantee a reasonable income to the agricultural collective economy. Under these conditions, the state plan’s requirements for increased production are identical to the requirements of the agricultural collective economy for increased production and increased income. The plan for increased production can generally be fulfilled or overfulfilled. However, the direction of the effects exerted by these two effects can be different. With regard to the comparative price relations between food grain crops and cash crops and among various cash crops within agricultural production, the prices of some cash crops can bring a relatively higher income to the collective economy than the prices of other cash crops. If the law of value is permitted to influence production, it will be detrimental to the requirement of the national economic plan that there be an overall increase in production of all crops but in varying degrees for different crops. Thus, we can see that when the effects of the two laws are identical, the law of value plays a constructive role in fulfilling the state plan. But when the effects of the two laws are not identical, the law of value disrupts the fulfillment of the state plan and plays a negative role. The so-called conscious use of the law of value means that the role of the law of value must be comprehensively understood and that through political and ideological work, arrangement of the state plan, and price policy, the positive role of the law of value will be played and its negative role will be curtailed so that its effects on socialist production will be conducive to fulfilling the state plan. Our Party and government have consistently emphasized socialist education of the peasant and planned leadership of agricultural production. At the same time, they have also paid attention to the rational arrangement of the purchasing prices of agricultural and sideline products and to the comparative price relationships among various agricultural and sideline products and have struggled hard to be able both to satisfy the state’s need for agricultural and sideline products and to promote the development of commune and brigade production and the elevation of the commune members’ income, thus correctly handling the interests of the state, the collective, and the individual.
The conscious exercise of the law of value by the socialist country to promote socialist production is also manifested in its use in the system of economic accounting to carry through the policy of running an enterprise with industry and frugality. Based on the requirement of the law of value, the socialist country charges the same price for identical products according to the average social expenditure in producing the product. But because of different conditions in production technology and different levels of management and operation, the individual labor expended on the same product in different enterprises may differ. The individual expenditure in enterprises which are experienced in mobilizing the masses, continually updating production technology, and lowering costs by careful and detailed calculation may be lower than the average social expenditure. They can thus fulfill and overfulfill the plan targets assigned by the state and occupy an advanced position. Conversely, enterprises which are careless, wasteful, conservative, and inefficient in mobilizing the masses to transform their backward technological conditions may have individual labor expenditures which are higher than the average social expenditure. They cannot fulfill the plan targets assigned to them by the state and occupy a backward position. Therefore, the unified prices set by the socialist state, making use of the law of value, are conducive to exposing the contradictions of various enterprises in operation and management and discovering the disparities between the advanced and the backward in order to press various enterprises continually to improve their operation and management, lower their production costs and carry through the policy of running an enterprise with industry and frugality.
The correct application of the law of value can teach us: to follow the requirements of the law of value to set prices rationally; to organize production rationally using the influence of the law of value; to calculate precisely the volume of production and tap production potentials based on actual conditions; and to improve production methods, lower production costs, and implement economic accounting continually. These positive roles demonstrate that the law of value is a great school. Stalin observed: “This is a very good practical school. It promotes the rapid growth of our cadres in economic work so they become real leaders in the socialist production of the present stage.” 8
In socialist society, the proletariat wants to make use of the law of value to promote the development of socialist construction while the bourgeoisie tries hard to use the law of value to set up free markets and disrupt socialist construction. The Liu Shaoch’i and Lin Piao clique tried hard to exaggerate the role of the law of value. They emphasized the “almighty nature” of the law of value and advocated the law of value as a regulator of social production. In their capitalist restoration, the Soviet revisionist renegade clique has flagrantly used the law of value as “an objective regulator of socialist social production.” It has also launched a “new economic system” centering on putting profit in command and having material incentives in accordance with this revisionist theory. Even though the measures taken by the internal and external revisionists are sometimes different, their purpose is the same, namely, to disrupt socialist construction and restore capitalism. The experience reflected in the struggles between the two lines with respect to the question of the law of value tells us that it is necessary to draw a demarcation line between Marxism and revisionism and firmly adhere to the socialist road if the law of value is to correctly serve socialist production. We should never be careless; otherwise, we will lose our way.
