PRICING POLICY
~ an: Issue in’ the Sino-Soviet Conflict
By Fernand Charlier
The international division of labor is an objective law opera= ting in the capitalist countries where its action is spontaneous, determined by the necessities of profiteseeking. This is illustrated by developments in the European Economic Community. [ Common. Market].as well as by the deepening gulf between the developed and underdevelcped countries. fe ,
In exchanges among the workers states, this law also exists. But this mere fact is not nearly so important as the need to understand arid utilize it in the interest of the combined development of the various economies of these states,
The Council for Mutual Economic Assistance [comcon] was born in 1949, Its task -- since relations among the member countries were seen at the time only under the angle of the sphere of circulation -was to’ co-ordinate exchanges among the workers states, These included the USSR, Albania, Bulgaria, Poland, Rumania, Czechoslovakia and Hungary. The Democratic. Gorman Republic joined’ in 1950. The People's Republic of China became an observer in 1956; North Korea in 19573 Outer Mongolia and North Vietnam in 1958, (ALL the workers states of Asia were placed on the level of observers, since "their planning has not yet attained the requisite degree of efficiency," according to Pierre Lefranc, )(1)
(T)see his article "The International Division of Labor Among the. Socialist Countries" in the December 1959 Economie et Politique, the magazine of the French Communist party.
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Despite this, COMECON has not yet. definitively taken the road that could convert it into a central planning body and thereby permit it to increase the efficiency of the efforts of the less favored workers states so that they could attain this requisite degree of planning, It was not until 1955 that it sought to begin a certain "specialization," in order to avoid. or to eliminate duplication in production,
The main activity of COMECON still consists of regulating exchanges among workers states. In 1956 the Soviet Manual of Political Economy still defined the role of foreign trade among the Wsocialist states" as short-term adjustment of passing disproportions, through. export of surpluses to cover necessary imports. a
This article will examine the role of COMECON only under the angle of foreign trade,
When the COMECON was born, Stalinism had just undergone the . first open fracture in its monolithism with the Yugoslav affair, Today we know the role which the question of exchanges among workers states played among the causes that determined this rupture, At the time, the Yugoslav theorétician Milentijé Popovic explained how the bureaucracy of the more developed workers states exploited the back ward ones through many methods, among them utilization of the standard of prices on the world market in determining - ‘exchange value among the workers states, Terms of the Problem
In the circumstances the problem is posed in the following way: the international value of a product is determined by the labor time socially necessary in the production of the product in the countries that place the greatest quantities of it on the world market -- and not by the labor time socially necessary.in the countries which produce the most in absolute figures without selling it beyond their own borders == because commodities that do not appear on the international market cannot, it goes without saying, contribute to the formation of international value. A country that has achieved great productivity of labor is favored under this system. This is the phenomenon well known in the exploitation of colonial and semicolon= ial countries:. the exchange of products at world market prices con-= ceals a nonequivalence; because an hour of labor.in a country of high productivity permits it to deliver more products-in the same lapse of time than a backward country. The commodity produced more rapidly will, then, have a value on the national market of this country below the world market price... The national value of a commodity is determined by the quantity of labor socially necessary in its production . within the framework of the national economy; and here this labor time is below that which determines the international value. Exchange ‘on’ the basis of equivalence determined by the world price thus permits a country of high productivity to sell above its national value; con= trariwise,-it-forces a backward country 60 sell below its national
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value, the latter being above the international value. To resort to. a graphic image which summarizes the question: for each of its hours of labor, the developed country from then on will receive in exchange many hours of labor from the less advanced country. From this it follows that the highly industrialized countries, where the national value of a commodity is consequently lower, gains the biggest advantages in international exchange.
With the great impetus given development after the capitalist restraints are removed, the workers states evolve gradually toward | the level of the most developed among them, Thus in the long range there is a tendency among them toward the equalization of national — values which will finally eliminate the disadvantages noted above, This is not the case within the framework of the capitalist development of colonial countries in view of the well-known phenomenon of the “deepening gulf," of the increasing lag of these countries,
But today, within the terms of the unequal development of the economies of the workers states, the phenomenon described above al» ways produces its effects if international value is chosen as the standard of prices among workers states, This problem, among others, was at the root of the conflict with the Yugoslav bureaucracy, The Stalinist bureaucracy of the USSR, consequently, at the time of the formation of the COMECON had to take into account the susceptibilities of its partner-bureaucrats. Hence the rule which was adopted requiring a unanimous vote in COMECON decisions. The Soviet bureaucracy succeeded nevertheless, in view of the utter dependency of its partners, in imposing its conception in the matter of the standard of prices despite the existence, among the official economists of the workers states, of several other theories, Against the theory adopted of utilizing the prices of the world market, some of them proposed that international value be determined among the workers states on the basis of labor socially necessary in these countries, while others proposed exchange on the basis of real production costs, coming close in this to the ideas of Popovic,
The Sino=Soviet Conflict
Where does the COMECON stand today from this point of view? It has been disciosed in the Sino-Soviet conflict that one of the griev- ‘ances lodged by the leaders of the Chinese Communist party against the leadership of. the Soviet Communist party was precisely the problem we are considering,
"Tt is absolutely necessary for Socialist countries to practice mutual economic assistance and cooperation and exchange, Such economic cooperation must be based on the principles of complete equality, mutual benefit and comradely mutual assistance,
"It would be great-power chauvinism to deny these basic principles. and, in the name of 'tinternational division of labor! or 'specialization,' to impose one's own will on others, infringe on the-
independence and sovereignty of fraternal countries or harm the inter-~ ests of their people.
