Fundamental Economic Law of Socialism

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 It might be outdated or ideologically biased.

Fundamental Economic Law of Socialism


the law of motion of the socialist economy, which provides for the welfare and all-around development of all members of society by meeting in the fullest possible way their constantly growing material and cultural needs, through a continuous increase and improvement in socialist production, on the basis of scientific and technological progress.

The fundamental economic law of socialism begins to operate when, as a result of a socialist revolution, workers’ power and public ownership of the means of production are established and the fundamental economic law of capitalism ceases to operate. Socialism’s fundamental economic law expresses the new production relations of socialist society; the aims of socialist production, which are historically more progressive than those of the preceding socioeconomic formations; new means of achieving these production aims; and the specific manner in which socialist production relations affect the development of the productive forces.

Because public ownership of the means of production prevails, socialist production serves the interests of society as a whole and the interests of each of its members. The goal of socialist production is the satisfaction of human beings and their needs. Production aimed at achieving this goal has virtually unlimited possibilities for rapid growth and improvement and full utilization of scientific and technological gains.

The fundamental economic law of socialism expresses the essence of all the basic economic processes under socialism and is, therefore, noteworthy for its complex, ramified, and multilevel mechanism of operation. The material basis for its operation consists of the socialized productive forces and the uninterrupted and increasingly rapid progress ensured in the modern era by the introduction of the latest technology, techniques, and organization of production. This provides for a high level of technology for all branches of the national economy and, consequently, for a steady increase in the production of diverse material goods, a growing number of services, systematic addition to the assortment of goods, and improvement in the quality of goods.

Optimum development of social production as a whole can only be ensured by the maintenance of a dynamic proportion in the economy. This objective necessity (economic law) is met by the planned direction of the economy. In socialist society the maximum national income must be produced with relatively minimal social expenditures, so that a high standard of living may be provided for all. Mathematically, this necessity is expressed in a formula proposed by the Soviet economist I. I. Kuz’minov

in which the numerator represents the two parts of the national income (necessary product and surplus product) and the denominator, the expenditures of embodied labor and live labor. On the level of the individual units of the socialist economy (the enterprises), the realization of the requirements of the fundamental law is mediated by the planned use of the commodity-money mechanism—the law of value. This opens to socialist society the possibility of harmoniously coordinating and reconciling the interests of the nation as a whole with those of each enterprise, according to the following principle: “What is good for society is good for the enterprise.”

As production increases, the national income grows in absolute and in per capita terms. Under Soviet power the national income has increased 55 times, reaching a value of 337.8 billion rubles in 1973. The national wealth has increased, as have the personal incomes of the members of society. Thus, in 1973 the real income of the population as a whole was 4.5 times greater than in 1940. In conformity with the changing structure of social and personal needs, a dynamic structure of production has been established within the framework of the relations between subdivisions I and II of social production and within each subdivision. [Subdivision I represents equipment, machinery, raw materials, fuel and electric energy, etc. These are consumed for the production of producers’ goods. Subdivision II represents food, clothes, footwear, luxury goods, etc. These products are intended only for personal nonproduction consumption.] Thus in advanced socialist society it is normal for the rates of growth in subdivisions I and II to converge. In subdivision I convergence is also normal for the rates of growth of the output of the means of production for both subdivisions. In the development of subdivision II there is a more rapid growth in the production of durable consumer goods than in the production of goods for which there is an everyday demand. Nonetheless, production of the latter increases rapidly. In advanced socialist society not only quantitative indexes but also numerous qualitative characteristics become increasingly important for the development of the economy and for improving the workers’ standard of living. Among these characteristics are labor productivity, production efficiency, modernization of the structure of production, and the quality of goods.

As social and personal needs are more fully satisfied under conditions of full employment and as labor productivity increases steadily, the members of society have more leisure time. This is necessary for their harmonious, all-around physical and cultural development, which, in turn, contributes to the increased productivity of social labor. The decisive advantages of socialism over capitalism are expressed in the fundamental economic law of socialism. Utilization of these advantages ensures rapid rates of growth in social production. Thus, from 1951 to 1972 the average annual rate of growth of industrial production in the socialist countries was 10.3 percent. In the advanced capitalist countries it was only 5.1 percent. The operation of the fundamental economic law of socialism is expressed most fully in the fusion of the gains of the scientific and technological revolution with the advantages of socialism.

However, both objective and subjective factors may interfere with the operation of the fundamental economic law of socialism. Among these obstacles are insufficient development of the material and technical basis for socialist society; shortcomings in planning, managing, and organizing production; and unfavorable international circumstances. Socialist society consciously seeks to discover and realize the enormous potential of the fundamental economic law of socialism and to know and to use the law, taking into account the concrete conditions and characteristics of each country at each stage of its development. The fundamental economic law of socialism and the proper knowledge and utilization of it govern the long-term direction and main content of the economic policies of the Communist parties in the socialist countries. Broad scope for the operation of the fundamental economic law of socialism is provided in the developed stage of socialism, when the conditions are created for the most rapid possible growth and improvement in social production and for raising the standard of living of the population. Success in achieving the goals of socialist production is ultimately defined by the level of efficiency of production and by its optimum functioning and growth.

Bourgeois economists give a distorted interpretation of the essence of the socialist economy, its law of motion. Some of them (the neoliberals and right revisionists) assert that the development of the socialist economy is, to a decisive degree, subordinated to the laws of commodity production and the market. Others (the left revisionists) deny the operation of the objective economic laws of socialism or of any law of motion of the socialist economy and declare that socialism is a “command economy.” Both of these interpretations are antiscientific. They ignore the specific incentives for the growth of social production, which are engendered by the predominance of public ownership in the means of production and by the entire system of socialist production relations. In other words, they ignore the objective operation of the fundamental economic law of socialism.


The Great Soviet Encyclopedia, 3rd Edition (1970-1979). © 2010 The Gale Group, Inc. All rights reserved.
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