E.A. Preobrazhensky, The New Economics: Historic Context and Contemporary Relevance

The following is an expanded abstract of a paper that I am writing which is intended for academic publication by the end of this year. This is an initial formulation of my ideas on these subjects. Readers comments are more than welcome as are additional references.

E.A. Preobrazhensky The New Economics: Historical Context and Contemporary Relevance. Expanded Abstract

In capitalist society individuals are controlled by a pitiless law usually beyond their comprehension. The alienated human specimen is tied to society as a whole by an invisible umbilical cord: the law of value. –Che Guevara Socialism and Man in Cuba[1]

Eugene A Preobrazhensky, Евге́ний Алексе́евич Преображе́нский,. (February 27 [O.S.February 15] 1886 – July 13, 1937)  was an early adherent to the Bolshevik the faction of the Russian Social Democratic Labor Party (RSDLP) (from 1903) a member of the Central Committee of the Bolsheviks in 1917, a leader of the Bolshevik party in the Urals at the time of the October Revolution, holder of several national party and state offices throughout the 1920s and early 1930’s, and a leading voice of the Left Opposition in the 1920s. He was a “professional revolutionary” party leader, activist, functionary, educator, intellectual and writer for the full extent of his adult life. He was also a piercingly insightful economist whose ideas transcended the intense factional party debates of the Soviet Union during the New Economic Policy (NEP)period (approximately 1921-1929).[2] [3]

Preobrazhensky’s writings on a broad range of economic problems have grown in influence over the past three decades and are increasingly cited in works on alternative economic theory, problems in the interpretation of Marx’s analysis, and the field of “development economics”[4] [5]as well as providing insights into the study of the history of the Soviet Union and theoretical models for the construction of both socialist and mixed or market socialist economies.

Preobrazhensky’s book, The New Economics (1965)[6] is his most influential and thoroughly developed work. First published as a complete edition in 1926 as Novasia economika: Opy t teoreticheskogo analiza sovetsokogo khoziatva [The New Economics: An Attempt at a Theoretical Analysis of the Soviet Economy],[7] The New Economics was actually part of a larger effort and one which unfortunately was never completed as a whole. Though many of the ideas contained in the work begin to emerge in the author’s writings concurrent to the end of the War Communism Period (1918-1921) and with the initial moves toward the establishment of the NEP. The first thorough expression of the theories was presented in 1924[8] as lectures and later as articles published in Vestnik Kommunisticheskoi Akedemii. The published version was intended to be the first of two volumes representing a complete theoretical work. Though the latter part of this work was never completed in full, some of the elements have been assembled in English translation in the collection The Crisis of Soviet Industrialization edited and translated by Donald A. Filtzer[9]

In the New Economics Preobrazhensky describes the conflict between the emerging Soviet State in its attempt to develop industry along planned lines and the broad operation of market forces remnant from the Russian empire as well as the new market forces created by the peasant revolution which accompanied the Bolshevik seizure of power.[10]

Preobrazhensky’s achievement is not limited to the specifics of his technical understanding or his subtle and significant contribution to Marxist literature or even to economic thought as a whole. It must be understood in the context of the broader continuity of scientific socialism and revolutionary ideas and as a part of the historical continuity of individuals who have sought to place the methods of discovery in social science at the service of the struggle for the social liberation of the working class.

This paper seeks to look at the work of Preobrazhensky for its content in the context of the individual as a political revolutionary and to understand his ideas as part of the historic continuity of revolutionary minded scientific socialism. Secondly it seeks to view Preobrazhensky’s ideas in the context of broader advances in bourgeois economic science made by his historical peers, in particular that of Alfred Marshall and John Maynard Keynes as well as the more vociferous critics of the Marxist view in particular Ludwig von Mises and the Austrian tradition. Thirdly it seeks to explain that an understanding of the economic conflicts and contradictions which existed during the New Economic Policy Period as described by Preobrazhensky remains directly relevant, not only to individual developing economies, or those in which agriculture remains the dominant form of production, or to countries which are nominally ‘socialist’ but rather to the fundamental dynamics of the contemporary global economy. Thusly I seek to justify the direct relevance of the study of Preobrazhensky’s writings in the context of contemporary political economics.


Every child knows, too, that the masses of products corresponding to the different needs required different and quantitatively determined masses of the total labor of society. That this necessity of the distribution of social labor in definite proportions cannot possibly be done away with by a particular form of social production but can only change the mode of its appearance , is self-evident. No natural laws can be done away with. What can change in historically different circumstances is only the form in which these laws assert themselves. And the form in which this proportional distribution of labor asserts itself, in the state of society where the interconnection of social labor is manifested in the private exchange of the individual products of labor, is precisely the exchange value of these products. http://www.marxists.org/archive/marx/works/1868/letters/68_07_11-abs.htm Marx to Kugelmann, In Hanover Abstract, London, July 11, 1868

As an essential aspect of this study I will explore certain key technical aspects of Marxist theory and of Preobrazhensky’s work in The New Economics.