The National Economic Plan Must Correctly Reflect Objective Laws
Work on the National Economic Plan Must Reflect the Requirements of Objective Laws
The law of planned development of the national economy and the law of value are both economic laws that objectively exist in socialist society. The roles of these laws are realized basically through their conscious application. The national economic plan of the socialist state is a form of conscious application of these laws. Work on the national economic plan includes research, formulation, implementation, inspection, adjustment, and summation. Without the work on the national economic plan, it is impossible to realize a proportional development of the socialist national economy. Of course, even if people do not consciously apply them, the law of planned development of the national economy and the law of value will eventually prevail. For example, if the economic leadership organs did not seriously investigate and study, did not respect the objective requirements of the law of planned development, or formulated the proportions carelessly or if they formulated the price plan without considering the requirements of the law of value and set prices arbitrarily such that the socially necessary expenditure of some production departments was not compensated and production could not be continued, then various dislocations would appear in mutually dependent departments. These phenomena would teach people by negative example to respect these laws and to reflect the requirements of these laws by strengthening and improving the work on the national economic plan.
An important link in the work on the national economic plan is the formulation of plans. Plans are formulated by people and are products of ideology. Ideology is a reflection of reality and also interacts with reality. A correct plan promotes a rapid development of the socialist economy. An incorrect plan hinders the development of the socialist economy.
If the national economic plan is to be correct, it is necessary first of all for the people to reflect the objective requirements of the law of planned development in all its aspects in the formulation process of the plan. This is by no means easy. In socialist society, the bourgeoisie and all exploitative classes always try hard to disrupt and interfere with the planned development of the national economy by various means and make it difficult for the proletariat to understand this law. The whole national economy appears to be a complex entity full of contradictions. Imbalances continually pop up and are resolved and then pop up again. Objective conditions are highly changeable. It is not easy for the subjective to correctly reflect the objective. But this is not to say that the proportional relations in the national economy cannot be identified. Provided that we continually sum up experience, penetratingly investigate and study, seriously analyze, rely on the masses, and do meticulous work, it is entirely possible to gradually identify the law and make the national economic plan more accurately reflect the requirements of planned development.
The law of planned development of the national economy merely requires that harmonious proportional relations be maintained among interdependent sectors in the development process. It does not point out for us the direction and duties of socialist economic development. It is the basic economic law of socialism that points out the basic direction and the duties for socialist economic development. Therefore, an accurate national economic plan must correctly reflect not only the requirements of the law of development, but also the requirements of the basic economic law of socialism in its 256 various aspects. The national economic plan which reflects the requirements of these objective laws embodies the interests of the proletariat and the whole laboring people. It is the Party program for economic construction and must be seriously treated and resolutely implemented.
Overall Balance Is the Basic Method in Planning Work
In the work on the national economic plan, it is important to master overall balance. Overall balance is not balance within individual sectors. It is balance in agriculture, balance in industry, and balance between industry and agriculture. Overall balance is the basic method in a planned economy.
The task of overall balance lies mainly in the arrangement of proportional relations in the national economy. In accordance with the major tasks of the state in the planning period, it properly allocates manpower, material resources, and finance to various sectors of the national economy and establishes a balance between social production and social needs so that the growth of production of the means of production corresponds to the needs of the ever-developing socialist production and so that the growth of production in the means of consumption conforms to the needs arising from the gradual improvement of the people’s livelihood.