"In relations among Socialist countries it would be preposterous to follow the practice of gaining profit for oneself at the expense of. others, a practice characteristic of relations among capitalist countries. ..
Thus elliptically but firmly, the Central Committee of the Chinese Communist party expressed their views in their reply to the March 30, 1963, letter of the Central Committee of the Communist party of | the Soviet Union, (The. so-called "Twenty-five Points,” dated June. 14, 1963, ) ee
The "Open Letter" of the ‘Central Committee of the Communist party of the Soviet Union which was published in the July 14 Pravda, and which sought to reply to the Chinese accusations in an extensive way, did not even attempt, it should be noted, to refute this point, The development of the: Sino=Soviet conflict, which led in practice: . to a break in the relations which China and. Albania had with the | other workers states in the framework of COMECON, brought to light a difference between the Rumanian and Soviet leaders within COMECON itself. It relates not only to the question of "specialization" in the. production of the workers states, as might have been concluded from the first indications of this conflict, (2) but likewise relates to. the problem of prices in the exchanges among workers states, Before examining this-conflict, it is necessary to probe more deeply into the way in which prices are currently fixed.
Current Practice
The basis of prices is always the international value of the exchanged products, .In adopting these prices, the COMECON, however, eliminates extra economic deformations of these prices; that is, the extra economic factors of constraint which the capitalist centers utilize to force dependent countries to sell below the prices of the world market and to buy finished goods at prices above their -international value, This goes without saying. But on the basis of
©“)See for example the article by R. Moldovan "Sur la division socialiste internationale du travail" which appeared in La Nouvelle Revue Internationale of August 1960: ". . . one thus cannot agree with the assertions of certain economists who hold that the ‘economic law of the priority in development of the means of production in relation to production of consumers goods, loses its standing within the framework of a Single country and is applicable only in the socialist world system as a whole, To agree with them would signify tacitly to approve maintaining, within the framework of the socialist world system, the distinction between industrial countries and other. countries as. sources of raw materials and agricultural products, Such specializa~ tion would. doom the economies of a certain number of socialist coun- tries to retain their agricultural character forever,"
exchange absolutely equivalent to international prices, the nonequivalence indicated above still remains -= the exchangé of many hours of” labor against a single one through the mere effect of the disparity between international value and national values. To set the international value, the COMECON takes ds its base the average prices of the principal capitalist markets during the preceding yean3) which makes it possible to abstract “from the speculative influences and fluctuations due to competition," as Jaromir Dolanski puts it.(4)
. .. This. is why, in the absence of unanimity, prices in the COMECON have remained pegged at the 1957-58 level,
An interbureaucratic conflict thus developed over the methods _to be followed in the practical application of the theory currently in force; that is, the use of world prices.
Paul Underwood, the Warsaw correspondent of the New York Times, reported in the January 21, 1964, issue that according to a “qualified source," a "planned modernization of trading prices," approved in. principle in 1962, had to be "put off," due to "opposition from some of the members" among whom "the Rumanians were again among the leaders,
According to Underwood, “in recent years world prices for raw materials generally have been falling while prices for industrial items have been rising." The adoption of new prices would be to the disadvantage of the less-developed countries. "Pressure for a recalculation of the price base has come primarily from the more industrialized countries of the bloc, such as East Germany and, Czechoslovakia,"
5), Horovitz: "A propos de certaines particularités et de certaines Limitations de la loi de la valeur dans le commerce extérieur socialiste, Probleme Economice, No. 4, 1958, magazine of the Institute of Economic Research of the Ace demy of the’ People's Republic of Rumania, Translated into’ French in Etudes Economiques, No, 112-113, 1958, (4) ui catece que la division socialiste internationale du travail?" In La Nouvelle Revue Internationale, December 1958.
OIL DISCOVERED IN CHINA
Chao An=po, head of the Chinese~Japanese Friendship Association, revealed during a visit to Japan that a "vast oil field" has been