“In particular, in America the farmers’ holdings, in spite of their comparatively scattered nature, …were completely subjected by means of credit, by means of supplies, and by means of the control of outlets by big trading firms, banks, steamship, elevator and refrigerating combines, and so on.” E.A. Preobrazhensky (1926)
This is another section in my ongoing project to digitize and serialize The New Economics the signature work of the Bolshevik revolutionary and scientific socialist E.A. Preobrazhensky. Originally published in 1926 by Preobrazhensky during the period of his struggle against the political rise of Stalin. The seminal work has been out of print in English for many decades.
The section below includes a succinct and still apt description of the way in which finance capital maintains economic control over small agricultural operations an holdings even without direct ownership of the productive capital of these enterprises.
The New Economics
The Law of Value in Soviet Economy
Section III chapter 2, Pages 160-162
Translation by Brian Pearce
Clarendon Press : Oxford 1965
Original in Russian 1926
The Law of Value under the Socialization of Industry in a Peasant Country
If commodity economy was already ‘undermined’, as Lenin put it, in the period of monopoly capitalism, this process must have gone much further where all large-scale industry is in the hands of a proletarian state. But in so far as we are concerned with the nationalization of industry not in a typical industrial country but in a country where a large part of the values are produced in petty production, especially in petty peasant economy, to that extent we have here, alongside a further advance along the road to monopolism, tendencies of a pre-monopoly character which are stronger than, say, in present-day America. It is in this that the peculiarity of the Soviet economy consists. In our analysis of this economy we therefore need to trace not only the historical trassition from capitalist monopolism to socialist monopolism but also to weigh all the consequences of the existence of an enormous provine of simple commodity production. The peculiarity of our Soviet economy consists precisely in the fact that post-capitalist forms of production confront 22 million peasant holdings, together with craft and artisan industry, while purely capitalist or state-capitalist forms are comparatively weak. Under such conditions, the law of value the planning principle enter into competition in an extremely distinctive setting, in which there is a very marked separation, in the spheres of production and exchange alike, between the united fist of the state economy and the unorganized sea of simple commodity production. The distinctiveness of the situation is still further increased by the fact that large-scale socialist production confronts petty production in the shape of industry confronting agriculture, that is, the confrontation of socialist forms with simple commodity production is also a confrontation of two different spheres of application of labour. Both American monopolism before the war and now and also German monopolism before the war grew up on the basis of a mighty concentration of production and a tremendous predominance of industry over agriculture. Both American and German capitalism achieved a very great degree of subordination of their respective countries’ petty and medium production, both industrial and agricultural, to a small number of powerful organizations of merchant capital, trusts, and big banks. In particular, in America the farmers’ holdings, in spite of their comparatively scattered nature, as compared, for example, with large-scale agricultural production in Britain and Germany, were completely subjected by means of credit, by means of supplies, and by means of the control of outlets by big trading firms, banks, steamship, elevator and refrigerating combines, and so on. Despite the fact that the American farmer, as a producer of grain, competes on the world market with the farmer of Canada and the Argentine, the peasant of Rumania, the Ukraine, and so on, despite the fact that America’s agricultural production is not the production of a single agricultural trust, nevertheless this production is sufficiently bound up organizationally to American trade, industrial, and banking capital, which overflows the barrier separating agriculture from industry and achieves a certain connection between the two branches (within capitalist limits), especially in the sphere of exchange and credit.
Conversely, in Soviet economy the connection between trustified state industry and the independent peasant holding is infinitely weaker in respect of exchange and of credit, while the organi-zational structure of industry is historically of a higher type than in any capitalist country. As a result we must inevitably have a far-reaching atrophy of the working of the law of value within the state economic sector, along with a very great development of the working of the law of value beyond the limits of the state economy and with continual blows struck by market spontaneity against the entire state economy as a unified whole. It is this circumstance, as we shall see below, that explains the predominant type of all the upheavals and depressions which we have suffered, are suffering, and will go on suffering in our economy; together, of course, with those complications which are bound to arise from the connection .between our economy and the world market.
On the other hand, as a result of the general economic and technical weakness of the state economy, the socialist character of the production relations within it can emerge more clearly only at a definite state of development of the productive forces. At the same time the planned guidance of the economy often breaks down, owing to the inadequacy of reserves for economic manreuvring1 and in spite of the fairly highly-developed structure of the state economy as a collective economy. From this comes the very great danger in the theoretical analysis of Soviet economy that one slides over from analysing production-relations to measuring the level of our wealth that is, one slides into the vulgar-naturalistic point of view. There have been numerous examples of this happening. After these preliminary observations I now pass to a concrete analysis of what categories of capitalist economy apply in our economy, and to what extent.
 In his pamphlet Autumn Difficulties and Problems of Agricultural Development, published by the People’s Commissariat of Finance, Comrade Sokolnikov, with whom I disagree on a number of fundamental questions of economic policy and the theoretical evaluation of our economy, has in a quite correct and timely fashion drawn attention to this fact. In itself this fact is only a fresh weighty argument in favour of my view that the law of primitive socialist accumulation is, along with the law of value, the basic law of our economy.