The process of overall balance is a process of exposing, analyzing, and resolving contradictions. To do a good job in overall balance, we must handle contradictions with a positive attitude, energetically promote production of shortrange products 9, and accelerate the development of key sectors in the national economy that are temporarily backward so that a new balance can be established on a new and higher level. Only in this way can national defense construction, capital construction, and the needs of the people’s livelihood be better safeguarded. To oppose Chairman Mao’s proletarian revolutionary line, the Liu Shaoch’i clique sometimes suggested so-called “short-run balance” and practiced negative balance in a big way to pull down the high to suit the low. Sometimes they set targets so high that they were not feasible. When these targets could not be reached, they resorted to “total retreats.” They pushed a Right opportunist line in planning work that was “Left” in form but right in substance.
Overall balance is the establishment of a balance in the whole national economy. But it is not an even application of force without differentiating what is more and less important. If two hands had to catch ten fish at one time, the result would be that no fish could be caught. In the complex proportional relations of the whole national economy, there are the more and the less important, the dominant and the subordinate. To achieve overall balance, we must differentiate the more and less important and guarantee to take care of the key points. We must first guarantee the satisfaction of the needs of the leading links and the key sectors in the development of the national economy. In formulating a plan for capital construction, the principle of concentrating forces to fight a battle of annihilation must be implemented. If we start from departmentalism, pay no attention to what is more important and what is less important, concentrate on too many items, and spread the limited manpower, material resources, and funds thinly over a long battlefront, then our forces will be dispersed, and the early completion and operation of many key items will inevitably be affected. Of course, safeguarding the key points does not mean neglecting ordinary things. There are close complementary relations between the key points and ordinary things. Ordinary things will not develop properly if we neglect the key points. But if we neglect ordinary things, the development of the key points will also be affected. Therefore, under the precondition of taking care of the key points, we must also pay attention to ordinary things. We must start from the whole and consider all vertical and horizontal relations in order to avoid the error of partiality.
In overall balance work, attention must be paid to the balance of labor, materials, and funds. People are the most important factor in the productive forces; so, of the three, the balance of labor must be arranged first. In conformity with the principle that agriculture is the foundation of the national economy, sufficient labor must first be secured for agriculture. Laborers will be transferred from agriculture to industry or other sectors of the national economy only when the development of agricultural production and agricultural mechanization enables the rural areas to succeed in providing surplus labor power and more marketable grain and commodity crops. If we depart from this prerequisite and transfer too much labor power away from agriculture, it will disrupt the overall balance and be unfavorable to the rapid, planned, and proportional development of the national economy.
There is an inevitable process between the appearance of imbalances among various sectors of the national economy and the establishment of a new balance. To guarantee a proportional development among various sectors, it is necessary to establish and maintain a certain amount of material reserves. The amount of material reserves of various kinds must be appropriate. If the reserves are too low, they cannot satisfy the needs for filling the gap between two relative balances. As a result, some sectors will have to work below capacity because of a shortage in certain material resources, and this will affect the rapid development of the national economy. If the material reserves are so high as to exceed the need for filling a temporary shortage, then material resources which could have been used for current production will not be available, and this will also adversely affect the rapid development of the national economy.
Follow the Basic Principles of Planning Work
To do a good job in planning work, in addition to the use of the basic method of overall balance, it is also necessary to follow some basic principles derived from the practical experience of planning work.
Planning work must mobilize central as well as local activism and must combine central, unified leadership with the exercise of local activism.
