There was nothing to prevent profitability of co-operative business from growing to the level that could be reached on the basis of state planned shopping prices, but bureaucracy in management. The same concerns increasing profitability of state enterprises as compared to a planned level.
Here a question arises, why did J.V. Stalin write that common wealth increase should be ensured by means of:
Direct wage raise;
Further systematic cut in prices for articles of mass consumption.
The latter point is especially important.
The answer to the question shows that in Socialist economy the principle of superior profitability of national economy as a whole must go with the principle of achieving utmost self-repayment of enterprises. Note that the principle of superior profitability of national economy is manifested by a planned systematic cut in prices according to the increase of social labor productivity and of serving people’s needs in various products including services. As a result the savings of manufacturing a product as well as over and above the plan production should become apparent not only in price cutting and output rate increasing[426], but in the up growth of nominal cash income of enterprises. This enables groups to develop their funds of public consumption and to reward their employees thereby encouraging them to work conscientiously, without waiting for a national cut in prices.
During post-Stalin’s period this strategy was distorted. But it does not mean that J.V. Stalin was wrong in his idea of a planned state beginning on a national scale and principles of self-repayment (profitability) of national economy as a whole as well as of single enterprises.
The issue of commodity production under Socialism and accordingly the issue of market functioning is explained by J.V. Stalin in the following way:
«Commodity production must not be regarded as something sufficient unto itself, something independent of the surrounding economic conditions. Commodity production is older than capitalist production. It existed in slave-owning society, and served it, but did not lead to capitalism. It existed in feudal society and served it, yet, although it prepared some of the conditions for capitalist production, it did not lead to capitalism. Why then, one asks, cannot commodity production similarly serve our socialist society for a certain period without leading to capitalism, bearing in mind that in our country commodity production is not so boundless and all-embracing as it is under capitalist conditions, being confined within strict bounds thanks to such decisive economic conditions as social ownership of the means of production, the abolition of the system of wage labour, and the elimination of the system of exploitation?
(…)
Of course, when instead of the two basic production sectors, the state sector and the collective-farm sector, there will be only one all-embracing production sector, with the right to dispose of all the consumer goods produced in the country, commodity circulation, with its "money economy," will disappear, as being an unnecessary element in the national economy. But so long as this is not the case, so long as the two basic production sectors remain, commodity production and commodity circulation must remain in force, as a necessary and very useful element in our system of national economy. How the formation of a single and united sector will come about, whether simply by the swallowing up of the collective-farm sector by the state sector – which is hardly likely (because that would be looked upon as the expropriation of the collective farms) – or by the setting up of a single national economic body (comprising representatives of state industry and of the collective farms), with the right at first to keep account of all consumer product in the country, and eventually also to distribute it, by way, say, of products-exchange – is a special question which requires separate discussion.
Consequently, our commodity production is not of the ordinary type, but is a special kind of commodity production, commodity production without capitalists, which is concerned mainly with the goods of associated socialist producers (the state, the collective farms, the cooperatives), the sphere of action of which is confined to items of personal consumption, which obviously cannot possibly develop into capitalist production, and which, together with its "money economy," is designed to serve the development and consolidation of socialist production». (“Economic Problems of Socialism in the U.S.S.R.”, “Remarks on Economics Questions Connected with the November 1951 Discussion”, part 2. “Commodity Production Under Socialism”.)
«Wherever commodities and commodity production exist, there the law of value must also exist.
In our country, the sphere of operation of the law of value extends, first of all, to commodity circulation, to the exchange of commodities through purchase and sale, the exchange, chiefly, of articles of personal consumption. Here, in this sphere, the law of value preserves, within certain limits, of course, the function of a regulator.
But the operation of the law of value is not confined to the sphere of commodity circulation. It also extends to production. True, the law of value has no regulating function in our socialist production, but it nevertheless influences production, and this fact cannot be ignored when directing production. As a matter of fact, consumer goods, which are needed to compensate the labour power expended in the process of production, are produced and realized in our country as commodities coming under the operation of the law of value. It is precisely here that the law of value exercises its influence on production. In this connection, such things as cost accounting and profitableness, production costs, prices, etc., are of actual importance in our enterprises. Consequently, our enterprises cannot, and must not, function without taking the law of value into account.
Is this a good thing? It is not a bad thing. Under present conditions, it really is not a bad thing, since it trains our business executives to conduct production on rational lines and disciplines them. It is not a bad thing because it teaches our executives to count production magnitudes, to count them accurately, and also to calculate the real things in production precisely, and not to talk nonsense about "approximate figures," spun out of thin air. It is not a bad thing because it teaches our executives to look for, find and utilize hidden reserves latent in production, and not to trample them under foot. It is not a bad thing because it teaches our executives systematically to improve methods of production, to lower production costs, to practise cost accounting, and to make their enterprises pay. It is a good practical school which accelerates the development of our executive personnel and their growth into genuine leaders of socialist production at the present stage of development.
The trouble is not that production in our country is influenced by the law of value. The trouble is that our business executives and planners, with few exceptions, are poorly acquainted with the operations of the law of value, do not study them, and are unable to take account of them in their computations. This, in fact, explains the confusion that still reigns in the sphere of price-fixing policy (put in bold type by the authors: the integral evaluation of economic literacy of managers and economists generation brought up by Marxism political economy). Here is one of many examples. Some time ago it was decided to adjust the prices of cotton and grain in the interest of cotton growing, to establish more accurate prices for grain sold to the cotton growers, and to raise the prices of cotton delivered to the state. Our business executives and planners submitted a proposal on this score which could not but astound the members of the Central Committee, since it suggested fixing the price of a ton of grain at practically the same level as a ton of cotton, and, moreover, the price of a ton of grain was taken as equivalent to that of a ton of baked bread. In reply to the remarks of members of the Central Committee that the price of a ton of bread must be higher than that of a ton of grain, because of the additional expense of milling and baking, and that cotton was generally much dearer than grain, as was also borne out by their prices in the world market, the authors of the proposal could find nothing coherent to say. The Central Committee was therefore obliged to take the matter into its own hands and to lower the prices of grain and raise the prices of cotton. What would have happened if the proposal of these comrades had received legal force? We should have ruined the cotton growers and would have found ourselves without cotton». (“Economic Problems of Socialism in the U.S.S.R.”, “Remarks on Economics Questions Connected with the November 1951 Discussion”, part 3. “The Law of Value Under Socialism”.)