  • The Marxist conception of ‘value’ and the term “The Law of Value”
  • The concept of ‘The Planning Principle” and the ideal of a planned economy as described by Preobrazhensky and other Second International and Bolshevik Marxists and socialists.
  • The Concept of “pimative” or “primary accumulation” as described by Marx and as applied by Preobrazhensky to socialist transitional economics.

The history of the 20th century was largely defined on its surface by the contest between the Soviet Socialism on the one hand and ‘western’(sic) capitalism on the other. Despite this and despite the spectacular collapse of the Soviet state, it seems clear enough at the present time that little in terms of social contradiction was resolved by the demise of the Soviet system. As the binary simplicity of the cold war contest fades into a quaint memory, the present world order –if it may be considered an order at all—is characterized by the massively expanded political and economic weight of China, by the post-colonial rise of mass struggle in the Middle East, North Africa, Central and South Asia known as the “Arab Spring”, by the multi-polar fractalization of economic power characterized by the emergence of the BRIC nations and other rising second world economic stars such as South Korea and Indonesia and by the grinding extended stagnation of the economies of the 20th century imperialist nations, Japan, the European Union countries and to a lesser extent but not insignificantly the United States and Canada.

The fundamental historical development of the period following the World Wars was not a contest of two systems but rather the extended workings of the development of capitalism which brings us to the present moment. Rising above the fearful tremblings of the political left and the triumphal bluster of neoliberal dogma are four clear social facts which can be reduced from the boiling broth of 20th century history.

I. Effective extension of commodity relations to the whole of the world’s population.

The primary element which defines the present epoch is the penetration of commodity production as the dominant feature of economic life for virtually all of the world’s populations in every sphere of human activity. Involvement of the entire world society in relations of commodity exchange remained an incomplete development at the end of the Second World War. Today this process has neared its completion and the “world market” has come in to its full fruition.[11]

II. The overall resolution of the national question as a motive force for progressive democratic social change. The virtually complete {with evident exceptions} establishment of republican national forms of government for the vast majority of the world’s populations, the complete end of the colonial system and the beginnings of the end of the social relations of neo-colonialism.

In the political sphere, the history of the 20th century may be primarily defined by the transformation of the world political structure such that the inexorable assertion of the right of nations to self-determination has won out against all forces opposing it. It is now the case nearly all of the world’s citizens live in more or less modern nation states which are more or less self-governing republics.[12] Nationalism as a political force has effectively met its end by its own success. The dominant wars and revolutions of the 20th century drove forward this process and drove the colonial arrangement out of existence and set the imperialist powers on the run. No state has been returned to monarchical or other non-republican governmental form in the recent course of history. No existing nation states have been dissolved or successfully robbed of their sovereignty. Attempts to repress the natural tendency toward nationhood on the part of like peoples sharing common histories and languages have proven doomed to relentless bloodshed and eventual failure.

III. The development of the raw productive capacity, infrastructural development of transport, communications and information technology, advances of medical technology and integration of the world’s populations into the world economy such that the technical and material foundations of extreme poverty and disenfranchisement are eradicable but for political will and effective social organization.

The productive capacity, cultural and technical development, and the development of communications and transport infrastructure is now in the present quite sufficient to support the wellbeing of each member of the world’s populace. It is in every way materially possible to educate all of the world’s children, to have complete literacy within every community, to begin to reverse the effects of industrial pollution and the excess accumulation of waste, to combat disease and to provide adequate health care universally across the entire human race. This capacity exists now. The productive forces, technical development, human resources, exist now. The utilization of the massively untapped human resources necessary to achieve this task can and will in itself elevate the whole standard of human society while the extraordinary condition exists that the abilities of somewhere between one quarter and one half of the world’s population is wasted by unemployment, lack of education and conditions of abject poverty.

IV. The established social fact of the welfare state and the inescapable reality that government spending represents between 20 and 60 percent of GDP in all developed societies, such that macro level economic planning, regulation and monetary/financial intervention is an integrated aspect of modern capitalist society. These mechanisms do not simply exist as commonly understood (especially on the left) as mediating forces in the class struggle but also because they have become essential to the basic operation of the capitalist system itself as they are directly integrated into the process of appropriation and distribution of surplus value now that the classical “laissez” faire operations of the capitalist market have been rendered by its own contradictions, not just socially unviable, but in fact unviable at an economic level without perpetual state intervention.

No form of political or military force proved able to forestall these powerful tendencies in the long course of history, neither the statist socialism of countries governed by Stalinist political parties, nor the traditional political powers of Europe nor the hyper-capitalist young imperial power of the United States. Monarchies and colonial arrangements collapsed into failing wars or revolutions, and markets opened up to virtually everyone everywhere.

