The national economy

The national economy includes the sectors of the production sphere, where material social product is created, and sectors of the nonproduction sphere, where non-material services are performed. Material production is in turn divided into those sectors that produce the means of production (subdivision I of social production) and those sectors that produce consumer goods (subdivision II).

The socioeconomic nature of any national economy, as well as its structure and rate of development, is determined by the character of the dominant production relationships in society.

Under capitalism, the national economy as a unified whole first takes shape during the formation of national states. It is a result of the development of productive forces and the division of labor in society, the growing specialization of production sectors, and the emergence of a national market and large-scale mechanized production. Under capitalism, the national economy is based on private ownership of the means of production and on the exploitation of hired labor. In conformity with the economic laws of capitalism, it develops in an anarchical, cyclical manner, always subordinate to the primary purpose of capitalist production, that is, the race for profits. Under this system, primary wealth is owned by a relatively small part of society, the big capitalists. Increasing intervention by the capitalist state in the economy cannot overcome the antagonistic contradictions and uncontrollable character of the capitalist national economy or such periodic crises as currency upheavals, inflation, and unemployment. After the crisis of 1969–71, for example, the rate of economic development in most of the capitalist countries fell. In 1972, between 20 and 25 percent of existing industrial processing capacity alone went unused in the developed capitalist countries. According to official figures, the number of unemployed in these countries in 1973 was about 11 million.

Under socialism, the national economy is based on public ownership of the means of production, on labor without exploitation, on true realization of the right to work, and on the universality of labor. The development of the socialist economy takes place in a planned manner and at a rapid rate on the basis of the economic laws of socialism, with the purpose of “ensuring full well-being and free, all-round development of all the members of society”  (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 6, p. 232). Therefore all the aggregate social product created in the socialist national economy belongs to the working people. A most important characteristic of the socialist national economy is the combination of centralized administration with active participation by production collectives, local bodies, and all working people in such administration. This makes possible the fullest, most efficient use of available material and labor resources in the interests of all of society and of each of its members. In the USSR, the national economies of all the Union republics are formed and developed as an integrated whole of interrelated economic complexes which, on the basis of a socialist division of labor in society, ensure a combination of the economic interests of each republic with those of the country as a whole.

According to the classification system adopted by the Central Statistical Board of the USSR, the sphere of material production in the national economy of the Soviet Union includes the following sectors: industry, construction, agriculture, forestry, freight transport, communications (serving enterprises engaged in material production), trade, public catering, material-technical supply, and procurement of agricultural products. In the non-production sphere are passenger transport, communications (serving nonproduction institutions and the populace at large), housing, community and consumer services, public health, physical culture, social security, public education, science and scientific services, art, finance, credit, insurance, and administration.

Socialist society ensures the conditions necessary for planned formation of a progressive sectorial structure for the national economy, one that will meet the needs of constructing the material and technical base of communism, of steadily increasing social productivity, and of improving the standard of living. Influenced by such factors as the scientific and technological revolution, the continuous improvement of technology, and the growth of social productivity, the sectorial structure of the national economy becomes more complex. In the course of socialist construction in the USSR, the dimensions of the national economy have increased enormously; the economy has come to be based on multisectorial industry, large-scale agriculture, and scientific advance. In 1972 the industrial output of the USSR was 320 times as great as in 1922; the production of means of production (by group A industries) had increased 822 times and the production of consumer goods (by group B industries) had increased 101 times. In 1972 the share in overall industrial production held by group A enterprises was 73.6 percent; in 1922 it was 32 percent. Group B industries accounted for a corresponding share of 26.4 percent of total output, as opposed to 68 percent in 1922. Dozens of new national economic sectors have emerged, such as aviation, automobiles, electronics, petrochemicals, radio, instrument-making, natural gas, and atomic energy.

During the ninth five-year plan (1971–75), major structural changes are being made in the national economy of the USSR. Not only are the high growth rates for production of the means of production and of consumer goods being maintained, but they are also being brought significantly into line with each other, although production of the means of production will continue to develop faster, as is the rule in a socialist economy. This will facilitate technical retooling, which will help develop the material and technical base of all national economic sectors, especially agriculture and the production of consumer goods. Significant changes are taking place in the structure of each industrial subdivision. In subdivision I, for example, the progressive sectors—including machine building, chemicals and petrochemicals, the production of plastics and synthetic resins, and the manufacture of precision instruments and automated equipment—are developing at higher rates. These sectors are precisely those that determine scientific and technological progress and ensure decreasing production costs, increasing final output, and rising labor productivity. Special attention is devoted to creating fully mechanized and automated systems of production, as well as to incorporating qualitatively new machine designs and increasing the capacities of such newly introduced equipment. The structure of subdivision II is also being improved fundamentally; the rate of development in such sectors as agriculture and services is increasing. The growing production of consumer goods reflects the increase in the proportion of agricultural products that can go into industrial processing, as well as the accelerated growth in the production of consumer durable goods.

The fundamental advantages enjoyed by the national economy under socialism are graphically expressed in both the higher growth rates of socialist production and the steady improvement in the standard of living of the working people. Thus between 1951 and 1973, national income in the USSR had an average annual growth rate of 8.3 percent, while in the United States it was 3.6 percent. For industrial output in the USSR during the same period, the figure was 9.7 percent; for agricultural output it was 4.0 percent. Corresponding figures for the United States were 4.6 percent and 2.1 percent. In 1973 the national economy of the USSR was one of the leaders in most industrial sectors, while in several of the most important, such as coal, cast iron, iron ore, coke, cement, tractors, and diesel and electric locomotives, the Soviet Union was first in the world.

The national economies of the socialist countries are interconnected to make up the world socialist system. Especially close economic and scientific and technical relations have emerged and grown among the member countries of the Council for Mutual Economic Assistance (COMECON). This is based on an international socialist division of labor, which reflects the objective process of socialist integration. The development of strong, comprehensive ties in science, technology, and production promotes both the formation of a progressive sectorial structure in the national economy of each country and the convergence and equalizing of their respective levels of economic development. This ensures higher national economic growth rates, fuller use of the productive forces of the entire COMECON community, and an increase in the economic strength of the international socialist system. Compared to 1948, the aggregate national income of the COMECON countries in 1973 had increased by more than eight times, while their volume of industrial production had grown by more than 12 times. During the same period, the aggregate national income of the developed capitalist countries increased by 3.2 times, while their industrial production rose about four times.

The Leninist policy of peaceful coexistence between the two systems is based on the necessity of comprehensive development of broad, stable, long-term economic ties that will link the USSR and the other socialist countries with the the capitalist countries. This would be one guarantee of stable and long-lasting peace. International economic cooperation enables the Soviet Union and the socialist countries to realize quickly and concretely the economic benefits of specialization and cooperation in production, on the scale of both the socialist and world division of labor. Ever increasing amounts of new natural resources are drawn into economic circulation more and more rapidly, thus accelerating the development of the national economy of each cooperating country.