To formulate and carry through a unified national economic plan, it is necessary to have a highly centralized and unified leadership. In national economic planning work, there can be no unified national economic plan if there is no central unified leadership and if the viewpoint of the whole situation is not promoted and excessive decentralization is not opposed so that every local unit can make its own plans. However, socialist centralized leadership is built on a wide foundation of democracy. Central unified leadership must be combined with local activism. In formulating a national economic plan, the central departments concerned must find out what the local opinion is, consult with the local units, and formulate plans with the local units. In implementing the plan, it is also necessary to allow exceptions for local conditions. These exceptions are not excuses for creating independent kingdoms, but are necessary allowances that suit the interests of the whole, permit full tapping of production potentials in accordance with local conditions, and facilitate a better fulfillment of the national economic plan. As for the system of planning work, it is necessary to implement a system with a unified plan and administration by different levels. Chairman Mao pointed out early in the establishment of the People’s Republic of China:
“What should be unified must be unified. Excessive decentralization cannot be permitted. But it is necessary to combine unification with local adaptations.” 10
Later, Chairman Mao taught us more than once to exercise local activism more often in handling the relations between the center and the local units. Under a central, unified plan, the local units should be allowed to do more. Following Chairman Mao’s teachings, the broad people of the country criticized and repudiated the “dictatorship by regulations” fostered by the Liu Shaoch’i clique that stifled local activism, and they better exercised central and local activism in plan management work, thus promoting the rapid, planned, and proportional development of China’s socialist economy.
Chairman Mao remarked, “When the plan is being formulated, it is necessary to mobilize the masses and to leave leeway.” 11 This is a very important principle in national economic planning work.
In socialist construction, the mass line must be followed whatever the work may be. Mass movements must be launched in a big way. Planning work must also follow the mass line. The masses must be mobilized to talk about lines, expose contradictions, uncover disparities, and accelerate changes. If the plan targets are not discussed by the masses, they are the ideas of the cadre. Only after the plans are discussed by the masses do they become the plans of the masses. Only then will the plan targets be both advanced and reliable and will the activism of the broad masses be fully mobilized. Plan targets should be advanced. Only an advanced plan can embody the superiority of the socialist system, and only an advanced plan can heighten morale. To formulate an advanced plan, it is necessary to struggle with conservative thought. Some people clearly realize there is immense production potential but they set the plan targets very low. All they care about is to be able to fulfill the plan comfortably. The formulation process of a plan is also a process of struggle between advanced and conservative thought.
Plan targets should be advanced. But this does not mean that the higher the targets, the more morale will be heightened. Plan targets that are too high to be practicable not only do not mobilize mass activism, but will discourage mass activism. Advanced plan targets must have a scientific basis; they must be reliable and practicable. Chairman Mao said: “Nobody should indulge in illusions, plan his action beyond what the objective conditions allow, and dare to do impossible things.” 12 Plan targets that are objectively possible should not be set too high. Leave some leeway. Practical experience demonstrates that plan targets which are not set too high and which enable the plan to be over-fulfilled through the efforts of the masses are more favorable to mobilizing mass activism.
It is necessary to combine long-range plans (plans covering five years, ten years, twenty years) with short-term plans (annual plans, quarterly plans, and monthly plans) in national economic planning. If long-range plans are not set up, it is difficult to arrange capital construction. Long-term plans embody long-term targets. They encourage people to stand high, to see afar and to exert themselves. The worker comrades put it well: “Without big targets in our minds, even one simple straw is heavy enough to bend our backs. With big targets in our minds, even the Taishan will not bend our backs.” But long-term plans require that short-term plans materialize, are grasped, and serve the purpose of comparison and inspection so that the realization of long-term plans will not fall short.
The planning work for an economy under a socialist collective ownership system has its own characteristics. An economy under a collective ownership system must obey the leadership of a unified state plan. But it can retain a higher degree of flexibility provided that the unified state plan and state policies and laws are not violated. This permits a fuller mobilization of the activism and initiative of the collective economy in socialist production through local adaptations so that the collective economy can develop with the development of the state economy.
Major Study References
Engels, Anti-Dühring. Part 3, Chapter 2.
Stalin, Socialist Economic Problems of the Soviet Union.
Chairman Mao, “On the Correct Handling of Contradictions among the People,” Section 1.
Review Problems
- Why do we say that only socialist society can adopt a planned economy? What is the superiority of a socialist planned economy?
- What are the important proportional relations in the national economy? How should these proportional relations be correctly handled?
- What does planning is primary and pricing is secondary tell us? How should the law of planned development and the law of value be correctly used to promote the development of socialist production?
12 Footnotes
