CHAPTER 5

PART 2

Varga's State Communism as a Factor in Distribution

Leichter, however, is not the only one to seek his salvation in a "price policy": Varga also makes this the centre of gravity in a communist system of distribution. He differs only from his colleagues Neurath, Leichter, etc. only insofar as he approves in principle of a system of equal distribution of the social product. In the transitional period, it will not be possible to eliminate exploitation immediately, because we must expect that "a generation of workers would for a time exist which has been corrupted by capitalism, which has been brought up under the shadow of an acquisitive and egotistical capitalism", (5) and would set its face against an equal distribution of the social product. It is well-known that skilled workers tend to view unskilled workers with a certain contempt, whilst a perverted sense of justice tends to allot to the scions of the intellectual professions, such as doctors, engineers, etc., a larger share of the total product than that which accrues to the "ordinary" workers. Today one may consider this differentiation to be too extreme, but .. "an engineer nevertheless remains something different from a dustman"! To what extent the working class may in the course of the revolution come to discard this ideologically bolstered excrescence remains to be seen. One thing, however, remains certain: once the revolution is complete, this re-education must be carried through very swiftly, since an antagonistic mode of distribution of the product will always lead to rivalries and quarrels within the working class itself.

In the above mentioned text Varga has set down his experiences and theoretical observations concerning the Hungarian Soviet Republic. The history of Hungary is extremely important to the study of a communist economy, because it was here that the theory of state communism was first put into practice and that practice than hallowed as theory. In Hungary the attempt was made to construct communism according to the rules of the state-communist concept, and indeed under such favourable conditions that "the transformation and organisational restructuring of the economy proceeded faster and with greater energy in Hungary than in Russia itself" (Varga, page 78). Economic construction, indeed, proceeded according to the Hilferdingian vision of a "general cartel" (page 122), in which the State, as general manager and administrator of both production and distribution, enjoys the full right of disposal over all products. All commodities still produced in the "free" capitalist sector of the economy are now bought up by the State, whereupon the latter does indeed enjoy complete domination over the social product.

In the case of distribution, it was at first the pressing need to supply industry with raw materials and means of production which imposed itself as an urgent necessity. For this purpose the Supreme Economic Council had established a number of central distribution points for raw materials, which then allocated to the factories whatever quantities of raw materials and other means of production as seemed necessary and expedient to them. These central distribution points were, however, by no means simply organs of distribution; they operated simultaneously as instruments of political and economic power, since they consciously sought to promote the concentration of production through their control of materials supply. Factories which "higher authority" had decided to close down were simply cut off from the source of supply of essential materials, whereupon the operating staff were thrown onto the street. There is first hand evidence to show that the workers fought against such a process of concentration, which held the same fateful consequences for them as it did under capitalism. The very practice taught them the lesson that the producers held no rights of disposal over the system of production. This right remained in the hands of the state officials of the Supreme Economic Council, which later thus comes into irreconcilable conflict with the producers themselves (E. Varga: ibid., p.71).

To this we would add the comment that concentration "from above downwards" apparently enjoys the virtue of being carried through more quickly than that "from below upwards", but the price to be paid for this accelerated development is the power the producers would otherwise wield over the system of production, that is to say: communism itself!

We have already noted that state communism of the Varga brand knows nothing of any economic scale of measurement determining the distribution of raw materials and means of production. The allocation of materials needed by industry for current production is carried out solely "by order of the relevant authorities" and is in no way determined objectively by the process of production itself. From the point of view of both social and economic policy, industrial production thus leads to a total fiasco. In social policy, because producers end up in a situation of total dependence upon those authorities which allocate the products; in economic policy, because under a system of distribution based upon subjective administrative assessments the needs of reproduction are not guaranteed. Varga is thus in essence a "commodity manager", who in the last analysis tends towards the system of centralised production and distribution advocated by Neurath, one which operates without any unit of economic control. Indeed he states that "for the time being the need for money prices and money wages exists", but is forced to add that this has to be overcome through a more plentiful production of goods. But then there remains absolutely no objective measure by means of which the growing productivity of the production apparatus may be evaluated. True planned production on any real basis then ceases, and it becomes impossible to measure and allocate as much product for the next production period as was used up in the previous one - ie., to ensure even simple reproduction.

To overcome the chaos of state communism of the Varga variety, it would finally have become necessary to have established production upon the firm foundation of a unit of control, which by the very nature of the situation could have been nothing other than that of the average social hour of labour. But this would simultaneously have brought to an end any system based upon arbitrary allocation of the social product according to subjective administrative decision. As soon as the factories introduce a system by means of which their consumption is calculated in terms of labour-hours, according to the formula (p + c) + L, then the system becomes one in which the objective process of production itself determines how much product in the form of means of production and raw materials must be supplied to the factories for the next production period. With this system, the subjective element is eliminated along with the centralised power of disposal over the production apparatus, because management and administration of both production and distribution lie in the hands of the producers.

In Varga's system, the norms determining the distribution of products for individual consumption also reflect allocation according to subjective administration decision. Indeed, we cannot expect anything different, since production and distribution are functionally interconnected. The ideal which drifts vaguely before his eyes is "natural" allocation (ie., by barter) without any economic measure, in exactly the same way as in the objective process of production. It is for this reason that he establishes for all consumers a fixed ration for the various staple products, which can then be obtained at consumers' cooperatives. "Since, however, money wages and money prices must for the time being remain in operation", we must now turn our attention to the problem of "the fixing of prices by the state" (Varga, page 147):

"At what level should the prices of state products be fixed? If goods produced by state enterprises were to be sold at cost price, there would be no economic resources available for maintaining the above-mentioned unproductive sections of the population. (This refers to military personnel, officials, teachers, the unemployed, the sick, invalids, etc. - the Authors). Also there would be no possibility of any real accumulation of means of production, which in the proletarian state is more urgently needed for the purpose of raising the standard of living of the inhabitants than in a capitalist one. It is for this reason that, in principle, all goods produced by state establishments should be sold at the 'social cost price'. By this we mean the cost price plus an additional increment to cover the cost of maintaining the non-productive section of the population, plus yet a further increment out of which real accumulation may be financed. (Varga's emphasis). Expressed otherwise, selling prices must be fixed in such a way that the state not only suffers no deficit, but actually disposes over a surplus out of which new productive installations may be financed. This, in principle, is the solution." (E. Varga: ibid., p.147)

References

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