If one is to examine the nature of the economies of all countries presently engaged at least nominally in the construction of some form of Socialism today one will find forms of the same challenges faced by the Bolsheviks during the New Economic Policy period. It is even so in North Korea in which the state attempts to fully suppress market forces. There are varied levels of operation of the “law of Value” as this remains the dominant force in world economic development at the present time. On the other side in virtually all of the capitalist world with the ascendance of Keynesian methods of state intervention and even on a global scale with the operation of the International Monetary Fund and coordinated actions on the part of the “G20” governments the European Common Market, The North American Free Trade Alliance and major corporate monopolists engage in variedly successful and unsuccessful attempts to “manage” the operation of the ‘free market’ in pursuit of normative economic goals.

While the Bolshevik government had as its goal the construction of a socialist economy the essential conflict described by Preobrazhensky at the time remains at the core of the challenges facing human progress at the second decade of the 21st century only four years short of the centennial of the October Revolution.

Preobrazhensky’s economic views reduced the challenge before himself, his comrades and the working people who had made the Soviet revolution as a contradiction between the planning principle and the Law of Value.

It is a complex business to analyse an economic system in which both the planning principle—within the limits imposed by the degree of organization attained in the economy—and also the law of value, with its externally-compelling power, are operating simultaneously. The especial difficulty of studying an economy of this kind is that neither form of production is present in its pure form. While the law of value, to the extent that it manifests itself in this system, is an old acquaintance of ours, which has been sufficiently studied as it is exemplified in classical capitalism and in relation to the system of simple commodity production, the planning principle is something unfamiliar, which first emerges on to the arena of history in our economy, and has so far revealed itself to us only to a limited extent. Nor is that all. Both the law of value and the planning principle, the basic tendencies of which assume in the Soviet economy the form of the law of primitive socialist accumulation, are operating within a single economic organism, and are counterposed one to the other as a result of the victory of the October revolution. [13]

It is the assertion of the planning principal characterized by direct investment and social intervention[14] rather than monetarist or fiscal market manipulation which can bring humanity forward at the present juncture. The movement in this direction must come from political action with social demands.

Chart showing progress of US Government spending as a factor of GDP over time http://www.ritholtz.com/blog/2011/07/government-spending-as-a-percentage-of-gdp-2/ by Barry Ritholtz – July 29th, 2011

[3] Gorinov,  M. M. , Tsakunov S. V. and Konstantin Gurevich Life and Works of Evgenii Alekseevich Preobrazhenskii Slavic Review , Vol. 50, No. 2 (Summer, 1991), pp. 286-296 Published by: Association for Slavic, East European, and Eurasian Studies Article Stable URL: http://www.jstor.org/stable/2500204

[4] Lin, J. and M. Yu (2008) ‘The Economics of Price Scissors: An Empirical Investigation for China’,CCER working paper.http://wise.xmu.edu.cn/ Master/News/NewsPic/20084795119869.pdf

[5] Sah, Raaj Kumar and Stiglitz, Joseph E.; The Economics of Price Scissors The American Economic Review , Vol. 74, No. 1 (Mar., 1984), pp. 125-138 Published by: American Economic Association Article Stable URL: http://www.jstor.org/stable/1803313 http://www.nber.org/papers/w1156

[6] Preobrazhensky, Evgeny. The New Economics. Translated by Brian Pearce. London, UK: Clarendon Press, 1965.

[7] Fitzer “A Select Bibliography of Preobrazhensky’s Works” in Preobrazhensky E.A. The Crisis of Soviet Industrialization pp 237-240

[8] Nove, A. Introduction to The New Economics. pp xi. In Preobrazhensky, The New Economics

[9] Preobrazhensky. E.A. Filtzer editor,  M.E. Sharpe 1979

[10] The Slogan of the October Revolution of 1917 “Peace Land and Bread” Was taken in earnest by millions of Russian and Central Asian peasants who revolted against Feudal conditions and seized the lands formerly possessed by feudal aristocrats. The resulting condition was that the Socialist Revolution in Russia achieved a significant task assigned to the bourgeois stage of social development. It opened the door to unfettered commodity production in the sphere of agriculture and liberated the peasantry to condition of open competition amongst themselves. http://www.marxists.org/archive/lenin/works/1917/sep/06.htm

[11] The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.
The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. Marx, Karl The Communist Manifesto http://www.marxists.org/archive/marx/works/1848/communist-manifesto/

[12] There are notable exceptions such as Saudi Arabia and the Gulf States which remains hereditary monarchies but such are few and far between. This is not a comment on the level of internal political development or social progress of the existing regimes in many nations but rather simply to state that virtually all of the world’s peoples now reside in self-governing republics and thusly that the completion of the extension of relations of commodity production to the whole of the world’s population is coupled with the near resolution of what was once called the “national question”.

[13] Preobrazhensky TNE pp 55

[14] Both of these terms as used here are unacceptably vague it is my intention to expand and concentrate on a more scientifically precise meaning and definition of “The Law of value” and the “planning principle”. Suffice at this juncture to understand The planning principle to mean normative rather than profit driven conscious direction of economic development. And the Law of Value to mean essentially the raw forces of profit driven market activity.

About rawlinsview

News and political commentary from the point of view of the social interests of the international working class.
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