Circulation of Funds of Socialist Enterprises

The following article is from The Great Soviet Encyclopedia (1979). It might be outdated or ideologically biased.

Circulation of Funds of Socialist Enterprises


the movement of funds in production and circulation, during which these funds pass through three stages. The stages correspond to three functional forms: monetary, productive, and commodity. In the process of the circulation of funds these functional forms alternate: the monetary form of enterprise funds is converted into the productive form and the productive form into the commodity form, and then, after sale of the finished product, the commodity form is converted again into the monetary form and the circuit is repeated.

The circulation of funds of socialist enterprises is expressed by the formula

where M is money, w is wages, C(MP) is means of production, P is the process of production, C1 is finished products, and M1 is the money received after sale of the finished product. Because commodity-monetary relations and economic accountability are used under socialism, the formula for the circuit of funds expresses the commodity value form of the output of socialist production enterprises and expresses the necessity of exchanging the products as commodities in the sphere of circulation. The circulation of funds of socialist enterprises differs in form and essence from the circulation of capital of capitalist enterprises because the former takes place on a planned basis. Thus the movement of funds is not associated with crises and is not cyclical in nature.

The first stage in the circulation of funds is the monetary stage. Unlike the equivalent stage in the circulation of capital, this stage does not include the association of the wages of working people with the process of buying the means of production and labor, since under socialism labor has ceased to be a commodity. Payment for labor is based on quantity and quality and is funded by the part of enterprise income representing new value created by necessary labor. Therefore, payment for labor in the form of wages is an independent element in the movement of funds and is expressed by the formula

In order to raise production efficiency and increase the incremental output/funds ratio in this stage, it is necessary to adhere strictly to established norms in purchasing the necessary means of production (instruments of labor and objects of labor) because above-norm stocks lead to “freezing” working funds and to retarding the circulation of funds. Refining the forms and methods of planned material and technical supply makes it possible for socialist enterprises to carry on a continuous production process with minimum stocks of raw and processed materials and fuel. The economical use of resources is also promoted by the system of fees for funds that was instituted in January 1966 for enterprises working under the new conditions of planning and economic incentives.

The second stage in the circulation of funds is the production stage. In this stage value increases during the process of labor, with the result that socialist enterprises that are functioning on the basis of economic accountability receive profits, which ensures the efficiency of socialist production as a whole. This process is expressed by the formula … P. … In this stage of the circulation of funds the special nature of the unification of the personal and material factors of production—labor and the implements and objects of labor—manifests itself. Under socialism the working people are the direct producers and the owners of the means of production; the workers produce goods in the interest of all society. The unification of labor and the means of production is free from the antagonism characteristic of capital; that is why the process of socialist production is carried on in close, comradely cooperation and mutual assistance among associated producers. Technological progress has several effects: it changes the structure of production funds; it promotes growth in the quantity and quality of output and acceleration of the circulation of funds, primarily by reducing the working time and the time that working funds spend in production stocks; and it increases labor efficiency, the incremental output/funds ratio, and production efficiency.

The third stage in the circulation of funds is the commodity stage; here the output is sold as commodities. The conversion of commodities into money (selling) makes it possible for socialist enterprises to recover production costs in monetary form, including payments for labor and a profit, part of which remains at the disposal of the enterprise and part of which goes to state income and is used for the needs of society (above all for expanded economic reproduction, education, public health, social security, and defense). This stage is expressed by the formula C1M1. Under capitalism the stage involves antagonistic contradictions within the commodity itself, including the contradiction between its use value and value, which retards selling and creates a tortuous marketing process charged with crises of over-production; however, under socialism at this stage commodities are sold on a planned basis, and as a result a continuous alternation of stages and forms of the circulation of funds is ensured. In this way the high efficiency characterizing the use of production funds by socialist enterprises in all stages of circulation is achieved.

In the process of circulation the funds of socialist enterprises circulate simultaneously in all forms and in all three stages.


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Lenskaia, S. A. Krugooborot i oborot obshchestvennykh fondov SSSR. Moscow, 1967,
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The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.