But here a question arises: how does the superior profitability of national economy correlate with profitability of every single industry? In other words with profitability of a number of enterprises in certain industries. These enterprises can work by any pattern of ownership, i.e. state, co-operative or kolkhoz and even sole proprietorship.
Normally sales return of a business should exceed expenses. Otherwise donation would be needed. If it is not needed and the business is profitable, then what does profitability of national economy as a unite system in the course of 10 or 15 years mean? Many people do not understand it.
First of all they do not understand it because a Socialist state is not one of the financial system users but the owner of it. Besides the state as the owner of the financial system and a number of enterprises gets no profit and suffers no loss if some values move from the balance of an enterprise to the balance of another one. This process is accompanied by the proper transfer of funds.
Actually it is not so difficult as it may seem. At a certain period gross output can be valued at cost or at a real price. Accordingly at the same period it can comprise capital goods expenditures including the equipment of production distribution system securing production storage and sale to ultimate consumers. After a while these means of production will produce products that a consumer will buy. The way consumers will pay for them and their prices do not matter when considering the question of national economy profitability as a whole. Another thing matters:
Introducing new means of production in all the industries results in a range of products. If national economy on the whole is profitable at a certain period of time then the cost of the range of production at a value cost of the beginning of the period must exceed the cost of means of production.
Certainly some time is needed for the products to compensate for the new means of production. It is natural that the shorter this period, the more effective and the larger the profitability of national economy as a whole. At this it is not production for consumptive use but manufacturing more effective means of production that should be of paramount importance. This is the pledge of stability of the given regime of national economy functioning in the succession of planned production cycles, i.e. intervals of all-system profitability control.
This approach estimates profitability of national economy only by the production activity including production distribution to ultimate consumers. Anything that is not directly relevant to production and distribution is excluded from the estimation of national economy profitability. The reason for it is the fact that other sectors’ activity is conditioned by the capability of the production and distribution sector to feed and to settle lives of those involved in other sectors. Scientific, technological and organizational advances are kept in stability store of estimation of national economy profitability. Speculative sector preoccupied with deriving an income from «securities» and on-selling is not taken into consideration for being parasite[421].
This is a general point of view. It is to be put into practice on the ground of a certain classified nomenclature of products and services. It forms a basis for planning, production record, production distribution and real consumption. They are to provide correlation between showings at the beginning and at the end of a control period. Otherwise uncertain nomenclature and changes in it during the period of time would prevent from correlating the showings.
The structure of industries and their relationship change in the course of time under the influence of scientific, technological and organizational advance. Therefore division of national economy into industries and classification of industries are secondary to classified nomenclature of production. In other words the system of long-term strategic planning of production, distribution, consumption and recycling can be and must be derived from stable nomenclature of a range of needs based on population study. It should not be the consequence of unstable nomenclature of industries[422].
J.V. Stalin determined the duration of the estimation period of national economy profitability on the whole as ten or fifteen years. It means that during tan or fifteen years virtually all investments should compensate for themselves in the described way and secure national economy profitability estimated at constant prices.
Besides J. Stalin’s wording about the rule of superior profitability of national economy actually implicated the requirements for planning. Those are to provide for high-quality renewal of all the equipment and organization of national economy as united system of production and consumption every ten or fifteen years. It does not mean that there cannot be more durable enginery and projects with a longer self-repayment span or planned unprofitable but socially necessary projects. It means that in every industry more up-to-date, more efficient equipment and technologies should be introduced extensively.
What has been said proves that that J.V. Stalin suggested no protracted building when a project would become obsolete, the execution of it would lose sense and when structures installations would begin ruining in course of construction. Such protracted building later becomes normal. But it is a perversion of Baibakov’s followers[423] in the State Planning Committees of the USSR and republics of Khrushchev and Brezhnev’s age.
J.V. Stalin wrote that the law of value was subject to the rule of «superior profitability of national economy» in the period of ten-fifteen years, while the multi-industry system of production and consumption was subject to «the main economic law of Socialism» and «the law of planned (proportional) development of national economy». Actually all these things implicated two associated goals:
Maintaining balance of dues and grants in national economy, i.e. providing for financial stability of planned unprofitable enterprises and business of low profit. That is to be achieved owing to redistribution of excess profits of highly remunerative enterprises in favor of business of low profit;
Using over and above the plan production facilities so that the produced output would find a consumer and would serve society. These facilities:
inevitably exist because of mistakes in books and necessity to secure stability of the plan by resources and facilities involved[424];
appear again due to scientific, technical and organizational advance in process of accomplishing state plan targets, – so that the goods which can be produced with these facilities could be in demand and use for the society.
Neither of these goals can be achieved under bureaucracy rule. It was one of the reasons for J.V. Stalin to write fairly that «under the present Socialist conditions of production (our splash text) the law of value cannot work as a «regulator of proportions» in labor division between different industries».
The matter is that non-profitability and low profitability of an enterprise can have different nature. It can result from poor bureaucratic management and Socialist property looting or from the public price-formation policy pursuing noneconomic objects and being guided by J. Stalin’s principle of superior profitability. A bureaucrat who is to manage the balance of dues and grants cannot differentiate between these types of non-profitability and low profitability. Therefore basically he can maintain the balance of dues and grants distributing donations in favor of fools and thieves at the expense of hard-working people. Being «quite well-meant» he violates the principle of the superior profitability of national economy trying ‘not to make a mistake’ and not to harm the public price-formation policy though he does not understand what objects it pursues. But it is within a high-ranking bureaucrat’s grasp to maintain the balance of dues and grants according to the principle of the superior profitability of national economy.