During Socialist transition some workers were in more mechanised workplaces than others, some less rationally organised or working with less up to date equipment etc. So the same product(s) produced from different locations could not at this time be directly exchanged with other products solely on the basis of the number of hours worked.
The nature of unevenness meant one worker’s hour of labour could not yet be fully equated with another’s. It was found that an alternative measure must still be used – one which represents socially necessary labour in the abstract. Value expressed in money as outlined below was therefore the most convenient medium ready to hand for this purpose.
Key to the system that operated after 1931 was the ability to administer the amount of paper money, coinage and industrial credit in circulation, so that it broadly matched the sum of the following four elements that represented the estimated total cost of social production for the coming year:
a) The total cost of social production for the previous year.
b) A credit margin to cover the transfer of goods in production and unexpected contingencies during the daily manufacturing process, e.g. mechanical breakdown or delays in the delivery of raw materials.
c) An amount to facilitate the exchange of agricultural commodities produced by the peasants.
d) The anticipated increase in the total social product expected to be generated throughout the coming year.
During each year a part of element d) above as designated by an equivalent number of notes, would be withdrawn from circulation by the Central Bank (Gosbank).
The amount withdrawn was treated as savings and was broadly calculated by reference to the formula Total Cost of Production less Total Cost of Consumption equals Savings (Surplus Product). The annual withdrawal using the aforementioned formula would therefore signify in money terms the surplus product (value) embodied in the new plant and capital equipment such as factory buildings and machine tools that had actually been produced during that year. Once banked as savings the surplus product would re-emerge in money terms the following year, to be used as new industrial credit (e.g. factory grants) as part of the five-year planning and investment cycle.
By accounting both annually in advance and annually in arrears meant the amount of circulating currency and industrial credit could be constantly increased to match the actual annual increase in productive capacity (i.e. balanced proportionate development of the economy).
So as well as being used as wages, as a means of distributing consumer goods and services and thereby facilitating “to each according to his work”, money in the Soviet Union also became an accounting device to measure savings to be set aside and allocated as part of further investment, including education and health provision.
No longer was the question of national finance a thing to shy away from or for it to be treated as a mystery. During the 1930s workers were often heard saying, “There is no fortress the Bolsheviks cannot storm” – finance being a case in point.